Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 169777*

April 20, 2006

SENATE OF THE PHILIPPINES, represented by

FRANKLIN M. DRILON, in his capacity as Senate
President, JUAN M. FLAVIER, in his capacity as Senate
President Pro Tempore, FRANCIS N. PANGILINAN, in
his capacity as Majority Leader, AQUILINO Q.
PIMENTEL, JR., in his capacity as Minority Leader,
SENATORS RODOLFO G. BIAZON, "COMPANERA" PIA
S. CAYETANO, JINGGOY EJERCITO ESTRADA, LUISA
"LOI" EJERCITO ESTRADA, JUAN PONCE ENRILE,
RICHARD J. GORDON, PANFILO M. LACSON, ALFREDO
S.LIM, M. A. MADRIGAL, SERGIO OSMENA III, RALPH
G. RECTO, and MAR ROXAS,Petitioners,
vs.
EDUARDO R. ERMITA, in his capacity as Executive
Secretary and alter-ego of President Gloria
Macapagal-Arroyo, and anyone acting in his stead and
in behalf of the President of the
Philippines,Respondents.

x-------------------------x
G.R. No. 169660

April 20, 2006

FRANCISCO I. CHAVEZ, Petitioner,

vs.
EDUARDO R. ERMITA, in his capacity as Executive
Secretary, AVELINO J. CRUZ, JR., in his capacity as
Secretary of Defense, and GENEROSO S. SENGA, in his
capacity as AFP Chief of Staff, Respondents.
x-------------------------x
G.R. No. 169667

April 20, 2006

ALTERNATIVE LAW GROUPS, INC. (ALG), Petitioner,

vs.
HON. EDUARDO R. ERMITA, in his capacity as
Executive Secretary, Respondent.
x-------------------------x

x-------------------------x
G.R. No. 169659

represented by ATTY. REMEDIOS BALBIN, Petitioners,

vs.
EDUARDO ERMITA, in his capacity as Executive
Secretary and alter-ego of President Gloria
Macapagal-Arroyo, Respondent.

April 20, 2006

BAYAN MUNA represented by DR. REYNALDO LESACA,

JR., Rep. SATUR OCAMPO, Rep. CRISPIN BELTRAN,
Rep. RAFAEL MARIANO, Rep. LIZA MAZA, Rep.
TEODORO CASINO, Rep. JOEL VIRADOR, COURAGE
represented by FERDINAND GAITE, and COUNSELS
FOR THE DEFENSE OF LIBERTIES (CODAL)

G.R. No. 169834

April 20, 2006

PDP- LABAN, Petitioner,

vs.
EXECUTIVE SECRETARY EDUARDO R.
ERMITA, Respondent.
x-------------------------x

G.R. No. 171246

April 20, 2006

JOSE ANSELMO I. CADIZ, FELICIANO M. BAUTISTA,

ROMULO R. RIVERA, JOSE AMOR AMORANDO, ALICIA
A. RISOS-VIDAL, FILEMON C. ABELITA III, MANUEL P.
LEGASPI, J. B. JOVY C. BERNABE, BERNARD L.
DAGCUTA, ROGELIO V. GARCIA, and the INTEGRATED
BAR FOR THE PHILIPPINES, Petitioners,
vs.
HON. EXECUTIVE SECRETARY EDUARDO R.
ERMITA, Respondent.
DECISION
CARPIO MORALES, J.:
A transparent government is one of the hallmarks of a truly
republican state. Even in the early history of republican
thought, however, it has been recognized that the head of
government may keep certain information confidential in
pursuit of the public interest. Explaining the reason for
vesting executive power in only one magistrate, a
distinguished delegate to the U.S. Constitutional Convention
said: "Decision, activity, secrecy, and dispatch will generally
characterize the proceedings of one man, in a much more
eminent degree than the proceedings of any greater
number; and in proportion as the number is increased,
these qualities will be diminished."1
History has been witness, however, to the fact that the
power to withhold information lends itself to abuse, hence,
the necessity to guard it zealously.
The present consolidated petitions for certiorari and
prohibition proffer that the President has abused such
power by issuing Executive Order No. 464 (E.O. 464) last

September 28, 2005. They thus pray for its declaration as

null and void for being unconstitutional.
In resolving the controversy, this Court shall proceed with
the recognition that the issuance under review has come
from a co-equal branch of government, which thus entitles
it to a strong presumption of constitutionality. Once the
challenged order is found to be indeed violative of the
Constitution, it is duty-bound to declare it so. For the
Constitution, being the highest expression of the sovereign
will of the Filipino people, must prevail over any issuance of
the government that contravenes its mandates.
In the exercise of its legislative power, the Senate of the
Philippines, through its various Senate Committees,
conducts inquiries or investigations in aid of legislation
which call for, inter alia, the attendance of officials and
employees of the executive department, bureaus, and
offices including those employed in Government Owned and
Controlled Corporations, the Armed Forces of the Philippines
(AFP), and the Philippine National Police (PNP).
On September 21 to 23, 2005, the Committee of the Senate
as a whole issued invitations to various officials of the
Executive Department for them to appear on September 29,
2005 as resource speakers in a public hearing on the
railway project of the North Luzon Railways Corporation
with the China National Machinery and Equipment Group
(hereinafter North Rail Project). The public hearing was
sparked by a privilege speech of Senator Juan Ponce Enrile
urging the Senate to investigate the alleged overpricing and
other unlawful provisions of the contract covering the North
Rail Project.
The Senate Committee on National Defense and Security
likewise issued invitations2 dated September 22, 2005 to
the following officials of the AFP: the Commanding General

of the Philippine Army, Lt. Gen. Hermogenes C. Esperon;

Inspector General of the AFP Vice Admiral Mateo M.
Mayuga; Deputy Chief of Staff for Intelligence of the AFP
Rear Admiral Tirso R. Danga; Chief of the Intelligence
Service of the AFP Brig. Gen. Marlu Q. Quevedo; Assistant
Superintendent of the Philippine Military Academy (PMA)
Brig. Gen. Francisco V. Gudani; and Assistant Commandant,
Corps of Cadets of the PMA, Col. Alexander F. Balutan, for
them to attend as resource persons in a public hearing
scheduled on September 28, 2005 on the following: (1)
Privilege Speech of Senator Aquilino Q. Pimentel Jr.,
delivered on June 6, 2005 entitled "Bunye has Provided
Smoking Gun or has Opened a Can of Worms that Show
Massive Electoral Fraud in the Presidential Election of May
2005"; (2) Privilege Speech of Senator Jinggoy E. Estrada
delivered on July 26, 2005 entitled "The Philippines as the
Wire-Tapping Capital of the World"; (3) Privilege Speech of
Senator Rodolfo Biazon delivered on August 1, 2005 entitled
"Clear and Present Danger"; (4) Senate Resolution No. 285
filed by Senator Maria Ana Consuelo Madrigal Resolution
Directing the Committee on National Defense and Security
to Conduct an Inquiry, in Aid of Legislation, and in the
National Interest, on the Role of the Military in the So-called
"Gloriagate Scandal"; and (5) Senate Resolution No. 295
filed by Senator Biazon Resolution Directing the
Committee on National Defense and Security to Conduct an
Inquiry, in Aid of Legislation, on the Wire-Tapping of the
President of the Philippines.
Also invited to the above-said hearing scheduled on
September 28 2005 was the AFP Chief of Staff, General
Generoso S. Senga who, by letter3 dated September 27,
2005, requested for its postponement "due to a pressing
operational situation that demands [his utmost personal
attention" while "some of the invited AFP officers are
currently attending to other urgent operational matters."

On September 28, 2005, Senate President Franklin M.

Drilon received from Executive Secretary Eduardo R. Ermita
a letter4 dated September 27, 2005 "respectfully
request[ing] for the postponement of the hearing [regarding
the NorthRail project] to which various officials of the
Executive Department have been invited" in order to "afford
said officials ample time and opportunity to study and
prepare for the various issues so that they may better
enlighten the Senate Committee on its investigation."
Senate President Drilon, however, wrote5 Executive
Secretary Ermita that the Senators "are unable to accede to
[his request]" as it "was sent belatedly" and "[a]ll
preparations and arrangements as well as notices to all
resource persons were completed [the previous] week."
Senate President Drilon likewise received on September 28,
2005 a letter6 from the President of the North Luzon
Railways Corporation Jose L. Cortes, Jr. requesting that the
hearing on the NorthRail project be postponed or cancelled
until a copy of the report of the UP Law Center on the
contract agreements relative to the project had been
secured.
On September 28, 2005, the President issued E.O. 464,
"Ensuring Observance of the Principle of Separation of
Powers, Adherence to the Rule on Executive Privilege and
Respect for the Rights of Public Officials Appearing in
Legislative Inquiries in Aid of Legislation Under the
Constitution, and For Other Purposes,"7 which, pursuant to
Section 6 thereof, took effect immediately. The salient
provisions of the Order are as follows:
SECTION 1. Appearance by Heads of Departments Before
Congress. In accordance with Article VI, Section 22 of the
Constitution and to implement the Constitutional provisions
on the separation of powers between co-equal branches of

the government, all heads of departments of the Executive

Branch of the government shall secure the consent of the
President prior to appearing before either House of
Congress.
When the security of the State or the public interest so
requires and the President so states in writing, the
appearance shall only be conducted in executive session.
SECTION. 2. Nature, Scope and Coverage of Executive
Privilege.
(a) Nature and Scope. - The rule of confidentiality based on
executive privilege is fundamental to the operation of
government and rooted in the separation of powers under
the Constitution (Almonte vs. Vasquez, G.R. No. 95367, 23
May 1995). Further, Republic Act No. 6713 or the Code of
Conduct and Ethical Standards for Public Officials and
Employees provides that Public Officials and Employees
shall not use or divulge confidential or classified information
officially known to them by reason of their office and not
made available to the public to prejudice the public interest.
Executive privilege covers all confidential or classified
information between the President and the public officers
covered by this executive order, including:
Conversations and correspondence between the President
and the public official covered by this executive order
(Almonte vs. Vasquez G.R. No. 95367, 23 May 1995;
Chavez v. Public Estates Authority, G.R. No. 133250, 9 July
2002);
Military, diplomatic and other national security matters
which in the interest of national security should not be
divulged (Almonte vs. Vasquez, G.R. No. 95367, 23 May

1995; Chavez v. Presidential Commission on Good

Government, G.R. No. 130716, 9 December 1998).
Information between inter-government agencies prior to the
conclusion of treaties and executive agreements (Chavez v.
Presidential Commission on Good Government, G.R. No.
130716, 9 December 1998);
Discussion in close-door Cabinet meetings (Chavez v.
Presidential Commission on Good Government, G.R. No.
130716, 9 December 1998);
Matters affecting national security and public order (Chavez
v. Public Estates Authority, G.R. No. 133250, 9 July 2002).
(b) Who are covered. The following are covered by this
executive order:
Senior officials of executive departments who in the
judgment of the department heads are covered by the
executive privilege;
Generals and flag officers of the Armed Forces of the
Philippines and such other officers who in the judgment of
the Chief of Staff are covered by the executive privilege;
Philippine National Police (PNP) officers with rank of chief
superintendent or higher and such other officers who in the
judgment of the Chief of the PNP are covered by the
executive privilege;
Senior national security officials who in the judgment of the
National Security Adviser are covered by the executive
privilege; and
Such other officers as may be determined by the President.

SECTION 3. Appearance of Other Public Officials Before

Congress. All public officials enumerated in Section 2 (b)
hereof shall secure prior consent of the President prior to
appearing before either House of Congress to ensure the
observance of the principle of separation of powers,
adherence to the rule on executive privilege and respect for
the rights of public officials appearing in inquiries in aid of
legislation. (Emphasis and underscoring supplied)
Also on September 28, 2005, Senate President Drilon
received from Executive Secretary Ermita a copy of E.O.
464, and another letter8 informing him "that officials of the
Executive Department invited to appear at the meeting
[regarding the NorthRail project] will not be able to attend
the same without the consent of the President, pursuant to
[E.O. 464]" and that "said officials have not secured the
required consent from the President." On even date which
was also the scheduled date of the hearing on the alleged
wiretapping, Gen. Senga sent a letter9 to Senator Biazon,
Chairperson of the Committee on National Defense and
Security, informing him "that per instruction of [President
Arroyo], thru the Secretary of National Defense, no officer
of the [AFP] is authorized to appear before any Senate or
Congressional hearings without seeking a written approval
from the President" and "that no approval has been granted
by the President to any AFP officer to appear before the
public hearing of the Senate Committee on National Defense
and Security scheduled [on] 28 September 2005."
Despite the communications received from Executive
Secretary Ermita and Gen. Senga, the investigation
scheduled by the Committee on National Defense and
Security pushed through, with only Col. Balutan and Brig.
Gen. Gudani among all the AFP officials invited attending.
For defying President Arroyos order barring military
personnel from testifying before legislative inquiries without
her approval, Brig. Gen. Gudani and Col. Balutan were

relieved from their military posts and were made to face

court martial proceedings.
As to the NorthRail project hearing scheduled on September
29, 2005, Executive Secretary Ermita, citing E.O. 464, sent
letter of regrets, in response to the invitations sent to the
following government officials: Light Railway Transit
Authority Administrator Melquiades Robles, Metro Rail
Transit Authority Administrator Roberto Lastimoso,
Department of Justice (DOJ) Chief State Counsel Ricardo V.
Perez, then Presidential Legal Counsel Merceditas Gutierrez,
Department of Transportation and Communication (DOTC)
Undersecretary Guiling Mamonding, DOTC Secretary
Leandro Mendoza, Philippine National Railways General
Manager Jose Serase II, Monetary Board Member Juanita
Amatong, Bases Conversion Development Authority
Chairperson Gen. Narciso Abaya and Secretary Romulo L.
Neri.10 NorthRail President Cortes sent personal regrets
likewise citing E.O. 464.11
On October 3, 2005, three petitions, docketed as G.R. Nos.
169659, 169660, and 169667, for certiorari and prohibition,
were filed before this Court challenging the constitutionality
of E.O. 464.
In G.R. No. 169659, petitioners party-list Bayan Muna,
House of Representatives Members Satur Ocampo, Crispin
Beltran, Rafael Mariano, Liza Maza, Joel Virador and
Teodoro Casino, Courage, an organization of government
employees, and Counsels for the Defense of Liberties
(CODAL), a group of lawyers dedicated to the promotion of
justice, democracy and peace, all claiming to have standing
to file the suit because of the transcendental importance of
the issues they posed, pray, in their petition that E.O. 464
be declared null and void for being unconstitutional; that
respondent Executive Secretary Ermita, in his capacity as
Executive Secretary and alter-ego of President Arroyo, be
prohibited from imposing, and threatening to impose

sanctions on officials who appear before Congress due to

congressional summons. Additionally, petitioners claim that
E.O. 464 infringes on their rights and impedes them from
fulfilling their respective obligations. Thus, Bayan Muna
alleges that E.O. 464 infringes on its right as a political
party entitled to participate in governance; Satur Ocampo,
et al. allege that E.O. 464 infringes on their rights and
duties as members of Congress to conduct investigation in
aid of legislation and conduct oversight functions in the
implementation of laws; Courage alleges that the tenure of
its members in public office is predicated on, and
threatened by, their submission to the requirements of E.O.
464 should they be summoned by Congress; and CODAL
alleges that its members have a sworn duty to uphold the
rule of law, and their rights to information and to
transparent governance are threatened by the imposition of
E.O. 464.
In G.R. No. 169660, petitioner Francisco I. Chavez, claiming
that his constitutional rights as a citizen, taxpayer and law
practitioner, are affected by the enforcement of E.O. 464,
prays in his petition that E.O. 464 be declared null and void
for being unconstitutional.
In G.R. No. 169667, petitioner Alternative Law Groups,
Inc.12 (ALG), alleging that as a coalition of 17 legal resource
non-governmental organizations engaged in developmental
lawyering and work with the poor and marginalized sectors
in different parts of the country, and as an organization of
citizens of the Philippines and a part of the general public, it
has legal standing to institute the petition to enforce its
constitutional right to information on matters of public
concern, a right which was denied to the public by E.O.
464,13 prays, that said order be declared null and void for
being unconstitutional and that respondent Executive
Secretary Ermita be ordered to cease from implementing it.

On October 11, 2005, Petitioner Senate of the Philippines,

alleging that it has a vital interest in the resolution of the
issue of the validity of E.O. 464 for it stands to suffer
imminent and material injury, as it has already sustained
the same with its continued enforcement since it directly
interferes with and impedes the valid exercise of the
Senates powers and functions and conceals information of
great public interest and concern, filed its petition for
certiorari and prohibition, docketed as G.R. No. 169777 and
prays that E.O. 464 be declared unconstitutional.
On October 14, 2005, PDP-Laban, a registered political
party with members duly elected into the Philippine Senate
and House of Representatives, filed a similar petition for
certiorari and prohibition, docketed as G.R. No. 169834,
alleging that it is affected by the challenged E.O. 464
because it hampers its legislative agenda to be
implemented through its members in Congress, particularly
in the conduct of inquiries in aid of legislation and
transcendental issues need to be resolved to avert a
constitutional crisis between the executive and legislative
branches of the government.
Meanwhile, by letter14 dated February 6, 2006, Senator
Biazon reiterated his invitation to Gen. Senga for him and
other military officers to attend the hearing on the alleged
wiretapping scheduled on February 10, 2005. Gen. Senga
replied, however, by letter15 dated February 8, 2006, that
"[p]ursuant to Executive Order No. 464, th[e] Headquarters
requested for a clearance from the President to allow
[them] to appear before the public hearing" and that "they
will attend once [their] request is approved by the
President." As none of those invited appeared, the hearing
on February 10, 2006 was cancelled.16
In another investigation conducted jointly by the Senate
Committee on Agriculture and Food and the Blue Ribbon
Committee on the alleged mismanagement and use of the

fertilizer fund under the Ginintuang Masaganang Ani

program of the Department of Agriculture (DA), several
Cabinet officials were invited to the hearings scheduled on
October 5 and 26, November 24 and December 12, 2005
but most of them failed to attend, DA Undersecretary
Belinda Gonzales, DA Assistant Secretary Felix Jose Montes,
Fertilizer and Pesticide Authority Executive Director Norlito
R. Gicana,17 and those from the Department of Budget and
Management18 having invoked E.O. 464.

publication in the Official Gazette or in a newspaper of

general circulation; and (2) whether E.O. 464 violates the
following provisions of the Constitution: Art. II, Sec. 28, Art.
III, Sec. 4, Art. III, Sec. 7, Art. IV. Sec. 1, Art. VI, Sec. 21,
Art. VI, Sec. 22, Art. XI, Sec. 1, and Art. XIII, Sec. 16. The
procedural issue of whether there is an actual case or
controversy that calls for judicial review was not taken up;
instead, the parties were instructed to discuss it in their
respective memoranda.

In the budget hearings set by the Senate on February 8 and

13, 2006, Press Secretary and Presidential Spokesperson
Ignacio R. Bunye,19 DOJ Secretary Raul M. Gonzalez20 and
Department of Interior and Local Government
Undersecretary Marius P. Corpus21 communicated their
inability to attend due to lack of appropriate clearance from
the President pursuant to E.O. 464. During the February 13,
2005 budget hearing, however, Secretary Bunye was
allowed to attend by Executive Secretary Ermita.

After the conclusion of the oral arguments, the parties were

directed to submit their respective memoranda, paying
particular attention to the following propositions: (1) that
E.O. 464 is, on its face, unconstitutional; and (2) assuming
that it is not, it is unconstitutional as applied in four
instances, namely: (a) the so called Fertilizer scam; (b) the
NorthRail investigation (c) the Wiretapping activity of the
ISAFP; and (d) the investigation on the Venable contract.22

On February 13, 2006, Jose Anselmo I. Cadiz and the

incumbent members of the Board of Governors of the
Integrated Bar of the Philippines, as taxpayers, and the
Integrated Bar of the Philippines as the official organization
of all Philippine lawyers, all invoking their constitutional
right to be informed on matters of public interest, filed their
petition for certiorari and prohibition, docketed as G.R. No.
171246, and pray that E.O. 464 be declared null and void.
All the petitions pray for the issuance of a Temporary
Restraining Order enjoining respondents from
implementing, enforcing, and observing E.O. 464.
In the oral arguments on the petitions conducted on
February 21, 2006, the following substantive issues were
ventilated: (1) whether respondents committed grave abuse
of discretion in implementing E.O. 464 prior to its

Petitioners in G.R. No. 16966023 and G.R. No. 16977724 filed

their memoranda on March 7, 2006, while those in G.R. No.
16966725 and G.R. No. 16983426 filed theirs the next day or
on March 8, 2006. Petitioners in G.R. No. 171246 did not
file any memorandum.
Petitioners Bayan Muna et al. in G.R. No. 169659, after their
motion for extension to file memorandum 27 was granted,
subsequently filed a manifestation28 dated March 14, 2006
that it would no longer file its memorandum in the interest
of having the issues resolved soonest, prompting this Court
to issue a Resolution reprimanding them.29
Petitioners submit that E.O. 464 violates the following
constitutional provisions:
Art. VI, Sec. 2130

Art. VI, Sec. 2231

requisites for a valid exercise of the Courts power of judicial

review are present is in order.

Art. VI, Sec. 132

Art. XI, Sec. 133
Art. III, Sec. 734
Art. III, Sec. 435
Art. XIII, Sec. 16

36

Art. II, Sec. 2837

Respondents Executive Secretary Ermita et al., on the other
hand, pray in their consolidated memorandum 38 on March
13, 2006 for the dismissal of the petitions for lack of merit.
The Court synthesizes the issues to be resolved as follows:
1. Whether E.O. 464 contravenes the power of
inquiry vested in Congress;
2. Whether E.O. 464 violates the right of the people
to information on matters of public concern; and
3. Whether respondents have committed grave
abuse of discretion when they implemented E.O. 464
prior to its publication in a newspaper of general
circulation.
Essential requisites for judicial review
Before proceeding to resolve the issue of the
constitutionality of E.O. 464, ascertainment of whether the

Like almost all powers conferred by the Constitution, the

power of judicial review is subject to limitations, to wit: (1)
there must be an actual case or controversy calling for the
exercise of judicial power; (2) the person challenging the
act must have standing to challenge the validity of the
subject act or issuance; otherwise stated, he must have a
personal and substantial interest in the case such that he
has sustained, or will sustain, direct injury as a result of its
enforcement; (3) the question of constitutionality must be
raised at the earliest opportunity; and (4) the issue of
constitutionality must be the very lis mota of the case. 39
Except with respect to the requisites of standing and
existence of an actual case or controversy where the
disagreement between the parties lies, discussion of the
rest of the requisites shall be omitted.
Standing
Respondents, through the Solicitor General, assert that the
allegations in G.R. Nos. 169659, 169660 and 169667 make
it clear that they, adverting to the non-appearance of
several officials of the executive department in the
investigations called by the different committees of the
Senate, were brought to vindicate the constitutional duty of
the Senate or its different committees to conduct inquiry in
aid of legislation or in the exercise of its oversight functions.
They maintain that Representatives Ocampo et al. have not
shown any specific prerogative, power, and privilege of the
House of Representatives which had been effectively
impaired by E.O. 464, there being no mention of any
investigation called by the House of Representatives or any
of its committees which was aborted due to the
implementation of E.O. 464.

As for Bayan Munas alleged interest as a party-list

representing the marginalized and underrepresented, and
that of the other petitioner groups and individuals who
profess to have standing as advocates and defenders of the
Constitution, respondents contend that such interest falls
short of that required to confer standing on them as parties
"injured-in-fact."40
Respecting petitioner Chavez, respondents contend that
Chavez may not claim an interest as a taxpayer for the
implementation of E.O. 464 does not involve the exercise of
taxing or spending power.41
With regard to the petition filed by the Senate, respondents
argue that in the absence of a personal or direct injury by
reason of the issuance of E.O. 464, the Senate and its
individual members are not the proper parties to assail the
constitutionality of E.O. 464.
Invoking this Courts ruling in National Economic
Protectionism Association v. Ongpin42 and Valmonte v.
Philippine Charity Sweepstakes Office,43 respondents assert
that to be considered a proper party, one must have a
personal and substantial interest in the case, such that he
has sustained or will sustain direct injury due to the
enforcement of E.O. 464.44
That the Senate of the Philippines has a fundamental right
essential not only for intelligent public decision-making in a
democratic system, but more especially for sound
legislation45 is not disputed. E.O. 464, however, allegedly
stifles the ability of the members of Congress to access
information that is crucial to law-making.46 Verily, the
Senate, including its individual members, has a substantial
and direct interest over the outcome of the controversy and
is the proper party to assail the constitutionality of E.O.
464. Indeed, legislators have standing to maintain inviolate

the prerogative, powers and privileges vested by the

Constitution in their office and are allowed to sue to
question the validity of any official action which they claim
infringes their prerogatives as legislators.47
In the same vein, party-list representatives Satur Ocampo
(Bayan Muna), Teodoro Casino (Bayan Muna), Joel Virador
(Bayan Muna), Crispin Beltran (Anakpawis), Rafael Mariano
(Anakpawis), and Liza Maza (Gabriela) are allowed to sue to
question the constitutionality of E.O. 464, the absence of
any claim that an investigation called by the House of
Representatives or any of its committees was aborted due
to the implementation of E.O. 464 notwithstanding, it being
sufficient that a claim is made that E.O. 464 infringes on
their constitutional rights and duties as members of
Congress to conduct investigation in aid of legislation and
conduct oversight functions in the implementation of laws.
The national political party, Bayan Muna, likewise meets the
standing requirement as it obtained three seats in the
House of Representatives in the 2004 elections and is,
therefore, entitled to participate in the legislative process
consonant with the declared policy underlying the party list
system of affording citizens belonging to marginalized and
underrepresented sectors, organizations and parties who
lack well-defined political constituencies to contribute to the
formulation and enactment of legislation that will benefit the
nation.48
As Bayan Muna and Representatives Ocampo et al. have the
standing to file their petitions, passing on the standing of
their co-petitioners Courage and Codal is rendered
unnecessary.49
In filing their respective petitions, Chavez, the ALG which
claims to be an organization of citizens, and the incumbent
members of the IBP Board of Governors and the IBP in

behalf of its lawyer members,50 invoke their constitutional

right to information on matters of public concern, asserting
that the right to information, curtailed and violated by E.O.
464, is essential to the effective exercise of other
constitutional rights51 and to the maintenance of the
balance of power among the three branches of the
government through the principle of checks and balances. 52
It is well-settled that when suing as a citizen, the interest of
the petitioner in assailing the constitutionality of laws,
presidential decrees, orders, and other regulations, must be
direct and personal. In Franciso v. House of
Representatives,53 this Court held that when the proceeding
involves the assertion of a public right, the mere fact that
he is a citizen satisfies the requirement of personal interest.
As for petitioner PDP-Laban, it asseverates that it is clothed
with legal standing in view of the transcendental issues
raised in its petition which this Court needs to resolve in
order to avert a constitutional crisis. For it to be accorded
standing on the ground of transcendental importance,
however, it must establish (1) the character of the funds
(that it is public) or other assets involved in the case, (2)
the presence of a clear case of disregard of a constitutional
or statutory prohibition by the public respondent agency or
instrumentality of the government, and (3) the lack of any
party with a more direct and specific interest in raising the
questions being raised.54 The first and last determinants not
being present as no public funds or assets are involved and
petitioners in G.R. Nos. 169777 and 169659 have direct and
specific interests in the resolution of the controversy,
petitioner PDP-Laban is bereft of standing to file its petition.
Its allegation that E.O. 464 hampers its legislative agenda is
vague and uncertain, and at best is only a "generalized
interest" which it shares with the rest of the political parties.
Concrete injury, whether actual or threatened, is that
indispensable element of a dispute which serves in part to
cast it in a form traditionally capable of judicial

resolution.55 In fine, PDP-Labans alleged interest as a

political party does not suffice to clothe it with legal
standing.
Actual Case or Controversy
Petitioners assert that an actual case exists, they citing the
absence of the executive officials invited by the Senate to
its hearings after the issuance of E.O. 464, particularly
those on the NorthRail project and the wiretapping
controversy.
Respondents counter that there is no case or controversy,
there being no showing that President Arroyo has actually
withheld her consent or prohibited the appearance of the
invited officials.56 These officials, they claim, merely
communicated to the Senate that they have not yet secured
the consent of the President, not that the President
prohibited their attendance.57 Specifically with regard to the
AFP officers who did not attend the hearing on September
28, 2005, respondents claim that the instruction not to
attend without the Presidents consent was based on its role
as Commander-in-Chief of the Armed Forces, not on E.O.
464.
Respondents thus conclude that the petitions merely rest on
an unfounded apprehension that the President will abuse its
power of preventing the appearance of officials before
Congress, and that such apprehension is not sufficient for
challenging the validity of E.O. 464.
The Court finds respondents assertion that the President
has not withheld her consent or prohibited the appearance
of the officials concerned immaterial in determining the
existence of an actual case or controversy insofar as E.O.
464 is concerned. For E.O. 464 does not require either a
deliberate withholding of consent or an express prohibition

issuing from the President in order to bar officials from

appearing before Congress.

established therein the Batasang Pambansa and its

committees.

As the implementation of the challenged order has already

resulted in the absence of officials invited to the hearings of
petitioner Senate of the Philippines, it would make no sense
to wait for any further event before considering the present
case ripe for adjudication. Indeed, it would be sheer
abandonment of duty if this Court would now refrain from
passing on the constitutionality of E.O. 464.

The 1935 Constitution did not contain a similar provision.

Nonetheless, in Arnault v. Nazareno,58 a case decided in
1950 under that Constitution, the Court already recognized
that the power of inquiry is inherent in the power to
legislate.

Constitutionality of E.O. 464

E.O. 464, to the extent that it bars the appearance of
executive officials before Congress, deprives Congress of
the information in the possession of these officials. To
resolve the question of whether such withholding of
information violates the Constitution, consideration of the
general power of Congress to obtain information, otherwise
known as the power of inquiry, is in order.
The power of inquiry
The Congress power of inquiry is expressly recognized in
Section 21 of Article VI of the Constitution which reads:
SECTION 21. The Senate or the House of Representatives or
any of its respective committees may conduct inquiries in
aid of legislation in accordance with its duly published rules
of procedure. The rights of persons appearing in or affected
by such inquiries shall be respected. (Underscoring
supplied)
This provision is worded exactly as Section 8 of Article VIII
of the 1973 Constitution except that, in the latter, it vests
the power of inquiry in the unicameral legislature

Arnault involved a Senate investigation of the reportedly

anomalous purchase of the Buenavista and Tambobong
Estates by the Rural Progress Administration. Arnault, who
was considered a leading witness in the controversy, was
called to testify thereon by the Senate. On account of his
refusal to answer the questions of the senators on an
important point, he was, by resolution of the Senate,
detained for contempt. Upholding the Senates power to
punish Arnault for contempt, this Court held:
Although there is no provision in the Constitution expressly
investing either House of Congress with power to make
investigations and exact testimony to the end that it may
exercise its legislative functions advisedly and effectively,
such power is so far incidental to the legislative function as
to be implied. In other words, the power of inquiry with
process to enforce it is an essential and appropriate
auxiliary to the legislative function. A legislative body
cannot legislate wisely or effectively in the absence of
information respecting the conditions which the legislation is
intended to affect or change; and where the legislative body
does not itself possess the requisite information which is
not infrequently true recourse must be had to others who
do possess it. Experience has shown that mere requests for
such information are often unavailing, and also that
information which is volunteered is not always accurate or
complete; so some means of compulsion is essential to
obtain what is needed.59 . . . (Emphasis and underscoring
supplied)

That this power of inquiry is broad enough to cover officials

of the executive branch may be deduced from the same
case. The power of inquiry, the Court therein ruled, is coextensive with the power to legislate.60 The matters which
may be a proper subject of legislation and those which may
be a proper subject of investigation are one. It follows that
the operation of government, being a legitimate subject for
legislation, is a proper subject for investigation.
Thus, the Court found that the Senate investigation of the
government transaction involved in Arnault was a proper
exercise of the power of inquiry. Besides being related to
the expenditure of public funds of which Congress is the
guardian, the transaction, the Court held, "also involved
government agencies created by Congress and officers
whose positions it is within the power of Congress to
regulate or even abolish."
Since Congress has authority to inquire into the operations
of the executive branch, it would be incongruous to hold
that the power of inquiry does not extend to executive
officials who are the most familiar with and informed on
executive operations.
As discussed in Arnault, the power of inquiry, "with process
to enforce it," is grounded on the necessity of information in
the legislative process. If the information possessed by
executive officials on the operation of their offices is
necessary for wise legislation on that subject, by parity of
reasoning, Congress has the right to that information and
the power to compel the disclosure thereof.
As evidenced by the American experience during the socalled "McCarthy era," however, the right of Congress to
conduct inquiries in aid of legislation is, in theory, no less
susceptible to abuse than executive or judicial power. It
may thus be subjected to judicial review pursuant to the

Courts certiorari powers under Section 1, Article VIII of the

Constitution.
For one, as noted in Bengzon v. Senate Blue Ribbon
Committee,61 the inquiry itself might not properly be in aid
of legislation, and thus beyond the constitutional power of
Congress. Such inquiry could not usurp judicial functions.
Parenthetically, one possible way for Congress to avoid such
a result as occurred in Bengzon is to indicate in its
invitations to the public officials concerned, or to any person
for that matter, the possible needed statute which prompted
the need for the inquiry. Given such statement in its
invitations, along with the usual indication of the subject of
inquiry and the questions relative to and in furtherance
thereof, there would be less room for speculation on the
part of the person invited on whether the inquiry is in aid of
legislation.
Section 21, Article VI likewise establishes crucial safeguards
that proscribe the legislative power of inquiry. The provision
requires that the inquiry be done in accordance with the
Senate or Houses duly published rules of procedure,
necessarily implying the constitutional infirmity of an inquiry
conducted without duly published rules of procedure.
Section 21 also mandates that the rights of persons
appearing in or affected by such inquiries be respected, an
imposition that obligates Congress to adhere to the
guarantees in the Bill of Rights.
These abuses are, of course, remediable before the courts,
upon the proper suit filed by the persons affected, even if
they belong to the executive branch. Nonetheless, there
may be exceptional circumstances, none appearing to
obtain at present, wherein a clear pattern of abuse of the
legislative power of inquiry might be established, resulting
in palpable violations of the rights guaranteed to members
of the executive department under the Bill of Rights. In
such instances, depending on the particulars of each case,

attempts by the Executive Branch to forestall these abuses

may be accorded judicial sanction.
Even where the inquiry is in aid of legislation, there are still
recognized exemptions to the power of inquiry, which
exemptions fall under the rubric of "executive privilege."
Since this term figures prominently in the challenged order,
it being mentioned in its provisions, its preambular
clauses,62 and in its very title, a discussion of executive
privilege is crucial for determining the constitutionality of
E.O. 464.
Executive privilege
The phrase "executive privilege" is not new in this
jurisdiction. It has been used even prior to the promulgation
of the 1986 Constitution.63 Being of American origin, it is
best understood in light of how it has been defined and used
in the legal literature of the United States.
Schwartz defines executive privilege as "the power of the
Government to withhold information from the public, the
courts, and the Congress."64 Similarly, Rozell defines it as
"the right of the President and high-level executive branch
officers to withhold information from Congress, the courts,
and ultimately the public."65
Executive privilege is, nonetheless, not a clear or unitary
concept. 66 It has encompassed claims of varying
kinds.67 Tribe, in fact, comments that while it is customary
to employ the phrase "executive privilege," it may be more
accurate to speak of executive privileges "since presidential
refusals to furnish information may be actuated by any of at
least three distinct kinds of considerations, and may be
asserted, with differing degrees of success, in the context of
either judicial or legislative investigations."

One variety of the privilege, Tribe explains, is the state

secrets privilege invoked by U.S. Presidents, beginning with
Washington, on the ground that the information is of such
nature that its disclosure would subvert crucial military or
diplomatic objectives. Another variety is the informers
privilege, or the privilege of the Government not to disclose
the identity of persons who furnish information of violations
of law to officers charged with the enforcement of that law.
Finally, a generic privilege for internal deliberations has
been said to attach to intragovernmental documents
reflecting advisory opinions, recommendations and
deliberations comprising part of a process by which
governmental decisions and policies are formulated. 68
Tribes comment is supported by the ruling in In re Sealed
Case, thus:
Since the beginnings of our nation, executive officials have
claimed a variety of privileges to resist disclosure of
information the confidentiality of which they felt was crucial
to fulfillment of the unique role and responsibilities of the
executive branch of our government. Courts ruled early that
the executive had a right to withhold documents that might
reveal military or state secrets. The courts have also
granted the executive a right to withhold the identity of
government informers in some circumstances and a
qualified right to withhold information related to pending
investigations. x x x"69 (Emphasis and underscoring
supplied)
The entry in Blacks Law Dictionary on "executive privilege"
is similarly instructive regarding the scope of the doctrine.
This privilege, based on the constitutional doctrine of
separation of powers, exempts the executive from
disclosure requirements applicable to the ordinary citizen or
organization where such exemption is necessary to the

discharge of highly important executive responsibilities

involved in maintaining governmental operations, and
extends not only to military and diplomatic secrets but also
to documents integral to an appropriate exercise of the
executive domestic decisional and policy making functions,
that is, those documents reflecting the frank expression
necessary in intra-governmental advisory and deliberative
communications.70 (Emphasis and underscoring supplied)
That a type of information is recognized as privileged does
not, however, necessarily mean that it would be considered
privileged in all instances. For in determining the validity of
a claim of privilege, the question that must be asked is not
only whether the requested information falls within one of
the traditional privileges, but also whether that privilege
should be honored in a given procedural setting.71
The leading case on executive privilege in the United States
is U.S. v. Nixon, 72 decided in 1974. In issue in that case
was the validity of President Nixons claim of executive
privilege against a subpoena issued by a district court
requiring the production of certain tapes and documents
relating to the Watergate investigations. The claim of
privilege was based on the Presidents general interest in
the confidentiality of his conversations and correspondence.
The U.S. Court held that while there is no explicit reference
to a privilege of confidentiality in the U.S. Constitution, it is
constitutionally based to the extent that it relates to the
effective discharge of a Presidents powers. The Court,
nonetheless, rejected the Presidents claim of privilege,
ruling that the privilege must be balanced against the public
interest in the fair administration of criminal justice.
Notably, the Court was careful to clarify that it was not
there addressing the issue of claims of privilege in a civil
litigation or against congressional demands for information.
Cases in the U.S. which involve claims of executive privilege
against Congress are rare.73 Despite frequent assertion of

the privilege to deny information to Congress, beginning

with President Washingtons refusal to turn over treaty
negotiation records to the House of Representatives, the
U.S. Supreme Court has never adjudicated the
issue.74 However, the U.S. Court of Appeals for the District
of Columbia Circuit, in a case decided earlier in the same
year as Nixon, recognized the Presidents privilege over his
conversations against a congressional
subpoena.75 Anticipating the balancing approach adopted by
the U.S. Supreme Court in Nixon, the Court of Appeals
weighed the public interest protected by the claim of
privilege against the interest that would be served by
disclosure to the Committee. Ruling that the balance
favored the President, the Court declined to enforce the
subpoena. 76
In this jurisdiction, the doctrine of executive privilege was
recognized by this Court in Almonte v. Vasquez.77Almonte
used the term in reference to the same privilege subject of
Nixon. It quoted the following portion of the Nixon decision
which explains the basis for the privilege:
"The expectation of a President to the confidentiality of his
conversations and correspondences, like the claim of
confidentiality of judicial deliberations, for example, has all
the values to which we accord deference for the privacy of
all citizens and, added to those values, is the necessity for
protection of the public interest in candid, objective, and
even blunt or harsh opinions in Presidential decisionmaking. A President and those who assist him must be free
to explore alternatives in the process of shaping policies and
making decisions and to do so in a way many would be
unwilling to express except privately. These are the
considerations justifying a presumptive privilege for
Presidential communications. The privilege is fundamental
to the operation of government and inextricably rooted in
the separation of powers under the Constitution x x x "
(Emphasis and underscoring supplied)

Almonte involved a subpoena duces tecum issued by the

Ombudsman against the therein petitioners. It did not
involve, as expressly stated in the decision, the right of the
people to information.78 Nonetheless, the Court recognized
that there are certain types of information which the
government may withhold from the public, thus
acknowledging, in substance if not in name, that executive
privilege may be claimed against citizens demands for
information.
In Chavez v. PCGG,79 the Court held that this jurisdiction
recognizes the common law holding that there is a
"governmental privilege against public disclosure with
respect to state secrets regarding military, diplomatic and
other national security matters."80 The same case held that
closed-door Cabinet meetings are also a recognized
limitation on the right to information.
Similarly, in Chavez v. Public Estates Authority,81 the Court
ruled that the right to information does not extend to
matters recognized as "privileged information under the
separation of powers,"82 by which the Court meant
Presidential conversations, correspondences, and
discussions in closed-door Cabinet meetings. It also held
that information on military and diplomatic secrets and
those affecting national security, and information on
investigations of crimes by law enforcement agencies before
the prosecution of the accused were exempted from the
right to information.
From the above discussion on the meaning and scope of
executive privilege, both in the United States and in this
jurisdiction, a clear principle emerges. Executive privilege,
whether asserted against Congress, the courts, or the
public, is recognized only in relation to certain types of
information of a sensitive character. While executive
privilege is a constitutional concept, a claim thereof may be
valid or not depending on the ground invoked to justify it

and the context in which it is made. Noticeably absent is

any recognition that executive officials are exempt from the
duty to disclose information by the mere fact of being
executive officials. Indeed, the extraordinary character of
the exemptions indicates that the presumption inclines
heavily against executive secrecy and in favor of disclosure.
Validity of Section 1
Section 1 is similar to Section 3 in that both require the
officials covered by them to secure the consent of the
President prior to appearing before Congress. There are
significant differences between the two provisions, however,
which constrain this Court to discuss the validity of these
provisions separately.
Section 1 specifically applies to department heads. It does
not, unlike Section 3, require a prior determination by any
official whether they are covered by E.O. 464. The President
herself has, through the challenged order, made the
determination that they are. Further, unlike also Section 3,
the coverage of department heads under Section 1 is not
made to depend on the department heads possession of
any information which might be covered by executive
privilege. In fact, in marked contrast to Section 3 vis--vis
Section 2, there is no reference to executive privilege at all.
Rather, the required prior consent under Section 1 is
grounded on Article VI, Section 22 of the Constitution on
what has been referred to as the question hour.
SECTION 22. The heads of departments may upon their own
initiative, with the consent of the President, or upon the
request of either House, as the rules of each House shall
provide, appear before and be heard by such House on any
matter pertaining to their departments. Written questions
shall be submitted to the President of the Senate or the
Speaker of the House of Representatives at least three days

before their scheduled appearance. Interpellations shall not

be limited to written questions, but may cover matters
related thereto. When the security of the State or the public
interest so requires and the President so states in writing,
the appearance shall be conducted in executive session.
Determining the validity of Section 1 thus requires an
examination of the meaning of Section 22 of Article VI.
Section 22 which provides for the question hour must be
interpreted vis--vis Section 21 which provides for the
power of either House of Congress to "conduct inquiries in
aid of legislation." As the following excerpt of the
deliberations of the Constitutional Commission shows, the
framers were aware that these two provisions involved
distinct functions of Congress.
MR. MAAMBONG. x x x When we amended Section 20 [now
Section 22 on the Question Hour] yesterday, I noticed that
members of the Cabinet cannot be compelled anymore to
appear before the House of Representatives or before the
Senate. I have a particular problem in this regard, Madam
President, because in our experience in the Regular
Batasang Pambansa as the Gentleman himself has
experienced in the interim Batasang Pambansa one of the
most competent inputs that we can put in our committee
deliberations, either in aid of legislation or in congressional
investigations, is the testimonies of Cabinet ministers. We
usually invite them, but if they do not come and it is a
congressional investigation, we usually issue subpoenas.
I want to be clarified on a statement made by Commissioner
Suarez when he said that the fact that the Cabinet ministers
may refuse to come to the House of Representatives or the
Senate [when requested under Section 22] does not mean
that they need not come when they are invited or
subpoenaed by the committee of either House when it
comes to inquiries in aid of legislation or congressional
investigation. According to Commissioner Suarez, that is

allowed and their presence can be had under Section 21.

Does the gentleman confirm this, Madam President?
MR. DAVIDE. We confirm that, Madam President, because
Section 20 refers only to what was originally the Question
Hour, whereas, Section 21 would refer specifically to
inquiries in aid of legislation, under which anybody for that
matter, may be summoned and if he refuses, he can be
held in contempt of the House.83 (Emphasis and
underscoring supplied)
A distinction was thus made between inquiries in aid of
legislation and the question hour. While attendance was
meant to be discretionary in the question hour, it was
compulsory in inquiries in aid of legislation. The reference to
Commissioner Suarez bears noting, he being one of the
proponents of the amendment to make the appearance of
department heads discretionary in the question hour.
So clearly was this distinction conveyed to the members of
the Commission that the Committee on Style, precisely in
recognition of this distinction, later moved the provision on
question hour from its original position as Section 20 in the
original draft down to Section 31, far from the provision on
inquiries in aid of legislation. This gave rise to the following
exchange during the deliberations:
MR. GUINGONA. [speaking in his capacity as Chairman of
the Committee on Style] We now go, Mr. Presiding Officer,
to the Article on Legislative and may I request the
chairperson of the Legislative Department, Commissioner
Davide, to give his reaction.
THE PRESIDING OFFICER (Mr. Jamir). Commissioner Davide
is recognized.|avvphi|.net

MR. DAVIDE. Thank you, Mr. Presiding Officer. I have only

one reaction to the Question Hour. I propose that instead of
putting it as Section 31, it should follow Legislative
Inquiries.
THE PRESIDING OFFICER. What does the committee say?
MR. GUINGONA. I ask Commissioner Maambong to reply,
Mr. Presiding Officer.
MR. MAAMBONG. Actually, we considered that previously
when we sequenced this but we reasoned that in Section
21, which is Legislative Inquiry, it is actually a power of
Congress in terms of its own lawmaking; whereas, a
Question Hour is not actually a power in terms of its own
lawmaking power because in Legislative Inquiry, it is in aid
of legislation. And so we put Question Hour as Section 31. I
hope Commissioner Davide will consider this.
MR. DAVIDE. The Question Hour is closely related with the
legislative power, and it is precisely as a complement to or
a supplement of the Legislative Inquiry. The appearance of
the members of Cabinet would be very, very essential not
only in the application of check and balance but also, in
effect, in aid of legislation.
MR. MAAMBONG. After conferring with the committee, we
find merit in the suggestion of Commissioner Davide. In
other words, we are accepting that and so this Section 31
would now become Section 22. Would it be, Commissioner
Davide?
MR. DAVIDE. Yes.

84

(Emphasis and underscoring supplied)

Consistent with their statements earlier in the deliberations,

Commissioners Davide and Maambong proceeded from the
same assumption that these provisions pertained to two

different functions of the legislature. Both Commissioners

understood that the power to conduct inquiries in aid of
legislation is different from the power to conduct inquiries
during the question hour. Commissioner Davides only
concern was that the two provisions on these distinct
powers be placed closely together, they being
complementary to each other. Neither Commissioner
considered them as identical functions of Congress.
The foregoing opinion was not the two Commissioners
alone. From the above-quoted exchange, Commissioner
Maambongs committee the Committee on Style shared
the view that the two provisions reflected distinct functions
of Congress. Commissioner Davide, on the other hand, was
speaking in his capacity as Chairman of the Committee on
the Legislative Department. His views may thus be
presumed as representing that of his Committee.
In the context of a parliamentary system of government,
the "question hour" has a definite meaning. It is a period of
confrontation initiated by Parliament to hold the Prime
Minister and the other ministers accountable for their acts
and the operation of the government,85 corresponding to
what is known in Britain as the question period. There was a
specific provision for a question hour in the 1973
Constitution86 which made the appearance of ministers
mandatory. The same perfectly conformed to the
parliamentary system established by that Constitution,
where the ministers are also members of the legislature and
are directly accountable to it.
An essential feature of the parliamentary system of
government is the immediate accountability of the Prime
Minister and the Cabinet to the National Assembly. They
shall be responsible to the National Assembly for the
program of government and shall determine the guidelines
of national policy. Unlike in the presidential system where
the tenure of office of all elected officials cannot be

terminated before their term expired, the Prime Minister

and the Cabinet remain in office only as long as they enjoy
the confidence of the National Assembly. The moment this
confidence is lost the Prime Minister and the Cabinet may
be changed.87
The framers of the 1987 Constitution removed the
mandatory nature of such appearance during the question
hour in the present Constitution so as to conform more fully
to a system of separation of powers.88 To that extent, the
question hour, as it is presently understood in this
jurisdiction, departs from the question period of the
parliamentary system. That department heads may not be
required to appear in a question hour does not, however,
mean that the legislature is rendered powerless to elicit
information from them in all circumstances. In fact, in light
of the absence of a mandatory question period, the need to
enforce Congress right to executive information in the
performance of its legislative function becomes more
imperative. As Schwartz observes:
Indeed, if the separation of powers has anything to tell us
on the subject under discussion, it is that the Congress has
the right to obtain information from any source even from
officials of departments and agencies in the executive
branch. In the United States there is, unlike the situation
which prevails in a parliamentary system such as that in
Britain, a clear separation between the legislative and
executive branches. It is this very separation that makes
the congressional right to obtain information from the
executive so essential, if the functions of the Congress as
the elected representatives of the people are adequately to
be carried out. The absence of close rapport between the
legislative and executive branches in this country,
comparable to those which exist under a parliamentary
system, and the nonexistence in the Congress of an
institution such as the British question period have perforce
made reliance by the Congress upon its right to obtain

information from the executive essential, if it is intelligently

to perform its legislative tasks. Unless the Congress
possesses the right to obtain executive information, its
power of oversight of administration in a system such as
ours becomes a power devoid of most of its practical
content, since it depends for its effectiveness solely upon
information parceled out ex gratia by the
executive.89 (Emphasis and underscoring supplied)
Sections 21 and 22, therefore, while closely related and
complementary to each other, should not be considered as
pertaining to the same power of Congress. One specifically
relates to the power to conduct inquiries in aid of
legislation, the aim of which is to elicit information that may
be used for legislation, while the other pertains to the power
to conduct a question hour, the objective of which is to
obtain information in pursuit of Congress oversight
function.
When Congress merely seeks to be informed on how
department heads are implementing the statutes which it
has issued, its right to such information is not as imperative
as that of the President to whom, as Chief Executive, such
department heads must give a report of their performance
as a matter of duty. In such instances, Section 22, in
keeping with the separation of powers, states that Congress
may only request their appearance. Nonetheless, when the
inquiry in which Congress requires their appearance is "in
aid of legislation" under Section 21, the appearance is
mandatory for the same reasons stated in Arnault.90
In fine, the oversight function of Congress may be
facilitated by compulsory process only to the extent that it
is performed in pursuit of legislation. This is consistent with
the intent discerned from the deliberations of the
Constitutional Commission.

Ultimately, the power of Congress to compel the appearance

of executive officials under Section 21 and the lack of it
under Section 22 find their basis in the principle of
separation of powers. While the executive branch is a coequal branch of the legislature, it cannot frustrate the power
of Congress to legislate by refusing to comply with its
demands for information.
When Congress exercises its power of inquiry, the only way
for department heads to exempt themselves therefrom is by
a valid claim of privilege. They are not exempt by the mere
fact that they are department heads. Only one executive
official may be exempted from this power the President
on whom executive power is vested, hence, beyond the
reach of Congress except through the power of
impeachment. It is based on her being the highest official of
the executive branch, and the due respect accorded to a coequal branch of government which is sanctioned by a longstanding custom.
By the same token, members of the Supreme Court are also
exempt from this power of inquiry. Unlike the Presidency,
judicial power is vested in a collegial body; hence, each
member thereof is exempt on the basis not only of
separation of powers but also on the fiscal autonomy and
the constitutional independence of the judiciary. This point
is not in dispute, as even counsel for the Senate, Sen. Joker
Arroyo, admitted it during the oral argument upon
interpellation of the Chief Justice.
Having established the proper interpretation of Section 22,
Article VI of the Constitution, the Court now proceeds to
pass on the constitutionality of Section 1 of E.O. 464.
Section 1, in view of its specific reference to Section 22 of
Article VI of the Constitution and the absence of any
reference to inquiries in aid of legislation, must be

construed as limited in its application to appearances of

department heads in the question hour contemplated in the
provision of said Section 22 of Article VI. The reading is
dictated by the basic rule of construction that issuances
must be interpreted, as much as possible, in a way that will
render it constitutional.
The requirement then to secure presidential consent under
Section 1, limited as it is only to appearances in the
question hour, is valid on its face. For under Section 22,
Article VI of the Constitution, the appearance of department
heads in the question hour is discretionary on their part.
Section 1 cannot, however, be applied to appearances of
department heads in inquiries in aid of legislation. Congress
is not bound in such instances to respect the refusal of the
department head to appear in such inquiry, unless a valid
claim of privilege is subsequently made, either by the
President herself or by the Executive Secretary.
Validity of Sections 2 and 3
Section 3 of E.O. 464 requires all the public officials
enumerated in Section 2(b) to secure the consent of the
President prior to appearing before either house of
Congress. The enumeration is broad. It covers all senior
officials of executive departments, all officers of the AFP and
the PNP, and all senior national security officials who, in the
judgment of the heads of offices designated in the same
section (i.e. department heads, Chief of Staff of the AFP,
Chief of the PNP, and the National Security Adviser), are
"covered by the executive privilege."
The enumeration also includes such other officers as may be
determined by the President. Given the title of Section 2
"Nature, Scope and Coverage of Executive Privilege" , it is
evident that under the rule of ejusdem generis, the

determination by the President under this provision is

intended to be based on a similar finding of coverage under
executive privilege.
En passant, the Court notes that Section 2(b) of E.O. 464
virtually states that executive privilege actually covers
persons. Such is a misuse of the doctrine. Executive
privilege, as discussed above, is properly invoked in relation
to specific categories of information and not to categories of
persons.
In light, however, of Sec 2(a) of E.O. 464 which deals with
the nature, scope and coverage of executive privilege, the
reference to persons being "covered by the executive
privilege" may be read as an abbreviated way of saying that
the person is in possession of information which is, in the
judgment of the head of office concerned, privileged as
defined in Section 2(a). The Court shall thus proceed on the
assumption that this is the intention of the challenged
order.
Upon a determination by the designated head of office or by
the President that an official is "covered by the executive
privilege," such official is subjected to the requirement that
he first secure the consent of the President prior to
appearing before Congress. This requirement effectively
bars the appearance of the official concerned unless the
same is permitted by the President. The proviso allowing
the President to give its consent means nothing more than
that the President may reverse a prohibition which already
exists by virtue of E.O. 464.
Thus, underlying this requirement of prior consent is the
determination by a head of office, authorized by the
President under E.O. 464, or by the President herself, that
such official is in possession of information that is covered
by executive privilege. This determination then becomes the

basis for the officials not showing up in the legislative

investigation.
In view thereof, whenever an official invokes E.O. 464 to
justify his failure to be present, such invocation must be
construed as a declaration to Congress that the President,
or a head of office authorized by the President, has
determined that the requested information is privileged, and
that the President has not reversed such determination.
Such declaration, however, even without mentioning the
term "executive privilege," amounts to an implied claim that
the information is being withheld by the executive branch,
by authority of the President, on the basis of executive
privilege. Verily, there is an implied claim of privilege.
The letter dated September 28, 2005 of respondent
Executive Secretary Ermita to Senate President Drilon
illustrates the implied nature of the claim of privilege
authorized by E.O. 464. It reads:
In connection with the inquiry to be conducted by the
Committee of the Whole regarding the Northrail Project of
the North Luzon Railways Corporation on 29 September
2005 at 10:00 a.m., please be informed that officials of the
Executive Department invited to appear at the meeting will
not be able to attend the same without the consent of the
President, pursuant to Executive Order No. 464 (s. 2005),
entitled "Ensuring Observance Of The Principle Of
Separation Of Powers, Adherence To The Rule On Executive
Privilege And Respect For The Rights Of Public Officials
Appearing In Legislative Inquiries In Aid Of Legislation
Under The Constitution, And For Other Purposes". Said
officials have not secured the required consent from the
President. (Underscoring supplied)
The letter does not explicitly invoke executive privilege or
that the matter on which these officials are being requested

to be resource persons falls under the recognized grounds

of the privilege to justify their absence. Nor does it
expressly state that in view of the lack of consent from the
President under E.O. 464, they cannot attend the hearing.
Significant premises in this letter, however, are left
unstated, deliberately or not. The letter assumes that the
invited officials are covered by E.O. 464. As explained
earlier, however, to be covered by the order means that a
determination has been made, by the designated head of
office or the President, that the invited official possesses
information that is covered by executive privilege. Thus,
although it is not stated in the letter that such
determination has been made, the same must be deemed
implied. Respecting the statement that the invited officials
have not secured the consent of the President, it only
means that the President has not reversed the standing
prohibition against their appearance before Congress.
Inevitably, Executive Secretary Ermitas letter leads to the
conclusion that the executive branch, either through the
President or the heads of offices authorized under E.O. 464,
has made a determination that the information required by
the Senate is privileged, and that, at the time of writing,
there has been no contrary pronouncement from the
President. In fine, an implied claim of privilege has been
made by the executive.
While there is no Philippine case that directly addresses the
issue of whether executive privilege may be invoked against
Congress, it is gathered from Chavez v. PEA that certain
information in the possession of the executive may validly
be claimed as privileged even against Congress. Thus, the
case holds:
There is no claim by PEA that the information demanded by
petitioner is privileged information rooted in the separation

of powers. The information does not cover Presidential

conversations, correspondences, or discussions during
closed-door Cabinet meetings which, like internaldeliberations of the Supreme Court and other collegiate
courts, or executive sessions of either house of Congress,
are recognized as confidential. This kind of information
cannot be pried open by a co-equal branch of government.
A frank exchange of exploratory ideas and assessments,
free from the glare of publicity and pressure by interested
parties, is essential to protect the independence of decisionmaking of those tasked to exercise Presidential, Legislative
and Judicial power. This is not the situation in the instant
case.91 (Emphasis and underscoring supplied)
Section 3 of E.O. 464, therefore, cannot be dismissed
outright as invalid by the mere fact that it sanctions claims
of executive privilege. This Court must look further and
assess the claim of privilege authorized by the Order to
determine whether it is valid.
While the validity of claims of privilege must be assessed on
a case to case basis, examining the ground invoked therefor
and the particular circumstances surrounding it, there is, in
an implied claim of privilege, a defect that renders it invalid
per se. By its very nature, and as demonstrated by the
letter of respondent Executive Secretary quoted above, the
implied claim authorized by Section 3 of E.O. 464 is not
accompanied by any specific allegation of the basis thereof
(e.g., whether the information demanded involves military
or diplomatic secrets, closed-door Cabinet meetings, etc.).
While Section 2(a) enumerates the types of information that
are covered by the privilege under the challenged order,
Congress is left to speculate as to which among them is
being referred to by the executive. The enumeration is not
even intended to be comprehensive, but a mere statement
of what is included in the phrase "confidential or classified
information between the President and the public officers
covered by this executive order."

Certainly, Congress has the right to know why the executive

considers the requested information privileged. It does not
suffice to merely declare that the President, or an
authorized head of office, has determined that it is so, and
that the President has not overturned that determination.
Such declaration leaves Congress in the dark on how the
requested information could be classified as privileged. That
the message is couched in terms that, on first impression,
do not seem like a claim of privilege only makes it more
pernicious. It threatens to make Congress doubly blind to
the question of why the executive branch is not providing it
with the information that it has requested.
A claim of privilege, being a claim of exemption from an
obligation to disclose information, must, therefore, be
clearly asserted. As U.S. v. Reynolds teaches:
The privilege belongs to the government and must be
asserted by it; it can neither be claimed nor waived by a
private party. It is not to be lightly invoked. There must be
a formal claim of privilege, lodged by the head of the
department which has control over the matter, after actual
personal consideration by that officer. The court itself must
determine whether the circumstances are appropriate for
the claim of privilege, and yet do so without forcing a
disclosure of the very thing the privilege is designed to
protect.92 (Underscoring supplied)
Absent then a statement of the specific basis of a claim of
executive privilege, there is no way of determining whether
it falls under one of the traditional privileges, or whether,
given the circumstances in which it is made, it should be
respected.93 These, in substance, were the same criteria in
assessing the claim of privilege asserted against the
Ombudsman in Almonte v. Vasquez94 and, more in point,
against a committee of the Senate in Senate Select
Committee on Presidential Campaign Activities v. Nixon.95

A.O. Smith v. Federal Trade Commission is enlightening:

[T]he lack of specificity renders an assessment of the
potential harm resulting from disclosure impossible, thereby
preventing the Court from balancing such harm against
plaintiffs needs to determine whether to override any
claims of privilege.96 (Underscoring supplied)
And so is U.S. v. Article of Drug:97
On the present state of the record, this Court is not called
upon to perform this balancing operation. In stating its
objection to claimants interrogatories, government asserts,
and nothing more, that the disclosures sought by claimant
would inhibit the free expression of opinion that nondisclosure is designed to protect. The government has not
shown nor even alleged that those who evaluated
claimants product were involved in internal policymaking,
generally, or in this particular instance. Privilege cannot be
set up by an unsupported claim. The facts upon which the
privilege is based must be established. To find these
interrogatories objectionable, this Court would have to
assume that the evaluation and classification of claimants
products was a matter of internal policy formulation, an
assumption in which this Court is unwilling to indulge sua
sponte.98 (Emphasis and underscoring supplied)
Mobil Oil Corp. v. Department of Energy99 similarly
emphasizes that "an agency must provide precise and
certain reasons for preserving the confidentiality of
requested information."
Black v. Sheraton Corp. of America100 amplifies, thus:
A formal and proper claim of executive privilege requires a
specific designation and description of the documents within
its scope as well as precise and certain reasons for

preserving their confidentiality. Without this specificity, it is

impossible for a court to analyze the claim short of
disclosure of the very thing sought to be protected. As the
affidavit now stands, the Court has little more than its sua
sponte speculation with which to weigh the applicability of
the claim. An improperly asserted claim of privilege is no
claim of privilege. Therefore, despite the fact that a claim
was made by the proper executive as Reynolds requires, the
Court can not recognize the claim in the instant case
because it is legally insufficient to allow the Court to make a
just and reasonable determination as to its applicability. To
recognize such a broad claim in which the Defendant has
given no precise or compelling reasons to shield these
documents from outside scrutiny, would make a farce of the
whole procedure.101 (Emphasis and underscoring supplied)
Due respect for a co-equal branch of government,
moreover, demands no less than a claim of privilege clearly
stating the grounds therefor. Apropos is the following ruling
in McPhaul v. U.S:102
We think the Courts decision in United States v. Bryan, 339
U.S. 323, 70 S. Ct. 724, is highly relevant to these
questions. For it is as true here as it was there, that if
(petitioner) had legitimate reasons for failing to produce the
records of the association, a decent respect for the House of
Representatives, by whose authority the subpoenas issued,
would have required that (he) state (his) reasons for
noncompliance upon the return of the writ. Such a
statement would have given the Subcommittee an
opportunity to avoid the blocking of its inquiry by taking
other appropriate steps to obtain the records. To deny the
Committee the opportunity to consider the objection or
remedy is in itself a contempt of its authority and an
obstruction of its processes. His failure to make any such
statement was "a patent evasion of the duty of one
summoned to produce papers before a congressional

committee[, and] cannot be condoned." (Emphasis and

underscoring supplied; citations omitted)
Upon the other hand, Congress must not require the
executive to state the reasons for the claim with such
particularity as to compel disclosure of the information
which the privilege is meant to protect.103 A useful analogy
in determining the requisite degree of particularity would be
the privilege against self-incrimination. Thus, Hoffman v.
U.S.104 declares:
The witness is not exonerated from answering merely
because he declares that in so doing he would incriminate
himself his say-so does not of itself establish the hazard
of incrimination. It is for the court to say whether his silence
is justified, and to require him to answer if it clearly
appears to the court that he is mistaken. However, if the
witness, upon interposing his claim, were required to prove
the hazard in the sense in which a claim is usually required
to be established in court, he would be compelled to
surrender the very protection which the privilege is
designed to guarantee. To sustain the privilege, it need only
be evident from the implications of the question, in the
setting in which it is asked, that a responsive answer to the
question or an explanation of why it cannot be answered
might be dangerous because injurious disclosure could
result." x x x (Emphasis and underscoring supplied)
The claim of privilege under Section 3 of E.O. 464 in relation
to Section 2(b) is thus invalid per se. It is not asserted. It is
merely implied. Instead of providing precise and certain
reasons for the claim, it merely invokes E.O. 464, coupled
with an announcement that the President has not given her
consent. It is woefully insufficient for Congress to determine
whether the withholding of information is justified under the
circumstances of each case. It severely frustrates the power
of inquiry of Congress.

In fine, Section 3 and Section 2(b) of E.O. 464 must be

invalidated.
No infirmity, however, can be imputed to Section 2(a) as it
merely provides guidelines, binding only on the heads of
office mentioned in Section 2(b), on what is covered by
executive privilege. It does not purport to be conclusive on
the other branches of government. It may thus be
construed as a mere expression of opinion by the President
regarding the nature and scope of executive privilege.
Petitioners, however, assert as another ground for
invalidating the challenged order the alleged unlawful
delegation of authority to the heads of offices in Section
2(b). Petitioner Senate of the Philippines, in particular, cites
the case of the United States where, so it claims, only the
President can assert executive privilege to withhold
information from Congress.
Section 2(b) in relation to Section 3 virtually provides that,
once the head of office determines that a certain
information is privileged, such determination is presumed to
bear the Presidents authority and has the effect of
prohibiting the official from appearing before Congress,
subject only to the express pronouncement of the President
that it is allowing the appearance of such official. These
provisions thus allow the President to authorize claims of
privilege by mere silence.
Such presumptive authorization, however, is contrary to the
exceptional nature of the privilege. Executive privilege, as
already discussed, is recognized with respect to information
the confidential nature of which is crucial to the fulfillment
of the unique role and responsibilities of the executive
branch,105 or in those instances where exemption from
disclosure is necessary to the discharge of highly important
executive responsibilities.106 The doctrine of executive

privilege is thus premised on the fact that certain

informations must, as a matter of necessity, be kept
confidential in pursuit of the public interest. The privilege
being, by definition, an exemption from the obligation to
disclose information, in this case to Congress, the necessity
must be of such high degree as to outweigh the public
interest in enforcing that obligation in a particular case.
In light of this highly exceptional nature of the privilege, the
Court finds it essential to limit to the President the power to
invoke the privilege. She may of course authorize the
Executive Secretary to invoke the privilege on her behalf, in
which case the Executive Secretary must state that the
authority is "By order of the President," which means that
he personally consulted with her. The privilege being an
extraordinary power, it must be wielded only by the highest
official in the executive hierarchy. In other words, the
President may not authorize her subordinates to exercise
such power. There is even less reason to uphold such
authorization in the instant case where the authorization is
not explicit but by mere silence. Section 3, in relation to
Section 2(b), is further invalid on this score.
It follows, therefore, that when an official is being
summoned by Congress on a matter which, in his own
judgment, might be covered by executive privilege, he must
be afforded reasonable time to inform the President or the
Executive Secretary of the possible need for invoking the
privilege. This is necessary in order to provide the President
or the Executive Secretary with fair opportunity to consider
whether the matter indeed calls for a claim of executive
privilege. If, after the lapse of that reasonable time, neither
the President nor the Executive Secretary invokes the
privilege, Congress is no longer bound to respect the failure
of the official to appear before Congress and may then opt
to avail of the necessary legal means to compel his
appearance.

The Court notes that one of the expressed purposes for

requiring officials to secure the consent of the President
under Section 3 of E.O. 464 is to ensure "respect for the
rights of public officials appearing in inquiries in aid of
legislation." That such rights must indeed be respected by
Congress is an echo from Article VI Section 21 of the
Constitution mandating that "[t]he rights of persons
appearing in or affected by such inquiries shall be
respected."
In light of the above discussion of Section 3, it is clear that
it is essentially an authorization for implied claims of
executive privilege, for which reason it must be invalidated.
That such authorization is partly motivated by the need to
ensure respect for such officials does not change the infirm
nature of the authorization itself.
Right to Information
E.O 464 is concerned only with the demands of Congress for
the appearance of executive officials in the hearings
conducted by it, and not with the demands of citizens for
information pursuant to their right to information on
matters of public concern. Petitioners are not amiss in
claiming, however, that what is involved in the present
controversy is not merely the legislative power of inquiry,
but the right of the people to information.
There are, it bears noting, clear distinctions between the
right of Congress to information which underlies the power
of inquiry and the right of the people to information on
matters of public concern. For one, the demand of a citizen
for the production of documents pursuant to his right to
information does not have the same obligatory force as a
subpoena duces tecum issued by Congress. Neither does
the right to information grant a citizen the power to exact

testimony from government officials. These powers belong

only to Congress and not to an individual citizen.
Thus, while Congress is composed of representatives
elected by the people, it does not follow, except in a highly
qualified sense, that in every exercise of its power of
inquiry, the people are exercising their right to information.
To the extent that investigations in aid of legislation are
generally conducted in public, however, any executive
issuance tending to unduly limit disclosures of information
in such investigations necessarily deprives the people of
information which, being presumed to be in aid of
legislation, is presumed to be a matter of public concern.
The citizens are thereby denied access to information which
they can use in formulating their own opinions on the
matter before Congress opinions which they can then
communicate to their representatives and other government
officials through the various legal means allowed by their
freedom of expression. Thus holds Valmonte v. Belmonte:
It is in the interest of the State that the channels for free
political discussion be maintained to the end that the
government may perceive and be responsive to the peoples
will. Yet, this open dialogue can be effective only to the
extent that the citizenry is informed and thus able to
formulate its will intelligently. Only when the participants in
the discussion are aware of the issues and have access to
information relating thereto can such bear fruit.107(Emphasis
and underscoring supplied)
The impairment of the right of the people to information as
a consequence of E.O. 464 is, therefore, in the sense
explained above, just as direct as its violation of the
legislatures power of inquiry.
Implementation of E.O. 464 prior to its publication

While E.O. 464 applies only to officials of the executive

branch, it does not follow that the same is exempt from the
need for publication. On the need for publishing even those
statutes that do not directly apply to people in general,
Taada v. Tuvera states:
The term "laws" should refer to all laws and not only to
those of general application, for strictly speaking all laws
relate to the people in general albeit there are some that do
not apply to them directly. An example is a law granting
citizenship to a particular individual, like a relative of
President Marcos who was decreed instant naturalization. It
surely cannot be said that such a law does not affect the
public although it unquestionably does not apply directly to
all the people. The subject of such law is a matter of public
interest which any member of the body politic may question
in the political forums or, if he is a proper party, even in
courts of justice.108 (Emphasis and underscoring supplied)
Although the above statement was made in reference to
statutes, logic dictates that the challenged order must be
covered by the publication requirement. As explained
above, E.O. 464 has a direct effect on the right of the
people to information on matters of public concern. It is,
therefore, a matter of public interest which members of the
body politic may question before this Court. Due process
thus requires that the people should have been apprised of
this issuance before it was implemented.
Conclusion
Congress undoubtedly has a right to information from the
executive branch whenever it is sought in aid of legislation.
If the executive branch withholds such information on the
ground that it is privileged, it must so assert it and state the
reason therefor and why it must be respected.

The infirm provisions of E.O. 464, however, allow the

executive branch to evade congressional requests for
information without need of clearly asserting a right to do
so and/or proffering its reasons therefor. By the mere
expedient of invoking said provisions, the power of
Congress to conduct inquiries in aid of legislation is
frustrated. That is impermissible. For
[w]hat republican theory did accomplishwas to reverse the
old presumption in favor of secrecy, based on the divine
right of kings and nobles, and replace it with a presumption
in favor of publicity, based on the doctrine of popular
sovereignty. (Underscoring supplied)109
Resort to any means then by which officials of the executive
branch could refuse to divulge information cannot be
presumed valid. Otherwise, we shall not have merely
nullified the power of our legislature to inquire into the
operations of government, but we shall have given up
something of much greater value our right as a people to
take part in government.
WHEREFORE, the petitions are PARTLY GRANTED. Sections
2(b) and 3 of Executive Order No. 464 (series of 2005),
"Ensuring Observance of the Principle of Separation of
Powers, Adherence to the Rule on Executive
Privilege and Respect for the Rights of Public Officials
Appearing in Legislative Inquiries in Aid of Legislation Under
the Constitution, and For Other Purposes," are declared
VOID. Sections 1 and 2(a) are, however, VALID.
SO ORDERED.
CONCHITA CARPIO MORALES
Associate Justice

WE CONCUR:

CERTIFICATION
ARTEMIO V. PANGANIBAN
Chief Justice

(ON LEAVE)
REYNATO S. PUNO
Associate Justice

LEONARDO A.
QUISUMBING
Associate Justice

CONSUELO YNARESSANTIAGO
Asscociate Justice
ANGELINA SANDOVALGUTIERREZ
Asscociate Justice

Pursuant to Article VIII, Section 13 of the Constitution, it is

hereby certified that the conclusions in the above Resolution
were reached in consultation before the case was assigned
to the writer of the opinion of the Court.
ARTEMIO V. PANGANIBAN
Chief Justice

Footnotes
*

ANTONIO T. CARPIO
Associate Justice

MA. ALICIA AUSTRIAMARTINEZ

Asscociate Justice

RENATO C. CORONA
Associate Justice

ADOLFO S. AZCUNA
Asscociate Justice

ROMEO J. CALLEJO,
SR.
Associate Justice

DANTE O. TINGA
Asscociate Justice

MINITA V. CHICONAZARIO
Associate Justice

CANCIO C. GARCIA
Asscociate Justice

Henceforth, in consolidated petitions which assail

the validity or constitutionality of an issuance of a
government official or agency, the petitioner which is
the most directly affected by the issuance shall be
first in the order of enumeration of the titles of the
petitions irrespective of their docket numbers or
dates of filing.
**

PRESBITERO J. VELASCO, JR.

Associate Justice

On Leave.

Hamilton, The Federalist No. 70.

Annexes "J-2" to "J-7," rollo (G.R. No. 169777), pp.

72-77.
3

Annex "G," id. at 58.

Annex "B," id. at 52.

Annex "C," id. at 53.

Annex "D," id. at 54-55.

13

Rollo (G.R. No. 169667), p. 22.

Annex "A," id. at 48-51.

14

Annex "H," id. at 460-461.

Annex "F," id. at 57.

15

Annex "H-1," id. at 462.

Annex "H," id. at 59.

16

Rollo (G.R. No. 169777), pp. 383-384.

10

Rollo (G.R. No. 169777), p. 379.

17

Annex "K," rollo (G.R. No. 169777), p. 466.

11

Ibid.

18

Annex "J," id. at 465.

19

Annex "M," id. at 468.

20

Annex "N," id. at 469.

21

Annex "O," id. at 470.

12

The petitioner names the following organizations

as members: Albert Schweitzer Association,
Philippines, Inc. (ASAP), Alternative Law Research
and Development Center, Inc. (ALTERLAW), Ateneo
Human Rights Center (AHRC), Balay Alternative
Legal Advocates for Development in Mindanaw, Inc
(BALAOD Mindanaw), Childrens Legal Bureau (CLB),
Inc., Environment Legal Assistance Center (ELAC),
Free Rehabilitation, Economic, Education and Legal
Assistance Volunteers Association, Inc. (FREELAVA),
Kaisahan Tungo sa Kaunlaran ng Kanayunan at
Repormang Pansakahan (KAISAHAN), Legal Rights
and Natural Resources Center-Kasama sa
Kalikasan/Friends of the Earth-Philippines, Inc. (LRCLSK/FOEI-Phils.), Paglilingkod Batas Pangkapatiran
Foundation (PBPF), Participatory Research
Organization of Communities and Education Towards
Struggle for Self-Reliance (PROCESS) FoundationPANAY, Inc., Pilipina Legal Resources Center (PLRC),
Sentro ng Alternatibong Lingap Panligal (SALIGAN),
Tanggapang Panligal ng Katutubong Pilipino
(PANLIPI), Tanggol Kalikasan (TK), Womens Legal
Bureau (WLB), and Womens Legal Education,
Advocacy and Defense Foundation, Inc.
(WomenLEAD).

22

Court En Banc Resolution dated February 21,

2006, rollo (G.R. No. 169659), pp. 370-372.
23

Rollo (G.R. No. 169660), pp. 339-370.

24

Rollo (G.R. No. 169777), pp. 373-439.

25

Rollo (G.R. No. 169667), pp. 388-426.

26

Rollo (G.R. No. 169834), pp. 211-240.

27

Rollo (G.R. No. 169659), pp. 419-421.

28

id. at 469-471.

29

Court En Banc Resolution dated March 21, 2006,

rollo (G.R. No. 169659), pp. 570-572.

30

Sec. 21. The Senate or the House of

Representatives or any of its respective committees
may conduct inquiries in aid of legislation in
accordance with its duly published rules of
procedure. The rights of persons appearing in or
affected by such inquiries shall be respected.

to official records, and to documents, and papers

pertaining to official acts, transactions, or decisions,
as well as to government research data used as
basis for policy development, shall be afforded the
citizen, subject to such limitations as may be
provided by law.

31

35

Sec. 22. The heads of departments may upon their

own initiative, with the consent of the President, or
upon the request of either House, as the rules of
each House shall provide, appear before and be
heard by such House on any matter pertaining to
their departments. Written questions shall be
submitted to the President of the Senate or the
Speaker of the House of Representatives at least
three days before their scheduled appearance.
Interpellations shall not be limited to written
questions, but may cover matters related thereto.
When the security of the State or the public interest
so requires and the President so states in writing,
the appearance shall be conducted in executive
session.
32

Sec. 1. The legislative power shall be vested in the

Congress of the Philippines which shall consist of a
Senate and a House of Representatives, except to
the extent reserved to the people by the provision on
initiative and referendum.1avvphil.net
33

Sec. 1. Public office is a public trust. Public officers

and employees must at all times be accountable to
the people, serve them with utmost responsibility,
integrity, loyalty, and efficiency, act with patriotism
and justice, and lead modest lives.
34

Sec. 7. The right of the people to information on

matters of public concern shall be recognized. Access

Sec. 4. No law shall be passed abridging the

freedom of speech, of expression, or of the press, or
the right of the people peaceably to assemble and
petition the government for redress of grievances.
36

Sec. 16. The right of the people and their

organizations to effective and reasonable
participation at all levels of social, political, and
economic decision-making shall not be abridged. The
State shall, by law, facilitate the establishment of
adequate consultation mechanisms.
37

Sec. 28. Subject to reasonable conditions

prescribed by law, the State adopts and implements
a policy of full public disclosure of all its transactions
involving public interest.
38

Rollo (G.R. No. 169777), pp. 524-569.

39

Francisco v. House of Representatives, G.R. No.

160261, November 10, 2003, 415 SCRA 44, 133.
40

Citing Lujan v. Defenders of Wildlife, 504 US 555,

119 L. Ed.2d 351 (1992), rollo (G.R. No. 169777), p.
116.
41

Citing Lim v. Hon. Exec. Sec., 430 Phil. 555

(2002), rollo (G.R. No. 169777), p. 116.
42

G.R. No. 67752, April 10, 1989, 171 SCRA 657.

43

G.R. No. 78716, September 22, 1987 (res).

44

Rollo (G.R. No. 169777), p. 117.

45

46

Id. at 279.
Ibid.

50

IBP Board of Governors Resolution No. XVII-200518, rollo (G.R. No 171246), p. 28.
51

Rollo (G.R. No. 169667), p. 3.

52

Rollo (G.R. No. 169660), p. 5.

53

Supra note 39 at 136.

47

Pimentel Jr., v. Executive Secretary, G.R. No.

158088, July 6, 2005, 462 SCRA 623, 631-632.

54

Francisco, Jr. v. House of Representatives, supra

note 39 at 139.

48

Section 2 of The Party-List System Act (Republic

Act 7941) reads:
SEC. 2. Declaration of Policy. The State shall
promote proportional representation in the election
of representatives to the House of Representatives
through a party-list system of registered national,
regional and sectoral parties or organizations or
coalitions thereof, which will enable Filipino citizens
belonging to marginalized and underrepresented
sectors, organizations and parties, and who lack
well-defined political constituencies but who could
contribute to the formulation and enactment of
appropriate legislation that will benefit the nation as
a whole, to become members of the House of
Representatives. Towards this end, the State shall
develop and guarantee a full, free and open party
system in order to attain the broadest possible
representation of party, sectoral or group interests in
the House of Representatives by enhancing their
chances to compete for and win seats in the
legislature, and shall provide the simplest scheme
possible.
49

Chavez v. PCGG, G.R. No. 130716, December 9,

1998, 299 SCRA 744 , 761 (1998).

55

Lozada v. Commission on Elections, 205 Phil. 283,

287 (1983).
56

Rollo (G.R. No. 169659), p. 79.

57

Rollo (G.R. No. 169659), pp. 80-81.

58

87 Phil. 29 (1950).

59

Supra at 45, citing McGrain v. Daugherty 273 US

135, 47 S. Ct. 319, 71 L.Ed. 580, 50 A.L.R. 1
(1927).
60

Id. at 46.

61

G.R. 89914, Nov. 20, 1991, 203 SCRA 767.

62

"WHEREAS, pursuant to the rule on executive

privilege, the President and those who assist her
must be free to explore the alternatives in the
process of shaping policies and making decisions
since this is fundamental to the operation of the
government and is rooted in the separation of
powers under the Constitution;

xxxx

71

I L.Tribe, supra note 68 at 771.

"WHEREAS, recent events, particularly with respect

to the invitation of a member of the Cabinet by the
Senate as well as various heads of offices, civilian
and military, have highlighted the need to ensure the
observance of the principle of separation of powers,
adherence to the rule on executive privilege and
respect for the rights of persons appearing in such
inquiries in aid of legislation and due regard to
constitutional mandate; x x x"

72

418 U.S. 683 (1974)

63

II Record, Constitutional Commission 150-151

(July 23, 1986).
64

B. Schwartz, Executive Privilege and Congressional

Investigatory Power 47 Cal. L. Rev. 3.
65

M. Rozell, Executive Privilege and the Modern

Presidents: In Nixons Shadow (83 Minn. L. Rev.
1069).
66

P. Shane & H. Bruff, Separation of Powers: Law

Cases and Materials 292 (1996).
67

Id. at 293.

68

I L.Tribe, American Constitutional Law 770-1 (3rd

ed., 2000).
69

70

121 F.3d 729, 326 U.S. App. D.C. 276.

Blacks Law Dictionary 569-570 (6th ed., 1991)

citing 5 U.S.C.A. Sec. 552(b)(1); Black v. Sheraton
Corp. of America, D.C.D.C., 371 F.Supp. 97, 100.

73

In re Sealed Case 121 F.3d 729, 326 U.S.App.D.C.

276 (1997) states: "It appears that the courts have
been drawn into executive-congressional privilege
disputes over access to information on only three
recent occasions. These were: Unites States v. AT&T,
551 F.2d 384 (D.C. Cir.1976), appeal after remand,
567 F.2d 121 (D.C.Cir.1977); Senate Select
Committee on Presidential Campaign Activities v.
Nixon (Senate Committee), 498 F.2d 725 (D.C. Cir.
1974); United States v. House of Representatives,
556 F. Supp. 150 (D.D.C. 1983)"; Vide R. Iraola,
Congressional Oversight, Executive Privilege, and
Requests for Information Relating to Federal Criminal
Investigations and Prosecutions (87 Iowa L. Rev.
1559): "The Supreme Court has yet to rule on a
dispute over information requested by Congress
where executive privilege has been asserted; in the
past twenty-five years, there have been only three
reported cases dealing with this issue."
74

J. Chaper & R. Fallon, Jr., Constitutional Law:

Cases Comments Questions 197 (9th ed., 2001).
75

Senate Select Committee on Presidential

Campaign Activities v. Nixon 498 F.2d 725, 162
U.S.App.D.C.183 (May 23, 1974).
76

N. Redlich & B. Schwartz, Constitutional Law 333

(3rd ed. ,1996) states in Note 24: "Now that the
Supreme Court decision has specifically recognized a
"privilege of confidentiality of Presidential
communications," the Select Committee decision
appears even stronger. If the need of the Watergate

Committee for evidence was not enough before the

Supreme Court recognized executive privilege, the
same would surely have been true after the
recognition. And, if the demand of the Watergate
Committee, engaged in a specific investigation of
such importance, was not enough to outweigh the
nondisclosure claim, it is hard to see what
Congressional demand will fare better when met by
an assertion of privilege."
77

314 Phil. 150 (1995).

78

Comm. Almonte v. Hon. Vasquez, 314 Phil. 150,

166 (1995) states: "To put this case in perspective it
should be stated at the outset that it does not
concern a demand by a citizen for information under
the freedom of information guarantee of the
Constitution."

86

Constitution (1973), Art. VIII, Sec. 12(1).

87

R. Martin, The New Constitution of the Philippines

394 (1973).
88

II Record, Constitutional Commission 133 (July 23,

1986).
89

Schwartz, supra at 11-12.

90

Supra.

91

Supra note 82 at 189.

92

345 U.S. 1 , 73 S. Ct. 528, 97 L.Ed. 727, 32

A.L.R.2d 382 (1953).
93

Vide Tribe, supra note 68.

94

Supra note 78.

95

Supra note 75.

96

403 F.Supp. 1000, 20 Fed,R.Serv.2d 1382 (1975).

Chavez v. Public Estates Authority, 433 Phil. 506,

534 (2002).

97

43 F.R.D. 181 (1967).

83

98

Ibid., citation omitted.

99

520 F.Supp.414, 32 Fed.R.Serv.2d 913 (1981).

79

80

81

360 Phil. 133 (1998).

Chavez v. PCGG, 360 Phil. 133, 160 (1998).
433 Phil. 506 (2002).

82

II Record, Constitutional Commission 199 (July 24,

1986).
84

II Record, Constitutional Commission 900-1

(October 12, 1986).

100

371 F.Supp.97, 18 Fed.R.Serv.2d 563 (1974).

85

101

Ibid., citations omitted.

H. Mendoza & A. Lim, The New Constitution 177

(1974).

102

364 U.S. 372, 81 S.Ct. 138, 5 L.Ed.2d 136

(1960).
103

U.S. v. Reynolds, supra note 85.

104

341 U.S. 479, 71 S.Ct. 814, 95 L.Ed. 1118

(1951).
105

In re Sealed Case, supra note 69.

106

Blacks Law Dictionary, supra note 70 at 569.

107

G.R. No. 74930, February 13, 1989, 170 SCRA

256.
108

G.R. No. L-63915, December 29, 1986, 146 SCRA

446, 453.
109

Hoffman, Governmental Secrecy and the

Founding Fathers: A Study in Constitutional Controls
(1981) 13.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC

G.R. No. 115455 August 25, 1994

ARTURO M. TOLENTINO, petitioner,
vs.
THE SECRETARY OF FINANCE and THE COMMISSIONER OF
INTERNAL REVENUE, respondents.
G.R. No. 115525 August 25, 1994
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.

PHILIPPINE PRESS INSTITUTE, INC.; EGP PUBLISHING CO.,

INC.; 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 August 25, 1994
CHAMBER OF REAL ESTATE AND BUILDERS
ASSOCIATIONS, INC., (CREBA), petitioner,
vs.
THE COMMISSIONER OF INTERNAL REVENUE, respondent.
G.R. No. 115781 August 25, 1994

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.

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.,
PHILIPPINE BIBLE SOCIETY, INC., and WIGBERTO
TAADA,petitioners,
vs.
THE EXECUTIVE SECRETARY, THE SECRETARY OF
FINANCE, THE COMMISSIONER OF INTERNAL REVENUE
and THE COMMISSIONER OF CUSTOMS, respondents.

G.R. No. 115544 August 25, 1994

G.R. No. 115852 August 25, 1994

G.R. No. 115543 August 25, 1994

PHILIPPINE AIRLINES, INC., petitioner,

vs.
THE SECRETARY OF FINANCE, and COMMISSIONER OF
INTERNAL REVENUE, respondents.

Carlos A. Raneses and Manuel M. Serrano for petitioner in G.R.

No. 115754.
Salonga, Hernandez & Allado for Freedon From Debts Coalition,
Inc. & Phil. Bible Society.

G.R. No. 115873 August 25, 1994

Estelito P. Mendoza for petitioner in G.R. No. 115852.
COOPERATIVE UNION OF THE PHILIPPINES, petitioners,
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.

Panganiban, Benitez, Parlade, Africa & Barinaga Law Offices for

petitioners in G.R. No. 115873.
R.B. Rodriguez & Associates for petitioners in G.R. No. 115931.
Reve A.V. Saguisag for MABINI.

G.R. No. 115931 August 25, 1994

PHILIPPINE EDUCATIONAL PUBLISHERS ASSOCIATION,
INC., and ASSOCIATION OF PHILIPPINE BOOKSELLERS, 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.
Arturo M. Tolentino for and in his behalf.
Donna Celeste D. Feliciano and Juan T. David for petitioners in
G.R. No. 115525.
Roco, Bunag, Kapunan, Migallos and Jardeleza for petitioner
R.S. Roco.
Villaranza and Cruz for petitioners in G.R. No. 115544.

MENDOZA, J.:
The value-added tax (VAT) is levied on the sale, barter or
exchange of goods and properties as well as on the sale or
exchange of services. It is equivalent to 10% of the gross selling
price or gross value in money of goods or properties sold,
bartered or exchanged or of the gross receipts from the sale or
exchange of services. Republic Act No. 7716 seeks to widen the
tax base of the existing VAT system and enhance its
administration by amending the National Internal Revenue Code.
These are various suits for certiorari and prohibition, challenging
the constitutionality of Republic Act No. 7716 on various grounds
summarized in the resolution of July 6, 1994 of this Court, as
follows:
I. Procedural Issues:
A. Does Republic Act No. 7716 violate Art. VI,
24 of the Constitution?

B. Does it violate Art. VI, 26(2) of the

Constitution?
C. What is the extent of the power of the
Bicameral Conference Committee?
II. Substantive Issues:
A. Does the law violate the following provisions in
the Bill of Rights (Art. III)?
1. 1
2. 4
3. 5

The contention of petitioners is that in enacting Republic Act No.

7716, or the Expanded Value-Added Tax Law, Congress violated
the Constitution because, although H. No. 11197 had originated
in the House of Representatives, it was not passed by the Senate
but was simply consolidated with the Senate version (S. No.
1630) in the Conference Committee to produce the bill which the
President signed into law. The following provisions of the
Constitution are cited in support of the proposition that because
Republic Act No. 7716 was passed in this manner, it did not
originate in the House of Representatives and it has not thereby
become a law:
Art. VI, 24: 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.

4. 10
B. Does the law violate the following other
provisions of the Constitution?
1. Art. VI, 28(1)
2. Art. VI, 28(3)
These questions will be dealt in the order they are stated above.
As will presently be explained not all of these questions are
judicially cognizable, because not all provisions of the
Constitution are self executing and, therefore, judicially
enforceable. The other departments of the government are
equally charged with the enforcement of the Constitution,
especially the provisions relating to them.
I. PROCEDURAL ISSUES

Id., 26(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 yeasand nays entered in the Journal.
It appears that on various dates between July 22, 1992 and
August 31, 1993, several bills 1 were introduced in the House of
Representatives seeking to amend certain provisions of the National
Internal Revenue Code relative to the value-added tax or VAT.
These bills were referred to the House Ways and Means Committee
which recommended for approval a substitute measure, H. No.
11197, entitled

AN ACT RESTRUCTURING THE VALUE-ADDED

TAX (VAT) SYSTEM TO WIDEN ITS TAX BASE
AND ENHANCE ITS ADMINISTRATION,
AMENDING FOR THESE PURPOSES
SECTIONS 99, 100, 102, 103, 104, 105, 106,
107, 108 AND 110 OF TITLE IV, 112, 115 AND
116 OF TITLE V, AND 236, 237 AND 238 OF
TITLE IX, AND REPEALING SECTIONS 113
AND 114 OF TITLE V, ALL OF THE NATIONAL
INTERNAL REVENUE CODE, AS AMENDED
The bill (H. No. 11197) was considered on second reading
starting November 6, 1993 and, on November 17, 1993, it was
approved by the House of Representatives after third and final
reading.
It was sent to the Senate on November 23, 1993 and later
referred by that body to its Committee on Ways and Means.
On February 7, 1994, the Senate Committee submitted its report
recommending approval of S. No. 1630, entitled
AN ACT RESTRUCTURING THE VALUE-ADDED
TAX (VAT) SYSTEM TO WIDEN ITS TAX BASE
AND ENHANCE ITS ADMINISTRATION,
AMENDING FOR THESE PURPOSES
SECTIONS 99, 100, 102, 103, 104, 105, 107,
108, AND 110 OF TITLE IV, 112 OF TITLE V,
AND 236, 237, AND 238 OF TITLE IX, AND
REPEALING SECTIONS 113, 114 and 116 OF
TITLE V, ALL OF THE NATIONAL INTERNAL
REVENUE CODE, AS AMENDED, AND FOR
OTHER PURPOSES
It was stated that the bill was being submitted "in substitution of
Senate Bill No. 1129, taking into consideration P.S. Res. No. 734
and H.B. No. 11197."

On February 8, 1994, the Senate began consideration of the bill

(S. No. 1630). It finished debates on the bill and approved it on
second reading on March 24, 1994. On the same day, it approved
the bill on third reading by the affirmative votes of 13 of its
members, with one abstention.
H. No. 11197 and its Senate version (S. No. 1630) were then
referred to a conference committee which, after meeting four
times (April 13, 19, 21 and 25, 1994), recommended that "House
Bill No. 11197, in consolidation with Senate Bill No. 1630, be
approved in accordance with the attached copy of the bill as
reconciled and approved by the conferees."
The Conference Committee bill, entitled "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," was thereafter approved by the
House of Representatives on April 27, 1994 and by the Senate on
May 2, 1994. The enrolled bill was then presented to the
President of the Philippines who, on May 5, 1994, signed it. It
became Republic Act No. 7716. On May 12, 1994, Republic Act
No. 7716 was published in two newspapers of general circulation
and, on May 28, 1994, it took effect, although its implementation
was suspended until June 30, 1994 to allow time for the
registration of business entities. It would have been enforced on
July 1, 1994 but its enforcement was stopped because the Court,
by the vote of 11 to 4 of its members, granted a temporary
restraining order on June 30, 1994.
First. Petitioners' contention is that Republic Act No. 7716 did not
"originate exclusively" in the House of Representatives as
required by Art. VI, 24 of the Constitution, because it is in fact
the result of the consolidation of two distinct bills, H. No. 11197
and S. No. 1630. In this connection, petitioners point out that
although Art. VI, SS 24 was adopted from the American Federal

Constitution, 2 it is notable in two respects: the verb "shall originate"

is qualified in the Philippine Constitution by the word "exclusively"
and the phrase "as on other bills" in the American version is omitted.
This means, according to them, that to be considered as having
originated in the House, Republic Act No. 7716 must retain the
essence of H. No. 11197.

This argument will not bear analysis. To begin with, it is not the
law but the revenue bill which is required by the Constitution
to "originate exclusively" in the House of Representatives. It is
important to emphasize this, because a bill originating in the
House may undergo such extensive changes in the Senate that
the result may be a rewriting of the whole. The possibility of a
third version by the conference committee will be discussed later.
At this point, what is important to note is that, as a result of the
Senate action, a distinct bill may be produced. To insist that a
revenue statute and not only the bill which initiated the
legislative process culminating in the enactment of the law
must substantially be the same as the House bill would be to
deny the Senate's power not only to "concur with amendments"
but also to "propose amendments." It would be to violate the
coequality of legislative power of the two houses of Congress and
in fact make the House superior to the Senate.
The contention that the constitutional design is to limit the
Senate's power in respect of revenue bills in order to compensate
for the grant to the Senate of the treaty-ratifying power 3 and
thereby equalize its powers and those of the House overlooks the
fact that the powers being compared are different. We are dealing
here with the legislative power which under the Constitution is vested
not in any particular chamber but in the Congress of the Philippines,
consisting of "a Senate and a House of Representatives." 4 The
exercise of the treaty-ratifying power is not the exercise of legislative
power. It is the exercise of a check on the executive power. There is,
therefore, no justification for comparing the legislative powers of the
House and of the Senate on the basis of the possession of such
nonlegislative power by the Senate. The possession of a similar
power by the U.S. Senate 5 has never been thought of as giving it
more legislative powers than the House of Representatives.

In the United States, the validity of a provision ( 37) imposing

an ad valorem tax based on the weight of vessels, which the U.S.
Senate had inserted in the Tariff Act of 1909, was upheld against
the claim that the provision was a revenue bill which originated in
the Senate in contravention of Art. I, 7 of the U.S.
Constitution. 6 Nor is the power to amend limited to adding a
provision or two in a revenue bill emanating from the House. The
U.S. Senate has gone so far as changing the whole of bills following
the enacting clause and substituting its own versions. In 1883, for
example, it struck out everything after the enacting clause of a tariff
bill and wrote in its place its own measure, and the House
subsequently accepted the amendment. The U.S. Senate likewise
added 847 amendments to what later became the Payne-Aldrich
Tariff Act of 1909; it dictated the schedules of the Tariff Act of 1921;
it rewrote an extensive tax revision bill in the same year and recast
most of the tariff bill of 1922. 7 Given, then, the power of the Senate
to propose amendments, the Senate can propose its own version
even with respect to bills which are required by the Constitution to
originate in the House.

It is insisted, however, that S. No. 1630 was passed not in

substitution of H. No. 11197 but of another Senate bill (S. No.
1129) earlier filed and that what the Senate did was merely to
"take [H. No. 11197] into consideration" in enacting S. No. 1630.
There is really no difference between the Senate preserving H.
No. 11197 up to the enacting clause and then writing its own
version following the enacting clause (which, it would seem,
petitioners admit is an amendment by substitution), and, on the
other hand, separately presenting a bill of its own on the same
subject matter. In either case the result are two bills on the same
subject.
Indeed, what the Constitution simply means is that the initiative
for filing revenue, tariff, or tax bills, bills authorizing an increase of
the public debt, private bills and bills of local application must
come from the House of Representatives on the theory that,
elected as they are from the districts, the members of the House
can be expected to be more sensitive to the local needs and
problems. On the other hand, the senators, who are elected at

large, are expected to approach the same problems from the

national perspective. Both views are thereby made to bear on the
enactment of such laws.
Nor does the Constitution prohibit the filing in the Senate of a
substitute bill in anticipation of its receipt of the bill from the
House, so long as action by the Senate as a body is withheld
pending receipt of the House bill. The Court cannot, therefore,
understand the alarm expressed over the fact that on March 1,
1993, eight months before the House passed H. No. 11197, S.
No. 1129 had been filed in the Senate. After all it does not appear
that the Senate ever considered it. It was only after the Senate
had received H. No. 11197 on November 23, 1993 that the
process of legislation in respect of it began with the referral to the
Senate Committee on Ways and Means of H. No. 11197 and the
submission by the Committee on February 7, 1994 of S. No.
1630. For that matter, if the question were simply the priority in
the time of filing of bills, the fact is that it was in the House that a
bill (H. No. 253) to amend the VAT law was first filed on July 22,
1992. Several other bills had been filed in the House before S.
No. 1129 was filed in the Senate, and H. No. 11197 was only a
substitute of those earlier bills.
Second. Enough has been said to show that it was within the
power of the Senate to propose S. No. 1630. We now pass to the
next argument of petitioners that S. No. 1630 did not pass three
readings on separate days as required by the
Constitution 8 because the second and third readings were done on
the same day, March 24, 1994. But this was because on February
24, 1994 9 and again on March 22, 1994, 10 the President had
certified S. No. 1630 as urgent. The presidential certification
dispensed with the requirement not only of printing but also that of
reading the bill on separate days. The phrase "except when the
President certifies to the necessity of its immediate enactment, etc."
in Art. VI, 26(2) qualifies the two stated conditions before a bill can
become a law: (i) the bill has passed three readings on separate
days and (ii) it has been printed in its final form and distributed three
days before it is finally approved.

In other words, the "unless" clause must be read in relation to the

"except" clause, because the two are really coordinate clauses of
the same sentence. To construe the "except" clause as simply
dispensing with the second requirement in the "unless" clause
(i.e., printing and distribution three days before final approval)
would not only violate the rules of grammar. It would also negate
the very premise of the "except" clause: the necessity of securing
the immediate enactment of a bill which is certified in order to
meet a public calamity or emergency. For if it is only the printing
that is dispensed with by presidential certification, the time saved
would be so negligible as to be of any use in insuring immediate
enactment. It may well be doubted whether doing away with the
necessity of printing and distributing copies of the bill three days
before the third reading would insure speedy enactment of a law
in the face of an emergency requiring the calling of a special
election for President and Vice-President. Under the Constitution
such a law is required to be made within seven days of the
convening of Congress in emergency session. 11
That upon the certification of a bill by the President the
requirement of three readings on separate days and of printing
and distribution can be dispensed with is supported by the weight
of legislative practice. For example, the bill defining
the certiorari jurisdiction of this Court which, in consolidation with
the Senate version, became Republic Act No. 5440, was passed
on second and third readings in the House of Representatives on
the same day (May 14, 1968) after the bill had been certified by
the President as urgent. 12
There is, therefore, no merit in the contention that presidential
certification dispenses only with the requirement for the printing of
the bill and its distribution three days before its passage but not
with the requirement of three readings on separate days, also.
It is nonetheless urged that the certification of the bill in this case
was invalid because there was no emergency, the condition
stated in the certification of a "growing budget deficit" not being
an unusual condition in this country.

It is noteworthy that no member of the Senate saw fit to

controvert the reality of the factual basis of the certification. To
the contrary, by passing S. No. 1630 on second and third
readings on March 24, 1994, the Senate accepted the President's
certification. Should such certification be now reviewed by this
Court, especially when no evidence has been shown that,
because S. No. 1630 was taken up on second and third readings
on the same day, the members of the Senate were deprived of
the time needed for the study of a vital piece of legislation?
The sufficiency of the factual basis of the suspension of the writ
of habeas corpus or declaration of martial law under Art. VII, 18,
or the existence of a national emergency justifying the delegation
of extraordinary powers to the President under Art. VI, 23(2), is
subject to judicial review because basic rights of individuals may
be at hazard. But the factual basis of presidential certification of
bills, which involves doing away with procedural requirements
designed to insure that bills are duly considered by members of
Congress, certainly should elicit a different standard of review.
Petitioners also invite attention to the fact that the President
certified S. No. 1630 and not H. No. 11197. That is because S.
No. 1630 was what the Senate was considering. When the matter
was before the House, the President likewise certified H. No.
9210 the pending in the House.
Third. Finally it is contended that the bill which became Republic
Act No. 7716 is the bill which the Conference Committee
prepared by consolidating H. No. 11197 and S. No. 1630. It is
claimed that the Conference Committee report included
provisions not found in either the House bill or the Senate bill and
that these provisions were "surreptitiously" inserted by the
Conference Committee. Much is made of the fact that in the last
two days of its session on April 21 and 25, 1994 the Committee
met behind closed doors. We are not told, however, whether the
provisions were not the result of the give and take that often mark
the proceedings of conference committees.

Nor is there anything unusual or extraordinary about the fact that

the Conference Committee met in executive sessions. Often the
only way to reach agreement on conflicting provisions is to meet
behind closed doors, with only the conferees present. Otherwise,
no compromise is likely to be made. The Court is not about to
take the suggestion of a cabal or sinister motive attributed to the
conferees on the basis solely of their "secret meetings" on April
21 and 25, 1994, nor read anything into the incomplete remarks
of the members, marked in the transcript of stenographic notes by
ellipses. The incomplete sentences are probably due to the
stenographer's own limitations or to the incoherence that
sometimes characterize conversations. William Safire noted
some such lapses in recorded talks even by recent past
Presidents of the United States.
In any event, in the United States conference committees had
been customarily held in executive sessions with only the
conferees and their staffs in attendance. 13 Only in November 1975
was a new rule adopted requiring open sessions. Even then a
majority of either chamber's conferees may vote in public to close the
meetings. 14

As to the possibility of an entirely new bill emerging out of a

Conference Committee, it has been explained:
Under congressional rules of procedure,
conference committees are not expected to make
any material change in the measure at issue,
either by deleting provisions to which both houses
have already agreed or by inserting new
provisions. But this is a difficult provision to
enforce. Note the problem when one house
amends a proposal originating in either house by
striking out everything following the enacting
clause and substituting provisions which make it
an entirely new bill. The versions are now
altogether different, permitting a conference
committee to draft essentially a new bill. . . . 15

The result is a third version, which is considered an "amendment

in the nature of a substitute," the only requirement for which being
that the third version be germane to the subject of the House and
Senate bills. 16
Indeed, this Court recently held that it is within the power of a
conference committee to include in its report an entirely new
provision that is not found either in the House bill or in the Senate
bill. 17 If the committee can propose an amendment consisting of one
or two provisions, there is no reason why it cannot propose several
provisions, collectively considered as an "amendment in the nature
of a substitute," so long as such amendment is germane to the
subject of the bills before the committee. After all, its report was not
final but needed the approval of both houses of Congress to become
valid as an act of the legislative department. The charge that in this
case the Conference Committee acted as a third legislative chamber
is thus without any basis. 18

The President shall designate the members of the

conference committee in accordance with
subparagraph (c), Section 3 of Rule III.
Each Conference Committee Report shall contain
a detailed and sufficiently explicit statement of the
changes in or amendments to the subject
measure, and shall be signed by the conferees.
The consideration of such report shall not be in
order unless the report has been filed with the
Secretary of the Senate and copies thereof have
been distributed to the Members.
(Emphasis added)
Rules of the House of Representatives

Nonetheless, it is argued that under the respective Rules of the

Senate and the House of Representatives a conference
committee can only act on the differing provisions of a Senate bill
and a House bill, and that contrary to these Rules the Conference
Committee inserted provisions not found in the bills submitted to
it. The following provisions are cited in support of this contention:
Rules of the Senate
Rule XII:
26. In the event that the Senate does not agree
with the House of Representatives on the
provision of any bill or joint
resolution, the differences shall be settled by a
conference committee of both Houses which shall
meet within ten days after their composition.

Rule XIV:
85. Conference Committee Reports. In the
event that the House does not agree with the
Senate on the amendments to any bill or joint
resolution, the differences may be settled by
conference committees of both Chambers.
The consideration of conference committee
reports shall always be in order, except when the
journal is being read, while the roll is being called
or the House is dividing on any question. Each of
the pages of such reports shall be signed by the
conferees. Each report shall contain a detailed,
sufficiently explicit statement of the changes in or
amendments to the subject measure.
The consideration of such report shall not be in
order unless copies thereof are distributed to the

Members: Provided, That in the last fifteen days

of each session period it shall be deemed
sufficient that three copies of the report, signed as
above provided, are deposited in the office of the
Secretary General.
(Emphasis added)
To be sure, nothing in the Rules limits a conference committee to
a consideration of conflicting provisions. But Rule XLIV, 112 of
the Rules of the Senate is cited to the effect that "If there is no
Rule applicable to a specific case the precedents of the
Legislative Department of the Philippines shall be resorted to, and
as a supplement of these, the Rules contained in Jefferson's
Manual." The following is then quoted from the Jefferson's
Manual:
The managers of a conference must confine
themselves to the differences committed to them.
. . and may not include subjects not within
disagreements, even though germane to a
question in issue.
Note that, according to Rule XLIX, 112, in case there is no
specific rule applicable, resort must be to the legislative practice.
The Jefferson's Manual is resorted to only as supplement. It is
common place in Congress that conference committee reports
include new matters which, though germane, have not been
committed to the committee. This practice was admitted by
Senator Raul S. Roco, petitioner in G.R. No. 115543, during the
oral argument in these cases. Whatever, then, may be provided
in the Jefferson's Manual must be considered to have been
modified by the legislative practice. If a change is desired in the
practice it must be sought in Congress since this question is not
covered by any constitutional provision but is only an internal rule
of each house. Thus, Art. VI, 16(3) of the Constitution provides
that "Each House may determine the rules of its proceedings. . .
."

This observation applies to the other contention that the Rules of

the two chambers were likewise disregarded in the preparation of
the Conference Committee Report because the Report did not
contain a "detailed and sufficiently explicit statement of changes
in, or amendments to, the subject measure." The Report used
brackets and capital letters to indicate the changes. This is a
standard practice in bill-drafting. We cannot say that in using
these marks and symbols the Committee violated the Rules of the
Senate and the House. Moreover, this Court is not the proper
forum for the enforcement of these internal Rules. To the
contrary, as we have already ruled, "parliamentary rules are
merely procedural and with their observance the courts have no
concern." 19 Our concern is with the procedural requirements of the
Constitution for the enactment of laws. As far as these requirements
are concerned, we are satisfied that they have been faithfully
observed in these cases.

Nor is there any reason for requiring that the Committee's Report
in these cases must have undergone three readings in each of
the two houses. If that be the case, there would be no end to
negotiation since each house may seek modifications of the
compromise bill. The nature of the bill, therefore, requires that it
be acted upon by each house on a "take it or leave it" basis, with
the only alternative that if it is not approved by both houses,
another conference committee must be appointed. But then again
the result would still be a compromise measure that may not be
wholly satisfying to both houses.
Art. VI, 26(2) must, therefore, be construed as referring only to
bills introduced for the first time in either house of Congress, not
to the conference committee report. For if the purpose of
requiring three readings is to give members of Congress time to
study bills, it cannot be gainsaid that H. No. 11197 was passed in
the House after three readings; that in the Senate it was
considered on first reading and then referred to a committee of
that body; that although the Senate committee did not report out
the House bill, it submitted a version (S. No. 1630) which it had
prepared by "taking into consideration" the House bill; that for its

part the Conference Committee consolidated the two bills and

prepared a compromise version; that the Conference Committee
Report was thereafter approved by the House and the Senate,
presumably after appropriate study by their members. We cannot
say that, as a matter of fact, the members of Congress were not
fully informed of the provisions of the bill. The allegation that the
Conference Committee usurped the legislative power of
Congress is, in our view, without warrant in fact and in law.
Fourth. Whatever doubts there may be as to the formal validity of
Republic Act No. 7716 must be resolved in its favor. Our
cases 20 manifest firm adherence to the rule that an enrolled copy of
a bill is conclusive not only of its provisions but also of its due
enactment. Not even claims that a proposed constitutional
amendment was invalid because the requisite votes for its approval
had not been obtained 21 or that certain provisions of a statute had
been "smuggled" in the printing of the bill 22 have moved or
persuaded us to look behind the proceedings of a coequal branch of
the government. There is no reason now to depart from this rule.

No claim is here made that the "enrolled bill" rule is absolute. In

fact in one case 23 we "went behind" an enrolled bill and consulted
the Journal to determine whether certain provisions of a statute had
been approved by the Senate in view of the fact that the President of
the Senate himself, who had signed the enrolled bill, admitted a
mistake and withdrew his signature, so that in effect there was no
longer an enrolled bill to consider.

But where allegations that the constitutional procedures for the

passage of bills have not been observed have no more basis than
another allegation that the Conference Committee
"surreptitiously" inserted provisions into a bill which it had
prepared, we should decline the invitation to go behind the
enrolled copy of the bill. To disregard the "enrolled bill" rule in
such cases would be to disregard the respect due the other two
departments of our government.

Fifth. An additional attack on the formal validity of Republic Act

No. 7716 is made by the Philippine Airlines, Inc., petitioner in
G.R. No. 11582, namely, that it violates Art. VI, 26(1) which
provides that "Every bill passed by Congress shall embrace only
one subject which shall be expressed in the title thereof." It is
contended that neither H. No. 11197 nor S. No. 1630 provided for
removal of exemption of PAL transactions from the payment of
the VAT and that this was made only in the Conference
Committee bill which became Republic Act No. 7716 without
reflecting this fact in its title.
The title of Republic Act No. 7716 is:
AN ACT RESTRUCTURING THE VALUEADDED 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.
Among the provisions of the NIRC amended is 103, which
originally read:
103. Exempt transactions. The following shall
be exempt from the value-added tax:
....
(q) Transactions which are exempt under special
laws or international agreements to which the
Philippines is a signatory. Among the transactions
exempted from the VAT were those of PAL
because it was exempted under its franchise
(P.D. No. 1590) from the payment of all "other
taxes . . . now or in the near future," in

consideration of the payment by it either of the

corporate income tax or a franchise tax of 2%.
As a result of its amendment by Republic Act No. 7716, 103 of
the NIRC now provides:
103. Exempt transactions. The following shall
be exempt from the value-added tax:
....
(q) Transactions which are exempt under special
laws, except those granted under Presidential
Decree Nos. 66, 529, 972, 1491, 1590. . . .
The effect of the amendment is to remove the exemption granted
to PAL, as far as the VAT is concerned.
The question is whether this amendment of 103 of the NIRC is
fairly embraced in the title of Republic Act No. 7716, although no
mention is made therein of P.D. No. 1590 as among those which
the statute amends. We think it is, since the title states that the
purpose of the statute is to expand the VAT system, and one way
of doing this is to widen its base by withdrawing some of the
exemptions granted before. To insist that P.D. No. 1590 be
mentioned in the title of the law, in addition to 103 of the NIRC,
in which it is specifically referred to, would be to insist that the title
of a bill should be a complete index of its content.
The constitutional requirement that every bill passed by Congress
shall embrace only one subject which shall be expressed in its
title is intended to prevent surprise upon the members of
Congress and to inform the people of pending legislation so that,
if they wish to, they can be heard regarding it. If, in the case at
bar, petitioner did not know before that its exemption had been
withdrawn, it is not because of any defect in the title but perhaps
for the same reason other statutes, although published, pass

unnoticed until some event somehow calls attention to their

existence. Indeed, the title of Republic Act No. 7716 is not any
more general than the title of PAL's own franchise under P.D. No.
1590, and yet no mention is made of its tax exemption. The title
of P.D. No. 1590 is:
AN ACT GRANTING A NEW FRANCHISE TO
PHILIPPINE AIRLINES, INC. TO ESTABLISH,
OPERATE, AND MAINTAIN AIR-TRANSPORT
SERVICES IN THE PHILIPPINES AND
BETWEEN THE PHILIPPINES AND OTHER
COUNTRIES.
The trend in our cases is to construe the constitutional
requirement in such a manner that courts do not unduly interfere
with the enactment of necessary legislation and to consider it
sufficient if the title expresses the general subject of the statute
and all its provisions are germane to the general subject thus
expressed. 24
It is further contended that amendment of petitioner's franchise
may only be made by special law, in view of 24 of P.D. No.
1590 which provides:
This franchise, as amended, or any section or
provision hereof may only be modified, amended,
or repealed expressly by a special law or decree
that shall specifically modify, amend, or repeal
this franchise or any section or provision thereof.
This provision is evidently intended to prevent the amendment of
the franchise by mere implication resulting from the enactment of
a later inconsistent statute, in consideration of the fact that a
franchise is a contract which can be altered only by consent of
the parties. Thus in Manila Railroad Co. v.
Rafferty, 25 it was held that an Act of the U.S. Congress, which
provided for the payment of tax on certain goods and articles
imported into the Philippines, did not amend the franchise of plaintiff,

which exempted it from all taxes except those mentioned in its

franchise. It was held that a special law cannot be amended by a
general law.

power to grant tax exemption because this is vested in Congress

and requires for its exercise the vote of a majority of all its
members 26 and (2) the Secretary's duty is to execute the law.

In contrast, in the case at bar, Republic Act No. 7716 expressly

amends PAL's franchise (P.D. No. 1590) by specifically excepting
from the grant of exemptions from the VAT PAL's exemption
under P.D. No. 1590. This is within the power of Congress to do
under Art. XII, 11 of the Constitution, which provides that the
grant of a franchise for the operation of a public utility is subject to
amendment, alteration or repeal by Congress when the common
good so requires.

103 of the NIRC contains a list of transactions exempted from

VAT. Among the transactions previously granted exemption were:
(f) Printing, publication, importation or sale of
books and any newspaper, magazine, review, or
bulletin which appears at regular intervals with
fixed prices for subscription and sale and which is
devoted principally to the publication of
advertisements.

II. SUBSTANTIVE ISSUES

A. Claims of Press
Freedom, Freedom
of Thought and
Religious Freedom
The Philippine Press Institute (PPI), petitioner in G.R. No.
115544, is a nonprofit organization of newspaper publishers
established for the improvement of journalism in the Philippines.
On the other hand, petitioner in G.R. No. 115781, the Philippine
Bible Society (PBS), is a nonprofit organization engaged in the
printing and distribution of bibles and other religious articles. Both
petitioners claim violations of their rights under 4 and 5 of the
Bill of Rights as a result of the enactment of the VAT Law.
The PPI questions the law insofar as it has withdrawn the
exemption previously granted to the press under 103 (f) of the
NIRC. Although the exemption was subsequently restored by
administrative regulation with respect to the circulation income of
newspapers, the PPI presses its claim because of the possibility
that the exemption may still be removed by mere revocation of
the regulation of the Secretary of Finance. On the other hand, the
PBS goes so far as to question the Secretary's power to grant
exemption for two reasons: (1) The Secretary of Finance has no

Republic Act No. 7716 amended 103 by deleting (f) with the
result that print media became subject to the VAT with respect to
all aspects of their operations. Later, however, based on a
memorandum of the Secretary of Justice, respondent Secretary
of Finance issued Revenue Regulations No. 11-94, dated June
27, 1994, exempting the "circulation income of print media
pursuant to 4 Article III of the 1987 Philippine Constitution
guaranteeing against abridgment of freedom of the press, among
others." The exemption of "circulation income" has left income
from advertisements still subject to the VAT.
It is unnecessary to pass upon the contention that the exemption
granted is beyond the authority of the Secretary of Finance to
give, in view of PPI's contention that even with the exemption of
the circulation revenue of print media there is still an
unconstitutional abridgment of press freedom because of the
imposition of the VAT on the gross receipts of newspapers from
advertisements and on their acquisition of paper, ink and services
for publication. Even on the assumption that no exemption has
effectively been granted to print media transactions, we find no
violation of press freedom in these cases.

To be sure, we are not dealing here with a statute that on its

face operates in the area of press freedom. The PPI's claim is
simply that, as applied to newspapers, the law abridges press
freedom. Even with due recognition of its high estate and its
importance in a democratic society, however, the press is not
immune from general regulation by the State. It has been held:
The publisher of a newspaper has no immunity
from the application of general laws. He has no
special privilege to invade the rights and liberties
of others. He must answer for libel. He may be
punished for contempt of court. . . . Like others,
he must pay equitable and nondiscriminatory
taxes on his business. . . . 27
The PPI does not dispute this point, either.
What it contends is that by withdrawing the exemption previously
granted to print media transactions involving printing, publication,
importation or sale of newspapers, Republic Act No. 7716 has
singled out the press for discriminatory treatment and that within
the class of mass media the law discriminates against print media
by giving broadcast media favored treatment. We have carefully
examined this argument, but we are unable to find a differential
treatment of the press by the law, much less any censorial
motivation for its enactment. If the press is now required to pay a
value-added tax on its transactions, it is not because it is being
singled out, much less targeted, for special treatment but only
because of the removal of the exemption previously granted to it
by law. The withdrawal of exemption is all that is involved in these
cases. Other transactions, likewise previously granted exemption,
have been delisted as part of the scheme to expand the base and
the scope of the VAT system. The law would perhaps be open to
the charge of discriminatory treatment if the only privilege
withdrawn had been that granted to the press. But that is not the
case.

The situation in the case at bar is indeed a far cry from those
cited by the PPI in support of its claim that Republic Act No. 7716
subjects the press to discriminatory taxation. In the cases cited,
the discriminatory purpose was clear either from the background
of the law or from its operation. For example, in Grosjean v.
American Press Co., 28 the law imposed a license tax equivalent to
2% of the gross receipts derived from advertisements only on
newspapers which had a circulation of more than 20,000 copies per
week. Because the tax was not based on the volume of
advertisement alone but was measured by the extent of its
circulation as well, the law applied only to the thirteen large
newspapers in Louisiana, leaving untaxed four papers with
circulation of only slightly less than 20,000 copies a week and 120
weekly newspapers which were in serious competition with the
thirteen newspapers in question. It was well known that the thirteen
newspapers had been critical of Senator Huey Long, and the Longdominated legislature of Louisiana respondent by taxing what Long
described as the "lying newspapers" by imposing on them "a tax on
lying." The effect of the tax was to curtail both their revenue and their
circulation. As the U.S. Supreme Court noted, the tax was "a
deliberate and calculated device in the guise of a tax to limit the
circulation of information to which the public is entitled in virtue of the
constitutional guaranties." 29 The case is a classic illustration of the
warning that the power to tax is the power to destroy.

In the other case 30 invoked by the PPI, the press was also found to
have been singled out because everything was exempt from the "use
tax" on ink and paper, except the press. Minnesota imposed a tax on
the sales of goods in that state. To protect the sales tax, it enacted a
complementary tax on the privilege of "using, storing or consuming in
that state tangible personal property" by eliminating the residents'
incentive to get goods from outside states where the sales tax might
be lower. The Minnesota Star Tribune was exempted from both
taxes from 1967 to 1971. In 1971, however, the state legislature
amended the tax scheme by imposing the "use tax" on the cost of
paper and ink used for publication. The law was held to have singled
out the press because (1) there was no reason for imposing the "use
tax" since the press was exempt from the sales tax and (2) the "use
tax" was laid on an "intermediate transaction rather than the ultimate
retail sale." Minnesota had a heavy burden of justifying the

differential treatment and it failed to do so. In addition, the U.S.

Supreme Court found the law to be discriminatory because the
legislature, by again amending the law so as to exempt the first
$100,000 of paper and ink used, further narrowed the coverage of
the tax so that "only a handful of publishers pay any tax at all and
even fewer pay any significant amount of tax." 31 The discriminatory
purpose was thus very clear.

More recently, in Arkansas Writers' Project, Inc. v. Ragland, 32 it

was held that a law which taxed general interest magazines but not
newspapers and religious, professional, trade and sports journals
was discriminatory because while the tax did not single out the press
as a whole, it targeted a small group within the press. What is more,
by differentiating on the basis of contents (i.e., between general
interest and special interests such as religion or sports) the law
became "entirely incompatible with the First Amendment's guarantee
of freedom of the press."

"The First Amendment does not prohibit all regulation of the press
[and that] the States and the Federal Government can subject
newspapers to generally applicable economic regulations without
creating constitutional problems." 35

What has been said above also disposes of the allegations of the
PBS that the removal of the exemption of printing, publication or
importation of books and religious articles, as well as their printing
and publication, likewise violates freedom of thought and of
conscience. For as the U.S. Supreme Court unanimously held
in Jimmy Swaggart Ministries v. Board of Equalization, 36 the Free
Exercise of Religion Clause does not prohibit imposing a generally
applicable sales and use tax on the sale of religious materials by a
religious organization.

This brings us to the question whether the registration provision

of the law, 37 although of general applicability, nonetheless is invalid

without merit since it has not been shown that as a result the class
subject to tax has been unreasonably narrowed. The fact is that this
limitation does not apply to the press along but to all sales. Nor is
impermissible motive shown by the fact that print media and
broadcast media are treated differently. The press is taxed on its
transactions involving printing and publication, which are different
from the transactions of broadcast media. There is thus a reasonable
basis for the classification.

when applied to the press because it lays a prior restraint on its

essential freedom. The case ofAmerican Bible Society v. City of
Manila 38 is cited by both the PBS and the PPI in support of their
contention that the law imposes censorship. There, this Court held
that an ordinance of the City of Manila, which imposed a license fee
on those engaged in the business of general merchandise, could not
be applied to the appellant's sale of bibles and other religious
literature. This Court relied on Murdock v. Pennsylvania, 39 in which it
was held that, as a license fee is fixed in amount and unrelated to
the receipts of the taxpayer, the license fee, when applied to a
religious sect, was actually being imposed as a condition for the
exercise of the sect's right under the Constitution. For that reason, it
was held, the license fee "restrains in advance those constitutional
liberties of press and religion and inevitably tends to suppress their
exercise." 40

The cases canvassed, it must be stressed, eschew any

suggestion that "owners of newspapers are immune from any
forms of ordinary taxation." The license tax in the Grosjean case
was declared invalid because it was "one single in kind, with a
long history of hostile misuse against the freedom of the
press." 34 On the other hand, Minneapolis Star acknowledged that

But, in this case, the fee in 107, although a fixed amount

(P1,000), is not imposed for the exercise of a privilege but only for
the purpose of defraying part of the cost of registration. The
registration requirement is a central feature of the VAT system. It
is designed to provide a record of tax credits because any person
who is subject to the payment of the VAT pays an input tax, even

These cases come down to this: that unless justified, the

differential treatment of the press creates risks of suppression of
expression. In contrast, in the cases at bar, the statute applies to
a wide range of goods and services. The argument that, by
imposing the VAT only on print media whose gross sales exceeds
P480,000 but not more than P750,000, the law discriminates 33 is

as he collects an output tax on sales made or services rendered.

The registration fee is thus a mere administrative fee, one not
imposed on the exercise of a privilege, much less a constitutional
right.
For the foregoing reasons, we find the attack on Republic Act No.
7716 on the ground that it offends the free speech, press and
freedom of religion guarantees of the Constitution to be without
merit. For the same reasons, we find the claim of the Philippine
Educational Publishers Association (PEPA) in G.R. No. 115931
that the increase in the price of books and other educational
materials as a result of the VAT would violate the constitutional
mandate to the government to give priority to education, science
and technology (Art. II, 17) to be untenable.

B. Claims of
Regressivity,
Denial of Due
Process, Equal
Protection, and
Impairment
of Contracts
There is basis for passing upon claims that on its face the statute
violates the guarantees of freedom of speech, press and religion.
The possible "chilling effect" which it may have on the essential
freedom of the mind and conscience and the need to assure that
the channels of communication are open and operating
importunately demand the exercise of this Court's power of
review.
There is, however, no justification for passing upon the claims
that the law also violates the rule that taxation must be
progressive and that it denies petitioners' right to due process
and that equal protection of the laws. The reason for this different

treatment has been cogently stated by an eminent authority on

constitutional law thus: "[W]hen freedom of the mind is imperiled
by law, it is freedom that commands a momentum of respect;
when property is imperiled it is the lawmakers' judgment that
commands respect. This dual standard may not precisely reverse
the presumption of constitutionality in civil liberties cases, but
obviously it does set up a hierarchy of values within the due
process clause." 41
Indeed, the absence of threat of immediate harm makes the need
for judicial intervention less evident and underscores the essential
nature of petitioners' attack on the law on the grounds of
regressivity, denial of due process and equal protection and
impairment of contracts as a mere academic discussion of the
merits of the law. For the fact is that there have even been no
notices of assessments issued to petitioners and no
determinations at the administrative levels of their claims so as to
illuminate the actual operation of the law and enable us to reach
sound judgment regarding so fundamental questions as those
raised in these suits.
Thus, the broad argument against the VAT is that it is regressive
and that it violates the requirement that "The rule of taxation shall
be uniform and equitable [and] Congress shall evolve a
progressive system of taxation." 42Petitioners in G.R. No. 115781
quote from a paper, entitled "VAT Policy Issues: Structure,
Regressivity, Inflation and Exports" by Alan A. Tait of the
International Monetary Fund, that "VAT payment by low-income
households will be a higher proportion of their incomes (and
expenditures) than payments by higher-income households. That is,
the VAT will be regressive." Petitioners contend that as a result of
the uniform 10% VAT, the tax on consumption goods of those who
are in the higher-income bracket, which before were taxed at a rate
higher than 10%, has been reduced, while basic commodities, which
before were taxed at rates ranging from 3% to 5%, are now taxed at
a higher rate.

Just as vigorously as it is asserted that the law is regressive, the

opposite claim is pressed by respondents that in fact it distributes
the tax burden to as many goods and services as possible
particularly to those which are within the reach of higher-income
groups, even as the law exempts basic goods and services. It is
thus equitable. The goods and properties subject to the VAT are
those used or consumed by higher-income groups. These include
real properties held primarily for sale to customers or held for
lease in the ordinary course of business, the right or privilege to
use industrial, commercial or scientific equipment, hotels,
restaurants and similar places, tourist buses, and the like. On the
other hand, small business establishments, with annual gross
sales of less than P500,000, are exempted. This, according to
respondents, removes from the coverage of the law some 30,000
business establishments. On the other hand, an occasional
paper 43 of the Center for Research and Communication cities a
NEDA study that the VAT has minimal impact on inflation and
income distribution and that while additional expenditure for the
lowest income class is only P301 or 1.49% a year, that for a family
earning P500,000 a year or more is P8,340 or 2.2%.

Lacking empirical data on which to base any conclusion regarding

these arguments, any discussion whether the VAT is regressive
in the sense that it will hit the "poor" and middle-income group in
society harder than it will the "rich," as the Cooperative Union of
the Philippines (CUP) claims in G.R. No. 115873, is largely an
academic exercise. On the other hand, the CUP's contention that
Congress' withdrawal of exemption of producers cooperatives,
marketing cooperatives, and service cooperatives, while
maintaining that granted to electric cooperatives, not only goes
against the constitutional policy to promote cooperatives as
instruments of social justice (Art. XII, 15) but also denies such
cooperatives the equal protection of the law is actually a policy
argument. The legislature is not required to adhere to a policy of
"all or none" in choosing the subject of taxation. 44
Nor is the contention of the Chamber of Real Estate and Builders
Association (CREBA), petitioner in G.R. 115754, that the VAT will

reduce the mark up of its members by as much as 85% to 90%

any more concrete. It is a mere allegation. On the other hand, the
claim of the Philippine Press Institute, petitioner in G.R. No.
115544, that the VAT will drive some of its members out of
circulation because their profits from advertisements will not be
enough to pay for their tax liability, while purporting to be based
on the financial statements of the newspapers in question, still
falls short of the establishment of facts by evidence so necessary
for adjudicating the question whether the tax is oppressive and
confiscatory.
Indeed, regressivity is not a negative standard for courts to
enforce. What Congress is required by the Constitution to do is to
"evolve a progressive system of taxation." This is a directive to
Congress, just like the directive to it to give priority to the
enactment of laws for the enhancement of human dignity and the
reduction of social, economic and political inequalities (Art. XIII,
1), or for the promotion of the right to "quality education" (Art. XIV,
1). These provisions are put in the Constitution as moral
incentives to legislation, not as judicially enforceable rights.
At all events, our 1988 decision in Kapatiran 45 should have laid to
rest the questions now raised against the VAT. There similar
arguments made against the original VAT Law (Executive Order No.
273) were held to be hypothetical, with no more basis than
newspaper articles which this Court found to be "hearsay and
[without] evidentiary value." As Republic Act No. 7716 merely
expands the base of the VAT system and its coverage as provided in
the original VAT Law, further debate on the desirability and wisdom
of the law should have shifted to Congress.

Only slightly less abstract but nonetheless hypothetical is the

contention of CREBA that the imposition of the VAT on the sales
and leases of real estate by virtue of contracts entered into prior
to the effectivity of the law would violate the constitutional
provision that "No law impairing the obligation of contracts shall
be passed." It is enough to say that the parties to a contract
cannot, through the exercise of prophetic discernment, fetter the

exercise of the taxing power of the State. For not only are existing
laws read into contracts in order to fix obligations as between
parties, but the reservation of essential attributes of sovereign
power is also read into contracts as a basic postulate of the legal
order. The policy of protecting contracts against impairment
presupposes the maintenance of a government which retains
adequate authority to secure the peace and good order of
society. 46
In truth, the Contract Clause has never been thought as a
limitation on the exercise of the State's power of taxation save
only where a tax exemption has been granted for a valid
consideration. 47 Such is not the case of PAL in G.R. No. 115852,
and we do not understand it to make this claim. Rather, its position,
as discussed above, is that the removal of its tax exemption cannot
be made by a general, but only by a specific, law.

The substantive issues raised in some of the cases are presented

in abstract, hypothetical form because of the lack of a concrete
record. We accept that this Court does not only adjudicate private
cases; that public actions by "non-Hohfeldian" 48 or ideological
plaintiffs are now cognizable provided they meet the standing
requirement of the Constitution; that under Art. VIII, 1, 2 the
Court has a "special function" of vindicating constitutional rights.
Nonetheless the feeling cannot be escaped that we do not have
before us in these cases a fully developed factual record that alone
can impart to our adjudication the impact of actuality 49 to insure that
decision-making is informed and well grounded. Needless to say, we
do not have power to render advisory opinions or even jurisdiction
over petitions for declaratory judgment. In effect we are being asked
to do what the Conference Committee is precisely accused of having
done in these cases to sit as a third legislative chamber to review
legislation.

We are told, however, that the power of judicial review is not so

much power as it is duty imposed on this Court by the
Constitution and that we would be remiss in the performance of
that duty if we decline to look behind the barriers set by the

principle of separation of powers. Art. VIII, 1, 2 is cited in

support of this view:
Judicial power includes the duty of the courts of
justice to settle actual controversies involving
rights which are legally demandable and
enforceable, and to determine whether or not
there has been a grave abuse of discretion
amounting to lack or excess of jurisdiction on the
part of any branch or instrumentality of the
Government.
To view the judicial power of review as a duty is nothing new.
Chief Justice Marshall said so in 1803, to justify the assertion of
this power in Marbury v. Madison:
It is emphatically the province and duty of the
judicial department to say what the law is. Those
who apply the rule to particular cases must of
necessity expound and interpret that rule. If two
laws conflict with each other, the courts must
decide on the operation of each. 50
Justice Laurel echoed this justification in 1936 in Angara v.
Electoral Commission:
And when the judiciary mediates to allocate
constitutional boundaries, it does not assert any
superiority over the other departments; it does not
in reality nullify or invalidate an act of the
legislature, but only asserts the solemn and
sacred obligation assigned to it by the
Constitution to determine conflicting claims of
authority under the Constitution and to establish
for the parties in an actual controversy the rights
which that instrument secures and guarantees to
them. 51

This conception of the judicial power has been affirmed in several

cases 52 of this Court following Angara.
It does not add anything, therefore, to invoke this "duty" to justify
this Court's intervention in what is essentially a case that at best
is not ripe for adjudication. That duty must still be performed in
the context of a concrete case or controversy, as Art. VIII, 5(2)
clearly defines our jurisdiction in terms of "cases," and nothing but
"cases." That the other departments of the government may have
committed a grave abuse of discretion is not an independent
ground for exercising our power. Disregard of the essential limits
imposed by the case and controversy requirement can in the long
run only result in undermining our authority as a court of law. For,
as judges, what we are called upon to render is judgment
according to law, not according to what may appear to be the
opinion of the day.

(4) That, in view of the absence of a factual foundation of record,

claims that the law is regressive, oppressive and confiscatory and
that it violates vested rights protected under the Contract Clause
are prematurely raised and do not justify the grant of prospective
relief by writ of prohibition.
WHEREFORE, the petitions in these cases are DISMISSED.
Bidin, Quiason, and Kapunan, JJ., concur.

Separate Opinions

_______________________________
In the preceeding pages we have endeavored to discuss, within
limits, the validity of Republic Act No. 7716 in its formal and
substantive aspects as this has been raised in the various cases
before us. To sum up, we hold:
(1) That the procedural requirements of the Constitution have
been complied with by Congress in the enactment of the statute;
(2) That judicial inquiry whether the formal requirements for the
enactment of statutes beyond those prescribed by the
Constitution have been observed is precluded by the principle
of separation of powers;
(3) That the law does not abridge freedom of speech, expression
or the press, nor interfere with the free exercise of religion, nor
deny to any of the parties the right to an education; and

NARVASA, C.J.:
I fully concur with the conclusions set forth in the scholarly
opinion of my learned colleague, Mr. Justice Vicente V. Mendoza.
I write this separate opinion to express my own views relative to
the procedural issues raised by the various petitions and death
with by some other Members of the Court in their separate
opinions.
By their very nature, it would seem, discussions of constitutional
issues prove fertile ground for a not uncommon phenomenon:
debate marked by passionate partisanship amounting sometimes
to impatience with adverse views, an eagerness on the part of the
proponents on each side to assume the role of, or be perceived
as, staunch defenders of constitutional principles, manifesting
itself in flights of rhetoric, even hyperbole. The peril in this,
obviously, is a diminution of objectivity that quality which, on

the part of those charged with the duty and authority of

interpreting the fundamental law, is of the essence of their great
function. For the Court, more perhaps than for any other person
or group, it is necessary to maintain that desirable objectivity. It
must make certain that on this as on any other occasion, the
judicial function is meticulously performed, the facts ascertained
as comprehensively and as accurately as possible, all the issues
particularly identified, all the arguments clearly understood; else,
it may itself be accused, by its own members or by others, of a
lack of adherence to, or a careless observance of, its own
procedures, the signatures of its individual members on its
enrolled verdicts notwithstanding.
In the matter now before the Court, and whatever reservations
some people may entertain about their intellectual limitations or
moral scruples, I cannot bring myself to accept the thesis which
necessarily implies that the members of our august Congress, in
enacting the expanded VAT law, exposed their ignorance, or
indifference to the observance, of the rules of procedure set down
by the Constitution or by their respective chambers, or what is
worse, deliberately ignored those rules for some yet undiscovered
purpose nefarious in nature, or at least some purpose other than
the public weal; or that a few of their fellows, acting as a
bicameral conference committee, by devious schemes and
cunning maneuvers, and in conspiracy with officials of the
Executive Department and others, succeeded in "pulling the wool
over the eyes" of all their other colleagues and foisting on them a
bill containing provisions that neither chamber of our bicameral
legislature conceived or contemplated. This is the thesis that the
petitioners would have this Court approve. It is a thesis I consider
bereft of any factual or logical foundation.
Other than the bare declarations of some of the petitioners, or
arguments from the use and import of the language employed in
the relevant documents and records, there is no evidence before
the Court adequate to support a finding that the legislators
concerned, whether of the upper or lower chamber, acted
otherwise than in good faith, in the honest discharge of their

functions, in the sincere belief that the established procedures

were being regularly observed or, at least, that there occurred no
serious or fatal deviation therefrom. There is no evidence on
which reasonably to rest a conclusion that any executive or other
official took part in or unduly influenced the proceedings before
the bicameral conference committee, or that the members of the
latter were motivated by a desire to surreptitiously introduce
improper revisions in the bills which they were required to
reconcile, or that after agreement had been reached on the mode
and manner of reconciliation of the "disagreeing provisions," had
resorted to stratragems or employed under-handed ploys to
ensure their approval and adoption by either House. Neither is
there any proof that in voting on the Bicameral Conference
Committee (BCC) version of the reconciled bills, the members of
the Senate and the House did so in ignorance of, or without
understanding, the contents thereof or the bills therein reconciled.
Also unacceptable is the theory that since the Constitution
requires appropriation and revenue bills to originate exclusively in
the House of Representatives, it is improper if not unconstitutional
for the Senate to formulate, or even think about formulating, its
own draft of this type of measure in anticipation of receipt of one
transmitted by the lower Chamber. This is specially cogent as
regards much-publicized suggestions for legislation (like the
expanded VAT Law) emanating from one or more legislators, or
from the Executive Department, or the private sector, etc. which
understandably could be expected to forthwith generate much
Congressional cogitation.
Exclusive origination, I submit, should have no reference to time
of conception. As a practical matter, origination should refer to the
affirmative act which effectively puts the bicameral legislative
procedure in motion, i.e., the transmission by one chamber to the
other of a bill for its adoption. This is the purposeful act which
sets the legislative machinery in operation to effectively lead to
the enactment of a statute. Until this transmission takes place, the
formulation and discussions, or the reading for three or more
times of proposed measures in either chamber, would be

meaningless in the context of the activity leading towards

concrete legislation. Unless transmitted to the other chamber, a
bill prepared by either house cannot possibly become law. In
other words, the first affirmative, efficacious step, the operative
act as it were, leading to actual enactment of a statute, is the
transmission of a bill from one house to the other for action by the
latter. This is the origination that is spoken of in the Constitution in
its Article VI, Section 24, in reference to appropriation, revenue,
or tariff bills, etc.
It may be that in the Senate, revenue or tax measures are
discussed, even drafted, and this before a similar activity takes
place in the House. This is of no moment, so long as those
measures or bill remain in the Senate and are not sent over the
House. There is no origination of revenue or tax measures by the
Senate in this case. However, once the House completes the
drawing up of a similar tax measure in accordance with the
prescribed procedure, ven if this is done subsequent to the
Senates own measure indeed, even if this be inspired by
information that measure of the Senate and after third reading
transmits its bill to the Senate, there is origination by (or in) the
House within the contemplation of the Constitution.
So it is entirely possible, as intimated, that in expectation of the
receipt of a revenue or tax bill from the House of Representatives,
the Senate commences deliberations on its own concept of such
a legislative measure. This, possibly to save time, so that when
the House bill raches it, its thoughts and views on the matter are
already formed and even reduced to writing in the form of a draft
statute. This should not be thought ilegal, as interdicted by the
Constitution. What the Constitution prohibits is for the Senate to
begin the legislative process first, by sending its own revenue bill
to the House of Representatives for its consideration and action.
This is the initiation that is prohibited to the Senate.
But petitioners claims that this last was what in fact happened,
that the went through the legislative mill and was finally approved
as R.A. No. 7716, was the Senate version, SB 1630. This is

disputed by the respondents. They claim it was House Bill 11197

that, after being transmitted to the Senate, was referred after first
reading to its Committee on Ways and Means; was reported out
by said Committee; underwent second and third readings, was
sent to the bicameral conference committee and then, after
appropriate proceedings therein culminating in extensive
amendments thereof, was finally approved by both Houses and
became the Expanded VAT Law.
On whose side does the truth lie? If it is not possible to make that
determination from the pleadings and records before this Court,
shall it require evidence to be presented? No, on both law and
principle. The Court will reject a case where the legal issues
raised, whatever they may be, depend for their resolution on still
unsettled questions of fact. Petitioners may not, by raising what
are Court to assume the role of a trier of facts. It is on the
contrary their obligation, before raising those questions to this
Court, to see to it that all issues of fact are settled in accordance
with the procedures laid down by law for proof of facts. Failing
this, petitioners would have only themselves to blame for a
peremptory dismissal.
Now, what is really proven about what happened to HB 11197
after it was transmitted to the Senate? It seems to be admitted on
all sides that after going through first reading, HB 11197 was
referred to the Committee on Ways and Means chaired by
Senator Ernesto Herrera.
It is however surmised that after this initial step, HB 11197 was
never afterwards deliberated on in the Senate, that it was there
given nothing more than a "passing glance," and that it never
went through a proper second and third reading. There is no
competent proof to substantiate this claim. What is certain is that
on February 7, 1994, the Senate Committee on Ways and Means
submitted its Report (No. 349) stating that HB 11197
was considered, and recommending that SB 1630 be approved
"in substitution of S.B. No. 1129, taking into consideration P.S.
Res. No. 734 1 and H.B. No. 11197." This Report made known to

the Senate, and clearly indicates, that H.B. No. 11197 was indeed
deliberated on by the Committee; in truth, as Senator Herrera
pointed out, the BCC later "agreed to adopt (a broader coverage of
the VAT) which is closely adhering to the Senate version ** ** with
some new provisions or amendments." The plain implication is that
the Senate Committee had indeed discussed HB 11197 in
comparison with the inconsistent parts of SB 1129 and afterwards
proposed amendments to the former in the form of a new bill (No.
1630) more closely akin to the Senate bill (No. 1129).

And it is as reasonable to suppose as not that later, during the

second and third readings on March 24, 1994, the Senators,
assembled as a body, had before them copies of HB 11197 and
SB 1129, as well as of the Committee's new "SB 1630" that had
been recommended for their approval, or at the very least were
otherwise perfectly aware that they were considering the
particular provisions of these bills. That there was such a
deliberation in the Senate on HB 11197 in light of inconsistent
portions of SB 1630, may further be necessarily inferred from the
request, made by the Senate on the same day, March 24, 1994,
for the convocation of a bicameral conference committee to
reconcile "the disagreeing provisions of said bill (SB 1630) and
House Bill No. 11197," a request that could not have been made
had not the Senators more or less closely examined the
provisions of HB 11197 and compared them with those of the
counterpart Senate measures.
Were the proceedings before the bicameral conference
committee fatally flawed? The affirmative is suggested because
the committee allegedly overlooked or ignored the fact that SB
1630 could not validly originate in the Senate, and that HB 11197
and SB 1630 never properly passed both chambers. The
untenability of these contentions has already been demonstrated.
Now, demonstration of the indefensibility of other arguments
purporting to establish the impropriety of the BCC proceedings
will be attempted.

There is the argument, for instance, that the conference

committee never used HB 11197 even as "frame of reference"
because it does not appear that the suggestion therefor (made by
House Penal Chairman Exequiel Javier at the bicameral
conference committee's meeting on April 19, 1994, with the
concurrence of Senator Maceda) was ever resolved, the minutes
being regrettably vague as to what occurred after that suggestion
was made. It is, however, as reasonable to assume that it was, as
it was not, given the vagueness of the minutes already alluded to.
In fact, a reading of the BCC Report persuasively demonstrates
that HB 11197 was not only utilized as a "frame of reference" but
actually discussed and deliberated on.
Said BCC Report pertinently states: 2
CONFERENCE COMMITTEE REPORT
The Conference Committee on the disagreeing
provisions of House Bill No. 11197, entitled:
AN ACT RESTRUCTURING THE VALUE ADDED
TAX (VAT) SYSTEM TO WIDEN ITS TAX BASE
AND ENHANCE ITS ADMINISTRATION,
AMENDING FOR THESE PURPOSES
SECTIONS 99, 100, 102, 1013, 104, 105, 106,
107, 108 AND 110 OF TITLE IV, 112, 115 AND
116 OF TITLE V, AND 236, 237, AND 238 OF
TITLE IX, AND REPEALING SECTIONS 113SD
AND 114 OF TITLE V, ALL OF THE NATIONAL
INTERNAL REVENUE CODE, AS AMENDED
and Senate Bill No. 1630 entitled:
AN ACT RESTRUCTURING THE VALUE ADDED
TAX (VAT) SYSTEM TO WIDEN ITS TAX BASE
AND ENHANCE ITS ADMINISTRATION,
AMENDING FOR THESE PURPOSES

SECTIONS 99, 100, 102, 103, 104, 1 106, 107,

108 AND 110 OF TITLE IV, 112, 115, 117 AND
121 OF TITLE V, ACND 236, 237, AND 238 OF
TITLE IX, AND REPEALING SECTIONS 1113,
114, 116, 119 AND 120 OF TITLE V, ALL OF
THE NATIONAL INTERNAL REVENUE CODE,
AS AMENDED AND FOR OTHER PURPOSES
having met, after full and free conference, has
agreed to recommend and do hereby recommend
to their respective Houses that House Bill No.
11197, in consolidation with Senate Bill No. 1630,
be approved in accordance with the attached
copy of the bill as reconciled and approved by the
conferees.
Approved.
The Report, it will be noted, explicitly adverts to House Bill No.
11197, it being in fact mentioned ahead of Senate Bill No. 1630;
graphically shows the very close identity of the subjects of both
bills (indicated in their respective titles); and clearly says that the
committee met in "full and free conference" on the "disagreeing
provisions" of both bills (obviously in an effort to reconcile them);
and that reconciliation of said "disagreeing provisions" had been
effected, the BCC having agreed that "House Bill No. 11197, in
consolidation with Senate Bill No. 1630, be approved in
accordance with the attached copy of the bill as reconciled and
approved by the conferees."
It may be concluded, in other words, that, conformably to the
procedure provided in the Constitution with which all the
Members of the bicameral conference committee cannot but be
presumed to be familiar, and no proof to the contrary having been
adduced on the point, it was the original bill (HB 11197) which
said body had considered and deliberated on in detail, reconciled
or harmonized with SB 1630, and used as basis for drawing up

the amended version eventually reported out and submitted to

both houses of Congress.
It is further contended that the BCC was created and convoked
prematurely, that SB 1630 should first have been sent to the
House of Representatives for concurrence It is maintained, in
other words, that the latter chamber should have refused the
Senate request for a bicameral conference committee to
reconcile the "disagreeing provisions" of both bills, and should
have required that SB 1630 be first transmitted to it. This,
seemingly, is nit-picking given the urgency of the proposed
legislation as certified by the President (to both houses, in fact).
Time was of the essence, according to the President's best
judgment as regards which absolutely no one in either
chamber of Congress took exception, general acceptance being
on the contrary otherwise manifested and that judgment the
Court will not now question. In light of that urgency, what was so
vital or indispensable about such a transmittal that its absence
would invalidate all else that had been done towards enactment
of the law, completely escapes me, specially considering that the
House had immediately acceded without demur to the request for
convocation of the conference committee.
What has just been said should dispose of the argument that the
statement in the enrolled bill, that "This Act which is
a consolidation of House Bill No. 11197 and Senate Bill No.
11630 was finally passed by the House of Representatives and
the Senate on April 27, 1994 and May 2, 1994," necessarily
signifies that there were two (2) bills separately introduced,
retaining their independent existence until they reached the
bicameral conference committee where they were consolidated,
and therefore, the VAT law did not originate exclusively in the
House having originated in part in the Senate as SB 1630, which
bill was not embodied in but merely merged with HB 11197,
retaining its separate identity until it was joined by the BCC with
the house measure. The more logical, and fairer, course is to
construe the expression, "consolidation of House Bill No. 11197
and Senate Bill No. 11630" in the context of accompanying and

contemporaneous statements, i.e.: (a) the declaration in the BCC

Report, supra, that the committee met to reconcile the
disagreeing provisions of the two bills, "and after full and free
conference" on the matter, agreed and so recommended that
"House Bill No. 11197, in consolidation with Senate Bill No. 1630,
be approved in accordance with the attached copy of the bill as
reconciled and approved by the conferees;" and (b) the averment
of Senator Herrera, in the Report of the Ways and Means
Committee, supra, that the committee had actually "considered"
(discussed) HB No. 11197 and taken it "into consideration" in
recommending that its own version of the measure (SB 1630) be
the one approved.
That the Senate might have drawn up its own version of the
expanded VAT bill, contemporaneously with or even before the
House did, is of no moment. It bears repeating in this connection
that no VAT bill ever originated in the Senate; neither its SB 1129
or SB 1630 or any of its drafts was ever officially transmitted to
the House as an initiating bill which, as already pointed out, is
what the Constitution forbids; it was HB 11197 that was first sent
to the Senate, underwent first reading, was referred to Committee
on Ways and Means and there discussed in relation to and in
comparison with the counterpart Senate version or versions
the mere formulation of which was, as also already discussed, not
prohibited to it and afterwards considered by the Senate itself,
also in connection with SB 1630, on second and third readings.
HB 11197 was in the truest sense, the originating bill.
An issue has also arisen respecting the so-called "enrolled bill
doctrine" which, it is said, whatever sacrosanct status it might
originally have enjoyed, is now in bad odor with modern scholars
on account of its imputed rigidity and unrealism; it being also
submitted that the ruling in Mabanag v. Lopez Vito (78 Phil. 1)
and the cases reaffirming it, is no longer good law, it being based
on a provision of the Code of Civil Procedure 3 long since stricken
from the statute books.

I would myself consider the "enrolled bill" theory as laying down a

presumption of so strong a character as to be well nigh absolute
or conclusive, fully in accord with the familiar and fundamental
philosophy of separation of powers. The result, as far as I am
concerned, is to make discussion of the enrolled bill principle
purely academic; for as already pointed out, there is no proof
worthy of the name of any facts to justify its reexamination and,
possibly, disregard.
The other question is, what is the nature of the power given to a
bicameral conference committee of reconciling differences
between, or "disagreeing provisions" in, a bill originating from the
House in relation to amendments proposed by the Senate
whether as regards some or all of its provisions? Is the mode of
reconciliation, subject to fixed procedure and guidelines? What
exactly can the committee do, or not do? Can it only clarify or
revise provisions found in either Senate or House bill? Is it
forbidden to propose additional or new provisions, even on
matters necessarily or reasonably connected with or germane to
items in the bills being reconciled?
In answer, it is postulated that the reconciliation function is quite
limited. In these cases, the conference committee should have
confined itself to reconciliation of differences or inconsistencies
only by (a) restoring provisions of HB11197 aliminated by SB
1630, or (b) sustaining wholly or partly the Senate amendments,
or (c) as a compromise, agreeing that neither provisions nor
amendments be carried into the final form of HB 11197 for
submission to both chambers of the legislature.
The trouble is, it is theorized, the committee incorporated
activities or transactions which were not within the contemplation
of both bills; it made additions and deletions which did not enjoy
the enlightenment of initial committee studies; it exercised what is
known as an "ex post veto power" granted to it by no law, rule or
regulation, a power that in truth is denied to it by the rules of both
the Senate and the House. In substantiation, the Senate rule is
cited, similar to that of the House, providing that "differences shall

be settled by a conference committee" whose report shall contain

"detailed and sufficiently explicit statement of the changes in or
amendments to the subject measure, ** (to be) signed by the
conferees;" as well as the "Jefferson's Manual," adopted by the
Senate as supplement to its own rules, directing that the
managers of the conference must confine themselves to
differences submitted to them; they may not include subjects not
within the disagreements even though germane to a question in
issue."
It is significant that the limiting proviso in the relevant rules has
been construed and applied as directory, not mandatory. During
the oral argument, counsel for petitioners admitted that the
practice for decades has been for bicameral conference
committees to include such provisions in the reconciled bill as
they believed to be germane or necessary and acceptable to both
chambers, even if not within any of the "disagreeing provisions,"
and the reconciled bills, containing such provisions had invariably
been approved and adopted by both houses of Congress. It is a
practice, they say, that should be stopped. But it is a practice that
establishes in no uncertain manner the prevailing concept in both
houses of Congress of the permissible and acceptable modes of
reconciliation that their conference committees may adopt, one
whose undesirability is not all that patent if not, indeed, incapable
of unquestionable demonstration. The fact is that conference
committees only take up bills which have already been freely and
fully discussed in both chambers of the legislature, but as to
which there is need of reconciliation in view of "disagreeing
provisions" between them; and both chambers entrust the
function of reconciling the bills to their delegates at a conference
committee with full awareness, and tacit consent, that
conformably with established practice unquestioningly observed
over many years, new provisions may be included even if not
within the "disagreeing provisions" but of which, together with
other changes, they will be given detailed and sufficiently explicit
information prior to voting on the conference committee version.

In any event, a fairly recent decision written for the Court by

Senior Associate Justice Isagani A. Cruz, promulgated on
November 11, 1993 (G.R. No. 105371, The Philippine Judges
Association, etc., et al. v. Hon. Pete Prado, etc., et al.), should
leave no doubt of the continuing vitality of the enrolled bill
doctrine and give an insight into the nature of the reconciling
function of bicameral conference committees. In that case, a
bilateral conference committee was constituted and met to
reconcile Senate Bill No. 720 and House Bill No. 4200. It adopted
a "reconciled" measure that was submitted to and approved by
both chambers of Congress and ultimately signed into law by the
President, as R.A. No. 7354. A provision in this statute (removing
the franking privilege from the courts, among others) was
assailed as being an invalid amendment because it was not
included in the original version of either the senate or the house
bill and hence had generated no disagreement between them
which had to be reconciled. The Court held:
While it is true that a conference committee is the
mechanism for compromising differences
between the Senate and the House, it is not
limited in its jurisdiction to this question. Its
broader function is described thus:
A conference committee may deal
generally with the subject matter
or it may be limited to resolving
the precise differences between
the two houses. Even where the
conference committee is not by
rule limited in its jurisdiction,
legislative custom severely limits
the freedom with which new
subject matter can be inserted into
the conference bill. But
occasionally a conference
committee produces unexpected
results, results beyond its

mandate. These excursions occur

even where the rules impose strict
limitations on conference
committee jurisdiction. This is
symptomatic of the authoritarian
power of conference committee
(Davies, Legislative Law and
Process: In A Nutshell, 1987 Ed.,
p. 81).
It is a matter of record that the Conference
Committee Report on the bill in question was
returned to and duly approved by both the Senate
and the House of Representatives. Thereafter, the
bill was enrolled with its certification by Senate
President Neptali A. Gonzales and Speaker
Ramon V. Mitra of the House of Representatives
as having been duly passed by both Houses of
Congress. It was then presented to and approved
by President Corazon C. Aquino on April 3, 1992.
Under the doctrine of separation of powers, the
Court may not inquire beyond the certification of
the approval of a bill from the presiding officers of
Congress. Casco Philippine Chemical Co. v.
Gimenez(7 SCRA 347) laid down the rule that the
enrolled bill is conclusive upon the Judiciary
(except in matters that have to be entered in the
journals like the yeas and nays on the final
reading of the bill) (Mabanag v. Lopez Vito, 78
Phil. 1). The journals are themselves also binding
on the Supreme Court, as we held in the old (but
still valid) case of U.S. v. Pons (34 Phil. 729),
where we explained the reason thus:
To inquire into the veracity of the
journals of the Philippine
legislature when they are, as we

have said, clear and explicit,

would be to violate both the letter
and spirit of the organic laws by
which the Philippine Government
was brought into existence, to
invade a coordinate and
independent department of the
Government, and to interfere with
the legitimate powers and
functions of the Legislature.
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 R.A. No. 7354
and that copies thereof in its final
form were 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.
Withal, an analysis of the changes made by the conference
committee in HB 11197 and SB 1630 by way of reconciling their
"disagreeing provisions," assailed by petitioners as
unauthorized or incongrouous reveals that many of the
changes related to actual "disagreeing provisions," and that those
that might perhaps be considered as entirely new are
nevertheless necessarily or logically connected with or germane
to particular matters in the bills being reconciled.

For instance, the change made by the bicameral conference

committee (BCC) concerning amendments to Section 99 of the
National Internal Revenue Code (NIRC) the addition of
"lessors of goods or properties and importers of goods" is
really a reconciliation of disagreeing provisions, for while HB
11197 mentions as among those subject to tax, "one who sells,
barters, or exchanges goods or properties and any person who
leases personal properties," SB 1630 does not. The change also
merely clarifies the provision by providing that the contemplated
taxpayers includes "importers." The revision as regards the
amendment to Section 100, NIRC, is also simple reconciliation,
being nothing more than the adoption by the BCC of the provision
in HB 11197 governing the sale of gold to Bangko Sentral, in
contrast to SB 1630 containing no such provision. Similarly, only
simple reconciliation was involved as regards approval by the
BCC of a provision declaring as not exempt, the sale of real
properties primarily held for sale to customers or held for lease in
the ordinary course of trade or business, which provision is found
in HB 11197 but not in SB 1630; as regards the adoption by the
BCC of a provision on life insurance business, contained in SB
1630 but not found in HB 11197; as regards adoption by the BCC
of the provision in SB 1630 for deferment of tax on certain goods
and services for no longer than 3 years, as to which there was no
counterpart provision in SB 11197; and as regards the fixing of a
period for the adoption of implementing rules, a period being
prescribed in SB 1630 and none in HB 11197.
In respect of other revisions, it would seem that questions
logically arose in the course of the discussion of specific
"disagreeing provisions" to which answers were given which,
because believed acceptable to both houses of Congress, were
placed in the BCC draft. For example, during consideration
of radio and television time (Sec. 100, NIRC) dealt with in both
House and Senate bills, the question apparently came up, the
relevance of which is apparent on its face, relative to satellite
transmission and cable television time. Hence, a provision in the
BCC bill on the matter. Again, while deliberating on the definition
of goods or properties in relation to the provision subjecting sales

thereof to tax, a question apparently arose, logically relevant,

about real properties intended to be sold by a person in economic
difficulties, or because he wishes to buy a car, i.e., not as part of
a business, the BCC evidently resolved to clarify the matter by
excluding from the tax, "real properties held primarily for sale to
customers or held for lease in the ordinary course of business."
And in the course of consideration of the term,sale or exchange
of services (Sec 102, NIRC), the inquiry most probably was
posed as to whether the term should be understood as including
other services: e.g., services of lessors of property whether real
or personal, of warehousemen, of keepers of resthouses, pension
houses, inns, resorts, or of common carriers, etc., and
presumably the BCC resolved to clarify the matter by including
the services just mentioned. Surely, changes of this nature are
obviously to be expected in proceedings before bicameral
conference committees and may even be considered grist for
their mill, given the history of such BCCs and their general
practice here and abroad
In any case, all the changes and revisions, and deletions, made
by the conference committee were all subsequently considered
by and approved by both the Senate and the House, meeting and
voting separately. It is an unacceptable theorization, to repeat,
that when the BCC report and its proposed bill were submitted to
the Senate and the House, the members thereof did not bother to
read, or what is worse, having read did not understand, what was
before them, or did not realize that there were new provisions in
the reconciled version unrelated to any "disagreeing provisions,"
or that said new provisions or revisions were effectively
concealed from them
Moreover, it certainly was entirely within the power and
prerogative of either legislative chamber to reject the BCC bill and
require the organization of a new bicameral conference
committee. That this option was not exercised by either house
only proves that the BCC measure was found to be acceptable as
in fact it was approved and adopted by both chambers.

I vote to DISMISS the petitions for lack of merit.

Consequently, upon careful deliberation, I have no difficulty in

reaching the conclusion that the expanded VAT law comes within
the legitimate power of the state to tax. And as I had occasion to
previously state:

PADILLA, J.:
I
The original VAT law and the expanded VAT law
In Kapatiran v. Tan, 1 where the ponente was the writer of this
Separate Opinion, a unanimous Supreme Court en bancupheld the
validity of the original VAT law (Executive Order No. 273, approved
on 25 July 1987). It will, in my view, be pointless at this time to reopen arguments advanced in said case as to why said VAT law was
invalid, and it will be equally redundant to re-state the principles laid
down by the Court in the same case affirming the validity of the VAT
law as a tax measure. And yet, the same arguments are, in effect,
marshalled against the merits and substance of the expanded VAT
law (Rep. Act. No. 7716, approved on 5 May 1994). The same
Supreme Court decision should therefore dispose, in the main, of
such arguments, for the expanded VAT law is predicated basically
on the same principles as the original VAT law, except that now the
tax base of the VAT imposition has been expanded or broadened.

It only needs to be stated what actually should be obvious

that a tax measure, like the expanded VAT law (Republic Act. No.
7716), is enacted by Congress and approved by the President in
the exercise of the State's power to tax, which is an attribute of
sovereignty. And while the power to tax, if exercised without limit,
is a power to destroy, and should, therefore, not be allowed in
such form, it has to be equally recognized that the power to tax is
an essential right of government. Without taxes, basic services to
the people can come to a halt; economic progress will be stunted,
and, in the long run, the people will suffer the pains of stagnation
and retrogression.

Constitutional Law, to begin with, is concerned

with power not political convenience, wisdom,
exigency, or even necessity. Neither the
Executive nor the legislative (Commission on
Appointments) can create power where the
Constitution confers none. 2
Likewise, in the first VAT case, I said:
In any event, if petitioners seriously believe that
the adoption and continued application of the VAT
are prejudicial to the general welfare or the
interests of the majority of the people, they should
seek, recourse and relief from the political
branches of the government. The Court, following
the time-honored doctrine of separation of
powers, cannot substitute its judgment for that of
the President (and Congress) as to the wisdom,
justice and advisability of the adoption of the
VAT. 3
This Court should not, as a rule, concern itself with questions of
policy, much less, economic policy. That is better left to the two
(2) political branches of government. That the expanded VAT law
is unwise, unpopular and even anti-poor, among other things said
against it, are arguments and considerations within the realm of
policy-debate, which only Congress and the Executive have the
authority to decisively confront, alleviate, remedy and resolve.
II
The procedure followed in the approval of Rep. Act No. 7716

Petitioners however posit that the present case raises a farreaching constitutional question which the Court is duty-bound to
decide under its expanded jurisdiction in the 1987
Constitution. 4 Petitioners more specifically question and impugn
the manner by which the expanded VAT law (Rep. Act. No. 7716)
was approved by Congress. They contend that it was approved in
violation of the Constitution from which fact it follows, as a
consequence, that the law is null and void. Main reliance of the
petitioners in their assault in Section 24, Art. VI of the Constitution
which provides:

Sec. 24. All appropriation, revenue or tariff bills,

bills authorizing increase of the public debt, bill of
local application, and private bills shall originate
exclusively in the House of Representatives, but
the Senate may propose or concur with
amendments.
While it should be admitted at the outset that there was no
rigorous and strict adherence to the literal command of the above
provision, it may however be said, after careful reflection, that
there was substantial compliance with the provision.
There is no question that House Bill No. 11197 expanding the
VAT law originated from the House of Representatives. It is
undeniably a House measure. On the other hand, Senate Bill No.
1129, also expanding the VAT law, originated from the Senate. It
is undeniably a Senate measure which, in point of time, actually
antedated House Bill No. 11197.
But it is of record that when House Bill No. 11197 was, after
approval by the House, sent to the Senate, it was referred to, and
considered by the Senate Committee on Ways and Means (after
first reading) together with Senate Bill No. 1129, and the
Committee came out with Senate Bill No. 1630 in substitution of
Senate Bill No. 1129 but after expressly taking into consideration
House Bill No. 11197.

Since the Senate is, under the above-quoted constitutional

provision, empowered to concur with a revenue measure
exclusively originating from the House, or to propose
amendments thereto, to the extent of proposing amendments by
SUBSTITUTION to the House measure, the approval by the
Senate of Senate Bill No. 1630, after it had considered House Bill
No. 11197, may be taken, in my view, as an AMENDMENT BY
SUBSTITUTION by the Senate not only of Senate Bill No. 1129
but of House Bill No. 11197 as well which, it must be
remembered, originated exclusively from the House.
But then, in recognition of the fact that House Bill No. 11197
which originated exclusively from the House and Senate Bill No.
1630 contained conflicting provisions, both bills (House Bill No.
11197 and Senate Bill No. 1630) were referred to the Bicameral
Conference Committee for joint consideration with a view to
reconciling their conflicting provisions.
The Conference Committee came out eventually with a
Conference Committee Bill which was submitted to both
chambers of Congress (the Senate and the House). The
Conference Committee reported out a bill consolidating
provisions in House Bill No. 11197 and Senate Bill No. 1630.
What transpired in both chambers after the Conference
Committee Report was submitted to them is not clear from the
records in this case. What is clear however is that both chambers
voted separately on the bill reported out by the Conference
Committee and both chambers approved the bill of the
Conference Committee.
To me then, what should really be important is that both
chambers of Congress approved the bill reported out by the
Conference Committee. In my considered view, the act of both
chambers of Congress in approving the Conference Committee
bill, should put an end to any inquiry by this Court as to how the
bill came about. What is more, such separate approvals CURED
whatever constitutional infirmities may have arisen in the
procedures leading to such approvals. For, if such infirmities were

serious enough to impugn the very validity of the measure itself,

there would have been an objection or objections from members
of both chambers to the approval. The Court has been shown no
such objection on record in both chambers.
Petitioners contend that there were violations of Sec. 26
paragraph 2, Article VI of the Constitution which provides:
Sec. 26. . . .
(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.
in that, when Senate Bill No. 1630 (the Senate counterpart of
House Bill No. 11197) was approved by the Senate, after it had
been reported out by the Senate Committee on Ways and Means,
the bill went through second and third readings on the same day
(not separate days) and printed copies thereof in its final form
were not distributed to the members of the Senate at least three
(3) days before its passage by the Senate. But we are told by the
respondents that the reason for this "short cut" was that the
President had certified to the necessity of the bill's immediate
enactment to meet an emergency a certification that, by leave
of the same constitutional provision, dispensed with the second
and third readings on separate days and the printed form at least
three (3) days before its passage.

We have here then a situation where the President did certify to

the necessity of Senate Bill No. 1630's immediate enactment to
meet an emergency and the Senate responded accordingly.
While I would be the last to say that this Court cannot review the
exercise of such power by the President in appropriate cases ripe
for judicial review, I am not prepared however to say that the
President gravely abused his discretion in the exercise of such
power as to require that this Court overturn his action. We have
been shown no fact or circumstance which would impugn the
judgment of the President, concurred in by the Senate, that there
was an emergency that required the immediate enactment of
Senate Bill No. 1630. On the other hand, a becoming respect for
a co-equal and coordinate department of government points that
weight and credibility be given to such Presidential judgment.
The authority or power of the Conference Committee to make
insertions in and deletions from the bills referred to it, namely,
House Bill No. 11197 and Senate Bill No. 1630 is likewise
assailed by petitioners. Again, what appears important here is
that both chambers approved and ratified the bill as reported out
by the Conference Committee (with the reported insertions and
deletions). This is perhaps attributable to the known legislative
practice of allowing a Conference Committee to make insertions
in and deletions from bills referred to it for consideration, as long
as they are germane to the subject matter of the bills under
consideration. Besides, when the Conference Committee made
the insertions and deletions complained of by petitioners, was it
not actually performing the task assigned to it of reconciling
conflicting provisions in House Bill No. 11197 and Senate Bill No.
1630?
This Court impliedly if not expressly recognized the fact of such
legislative practice in Philippine Judges Association, etc. vs. Hon.
Peter Prado, etc., 5 In said case, we stated thus:
The petitioners also invoke Sec. 74 of the Rules
of the House of Representatives, requiring that
amendment to any bill when the House and the

Senate shall have differences thereon may be

settled by a conference committee of both
chambers. They stress that Sec. 35 was never a
subject of any disagreement between both
Houses and so the second paragraph could not
have been validly added as an amendment.
These arguments are unacceptable.
While it is true that a conference committee is the
mechanism for compromising differences
between the Senate and the House, it is not
limited in its jurisdiction to this question. Its
broader function is described thus:
A conference committee may deal
generally with the subject matter
or it may be limited to resolving
the precise differences between
the two houses. Even where the
conference committee is not by
rule limited in its jurisdiction,
legislative custom severely limits
the freedom with which new
subject matter can be inserted into
the conference bill. But
occasionally a conference
committee produces unexpected
results, results beyond its
mandate. These excursions
occurs even where the rules
impose strict limitations on
conference committee jurisdiction.
This is symptomatic of the
authoritarian power of conference
committee (Davies, Legislative
Law and Process: In A Nutshell,
1986 Ed., p. 81).

It is a matter of record that the Conference

Committee Report on the bill in question was
returned to and duly approved by both the Senate
and the House of Representatives. Thereafter, the
bill was enrolled with its certification by Senate
President Neptali A. Gonzales and Speaker
Ramon V. Mitra of the House of Representatives
as having been duly passed by both Houses of
Congress. It was then presented to and approved
by President Corazon C. Aquino on April 3, 1992.
It would seem that if corrective measures are in order to clip the
powers of the Conference Committee, the remedy should come
from either or both chambers of Congress, not from this Court,
under the time-honored doctrine of separation of powers.
Finally, as certified by the Secretary of the Senate and the
Secretary General of the House of Representatives
This Act (Rep. Act No. 7716) is a consolidation of
House Bill No. 11197 and Senate Bill No. 1630
(w)as finally passed by the House of
Representatives and the Senate on April 27, 1994
and May 2, 1994 respectively.
Under the long-accepted doctrine of the "enrolled bill," the Court
in deference to a co-equal and coordinate branch of government
is held to a recognition of Rep. Act No. 7716 as a law validly
enacted by Congress and, thereafter, approved by the President
on 5 May 1994. Again, we quote from out recent decision
in Philippine Judges Association, supra:
Under the doctrine of separation of powers, the
Court may not inquire beyond the certification of
the approval of a bill from the presiding officers of
Congress. Casco Philippine Chemical Co. v.
Gimenezlaid down the rule that the enrolled bill is

conclusive upon the Judiciary (except in matters

that have to be entered in the journals like
the yeas and nays on the finally reading of the
bill). The journals are themselves also binding on
the Supreme Court, as we held in the old (but still
valid) case of U.S. vs. Pons, 8 where we explained

Press Freedom and Religious Freedom and Rep. Act No. 7716

the reason thus:

Rep. Act. No. 7716 in imposing a value-added tax on circulation

income of newspapers and similar publications and on income
derived from publishing advertisements in newspapers 9, to my

To inquire into the veracity of the

journals of the Philippine
legislature when they are, as we
have said, clear and explicit,
would be to violate both the letter
and spirit of the organic laws by
which the Philippine Government
was brought into existence, to
invade a coordinate and
independent department of the
Government, and to interfere with
the legitimate powers and
functions of the Legislature.
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 form were 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.
III

The validity of the passage of Rep. Act No. 7716 notwithstanding,

certain provisions of the law have to be examined separately and
carefully.

mind, violates Sec. 4, Art. III of the Constitution. Indeed, even the
Executive Department has tried to cure this defect by the issuance of
the BIR Regulation No.11-94 precluding implementation of the tax in
this area. It should be clear, however, that the BIR regulation cannot
amend the law (Rep. Act No. 7716). Only legislation (as
distinguished from administration regulation) can amend an existing
law.

Freedom of the press was virtually unknown in the Philippines

before 1900. In fact, a prime cause of the revolution against
Spain at the turn of the 19th century was the repression of the
freedom of speech and expression and of the press. No less than
our national hero, Dr. Jose P. Rizal, in "Filipinas Despues de Cien
Anos" (The Philippines a Century Hence) describing the
reforms sine quibus non which the Filipinos were insisting upon,
stated: "The minister . . . who wants his reforms to be reforms,
must begin by declaring the press in the Philippines free . . . ". 10
Press freedom in the Philippines has met repressions, most
notable of which was the closure of almost all forms of existing
mass media upon the imposition of martial law on 21 September
1972.
Section 4, Art. III of the Constitution maybe traced to the United
States Federal Constitution. The guarantee of freedom of
expression was planted in the Philippines by President McKinley
in the Magna Carta of Philippine Liberty, Instructions to the
Second Philippine Commission on 7 April 1900.

The present constitutional provision which reads:

Sec. 4 No law shall be passed abridging the
freedom of speech, of expression, or of the press,
or the right of the people peaceably to assemble
and petition the government for redress of
grievances.
is essentially the same as that guaranteed in the U.S. Federal
Constitution, for which reason, American case law giving judicial
expression as to its meaning is highly persuasive in the
Philippines.
The plain words of the provision reveal the clear intention that no
prior restraint can be imposed on the exercise of free speech and
expression if they are to remain effective and meaningful.
The U.S. Supreme Court in the leading case of Grosjean v.
American Press Co. Inc. 11 declared a statute imposing a gross
receipts license tax of 2% on circulation and advertising income of
newspaper publishers as constituting a prior restraint which is
contrary to the guarantee of freedom of the press.

constitutional flaw in the law is at once apparent and should not

be allowed to proliferate.
Similarly, the imposition of the VAT on the sale and distribution of
religious articles must be struck down for being contrary to Sec.
5, Art. III of the Constitution which provides:
Sec. 5. No law shall be made respecting an
establishment of religion, or prohibiting the free
exercise thereof. The free exercise and enjoyment
of religious profession and worship, without
discrimination or preference, shall forever be
allowed. No religious test shall be required for the
exercise of civil or political rights.
That such a tax on the sale and distribution of religious articles is
unconstitutional, has been long settled in American Bible
Society, supra.
Insofar, therefore, as Rep. Act No. 7716 imposes a value-added
tax on the exercise of the above- discussed two (2) basic
constitutional rights, Rep. Act No. 7716 should be declared
unconstitutional and of no legal force and effect.

In Bantam Books, Inc. v. Sullivan 12, the U.S. Supreme Court

stated: "Any system of prior restraint of expression comes to this
Court bearing a heavy presumption against its constitutionality."

In this jurisdiction, prior restraint on the exercise of free

expression can be justified only on the ground that there is a clear
and present danger of a substantive evil which the State has the
right to prevent 13.
In the present case, the tax imposed on circulation and
advertising income of newspaper publishers is in the nature of
a prior restraint on circulation and free expression and, absent a
clear showing that the requisite for prior restraint is present, the

IV
Petitions of CREBA and PAL and Rep. Act No. 7716
The Chamber of Real Estate and Builder's Association, Inc.
(CREBA) filed its own petition (GR No. 11574) arguing that the
provisions of Rep. Act No. 7716 imposing a 10% value-added tax
on the gross selling price or gross value in money of every sale,
barter or exchange of goods or properties (Section 2) and a 10%
value-added tax on gross receipts derived from the sale or
exchange of services, including the use or lease of properties
(Section 3), violate the equal protection, due process and non-

impairment provisions of the Constitution as well as the rule that

taxation should be uniform, equitable and progressive.
The issue of whether or not the value-added tax is uniform,
equitable and progressive has been settled inKapatiran.

The validity of PAL's above argument can be tested by

ascertaining the true intention of Congress in enacting Rep. Act
No. 7716. Sec. 4 thereof dealing with Exempt Transactions
states:
Sec. 103. Exempt Transactions. The following
shall be exempt from the value-added tax:

CREBA which specifically assails the 10% value-added tax on the

gross selling price of real properties, fails to distinguish between a
sale of real properties primarily held for sale to customers or held
for lease in the ordinary course of trade or business and isolated
sales by individual real property owners (Sec. 103[s]). That those
engaged in the business of real estate development realize great
profits is of common knowledge and need not be discussed at
length here. The qualification in the law that the 10% VAT covers
only sales of real property primarily held for sale to
customers, i.e. for trade or business thus takes into consideration
a taxpayer's capacity to pay. There is no showing that the
consequent distinction in real estate sales is arbitrary and in
violation of the equal protection clause of the Constitution. The
inherent power to tax of the State, which is vested in the
legislature, includes the power to determine whom or what to tax,
as well as how much to tax. In the absence of a clear showing
that the tax violates the due process and equal protection clauses
of the Constitution, this Court, in keeping with the doctrine of
separation of powers, has to defer to the discretion and judgment
of Congress on this point.

The repealing clause of Rep. Act No. 7716 further reads:

Philippine Airlines (PAL) in a separate petition (G.R. No. 115852)

claims that its franchise under PD No. 1590 which makes it liable
for a franchise tax of only 2% of gross revenues "in lieu of all the
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," cannot be amended by Rep. Act
No. 7716 as to make it (PAL) liable for a 10% value-added tax on
revenues, because Sec. 24 of PD No. 1590 provides that PAL's
franchise can only be amended, modified or repealed by a special
law specifically for that purpose.

There can be no dispute, in my mind, that the clear intent of

Congress was to modify PAL's franchise with respect to the taxes
it has to pay. To this extent, Rep. Act No. 7716 can be considered
as a special law amending PAL's franchise and its tax liability
thereunder. That Rep. Act. No. 7716 imposes the value-added
taxes on other subjects does not make it a general law which
cannot amend PD No. 1590.

xxx xxx xxx

(q) Transactions which are exempt under special
laws, except those granted under Presidential
Decrees No. 66, 529, 972, 1491,
1590, . . . " (Emphasis supplied)

Sec. 20. Repealing clauses. The provisions of

any special law relative to the rate of franchise
taxes are hereby expressly repealed.
xxx xxx xxx
All other laws, orders, issuances, rules and
regulations or parts thereof inconsistent with this
Act are hereby repealed, amended or modified
accordingly (Emphasis supplied)

To sum up: it is my considered view that Rep. Act No. 7716 (the
expanded value-added tax) is a valid law, viewed from both
substantive and procedural standards, except only insofar as it
violates Secs. 4 and 5, Art. III of the Constitution (the guarantees
of freedom of expression and the free exercise of religion). To
that extent, it is, in its present form, unconstitutional.

It has never occurred to me, and neither do I believe it has been

intended, that judicial tyranny is envisioned, let alone
institutionalized, by our people in the 1987 Constitution. The test
of tyranny is not solely on how it is wielded but on how, in the first
place, it can be capable of being exercised. It is time that any
such perception of judicial omnipotence is corrected.

I, therefore, vote to DISMISS the petitions, subject to the above

qualification.

Against all that has been said, I see, in actuality in these cases at
bench, neither a constitutional infringement of substance, judging
from precedents already laid down by this Court in previous
cases, nor a justiciability even now of the issues raised, more
than an attempt to sadly highlight the perceived shortcomings in
the procedural enactment of laws, a matter which is internal to
Congress and an area that is best left to its own basic concern.
The fact of the matter is that the legislative enactment, in its final
form, has received the ultimate approval of both houses of
Congress. The finest rhetoric, indeed fashionable in the early part
of this closing century, would still be a poor substitute for
tangibility. I join, nonetheless, some of my colleagues in
respectfully inviting the kind attention of the honorable members
of our Congress in the suggested circumspect observance of their
own rules.

VITUG, J.:
Lest we be lost by a quagmire of trifles, the real threshold and
prejudicial issue, to my mind, is whether or not this Court is ready
to assume and to take upon itself with an overriding authority the
awesome responsibility of overseeing the entire bureaucracy. Far
from it, ours is merely to construe and to apply the law regardless
of its wisdom and salutariness, and to strike it down only when it
clearly disregards constitutional proscriptions. It is what the
fundamental law mandates, and it is what the Court must do.
I cannot yet concede to the novel theory, so challengingly
provocative as it might be, that under the 1987 Constitution the
Court may now at good liberty intrude, in the guise of the people's
imprimatur, into every affair of the government. What significance
can still then remain, I ask, of the time honored and widely
acclaimed principle of separation of powers, if at every turn the
Court allows itself to pass upon, at will, the disposition of a coequal, independent and coordinate branch in our system of
government. I dread to think of the so varied uncertainties that
such an undue interference can lead to. The respect for long
standing doctrines in our jurisprudence, nourished through time,
is one of maturity not timidity, of stability rather than quiescence.

A final remark. I should like to make it clear that this opinion does
not necessarily foreclose the right, peculiar to any taxpayer
adversely affected, to pursue at the proper time, in appropriate
proceedings, and in proper fora, the specific remedies prescribed
therefor by the National Internal Revenue Code, Republic Act
1125, and other laws, as well as rules of procedure, such as may
be pertinent. Some petitions filed with this Court are, in essence,
although styled differently, in the nature of declaratory relief over
which this Court is bereft of original jurisdiction.
All considered, I, therefore, join my colleagues who are voting for
the dismissal of the petitions.

CRUZ, J.:
It is a curious and almost incredible fact that at the hearing of
these cases on July 7, 1994, the lawyers who argued for the
petitioners two of them former presidents of the Senate and
the third also a member of that body all asked this Court to
look into the internal operations of their Chamber and correct the
irregularities they claimed had been committed there as well as in
the House of Representatives and in the bicameral conference
committee.
While a member of the legislative would normally resist such
intervention and invoke the doctrine of separation of powers to
protect Congress from what he would call judicial intrusion, these
counsel practically implored the Court to examine the questioned
proceedings and to this end go beyond the journals of each
House, scrutinize the minutes of the committee, and investigate
all other matters relating to the passage of the bill (or bills) that
eventually became R.A. No. 7716.
In effect, the petitioners would have us disregard the timehonored inhibitions laid down by the Court upon itself in the
landmark case of U.S. v. Pons (34 Phil. 725), where it refused to
consider extraneous evidence to disprove the recitals in the
journals of the Philippine Legislature that it had adjourned sine
die at midnight of February 28, 1914. Although it was generally
known then that the special session had actually exceeded the
deadline fixed by the Governor-General in his proclamation, the
Court chose to be guided solely by the legislative journals,
holding significantly as follows:
. . . From their very nature and object, the records
of the legislature are as important as those of the
judiciary, and to inquire into the veracity of the
journals of the Philippine Legislature, when they
are, as we have said, clear and explicit, would be
to violate both the letter and the spirit of the
organic laws by which the Philippine Government

was brought into existence, to invade a coordinate

and independent department of the Government,
and to interfere with the legitimate powers and
functions of the Legislature. But counsel in his
argument says that the public knows that the
Assembly's clock was stopped on February 28,
1914, at midnight and left so until the
determination of the discussion of all pending
matters. Or, in other words, the hands of the clock
were stayed in order to enable the Assembly to
effect an adjournment apparently within the fixed
time by the Governor's proclamation for the
expiration of the special session, in direct violation
of the Act of Congress of July 1, 1902. If the clock
was, in fact, stopped, as here suggested, "the
resultant evil might be slight as compared with
that of altering the probative force and character
of legislative records, and making the proof of
legislative action depend upon uncertain oral
evidence, liable to loss by death or absence, and
so imperfect on account of the treachery of
memory.
. . . The journals say that the Legislature
adjourned at 12 midnight on February 28, 1914.
This settles the question, and the court did not err
in declining to go beyond the journals.
As one who has always respected the rationale of the separation
of powers, I realize only too well the serious implications of the
relaxation of the doctrine except only for the weightiest of
reasons. The lowering of the barriers now dividing the three major
branches of the government could lead to individious incursions
by one department into the exclusive domains of the other
departments to the detriment of the proper discharge of the
functions assigned to each of them by the Constitution.

Still, while acknowledging the value of tradition and the reasons

for judicial non-interference announced in Pons, I am not
disinclined to take a second look at the ruling from a more
pragmatic viewpoint and to tear down, if we must, the iron curtain
it has hung, perhaps improvidently, around the proceedings of the
legislature.
I am persuaded even now that where a specific procedure is fixed
by the Constitution itself, it should not suffice for Congress to
simply say that the rules have been observed and flatly consider
the matter closed. It does not have to be as final as that. I would
imagine that the judiciary, and particularly this Court, should be
able to verify that statement and determine for itself, through the
exercise of its own powers, if the Constitution has, indeed, been
obeyed.
In fact, the Court had already said that the question of whether
certain procedural rules have been followed is justiciable rather
than political because what is involved is the legality and not
the wisdom of the act in question. So we ruled in Sanidad v.
Commission on Elections (73 SCRA 333) on the amendment of
the Constitution; in Daza v. Singson (180 SCRA 496) on the
composition of the Commission on Appointments; and in the
earlier case ofTaada v. Cuenco (100 SCRA 1101) on the
organization of the Senate Electoral Tribunal, among several
other cases.
By the same token, the ascertainment of whether a bill underwent
the obligatory three readings in both Houses of Congress should
not be considered an invasion of the territory of the legislature as
this would not involve an inquiry into its discretion in approving
the measure but only the manner in which the measure was
enacted.
These views may upset the conservatives among us who are
most comfortable when they allow themselves to be petrified by
precedents instead of venturing into uncharted waters. To be
sure, there is much to be said of the wisdom of the past

expressed by vanished judges talking to the future. Via trita est

tuttisima. Except when there is a need to revise them because of
an altered situation or an emergent idea, precedents should tell
us that, indeed, the trodden path is the safest path.
It could be that the altered situation has arrived to welcome the
emergent idea. The jurisdiction of this Court has been expanded
by the Constitution, to possibly include the review the petitioners
would have us make of the congressional proceedings being
questioned. Perhaps it is also time to declare that the activities of
Congress can no longer be smoke-screened in the inviolate
recitals of its journals to prevent examination of its sacrosanct
records in the name of the separation of powers.
But then again, perhaps all this is not yet necessary at this time
and all these observations are but wishful musings for a more
activist judiciary. For I find that this is not even necessary, at least
for me, to leave the trodden path in the search for new
adventures in the byways of the law. The answer we seek, as I
see it, is not far afield. It seems to me that it can be found through
a study of the enrolled bill alone and that we do not have to go
beyond that measure to ascertain if R.A. No. 7716 has been
validly enacted.
It is settled in this jurisdiction that in case of conflict between the
enrolled bill and the legislative journals, it is the former that
should prevail except only as to matters that the Constitution
requires to be entered in the journals. (Mabanag v. Lopez Vito, 78
Phil. 1). These are the yeas and nays on the final reading of a bill
or on any question at the request of at least one-fifth of the
member of the House (Constitution, Art. VI, Sec. 16[4]), the
objections of the President to a vetoed bill or item (Ibid, Sec. 27
[1]), and the names of the members voting for or against the
overriding of his veto (Id. Section 27 [1]), The original of a bill is
not specifically required by the Constitution to be entered in the
journals. Hence, on this particular manner, it is the recitals in the
enrolled bill and not in the journals that must control.

Article VI, Section 24, of the Constitution provides:

Sec. 24. 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 enrolled bill submitted to and later approved by the President
of the Philippines as R.A. No. 7716 was signed by the President
of the Senate and the Speaker of the House of Representatives.
It carried the following certification over the signatures of the
Secretary of the Senate and the Acting Secretary of the House of
Representatives:
This Act which is a consolidation of House Bill No.
11197 and Senate Bill No. 11630 was finally
passed by the House of Representative and the
Senate on April 27, 1994, and May 2, 1994.
Let us turn to Webster for the meaning of certain words,
To "originate" is "to bring into being; to create something
(original); to invent; to begin; start." The word "exclusively" means
"excluding all others" and is derived from the word "exclusive,"
meaning "not shared or divided; sole; single." Applying these
meanings, I would read Section 24 as saying that the bills
mentioned therein must be brought into being, or created, or
invented, or begun or started, only or singly or by no other body
than the house of Representatives.
According to the certification, R.A. No. 7716 "is a consolidation of
House Bill No. 11197 and Senate Bill No. 1630." Again giving the
words used their natural and ordinary sense conformably to an
accepted canon of construction, I would read the word
"consolidation" as a "combination or merger" and derived from

the word "consolidated," meaning "to combine into one; merge;

unite."
The two bills were separately introduced in their respective
Chambers. Both retained their independent existence until they
reached the bicameral conference committee where they were
consolidated. It was this consolidated measure that was finally
passed by Congress and submitted to the President of the
Philippines for his approval.
House Bill No. 11197 originated in the House of Representatives
but this was not the bill that eventually became R.A. No. 7716.
The measure that was signed into law by President Ramos was
the consolidation of that bill and another bill, viz., Senate Bill No.
1630, which was introduced in the Senate. The resultant enrolled
bill thus did not originate exclusively in the House of
Representatives. The enrolled bill itself says that part of it (and it
does not matter to what extent) originated in the Senate.
It would have been different if the only participation of the Senate
was in the amendment of the measure that was originally
proposed in the House of Representatives. But this was not the
case. The participation of the Senate was not in proposing or
concurring with amendments that would have been incorporated
in House Bill No. 11197. Its participation was in originating its own
Senate Bill No. 1630, which was not embodied in but merged with
House Bill No. 11197.
Senate Bill No. 1630 was not even an amendment by
substitution, assuming this was permissible. To "substitute"
means "to take the place of; to put or use in place of another."
Senate Bill No. 1630 did not, upon its approval replace (and thus
eliminate) House Bill No. 11197. Both bills retained their separate
identities until they were joined or united into what became the
enrolled bill and ultimately R.A. No. 7716.

The certification in the enrolled bill says it all. It is clear that R.A.
No. 7716 did not originate exclusively in the House of
Representatives.
To go back to my earlier observations, this conclusion does not
require the reversal of U.S. vs. Pons and an inquiry by this Court
into the proceedings of the legislature beyond the recitals of its
journals. All we need to do is consider the certification in the
enrolled bill and, without entering the precincts of Congress,
declare that by this own admission it has, indeed, not complied
with the Constitution.
While this Court respects the prerogatives of the other
departments, it will not hesitate to rise to its higher duty to require
from them, if they go astray, full and strict compliance with the
fundamental law. Our fidelity to it must be total. There is no loftier
principle in our democracy than the supremacy of the
Constitution, to which all must submit.
I vote to invalidate R.A. No. 7716 for violation of Article VI, Sec.
24, of the Constitution.

REGALADO, J.:
It would seem like an inconceivable irony that Republic Act No.
7716 which, so respondents claim, was conceived by the
collective wisdom of a bicameral Congress and crafted with
sedulous care by two branches of government should now be
embroiled in challenges to its validity for having been enacted in
disregard of mandatory prescriptions of the Constitution itself.
Indeed, such impugnment by petitioners goes beyond merely the
procedural flaws in the parturition of the law. Creating and
regulating as it does definite rights to property, but with its own
passage having been violative of explicit provisions of the organic
law, even without going into the intrinsic merits of the provisions

of Republic Act No. 7716 its substantive invalidity is pro

facto necessarily entailed.
How it was legislated into its present statutory existence is not in
serious dispute and need not detain us except for a recital of
some salient and relevant facts. The House of Representatives
passed House Bill No. 11197 1 on third reading on November 17,
1993 and, the following day, It transmitted the same to the Senate for
concurrence. On its part, the Senate approved Senate Bill No. 1630
on second and third readings on March 24, 1994. It is important to
note in this regard that on March 22, 1994, said S.B. No. 1630 had
been certified by President Fidel V. Ramos for immediate enactment
to meet a public emergency, that is, a growing budgetary
deficit. There was no such certification for H.B. No. 11197 although it
was the initiating revenue bill.

It is, therefore, not only a curious fact but, more importantly,

an invalid procedure since that Presidential certification was
erroneously made for and confined to S.B. No. 1630 which was
indisputably a tax bill and, under the Constitution, could not
validly originate in the Senate. Whatever is claimed in favor of
S.B. No. 1630 under the blessings of that certification, such as its
alleged exemption from the three separate readings requirement,
is accordingly negated and rendered inutile by
the inefficacious nature of said certification as it could lawfully
have been issued only for a revenue measure
originating exclusively from the lower House. To hold otherwise
would be to validate a Presidential certification of a bill initiated in
the Senate despite the Constitutional prohibition against its
originating therefrom.
Equally of serious significance is the fact that S.B. No. 1630 was
reported out in Committee Report No. 349 submitted to the
Senate on February 7, 1994 and approved by that body "in
substitution of S.B. No. 1129," while merely "taking into
consideration P.S. No. 734 and H.B. No. 11197." 2 S.B. No. 1630,
therefore, was never filed in substitution of either P.S. No. 734 or,
more emphatically, of H.B. No. 11197 as these two legislative

issuances were merely taken account of, at the most, as referential

bases or materials.

This is not a play on misdirection for, in the first instance, the

respondents assure us that H.B. No. 11197 was actually the sole
source of and started the whole legislative process which
culminated in Republic Act No. 7716. The participation of the
Senate in enacting S.B. No. 1630 was, it is claimed, justified as it
was merely in pursuance of its power to concur in or propose
amendments to H.B. No. 11197. Citing the 83-year old case
of Flint vs. Stone Tracy Co., 3 it is blithely announced that such
power to amend includes an amendment by substitution, that is,
even the extent of substituting the entire H.B. No. 11197 by an
altogether completely new measure of Senate provenance. Ergo, so
the justification goes, the Senate acted perfectly in accordance with
its amending power under Section 24, Article VI of the Constitution
since it merely proposed amendments through a bill allegedly
prepared in advance.

This is a mode of argumentation which, by reason of factual

inaccuracy and logical implausibility, both astounds and
confounds. For, it is of official record that S.B. No. 1630 was filed,
certified and enacted in substitution of S.B. No. 1129 which in
itself was likewise in derogation of the Constitutional prohibition
against such initiation of a tax bill in the Senate. In any event,
S.B. No. 1630 was neither intended as a bill to be adopted by the
Senate nor to be referred to the bicameral conference committee
as a substitute for H.B. No. 11197. These indelible facts
appearing in official documents cannot be erased by any amount
of strained convolutions or incredible pretensions that S.B. No.
1630 was supposedly enacted in anticipation of H.B. No. 11197.
On that score alone, the invocation by the Solicitor General of the
hoary concept of amendment by substitution falls flat on its face.
Worse, his concomitant citation of Flint to recover from that prone
position only succeeded in turning the same postulation over, this
time supinely flat on its back. As elsewhere noted by some
colleagues, which I will just refer to briefly to avoid duplication,

respondents initially sought sanctuary in that doctrine supposedly

laid down in Flint, thus: "It has, in fact, been held that
the substitution of an entirely new measure for the one originally
proposed can be supported as a valid amendment." 4 (Emphasis
supplied.) During the interpellation by the writer at the oral argument
held in these cases, the attention of the Solicitor General was called
to the fact that the amendment in Flint consisted only of a single
item, that its, the substitution of a corporate tax for an inheritance tax
proposed in a general revenue bill; and that the text of the decision
therein nowhere contained the supposed doctrines he quoted and
ascribed to the court, as those were merely summations of
arguments of counsel therein. It is indeed a source of disappointment
for us, but an admission of desperation on his part, that, instead of
making a clarification or a defense of his contention, the Solicitor
General merely reproduced all over again 5 the same quotations as
they appeared in his original consolidated comment, without
venturing any explanation or justification.

The aforestated dissemblance, thus unmasked, has further

undesirable implications on the contentions advanced by
respondents in their defense. For, even indulging respondents ex
gratia argumenti in their pretension that S.B. No. 1630 substituted
or replaced H.B. No. 11197, aside from muddling the issue of the
true origination of the disputed law, this would further enmesh
respondents in a hopeless contradiction.
In a publication authorized by the Senate and from which the
Solicitor General has liberally quoted, it is reported as an
accepted rule therein that "(a)n amendment by substitution when
approved takes the place of the principal bill. C.R. March 19,
1963, p. 943." 6 Stated elsewise, the principal bill is supplanted and
goes out of actuality. Applied to the present situation, and following
respondents' submission that H.B. No. 11197 had been substituted
or replaced in its entirety, then in law it had no further existence for
purposes of the subsequent stages of legislation except, possibly, for
referential data.

Now, the enrolled bill thereafter submitted to the President of the

Philippines, signed by the President of the Senate and the

Speaker of the House of Representatives, carried this solemn

certification over the signatures of the respective secretaries of
both chambers: "This Act which is a consolidation of House Bill
No. 11197 and Senate Bill No. 1630 was finally passed by the
House of Representatives and the Senate on April 27, 1994, and
May 2, 1994." (Emphasis mine.) In reliance thereon, the Chief
Executive signed the same into law as Republic Act No. 7716.
The confusion to which the writer has already confessed is now
compounded by that official text of the aforequoted certification
which speaks, and this cannot be a mere lapsus calami, of
two independent and existingbills (one of them being H.B. No.
11197) which were consolidated to produce the enrolled bill. In
parliamentary usage, to consolidate two bills, is to unite them into
one 7 and which, in the case at bar, necessarily assumes that H.B.
No. 11197 never became legally inexistent. But did not the Solicitor
General, under the theory of amendment by substitution of the entire
H.B. No. 11197 by S.B. No. 1630, thereby premise the same upon
the replacement, hence the total elimination from the legislative
process, of H.B. 11197?

It results, therefore, that to prove compliance with the requirement

for the exclusive origination of H.B. No. 11197, two alternative but
inconsistent theories had to be espoused and defended by
respondents' counsel. To justify the introduction and passage of
S.B. No. 1630 in the Senate, it was supposedly enacted only as
an amendment by substitution, hence on that theory H.B. No.
11197 had to be considered as displaced and terminated from its
role or existence. Yet, likewise for the same purpose but this time
on the theory of origination by consolidation, H.B. No. 11197 had
to be resuscitated so it could be united or merged with S.B. No.
1630. This latter alternative theory, unfortunately, also
exacerbates the constitutional defect for then it is an admission of
a dual origination of the two tax bills, each respectively initiated in
and coming from the lower and upper chambers of Congress.
Parenthetically, it was also this writer who pointedly brought this
baffling situation to the attention of the Solicitor General during

the aforesaid oral argument, to the extent of reading aloud the

certification in full. We had hoped thereby to be clarified on these
vital issue in respondents' projected memorandum, but we have
not been favored with an explanation unraveling this delimma.
Verily, by passing sub silentio on these intriguing submissions,
respondents have wreaked havoc on both logic and law just to
gloss over their non-compliance with the Constitutional mandate
for exclusive origination of a revenue bill. The procedure required
therefor, we emphatically add, can be satisfied only by complete
and strict compliance since this is laid down by the Constitution
itself and not by a mere statute.
This writer consequently agrees with the clearly tenable
proposition of petitioners that when the Senate passed and
approved S.B. No. 1630, had it certified by the Chief Executive,
and thereafter caused its consideration by the bicameral
conference committee in total substitution of H.B. No. 11197, it
clearly and deliberately violated the requirements of the
Constitution not only in the origination of the bill but in the very
enactment of Republic Act No. 7716. Contrarily, the shifting
sands of inconsistency in the arguments adduced for respondents
betray such lack of intellectual rectitude as to give the impression
of being mere rhetorics in defense of the indefensible.
We are told, however, that by our discoursing on the foregoing
issues we are introducing into non-justiciable areas long
declared verboten by such time-honored doctrines as those on
political questions, the enrolled bill theory and the respect due to
two co-equal and coordinate branches of Government, all derived
from the separation of powers inherent in republicanism. We
appreciate the lectures, but we are not exactly unaware of the
teachings inU.S. vs. Pons, 8 Mabanag, vs. Lopez Vito, 9 Casco
Philippine Chemical Co., Inc. vs. Gimenez, etc., et al., 10 Morals vs.
Subido, etc., 11 and Philippine Judges Association, etc., et al. vs.
Prado, etc., et al., 12 on the one hand, and Taada, et al. vs. Cuenco,
et al., 13 Sanidad, et al., vs. Commission on Elections, et
al., 14 and Daza vs. Singson, et al., 15 on the other, to know which

would be applicable to the present controversy and which should be

rejected.

But, first, a positional exordium. The writer of this opinion would

be among the first to acknowledge and enjoin not only courtesy
to, but respect for, the official acts of the Executive and
Legislative departments, but only so long as the same are in
accordance with or are defensible under the fundamental charter
and the statutory law. He would readily be numbered in the ranks
of those who would preach a reasoned sermon on the separation
of powers, but with the qualification that the same are not
contained in tripartite compartments separated by empermeable
membranes. He also ascribes to the general validity of American
constitutional doctrines as a matter of historical and legal
necessity, but not to the extent of being oblivious to political
changes or unmindful of the fallacy of undue generalization
arising from myopic disregard of the factual setting of each
particular case.
These ruminations have likewise been articulated and dissected
by my colleagues, hence it is felt that the only issue which must
be set aright in this dissenting opinion is the so-called enrolled bill
doctrine to which we are urged to cling with reptilian tenacity. It
will be preliminarily noted that the official certification appearing
right on the face of Republic Act No. 7716 would even render
unnecessary any further judicial inquiry into the proceedings
which transpired in the two legislative chambers and, on a parody
of tricameralism, in the bicameral conference committee.
Moreover, we have the excellent dissertations of some of my
colleagues on these matters, but respondents insist en
contra that the congressional proceedings cannot properly be
inquired into by this Court. Such objection confirms a suppressive
pattern aimed at sacrificing the rule of law to the fiat of
expediency.
Respondents thus emplaced on their battlements the
pronouncement of this Court in the aforecited case ofPhilippine
Judges Association vs. Prado. 16 Their reliance thereon falls into

the same error committed by their seeking refuge in the Flint case,
ante. which, as has earlier been demonstrated (aside from the
quotational misrepresentation), could not be on par with the factual
situation in the present case. Flint, to repeat, involved a mere
amendment on a single legislative item, that is, substituting the
proposal therein of an inheritance tax by one on corporate tax. Now,
in their submission based on Philippine Judges
Association, respondents studiously avoid mention of the fact that
the questioned insertion referred likewise to a single item, that is, the
repeal of the franking privilege thretofore granted to the judiciary.
That both cases cannot be equated with those at bar, considering
the multitude of items challenged and the plethora of constitutional
violations involved, is too obvious to belabor. Legal advocacy and
judicial adjudication must have a becoming sense of qualitative
proportion, instead of lapsing into the discredited and maligned
practice of yielding blind adherence to precedents.

The writer unqualifiedly affirms his respect for valid official acts of
the two branches of government and eschews any unnecessary
intrusion into their operational management and internal affairs.
These, without doubt, are matters traditionally protected by the
republican principle of separation of powers. Where, however,
there is an overriding necessity for judicial intervention in light of
the pervasive magnitude of the problems presented and the
gravity of the constitutional violations alleged, but this Court
cannot perform its constitutional duty expressed in Section 1,
Article VIII of the Constitution unless it makes the inescapable
inquiry, then the confluence of such factors should compel an
exception to the rule as an ultimate recourse. The cases now
before us present both the inevitable challenge and the
inescapable exigency for judicial review. For the Court to now
shirk its bounden duty would not only project it as a citadel of the
timorous and the slothful, but could even undermine its raison
d'etre as the highest and ultimate tribunal.
Hence, this dissenting opinion has touched on events behind and
which transpired prior to the presentation of the enrolled bill for
approval into law. The details of that law which resulted from the
legislative action followed by both houses of Congress, the

substantive validity of whose provisions and the procedural

validity of which legislative process are here challenged as
unconstitutional, have been graphically presented by petitioners
and admirably explained in the respective opinions of my
brethren. The writer concurs in the conclusions drawn therefrom
and rejects the contention that we have unjustifiably breached the
dike of the enrolled bill doctrine.

such proof the enrolled bill is not

conclusive.
More enlightening and apropos to the present controversy is the
decision promulgated on May 13, 1980 by the Supreme Court of
Kentucky in D & W Auto Supply, et al. vs. Department of
Revenue, et al., 19 pertinent exceprts wherefrom are extensively
reproduced hereunder:

Even in the land of its source, the so-called conclusive

presumption of validity originally attributed to that doctrine has
long been revisited and qualified, if not altogether rejected. On
the competency of judicial inquiry, it has been held that "(u)nder
the 'enrolled bill rule' by which an enrolled bill is sole expository of
its contents and conclusive evidence of its existence and valid
enactment, it is nevertheless competent for courts to inquire as to
what prerequisites are fixed by the Constitution of which journals
of respective houses of Legislature are required to furnish the
evidence." 17
In fact, in Gwynn vs. Hardee, etc., et al., 18 the Supreme Court of
Florida declared:

(1) While the presumption is that the enrolled bill,

as signed by the legislative officers and filed with
the secretary of state, is the bill as it passed, yet
this presumption is not conclusive, and when it is
shown from the legislative journals that a bill
though engrossed and enrolled, and signed by the
legislative officers, contains provisions that have
not passed both houses, such provisions will be
held spurious and not a part of the law. As was
said by Mr. Justice Cockrell in the case of Wade
vs. Atlantic Lumber Co., 51 Fla. 628, text 633, 41
So. 72, 73:
This Court is firmly committed to
the holding that when the journals
speak they control, and against

. . . In arriving at our decision we must, perforce,

reconsider the validity of a long line of decisions
of this court which created and nurtured the socalled "enrolled bill" doctrine.
xxx xxx xxx
[1] Section 46 of the Kentucky Constitution sets
out certain procedures that the legislature must
follow before a bill can be considered for final
passage. . . . .
xxx xxx xxx
. . . Under the enrolled bill doctrine as it now
exists in Kentucky, a court may not look behind
such a bill, enrolled and certified by the
appropriate officers, to determine if there are any
defects.
xxx xxx xxx
. . . In Lafferty, passage of the law in question
violated this provision, yet the bill was properly
enrolled and approved by the governor. In
declining to look behind the law to determine the
propriety of its enactment, the court enunciated
three reasons for adopting the enrolled bill rule.

First, the court was reluctant to scrutinize the

processes of the legislature, an equal branch of
government. Second, reasons of convenience
prevailed, which discouraged requiring the
legislature to preserve its records and anticipated
considerable complex litigation if the court ruled
otherwise. Third, the court acknowledged the poor
record-keeping abilities of the General Assembly
and expressed a preference for accepting the final
bill as enrolled, rather than opening up the
records of the legislature. . . . .

provisions. (3) The rule is conducive to fraud,

forgery, corruption and other wrongdoings. (4)
Modern automatic and electronic record-keeping
devices now used by legislatures remove one of
the original reasons for the rule. (5) The rule
disregards the primary obligation of the courts to
seek the truth and to provide a remedy for a
wrong committed by any branch of government. In
light of these considerations, we are convinced
that the time has come to re-examine the enrolled
bill doctrine.

xxx xxx xxx

[2] This court is not unmindful of the admonition of

the doctrine of stare decisis. The maxim is "Stare
decisis et non quieta movere," which simply
suggests that we stand by precedents and not
disturb settled points of law. Yet, this rule is not
inflexible, nor is it of such a nature as to require
perpetuation of error or logic. As we stated
in Daniel's Adm'r v. Hoofnel, 287 Ky 834, 155
S.W. 2d 469, 471-72 (1941) (citations omitted):

Nowhere has the rule been adopted without

reason, or as a result of judicial whim. There are
four historical bases for the doctrine. (1) An
enrolled bill was a "record" and, as such, was not
subject to attack at common law. (2) Since the
legislature is one of the three branches of
government, the courts, being coequal, must
indulge in every presumption that legislative acts
are valid. (3) When the rule was originally
formulated, record-keeping of the legislatures was
so inadequate that a balancing of equities
required that the final act, the enrolled bill, be
given efficacy. (4) There were theories of
convenience as expressed by the Kentucky court
in Lafferty.
The rule is not unanimous in the several states,
however, and it has not been without its critics.
From an examination of cases and treaties, we
can summarize the criticisms as follows: (1)
Artificial presumptions, especially conclusive
ones, are not favored. (2) Such a rule frequently
(as in the present case) produces results which
do not accord with facts or constitutional

The force of the rule depends

upon the nature of the question to
be decided and the extent of the
disturbance of rights and practices
which a change in the
interpretation of the law or the
course of judicial opinions may
create. Cogent considerations are
whether there is clear error and
urgent reasons "for neither justice
nor wisdom requires a court to go
from one doubtful rule to another,"
and whether or not the evils of the
principle that has been followed
will be more injurious than can
possibly result from a change.

Certainly, when a theory supporting a rule of law is not grounded

on facts, or upon sound logic, or is unjust, or has been discredited
by actual experience, it should be discarded, and with it the rule it
supports.
[3] It is clear to us that the major premise of
the Lafferty decision, the poor record-keeping of
the legislature, has disappeared. Modern
equipment and technology are the rule in recordkeeping by our General Assembly. Tape
recorders, electric typewriters, duplicating
machines, recording equipment, printing presses,
computers, electronic voting machines, and the
like remove all doubts and fears as to the ability of
the General Assembly to keep accurate and
readily accessible records.
It is also apparent that the "convenience" rule is
not appropriate in today's modern and developing
judicial philosophy. The fact that the number and
complexity of lawsuits may increase is not
persuasive if one is mindful that the overriding
purpose of our judicial system is to discover the
truth and see that justice is done. The existence
of difficulties and complexities should not deter
this pursuit and we reject any doctrine or
presumption that so provides.
Lastly, we address the premises that the equality
of the various branches of government requires
that we shut our eyes to constitutional failings and
other errors of our coparceners in government.
We simply do not agree. Section 26 of the
Kentucky Constitution provides that any law
contrary to the constitution is "void." The proper
exercise of judicial authority requires us to
recognize any law which is unconstitutional and to
declare it void. Without belaboring the point, we

believe that under section 228 of the Kentucky

Constitution it is our obligation to "support . . . the
Constitution of the commonwealth." We are sworn
to see that violations of the constitution by any
person, corporation, state agency or branch of
government are brought to light and
corrected. To countenance an artificial rule of law
that silences our voices when confronted with
violations of our constitution is not acceptable to
this court.
We believe that a more reasonable rule is the one
which Professor Sutherland describes as the
"extrinsic evidence" rule . . . Under this approach
there is a prima facie presumption that an enrolled
bill is valid, but such presumption may be
overcome by clear, satisfactory and convincing
evidence establishing that constitutional
requirements have not been met.
We therefore overrule Lafferty v. Huffman and all
other cases following the so-called enrolled bill
doctrine, to the extent that there is no longer a
conclusive presumption that an enrolled bill is
valid. . . . (Emphasis mine.)
Undeniably, the value-added tax system may have its own merits
to commend its continued adoption, and the proposed widening
of its base could achieve laudable governmental objectives if
properly formulated and conscientiously implemented. We would
like to believe, however, that ours is not only an enlightened
democracy nurtured by a policy of transparency but one where
the edicts of the fundamental law are sacrosanct for all, barring
none. While the realization of the lofty ends of this administration
should indeed be the devout wish of all, likewise barring none, it
can never be justified by methods which, even if unintended, are
suggestive of Machiavellism.

Accordingly, I vote to grant the instant petitions and to invalidate

Republic Act No. 7716 for having been enacted in violation of
Section 24, Article VI of the Constitution.

thereon shall be taken immediately thereafter, and

the yeas and nays entered in the journal.
The "three readings" refers to the three readings in both
chambers.

DAVIDE, JR., J.:

The legislative history of R.A. No. 7716, as highlighted in the
Consolidated Memorandum for the public respondents submitted
by the Office of the Solicitor General, demonstrates beyond doubt
that it was passed in violation or deliberate disregard of
mandatory provisions of the Constitution and of the rules of both
chambers of Congress relating to the enactment of bills.

There are, however, bills which must originate exclusively in the

House. Section 24, Article VI of the Constitution enumerates
them:
Sec. 24. 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.

I therefore vote to strike down R.A. No. 7716 as unconstitutional

and as having been enacted with grave abuse of discretion.

Webster's Third New International Dictionary 1 defines originate as

The Constitution provides for a bicameral Congress. Therefore,
no bill can be enacted into law unless it is approved by both
chambers the Senate and the House of Representatives
(hereinafter House). Otherwise stated, each chamber may
propose and approve a bill, but until it is submitted to the other
chamber and passed by the latter, it cannot be submitted to the
President for its approval into law.

follows:

vt 1: to cause the beginning of: give rise to:

INITIATE . . . 2. to start (a person or thing) on a
course or journey . . . vi: to take or have origin: be
derived: ARISE, BEGIN, START . . .
Black's Law Dictionary 2 defines the word exclusively in this wise:

Paragraph 2, Section 26, Article VI of the Constitution provides:

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

Apart from all others; only; solely; substantially all

or for the greater part. To the exclusion of all
others; without admission of others to
participation; in a manner to exclude.
In City Mayor vs. The Chief of Philippine Constabulary, 3 this Court
said:

The term "exclusive" in its usual and generally

accepted sense, means possessed to the

exclusion of others; appertaining to the subject

alone, not including, admitting or pertaining to
another or others, undivided, sole. (15 Words and
Phrases, p. 510, citing Mitchel v. Tulsa Water,
Light, Heat and Power Co., 95 P. 961, 21 Okl.
243; and p. 513, citing Commonwealth v.
Superintendent of House of Correction, 64 Pa.
Super. 613, 615).
Indisputably then, only the House can cause the beginning or
initiate the passage of any appropriation, revenue, or tarriff bill,
any bill increasing the public debt, any bill of local application, or
any private bill. The Senate can only "propose or concur with
amendments."
Under the Rules of the Senate, the first reading is the reading of
the title of the bill and its referral to the corresponding committee;
the second reading consists of the reading of the bill in the form
recommended by the corresponding committee; and the third
reading is the reading of the bill in the form it will be after approval
on second reading. 4 During the second reading, the following takes
place:

(6) Then, after the period of amendments is

closed, the voting on the bill on second reading.

After approval on second readings, printed copies thereof in its

final form shall be distributed to the Members of the Senate at
least three days prior to the third reading, except in cases of
certified bills. At the third reading, the final vote shall be taken and
the yeas and nays shall be entered in the Journal. 6
Under the Rules of the House, the first reading of a bill consists of
a reading of the number, title, and author followed by the referral
to the appropriate committees; 7 the second reading consists of the
reading in full of the bill with the amendments proposed by the
committee, it any; 8 and the third reading is the reading of the bill in
the form as approved on second reading and takes place only after
printed copies thereof in its final form have been distributed to the
Members at least three days before, unless the bill is
certified. 9 At the second reading, the following takes place:

(1) Reading of the bill;

(2) Sponsorship;

(1) Second reading of the bill;

(3) Debates;

(2) Sponsorship by the Committee Chairman or

any member designated by the corresponding
committee;

(4) Period of Amendments; and

(3) If a debate ensues, turns for and against the

bill shall be taken alternately;

At the third reading, the votes shall be taken immediately and

the yeas and nays entered in the Journal. 11

(4) The sponsor of the bill closes the debate;

Clearly, whether in the Senate or in the House, every bill must

pass the three readings on separate days, except when the bill is
certified. Amendments to the bill on third reading are
constitutionally prohibited. 12

(5) After the close of the debate, the period of

amendments follows;

(5) Voting on Second Reading.

10

After its passage by one chamber, the bill should then be

transmitted to the other chamber for its concurrence. Section 83,
Rule XIV of the Rules of the House expressly provides:
Sec. 83. Transmittal to Senate. The Secretary
General, without need of express order, shall
transmit to the Senate for its concurrence all the
bills and joint or concurrent resolutions approved
by the House or the amendments of the House to
the bills or resolutions of the Senate, as the case
may be. If the measures approved without
amendments are bills or resolutions of the
Senate, or if amendments of the Senate to bills of
the House are accepted, he shall forthwith notify
the Senate of the action taken.
Simplified, this rule means that:
1. As to a bill originating in the House:
(a) Upon its approval by the
House, the bill shall be transmitted
to the Senate;
(b) The Senate may approve it
with or without amendments;
(c) The Senate returns the bill to
the House;
(d) The House may accept the
Senate amendments; if it does
not, the Secretary General shall
notify the Senate of that action. As
hereinafter be shown, a request
for conference shall then be in
order.

2. As to bills originating in the Senate;

(a) Upon its approval by the
Senate, the bill shall be
transmitted to the House;
(b) The House may approve it with
or without amendments;
(c) The House then returns it to
the Senate, informing it of the
action taken;
(d) The Senate may accept the
House amendements; if it does
not, it shall notify the House and
make a request for conference.
The transmitted bill shall then pass three readings in the other
chamber on separate days. Section 84, Rule XIV of the Rules of
the House states:
Sec. 84. Bills from the Senate. The bills,
resolutions and communications of the Senate
shall be referred to the corresponding committee
in the same manner as bills presented by
Members of the House.
and Section 51, Rule XXIII of the Rules of the Senate provides:
Sec. 51. Prior to their final approval, bills and joint
resolutions shall be read at least three times.
It is only when the period of disagreement is
reached, i.e., amended proposed by one chamber to a bill
originating from the other are not accepted by the latter, that a
request for conference is made or is in order. The request for

conference is specifically covered by Section 26, Rule XII of the

Rules of the Senate which reads:
Sec. 26. In the event that the Senate does not
agree with the House of Representatives on the
provision of any bill or joint resolution, the
differences shall be settled by a conference
committee of both Houses which shall meet within
ten days after its composition.

vote of a majority of all. All those rules which are

of the essentials of law-making must be observed
and followed; and it is only the customary rules of
order and routine, such as in every deliberative
body are always understood to be under its
control, and subject to constant change at its will,
that the constitution can be understood to have
left as matters of discretion, to be established,
modified, or abolished by the bodies for whose
government in non-essential matters they exist.

and Section 85, Rule XIV of the Rules of the House which reads:
Sec. 85. Conference Committee Reports. In
the event that the House does not agree with the
Senate on the amendments to any bill or joint
resolution, the differences may be settled by
conference committees of both Chambers.
The foregoing provisions of the Constitution and the Rules of both
chambers of Congress are mandatory.
In his Treatise On the Constitutional Limitations,

13

more

particularly on enactment of bill, Cooley states:

Where, for an instance, the legislative power is to

be exercised by two houses, and by settled and
well-understood parliamentary law these two
houses are to hold separate sessions for their
deliberations, and the determination of the one
upon a proposes law is to be submitted to the
separate determination of the other, the
constitution, in providing for two houses, has
evidently spoken in reference to this settled
custom, incorporating it as a rule of constitutional
interpretation; so that it would require no
prohibitory clause to forbid the two houses from
combining in one, and jointly enacting laws by the

In respect of appropriation, revenue, or tariff bills, bills increasing

the public debt, bills of local application, or private bills, the return
thereof to the House after the Senate shall have "proposed or
concurred with amendments" for the former either to accept or
reject the amendments would not only be in conformity with the
foregoing rules but is also implicit from Section 24 of Article VI.
With the foregoing as our guiding light, I shall now show the
violations of the Constitution and of the Rules of the Senate and
of the House in the passage of R.A. No. 7716.
VIOLATIONS OF SECTION 24, ARTICLE VI
OF THE CONSTITUTION:
First violation. Since R.A. No. 7716 is a revenue measure, it
must originate exclusively in the House not in the Senate. As
correctly asserted by petitioner Tolentino, on the face of the
enrolled copy of R.A. No. 7716, it is a "CONSOLIDATION OF
HOUSE BILL NO. 11197 AND SENATE BILL NO. 1630." In short,
it is an illicit marriage of a bill which originated in the House and a
bill which originated in the Senate. Therefore, R.A. No. 7716 did
not originate exclusively in the House.
The only bill which could serve as a valid basis for R.A. No. 7716
is House Bill (HB) No. 11197. This bill, which is the substitute bill
recommended by the House Committee on Ways and Means in

substitution of House Bills Nos. 253, 771, 2450, 7033, 8086,

9030, 9210, 9397, 10012, and 10100, and covered by its
Committee Report No. 367,14 was approved on third reading by the
House on 17 November 1993. 15 Interestingly, HB No. 9210, 16 which
was filed by Representative Exequiel B. Javier on 19 May 1993,
was certified by the President in his letter to Speaker Jose de
Venecia, Jr. of 1 June 1993. 17 Yet, HB No. 11197, which substituted
HB No. 9210 and the others above-stated, was not. Its certification
seemed to have been entirely forgotten.

On 18 November 1993, the Secretary-General of the House,

pursuant to Section 83, Rule XIV of the Rules of the House,
transmitted to the President of the Senate HB No. 11197 and
requested the concurrence of the Senate therewith. 18
However, HB No. 11197 had passed only its first reading in that
Senate by its referral to its Committee on Ways and Means. That
Committee never deliberated on HB No. 11197 as it should have.
It acted only on Senate Bill (SB) No. 1129 19 introduced by Senator
Ernesto F. Herrera on 1 March 1993. It then prepared and proposed
SB No. 1630, and in its Committee Report No.
349 20 which was submitted to the Senate on 7 February 1994, 21 it
recommended that SB No. 1630 be approved "in substitution of S.B.
No. 1129, taking into consideration P.S. Res. No. 734 and H.B. No.
11197." 22 It must be carefully noted that SB No. 1630 was proposed
and submitted for approval by the Senate in SUBSTITUTION of SB
No. 1129, and not HB No. 11197. Obviously, the principal measure
which the Committee deliberated on and acted upon was SB No.
1129 and not HB No. 11197. The latter, instead of being the only
measure to be taken up, deliberated upon, and reported back to the
Senate for its consideration on second reading and, eventually, on
third reading, was, at the most, merely given by the Committee a
passing glance.

This specific unequivocal action of the Senate Committee on

Ways and Means, i.e., proposing and recommending approval of
SB No. 1630 as a substitute for or in substitution of SB No. 1129
demolishes at once the thesis of the Solicitor General that:

Assuming that SB 1630 is distinct from HB 11197,

amendment by substitution is within the purview
of Section 24, Article VI of the Constitution.
because, according to him, (a) "Section 68, Rule XXIX of the
Rules of the Senate authorizes an amendment by substitution
and the only condition required is that "the text thereof is
submitted in writing"; and (b) "[I]n Flint vs. Stone Tracy Co. (220
U.S. 107) the United Stated Supreme Court, interpreting the
provision in the United States Constitution similar to Section 24,
Article VI of the Philippine Constitution, stated that the power of
the Senate to amend a revenue bill includes substitution of an
entirely new measure for the one originally proposed by the
House of Representatives." 23
This thesis is utterly without merit. In the first place, it reads into
the Committee Report something which it had not contemplated,
that is, to propose SB No. 1630 in substitution of HB No. 11197;
or speculates that the Committee may have committed an error in
stating that it is SB No. 1129, and not HB No. 11197, which is to
be substituted by SB No. 1630. Either, of course, is unwarranted
because the words of the Report, solemnly signed by the
Chairman, Vice-Chairman (who dissented), seven members, and
three ex-officio
members, 24 leave no room for doubt that although SB No. 1129,
P.S. Res No. 734, and HB No. 11197 were referred to and
considered by the Committee, it had prepared the attached SB No.
1630 which it recommends for approval "in substitution of S.B. No.
11197, taking into consideration P.S. No. 734 and H.B. No. 11197
with Senators Herrera, Angara, Romulo, Sotto, Ople and Shahani as
authors." To do as suggested would be to substitute the judgment of
the Committee with another that is completely inconsistent with it, or,
simply, to capriciously ignore the facts.

In the second place, the Office of the Solicitor General

intentionally made it appear, to mislead rather than to persuade
us, that in Flint vs. Stone Tracy

Co. 25 The U.S. Supreme Court ruled, as quoted by it in the

Consolidated Memorandum for Respondents, as follows:

xxx xxx xxx

26

The Senate has the power to amend a revenue

bill. This power to amend is not confined to the
elimination of provisions contained in the original
act, but embraces as well the addition of such
provisions thereto as may render the original act
satisfactory to the body which is called upon to
support it. It has, in fact, been held that the
substitution of an entirely new measure for the
one originally proposed can be supported as a
valid amendment.

The Senate has the power to amend a revenue

bill. This power to amend is not confined to the
elimination of provisions contained in the original
act, but embraces as well the addition of such
provisions thereto as may render the original act
satisfactory to the body which is called upon to
support it. It has, in fact, been held that the
substitution of an entirely new measure for the
one originally proposed can be supported as a
valid amendment.
Brake v. Collison, 122 Fed. 722.

xxx xxx xxx

It is contended in the first place that this section of
the act is unconstitutional, because it is a revenue
measure, and originated in the Senate in violation
of Section 7 of article 1 of the Constitution,
providing that "all bills for raising revenue shall
originate in the House of Representatives, but the
Senate may propose or concur with the
amendments, as on other bills."
The first part is not a statement of the Court, but a summary of
the arguments of counsel in one of the companion cases (No.
425, entitled, "Gay vs. Baltic Mining Co."). The second part is the
second paragraph of the opinion of the Court delivered by Mr.
Justice Day. The misrepresentation that the first part is a
statement of the Court is highly contemptuous. To show such
deliberate misrepresentation, it is well to quote what actually are
found in 55 L.Ed. 408, 410, to wit:
Messrs. Charles A. Snow and Joseph H. Knight
filed a brief for appellees in No. 425:

Mr. James L. Quackenbush filed a statement for

appellees in No. 442.
Solicitor General Lehmann (by special leave)
argued the cause for the United States on
reargument.
Mr. Justice Day delivered the opinion of the court:
These cases involve the
constitutional validity of 38 of the
act of Congress approved August
5, 1909, known as "the corporation
tax" law. 36 Stat. at L. 11, 112117, chap. 6, U.S. Comp. Stat.
Supp. 1909, pp. 659, 844-849.
It is contended in the first place
that this section of the act is
unconstitutional, because it is a
revenue measure, and originated
in the Senate in violation of 7 of

article 1 of the Constitution,

providing the "all bills for raising
revenue shall originate in the
House of Representatives, but the
Senate may propose or concur
with the amendments, as on other
bills." The history of the act is
contained in the government's
brief, and is accepted as correct,
no objection being made to its
accuracy.
This statement shows that the
tariff bill of which the section under
consideration is a part, originated
in the House of Representatives,
and was there a general bill for the
collection of revenue. As originally
introduced, it contained a plan of
inheritance taxation. In the Senate
the proposed tax was removed
from the bill, and the corporation
tax, in a measure, substituted
therefor. The bill having properly
originated in the House, we
perceive no reason in the
constitutional provision relied upon
why it may not be amended in the
Senate in the manner which it was
in this case. The amendment was
germane to the subject-matter of
the bill, and not beyond the power
of the Senate to propose.
(Emphasis supplied)
xxx xxx xxx

As shown above, the underlined portions were deliberately

omitted in the quotation made by the Office of the Solicitor
General.
In the third place, a Senate amendment by substitution with an
entirely new bill of a bill, which under Section 24, Article VI of the
Constitution can only originate exclusively in the House, is not
authorized by said Section 24. Flint vs. Stone Tracy Co. cannot
be invoked in favor of such a view. As pointed out by Mr. Justice
Florenz D. Regalado during the oral arguments of these cases
and during the initial deliberations thereon by the
Court, Flint involves a Senate amendment to a revenue bill which,
under the United States Constitution, should originate from the
House of Representatives. The amendment consisted of the
substitution of a corporation tax in lieu of the plan of inheritance
taxation contained in a general bill for the collection of revenue as
it came from the House of Representatives where the bill
originated. The constitutional provision in question is Section 7,
Article I of the United States Constitution which reads:
Sec. 7. Bills and Resolutions. 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.
This provision, contrary to the misleading claim of the Solicitor
General, is not similar to Section 24, Article VI of our Constitution,
which for easy comparison is hereunder quoted again:
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.

Note that in the former the word exclusively does not appear.
And, in the latter, the phrase "as on other Bill," which is found in
the former, does not appear. These are very significant in
determining the authority of the upper chamber over the bills
enumerated in Section 24. Since the origination is not exclusively
vested in the House of Representatives of the United States, the
Senate's authority to propose or concur with amendments is
necessarily broader. That broader authority is further confirmed
by the phrase "as on other Bills," i.e., its power to propose or
concur with amendments thereon is the same as in ordinary bills.
The absence of this phrase in our Constitution was clearly
intended to restrict or limit the Philippine Senate's power to
propose or concur with amendments. In the light of
the exclusivity of origination and the absence of the phrase "as on
other Bills," the Philippine Senate cannot amend by substitution
with an entirely new bill of its own any bill covered by Section 24
of Article VI which the House of Representatives transmitted to it
because such substitution would indirectly violate Section 24.
These obvious substantive differences between Section 7, Article
I of the U.S. Constitution and Section 24, Article VI of our
Constitution are enough reasons why this Court should neither
allow itself to be misled by Flint vs. Stonenor be awed by Rainey
vs. United States 27 and the opinion of Messrs. Ogg and
Ray 28 which the majority cites to support the view that the power of
the U.S. Senate to amend a revenue measure is
unlimited. Rainey concerns the Tariff Act of 1909 of the United
States of America and specifically involved was its Section 37 which
was an amendment introduced by the U.S. Senate. It was claimed by
the petitioners that the said section is a revenue measure which
should originate in the House of Representatives. The U.S. Supreme
Court, however, adopted and approved the finding of the court a
quo that:

the section in question is not void as a bill for

raising revenue originating in the Senate, and not
in the House of Representatives. It appears that
the section was proposed by the Senate as an

amendment to a bill for raising revenue which

originated in the House. That is sufficient.
Messrs. Ogg and Ray, who are professors emeritus of political
science, based their statement not even on a case decided by the
U.S. Supreme Court but on their perception of what Section 7,
Article I of the U.S. Constitution permits. In the tenth edition
(1951) of their work, they state:
Any bill may make its first appearance in either
house, except only that bills for raising revenue
are required by the constitution to "originate" in
the House of Representatives. Indeed, through its
right to amend revenue bills, even to the extent of
substituting new ones, the Senate may, in effect,
originate them also. 29
Their "in effect" conclusion is, of course, logically correct because
the word exclusively does not appear in said Section 7, Article I of
the U.S. Constitution.
Neither can I find myself in agreement with the view of the
majority that the Constitution does not prohibit the filing in the
Senate of a substitute bill in anticipation of its receipt of the bill
from the House so long as action by the Senate as a body is
withheld pending receipt of the House bill, thereby stating, in
effect, that S.B. No. 1129 was such an anticipatory substitute bill,
which, nevertheless, does not seem to have been considered by
the Senate except only after its receipt of H.B. No. 11179 on 23
November 1993 when the process of legislation in respect of it
began with a referral to the Senate Committee on Ways and
Means. Firstly, to say that the Constitution does not prohibit it is
to render meaningless Section 24 of Article VI or to sanction its
blatant disregard through the simple expedient of filing in the
Senate of a so-called anticipatory substitute bill. Secondly, it
suggests that S.B. No. 1129 was filed as an anticipatory measure
to substitute for H.B. No. 11179. This is a speculation which even
the author of S.B. No. 1129 may not have indulged in. S.B. No.

1129 was filed in the Senate by Senator Herrera on 1 March

1993. H.B. No. 11197 was approved by the House on third
reading only on 17 November 1993. Frankly, I cannot believe that
Senator Herrera was able to prophesy that the House would pass
any VAT bill, much less to know its provisions. That "it does not
seem that the Senate even considered" the latter not until after its
receipt of H.B. No. 11179 is another speculation. As stated
earlier, S.B. No. 1129 was filed in the Senate on 1 March 1993,
while H.B. No. 11197 was transmitted to the Senate only on 18
November 1993. There is no evidence on record to show that
both were referred to the Senate Committee on Ways and Means
at the same time. Finally, in respect of H.B. No. 11197, its
legislative process did not begin with its referral to the Senate's
Ways and Means Committee. It began upon its filing, as a
Committee Bill of the House of Committee on Ways and Means,
in the House.
Second violation. Since SB No. 1129 is a revenue measure, it
could not even be validly introduced or initiated in the Senate. It
follows too, that the Senate cannot validly act thereon.
Third violation. Since SB No. 1129 could not have been validly
introduced in the Senate and could not have been validly acted
on by the Senate, then it cannot be substituted by another
revenue measure, SB No. 1630, which the Senate Committee on
Ways and Means introduced in substitution of SB No. 1129. The
filing or introduction in the Senate of SB No. 1630 also violated
Section 24, Article VI of the Constitution.
VIOLATIONS OF SECTION 26(2), ARTICLE VI
OF THE CONSTITUTION:
First violation. The Senate, despite its lack of constitutional
authority to consider SB No. 1630 or SB No. 1129 which the
former substituted, opened deliberations on second reading of SB
No. 1630 on 8 February 1994. On 24 March 1994, the Senate
approved it on second reading and on third reading. 30 That
approval on the same day violated Section 26(2), Article VI of the

Constitution. The justification therefor was that on 24 February 1994

the President certified to "the necessity of the enactment of SB No.
1630 . . . to meet a public emergency." 31

I submit, however, that the Presidential certification is void ab

initio not necessarily for the reason adduced by petitioner
Kilosbayan, Inc., but because it was addressed to the Senate for
a bill which is prohibited from originating therein. The only bill
which could be properly certified on permissible constitutional
grounds even if it had already been transmitted to the Senate is
HB No. 11197. As earlier observed, this was not so certified,
although HB No. 9210 (one of those consolidated into HB No.
11197) was certified on 1 June 1993. 32
Also, the certification of SB No. 1630 cannot, by any stretch of the
imagination, be extended to HB No. 11197 because SB No. 1630
did not substitute HB No. 11197 but SB No. 1129.
Considering that the certification of SB No. 1630 is void, its
approval on second and third readings in one day violated
Section 26(2), Article VI of the Constitution.
Second violation. It further appears that on 24 June 1994, after
the approval of SB No. 1630, the Secretary of the Senate, upon
directive of the Senate President, formally notified the House
Speaker of the Senate's approval thereof and its request for a
bicameral conference "in view of the disagreeing provisions of
said bill and House Bill No. 11197." 33
It must be stressed again that HB No. 11197 was never submitted
for or acted on second and third readings in the Senate, and SB
No. 1630 was never sent to the House for its concurrence.
Elsewise stated, both were only half-way through the legislative
mill. Their submission to a conference committee was not only
anomalously premature, but violative of the constitutional rule on
three readings.

The suggestion that SB No. 1630 was not required to be

submitted to the House for otherwise the procedure would be
endless, is unacceptable for, firstly, it violates Section 26, Rule XII
of the Rules of the Senate and Section 85, Rule XIV of the Rules
of the House, and, secondly, it is never endless. If the chamber of
origin refuses to accept the amendments of the other chamber,
the request for conference shall be made.
VIOLATIONS OF THE RULES OF BOTH
CHAMBERS;
GRAVE ABUSE OF DISCRETION.
The erroneous referral to the conference committee needs further
discussion. Since S.B. No. 1630 was not a substitute bill for H.B.
No. 11197 but for S.B. No. 1129, it (S.B. No. 1630) remained a
bill which originated in the Senate. Even assuming arguendo that
it could be validly initiated in the Senate, it should have been first
transmitted to the House where it would undergo three readings.
On the other hand, since HB No. 11197 was never acted upon by
the Senate on second and third readings, no differences or
inconsistencies could as yet arise so as to warrant a request for a
conference. It should be noted that under Section 83, Rule XIV of
the Rules of the House, it is only when the Senate shall have
approved with amendments HB no. 11197 and the House
declines to accept the amendments after having been notified
thereof that the request for a conference may be made by the
House, not by the Senate. Conversely, the Senate's request for a
conference would only be proper if, following the transmittal of SB
No. 1630 to the House, it was approved by the latter with
amendments but the Senate rejected the amendments.
Indisputably then, when the request for a bicameral conference
was made by the Senate, SB No. 1630 was not yet transmitted to
the House for consideration on three readings and HB No. 11197
was still in the Senate awaiting consideration on second and third
readings. Their referral to the bicameral conference committee
was palpably premature and, in so doing, both the Senate and
the House acted without authority or with grave abuse of

discretion. Nothing, and absolutely nothing, could have been

validly acted upon by the bicameral conference committee.
GRAVE ABUSE OF DISCRETION COMMITTED
BY
THE BICAMERAL CONFERENCE COMMITTEE.
Serious irregularities amounting to lack of jurisdiction or grave
abuse of discretion were committed by the bicameral conference
committee.
First, it assumed, and took for granted that SB No. 1630 could
validly originate in the Senate. This assumption is erroneous.
Second, it assumed that HB No. 11197 and SB No. 1630 had
properly passed both chambers of Congress and were properly
and regularly submitted to it. As earlier discussed, the assumption
is unfounded in fact.
Third, per the bicameral conference committee's proceedings of
19 April 1994, Representative Exequiel Javier, Chairman of the
panel from the House, initially suggested that HB No. 11197
should be the "frame of reference," because it is a revenue
measure, to which Senator Ernesto Maceda concurred. However,
after an incompletely recorded reaction of Senator Ernesto
Herrera, Chairman of the Senate panel, Representative Javier
seemed to agree that "all amendments will be coming from the
Senate." The issue of what should be the "frame of reference"
does not appear to have been resolved. These facts are recorded
in this wise, as quoted in the Consolidated Memorandum for
Respondents: 34
CHAIRMAN JAVIER.
First of all, what would be the basis, no, or
framework para huwag naman mawala yung
personality namin dito sa bicameral, no, because

the bill originates from the House because this is

a revenue bill, so we would just want to ask, we
make the House Bill as the frame of reference,
and then everything will just be inserted?
HON. MACEDA.
Yes. That's true for every revenue measure.
There's no other way. The House Bill has got to
be the base. Of course, for the record, we know
that this is an administration; this is certified by
the President and I was about to put into the
records as I am saying now that your problem
about the impact on prices on the people was
already decided when the President and the
administration sent this to us and certified it. They
have already gotten over that political implication
of this bill and the economic impact on prices.
CHAIRMAN HERRERA.
Yung concern mo about the bill as the reference
in this discussion is something that we can just . .
.
CHAIRMAN JAVIER.
We will just . . . all the amendments will be coming
from the Senate.
(BICAMERAL CONFERENCE ON MAJOR
DIFFERENCES BETWEEN HB NO. 11197 AND
SB NO. 1630 [Cte. on Ways & Means] APRIL 19,
1994, II-6 and II-7; Emphasis supplied)
These exchanges would suggest that Representative Javier had
wanted HB No. 11197 to be the principal measure on which

reconciliation of the differences should be based. However, since

the Senate did not act on this Bill on second and third readings
because its Committee on Ways and Means did not deliberate on
it but instead proposed SB No. 1630 in substitution of SB No.
1129, the suggestion has no factual basis. Then, when finally he
agreed that "all amendments will be coming from the Senate," he
in fact withdrew the former suggestion and agreed that SB No.
1630, which is the Senate version of the Value Added Tax (VAT)
measure, should be the "frame of reference." But then SB No.
1630 was never transmitted to the House for the latter's
concurrence. Hence, it cannot serve as the "frame of reference"
or as the basis for deliberation. The posture taken by
Representative Javier also indicates that SB No. 1630 should be
taken as the amendment to HB No. 11197. This, too, is
unfounded because SB No. 1630 was not proposed in
substitution of HB No. 11197.
Since SB No. 1630 did not pass three readings in the House and
HB No. 11197 did not pass second and third readings in the
Senate, it logically follows that no disagreeing provisions had as
yet arisen. The bicameral conference committee erroneously
assumed the contrary.
Even granting arguendo that both HB No. 11197 and SB No.
1630 had been validly approved by both chambers of Congress
and validly referred to the bicameral conference committee, the
latter had very limited authority thereon. It was created "in view of
the disagreeing provisions of" the two bills. 35 Its duty was limited
to the reconciliation of disagreeing provisions or the resolution of
differences or inconsistencies. The committee recognized that limited
authority in the opening paragraph of its Report 36 when it said:

The Conference Committee on the disagreeing

provisions of House Bill No. 11197 . . . and
Senate Bill No. 1630 . . . .
Under such limited authority, it could only either (a) restore,
wholly or partly, the specific provisions of HB No. 11197 amended

by SB No. 1630, (b) sustain, wholly or partly, the Senate's

amendments, or (c) by way of a compromise, to agree that
neither provisions in HB No. 11197 amended by the Senate nor
the latter's amendments thereto be carried into the final form of
the former.
But as pointed out by petitioners Senator Raul Roco and
Kilosbayan, Inc., the bicameral conference committee not only
struck out non-disagreeing provisions of HB No. 11197 and SB
No. 1630, i.e., provisions where both bills are in full agreement; it
added more activities or transactions to be covered by VAT,
which were not within the contemplation of both bills.
Since both HB No. 11197 and SB No. 1630 were still half-cooked
in the legislative vat, and were not ready for referral to a
conference, the bicameral conference committee clearly acted
without jurisdiction or with grave abuse of discretion when it
consolidated both into one bill which became R.A. No. 7716.
APPROVAL BY BOTH CHAMBERS OF
CONFERENCE
COMMITTEE REPORT AND PROPOSED BILL
DID
NOT CURE CONSTITUTIONAL INFIRMITIES.
I cannot agree with the suggestion that since both the Senate and
the House had approved the bicameral conference committee
report and the bill proposed by it in substitution of HB No. 11197
and SB No. 1630, whatever infirmities may have been committed
by it were cured by ratification. This doctrine of ratification may
apply to minor procedural flaws or tolerable breachs of the
parameters of the bicameral conference committee's limited
powers but never to violations of the Constitution. Congress is not
above the Constitution. In the instant case, since SB No. 1630
was introduced in violation of Section 24, Article VI of the
Constitution, was passed in the Senate in violation of the "three
readings" rule, and was not transmitted to the House for the
completion of the constitutional process of legislation, and HB No.

11197 was not likewise passed by the Senate on second and

third readings, neither the Senate nor the House could validly
approve the bicameral conference committee report and the
proposed bill.
In view of the foregoing, the conclusion is inevitable that for noncompliance with mandatory provisions of the Constitution and of
the Rules of the Senate and of the House on the enactment of
laws, R.A. No. 7716 is unconstitutional and, therefore, null and
void. A discussion then of the instrinsic validity of some of its
provisions would be unnecessary.
The majority opinion, however, invokes the enrolled bill doctrine
and wants this Court to desist from looking behind the copy of the
assailed measure as certified by the Senate President and the
Speaker of the House. I respectfully submit that the invocation is
misplaced. First, as to the issue of origination, the certification in
this case explicitly states that R.A. No. 7716 is a "consolidation of
House Bill No. 11197 and Senate Bill No. 1630." This is
conclusive evidence that the measure did not originate
exclusively in the House. Second, the enrolled bill doctrine is of
American origin, and unquestioned fealty to it may no longer be
justified in view of the expanded jurisdiction 37 of this Court under
Section 1, Article VIII of our Constitution which now expressly grants
authority to this Court to:

determine whether or not there has been a grave

abuse of discretion amounting to lack or excess of
jurisdiction on the part of any branch or
instrumentality of the Government.
Third, even under the regime of the 1935 Constitution
which did not contain the above provision, this Court,
through Mr. Chief Justice Makalintal, in Astorga vs.
Villegas, 38 declared that it cannot be truly said thatMabanag
vs. Lopez
Vito 39 has laid to rest the question of whether the enrolled

bill doctrine or the journal entry rule should be adhered to in

this jurisdiction, and stated:

As far as Congress itself is concerned, there is

nothing sacrosanct in the certification made by the
presiding officers. It is merely a mode of
authentication. The lawmaking process in
Congress ends when the bill is approved by both
Houses, and the certification does not add to the
validity of the bill or cure any defect already
present upon its passage. In other words, it is the
approval of Congress and not the signatures of
the presiding officers that is essential. Thus the
(1935) Constitution says that "[e]very bill passed
by the Congress shall, before it becomes law, be
presented to the President." In Brown vs. Morris,
supra, the Supreme Court of Missouri, interpreting
a similar provision in the State Constitution, said
that the same "makes it clear that the
indispensable step in the passage" and it follows
that if a bill, otherwise fully enacted as a law, is
not attested by the presiding officer, other proof
that it has "passed both houses will satisfy the
constitutional requirement."
Fourth, even in the United States, the enrolled bill doctrine has
been substantially undercut. This is shown in the disquisitions of
Mr. Justice Reynato S. Puno in his dissenting opinion,
citing Sutherland, Statutory Construction.
Last, the pleadings of the parties have established beyond doubt
that HB No. 11197 was not acted on second and third readings in
the Senate and SB No. 1630, which was approved by the Senate
on second and third readings in substitution of SB No. 1129,
was never transmitted to the House for its passage. Otherwise
stated, they were only passed in their respective chamber of
origin but not in the other. In no way can each become a law
under paragraph 2, Section 26, Article VI of the Constitution. For

the Court to close its eyes to this fact because of the enrolled bill
doctrine is to shrink its duty to hold "inviolate what is decreed by
the Constitution." 40
I vote then to GRANT these petitions and to declare R.A. No.
7716 as unconstitutional.

ROMERO, J.:
Few issues brought before this Court for resolution have roiled
the citizenry as much as the instant case brought by nine
petitioners which challenges the constitutionality of Republic Act
No. 7716 (to be referred to herein as the "Expanded Value Added
Tax" or EVAT law to distinguish it from Executive Order No. 273
which is the VAT law proper) that was enacted on May 5, 1994. A
visceral issue, it has galvanized the populace into mass action
and strident protest even as the EVAT proponents have taken to
podia and media in a post facto information campaign.
The Court is confronted here with an atypical case. Not only is it a
vatful of seething controversy but some unlikely petitioners invoke
unorthodox remedies. Three Senator-petitioners would nullify a
statute that bore the indispensable stamp of approval of their own
Chamber with two of them publicly repudiating what they had
earlier endorsed. With two former colleagues, one of them an
erstwhile Senate President, making common cause with them,
they would stay the implementation by the Executive Department
of a law which they themselves have initiated. They address a
prayer to a co-equal Department to probe their official acts for any
procedural irregularities they have themselves committed lest the
effects of these aberrations inflict such damage or irreparable
loss as would bring down the wrath of the people on their heads.
To the extent that they perceive that a vital cog in the internal
machinery of the Legislature has malfunctioned from having

operated in blatant violation of the enabling Rules they have

themselves laid down, they would now plead that this other
Branch of Government step in, invoking the exercise of what is at
once a delicate and awesome power. Undoubtedly, the case at
bench is as much a test for the Legislature as it is for the
Judiciary.
A backward glance on the Value Added Tax (VAT) is in order at
this point.
The first codification of the country's internal revenue laws was
effected with the enactment of Commonwealth Act No. 466,
commonly known as the 'National Internal Revenue Code' which
was approved on June 15, 1939 and took effect on July 1, 1939,
although the provisions on the income tax were made retroactive
to January 1, 1939.
Since 1939 when the turnover tax was replaced
by the manufacturer's sales tax, the Tax Code
had provided for a single-stage value-added tax
on original sales by manufacturers, producers and
importers computed on the "cost deduction
method" and later, on the basis of the "tax credit
method." The turnover tax was re-introduced in
1985 by Presidential Decree No. 1991 (as
amended by Presidential Decree No. 2006). 1
In 1986, a tax reform package was approved by the Aquino
Cabinet. It contained twenty-nine measures, one of which
proposed the adoption of the VAT, as well as the simplification of
the sales tax structure and the abolition of the turnover tax.
Up until 1987, the system of taxing goods
consisted of (a) an excise tax on certain selected
articles (b) fixed and percentage taxes on original
and subsequent sales, on importations and on
milled articles and (c) mining taxes on mineral

products. Services were subjected to percentage

taxes based mainly on gross receipts. 2
On July 25, 1987, President Corazon C. Aquino signed into law
Executive Order No. 273 which adopted the VAT. From the
former single-stage value-added tax, it introduced the multi-stage
VAT system where "the value-added tax is imposed on the sale
of and distribution process culminating in sale, to the final
consumer. Generally described, the taxpayer (the seller)
determines his tax liability by computing the tax on the gross
selling price or gross receipt ("output tax") and subtracting or
crediting the earlier VAT on the purchase or importation of goods
or on the sale of service ("input tax") against the tax due on his
own sale." 3
On January 1, 1988, implementing rules and regulations for the
VAT were promulgated. President Aquino then issued
Proclamation No. 219 on February 12, 1988 urging the public and
private sectors to join the nationwide consumers' education
campaign for VAT.
Soon after the implementation of Executive Order No. 273, its
constitutionality was assailed before this Court in the case
of Kapatiran ng mga Naglilingkod sa Pamahalaan ng Pilipinas,
Inc., et al. v. Tan. 4 The four petitioners sought to nullify the VAT law
"for being unconstitutional in that its enactment is not allegedly within
the powers of the President; that the VAT is oppressive,
discriminatory, regressive, and violates the due process and equal
protection clauses and other provisions of the 1987 Constitution." 5 In
dismissing the consolidated petitions, this Court stated:

The Court, following the time-honored doctrine of

separation of powers cannot substitute its
judgment for that of the President as to the
wisdom, justice and advisability of the VAT. The
Court can only look into and determine whether or
not Executive Order No. 273 was enacted and
made effective as law, in the manner required by

and consistent with, the Constitution, and to make

sure that it was not issued in grave abuse of
discretion amounting to lack or excess of
jurisdiction; and, in this regard, the Court finds no
reason to impede its application or continued
implementation. 6
Although declared constitutional, the VAT law was sought to be
amended from 1992 on by a series of bills filed in both Houses of
Congress. In chronological sequence, these were:

1993
HB No. 11197 in
substitution of HB Nos. 253,
771, 2450, 7033, 8086,
9030, 9210, 9297, 10012
and
10100 10 - November 5,
1993

We now trace the course taken by H.B. No. 11197 and S.B. No.
1129.
HB/SB No.

HB/SB No. Date Filed in Congress

HB No. 253 - July 22,
1992
HB No. 771 - August 10,
1992
HB No. 2450 - September
9, 1992
Senate Res. No. 734 7 September 10, 1992
HB No. 7033 - February 3,
1993
SB No. 1129 8 - March 1,
1993
HB No. 8086 - March 9,
1993
HB No. 9030 - May 11,
1993
HB No. 9210 9 - May 19,
1993
HB No. 9297 - May 25,
1993
HB No. 10012 - July 28,
1993
HB No. 10100 - August 3,

HB No. 11197 was approved in

the Lower House onsecond
reading - November 11, 1993
HB No. 11197 was approved in
the Lower House on third
reading and voted upon
with 114 Yeas and 12 Nays - November 17, 1993
HB No. 11197 was transmitted
to the Senate - November 18, 1993
Senate Committee on Ways and
Means submitted Com.
Report No. 349 recommeding
for approval SB No. 1630 in
substitution of SB No. 1129,
taking into consideration PS Res. No.
734 and HB No. 11197 11 - February 7, 1994
Certification by President Fidel V.
Ramos of Senate Bill No.
1630 for immediate enactment
to meet a public emergency - March 22, 1994

SB No. 1630 was approved by

the Senate on second and third
readings and subsequently
voted upon with 13 yeas, none
against and one abstention - March 24, 1994
Transmittal by the Senate to the
Lower House of a request
for a conference in view of
disagreeing provisions of
SB No. 1630 and HB NO.
11197 - March 24, 1994
The Bicameral Conference Committee
conducted various meetings to
reconcile the proposals on the
VAT - April 13, 19, 20, 21, 25
The House agreed on the Conference
Committee Report - April 27, 1994
The Senate agreed on the Conference
Committee Report - May 2, 1994
The President signed Republic Act
No. 7716 - The Expanded
VAT Law 12 - May 5, 1994
Republic Act No. 7716 was
published in two newspapers
of general circulation - May 12, 1994
Republic Act No. 7716 became
effective - May 28, 1994

Republic Act No. 7716 merely expanded the base of the VAT law
even as the tax retained its multi-stage character.
At the oral hearing held on July 7, 1994, this Court delimited
petitioners' arguments to the following issues culled from their
respective petitions.
PROCEDURAL ISSUES
Does Republic Act No. 7716 violate Article VI, Section 24, of the
Constitution? 13
Does it violate Article VI, Section 26, paragraph 2, of the
Constitution? 14
What is the extent of the power of the Bicameral Conference
Committee?
SUBSTANTIVE ISSUES
Does the law violate the following provisions in Article III (Bill of
Rights) of the Constitution:
1. Section 1 15
2. Section 4 16
3. Section 5 17
4. Section 10 18
Does the law violate the following other provisions of the
Constitution?

1. Article VI,
Section 28,
paragraph 1 19

whether or not there has indeed been a grave abuse of discretion

on the part of the Legislature amounting to lack or excess of
jurisdiction.

2. Article VI,
Section 28,
paragraph 3 20

Where there are grounds to resolve a case without touching on its

constitutionality, the Court will do so with utmost alacrity in due
deference to the doctrine of separation of powers anchored on
the respect that must be accorded to the other branches of
government which are coordinate, coequal and, as far as
practicable, independent of one another.

As a result of the unedifying experience of the past where the

Court had the propensity to steer clear of questions it perceived
to be "political" in nature, the present Constitution, in contrast,
has explicitly expanded judicial power to include the duty of the
courts, especially the Supreme Court, "to determine whether or
not there has been a grave abuse of discretion amounting to lack
or excess of jurisdiction on the part of any branch or
instrumentality of the Government." 21 I submit that under this
explicit mandate, the Court is empowered to rule upon acts of other
Government entities for the purpose of determining whether there
may have been, in fact, irregularities committed tantamount to
violation of the Constitution, which case would clearly constitute a
grave abuse of discretion on their part.

In the words of the sponsor of the above-quoted Article of the

Constitution on the Judiciary, the former Chief Justice Roberto R.
Concepcion, "the judiciary is the final arbiter on the question of
whether or not a branch of government or any of its officials has
acted without jurisdiction or in excess of jurisdiction, or so
capriciously as to constitute an abuse of discretion amounting to
excess of jurisdiction or lack of jurisdiction. This is not only a
judicial power but a duty to pass judgment on matters of this
nature.
This is the back ground of paragraph 2 of Section 1, which means
that the courts cannot hereafter exhibit its wonted reticence by
claiming that such matters constitute a political question." 22
In the instant petitions, this Court is called upon, not so much to
exercise its traditional power of judicial review as to determine

Once it is palpable that the constitutional issue is unavoidable,

then it is time to assume jurisdiction, provided that the following
requisites for a judicial inquiry are met: that there must be an
actual and appropriate case; a personal and substantial interest
of the party raising the constitutional question; the constitutional
question must be raised at the earliest possible opportunity and
the decision of the constitutional question must be necessary to
the determination of the case itself, the same being the lis mota of
the case. 23
Having assured ourselves that the above-cited requisites are
present in the instant petitions, we proceed to take them up.
ARTICLE VI, SECTION 24
Some petitioners assail the constitutionality of Republic Act No.
7716 as being in violation of Article VI, Section 24 of the
Constitution which provides:
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.

In G.R. Nos. 115455 and 115781, petitioners argue:

(a) The bill which became Republic Act No. 7716 did not originate
exclusively in the House of Representatives. The Senate, after
receiving H.B. No. 11197, submitted its own bill, S.B. No. 1630,
and proceeded to vote and approve the same after second and
third readings.
(b) The Senate exceeded its authority to "propose or concur with
amendments" when it submitted its own bill, S.B. No. 1630,
recommending its approval "in substitution of S.B. No. 1129,
taking into consideration P.S. Res. No. 734 and H.B. No. 11197."
(c) H.B. No. 11197 was not deliberated upon by the Senate.
Neither was it voted upon by the Senate on second and third
readings, as what was voted upon was S.B. No. 1630.
Article VI, Section 24 is taken word for word from Article VI,
Section 18 of the 1935 Constitution which was, in turn, patterned
after Article I, Section 7 (1) of the Constitution of the United
States, which states:
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.
The historical precedent for requiring revenue bills to originate in
Congress is explained in the U.S. case ofMorgan v. Murray. 24
The constitutional requirement that all bills for
raising revenue shall originate in the House of
Representatives stemmed from a remedial
outgrowth of the historic conflict between
Parliament (i.e., Commons) and the Crown,
whose ability to dominate the monarchially
appointive and hereditary Lords was patent. See

1 Story, Constitution, S 875 et seq., 5th Ed.; 1

Cooley, Constitutional Limitations, pp. 267, 268,
8th Ed., 1 Sutherland, Statutory Construction, S
806, 3d Ed. There was a measure of like
justification for the insertion of the provision of
article I, S 7, cl. 1, of the Federal Constitution. At
that time (1787) and thereafter until the adoption
(in 1913) of the Seventeenth Amendment
providing for the direct election of senators, the
members of the United States Senate were
elected for each state by the joint vote of both
houses of the Legislature of the respective states,
and hence, were removed from the people . . .
The legislative authority under the 1935 Constitution being
unicameral, in the form of the National Assembly, it served no
purpose to include the subject provision in the draft submitted by
the 1934 Constitutional Convention to the Filipino people for
ratification.
In 1940, however, the Constitution was amended to establish a
bicameral Congress of the Philippines composed of a House of
Representatives and a Senate.
In the wake of the creation of a new legislative machinery, new
provisions were enacted regarding the law-making power of
Congress. The National Assembly explained how the final
formulation of the subject provision came about:
The concurrence of both houses would be
necessary to the enactment of a law. However, all
appropriation, revenue or tariff bills, bills
authorizing an increase of the public debt, bills of
local application, and private bills, should originate
exclusively in the House of Representatives,
although the Senate could propose or concur with
amendments.

In one of the first drafts of the amendments, it was

proposed to give both houses equal powers in
lawmaking. There was, however, much opposition
on the part of several members of the Assembly.
In another draft; the following provision, more
restrictive than the present provision in the
amendment, was proposed and for sometime was
seriously considered:
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 sessions 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.

However, the special committee voted finally to

report the present amending provision as it is now
worded; and in that form it was approved by the
National Assembly with the approval of Resolution
No. 38 and later of Resolution No.
73. 25 (Emphasis supplied)
Thus, the present Constitution is identically worded as its 1935
precursor: "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." (Emphasis supplied)
That all revenue bills, such as Republic Act No. 7716, should
"originate exclusively in the House of Representatives" logically
flows from the more representative and broadly-based character
of this Chamber.
It is said that the House of Representatives being
the more popular branch of the legislature, being
closer to the people, and having more frequent
contacts with them than the Senate, should have
the privilege of taking the initiative in the
proposals of revenue and tax project, the disposal
of the people's money, and the contracting of
public indebtedness.
These powers of initiative in the raising and
spending of public funds enable the House of
Representatives not only to implement but even to
determine the fiscal policies of the government.
They place on its shoulders much of the
responsibility of solving the financial problems of
the government, which are so closely related to
the economic life of the country, and of deciding
on the proper distribution of revenues for such
uses as may best advance public interests. 26

The popular nature of the Lower House has been more

pronounced with the inclusion of Presidentially-appointed sectoral
representatives, as provided in Article VI, Section 5 (2), of the
Constitution, thus: "The party-list representatives shall constitute
twenty per centum of the total number of representatives
including those under the party list. For three consecutive terms
after the ratification of this Constitution, one-half of the seats
allocated to party-list representatives shall be filled, as provided
by law, by selection or election from the labor, peasant, urban
poor, indigenous cultural communities, women, youth, and such
other sectors as may be provided by law, except the religious
sector." (Emphasis supplied)
This novel provision which was implemented in the Batasang
Pambansa during the martial law regime 27 was eventually
incorporated in the present Constitution in order to give those from
the marginalized and often deprived sector, an opportunity to have
their voices heard in the halls of the Legislature, thus giving
substance and meaning to the concept of "people empowerment."

That the Congressmen indeed have access to, and consult their
constituencies has been demonstrated often enough by the fact
that even after a House bill has been transmitted to the Senate
for concurrence, some Congressmen have been known to
express their desire to change their earlier official position or
reverse themselves after having heard their constituents' adverse
reactions to their representations.
In trying to determine whether the mandate of the Constitution
with regard to the initiation of revenue bills has been preserved
inviolate, we have recourse to the tried and tested method of
definition of terms. The term "originate" is defined by Webster's
New International Dictionary (3rd Edition, 1986) as follows: "v.i.,
to come into being; begin; to start."
On the other hand, the word "exclusively" is defined by the same
Webster's Dictionary as "in an exclusive manner; to the exclusion
of all others; only; as, it is his, exclusively." Black's Law Dictionary

has this definition: "apart from all others; only; solely; substantially
all or for the greater part. To the exclusion of all other; without
admission of others to participation; in a manner to exclude.
Standard Oil Co. of Texas v. State, Tex. Civ. App., 142 S.W. 2d
519, 521, 522, 523."
This Court had occasion to define the term "exclusive" as follows:
. . . In its usual and generally accepted sense, the
term means possessed to the exclusion of others;
appertaining to the subject alone; not including,
admitting or pertaining to another or others;
undivided, sole. 28
When this writer, during the oral argument of July 7, 1994, asked
the petitioner in G.R. No. 115455 whether he considers the word
"exclusively" to be synonymous with "solely," he replied in the
affirmative. 29
A careful examination of the legislative history traced earlier in
this decision shows that the original VAT law, Executive Order
No. 273, was sought to be amended by ten House bills which
finally culminated in House Bill No. 11197, as well as two Senate
bills. It is to be noted that the first House Bill No. 253 was filed on
July 22, 1992, and two other House bills followed in quick
succession on August 10 and September 9, 1992 before a
Senate Resolution, namely, Senate Res. No. 734, was filed on
September 10, 1992 and much later, a Senate Bill proper,viz.,
Senate Bill No. 1129 on March 1, 1993. Undoubtedly, therefore,
these bills originated or had their start in the House and before
any Senate bill amending the VAT law was filed. In point of time
and venue, the conclusion is ineluctable that Republic Act No.
7716, which is indisputably a revenue measure, originated in the
House of Representatives in the form of House Bill No. 253, the
first EVAT bill.

Additionally, the content and substance of the ten amendatory

House Bills filed over the roughly one-year period from July 1992
to August 1993 reenforce the position that these revenue bills,
pertaining as they do, to Executive Order No. 273, the prevailing
VAT law, originated in the Lower House.
House Bill Nos. 253, 771, 2450, 7033, 8086, 9030, 9210, 9297,
10012 and 10100 were intended to restructure the VAT system
by exempting or imposing the tax on certain items or otherwise
introducing reforms in the mechanics of implementation. 30 Of
these, House Bill No. 9210 was favored with a Presidential
certification on the need for its immediate enactment to meet a public
emergency. Easily the most comprehensive, it noted that the
revenue performance of the VAT, being far from satisfactory since
the collections have always fallen short of projections, "the system is
rendered inefficient, inequitable and less comprehensive." Hence,
the Bill proposed several amendments designed to widen the tax
base of the VAT and enhance its administration. 31

That House Bill No. 11197 being a revenue bill, originated from
the Lower House was acknowledged, in fact was virtually taken
for granted, by the Chairmen of the Committee on Ways and
Means of both the House of Representatives and the Senate.
Consequently, at the April 19, 1994 meeting of the Bicameral
Conference Committee, the Members agreed to make the House
Bill as the "frame of reference" or "base" of the discussions of the
Bicameral Conference Committee with the "amendments" or
"insertions to emanate from the Senate." 32
As to whether the bills originated exclusively in the Lower House
is altogether a different matter. Obviously, bills amendatory of
VAT did not originate solely in the House to the exclusion of all
others for there were P.S. Res. No. 734 filed in the Senate on
September 10, 1992 followed by Senate Bill No. 1129 which was
filed on March 1, 1993. About a year later, this was substituted by
Senate Bill No. 1630 that eventually became the EVAT law,
namely, Republic Act No. 7716.

Adverting to the passage of the amendatory VAT bills in the

Lower House, it is to be noted that House Bill No. 11197 which
substituted all the prior bills introduced in said House complied
with the required readings, that is, the first reading consisting of
the reading of the title and referral to the appropriate Committee,
approval on second reading on November 11, 1993 and on third
reading on November 17, 1993 before being finally transmitted to
the Senate. In the Senate, its identity was preserved and its
provisions were taken into consideration when the Senate
Committee on Ways and Means submitted Com. Report No. 349
which recommended for approval "S.B. No. 1630 in substitution
of S.B. No. 1129, taking into consideration P.S. Res. No. 734 and
H.B. No. 11197." At this stage, the subject bill may be considered
to have passed first reading in the Senate with the submission of
said Committee Report No. 349 by the Senate Committee on
Ways and Means to which it had been referred earlier. What
remained, therefore, was no longer House Bill No. 11197 but
Senate Bill No. 1630. Thence, the Senate, instead of transmitting
the bill to the Lower House for its concurrence and amendments,
if any, took a "shortcut," bypassed the Lower House and instead,
approved Senate Bill No. 1630 on both second and third readings
on the same day, March 24, 1994.
The first irregularity, that is, the failure to return Senate Bill No.
1630 to the Lower House for its approval is fatal inasmuch as the
other chamber of legislature was not afforded the opportunity to
deliberate and make known its views. It is no idle dictum that no
less than the Constitution ordains: "The legislative power shall be
vested in the Congress of the Philippines which shall consist of
a Senate and a House of Representatives . . ." 33 (Emphasis
supplied)

It is to be pointed out too, that inasmuch as Senate Bill No. 1630

which had "taken into consideration" House Bill No. 11197 was
not returned to the Lower House for deliberation, the latter
Chamber had no opportunity at all to express its views thereon or
to introduce any amendment. The customary practice is, after the
Senate has considered the Lower House Bill, it returns the same

to the House of origin with its amendments. In the event that

there may be any differences between the two, the same shall
then be referred to a Conference Committee composed of
members from both Chambers which shall then proceed to
reconcile said differences.
In the instant case, the Senate transmitted to the Lower House on
March 24, 1994, a letter informing the latter that it had "passed S.
No. 1630
entitled . . . (and) in view of the disagreeing provisions of said bill
and House Bill No. 11197, entitled . . . the Senate requests a
conference . . ." This, in spite of the fact that Com. Report No.
349 of the Senate Committee on Ways and Means had already
recommended for approval on February 7, 1994 "S.B. No. 1630 .
. . taking into consideration H.B. No. 11197." Clearly, the
Conference Committee could only have acted upon Senate Bill
No. 1630, for House Bill No. 11197 had already been fused into
the former.
At the oral hearing of July 7, 1994, petitioner in G.R. No. 115455
admitted, in response to this writer's query, that he had attempted
to rectify some of the perceived irregularities by presenting a
motion in the Senate to recall the bill from the Conference
Committee so that it could revert to the period of amendment, but
he was outvoted, in fact "slaughtered." 34
In accordance with the Rules of the House of Representatives
and the Senate, Republic Act No. 7716 was duly authenticated
after it was signed by the President of the Senate and the
Speaker of the House of Representatives followed by the
certifications of the Secretary of the Senate and the Acting
Secretary General of the House of Representatives. 35 With the
signature of President Fidel V. Ramos under the words "Approved: 5
May 1994," it was finally promulgated.

Its legislative journey ended, Republic Act No. 7716 attained the
status of an enrolled bill which is defined as one "which has been
duly introduced, finally passed by both houses, signed by the

proper officers of each, approved by the governor (or president)

and filed by the secretary of state." 36
Stated differently:
It is a declaration by the two houses, through their
presiding officers, to the president, that a bill, thus
attested, has received in due form, the sanction of
the legislative branch of the government, and that
it is delivered to him in obedience to the
constitutional requirement that all bills which pass
Congress shall be presented to him. And when a
bill, thus attested, receives his approval, and is
deposited in the public archives, its authentication
as a bill that has passed Congress should be
deemed complete and unimpeachable. As the
President has no authority to approve a bill not
passed by Congress, an enrolled Act in the
custody of the Secretary of State, and having the
official attestations of the Speaker of the House of
Representatives, of the President of the Senate,
and of the President of the United States, carries,
on its face, a solemn assurance by the legislative
and executive departments of the government,
charged, respectively, with the duty of enacting
and executing the laws, that it was passed by
Congress. The respect due to coequal and
independent departments requires the judicial
department to act upon that assurance, and to
accept, as having passed Congress, all bills
authenticated in the manner stated; leaving the
courts to determine, when the question properly
arises, whether the Act, so authenticated, is in
conformity with the Constitution. 37
The enrolled bill assumes importance when there is some
variance between what actually transpired in the halls of
Congress, as reflected in its journals, and as shown in the text of

the law as finally enacted. But suppose the journals of either or

both Houses fail to disclose that the law was passed in
accordance with what was certified to by their respective
presiding officers and the President. Or that certain constitutional
requirements regarding its passage were not observed, as in the
instant case. Which shall prevail: the journal or the enrolled bill?
A word on the journal.
The journal is the official record of the acts of a
legislative body. It should be a true record of the
proceedings arranged in chronological order. It
should be a record of what is done rather than
what is said. The journal should be a clear,
concise, unembellished statement of all proposals
made and all actions taken complying with all
requirements of constitutions, statutes, charters or
rules concerning what is to be recorded and how
it is to be recorded. 38
Article VI, Section 16 (4) of the Constitution ordains:
Each house shall keep a Journal of its
proceedings, and from time to time publish the
same, excepting such parts as may, in its
judgment, affect national security; and
the yeas and nays on any question shall, at the
request of one-fifth of the Members present, be
entered in the Journal.
Each House shall also keep a Record of its
proceedings." (Emphasis supplied)
The rationale behind the above provision and of the "journal entry
rule" is as follows:

It is apparent that the object of this provision is to

make the legislature show what it has done,
leaving nothing whatever to implication. And,
when the legislature says what it has done, with
regard to the passage of any bill, it negatives the
idea that it has done anything else in regard
thereto. Silence proves nothing where one is
commanded to speak . . . . Our constitution
commands certain things to be done in regard to
the passage of a bill, and says that no bill shall
become a law unless these things are done. It
seems a travesty upon our supreme law to say
that it guaranties to the people the right to have
their laws made in this manner only, and that
there is no way of enforcing this right, or for the
court to say that this is law when the constitution
says it is not law. There is one safe course which
is in harmony with the constitution, and that is to
adhere to the rule that the legislature must show,
as commanded by the constitution, that it has
done everything required by the constitution to be
done in the serious and important matter of
making laws. This is the rule of evidence provided
by the constitution. It is not presumptuous in the
courts, nor disrespectful to the legislature, to
judge the acts of the legislature by its own
evidence. 39
Confronted with a discrepancy between the journal proceedings
and the law as duly enacted, courts have indulged in different
theories. The "enrolled bill" and "journal entry" rules, being rooted
deep in the Parliamentary practices of England where there is no
written constitution, and then transplanted to the United States, it
may be instructive to examine which rule prevails in the latter
country through which, by a process of legislative osmosis, we
adopted them in turn.

There seems to be three distinct and different

rules as applicable to the enrolled bill recognized
by the various courts of this country. The first of
these rules appears to be that the enrolled bill is
the ultimate proof and exclusive and conclusive
evidence that the bill passed the legislature in
accordance with the provisions of the
Constitution. Such has been the holding in
California, Georgia, Kentucky, Texas,
Washington, New Mexico, Mississippi, Indiana,
South Dakota, and may be some others.
The second of the rules seems to be that the
enrolled bill is a verity and resort cannot be had to
the journals of the Legislature to show that the
constitutional mandates were not complied with
by the Legislature, except as to those provisions
of the Constitution, compliance with which is
expressly required to be shown on the journal.
This rule has been adopted in South Carolina,
Montana, Oklahoma, Utah, Ohio, New Jersey,
United States Supreme Court, and others.
The third of the rules seems to be that the
enrolled bill raises only a prima facie presumption
that the mandatory provisions of the Constitution
have been complied with and that resort may be
had to the journals to refute that presumption, and
if the constitutional provision is one, compliance
with which is expressly required by the
Constitution to be shown on the journals, then the
mere silence of the journals to show a compliance
therewith will refute the presumption. This rule
has been adopted in Illinois, Florida, Kansas,
Louisiana, Tennessee, Arkansas, Idaho,
Minnesota, Nebraska, Arizona, Oregon, New
Jersey, Colorado, and others. 40

In the 1980 case of D & W Auto Supply v. Department of

Revenue, the Supreme Court of Kentucky which had subscribed
in the past to the first of the three theories, made the
pronouncement that it had shifted its stand and would henceforth
adopt the third. It justified its changed stance, thus:
We believe that a more reasonable rule is the one
which Professor Sutherland describes as the
"extrinsic evidence" rule . . . . Under this approach
there is a prima facie presumption that an enrolled
bill is valid, but such presumption may be
overcome by clear satisfactory and convincing
evidence establishing that constitutional
requirements have not been met. 41
What rule, if any, has been adopted in this jurisdiction?
Advocates of the "journal entry rule" cite the 1916 decision in U.S.
v. Pons 42 where this Court placed reliance on the legislative journals
to determine whether Act No. 2381 was passed on February 28,
1914 which is what appears in the Journal, or on March 1, 1914
which was closer to the truth. The confusion was caused by the
adjournment sine die at midnight of February 28, 1914 of the
Philippine Commission.

A close examination of the decision reveals that the Court did not
apply the "journal entry rule" vis-a-vis the "enrolled bill rule" but
the former as against what are "behind the legislative journals."
Passing over the question of whether the printed
Act (No. 2381), published by authority of law, is
conclusive evidence as to the date when it was
passed, we will inquire whether the courts may go
behind the legislative journals for the purpose of
determining the date of adjournment when such
journals are clear and explicit. 43

It is to be noted from the above that the Court "passed over" the
probative value to be accorded to the enrolled bill.
Opting for the journals, the Court proceeded to explain:
From their very nature and object, the records of
the Legislature are as important as those of the
judiciary, and to inquire into the veracity of the
journals of the Philippine Legislature, when they
are, as we have said clear and explicit, would be
to violate both the letter and the spirit of the
organic laws by which the Philippine Government
was brought into existence, to invade a coordinate
and independent department of the Government,
and to interfere with the legitimate powers and
functions of the Legislature. 44
Following the courts in the United States since the Constitution of
the Philippine Government is modeled after that of the Federal
Government, the Court did not hesitate to follow the courts in said
country, i.e., to consider the journals decisive of the point at
issue. Thus: "The journals say that the Legislature adjourned at
12 midnight on February 28, 1914. This settles the question and
the court did not err in declining to go behind these journals." 45
The Court made a categorical stand for the "enrolled bill rule" for
the first time in the 1947 case of Mabanag v. Lopez Vito 46 where
it held that an enrolled bill imports absolute verity and is binding on
the courts. This Court held itself bound by an authenticated
resolution, despite the fact that the vote of three-fourths of the
Members of the Congress (as required by the Constitution to
approve proposals for constitutional amendments) was not actually
obtained on account of the suspension of some members of the
House of Representatives and the Senate. In this connection, the
Court invoked the "enrolled bill rule" in this wise: "If a political
question conclusively binds the judges out of respect to the political
departments, a duly certified law or resolution also binds the judges
under the 'enrolled bill rule' born of that respect." 47

Mindful that the U.S. Supreme Court is on the side of those who
favor the rule and for no other reason than that it conforms to the
expressed policy of our law making body (i.e., Sec. 313 of the old
Code of Civil Procedure, as amended by Act No. 2210), the Court
said that "duly certified copies shall be conclusive proof of the
provisions of such Acts and of the due enactment thereof."
Without pulling the legal underpinnings from U.S. v. Pons, it
justified its position by saying that if the Court at the time looked
into the journals, "in all probability, those were the documents
offered in evidence" and that "even if both the journals and
authenticated copy of the Act had been presented, the disposal of
the issue by the Court on the basis of the journals does not imply
rejection of the enrolled theory; for as already stated, the due
enactment of a law may be proved in either of the two ways
specified in Section 313 of Act No. 190 as amended." 48 Three
Justices voiced their dissent from the majority decision.

Again, the Court made its position plain in the 1963 case
of Casco Philippine Chemical Co., Inc. v. Gimenez 49when a
unanimous Court ruled that: "The enrolled bill is conclusive upon the
courts as regards the tenor of the measure passed by Congress and
approved by the President. If there has been any mistake in the
printing of a bill before it was certified by the officers of Congress and
approved by the Executive, the remedy is by amendment or curative
legislation not by judicial decree." According to Webster's New 20th
Century Dictionary, 2nd ed., 1983, the word "tenor" means, among
others, "the general drift of something spoken or written; intent,
purport, substance."

Thus, the Court upheld the respondent Auditor General's

interpretation that Republic Act No. 2609 really exempted from
the margin fee on foreign exchange transactions "urea
formaldehyde" as found in the law and not "urea and
formaldehyde" which petitioner insisted were the words contained
in the bill and were so intended by Congress.
In 1969, the Court similarly placed the weight of its authority
behind the conclusiveness of the enrolled bill. In denying the

motion for reconsideration, the Court ruled in Morales v.

Subido that "the enrolled Act in the office of the legislative
secretary of the President of the Philippines shows that Section
10 is exactly as it is in the statute as officially published in slip
form by the Bureau of Printing . . . Expressed elsewise, this is a
matter worthy of the attention not of an Oliver Wendell Holmes
but of a Sherlock Holmes." 50 The alleged omission of a phrase in
the final Act was made, not at any stage of the legislative
proceedings, but only in the course of the engrossment of the bill,
more specifically in the proofreading thereof.

But the Court did include a caveat that qualified the absoluteness
of the "enrolled bill" rule stating:
By what we have essayed above we are not of
course to be understood as holding that in all
cases the journals must yield to the enrolled bill.
To be sure there are certain matters which the
Constitution (Art. VI, secs. 10 [4], 20 [1], and 21
[1]) expressly requires must be entered on the
journal of each house. To what extent the validity
of a legislative act may be affected by a failure to
have such matters entered on the journal, is a
question which we do not now decide (Cf. e.g.,
Wilkes Country Comm'rs. v. Coler, 180 U.S. 506
[1900]). All we hold is that with respect to matters
not expressly required to be entered on the
journal, the enrolled bill prevails in the event of
any discrepancy. 51
More recently, in the 1993 case of Philippine Judges Association
v. Prado, 52 this Court, in ruling on the unconstitutionality of Section
35 of Republic Act No. 7354 withdrawing the franking privilege from
the entire hierarchy of courts, did not so much adhere to the enrolled
bill rule alone as to both "enrolled bill and legislative journals."
Through Mr. Justice Isagani A. Cruz, we stated: "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."

Aware of the shifting sands on which the validity and continuing

relevance of the "enrolled bill" theory rests, I have taken pains to
trace the history of its applicability in this jurisdiction, as
influenced in varying degrees by different Federal rulings.
As applied to the instant petition, the issue posed is whether or
not the procedural irregularities that attended the passage of
House Bill No. 11197 and Senate Bill No. 1630, outside of the
reading and printing requirements which were exempted by the
Presidential certification, may no longer be impugned, having
been "saved" by the conclusiveness on us of the enrolled bill. I
see no cogent reason why we cannot continue to place reliance
on the enrolled bill, but only with respect to matters pertaining to
the procedure followed in the enactment of bills in Congress and
their subsequent engrossment, printing errors, omission of words
and phrases and similar relatively minor matters relating more to
form and factual issues which do not materially alter the essence
and substance of the law itself.
Certainly, "courts cannot claim greater ability to judge procedural
legitimacy, since constitutional rules on legislative procedure are
easily mastered. Procedural disputes are over facts whether or
not the bill had enough votes, or three readings, or whatever
not over the meaning of the constitution. Legislators, as
eyewitnesses, are in a better position than a court to rule on the
facts. The argument is also made that legislatures would be
offended if courts examined legislative procedure. 53
Such a rationale, however, cannot conceivably apply to
substantive changes in a bill introduced towards the end of its
tortuous trip through Congress, catching both legislators and the
public unawares and altering the same beyond recognition even
by its sponsors.

This issue I wish to address forthwith.

EXTENT OF THE POWER OF THE BICAMERAL
CONFERENCE COMMITTEE
One of the issues raised in these petitions, especially in G.R.
Nos. 115781, 115543 and 115754, respectively, is whether or not

Congress violated Section 26, par. 2, Article VI (of

the 1987 Constitution) when it approved the
Bicameral Conference Committee Report which
embodied, in violation of Rule XII of the Rules of
the Senate, a radically altered tax measure
containing provisions not reported out or
discussed in either House as well as provisions
on which there was no disagreement between the
House and the Senate and, worse, provisions
contrary to what the House and the Senate had
approved after three separate readings. 54
and
By adding or deleting provisions, when there was
no conflicting provisions between the House and
Senate versions, the BICAM acted in excess of its
jurisdiction or with such grave abuse of discretion
as to amount to loss of jurisdiction. . . . In adding
to the bill and thus subjecting to VAT, real
properties, media and cooperatives despite the
contrary decision of both Houses, the BICAM
exceeded its jurisdiction or acted with such abuse
of discretion as to amount to loss of jurisdiction. . .
.55
I wish to consider this issue in light of Article VIII, Sec. 1 of the
Constitution which provides that "(j)udicial power includes the

duty of the courts of justice . . . to determine whether or not there

has been a grave abuse of discretion amounting to lack or excess
of jurisdiction on the part of any branch or instrumentality of the
Government." We are also guided by the principle that a court
may interfere with the internal procedures of its coordinate branch
only to uphold the Constitution. 56
A conference committee has been defined:
. . . unlike the joint committee is two committees,
one appointed by each house. It is normally
appointed for a specific bill and its function is to
gain accord between the two houses either by the
recession of one house from its bill or its
amendments or by the further amendment of the
existing legislation or by the substitution of an
entirely new bill. Obviously the conference
committee is always a special committee and
normally includes the member who introduced the
bill and the chairman of the committee which
considered it together with such other
representatives of the house as seem expedient.
(Horack, Cases and Materials on Legislation
[1940] 220. See also Zinn, Conference Procedure
in Congress, 38 ABAJ 864 [1952]; Steiner, The
Congressional Conference Committee [U of III.
Press,
1951]). 57
From the foregoing definition, it is clear that a bicameral
conference committee is a creature, not of the Constitution, but of
the legislative body under its power to determine rules of its
proceedings under Article VI, Sec. 16 (3) of the Constitution.
Thus, it draws its life and vitality from the rules governing its
creation. The why, when, how and wherefore of its operations, in
other words, the parameters within which it is to function, are to
be found in Section 26, Rule XII of the Rules of the Senate and

Section 85 of the Rules of the House of Representatives,

respectively, which provide:
Rule XII, Rules of the Senate
Sec. 26. In the event that the Senate does not
agree with the House of Representatives on the
provision of any bill or joint resolution, the
differences shall be settled by a conference
committee of both Houses which shall meet within
ten days after their composition.
The President shall designate the members of the
conference committee in accordance with
subparagraph (c), Section 8 of Rule III.
Each Conference Committee Report shall contain
a detailed and sufficiently explicit statement of the
changes in or amendments to the subject
measure, and shall be signed by the conferees.
The consideration of such report shall not be in
order unless the report has been filed with the
Secretary of the Senate and copies thereof have
been distributed to the Members.
Rules of the House of Representatives
Sec. 85. Conference Committee Reports. In
the event that the House does not agree with the
Senate on the amendments to any bill or joint
resolution, the differences may be settled by
conference committee of both Chambers.
The consideration of conference committee
reports shall always be in order, except when the
journal is being read, while the roll is being called

or the House is dividing on any question. Each of

the pages of such reports shall contain a detailed,
sufficiently explicit statement of the changes in or
amendments to the subject measure.
The consideration of such report shall not be in
order unless copies thereof are distributed to the
Members: Provided, That in the last fifteen days
of each session period it shall be deemed
sufficient that three copies of the report, signed as
above provided, are deposited in the office of the
Secretary General.
Under these Rules, a bicameral conference committee comes
into being only when there are disagreements and
differences between the Senate and the House with regard to
certain provisions of a particular legislative act which have to be
reconciled.
Jefferson's Manual, which, according to Section 112, Rule XLIX
of the Senate Rules, supplements it, states that a conference
committee is usually called "on the occasion of amendments
between the Houses" and "in all cases of difference of opinion
between the two House on matters pending between
them." 58 It further states:
The managers of a conference must confine themselves to the
differences committed to them, and may not include subjects not
within the disagreements, even though germane to a question in
issue. But they may perfect amendments committed to them if
they do not in so doing go beyond the differences. . . . Managers
may not change the text to which both Houses have
agreed. 59 (Emphasis supplied.)
Mason's Manual of Legislative Procedures which is also
considered as controlling authority for any situation not covered
by a specific legislative

rule, 60 states that either House may "request a conference with the
other on any matter of difference or dispute between them" and that
in such a request, "the subject of the conference should always be
stated." 61

In the Philippines, as in the United States, the Conference

Committee exercises such a wide range of authority that they
virtually constitute a third House in the Legislature. As admitted
by the Solicitor General, "It was the practice in past Congresses
for Conference Committees to insert in bills approved by the two
Houses new provisions that were not originally contemplated by
them." 62
In Legislative Procedure, Robert Luce gives a graphic description
of the milieu and the circumstances which have conspired to
transform an initially innocuous mechanism designed to facilitate
action into an all-powerful Frankenstein that brooks no challenge
to its authority even from its own members.
Their power lies chiefly in the fact that reports of
conference committees must be accepted without
amendment or else rejected in toto. The impulse
is to get done with the matters and so the motion
to accept has undue advantage, for some
members are sure to prefer swallowing
unpalatable provisions rather than prolong
controversy. This is the more likely if the report
comes in the rush of business toward the end of a
session, when to seek further conference might
result in the loss of the measure altogether. At
any time in the session there is some risk of such
a result following the rejection of a conference
report, for it may not be possible to secure a
second conference, or delay may give opposition
to the main proposal chance to develop more
strength.
xxx xxx xxx

Entangled in a network of rule and custom, the

Representative who resents and would resist this
theft of his rights, finds himself helpless. Rarely
can he vote, rarely can he voice his mind, in the
matter of any fraction of the bill. Usually he cannot
even record himself as protesting against some
one feature while accepting the measure as
whole. Worst of all, he cannot by argument or
suggested change, try to improve what the other
branch has done.
This means more than the subversion of
individual rights. It means to a degree the
abandonment of whatever advantage the
bicameral system may have. By so much it in
effect transfers the lawmaking power to a small
group of members who work out in private a
decision that almost always prevails. What is
worse, these men are not chosen in a way to
ensure the wisest choice. It has become the
practice to name as conferees the ranking
members of the committee, so that the accident of
seniority determines. Exceptions are made, but in
general it is not a question of who are most
competent to serve. Chance governs, sometimes
giving way to favor, rarely to merit.
xxx xxx xxx
Speaking broadly, the system of legislating by
conference committee is unscientific and
therefore defective. Usually it forfeits the benefit of
scrutiny and judgment by all the wisdom available.
Uncontrolled, it is inferior to that process by which
every amendment is secured independent
discussion and vote. . . . 63 (Emphasis supplied)

Not surprisingly has it been said: "Conference Committee action

is the most undemocratic procedure in the legislative process; it is
an appropriate target for legislative critics." 64

2. Section 100 (VAT on Sale of Goods)

The term "goods" or "properties" includes the following, which
were not found in either the HB or the SB:

In the case at bench, petitioners insist that the Conference

Committee to which Senate Bill No. 1630 and House Bill No.
11197 were referred for the purpose of harmonizing their
differences, overreached themselves in not confining their
"reconciliation" function to those areas of disagreement in the two
bills but actually making "surreptitious insertions" and deletions
which amounted to a grave abuse of discretion.

In addition to radio and television time;

SATTELITE TRANSMISSION AND CABLE
TELEVISION TIME.
The term "Other similar properties" was
deleted, which was present in the HB and the SB.

At this point, it becomes imperative to focus on the errant

provisions which found their way into Republic Act No. 7716.
Below is a breakdown to facilitate understanding the grounds for
petitioners' objections:

Real properties held primarily for sale to

customers or held for lease in the ordinary course
or business were included, which was neither in
the HB nor the SB (subject of petition in G.R. No.
115754).

INSERTIONS MADE BY BICAMERAL CONFERENCE

COMMITTEE (BICAM) TO SENATE BILL (SB) NO. 1630 AND
HOUSE BILL (HB) NO. 11197

3. Section 102

1. Sec. 99 of the National Internal Revenue Code (NIRC)

On what are included in the term "sale or exchange of services,"

as to make them subject to VAT, the BICAM included/inserted the
following (not found in either House or Senate Bills):

(1) Under the HB, this section includes any person who, in the
course of trade or business, sells, barters or exchanges goods
OR PROPERTIES and any person who LEASES PERSONAL
PROPERTIES.
(2) The SB completely changed the said section and defined a
number of words and phrases. Also, Section 99-A was added
which included one who sells, exchanges, barters PROPERTIES
and one who imports PROPERTIES.
(3) The BICAM version makes LESSORS of goods OR
PROPERTIES and importers of goods LIABLE to VAT (subject of
petition in G.R. No. 115754).

1. Services of lessors of property, whether

personal or real (subject of petition in G.R. No.
115754);
2. Warehousing services;
3. Keepers of resthouses, pension houses, inns,
resorts;
4. Common carriers by land, air and sea;
5. Services of franchise grantees of telephone
and telegraph;

6. Radio and television broadcasting;

8. Services of surety, fidelity, indemnity, and

bonding companies;

Subsection U which exempts from VAT "transactions which are

exempt under special laws," was amended by the BICAM by
adding the phrase: EXCEPT THOSE GRANTED UNDER PD
Nos. 66, 529, 972, 1491, AND 1590, AND NON-ELECTRIC
COOPERATIVES UNDER RA 6938 (subject of petition in G.R.
No. 115873), not found in either the HB or the SB, resulting in the
inclusion of all cooperatives to the VAT, except non-electric
cooperatives.

9. Also inserted by the BICAM (on page 8 thereof)

is the lease or use of or the right to use of satellite
transmission and cable television time.

The sale of real properties was included in the exempt

transactions under the House Bill, but the BICAM qualified this
with the provision:

7. All other franchise grantees except those under

Section 117 of this Code (subject of petition in
G.R. No. 115852);

(S) SALE OF REAL PROPERTIES NOT

PRIMARILY HELD FOR SALE TO CUSTOMERS
OR HELD FOR LEASE IN THE ORDINARY
COURSE OF TRADE OR BUSINESS OR REAL
PROPERTY UTILIZED FOR LOW-COST AND
SOCIALIZED HOUSING AS DEFINED BY RA
NO. 7279 OTHERWISE KNOWN AS THE
URBAN DEVELOPMENT AND HOUSING ACT
OF 1992 AND OTHER RELATED LAWS. (subject
of petition in G.R. No. 115754)

4. Section 103 (Exempt Transactions)

The BICAM deleted subsection (f) in its entirety, despite its
inclusion in both the House and Senate Bills. Therefore, under
Republic Act No. 7716, the "printing, publication, importation or
sale of books and any newspaper, magazine, review, or bulletin
which appears at regular intervals with fixed prices for
subscription and sale and which is not devoted principally to the
publication of advertisements" is subject to VAT (subject of
petition in G.R. No. 115931 and G.R. No. 115544).
The HB and SB did not touch Subsection (g) but it was amended
by the BICAM by changing the word TEN to FIVE. Thus,
importation of vessels with tonnage of more than five thousand
tons is VAT exempt.
Subsection L, which was identical in the HB and the SB that
stated that medical, dental, hospital and veterinary services were
exempted from the VAT was amended by the BICAM by adding
the qualifying phrase: EXCEPT THOSE RENDERED BY
PROFESSIONALS, thus subjecting doctors, dentists and
veterinarians to the VAT.

The BICAM also exempted the sale of properties, the receipts of

which are not less than P480,000.00 or more than P720,000.00.
Under the SB, no amount was given, but in the HB it was stated
that receipts from the sale of properties not less than
P350,000.00 nor more than P600,000.00 were exempt.
It did not include, as VAT exempt, the sale or transfer of
securities, as defined in the Revised Securities Act (BP 178)
which was contained in both Senate and House Bills.
5. Section 104

Not included in the HB or the SB is the phrase "INCLUDING

PACKAGING MATERIALS" which was inserted by the BICAM in
Section 104 (A) (1) (B), thus excluding from creditable input tax
packaging materials and the phrase "ON WHICH A VALUEADDED TAX HAS BEEN ACTUALLY PAID" in Section 104 (A)
(2).

(a) The BICAM defers for only 2 years the VAT on services of
actors and actresses, although the SB defers it for 3 years.
(b) The BICAM uses the word "EXCLUDE" in the section on
deferment of VAT collection on certain goods and services. The
HB does not contain any counterpart provision and SB only
allows deferment for no longer than 3 years.

6. Section 107
Both House and Senate Bills provide for the payment of P500.00
VAT registration fee but this was increased by BICAM to
P1,000.00.

11. Section 18 on the Tax Administration Development Fund is

an entirely new provision not contained in the House/Senate Bills.
This fund is supposed to ensure effective implementation of
Republic Act No. 7716.

7. Section 112

12. Section 19

Regarding a person whose sales or receipts are exempt under

Section 103 (w), the BICAM inserted the phrase: "THREE
PERCENT UPON THE EFFECTIVITY OF THIS ACT AND FOUR
PERCENT (4%) TWO YEARS THEREAFTER," although the SB
and the HB provide only "three percent of his gross quarterly
sales."

No period within which to promulgate the implementing rules and

regulations is found in the HB or the SB but BICAM provided
"within 90 days" which found its way in Republic Act No. 7716.

8. Section 115
The BICAM adopted the HB version which subjects common
carriers by land, air or water for the transport of passengers to 3%
of their gross quarterly sales, which is not found in the SB.
9. Section 117
The BICAM amended this section by subjecting franchises on
electric, gas and water utilities to a tax of two percent (2%) on
gross receipts
derived . . ., although neither the HB nor the SB has a similar
provision.
10. Section 17 (d)

Even a cursory perusal of the above outline will convince one

that, indeed, the Bicameral Conference Committee (henceforth to
be referred to as BICAM) exceeded the power and authority
granted in the Rules of its creation. Both Senate and House
Rules limit the task of the Conference Committee in almost
identical language to the settlement of differences in the
provisions or amendments to any bill or joint resolution. If it
means anything at all, it is that there are provisions in subject bill,
to start with, which differ and, therefore, need reconciliation.
Nowhere in the Rules is it authorized to initiate or propose
completely new matter. Although under certain rules on legislative
procedure, like those in Jefferson's Manual, a conference
committee may introduce germane matters in a particular bill,
such matters should be circumscribed by the committee's sole
authority and function to reconcile differences.
Parenthetically, in the Senate and in the House, a matter is
"germane" to a particular bill if there is a common tie between

said matter and the provisions which tend to promote the object
and purpose of the bill it seeks to amend. If it introduces a new
subject matter not within the purview of the bill, then it is not
"germane" to the bill. 65 The test is whether or not the change
represented an amendment or extension of the basic purpose of the
original, or the introduction of an entirely new and different subject
matter. 66

In the BICAM, however, the germane subject matter must be

within the ambit of the disagreement between the two Houses. If
the "germane" subject is not covered by the disagreement but it is
reflected in the final version of the bill as reported by the
Conference Committee or, if what appears to be a "germane"
matter in the sense that it is "relevant or closely allied" 67 with the
purpose of the bill, was not the subject of a disagreement between
the Senate and the House, it should be deemed an extraneous
matter or even a "rider" which should never be considered legally
passed for not having undergone the three-day reading requirement.
Insertion of new matter on the part of the BICAM is, therefore,
anultra vires act which makes the same void.

In the instant case before us, the insertions and deletions made
do not merely spell an effort at settling conflicting provisions but
have materially altered the bill, thus giving rise to the instant
petitions on the part of those who were caught unawares by the
legislative legerdemain that took place. Going by the definition of
the word "amendment" in Black's Law Dictionary, 5th Ed., 1979,
which means "to change or modify for the better; to alter by
modification, deletion, or addition," said insertions and deletions
constitute amendments. Consequently, these violated Article VI,
Section 26 (2) which provides inter alia: "Upon the last reading of
a bill, no amendment thereto shall be
allowed . . ." This proscription is intended to subject all bills and
their amendments to intensive deliberation by the legislators and
the ample ventilation of issues to afford the public an opportunity
to express their opinions or objections issues to afford the public
an opportunity to express their opinions or objections thereon.
The same rationale underlies the three-reading requirement to
the end that no surprises may be sprung on an unsuspecting
citizenry.

the points of disagreement between the House and the Senate.

Provisions of the "now you see it, now you don't" variety, meaning
those which were either in the House and/or Senate versions but
simply disappeared or were "bracketed out" of existence in the
BICAM Report, were eventually incorporated in Republic Act No.
7716. Worse, some goods, properties or services which were not
covered by the two versions and, therefore, were never intended
to be so covered, suddenly found their way into the same Report.
No advance notice of such insertions prepared the rest of the
legislators, much less the public who could be adversely affected,
so that they could be given the opportunity to express their views
thereon. Well has the final BICAM report been described,
therefore, as an instance of "taxation without representation."

As regards inserted amendments in the BICAM, therefore, the

task of determining what is germane to a bill is simplified, thus: If
the amendments are not circumscribed by the subjects of
disagreement between the two Houses, then they are not
germane to the purpose of the bill.

That the conferees or delegates in the BICAM representing the

two Chambers could not possibly be charged with bad faith or
sinister motives or, at the very least, unseemly behavior, is of no
moment. The stark fact is that items not previously subjected to
the VAT now fell under its coverage without interested sectors or

The determination of what is "germane" and what is not may

appear to be a difficult task but the Congress, having been
confronted with the problem before, resolved it in accordance with
the rules. In that case, the Congress approved a Conference
Committee's insertion of new provisions that were not
contemplated in any of the provisions in question between the
Houses simply because of the provision in Jefferson's
Manual that conferees may report matters "which are germane
modifications of subjects in disagreement between the Houses
and the committee. 68 In other words, the matter was germane to

parties having been afforded the opportunity to be heard thereon.

This is not to say that the Conference Committee Report should
have undergone the three readings required in Article VI, Section
26 (2), for this clearly refers only to bills which, after having been
initially filed in either House, negotiated the labyrinthine passage
therein until its approval. The composition of the BICAM including
as it usually does, the Chairman of the appropriate Committee,
the sponsor of the bill and other interested members ensures an
informed discussion, at least with respect to the disagreeing
provisions. The same does not obtain as regards completely new
matter which suddenly spring on the legislative horizon.
It has been pointed out that such extraneous matters
notwithstanding, all Congressman and Senators were given the
opportunity to approve or turn down the Committee Report in toto,
thus "curing" whatever defect or irregularity it bore.
Earlier in this opinion, I explained that the source of the
acknowledged power of this ad hoc committee stems from the
precise fact that, the meetings, being scheduled "take it or leave
it" basis. It has not been uncommon for legislators who, for one
reason or another have been frustrated in their attempt to pass a
pet bill in their own chamber, to work for its passage in the
BICAM where it may enjoy a more hospitable reception and faster
approval. In the instant case, had there been full, open and
unfettered discussion on the bills during the Committee sessions,
there would not have been as much vociferous objections on this
score. Unfortunately, however, the Committee held two of the five
sessions behind closed doors, sans stenographers, record-takers
and interested observers. To that extent, the proceedings were
shrouded in mystery and the public's right to information on
matters of public concern as enshrined in Article III, Section
7 69 and the government's policy of transparency in transactions

"cured" or ratified. For all intents and purposes, these never

existed. Quae ab initio non valent, ex post facto convalescere non
possunt. Things that are invalid from the beginning are not made
valid by a subsequent act.
Should this argument be unacceptable, the "enrolled bill"
doctrine, in turn, is invoked to support the proposition that the
certification by the presiding officers of Congress, together with
the signature of the President, bars further judicial inquiry into the
validity of the law. I reiterate my submission that the "enrolled bill
ruling" may be applicable but only with respect to questions
pertaining to the procedural enactment, engrossment, printing,
the insertion or deletion of a word or phrase here and there, but
would draw a dividing line with respect to substantial substantive
changes, such as those introduced by the BICAM herein.
We have before us then the spectacle of a body created by the
two Houses of Congress for the very limited purpose of settling
disagreements in provisions between bills emanating therefrom,
exercising the plenary legislative powers of the parent chambers
but holding itself exempt from the mandatory constitutional
requirements that are the hallmarks of legislation under the aegis
of a democratic political system. From the initial filing, through the
three readings which entail detailed debates and discussions in
Committee and plenary sessions, and on to the transmittal to the
other House in a repetition of the entire process to ensure
exhaustive deliberations all these have been skipped over. In
the proverbial twinkling of an eye, provisions that probably may
not have seen the light of day had they but run their full course
through the legislative mill, sprang into existence and emerged
full-blown laws.

involving public interest in Article II, Section 28 of the

Constitution 70 are undermined.

Yet our Constitution vests the legislative power in "the Congress

of the Philippines which shall consist of a Senate and a House of
Representatives . . ." 71 and not in any special, standing or super

Moreover, that which is void ab initio such as the objectionable

provisions in the Conference Committee Report, cannot be

committee of its own creation, no matter that these have been

described, accurately enough, as "the eye, the ear, the hand, and
very often the brain of the house."

Firstly, that usage or custom has sanctioned this abbreviated, if

questionable, procedure does not warrant its being legitimized
and perpetuated any longer. Consuetudo, contra rationem
introducta, potius usurpatio quam consuetudo appellari debet. A
custom against reason is rather an usurpation. In the hierarchy of
sources of legislative procedure, constitutional rules, statutory
provisions and adopted rules (as for example, the Senate and
House Rules), rank highest, certainly much ahead of customs
and usages.
Secondly, is this Court to assume the role of passive spectator or
indulgent third party, timorous about exercising its power or more
importantly, performing its duty, of making a judicial determination
on the issue of whether there has been grave abuse of discretion
by the other branches or instrumentalities of government, where
the same is properly invoked? The time is past when the Court
was not loathe to raise the bogeyman of the political question to
avert a head-on collision with either the Executive or Legislative
Departments. Even the separation of powers doctrine was
burnished to a bright sheen as often as it was invoked to keep the
judiciary within bounds. No longer does this condition obtain.
Article VIII, Section 2 of the Constitution partly quoted in this
paragraph has broadened the scope of judicial inquiry. This Court
can now safely fulfill its mandate of delimiting the powers of coequal departments like the Congress, its officers or its
committees which may have no compunctions about exercising
legislative powers in full.
Thirdly, dare we close our eyes to the presumptuous assumption
by a runaway committee of its progenitor's legislative powers in
derogation of the rights of the people, in the process, subverting
the democratic principles we all are sworn to uphold, when a
proper case is made out for our intervention? The answers to the
above queries are self-evident.
I call to mind this exhortation: "We are sworn to see that
violations of the constitution by any person, corporation, state
agency or branch of government are brought to light and

corrected. To countenance an artificial rule of law that silences

our voices when confronted with violations of our Constitution is
not acceptable to this Court." 72
I am not unaware that a rather recent decision of ours brushed
aside an argument that a provision in subject law regarding the
withdrawal of the franking privilege from the petitioners and this
Court itself, not having been included in the original version of
Senate Bill No. 720 or of House Bill No. 4200 but only in the
Conference Committee Report, was violative of Article VI, Section
26 (2) of the Constitution. Likewise, that said Section 35, never
having been a subject of disagreement between both Houses,
could not have been validly added as an amendment before the
Conference Committee.
The majority opinion in said case explained:
While it is true that a conference committee is the mechanism for
compromising differences between the Senate and the House, it
is not limited in its jurisdiction to this question. Its broader function
is described thus:
A conference committee may deal generally with
the subject matter or it may be limited to resolving
the precise differences between the two houses.
Even where the conference committee is not by
rule limited in its jurisdiction, legislative custom
severely limits the freedom with which new
subject matter can be inserted into the conference
bill. But occasionally a conference committee
produces unexpected results, results beyond its
mandate. These excursions occur even where the
rules impose strict limitations on conference
committee jurisdiction. This is symptomatic of the
authoritarian power of conference committee
(Davies, Legislative Law and Process: In a
Nutshell, 1986 Ed., p. 81). 73(Emphasis supplied)

At the risk of being repetitious, I wish to point out that the general
rule, as quoted above, is: "Even where the conference committee
is not by rule limited in its jurisdiction, legislative custom severely
limits the freedom with which new subject matter can be inserted
into the conference bill." What follows, that is, "occasionally a
conference committee produces unexpected results, results
beyond its mandate. . ." is the exception. Then it concludes with a
declaration that: "This is symptomatic of the authoritarian power
of conference committee." Are we about to reinstall another
institution that smacks of authoritarianism which, after our past
experience, has become anathema to the Filipino people?
The ruling above can hardly be cited in support of the proposition
that a provision in a BICAM report which was not the subject of
differences between the House and Senate versions of a bill
cannot be nullified. It submit that such is not authorized in our
Basic Law. Moreover, this decision concerns merely one
provision whereas the BICAM Report that culminated in the EVAT
law has a wider scope as it, in fact, expanded the base of the
original VAT law by imposing the tax on several items which were
not so covered prior to the EVAT.
One other flaw in most BICAM Reports, not excluding this one
under scrutiny, is that, hastily drawn up, it often fails to conform to
the Senate and House Rules requiring no less than a "detailed"
and "sufficiently explicit statement of the changes in or
amendments to the subject measure." The Report of the
committee, as may be gleaned from the preceding pages, was no
more than the final version of the bill as "passed" by the BICAM.
The amendments or subjects of dissension, as well as the
reconciliation made by the committee, are not even pointed out,
much less explained therein.
It may be argued that legislative rules of procedure may properly
be suspended, modified, revoked or waived at will by the
legislators themselves. 74 This principle, however, does not come
into play in interpreting what the record of the proceedings shows
was, or was not, done. It is rather designed to test the validity of

legislative action where the record shows a final action in violation or

disregard of legislative rules. 75 Utilizing the Senate and the House
Rules as both guidelines and yardstick, the BICAM here obviously
did not adhere to the rule on what the Report should contain.

Given all these irregularities that have apparently been engrafted

into the BICAM system, and which have been tolerated, if not
accorded outright acceptance by everyone involved in or
conversant with, the institution, it may be asked: Why not leave
well enough alone?
That these practices have remained unchallenged in the past
does not justify our closing our eyes and turning a deaf ear to
them. Writ large is the spectacle of a mechanism ensconced in
the very heart of the people's legislative halls, that now stands
indicted with the charge of arrogating legislative powers unto itself
through the use of dubious "shortcuts." Here, for the people to
judge, is the "mother of all shortcuts."
In the petitions at bench, we are confronted with the enactment of
a tax law which was designed to broaden the tax base. It is rote
learning for any law student that as an attribute of sovereignty,
the power to tax is "the strongest of all the powers of
government." 76 Admittedly, "for all its plenitude, the power to tax is
not unconfined. There are restrictions." 77 Were there none, then the
oft-quoted 1803 dictum of Chief Justice Marshall that "the power to
tax involves the power to destroy" 78 would be a truism. Happily, we
can concur with, and the people can find comfort in, the reassuring
words of Mr. Justice Holmes: "The power to tax is not the power to
destroy while this Court sits." 79

Manakanaka, mayroong dumudulog dito sa Kataastaasang

Hukuman na may kamangha-manghang hinaing. Angkop na
halimbawa ay ang mga petisyong iniharap ngayon sa amin.
Ang ilan sa kanila ay mga Senador na nais mapawalang bisa ang
isang batas ukol sa buwis na ipinasa mismo nila. Diumano ito ay
hindi tumalima sa mga itinatadhana ng Saligang Batas. Bukod sa

rito, tutol sila sa mga bagong talata na isiningit ng "Bicameral

Conference Committee" na nagdagdag ng mga bagong bagay
bagay at serbisyo na papatawan ng buwis. Ayon sa kanila,
ginampanan ng komiteng iyan ang gawain na nauukol sa buong
Kongreso. Kung kaya't ang nararapat na mangyari ay ihatol ng
Kataastaasang Hukuman na malabis na pagsasamantala sa
sariling pagpapasiya ang ginawa ng Kongreso.
Bagama't bantulot kaming makialam sa isang kapantay na
sangay ng Pamahalaan, hindi naman nararapat na kami ay
tumangging gampanan ang tungkulin na iniatas sa amin ng
Saligang Batas. Lalu't-lalo nang ang batas na kinauukulan ay
maaaring makapinsala sa nakararami sa sambayanan.
Sa ganang akin, itong batas na inihaharap sa amin ngayon, ay
totoong labag sa Saligang Batas, samakatuwid ay walang bisa.
Nguni't ito ay nauukol lamang sa mga katiwalian na may
kinalaman sa paraan ng pagpapasabatas nito. Hindi namin
patakaran ang makialam o humadlang sa itinakdang gawain ng
Saligang Batas sa Pangulo at sa Kongreso. Ang dalawang
sangay na iyan ng Pamahalaan ang higit na maalam ukol sa
kung ang anumang panukalang batas ay nararapat, kanais-nais o
magagampanan; kung kaya't hindi kami nararapat na maghatol o
magpapasiya sa mga bagay na iyan. Ang makapapataw ng
angkop na lunas sa larangan na iyan ay ang mismong mga
kinatawan ng sambayanan sa Kongreso.
Faced with this challenge of protecting the rights of the people by
striking down a law that I submit is unconstitutional and in the
process, checking the wonted excesses of the Bicameral
Conference Committee system, I see in this case a suitable
vehicle to discharge the Court's Constitutional mandate and duty
of declaring that there has indeed been a grave abuse of
discretion amounting to lack or excess of jurisdiction on the part
of the Legislature.
Republic Act No. 7716, being unconstitutional and void, I find no
necessity to rule on the substantive issues as dealt with in the

majority opinion as they have been rendered moot and academic.

These issues pertain to the intrinsic merits of the law. It is
axiomatic that the wisdom, desirability and advisability of enacting
certain laws lie, not within the province of the Judiciary but that of
the political departments, the Executive and the Legislative. The
relief sought by petitioners from what they perceive to be the
harsh and onerous effect of the EVAT on the people is within their
reach. For Congress, of which Senator-petitioners are a part, can
furnish the solution by either repealing or amending the subject
law.
For the foregoing reasons, I VOTE to GRANT the petition.

PUNO, J.:
Petitioners plead that we affirm the self-evident proposition that
they who make law should not break the law. There are many
evils whose elimination can be trusted to time. The evil of
lawlessness in lawmaking cannot. It must be slain on sight for it
subverts the sovereignty of the people.
First, a fast snapshot of the facts. On November 17, 1993, the
House of Representatives passed on third reading House Bill
(H.B.) No. 11197 entitled "An Act Restructuring the Value Added
Tax (VAT) System to Widen its Tax Base and Enhance its
Administration, Amending for These Purposes Sections 99, 100,
102 to 108 and 110 Title V and 236, 237 and 238 of Title IX, and
Repealing Sections 113 and 114 of Title V, all of the National
Internal Revenue Code as Amended." The vote was
114 Yeas and 12 Nays. The next day, November 18, 1993, H.B.
No. 11197 was transmitted to the Senate for its concurrence by
the Hon. Camilo L. Sabio, Secretary General of the House of
Representatives.

On February 7, 1994, the Senate Committee on Ways and Means

submitted Senate Bill (S.B.) No. 1630, recommending its approval
"in substitution of Senate Bill No. 1129 taking into consideration
P.S. Res. No. 734 and House Bill No. 11197." On March 24,
1994, S.B. No. 1630 was approved on second and third readings.
On the same day, the Senate, thru Secretary Edgardo E.
Tumangan, requested the House for a conference "in view of the
disagreeing provisions of S.B. No. 1630 and H.B. No. 11197." It
designated the following as members of its Committee: Senators
Ernesto F. Herrera, Leticia R. Shahani, Alberto S. Romulo, John
H. Osmea, Ernesto M. Maceda, Blas F. Ople, Francisco S.
Tatad, Rodolfo G. Biazon, and Wigberto S. Taada. On the part
of the House, the members of the Committee were:
Congressmen Exequiel B. Javier, James L. Chiongbian, Renato
V. Diaz, Arnulfo P. Fuentebella, Mariano M. Tajon, Gregorio
Andolong, Thelma Almario, and Catalino Figueroa. After five (5)
meetings, 1 the Bicameral Conference Committee submitted its
Report to the Senate and the House stating:

AN ACT RESTRUCTURING THE VALUE ADDED

TAX (VAT) SYSTEM TO WIDEN ITS TAX BASE
AND ENHANCE ITS ADMINISTRATION,
AMENDING FOR THESE PURPOSES
SECTIONS 99, 100, 102, 103, 104, 106, 107, 108
AND 110 OF TITLE IV, 112, 115, 117 AND 121
OF TITLE V, AND 236, 237, AND 238 OF TITLE
IX, AND REPEALING SECTIONS 113, 114, 116,
119 AND 120 OF TITLE V, ALL OF THE
NATIONAL INTERNAL REVENUE CODE, AS
AMENDED AND FOR OTHER PURPOSES
having met, after full and free conference, has
agreed to recommend and do hereby recommend
to their respective Houses that House Bill No.
11197, in consolidation with Senate Bill No. 1630,
be approved in accordance with the attached
copy of the bill as reconciled and approved by the
conferees.

CONFERENCE COMMITTEE REPORT

Approved.
The Conference Committee on the disagreeing
provisions of House Bill No. 11197, entitled:
AN ACT RESTRUCTURING THE VALUE ADDED
TAX (VAT) SYSTEM TO WIDEN ITS TAX BASE
AND ENHANCE ITS ADMINISTRATION,
AMENDING FOR THESE PURPOSES
SECTIONS 99, 100, 102, 103, 104, 105, 106,
107, 108 AND 110 OF TITLE IV, 112, 115 AND
116 OF TITLE V, AND 236, 237, AND 238 OF
TITLE IX, AND REPEALING SECTIONS 113
AND 114 OF TITLE V, ALL OF THE NATIONAL
INTERNAL REVENUE CODE, AS AMENDED
and Senate Bill No. 1630 entitled:

The Report was approved by the House on April 27, 1994. The
Senate approved it on May 2, 1994. On May 5, 1994, the
President signed the bill into law as R.A. No. 7716.
There is no question that the Bicameral Conference Committee
did more than reconcile differences between House Bill No.
11197 and Senate Bill No. 1630. In several instances, it either
added new provisions or deleted provisions already approved in
House Bill No. 11197 and Senate Bill No. 1630. These
insertions/deletions numbering twenty four (24) are specified in
detail by petitioner Tolentino as follows: 2
SOME SALIENT POINTS ON THE
(AMENDMENTS TO THE VATE LAW [EO 273])
SHOWING ADDITIONS/INSERTIONS MADE BY

BICAMERAL
CONFERENCE COMMITTEE TO SB 1630 & HB
11197

. Right or the

1. The same

1. The same

2. The same

2. The same

3. The same

3. The same

privilege to use

I On Sec. 99 of the NIRC

patent, copyright,

H.B. 11197 amends this section by including, as

liable to VAT, any person who in the course of
trade of business, sells, barters, or exchanges
goods or PROPERTIES and any person who
LEASES PERSONAL PROPERTIES.

design, or model,
plan, secret
formula or process,
goodwill trademark,

Senate Bill 1630 deleted Sec. 99 to give way for a

new Section 99 DEFINITION OF TERMS
where eleven (11) terms were defined. A new
Section, Section 99-A was incorporated which
included as subject to VAT, one who sells,
exchanges, barters PROPERTIES and one who
imports PROPERTIES.

tradebrand or other
like property or
right.

The BCC version (R.A. 7716) makes LESSORS

of goods OR PROPERTIES and importers of
goods LIABLE to VAT.

2. Right or the

II On Section 100 (VAT on sale of goods)

in the Philippines

A. The H.B., S.B., and the BCC (R.A. 7716) all

included sale of PROPERTIES as subject to VAT.

of any industrial,

The term GOODS or PROPERTIES includes the

following:

scientific equip-

privilege to use

commercial, or

ment.
HB (pls. refer

SB (pls. refer

BCC (RA 7716

to Sec. 2)

To Sec. 1(4)

(Sec. 2)

3. Right or the

privilege to use

primarily for sale to

motion picture films,

customers or held

films, tapes and

for lease in the

discs.

ordinary course or
business

4. Radio and

4. The same

Television time

4. In addition
to radio and

included:

B. The HB and the BCC Bills has each a provision

which includes THE SALE OF GOLD TO
BANGKO SENTRAL NG PILIPINAS as falling
under the term Export Sales, hence subject to 0%
VAT. The Senate Bill does not contain such
provision (See Section 102-A thereof).

SATELLITE
TRANSMISSION

III. On Section 102

television time the

following were

and CABLE
TELEVISION TIME

5. Other Similar

5. The Same

properties

5. 'Other
similar properties'
was deleted

6. -

6. -

6. Real
properties held

This section was amended to include as subject

to a 10% VAT the gross receipts derived from
THE SALE OR EXCHANGE OF SERVICES,
INCLUDING THE USE OR LEASE OF
PROPERTIES.
The SB, HB, and BCC have the same provisions
on this.
However, on what are included in the term SALE
OR EXCHANGE OF SERVICES, the BCC
included/inserted the following (not found in either
the House or Senate Bills):

1. Services of lessors of property

WHETHER PERSONAL OR
REAL; (See BCC Report/Bill p. 7)
2. WAREHOUSING SERVICES
(Ibid.,)
3. Keepers of RESTHOUSES,
PENSION HOUSES, INNS,
RESORTS (Ibid.,)
4. Common carriers by LAND, AIR
AND SEA (Ibid.,)
5. SERVICES OF FRANCHISE
GRANTEES OF TELEPHONE
AND TELEGRAPH;
6. RADIO AND TELEVISION
BROADCASTING
7. ALL OTHER FRANCHISE
GRANTEES EXCEPT THOSE
UNDER SECTION 117 OF THIS
CODE
8. SERVICES OF SURETY,
FIDELITY, INDEMNITY, AND
BONDING COMPANIES.
9. Also inserted by the BCC (on
page B thereof) is the LEASE OR
USE OF OR THE RIGHT TO USE
OF SATTELITE TRANSMISSION
AND CABLE TELEVISION TIME
IV. On Section 103 (Exempt Transactions)

The BCC deleted subsection (f) in its entirety,

despite its retention in both the House and Senate
Bills, thus under RA 7716, the "printing,
publication, importation or sale of books and any
newspaper, magazine, review, or bulletin which
appears at regular intervals with fixed prices for
subscription and sale and which is not devoted
principally to the publication of advertisements" is
subject to VAT.
Subsection (g) was amended by the BCC (both
Senate and House Bills did not) by changing the
word TEN to FIVE, thus: "Importation of
passenger and/or cargo vessel of more than five
thousand ton to ocean going, including engine
and spare parts of said vessel to be used by the
importer himself as operator thereof." In short,
importation of vessels with tonnage of more than
5 thousand is VAT exempt.
Subsection L, was amended by the BCC by
adding the qualifying phrase: EXCEPT THOSE
RENDERED BY PROFESSIONALS.
Subsection U which exempts from VAT
"Transactions which are exempt under special
laws", was amended by BCC by adding the
phrase: EXCEPT THOSE GRANTED UNDER PD
NOS. 66, 529, 972, 1491, and 1590, and NONELECTRIC COOPERATIVES under RA 6938.
This is the reason why cooperatives are now
subject to VAT.
While the SALE OF REAL PROPERTIES was
included in the exempt transactions under the
House Bill, the BCC made a qualification by
stating:

(S) SALE OF REAL

PROPERTIES NOT PRIMARILY
HELD FOR SALE TO
CUSTOMERS OR HELD FOR
LEASE IN THE ORDINARY
COURSE OF TRADE OR
BUSINESS OR REAL
PROPERTY UTILIZED FOR
LOW-COST AND SOCIALIZED
HOUSING AS DEFINED BY R.A.
NO. 7279 OTHERWISE KNOWN
AS THE URBAN DEVELOPMENT
AND HOUSING ACT OF 1992
AND OTHER RELATED LAWS.

P240,000.00. The BCC agreed at

the amount of not less than
P480,000.00 or more than
P720,000.00 SUBJECT TO TAX
UNDER SEC. 112 OF THIS
CODE.
The BCC did not include, as VAT
exempt, the sale or transfer of
securities as defined in the
Revised Securities Act (BP 178)
which was contained in both
Senate and House Bills.
V On Section 104

Under the Senate Bill, the sale of

real property utilized for low-cost
and socialized housing as defined
by RA 7279, is one of the exempt
transactions.
Under the House Bill, also exempt
from VAT, is the SALE OF
PROPERTIES OTHER THAN
THE TRANSACTIONS
MENTIONED IN THE
FOREGOING PARAGRAPHS
WITH A GROSS ANNUAL SALES
AND/OR RECEIPTS OF WHICH
DOES NOT EXCEED THE
AMOUNT PRESCRIBED IN THE
REGULATIONS TO BE
PROMULGATED BY THE
SECRETARY OF FINANCE
WHICH SHALL NOT BE LESS
THAN P350,000.00 OR HIGHER
THAN P600,000.00 . . . Under the
Senate Bill, the amount is

The phrase INCLUDING PACKAGING

MATERIALS was included by the BCC on Section
104 (A) (1) (B), and the phrase ON WHICH A
VALUE-ADDED TAX HAS BEEN ACTUALLY on
Section 104 (A) (2).
These phrases are not contained in either House
and Senate Bills.
VI On Section 107
Both House and Senate Bills provide for the
payment of P500.00 VAT registration fee. The
BCC provides for P1,000.00 VAT fee.
VII On Section 112
While both the Senate and House Bills provide
that a person whose sales or receipts and are
exempt under Section 103[w] of the Code, and
who are not VAT registered shall pay a tax

equivalent to THREE (3) PERCENT of his gross

quarterly sales or receipts, the BCC inserted the
phrase: THREE PERCENT UPON THE
EFFECTIVITY OF THIS ACT AND FOUR
PERCENT (4%) TWO YEARS THEREAFTER.
VIII On Section 115
Sec. 17 of SB 1630 Sec. 12 of House Bill 11197
amends this Section by clarifying that common
carriers by land, air or water FOR THE
TRANSPORT OF PASSENGERS are subject to
Percentage Tax equivalent to 3% of their quarterly
gross sales.
The BCC adopted this and the House Bill's
provision that the GROSS RECEIPTS OF
COMMON CARRIERS DERIVED FROM THEIR
INCOMING AND OUTGOING FREIGHT SHALL
NOT BE SUBJECTED TO THE LOCAL TAXES
IMPOSED UNDER RA 7160. The Senate Bill has
no similar provision.
IX On Section 117
This Section has not been touched by either
Senate and House Bills. But the BCC amended it
by subjecting franchises on ELECTRIC, GAS and
WATER UTILITIES A TAX OF TWO PERCENT
(2%) ON GROSS RECEIPTS DERIVED . . . .
X On Section 121
The BCC adopted the Senate Bills' amendment to
this section by subjecting to 5% premium tax
on life insurance business.

The House Bill does not contain this provision.

XI Others
A) The House Bill does not contain any provision
on the deferment of VAT collection on Certain
Goods and Services as does the Senate Bill
(Section 19, SB 1630). But although the Senate
Bill authorizes the deferment on certain goods
and services for no longer than 3 years, there is
no specific provision that authorizes the President
to EXCLUDE from VAT any of these. The BCC
uses the word EXCLUDE.
B) Moreover, the Senate Bill defers the VAT on
services of actors and actresses etc. for 3 years
but the BCC defers it for only 2 years.
C) Section 18 of the BCC Bill (RA 7716) is an
entirely new provision not contained in the
House/Senate Bills.
D) The period within which to promulgate the
implementing rules and regulations is within 60
days under SB 1630; No specific period under the
House Bill, within 90 days under RA 7716 (BCC).
E) The House Bill provides for a general repealing
clause i.e., all inconsistent laws etc. are repealed.
Section 16 of the Senate Bill expressly repeals
Sections 113, 114, 116, 119 and 120 of the code.
The same Senate Bill however contains a general
repealing clause in Sec. 21 thereof.
RA 7716 (BCC's Bill) expressly repeals Sections
113, 114 and 116 of the NIRC; Article 39 (c) (d)
and (e) of EO 226 and provides the repeal of Sec.

119 and 120 of the NIRC upon the expiration of

two (2) years unless otherwise excluded by the
President.
The charge that the Bicameral Conference Committee added new
provisions in the bills of the two chambers is hardly disputed by
respondents. Instead, respondents justify them. According to
respondents: (1) the Bicameral Conference Committee has an ex
post veto power or a veto after the fact of approval of the bill by
both Houses; (2) the bill prepared by the Bicameral Conference
Committee, with its additions and deletions, was anyway
approved by both Houses; (3) it was the practice in past
Congresses for conference committees to insert in bills approved
by the two Houses new provisions that were not originally
contemplated by them; and (4) the enrolled bill doctrine precludes
inquiry into the regularity of the proceedings that led to the
enactment of R.A. 7716.
With due respect, I reject these contentions which will cave in on
closer examination.
First. There is absolutely no legal warrant for the bold submission
that a Bicameral Conference Committee possesses the power to
add/delete provisions in bills already approved on third reading by
both Houses or an ex post veto power. To support this postulate
that can enfeeble Congress itself, respondents cite no
constitutional provision, no law, not even any rule or
regulation. 3 Worse, their stance is categorically repudiated by the
rules of both the Senate and the House of Representatives which
define with precision the parameters of power of a Bicameral
Conference Committee. Thus, Section 209, Rule XII of the Rules of
the Senate provides;

In the event that the Senate does not agree with

the House of Representatives on the provision of
any bill or joint resolution, the differences shall be
settled by a conference committee of both

Houseswhich shall meet within ten days after their

composition.
Each Conference Committee Report shall contain
a detailed and sufficiently explicit statement of the
changes in or amendments to the subject
measure, and shall be signed by the conferees.
(Emphasis supplied)
The counterpart rule of the House of Representatives is cast in
near identical language. Section 85 of the Rules of the House of
Representatives pertinently provides:
In the event that the House does not agree with
the Senate on the amendments to any bill or joint
resolution, the differences may be settled by a
conference committee of both chambers.
. . . . Each report shall contain a detailed,
sufficiently explicit statement of the changes in or
amendments to the subject measure. (Emphasis
supplied)
The Jefferson's Manual has been adopted 4 as a supplement to
our parliamentary rules and practice. Section 456 of Jefferson's
Manual similarly confines the powers of a conference
committee, viz: 5

The managers of a conference must confine

themselves to the differences committed to them .
. . and may not include subjects not within the
disagreements, even though germane to a
question in issue.
This rule of antiquity has been honed and honored in practice by
the Congress of the United States. Thus, it is chronicled by Floyd

Biddick, Parliamentarian Emeritus of the United States

Senate, viz: 6
Committees of conference are appointed for
the sole purpose of compromising and adjusting
the differing and conflicting opinions of the two
Houses and the committees of conference alone
can grant compromises and modify propositions
of either Houses within the limits of the
disagreement. Conferees are limited to the
consideration of differences between the two
Houses.
Conferees shall not insert in their report matters
not committed to them by either House, nor shall
they strike from the bill matters agreed to by both
Houses. No matter on which there is nothing in
either the Senate or House passed versions of a
bill may be included in the conference report and
actions to the contrary would subject the report to
a point of order. (Emphasis ours)
In fine, there is neither a sound nor a syllable in the Rules of the
Senate and the House of Representative to support the thesis of
the respondents that a bicameral conference committee is
clothed with an ex post veto power.
But the thesis that a Bicameral Conference Committee can
wield ex post veto power does not only contravene the rules of
both the Senate and the House. It wages war against our settled
ideals of representative democracy. For the inevitable,
catastrophic effect of the thesis is to install a Bicameral
Conference Committee as the Third Chamber of our
Congress, similarly vested with the power to make laws but with
the dissimilarity that its laws are not the subject of a free and full
discussion of both Houses of Congress. With such a vagrant
power, a Bicameral Conference Committee acting as a Third
Chamber will be a constitutional monstrosity.

It needs no omniscience to perceive that our Constitution did not

provide for a Congress composed of three chambers. On the
contrary, section 1, Article VI of the Constitution provides in clear
and certain language: "The legislative power shall be vested in
the Congress of the Philippines which shall consist of a Senate
and a House of Representatives . . ." Note that in vesting
legislative power exclusively to the Senate and the House, the
Constitution used the word "shall." Its command for a Congress of
two houses is mandatory. It is not mandatory sometimes.
In vesting legislative power to the Senate, the Constitution means
the Senate ". . . composed of twenty-four Senators . . . elected at
large by the qualified voters of the Philippines . . . ." 7 Similarly,
when the Constitution vested the legislative power to the House, it
means the House ". . . composed of not more than two hundred and
fifty members . . . who shall be elected from legislative districts . . .
and those who . . . shall be elected through a party-list system of
registered national, regional, and sectoral parties or
organizations." 8 The Constitution thus, did not vest on a Bicameral
Conference Committee with an ad hoc membership the power to
legislate for it exclusively vested legislative power to the Senate and
the House as co-equal bodies. To be sure, the Constitution does not
mention the Bicameral Conference Committees of Congress. No
constitutional status is accorded to them. They are not even statutory
creations. They owe their existence from the internal rules of the two
Houses of Congress. Yet, respondents peddle the disconcerting idea
that they should be recognized as a Third Chamber of Congress and
with ex post veto power at that.

The thesis that a Bicameral Conference Committee can exercise

law making power with ex post veto power is freighted with
mischief. Law making is a power that can be used for good or for
ill, hence, our Constitution carefully laid out a plan and a
procedure for its exercise. Firstly, it vouchsafed that the power to
make laws should be exercised by no other body except the
Senate and the House. It ought to be indubitable that what is
contemplated is the Senate acting as a full Senate and the House
acting as a full House. It is only when the Senate and the House
act as whole bodies that they truly represent the people. And it is

only when they represent the people that they can legitimately
pass laws. Laws that are not enacted by the people's rightful
representatives subvert the people's sovereignty. Bicameral
Conference Committees, with their ad hoc character and limited
membership, cannot pass laws for they do not represent the
people. The Constitution does not allow the tyranny of the
majority. Yet, the respondents will impose the worst kind of
tyranny the tyranny of the minority over the majority. Secondly,
the Constitution delineated in deft strokes the steps to be followed
in making laws. The overriding purpose of these procedural rules
is to assure that only bills that successfully survive the searching
scrutiny of the proper committees of Congress and the full and
unfettered deliberations of both Houses can become laws. For
this reason, a bill has to undergo three (3) mandatory separate
readings in each House. In the case at bench, the additions and
deletions made by the Bicameral Conference Committee did not
enjoy the enlightened studies of appropriate committees. It is
meet to note that the complexities of modern day legislations
have made our committee system a significant part of the
legislative process. Thomas Reed called the committee system
as "the eye, the ear, the hand, and very often the brain of the
house." President Woodrow Wilson of the United States once
referred to the government of the United States as "a government
by the Chairman of the Standing Committees of Congress. . .
" 9 Neither did these additions and deletions of the Bicameral

All these notwithstanding, respondents resort to the legal

cosmetology that these additions and deletions should govern the
people as laws because the Bicameral Conference Committee
Report was anyway submitted to and approved by the Senate
and the House of Representatives. The submission may have
some merit with respect to provisions agreed upon by the
Committee in the process of reconciling conflicts between S.B.
No. 1630 and H.B. No. 11197. In these instances, the conflicting
provisions had been previously screened by the proper
committees, deliberated upon by both Houses and approved by
them. It is, however, a different matter with respect to additions
and deletions which were entirely new and which were made not
to reconcile inconsistencies between S.B. No. 1630 and H.B. No.
11197. The members of the Bicameral Conference Committee
did not have any authority to add new provisions or delete
provisions already approved by both Houses as it was not
necessary to discharge their limited task of reconciling differences
in bills. At that late stage of law making, the Conference
Committee cannot add/delete provisions which can become laws
without undergoing the study and deliberation of both chambers
given to bills on 1st, 2nd, and 3rd readings. Even the Senate and
the House cannot enact a law which will not undergo these
mandatory three (3) readings required by the Constitution. If the
Senate and the House cannot enact such a law, neither can the
lesser Bicameral Conference Committee.

Conference Committee pass through the coils of collective

deliberation of the members of the two Houses acting separately.
Due to this shortcircuiting of the constitutional procedure of making
laws, confusion shrouds the enactment of R.A. No. 7716. Who
inserted the additions and deletions remains a mystery. Why they
were inserted is a riddle. To use a Churchillian phrase, lawmaking
should not be a riddle wrapped in an enigma. It cannot be, for Article
II, section 28 of the Constitution mandates the State to adopt and
implement a "policy of full public disclosure of all its transactions
involving public interest." The Constitution could not have
contemplated a Congress of invisible and unaccountable John and
Mary Does. A law whose rationale is a riddle and whose authorship
is obscure cannot bind the people.

Moreover, the so-called choice given to the members of both

Houses to either approve or disapprove the said additions and
deletions is more of an optical illusion. These additions and
deletions are not submitted separately for approval. They are
tucked to the entire bill. The vote is on the bill as a package, i.e.,
together with the insertions and deletions. And the vote is either
"aye" or "nay," without any further debate and deliberation. Quite
often, legislators vote "yes" because they approve of the bill as a
whole although they may object to its amendments by the
Conference Committee. This lack of real choice is well observed
by Robert Luce: 10

Their power lies chiefly in the fact that reports of

conference committees must be accepted without
amendment or else rejected in toto. The impulse
is to get done with the matter and so the motion to
accept has undue advantage, for some members
are sure to prefer swallowing unpalatable
provisions rather than prolong controversy. This is
the more likely if the report comes in the rush of
business toward the end of a session, when to
seek further conference might result in the loss of
the measure altogether. At any time in the session
there is some risk of such a result following the
rejection of a conference report, for it may not be
possible to secure a second conference, or delay
may give opposition to the main proposal chance
to develop more strength.

1. Rules of Procedure are derived from several

sources. The principal sources are as follows:
a. Constitutional rules.
b. Statutory rules or charter
provisions.
c. Adopted rules.
d. Judicial decisions.
e. Adopted parliamentary
authority.
f. Parliamentary law.

In a similar vein, Prof. Jack Davies commented that "conference

reports are returned to assembly and Senate on a take-it or
leave-it-basis, and the bodies are generally placed in the position
that to leave-it is a practical impossibility." 11 Thus, he concludes
that "conference committee action is the most undemocratic
procedure in the legislative process." 12

The respondents also contend that the additions and deletions

made by the Bicameral Conference Committee were in accord
with legislative customs and usages. The argument does not
persuade for it misappreciates the value of customs and usages
in the hierarchy of sources of legislative rules of procedure. To be
sure, every legislative assembly has the inherent right to
promulgate its own internal rules. In our jurisdiction, Article VI,
section 16(3) of the Constitution provides that "Each House may
determine the rules of its proceedings . . ." But it is hornbook law
that the sources of Rules of Procedure are many and hierarchical
in character. Mason laid them down as follows: 13
xxx xxx xxx

g. Customs and usages.

2. The rules from the different sources take
precedence in the order listed above except that
judicial decisions, since they are interpretations of
rules from one of the other sources, take the
same precedence as the source interpreted.
Thus, for example, an interpretation of a
constitutional provision takes precedence over a
statute.
3. Whenever there is conflict between rules from
these sources the rule from the source listed
earlier prevails over the rule from the source
listed, later. Thus, where the Constitution requires
three readings of bills, this provision controls over
any provision of statute, adopted rules, adopted
manual, or of parliamentary law, and a rule of
parliamentary law controls over a local usage but

must give way to any rule from a higher source of

authority. (Emphasis ours)
As discussed above, the unauthorized additions and deletions
made by the Bicameral Conference Committee violated the
procedure fixed by the Constitution in the making of laws. It is
reasonless for respondents therefore to justify these insertions as
sanctioned by customs and usages.
Finally, respondents seek sanctuary in the conclusiveness of an
enrolled bill to bar any judicial inquiry on whether Congress
observed our constitutional procedure in the passage of R.A. No.
7716. The enrolled bill theory is a historical relic that should not
continuously rule us from the fossilized past. It should be
immediately emphasized that the enrolled bill theory originated in
England where there is no written constitution and where
Parliament is
supreme. 14 In this jurisdiction, we have a written constitution and the
legislature is a body of limited powers. Likewise, it must be pointed
out that starting from the decade of the 40's, even American courts
have veered away from the rigidity and unrealism of the
conclusiveness of an enrolled bill. Prof. Sutherland observed: 15

xxx xxx xxx.

Where the failure of constitutional compliance in
the enactment of statutes is not discoverable from
the face of the act itself but may be demonstrated
by recourse to the legislative journals, debates,
committee reports or papers of the governor,
courts have used several conflicting theories with
which to dispose of the issue. They have held: (1)
that the enrolled bill is conclusive and like the
sheriff's return cannot be attacked; (2) that the
enrolled bill is prima facie correct and only in case
the legislative journal shows affirmative
contradiction of the constitutional requirement will
the bill be held invalid, (3) that although the

enrolled bill is prima facie correct, evidence from

the journals, or other extrinsic sources is
admissible to strike the bill down; (4) that the
legislative journal is conclusive and the enrolled
bill is valid only if it accords with the recital in the
journal and the constitutional procedure.
Various jurisdictions have adopted these alternative approaches
in view of strong dissent and dissatisfaction against the
philosophical underpinnings of the conclusiveness of an enrolled
bill. Prof. Sutherland further observed:
. . . Numerous reasons have been given for this
rule. Traditionally, an enrolled bill was "a record"
and as such was not subject to attack at common
law. Likewise, the rule of conclusiveness was
similar to the common law rule of the inviolability
of the sheriff's return. Indeed, they had the same
origin, that is, the sheriff was an officer of the king
and likewise the parliamentary act was a regal act
and no official might dispute the king's word.
Transposed to our democratic system of
government, courts held that as the legislature
was an official branch of government the court
must indulge every presumption that the
legislative act was valid. The doctrine of
separation of powers was advanced as a strong
reason why the court should treat the acts of a coordinate branch of government with the same
respect as it treats the action of its own officers;
indeed, it was thought that it was entitled to even
greater respect, else the court might be in the
position of reviewing the work of a supposedly
equal branch of government. When these
arguments failed, as they frequently did, the
doctrine of convenience was advanced, that is,
that it was not only an undue burden upon the
legislature to preserve its records to meet the

attack of persons not affected by the procedure of

enactment, but also that it unnecessarily
complicated litigation and confused the trial of
substantive issues.
Although many of these arguments are
persuasive and are indeed the basis for the rule in
many states today, they are not invulnerable to
attack. The rule most relied on the sheriff's
return or sworn official rule did not in civil
litigation deprive the injured party of an action, for
always he could sue the sheriff upon his official
bond. Likewise, although collateral attack was not
permitted, direct attack permitted raising the issue
of fraud, and at a later date attack in equity was
also available; and that the evidence of the sheriff
was not of unusual weight was demonstrated by
the fact that in an action against the sheriff no
presumption of its authenticity prevailed.
The argument that the enrolled bill is a "record"
and therefore unimpeachable is likewise
misleading, for the correction of records is a
matter of established judicial procedure.
Apparently, the justification is either the historical
one that the king's word could not be questioned
or the separation of powers principle that one
branch of the government must treat as valid the
acts of another.
Persuasive as these arguments are, the tendency
today is to avoid reaching results by artificial
presumptions and thus it would seem desirable to
insist that the enrolled bill stand or fall on the
basis of the relevant evidence which may be
submitted for or against it.
(Emphasis ours)

Thus, as far back as the 1940's, Prof. Sutherland confirmed that

". . . the tendency seems to be toward the abandonment of the
conclusive presumption rule and the adoption of the third rule
leaving only a prima faciepresumption of validity which may be
attacked by any authoritative source of information." 16
I am not unaware that this Court has subscribed to the
conclusiveness of an enrolled bill as enunciated in the 1947 lead
case of Mabanag v. Lopez Vito, and reiterated in subsequent
cases. 17
With due respect, I submit that these rulings are no longer good
law. Part of the ratiocination in Mabanag states:
xxx xxx xxx
If for no other reason than that it conforms to the
expressed policy of our law making body, we
choose to follow the rule. Section 313 of the old
Code of Civil Procedure, as amended by Act No.
2210, provides: "Official documents" may be
proved as follows: . . . (2) the proceedings of the
Philippine Commission, or of any legislative body
that may be provided for in the Philippine Islands,
or of Congress, by the journals of those bodies or
of either house thereof, or by published statutes
or resolutions, or by copies certified by the clerk
or secretary, or printed by their order; Provided,
That in the case of Acts of the Philippine
Commission or the Philippine Legislature, when
there is an existence of a copy signed by the
presiding officers and secretaries of said bodies, it
shall be conclusive proof of the provisions of such
Acts and of the due enactment thereof.
Suffice to state that section 313 of the Old Code of Civil
Procedure as amended by Act No. 2210 is no longer in our

statute books. It has long been repealed by the Rules of

Court. Mabanag also relied on jurisprudence and authorities in
the United States which are under severe criticisms by modern
scholars. Hence, even in the United States the conclusiveness of
an enrolled bill has been junked by most of the States. It is also
true that as late as last year, in the case of Philippine Judges
Association v. Prado, op. cit., this Court still relied on the
conclusiveness of an enrolled bill as it refused to invalidate a
provision of law on the ground that it was merely inserted by the
bicameral conference committee of both Houses. Prado,
however, is distinguishable. In Prado, the alleged insertion of the
second paragraph of section 35 of R.A. No. 7354 repealing the
franking privilege of the judiciary does not appear to be an
uncontested fact. In the case at bench, the numerous
additions/deletions made by the Bicameral Conference
Committee as detailed by petitioners Tolentino and Salonga are
not disputed by the respondents. In Prado, the Court was not also
confronted with the argument that it can no longer rely on the
conclusiveness of an enrolled bill in light of the new provision in
the Constitution defining judicial power. More specifically, section
1 of Article VIII now provides:
Sec. 1. The judicial power shall be vested in one
Supreme Court and in such lower courts as may
be established by law.
Judicial power includes the duty of the courts of
justice to settle actual controversies involving
rights which are legally demandable and
enforceable, and to determine whether or not
there has been a grave abuse of discretion
amounting to lack or excess of jurisdiction on the
part of any branch or instrumentality of the
Government. (Emphasis supplied)
Former Chief Justice Roberto R. Concepcion, the sponsor of this
provision in the Constitutional Commission explained the sense
and the reach of judicial power as follows: 18

xxx xxx xxx

. . . In other words, the judiciary is the final arbiter
on the question of whether or not a branch of
government or any of its officials has acted
without jurisdiction or in excess of jurisdiction, or
so capriciously as to constitute an abuse of
discretion amounting to excess of
jurisdiction. This is not only a judicial power but a
duty to pass judgment on matters of this nature.
This is the background of paragraph 2 of Section
1, which means that the courts cannot hereafter
evade the duty to settle matters of this nature, by
claiming that such matters constitute political
question. (Emphasis ours)
The Constitution cannot be any clearer. What it granted to this
Court is not a mere power which it can decline to exercise.
Precisely to deter this disinclination, the Constitution imposed it
as a duty of this Court to strike down any act of a branch or
instrumentality of government or any of its officials done with
grave abuse of discretion amounting to lack or excess of
jurisdiction. Rightly or wrongly, the Constitution has elongated the
checking powers of this Court against the other branches of
government despite their more democratic character, the
President and the legislators being elected by the people.
It is, however, theorized that this provision is nothing new.

19

I beg
to disagree for the view misses the significant changes made in our
constitutional canvass to cure the legal deficiencies we discovered
during martial law. One of the areas radically changed by the framers
of the 1987 Constitution is the imbalance of power between and
among the three great branches of our government the Executive,
the Legislative and the Judiciary. To upgrade the powers of the
Judiciary, the Constitutional Commission strengthened some more
the independence of courts. Thus, it further protected the security of
tenure of the members of the Judiciary by providing "No law shall be

confirming appointments to the judiciary was also taken away from

Congress. 23 The President was likewise given a specific time to fill
up vacancies in the judiciary ninety (90) days from the occurrence
of the vacancy in case of the Supreme Court 24 and ninety (90) days
from the submission of the list of recommendees by the Judicial and
Bar Council in case of vacancies in the lower courts. 25 To further
insulate appointments in the judiciary from the virus of politics, the
Supreme Court was given the power to "appoint all officials and
employees of the Judiciary in accordance with the Civil Service
Law." 26 And to make the separation of the judiciary from the other
branches of government more watertight, it prohibited members of
the judiciary to be " . . . designated to any agency performing quasi
judicial or administrative functions." 27While the Constitution
strengthened the sinews of the Supreme Court, it reduced the
powers of the two other branches of government, especially the
Executive. Notable of the powers of the President clipped by the
Constitution is his power to suspend the writ of and to proclaim
martial law. The exercise of this power is now subject to revocation
by Congress. Likewise, the sufficiency of the factual basis for the
exercise of said power may be reviewed by this Court in an
appropriate proceeding filed by any citizen. habeas corpus 28

this provision is distinctly Filipino and its interpretation should not

be depreciated by undue reliance on inapplicable foreign
jurisprudence. It is thus crystal clear that unlike other Supreme
Courts, this Court has been mandated by our new Constitution to
be a more active agent in annulling acts of grave abuse of
discretion committed by a branch of government or any of its
officials. This new role, however, will not compel the Court,
appropriately defined by Prof. A. Bickel as the least dangerous
branch of government, to assume imperial powers and run
roughshod over the principle of separation of power for that is
judicial tyranny by any language. But while respecting the
essential of the principle of separation of power, the Court is not
to be restricted by its non-essentials. Applied to the case at
bench, by voiding R.A. No. 7716 on the ground that its enactment
violated the procedure imposed by the Constitution in lawmaking,
the Court is not by any means wrecking the wall separating the
powers between the legislature and the judiciary. For in so doing,
the Court is not engaging in lawmaking which is the essence of
legislative power. But the Court's interposition of power should
not be defeated by the conclusiveness of the enrolled bill. A
resort to this fiction will result in the enactment of laws not
properly deliberated upon and passed by Congress. Certainly, the
enrolled bill theory was not conceived to cover up violations of the
constitutional procedure in law making, a procedure intended to
assure the passage of good laws. The conclusiveness of the
enrolled bill can, therefore, be disregarded for it is not necessary
to preserve the principle of separation of powers.

The provision defining judicial power as including the "duty of the

courts of justice . . . to determine whether or not there has been a
grave abuse of discretion amounting to lack or excess of
jurisdiction on the part of any branch or instrumentality of the
Government" constitutes the capstone of the efforts of the
Constitutional Commission to upgrade the powers of this
Court vis-a-vis the other branches of government. This provision
was dictated by our experience under martial law which taught us
that a stronger and more independent judiciary is needed to abort
abuses in government. As sharply stressed by petitioner Salonga,

In sum, I submit that in imposing to this Court the duty to annul

acts of government committed with grave abuse of discretion, the
new Constitution transformed this Court from passivity to
activism. This transformation, dictated by our distinct experience
as a nation, is not merely evolutionary but revolutionary. Under
the 1935 and 1973 Constitutions, this Court approached
constitutional violations by initially determining what it cannot do;
under the 1987 Constitution, there is a shift in stress this Court
is mandated to approach constitutional violations not by finding
out what it should not do but what it must do. The Court must

passed reorganizing the Judiciary when it undermines the security of

tenure of its Members." 20 It also guaranteed fiscal autonomy to the
Judiciary. 21

More, it depoliticalized appointments in the judiciary by creating

the Judicial and Bar Council which was tasked with screening the
list of prospective appointees to the judiciary. 22 The power of

discharge this solemn duty by not resuscitating a past that

petrifies the present.

originate exclusively in the House of Representatives, but the

Senate may propose or concur with amendments" (Sec. 24, Art.
VI; Emphasis supplied).

I vote to declare R.A. No. 7716 unconstitutional.

BELLOSILLO, J.:
With a consensus already reached after due deliberations,
silence perhaps should be the better part of discretion, except to
vote. The different views and opinions expressed are so
persuasive and convincing; they are more than enough to sway
the pendulum for or against the subject petitions. The penetrating
and scholarly dissertations of my brethren should dispense with
further arguments which may only confound and confuse even
the most learned of men.
But there is a crucial point, a constitutional issue which, I submit,
has been belittled, treated lightly, if not almost considered
insignificant and purposeless. It is elementary, as much as it is
fundamental. I am referring to the word "exclusively" appearing in
Sec. 24, Art. VI, of our 1987 Constitution. This is regrettable, to
say the least, as it involves a constitutional mandate which,
wittingly or unwittingly, has been cast aside as trivial and
meaningless.
A comparison of the particular provision on the enactment of
revenue bills in the U.S. Constitution with its counterpart in the
Philippine Constitution will help explain my position.
Under the U.S. Constitution, "[a]ll bills for raising revenue shall
originate in the House of Representatives; but the Senate may
propose or concur with amendments as on other bills" (Sec. 7,
par. [1], Art. I). In contrast, our 1987 Constitution reads: "All
appropriation, revenue or tariff bills, bills authorizing increase of
the public debt, bills of local application, and private bills shall

As may be gleaned from the pertinent provision of our

Constitution, all revenue bills are required to originate
"exclusively" in the House of Representatives. On the other hand,
the U.S. Constitution does not use the word "exclusively;" it
merely says, "[a]ll bills for raising revenue shall originate in the
House of Representatives."
Since the term "exclusively" has already been adequately defined
in the various opinions, as to which there seems to be no dispute,
I shall no longer offer my own definition.
Verily, the provision in our Constitution requiring that all revenue
bills shall originate exclusively from the Lower House is
mandatory. The word "exclusively" is an "exclusive word," which
is indicative of an intent that the provision is mandatory. 1 Hence,
all American authorities expounding on the meaning and application
of Sec. 7, par. (1), Art. I, of the U.S. Constitution cannot be used in
the interpretation of Sec. 24, Art. VI, of our 1987 Constitution which
has a distinct feature of "exclusiveness" all its own. Thus, when our
Constitution absolutely requires as it is mandatory that a
particular bill should exclusively emanate from the Lower House,
there is no alternative to the requirement that the bill to become valid
law must originate exclusively from that House.

In the interpretation of constitutions, questions frequently arise as

to whether particular sections are mandatory or directory. The
courts usually hesitate to declare that a constitutional provision is
directory merely in view of the tendency of the legislature to
disregard provisions which are not said to be mandatory.
Accordingly, it is the general rule to regard constitutional
provisions as mandatory, and not to leave any discretion to the
will of the legislature to obey or disregard them. This presumption
as to mandatory quality is usually followed unless it is
unmistakably manifest that the provisions are intended to be

merely directory. So strong is the inclination in favor of giving

obligatory force to the terms of the organic law that it has even
been said that neither by the courts nor by any other department
of the government may any provision of the Constitution be
regarded as merely directory, but that each and everyone of its
provisions should be treated as imperative and mandatory,
without reference to the rules and distinguishing between the
directory and the mandatory statutes. 2
The framers of our 1987 Constitution could not have used the
term "exclusively" if they only meant to replicate and adopt the
U.S. version. By inserting "exclusively" in Sec. 24, Art. VI, of our
Constitution, their message is clear: they wanted it different,
strong, stringent. There must be a compelling reason for the
inclusion of the word "exclusively," which cannot be an act of
retrogression but progression, an improvement on its precursor.
Thus, "exclusively" must be given its true meaning, its purpose
observed and virtue recognized, for it could not have been
conceived to be of minor consequence. That construction is to be
sought which gives effect to the whole of the statute its every
word. .
in totoUt magis valeat quam pereat

Consequently, any reference to American authorities, decisions

and opinions, however wisely and delicately put, can only mislead
in the interpretation of our own Constitution. To refer to them in
defending the constitutionality of R.A. 7716, subject of the present
petitions, is to argue on a false premise, , that Sec. 24, Art. VI, of
our 1987 Constitution is, or means exactly, the same as Sec. 7,
par. (1), Art. I, of the U.S. Constitution, which is not correct.
Hence, only a wrong conclusion can be drawn from a wrong
premise.
i.e.

For example, it is argued that in the United States, from where

our own legislature is patterned, the Senate can practically

substitute its own tax measure for that of the Lower House. Thus,
according to the Majority, citing an American case, "the validity of
Sec. 37 which the Senate had inserted in the Tariff Act of 1909 by
imposing an tax based on the weight of vessels, was upheld
against the claim that the revenue bill originated in the Senate in
contravention of Art. I, Sec. 7, of the U.S. Constitution."
ad valorem 3In an effort to be more convincing, the Majority even
quotes the footnote in which reads Introduction to American
Government by F.A. Ogg and P.O. Ray

Thus in 1883 the upper house struck out everything after the
enacting clause of a tariff bill and wrote its own measure, which
the House eventually felt obliged to accept. It likewise added 847
amendments to the Payne-Aldrich tariff act of 1909, dictated the
schedules of the emergency tariff act of 1921, rewrote an
extensive tax revision bill in the same year, and recast most of
the permanent tariff bill of 1922
4

which in fact suggests, very clearly, that the subject revenue bill
actually originated from the Lower House and was only amended,
perhaps considerably, by the Senate
after it was passed by the former and transmitted to the latter.

In the cases cited, where the statutes passed by the U.S.

Congress were upheld, the revenue bills did not actually originate
from the Senate but, in fact, from the Lower House. Thus, the
Supreme Court of the United States, speaking through Chief
Justice White in
Rainey v. United States 5upheld the revenue bill passed by Congress
and adopted the ruling of the lower court that

. . . the section in question is not void as a bill for raising revenue

originating in the Senate and not in the House of
Representatives. It appears that the section was proposed by the
Senate as an amendment to a bill for raising revenue which
originated in the House. That is sufficient.
Flint v. Stone Tracy Co.,
6

on which the Solicitor General heavily leans in his Consolidated

Comment as well as in his Memorandum, does not support the
thesis of the Majority since the subject bill therein actually originated
from the Lower House and not from the Senate, and the amendment
merely covered a certain provision in the House bill.

"in substitution of SB No. 1129, taking into consideration P.S.

Res. No. 734 and HB No. 11197," and not HB No. 11197 itself
"as amended." Here, the Senate could not have proposed or
concurred with amendments because there was nothing to
concur with or amend except its own bill. It must be stressed that
the process of concurring or amending presupposes that there
exists a bill upon which concurrence may be based or
amendments introduced. The Senate should have reported out
HB No. 11197, as amended, even if in the amendment it took into
consideration SB No. 1630. It should not have submitted to the
Bicameral Conference Committee SB No. 1630 which,
admittedly, did not originate from the Lower House.
exclusively

In fine, in the cases cited which were lifted from American

authorities, it appears that the revenue bills in question actually
originated from the House of Representatives and were amended
by the Senate only after they were transmitted to it. Perhaps, if
the factual circumstances in those cases were exactly the same
as the ones at bench, then the subject revenue or tariff bill may
be upheld in this jurisdiction on the principle of substantial
compliance, as they were in the United States, except possibly in
instances where the House bill undergoes what is now referred to
as "amendment by substitution," for that would be in derogation of
our Constitution which vests solely in the House of
Representatives the power to initiate revenue bills. A Senate
amendment by substitution simply means that the bill in question
did not in effect originate from the lower chamber but from the
upper chamber and not disguises itself as a mere amendment of
the House version.
It is also theorized that in the U.S., amendment by substitution is
recognized. That may be true. But the process may be validly
effective only under the U.S. Constitution. The cases before us
present a totally different factual backdrop. Several months
before the Lower House could even pass HB No. 11197, P.S.
Res. No. 734 and SB No. 1129 had already been filed in the
Senate. Worse, the Senate subsequently approved SB No. 1630

But even assuming that in our jurisdiction a revenue bill of the

Lower House may be amended by substitution by the Senate
although I am not prepared to accept it in view of Sec. 24, Art. VI,
of our Constitution still R.A. 7716 could not have been the
result of amendment by substitution since the Senate had no
House bill to speak of that it could amend when the Senate
started deliberating on its own version.
Be that as it may, I cannot rest easy on the proposition that a
constitutional mandate calling for the exclusive power and
prerogative of the House of Representatives may just be
discarded and ignored by the Senate. Since the Constitution is for
the observance of all the judiciary as well as the other
departments of government and the judges are sworn to
support its provisions, the courts are not at liberty to overlook or
disregard its commands. And it is not fair and just to impute to
them undue interference if they look into the validity of legislative
enactments to determine whether the fundamental law has been
faithfully observed in the process. It is their duty to give effect to
the existing Constitution and to obey all constitutional provisions
irrespective of their opinion as to the wisdom of such provisions.

The rule is fixed that the duty in a proper case to declare a law
unconstitutional cannot be declined and must be performed in
accordance with the deliberate judgment of the tribunal before
which the validity of the enactment is directly drawn into question.
When it is clear that a statute transgresses the authority vested in
the legislature by the Constitution, it is the duty of the courts to
declare the act unconstitutional because they cannot shirk from it
without violating their oaths of office. This duty of the courts to
maintain the Constitution as the fundamental law of the state is
imperative and unceasing; and, as Chief Justice Marshal said,
whenever a statute is in violation of the fundamental law, the
courts must so adjudge and thereby give effect to the
Constitution. Any other course would lead to the destruction of
the Constitution. Since the question as to the constitutionality of a
statute is a judicial matter, the courts will not decline the exercise
of jurisdiction upon the suggestion that action might be taken by
political agencies in disregard of the judgment of the judicial
tribunals.
7

It is my submission that the power and authority to originate

revenue bills under our Constitution is vested in the House of
Representatives. Its members being more numerous than those
of the Senate, elected more frequently, and more directly
represent the people, are therefore considered better aware of
the economic life of their individual constituencies. It is just proper
that revenue bills originate from them.
exclusivelyexclusively

In this regard, we do not have to devote much time delving into

American decisions and opinions and invoke them in the
interpretation of our own Constitution which is different from the
American version, particularly on the enactment of revenue bills.
We have our own Constitution couched in a language our own
legislators thought best. Insofar as revenue bills are concerned,
our Constitution is not American; it is distinctively Filipino. And no

amplitude of legerdemain can detract from our constitutional

requirement that all appropriation, revenue or tariff bills, bills
authorizing increase of the public debt, bills of local application,
and private bills shall originate in the House of Representatives,
although the Senate may propose or concur with amendments.
exclusively

In this milieu, I am left no option but to vote to grant the petitions

and strike down R.A. 7716 as unconstitutional.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 118303

January 31, 1996

SENATOR HEHERSON T. ALVAREZ, SENATOR JOSE D.

LINA, JR., MR. NICASIO B. BAUTISTA, MR. JESUS P.
GONZAGA, MR. SOLOMON D. MAYLEM, LEONORA C.
MEDINA, CASIANO S. ALIPON, petitioners,
vs.
HON. TEOFISTO T. GUINGONA, JR., in his capacity as
Executive Secretary, HON. RAFAEL ALUNAN, in his
capacity as Secretary of Local Government, HON.
SALVADOR ENRIQUEZ, in his capacity as Secretary of
Budget, THE COMMISSION ON AUDIT, HON. JOSE
MIRANDA, in his capacity as Municipal Mayor of
Santiago and HON. CHARITO MANUFAY, HON.
VICTORINO MIRANDA, JR., HON. ARTEMIO ALVAREZ,
HON. DANILO VERGARA, HON. PETER DE JESUS, HON.
NELIA NATIVIDAD, HON. CELSO CALEON and HON.
ABEL MUSNGI, in their capacity as SANGGUNIANG
BAYAN MEMBERS, MR. RODRIGO L. SANTOS, in his
capacity as Municipal Treasurer, and ATTY. ALFREDO
S. DIRIGE, in his capacity as Municipal
Administrator, respondents.
DECISION
HERMOSISIMA, JR., J.:
Of main concern to the petitioners is whether Republic Act
No. 7720, just recently passed by Congress and signed by
the President into law, is constitutionally infirm.

Indeed, in this Petition for Prohibition with prayer for

Temporary Restraining Order and Preliminary Prohibitory
Injunction, petitioners assail the validity of Republic Act No.
7720, entitled, "An Act Converting the Municipality of
Santiago, Isabela into an Independent Component City to
be known as the City of Santiago," mainly because the Act
allegedly did not originate exclusively in the House of
Representatives as mandated by Section 24, Article VI of
the 1987 Constitution.
Also, petitioners claim that the Municipality of Santiago has
not met the minimum average annual income required
under Section 450 of the Local Government Code of 1991 in
order to be converted into a component city.
Undisputed is the following chronicle of the metamorphosis
of House Bill No. 8817 into Republic Act No. 7720:
On April 18, 1993, HB No. 8817, entitled "An Act Converting
the Municipality of Santiago into an Independent
Component City to be known as the City of Santiago," was
filed in the House of Representatives with Representative
Antonio Abaya as principal author. Other sponsors included
Representatives Ciriaco Alfelor, Rodolfo Albano, Santiago
Respicio and Faustino Dy. The bill was referred to the House
Committee on Local Government and the House Committee
on Appropriations on May 5, 1993.
On May 19, 1993, June 1, 1993, November 28, 1993, and
December 1, 1993, public hearings on HB No. 8817 were
conducted by the House Committee on Local Government.
The committee submitted to the House a favorable report,
with amendments, on December 9, 1993.
On December 13, 1993, HB No. 8817 was passed by the
House of Representatives on Second Reading and was
approved on Third Reading on December 17, 1993. On

January 28, 1994, HB No. 8817 was transmitted to the

Senate.
Meanwhile, a counterpart of HB No. 8817, Senate Bill No.
1243, entitled, "An Act Converting the Municipality of
Santiago into an Independent Component City to be Known
as the City of Santiago," was filed in the Senate. It was
introduced by Senator Vicente Sotto III, as principal
sponsor, on May 19, 1993. This was just after the House of
Representatives had conducted its first public hearing on HB
No. 8817.
On February 23, 1994, or a little less than a month after HB
No. 8817 was transmitted to the Senate, the Senate
Committee on Local Government conducted public hearings
on SB No. 1243. On March 1, 1994, the said committee
submitted Committee Report No. 378 on HB No. 8817, with
the recommendation that it be approved without
amendment, taking into consideration the reality that H.B.
No. 8817 was on all fours with SB No. 1243. Senator
Heherson T. Alvarez, one of the herein petitioners, indicated
his approval thereto by signing said report as member of
the Committee on Local Government.
On March 3, 1994, Committee Report No. 378 was passed
by the Senate on Second Reading and was approved on
Third Reading on March 14, 1994. On March 22, 1994, the
House of Representatives, upon being apprised of the action
of the Senate, approved the amendments proposed by the
Senate.
The enrolled bill, submitted to the President on April 12,
1994, was signed by the Chief Executive on May 5, 1994 as
Republic Act No. 7720. When a plebiscite on the Act was
held on July 13, 1994, a great majority of the registered
voters of Santiago voted in favor of the conversion of
Santiago into a city.

The question as to the validity of Republic Act No. 7720

hinges on the following twin issues: (I) Whether or not the
Internal Revenue Allotments (IRAs) are to be included in
the computation of the average annual income of a
municipality for purposes of its conversion into an
independent component city, and (II) Whether or not,
considering that the Senate passed SB No. 1243, its own
version of HB No. 8817, Republic Act No. 7720 can be said
to have originated in the House of Representatives.
I
The annual income of a local
government unit includes the IRAs
Petitioners claim that Santiago could not qualify into a
component city because its average annual income for the
last two (2) consecutive years based on 1991 constant
prices falls below the required annual income of Twenty
Million Pesos (P20,000,000.00) for its conversion into a city,
petitioners having computed Santiago's average annual
income in the following manner:
Total income (at 1991 constant
prices) for 1991

P 20,379,057.07

Total income (at 1991 constant

prices) for 1992

P 21,570,106.87

Total income for 1991 and 1992

P 41,949,163.94

Minus:
IRAs for 1991 and 1992

P 15,730,043.00

Total income for 1991 and 1992

P 26,219,120.94

Average Annual Income

P 13,109,560.47
===============

By dividing the total income of Santiago for calendar years

1991 and 1992, after deducting the IRAs, the average
annual income arrived at would only be P13,109,560.47
based on the 1991 constant prices. Thus, petitioners claim
that Santiago's income is far below the aforesaid Twenty
Million Pesos average annual income requirement.
The certification issued by the Bureau of Local Government
Finance of the Department of Finance, which indicates
Santiago's average annual income to be P20,974,581.97, is
allegedly not accurate as the Internal Revenue Allotments
were not excluded from the computation. Petitioners
asseverate that the IRAs are not actually income but
transfers and/or budgetary aid from the national
government and that they fluctuate, increase or decrease,
depending on factors like population, land and equal
sharing.
In this regard, we hold that petitioners asseverations are
untenable because Internal Revenue Allotments form part of
the income of Local Government Units.
It is true that for a municipality to be converted into a
component city, it must, among others, have an average
annual income of at least Twenty Million Pesos for the last
two (2) consecutive years based on 1991 constant
prices.1 Such income must be duly certified by the
Department of Finance.
Resolution of the controversy regarding compliance by the
Municipality of Santiago with the aforecited income
requirement hinges on a correlative and contextual
explication of the meaning of internal revenue allotments
(IRAs) vis-a-vis the notion of income of a local government
unit and the principles of local autonomy and
decentralization underlying the institutionalization and
intensified empowerment of the local government system.

A Local Government Unit is a political subdivision of the

State which is constituted by law and possessed of
substantial control over its own affairs.3 Remaining to be an
intra sovereign subdivision of one sovereign nation, but not
intended, however, to be an imperium in imperio,4 the local
government unit is autonomous in the sense that it is given
more powers, authority, responsibilities and
resources.5 Power which used to be highly centralized in
Manila, is thereby deconcentrated, enabling especially the
peripheral local government units to develop not only at
their own pace and discretion but also with their own
resources and assets.
The practical side to development through a decentralized
local government system certainly concerns the matter of
financial resources. With its broadened powers and
increased responsibilities, a local government unit must now
operate on a much wider scale. More extensive operations,
in turn, entail more expenses. Understandably, the vesting
of duty, responsibility and accountability in every local
government unit is accompanied with a provision for
reasonably adequate resources to discharge its powers and
effectively carry out its functions.7 Availment of such
resources is effectuated through the vesting in every local
government unit of (1) the right to create and broaden its
own source of revenue; (2) the right to be allocated a just
share in national taxes, such share being in the form of
internal revenue allotments (IRAs); and (3) the right to be
given its equitable share in the proceeds of the utilization
and development of the national wealth, if any, within its
territorial boundaries.8
The funds generated from local taxes, IRAs and national
wealth utilization proceeds accrue to the general fund of the
local government and are used to finance its operations
subject to specified modes of spending the same as
provided for in the Local Government Code and its
implementing rules and regulations. For instance, not less

than twenty percent (20%) of the IRAs must be set aside

for local development projects.9 As such, for purposes of
budget preparation, which budget should reflect the
estimates of the income of the local government unit,
among others, the IRAs and the share in the national wealth
utilization proceeds are considered items of income. This is
as it should be, since income is defined in the Local
Government Code to be all revenues and receipts collected
or received forming the gross accretions of funds of the
local government unit.10
The IRAs are items of income because they form part of the
gross accretion of the funds of the local government unit.
The IRAs regularly and automatically accrue to the local
treasury without need of any further action on the part of
the local government unit.11 They thus constitute income
which the local government can invariably rely upon as the
source of much needed funds.
For purposes of converting the Municipality of Santiago into
a city, the Department of Finance certified, among others,
that the municipality had an average annual income of at
least Twenty Million Pesos for the last two (2) consecutive
years based on 1991 constant prices. This, the Department
of Finance did after including the IRAs in its computation of
said average annual income.
Furthermore, Section 450 (c) of the Local Government Code
provides that "the average annual income shall include the
income accruing to the general fund, exclusive of special
funds, transfers, and non-recurring income." To reiterate,
IRAs are a regular, recurring item of income; nil is there a
basis, too, to classify the same as a special fund or transfer,
since IRAs have a technical definition and meaning all its
own as used in the Local Government Code that
unequivocally makes it distinct from special funds or
transfers referred to when the Code speaks of "funding

support from the national government, its instrumentalities

and government-owned-or-controlled corporations".12
Thus, Department of Finance Order No. 35-9313 correctly
encapsulizes the full import of the above disquisition when it
defined ANNUAL INCOME to be "revenues and receipts
realized by provinces, cities and municipalities from regular
sources of the Local General Fund including the internal
revenue allotment and other shares provided for in Sections
284, 290 and 291 of the Code, but exclusive of nonrecurring receipts, such as other national aids, grants,
financial assistance, loan proceeds, sales of fixed assets,
and similar others" (Emphasis ours).14 Such order,
constituting executive or contemporaneous construction of a
statute by an administrative agency charged with the task
of interpreting and applying the same, is entitled to full
respect and should be accorded great weight by the courts,
unless such construction is clearly shown to be in sharp
conflict with the Constitution, the governing statute, or
other laws.15
II
In the enactment of RA No. 7720,
there was compliance with Section 24,
Article VI of the 1987 Constitution
Although a bill of local application like HB No. 8817 should,
by constitutional prescription,16 originate exclusively in the
House of Representatives, the claim of petitioners that
Republic Act No. 7720 did not originate exclusively in the
House of Representatives because a bill of the same import,
SB No. 1243, was passed in the Senate, is untenable
because it cannot be denied that HB No. 8817 was filed in
the House of Representatives first before SB No. 1243 was
filed in the Senate. Petitioners themselves cannot disavow
their own admission that HB No. 8817 was filed on April 18,

1993 while SB No. 1243 was filed on May 19, 1993. The
filing of HB No. 8817 was thus precursive not only of the
said Act in question but also of SB No. 1243. Thus, HB No.
8817, was the bill that initiated the legislative process that
culminated in the enactment of Republic Act No. 7720. No
violation of Section 24, Article VI, of the 1987 Constitution
is perceptible under the circumstances attending the instant
controversy.
Furthermore, petitioners themselves acknowledge that HB
No. 8817 was already approved on Third Reading and duly
transmitted to the Senate when the Senate Committee on
Local Government conducted its public hearing on HB No.
8817. HB No. 8817 was approved on the Third Reading on
December 17, 1993 and transmitted to the Senate on
January 28, 1994; a little less than a month thereafter, or
on February 23, 1994, the Senate Committee on Local
Government conducted public hearings on SB No. 1243.
Clearly, the Senate held in abeyance any action on SB No.
1243 until it received HB No. 8817, already approved on the
Third Reading, from the House of Representatives. The filing
in the Senate of a substitute bill in anticipation of its receipt
of the bill from the House, does not contravene the
constitutional requirement that a bill of local application
should originate in the House of Representatives, for as long
as the Senate does not act thereupon until it receives the
House bill.
We have already addressed this issue in the case
of Tolentino vs. Secretary of Finance.17 There, on the matter
of the Expanded Value Added Tax (EVAT) Law, which, as a
revenue bill, is nonetheless constitutionally required to
originate exclusively in the House of Representatives, we
explained:
. . . To begin with, it is not the law but the
revenue bill which is required by the Constitution
to "originate exclusively" in the House of

Representatives. It is important to emphasize this,

because a bill originating in the House may undergo
such extensive changes in the Senate that the result
may be a rewriting of the whole. . . . as a result of
the Senate action, a distinct bill may be produced. To
insist that a revenue statute and not only the bill
which initiated the legislative process culminating in
the enactment of the law must substantially be
the same as the House bill would be to deny the
Senate's power not only to "concur with
amendments" but also to "propose amendments." It
would be to violate the coequality of legislative
power of the two houses of Congress and in fact
make the House superior to the Senate.
xxx

xxx

xxx

It is insisted, however, that S. No. 1630 was passed

not in substitution of H. No. 11197 but of another
Senate bill (S. No. 1129) earlier filed and that what
the Senate did was merely to "take [H. No. 11197]
into consideration" in enacting S. No. 1630. There is
really no difference between the Senate preserving
H. No. 11197 up to the enacting clause and then
writing its own version following the enacting clause
(which, it would seem petitioners admit is an
amendment by substitution), and, on the other
hand, separately presenting a bill of its own on the
same subject matter. In either case the result are
two bills on the same subject.
Indeed, what the Constitution simply means is that
the initiative for filing revenue, tariff, or tax bills,
bills authorizing an increase of the public debt,
private bills and bills of local application must come
from the House of Representatives on the theory
that, elected as they are from the districts, the
members of the House can be expected to be more

sensitive to the local needs and problems. On the

other hand, the senators, who are elected at large,
are expected to approach the same problems from
the national perspective. Both views are thereby
made to bear on the enactment of such laws.
Nor does the Constitution prohibit the filing in the
Senate of a substitute bill in anticipation of its receipt
of the bill from the House, so long as action by the
Senate as a body is withheld pending receipt of the
House bill. . . .18

SO ORDERED.
Narvasa, C.J., Padilla, Regalado, Davide, Jr., Romero,
Bellosillo, Melo, Puno, Vitug, Kapunan, Mendoza, Francisco
and Panganiban, JJ., concur.

Footnotes
1

Local Government Code, Section 450.

Ibid.

Basco v. PAGCOR, 197 SCRA 52.

Ibid.

Local Government Code, Section 2.

III
Every law, including RA No. 7720,
has in its favor the presumption
of constitutionality
It is a well-entrenched jurisprudential rule that on the side
of every law lies the presumption of
constitutionality.19Consequently, for RA No. 7720 to be
nullified, it must be shown that there is a clear and
unequivocal breach of the Constitution, not merely a
doubtful and equivocal one; in other words, the grounds for
nullity must be clear and beyond reasonable doubt.20 Those
who petition this court to declare a law to be
unconstitutional must clearly and fully establish the basis
that will justify such a declaration; otherwise, their petition
must fail. Taking into consideration the justification of our
stand on the immediately preceding ground raised by
petitioners to challenge the constitutionality of RA No. 7720,
the Court stands on the holding that petitioners have failed
to overcome the presumption. The dismissal of this petition
is, therefore, inevitable.
WHEREFORE, the instant petition is DISMISSED for lack of
merit with costs against petitioners.

Pimentel, Jr., Aquilino, The Local Government Code

of 1991: The Key to National Development, 1993
Edition, p. 4.
7

Local Government Code, Section 3(d).

Ibid.

Local Government Code, Section 17(g); Rules and

Regulations Implementing the Local Government
Code of 1991, Rule XXXII, Article 385.
10

Local Government Code, Section 306(i).

11

Local Government Code, Section 7.

12

Local Government Code, Section 17(g).

13

Dated June 16, 1993 on the subject of "Updating

the Income Classification of Provinces, Cities and
Municipalities Pursuant to the Provisions of Section 8
of the Local Government Code of 1991." (This DOF
order was issued to implement Executive Order No.
249 dated July 25, 1987 entitled, "Providing for a
New Income Classification of Provinces, Cities and
Municipalities and for Other Purposes.")
14

Id, Section 3.

15

Nestle Philippines, Inc. v. Court of Appeals, 203

SCRA 504.
16

1987 Constitution, Article VI, Section 24.

17

235 SCRA 630.

18

Tolentino v. Secretary of Finance, supra.

19

Basco v. PAGCOR, 197 SCRA 52; Abbas v.

COMELEC, 179 SCRA 287; Peralta v. COMELEC, 82
SCRA 30; Salas v. Jarencio, 48 SCRA 734; Yu Cong
Eng v. Trinidad, 47 Phil. 387.
20

Peralta v. COMELEC, supra; Basco v.

PAGCOR, supra.

Republic of the Philippines

SUPREME COURT
Baguio
EN BANC
G.R. No. 164987

April 24, 2012

LAWYERS AGAINST MONOPOLY AND POVERTY

(LAMP), represented by its Chairman and counsel,
CEFERINO PADUA, Members, ALBERTO ABELEDA, JR.,
ELEAZAR ANGELES, GREGELY FULTON ACOSTA,
VICTOR AVECILLA, GALILEO BRION, ANATALIA
BUENAVENTURA, EFREN CARAG, PEDRO CASTILLO,
NAPOLEON CORONADO, ROMEO ECHAUZ, ALFREDO DE
GUZMAN, ROGELIO KARAGDAG, JR., MARIA LUZ
ARZAGA-MENDOZA, LEO LUIS MENDOZA, ANTONIO P.
PAREDES, AQUILINO PIMENTEL III, MARIO REYES,
EMMANUEL SANTOS, TERESITA SANTOS, RUDEGELIO
TACORDA, SECRETARY GEN. ROLANDO ARZAGA,
Board of Consultants, JUSTICE ABRAHAM
SARMIENTO, SEN. AQUILINO PIMENTEL, JR., and
BARTOLOME FERNANDEZ, JR., Petitioners,
vs.
THE SECRETARY OF BUDGET AND MANAGEMENT, THE
TREASURER OF THE PHILIPPINES, THE COMMISSION
ON AUDIT, and THE PRESIDENT OF THE SENATE and
the SPEAKER OF THE HOUSE OF REPRESENTATIVES in
representation of the Members of the
Congress, Respondents.
DECISION
MENDOZA, J.:
For consideration of the Court is an original action for
certiorari assailing the constitutionality and legality of the

implementation of the Priority Development Assistance

Fund (PDAF) as provided for in Republic Act (R.A.) 9206 or
the General Appropriations Act for 2004 (GAA of 2004).
Petitioner Lawyers Against Monopoly and Poverty(LAMP), a
group of lawyers who have banded together with a mission
of dismantling all forms of political, economic or social
monopoly in the country,1 also sought the issuance of a writ
of preliminary injunction or temporary restraining order to
enjoin respondent Secretary of the Department of Budget
and Management (DBM) from making, and, thereafter,
releasing budgetary allocations to individual members of
Congress as "pork barrel" funds out of PDAF. LAMP likewise
aimed to stop the National Treasurer and the Commission
on Audit (COA) from enforcing the questioned provision.
On September 14, 2004, the Court required respondents,
including the President of the Senate and the Speaker of the
House of Representatives, to comment on the petition. On
April 7, 2005, petitioner filed a Reply thereto.2On April 26,
2005, both parties were required to submit their respective
memoranda.
The GAA of 2004 contains the following provision subject of
this petition:
PRIORITY DEVELOPMENT ASSISTANCE FUND
For fund requirements of priority development programs
and projects, as indicated hereunder P8,327,000,000.00
Xxxxx
Special Provision
1. Use and Release of the Fund. The amount herein
appropriated shall be used to fund priority programs and
projects or to fund the required counterpart for foreign-

assisted programs and projects: PROVIDED, That such

amount shall be released directly to the implementing
agency or Local Government Unit concerned: PROVIDED,
FURTHER, That the allocations authorized herein may be
realigned to any expense class, if deemed necessary:
PROVIDED FURTHERMORE, That a maximum of ten percent
(10%) of the authorized allocations by district may be used
for procurement of rice and other basic commodities which
shall be purchased from the National Food Authority.
Petitioners Position
According to LAMP, the above provision is silent and,
therefore, prohibits an automatic or direct allocation of lump
sums to individual senators and congressmen for the
funding of projects. It does not empower individual
Members of Congress to propose, select and identify
programs and projects to be funded out of PDAF. "In
previous GAAs, said allocation and identification of projects
were the main features of the pork barrel system
technically known as Countrywide Development Fund (CDF).
Nothing of the sort is now seen in the present law (R.A. No.
9206 of CY 2004).3 In its memorandum, LAMP insists that
"[t]he silence in the law of direct or even indirect
participation by members of Congress betrays a deliberate
intent on the part of the Executive and the Congress to
scrap and do away with the pork barrel system."4 In other
words, "[t]he omission of the PDAF provision to specify
sums as allocations to individual Members of Congress is a
casus omissus signifying an omission intentionally made by
Congress that this Court is forbidden to supply."5 Hence,
LAMP is of the conclusion that "the pork barrel has become
legally defunct under the present state of GAA 2004."6
LAMP further decries the supposed flaws in the
implementation of the provision, namely: 1) the DBM
illegally made and directly released budgetary allocations
out of PDAF in favor of individual Members of Congress; and

2) the latter do not possess the power to propose, select

and identify which projects are to be actually funded by
PDAF.
For LAMP, this situation runs afoul against the principle of
separation of powers because in receiving and, thereafter,
spending funds for their chosen projects, the Members of
Congress in effect intrude into an executive function. In
other words, they cannot directly spend the funds, the
appropriation for which was made by them. In their
individual capacities, the Members of Congress cannot
"virtually tell or dictate upon the Executive Department how
to spend taxpayers money.7 Further, the authority to
propose and select projects does not pertain to legislation.
"It is, in fact, a non-legislative function devoid of
constitutional sanction,"8 and, therefore, impermissible and
must be considered nothing less than malfeasance. The
proposal and identification of the projects do not involve the
making of laws or the repeal and amendment thereof, which
is the only function given to the Congress by the
Constitution. Verily, the power of appropriation granted to
Congress as a collegial body, "does not include the power of
the Members thereof to individually propose, select and
identify which projects are to be actually implemented and
funded - a function which essentially and exclusively
pertains to the Executive Department."9 By allowing the
Members of Congress to receive direct allotment from the
fund, to propose and identify projects to be funded and to
perform the actual spending of the fund, the
implementation of the PDAF provision becomes legally
infirm and constitutionally repugnant.
Respondents Position
For their part, the respondents10 contend that the petition
miserably lacks legal and factual grounds. Although they
admit that PDAF traced its roots to CDF,11 they argue that
the former should not be equated with "pork barrel," which

has gained a derogatory meaning referring "to government

projects affording political opportunism."12 In the petition,
no proof of this was offered. It cannot be gainsaid then that
the petition cannot stand on inconclusive media reports,
assumptions and conjectures alone. Without probative
value, media reports cited by the petitioner deserve scant
consideration especially the accusation that corrupt
legislators have allegedly proposed cuts or slashes from
their pork barrel. Hence, the Court should decline the
petitioners plea to take judicial notice of the supposed
iniquity of PDAF because there is no concrete proof that
PDAF, in the guise of "pork barrel," is a source of "dirty
money" for unscrupulous lawmakers and other officials who
tend to misuse their allocations. These "facts" have no
attributes of sufficient notoriety or general recognition
accepted by the public without qualification, to be subjected
to judicial notice. This applies, a fortiori, to the claim that
Members of Congress are beneficiaries of commissions
(kickbacks) taken out of the PDAF allocations and releases
and preferred by favored contractors representing from
20% to 50% of the approved budget for a particular
project. 13Suffice it to say, the perceptions of LAMP on the
implementation of PDAF must not be based on mere
speculations circulated in the news media preaching the
evils of pork barrel. Failing to present even an iota of proof
that the DBM Secretary has been releasing lump sums from
PDAF directly or indirectly to individual Members of
Congress, the petition falls short of its cause.
Likewise admitting that CDF and PDAF are "appropriations
for substantially similar, if not the same, beneficial
purposes," 14 the respondents invoke Philconsa v.
Enriquez,15 where CDF was described as an imaginative and
innovative process or mechanism of implementing priority
programs/projects specified in the law. In Philconsa, the
Court upheld the authority of individual Members of
Congress to propose and identify priority projects because
this was merely recommendatory in nature. In said case, it

was also recognized that individual members of Congress

far more than the President and their congressional
colleagues were likely to be knowledgeable about the needs
of their respective constituents and the priority to be given
each project.
The Issues
The respondents urge the Court to dismiss the petition for
its failure to establish factual and legal basis to support its
claims, thereby lacking an essential requisite of judicial
reviewan actual case or controversy.
The Courts Ruling
To the Court, the case boils down to these issues: 1)
whether or not the mandatory requisites for the exercise of
judicial review are met in this case; and 2) whether or not
the implementation of PDAF by the Members of Congress is
unconstitutional and illegal.
Like almost all powers conferred by the Constitution, the
power of judicial review is subject to limitations, to wit: (1)
there must be an actual case or controversy calling for the
exercise of judicial power; (2) the person challenging the
act must have the standing to question the validity of the
subject act or issuance; otherwise stated, he must have a
personal and substantial interest in the case such that he
has sustained, or will sustain, direct injury as a result of its
enforcement; (3) the question of constitutionality must be
raised at the earliest opportunity; and (4) the issue of
constitutionality must be the very lis mota of the case.16
An aspect of the "case-or-controversy" requirement is the
requisite of "ripeness." In the United States, courts are
centrally concerned with whether a case involves uncertain
contingent future events that may not occur as anticipated,

or indeed may not occur at all. Another concern is the

evaluation of the twofold aspect of ripeness: first, the
fitness of the issues for judicial decision; and second, the
hardship to the parties entailed by withholding court
consideration. In our jurisdiction, the issue of ripeness is
generally treated in terms of actual injury to the plaintiff.
Hence, a question is ripe for adjudication when the act
being challenged has had a direct adverse effect on the
individual challenging it.17
In this case, the petitioner contested the implementation of
an alleged unconstitutional statute, as citizens and
taxpayers. According to LAMP, the practice of direct
allocation and release of funds to the Members of Congress
and the authority given to them to propose and select
projects is the core of the laws flawed execution resulting in
a serious constitutional transgression involving the
expenditure of public funds. Undeniably, as taxpayers, LAMP
would somehow be adversely affected by this. A finding of
unconstitutionality would necessarily be tantamount to a
misapplication of public funds which, in turn, cause injury or
hardship to taxpayers. This affords "ripeness" to the present
controversy.
Further, the allegations in the petition do not aim to obtain
sheer legal opinion in the nature of advice concerning
legislative or executive action. The possibility of
constitutional violations in the implementation of PDAF
surely involves the interplay of legal rights susceptible of
judicial resolution. For LAMP, this is the right to recover
public funds possibly misapplied by no less than the
Members of Congress. Hence, without prejudice to other
recourse against erring public officials, allegations of illegal
expenditure of public funds reflect a concrete injury that
may have been committed by other branches of
government before the court intervenes. The possibility that
this injury was indeed committed cannot be discounted. The
petition complains of illegal disbursement of public funds

derived from taxation and this is sufficient reason to say

that there indeed exists a definite, concrete, real or
substantial controversy before the Court.
Anent locus standi, "the rule is that the person who
impugns the validity of a statute must have a personal and
substantial interest in the case such that he has sustained,
or will sustained, direct injury as a result of its
enforcement.18 The gist of the question of standing is
whether a party alleges "such a personal stake in the
outcome of the controversy as to assure that concrete
adverseness which sharpens the presentation of issues upon
which the court so largely depends for illumination of
difficult constitutional questions."19 In public suits, the
plaintiff, representing the general public, asserts a "public
right" in assailing an allegedly illegal official action. The
plaintiff may be a person who is affected no differently from
any other person, and could be suing as a "stranger," or as
a "citizen" or "taxpayer."20 Thus, taxpayers have been
allowed to sue where there is a claim that public funds are
illegally disbursed or that public money is being deflected to
any improper purpose, or that public funds are wasted
through the enforcement of an invalid or unconstitutional
law.21 Of greater import than the damage caused by the
illegal expenditure of public funds is the mortal wound
inflicted upon the fundamental law by the enforcement of an
invalid statute.22
Here, the sufficient interest preventing the illegal
expenditure of money raised by taxation required in
taxpayers suits is established. Thus, in the claim that PDAF
funds have been illegally disbursed and wasted through the
enforcement of an invalid or unconstitutional law, LAMP
should be allowed to sue. The case of Pascual v. Secretary
of Public Works23 is authority in support of the petitioner:
In the determination of the degree of interest essential to
give the requisite standing to attack the constitutionality of

a statute, the general rule is that not only persons

individually affected, but also taxpayers have sufficient
interest in preventing the illegal expenditures of moneys
raised by taxation and may therefore question the
constitutionality of statutes requiring expenditure of public
moneys. [11 Am. Jur. 761, Emphasis supplied.]
Lastly, the Court is of the view that the petition poses issues
impressed with paramount public interest. The ramification
of issues involving the unconstitutional spending of PDAF
deserves the consideration of the Court, warranting the
assumption of jurisdiction over the petition.

In determining whether or not a statute is unconstitutional,

the Court does not lose sight of the presumption of validity
accorded to statutory acts of Congress. In Farias v. The
Executive Secretary,26 the Court held that:
Every statute is presumed valid. The presumption is that
the legislature intended to enact a valid, sensible and just
law and one which operates no further than may be
necessary to effectuate the specific purpose of the
law. Every presumption should be indulged in favor of
the constitutionality and the burden of proof is on the
party alleging that there is a clear and unequivocal
breach of the Constitution.

Now, on the substantive issue.

The powers of government are generally divided into three
branches: the Legislative, the Executive and the Judiciary.
Each branch is supreme within its own sphere being
independent from one another and it is this supremacy
which enables the courts to determine whether a law is
constitutional or unconstitutional.24 The Judiciary is the final
arbiter on the question of whether or not a branch of
government or any of its officials has acted without
jurisdiction or in excess of jurisdiction or so capriciously as
to constitute an abuse of discretion amounting to excess of
jurisdiction. This is not only a judicial power but a duty to
pass judgment on matters of this nature.25
With these long-established precepts in mind, the Court
now goes to the crucial question: In allowing the direct
allocation and release of PDAF funds to the Members of
Congress based on their own list of proposed projects, did
the implementation of the PDAF provision under the GAA of
2004 violate the Constitution or the laws?
The Court rules in the negative.

To justify the nullification of the law or its implementation,

there must be a clear and unequivocal, not a doubtful,
breach of the Constitution. In case of doubt in the
sufficiency of proof establishing unconstitutionality, the
Court must sustain legislation because "to invalidate [a law]
based on x x x baseless supposition is an affront to the
wisdom not only of the legislature that passed it but also of
the executive which approved it."27 This presumption of
constitutionality can be overcome only by the clearest
showing that there was indeed an infraction of the
Constitution, and only when such a conclusion is reached by
the required majority may the Court pronounce, in the
discharge of the duty it cannot escape, that the challenged
act must be struck down.28
The petition is miserably wanting in this regard. LAMP would
have the Court declare the unconstitutionality of the PDAFs
enforcement based on the absence of express provision in
the GAA allocating PDAF funds to the Members of Congress
and the latters encroachment on executive power in
proposing and selecting projects to be funded by PDAF.
Regrettably, these allegations lack substantiation. No
convincing proof was presented showing that, indeed, there
were direct releases of funds to the Members of Congress,

who actually spend them according to their sole discretion.

Not even a documentation of the disbursement of funds by
the DBM in favor of the Members of Congress was
presented by the petitioner to convince the Court to probe
into the truth of their claims. Devoid of any pertinent
evidentiary support that illegal misuse of PDAF in the form
of kickbacks has become a common exercise of
unscrupulous Members of Congress, the Court cannot
indulge the petitioners request for rejection of a law which
is outwardly legal and capable of lawful enforcement. In a
case like this, the Courts hands are tied in deference to the
presumption of constitutionality lest the Court commits
unpardonable judicial legislation. The Court is not endowed
with the power of clairvoyance to divine from scanty
allegations in pleadings where justice and truth lie.29 Again,
newspaper or electronic reports showing the appalling
effects of PDAF cannot be appreciated by the Court, "not
because of any issue as to their truth, accuracy, or
impartiality, but for the simple reason that facts must be
established in accordance with the rules of evidence."30
Hence, absent a clear showing that an offense to the
principle of separation of powers was committed, much less
tolerated by both the Legislative and Executive, the Court is
constrained to hold that a lawful and regular government
budgeting and appropriation process ensued during the
enactment and all throughout the implementation of the
GAA of 2004. The process was explained in this wise, in
Guingona v. Carague:31
1. Budget preparation. The first step is essentially
tasked upon the Executive Branch and covers the
estimation of government revenues, the
determination of budgetary priorities and activities
within the constraints imposed by available
revenues and by borrowing limits, and the
translation of desired priorities and activities into
expenditure levels.

Budget preparation starts with the budget call issued

by the Department of Budget and Management. Each
agency is required to submit agency budget
estimates in line with the requirements consistent
with the general ceilings set by the Development
Budget Coordinating Council (DBCC).
With regard to debt servicing, the DBCC staff, based
on the macro-economic projections of interest rates
(e.g. LIBOR rate) and estimated sources of domestic
and foreign financing, estimates debt service levels.
Upon issuance of budget call, the Bureau of Treasury
computes for the interest and principal payments for
the year for all direct national government
borrowings and other liabilities assumed by the
same.
2. Legislative authorization. At this stage,
Congress enters the picture and deliberates
or acts on the budget proposals of the President, and
Congress in the exercise of its own judgment and
wisdom formulatesan appropriation act precisely
following the process established by the Constitution,
which specifies that no money may be paid from the
Treasury except in accordance with an appropriation
made by law.
xxx
3. Budget Execution. Tasked on the Executive, the
third phase of the budget process covers the
variousoperational aspects of budgeting. The
establishment of obligation authority ceilings, the
evaluation of work and financial plans for individual
activities, the continuing review of government fiscal
position, the regulation of funds releases, the
implementation of cash payment schedules, and

other related activities comprise this phase of the

budget cycle.

President to execute appropriation laws and therefore, to

exercise the spending per se of the budget.

4. Budget accountability. The fourth phase refers to

the evaluation of actual performance and initially
approved work targets, obligations incurred,
personnel hired and work accomplished are
compared with the targets set at the time the agency
budgets were approved.

As applied to this case, the petition is seriously wanting in

establishing that individual Members of Congress receive
and thereafter spend funds out of PDAF. Although the
possibility of this unscrupulous practice cannot be entirely
discounted, surmises and conjectures are not sufficient
bases for the Court to strike down the practice for being
offensive to the Constitution. Moreover, the authority
granted the Members of Congress to propose and select
projects was already upheld in Philconsa. This remains as
valid case law. The Court sees no need to review or reverse
the standing pronouncements in the said case. So long as
there is no showing of a direct participation of legislators in
the actual spending of the budget, the constitutional
boundaries between the Executive and the Legislative in the
budgetary process remain intact.

Under the Constitution, the power of appropriation is vested

in the Legislature, subject to the requirement that
appropriation bills originate exclusively in the House of
Representatives with the option of the Senate to propose or
concur with amendments.32 While the budgetary process
commences from the proposal submitted by the President to
Congress, it is the latter which concludes the exercise by
crafting an appropriation act it may deem beneficial to the
nation, based on its own judgment, wisdom and
purposes. Like any other piece of legislation, the
appropriation act may then be susceptible to objection from
the branch tasked to implement it, by way of a Presidential
veto. Thereafter, budget execution comes under the domain
of the Executive branch which deals with the operational
aspects of the cycle including the allocation and release of
funds earmarked for various projects. Simply put, from the
regulation of fund releases, the implementation of payment
schedules and up to the actual spending of the funds
specified in the law, the Executive takes the wheel. "The
DBM lays down the guidelines for the disbursement of the
fund. The Members of Congress are then requested by the
President to recommend projects and programs which may
be funded from the PDAF. The list submitted by the
Members of Congress is endorsed by the Speaker of the
House of Representatives to the DBM, which reviews and
determines whether such list of projects submitted are
consistent with the guidelines and the priorities set by the
Executive."33 This demonstrates the power given to the

While the Court is not unaware of the yoke caused by graft

and corruption, the evils propagated by a piece of valid
legislation cannot be used as a tool to overstep
constitutional limits and arbitrarily annul acts of Congress.
Again, "all presumptions are indulged in favor of
constitutionality; one who attacks a statute, alleging
unconstitutionality must prove its invalidity beyond a
reasonable doubt; that a law may work hardship does not
render it unconstitutional; that if any reasonable basis may
be conceived which supports the statute, it will be upheld,
and the challenger must negate all possible bases; that the
courts are not concerned with the wisdom, justice, policy, or
expediency of a statute; and that a liberal interpretation of
the constitution in favor of the constitutionality of legislation
should be adopted."34
There can be no question as to the patriotism and good
motive of the petitioner in filing this petition. Unfortunately,
the petition must fail based on the foregoing reasons.

WHEREFORE, the petition is DISMISSED without

pronouncement as to costs.
SO ORDERED.

MARIA LOURDES P. A.
SERENO
Associate Justice

JOSE CATRAL MENDOZA

Associate Justice

BIENVENIDO L. REYES
Associate Justice

ESTELA M. PERLAS-BERNABE
Associate Justice

WE CONCUR:

CERTIFICATION
RENATO C. CORONA
Chief Justice

ANTONIO T. CARPIO
Associate Justice

PRESBITERO J.
VELASCO, JR.
Associate Justice

TERESITA J.
LEONARDO-DE
CASTRO
Associate Justice

ARTURO D. BRION
Associate Justice

DIOSDADO M.
PERALTA
Associate Justice

LUCAS P. BERSAMIN
Associate Justice

MARIANO C. DEL
CASTILLO
Associate Justice

ROBERTO A. ABAD
Associate Justice

MARTIN S.
VILLARAMA, JR.
Associate Justice

JOSE PORTUGAL
PEREZ
Associate Justice

Pursuant to Section 13, Article VIII of the Constitution, I

hereby certify that the conclusions in the above Decision
had been reached in consultation before the case was
assigned to the writer of the opinion of the Court.
RENATO C. CORONA
Chief Justice

Footnotes
1

Rollo, p. 7.

Id. at 113-117.

Id. at 9.

Id. at 10.

Id. at 163.

Id. at 152.

Id. at 154.

Id.

Id. at 156.

10

The Office of the Solicitor General entered its

appearance and filed a Comment for the Secretary of
the Department of Budget and Management,
Treasurer of the Philippines and Commission on
Audit, while then Speaker of the House of
Representatives, Jose De Venecia Jr. filed his
separate Comment dated January 6, 2005.
11

20

David v. Macapagal-Arroyo, G.R. Nos. 171396,

171409, 171485, 171483, 171400, 171489 and
171424, May 3, 2006, 489 SCRA 160.
21

Public Interest Center, Inc. v. Honorable Vicente

Q. Roxas, in his capacity as Presiding Judge, RTC of
Quezon City, Branch 227, G.R. No. 125509, January
31, 2007, 513 SCRA 457, 470.
22

People v. Vera, 65 Phil. 56, 89 (1937).

23

110 Phil. 331, 342-343 (1960).

Rollo, p. 66.
24

Separate Opinion, Joker P. Arroyo v. HRET and

Augusto l. Syjuco, Jr., 316 Phil. 464 (1995).

12

Id. at 62.

13

Id. at 149.

25

Tanada v. Angara, 338 Phil. 546, 575 (1997).

14

Id. at 67.

26

463 Phil. 179, 197 (2003).

15

G.R. No. 113888, August 19, 1994, 235 SCRA

506.

27

16

Senate of the Philippines v. Ermita, G.R. No.

169777, April 20, 2006, 488 SCRA 1, 35.

28

17

29

Lozano v. Nograles, G.R. Nos. 187883, and

187910, June 16, 2009, 589 SCRA 356, 358, citing
Guingona Jr. v. Court of Appeals, 354 Phil. 415, 427428.
18

19

People v. Vera, 65 Phil. 56, 89 (1937).

Navarro v. Ermita, G.R. No. 180050, April 12,

2011, 648 SCRA 400, 434.

Abakada Guro Party List v. Purisima, G.R.

No. 166715, August 14, 2008, 562 SCRA 251.
Drilon v. Lim, G.R. No. 112497, August 4, 1994,
235 SCRA 135.
Dissenting Opinion, The Board of Election
Inspectors et al. v. Edmundo S. Piccio Judge of First
Instance of Leyte at Tacloban, and Cesario R.
Colasito, G.R. No. L-1852, October 14, 1948/
September 30, 1948.
30

Lim v. Hon. Executive Secretary, 430 Phil. 555,

580 (2002).
31

273 Phil. 443, 460, (1991).

32

1987 Constitution, Article 6 Sections 24 and 29

(1).
33

34

Rollo, p. 98.

Victoriano v. Elizalde Rope Workers' Union, 158

Phil. 60 (1974).

Republic of the Philippines

SUPREME COURT
Manila
EN BANC

G.R. No. L-33713 July 30, 1975

EUSEBIO B. GARCIA, petitioner-appellant,
vs.
HON. ERNESTO S. MATA, Secretary of National
Defense, and GENERAL MANUEL T. YAN, Chief of Staff,
Armed Forces of the Philippines, respondents-appellees.
Emilio Purugganan for petitioner-appellant.
Office of the Solicitor General Estelito P. Mendoza, Assistant
Solicitor General Rosalio A. de Leon and Solicitor Eulogio
Raquel-Santos for respondents-appellees.

CASTRO, J.:
This is a petition for certiorari to review the decision of the
Court of First Instance of Quezon City, Branch IX, in civil
case Q-13466, entitled "Eusebio B. Garcia, petitioner,
versus Hon. Ernesto Mata (Juan Ponce Enrile), et al.,
respondents," declaring paragraph 11 of the "Special
Provisions for the Armed Forces of the Philippines" of
Republic Act No. 1600 1 unconstitutional and therefore
invalid and inoperative.
We affirm the judgment a quo.

The facts material to this case are embodied in the following

stipulation submitted jointly by both parties to the lower
court:
Petitioner was a reserve officer on active duty
with the Armed Forces of the Philippines until
his reversion to inactive status on 15
November 1960, pursuant to the provisions of
Republic Act No. 2332. At the time of
reversion, Petitioner held the rank of Captain
with a monthly emolument of P478.00,
comprising his base and longevity pay,
quarters and subsistence allowances;
On June 18, 1955, the date when Republic
Act No. 1382 took effect, petitioner had a
total of 9 years, 4 months and 12 days of
accumulated active commissioned service in
the Armed Forces of the Philippines;
On July 11, 1956, the date when Republic Act
1600 took effect, petitioner had an
accumulated active commissioned service of
10 years, 5 months and 5 days in the Armed
Forces of the Philippines;
Petitioner's reversion to inactive status on 15
November 1960 was pursuant to the
provisions of Republic Act 2334, and such
reversion was neither for cause, at his own
request, nor after court-martial proceedings;
From 15 November 1960 up to the present,
petitioner has been on inactive status and as
such, he has neither received any
emoluments from the Armed Forces of the

Philippines, nor was he ever employed in the

Government in any capacity;
As a consequence of his reversion to inactive
status, petitioner filed the necessary petitions
with the offices of the AFP Chief of Staff, the
Secretary of National Defense, and the
President, respectively, but received reply
only from the Chief of Staff through the AFP
Adjutant General.
On September 17, 1969 the petitioner brought an action for
"Mandamus and Recovery of a Sum of Money" in the court a
quo to compel the respondents Secretary of National
Defense and Chief of Staff of the Armed Forces of the
Philippines 2 to reinstate him in the active commissioned
service of the Armed Forces of the Philippines, to readjust
his rank, and to pay all the emoluments and allowances due
to him from the time of his reversion to inactive status. On
December 2, 1970 the trial court dismissed the petition. The
court ruled that paragraph 11 of the "Special Provisions for
the Armed Forces of the Philippines" in Republic Act 1600 is
"invalid, unconstitutional and inoperative."
The petitioner had a total of 9 years, 4 months and 12 days
of accumulated active commissioned service in the AFP
when Republic Act 1382 took effect on June 18, 1955.
Section I of this law provided:
Reserve officers with at least ten years of
active accumulated commissioned service
who are still on active duty at the time of the
approval of this Act shall not be reverted into
inactive status except for cause after proper
court-martial proceedings or upon their own
request: Provided, That for purposes of
computing the length of service, six months

or more of active service shall be considered

one year. (emphasis supplied)
The petitioner's accumulated active commissioned service
was thus short of the minimum service requirement
prescribed in the aforequoted provision of R.A. 1382.
On July 11, 1956, 3 while the petitioner was yet in the active
service, Republic Act 1600 was enacted into law. Paragraph
11 of the SPECIAL PROVISIONS FOR THE ARMED FORCES
OF THE PHILIPPINES (on page 892 of the Act) provided as
follows:
11. After the approval of this Act, and when
there is no emergency, no reserve officer of
the Armed Forces of the Philippines may be
called to a tour of active duty for more than
two years during any period of five
consecutive years: PROVIDED, That hereafter
reserve officers of the Armed Forces of the
Philippines on active duty for more than two
years on the date of the approval of this Act
except those whose military and educational
training, experience and qualifications are
deemed essential to the needs of the service,
shall be reverted to inactive status within one
year from the approval of this Act:
PROVIDED, FURTHER, That reserve officers
with at least ten years of active accumulated
commissioned service who are still on active
duty at the time of the approval of this Act
shall not be reverted to inactive status except
for cause after proper court-martial
proceedings or upon their request;
PROVIDED, FURTHER, That any such reserve
officer reverted to inactive status who has at
least five of active commissioned service shall
be entitled to a gratuity equivalent to one

month's authorized base and longevity pay in

the rank held at the time of such reversion for
every year of active commissioned service;
PROVIDED, FURTHER, That any reserve
officer who receives a gratuity under the
provisions of this Act shall not except during a
National emergency or mobilization, be called
to a tour of active duty within five years from
the date of reversion: PROVIDED, FURTHER,
That the Secretary of National Defense is
authorized to extend the tour of active duty of
reserve officers who are qualified military
pilots and doctors; PROVIDED, FURTHER,
That any savings in the appropriations
authorized in this Act for the Department of
National Defense notwithstanding any
provision of this Act to the contrary and any
unexpended balance of certification to
accounts payable since 1 July 1949 regardless
of purpose of the appropriation shall be made
available for the purpose of this paragraph:
AND PROVIDED, FINALLY, That the Secretary
of National Defense shall render a quarterly
report to Congress as to the implementation
of the provisions of this paragraph. ( pp. 892893, RA 1600) (emphasis supplied)
The petitioner consequently argues that his reversion to
inactive status on November 15, 1960 was in violation of
the abovequoted provision which prohibits the reversion to
inactive status of reserve officers on active duty with at
least ten years of accumulated active commissioned service.
On the other hand, the respondents contend that the said
provision has no relevance or pertinence whatsoever to the
budget in question or to any appropriation item contained
therein, and is therefore proscribed by Art. VI, Sec. 19, par.
2 4 of the 1935 Constitution of the Philippines, which reads:

No provision or enactment shall be embraced

in the general appropriation bill unless it
relates specifically to some particular
appropriation therein; and any such provision
or enactment shall be limited in its operation
to such appropriation.
A perusal of the challenged provision of R.A. 1600 fails to
disclose its relevance or relation to any appropriation item
therein, or to the Appropriation Act as a whole. From the
very first clause of paragraph 11 itself, which reads,
After the approval of this Act, and when there
is no emergency, no reserve officer of the
Armed Forces of the Philippines may be called
to a tour of active duty for more than two
years during any period of five consecutive
years:
the incongruity and irrelevancy are already evident. While
R.A. 1600 appropriated money for the operation of the
Government for the fiscal year 1956-1957, the said
paragraph 11 refers to the fundamental government policy
matters of the calling to active duty and the reversion to
inactive status of reserve officers in the AFP. The
incongruity and irrelevancy continue throughout the entire
paragraph.
In the language of the respondents-appellees, "it was
indeed a non-appropriation item inserted in an
appropriation measure in violation of the constitutional
inhibition against "riders" to the general appropriation act."
It was indeed a new and completely unrelated provision
attached to the Appropriation Act.
The paragraph in question also violated Art. VI, Sec. 21,
par. 1 5 of the 1935 Constitution of the Philippines which

provided that "No bill which may be enacted into law shall
embrace more than one subject which shall be expressed in
the title of the bill." This constitutional requirement nullified
and rendered inoperative any provision contained in the
body of an act that was not fairly included in the subject
expressed in the title or was not germane to or properly
connected with that subject.
In determining whether a provision contained in an act is
embraced in the subject and is properly connected
therewith, the subject to be considered is the one expressed
in the title of the act, and every fair intendment and
reasonable doubt should be indulged in favor of the validity
of the legislative enactment. But when an act contains
provisions which are clearly not embraced in the subject of
the act, as expressed in the title, such provisions are
inoperative and without effect.
We are mindful that the title of an act is not required to be
an index to the body of the act. Thus, in Sumulong vs.
Comelec, 73 Phil. 288, 291, this Court held that it is "a
sufficient compliance with such requirement if the title
expresses the general subject and all the provisions of the
statute are germane to that general subject." The
constitutional provision was intended to preclude the
insertion of riders in legislation, a rider being a provision not
germane to the subject-matter of the bill. 6
The subject of R.A. 1600, as expressed in its title, is
restricted to "appropriating funds for the operation of the
government." Any provision contained in the body of the act
that is fairly included in this restricted subject or any matter
properly connected therewith is valid and operative. But, if
a provision in the body of the act is not fairly included in
this restricted subject, like the provision relating to the
policy matters of calling to active duty and reversion to
inactive duty of reserve officers of the AFP, such provision is
inoperative and of no effect.

To quote the respondents-appellees on this point:

It is obvious that the statutory provision in
question refers to security of reserve officers
from reversion to inactive status, whereas the
subject or title of the statute from which it
derives its existence refers to appropriations.
Verily, it runs contrary to or is repugnant to
the above-quoted injunctive provision of the
Constitution. Where a conflict arises between
a statute and the Constitution, the latter
prevails. It should be emphasized that a
Constitution is superior to a statute and is
precisely called the "supreme law of the land"
because it is the fundamental or organic law
which states the general principles and builds
the substantial foundation and general
framework of law and government, and for
that reason a statute contrary to or in
violation of the Constitution is null and void
(Talabon vs. Iloilo Provincial Warden, 78 Phil.
599).1wph1.t If a law, therefore, happens
to infringe upon or violate the fundamental
law, courts of justice may step in to nullify its
effectiveness (Mabanag vs. Lopez Vito, 78
Phil. 1).
Upon the foregoing dissertation, we declare Paragraph 11 of
the SPECIAL PROVISIONS FOR THE ARMED FORCES OF THE
PHILIPPINES as unconstitutional, invalid and inoperative.
Being unconstitutional, it confers no right and affords no
protection. In legal contemplation it is as though it has
never been passed. 7
Verily, not having shown a clear legal right to the position to
which he desires to be restored, the petitioner cannot
compel the respondents to reinstate and/or call him to

active duty, promote or readjust his rank, much less pay

him back emoluments and allowances.
ACCORDINGLY, the instant petition is denied, and the
decision of the lower court dismissing the complaint is
hereby affirmed. No pronouncement as to costs.
Makalintal, C.J., Fernando, Makasiar, Esquerra, Muoz
Palma, Aquino, Concepcion, Jr. and Martin, JJ., concur.
Antonio, J., took no part.
Teehankee, J., is on leave.

Separate Opinions
BARREDO, J., concurring:
I cannot but concur in the able and scholarly opinion of Mr.
Justice Castro. There is indeed constant need to make it
emphatically clear that the Constitution proscribes the
insertion of riders in the Budget, the pernicious implications
of which are too plain and well-known to call for further
elucidation. I am adding a few words here, only to bolster, if
I may, the conclusion that petitioner's pose would still be
unsustainable even if it could be assumed that the Special
Provisions invoked by him were constitutional.
According to the stipulation of facts submitted jointly by
both parties to the lower court, "(p)etitioner's reversion to
inactive status on 15 November 1960 was pursuant to
provisions of Republic Act 2334, and such reversion was
neither for cause, at his own request, nor after court martial
proceedings" and that "(o)n June 18, 1955, the date when
Republic Act 1382 took effect, petitioner had a total of

(only) 9 years, 4 months and 12 days of accumulated active

commission service in the Armed Forces of the Philippines."
In other words, indisputably petitioner is not in a position to
invoke Republic Act 1382 which provides as follows:
SECTION 1. Reserve Officers with at least ten
years of active accumulated commissioned
service who are still on active duty at the
time of the approval of this Act shall not be
reverted into inactive status except for cause
after proper court martial proceedings or
upon their own request: Provided, That for
purposes of computing the length of service,
six months or more of active service shall be
considered one year.
for the simple reason that he lacked, as of the date of the
approval of this law, the 10-year accumulated active
commissioned service required thereby.
On June 19, 1959, Republic Act 2334 was enacted
containing the following pertinent provisions:
SEC. 2. After the approval of this Act, and
except in time of emergency, no reserve
officer shall be called to extended tours of
active duty exceeding a total of two years
within any period of five consecutive years:
Provided, That reserve officers on active duty
for more than two years on the date of
approval of this Act, with the exception of
those covered by section three of this Act,
shall be reverted to inactive status within
three years from the approval of this Act:
Provided, further, That hereafter calls to
extended tours of active duty of reserve
officers shall be in proportion to the officers

requirement of each major service in the

reserve force build-up program of the Armed
Forces of the Philippines and the priority for
selecting such reserve officers within each
major service shall follow the order of age
groupings for the reserve force as defined in
section fifty-two of the National Defense Act,
as amended.
SEC. 3. The provisions of section two of this
Act shall not apply to reserve officers covered
by the provisions of Republic Act Numbered
Thirteen hundred eighty-two nor to those
possessing technical qualifications, skills, and
competence which are indispensable to the
needs of the Armed Forces of the Philippines
and for whom there are no satisfactory
replacements from among reserve officers in
the inactive status: Provided, That the
selection of such officers shall be as
determined by a Board of Officers to be
appointed by the Chief of Staff.
Having the foregoing provisions in mind, it is clear to me
that in reverting petitioner to inactive status on November
15, 1960, the Armed Forces authorities and original
respondents herein, now substituted respectively by the
present incumbents, acted properly and were merely
complying with the injunction of Section 2 above that
"(r)eserve officers on active duty for more than two years
on the date of the approval of this Act, with the exception of
those covered by section three of this Act, shall be reverted
to inactive status within three years from the approval of
this Act." As already stated, it is definite that petitioner is
not covered by the provisions of Republic Act 1382 and
there is no evidence here whatsoever that petitioner comes
within the other exception of the Act. We have not been
shown that, if he possesses the indispensable technical

qualifications, skills, etc. mentioned in Section 3, he has

been selected by the Board of Officers appointed by the
Chief of Staff for the purpose.
Now, under the Special Provision in question contained in
the National Budget for the fiscal year 1955-56 (Republic
Act 1600), reserve officers with at least ten years of active
accumulated commissioned service up to July 11, 1956, the
date of its enactment, and who were still on active duty on
said date "shall not be reverted to inactive status except for
cause after proper court martial proceedings or upon their
request." Upon the other hand, as already stated, under the
subsequent law, Republic Act 2334, "(r)eserve officers on
active duty for more than two years on the date of the
approval of this Act" (June 19, 1959), with the exceptions
already noted which do not apply to petitioner, "shall be
reverted to inactive status within three years from the
approval of this Act." To my mind, there is irreconcilable
repugnance between these two legal provisions. The first
prohibited reversion while the second ordains it under
practically identical circumstances. Accordingly, it is my
considered view that Republic Act 2334 has repealed the
Special Provision relied upon by petitioner, assuming its
validity, notwithstanding the absence of any specific
repealing clause in this later legislation. As I see it, the
inconsistency between the two is so clear and definite that
one cannot stand together with the other. What the first
says should not be done (reversion), the later one enjoins
mandatorily to be accomplished.
As to the possible contention that petitioner had acquired a
vested right to a permanent status under the prior law, I
believe it is plainly within the power of the legislature to
adjust the rights and status of reserve officers of the Armed
Forces. No member of the army has a vested right in his
employment, status or rank therein. One can easily imagine
the difficulties and complications, which can affect the
national security or the fiscal resources of the government,

if the legislature were deprived of the authority to adjust

the tours of duty of reserve officers according to the
demands of the prevailing situation. After all, from the very
nature of things, every member of the reserve force should
be under constant notice that this status as such member is
subject to legislative control. Moreover, reversion cannot be
considered as depriving the, officer concerned totally of his
employment and benefits, for Section 4 of Republic Act
2334 provides in this connection as follows:
SEC. 4. Any reserve officer who is reverted to
inactive duty under the provisions of this Act
after having completed an accumulated
period of active commissioned service of
between five years and twenty years shall,
unless he is already entitled to the retirement
benefits under Republic Act Numbered Three
hundred forty, as amended, be entitled upon
reversion to receive a gratuity equivalent to
one month's authorized base and longevity
pay in the permanent rank held at the time of
such reversion multiplied by his years of
active commissioned service: Provided, That
such reversion is not as a result of court
martial action or due to the officer's gross
misconduct, the intemparate use of drugs or
alcoholics, or inefficiency: Provided, however,
That if a reserve officer is reemployed in a
civilian office of the government or
government owned or controlled corporation,
he shall not be made to reimburse the
amounts received by him as gratuity under
this Act: Provided, further, That if a reserve
officer who has received gratuity under this
Act reenters the active service, he shall not
be eligible for a new gratuity until he has
completed at least five years of active
commissioned service from the date of such

reentry, and no subsequent gratuity shall be

paid covering any period of active
commissioned service for which he has
already received gratuity under this Act:
Provided, further, That in case a reserve
officer who has received gratuity under this
Act subsequently reenters the active service
and is retired pursuant to Republic Act
Numbered Three hundred forty, such gratuity
shall be deducted from his retirement gratuity
or pensions: And provided, finally, That for
purposes of this section, any period of service
amounting to six months or more shall be
counted as one year.
In conclusion, whether the Special Provision in question is
constitutional or not, petitioner cannot complain about his
reversion to inactive duty, considering the provisions of
Republic Act 2334 by virtue of which, according to the
stipulation of facts, it was ordered by respondents. Hence,
the herein petition should be dismissed.
Footnotes
1 Otherwise known as the Appropriation Act
for the Fiscal Year 1956-1957.
2 Then incumbent were Hon. Ernesto S. Mata
and General Manuel T. Yan. At present Hon.
Juan Ponce Enrile is the Secretary of National
Defense, General Romeo Espino is the Chief
of Staff.
3 As of this date, the petitioner had an
accumulated active commissioned service of
10 years, 5 months and 5 days.

4 Art. VIII, Sec. 16, par. 2 of the 1973

Constitution of the Philippines.
5 Art. VIII, Sec. 19, par. 1 of the 1973
Constitution of the Philippines.
6 Alalayan, et al., vs. National Power
Corporation and of Administrator Economic
Coordination,
L-24396, July 29, 1968, 24 SCRA 172, 179.
7 Municipality of Matabang, et al., vs. Benito,
et al., L-28113, 27 SCRA 533, 539.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 71977 February 27, 1987
DEMETRIO G. DEMETRIA, M.P., AUGUSTO S. SANCHEZ,
M.P., ORLANDO S. MERCADO, M.P., HONORATO Y.
AQUINO, M.P., ZAFIRO L. RESPICIO, M.P., DOUGLAS
R. CAGAS, M.P., OSCAR F. SANTOS, M.P., ALBERTO G.
ROMULO, M.P., CIRIACO R. ALFELOR, M.P., ISIDORO
E. REAL, M.P., EMIGDIO L. LINGAD, M.P., ROLANDO C.
MARCIAL, M.P., PEDRO M. MARCELLANA, M.P.,
VICTOR S. ZIGA, M.P., and ROGELIO V. GARCIA.
M.P., petitioners,
vs.
HON. MANUEL ALBA in his capacity as the MINISTER
OF THE BUDGET and VICTOR MACALINGCAG in his
capacity as the TREASURER OF THE
PHILIPPINES, respondents.

FERNAN, J.:
Assailed in this petition for prohibition with prayer for a writ
of preliminary injunction is the constitutionality of the first
paragraph of Section 44 of Presidential Decree No. 1177,
otherwise known as the "Budget Reform Decree of 1977."
Petitioners, who filed the instant petition as concerned
citizens of this country, as members of the National
Assembly/Batasan Pambansa representing their millions of
constituents, as parties with general interest common to all
the people of the Philippines, and as taxpayers whose vital

interests may be affected by the outcome of the reliefs

prayed for" 1 listed the grounds relied upon in this petition
as follows:
A. SECTION 44 OF THE 'BUDGET REFORM
DECREE OF 1977' INFRINGES UPON THE
FUNDAMENTAL LAW BY AUTHORIZING THE
ILLEGAL TRANSFER OF PUBLIC MONEYS.
B. SECTION 44 OF PRESIDENTIAL DECREE
NO. 1177 IS REPUGNANT TO THE
CONSTITUTION AS IT FAILS TO SPECIFY THE
OBJECTIVES AND PURPOSES FOR WHICH THE
PROPOSED TRANSFER OF FUNDS ARE TO BE
MADE.
C. SECTION 44 OF PRESIDENTIAL DECREE
NO. 1177 ALLOWS THE PRESIDENT TO
OVERRIDE THE SAFEGUARDS, FORM AND
PROCEDURE PRESCRIBED BY THE
CONSTITUTION IN APPROVING
APPROPRIATIONS.
D. SECTION 44 OF THE SAME DECREE
AMOUNTS TO AN UNDUE DELEGATION OF
LEGISLATIVE POWERS TO THE EXECUTIVE.
E. THE THREATENED AND CONTINUING
TRANSFER OF FUNDS BY THE PRESIDENT
AND THE IMPLEMENTATION THEREOF BY THE
BUDGET MINISTER AND THE TREASURER OF
THE PHILIPPINES ARE WITHOUT OR IN
EXCESS OF THEIR AUTHORITY AND
JURISDICTION. 2
Commenting on the petition in compliance with the Court
resolution dated September 19, 1985, the Solicitor General,

for the public respondents, questioned the legal standing of

petitioners, who were allegedly merely begging an advisory
opinion from the Court, there being no justiciable
controversy fit for resolution or determination. He further
contended that the provision under consideration was
enacted pursuant to Section 16[5], Article VIII of the 1973
Constitution; and that at any rate, prohibition will not lie
from one branch of the government to a coordinate branch
to enjoin the performance of duties within the latter's
sphere of responsibility.
On February 27, 1986, the Court required the petitioners to
file a Reply to the Comment. This, they did, stating, among
others, that as a result of the change in the administration,
there is a need to hold the resolution of the present case in
abeyance "until developments arise to enable the parties to
concretize their respective stands." 3
Thereafter, We required public respondents to file a
rejoinder. The Solicitor General filed a rejoinder with a
motion to dismiss, setting forth as grounds therefor the
abrogation of Section 16[5], Article VIII of the 1973
Constitution by the Freedom Constitution of March 25,
1986, which has allegedly rendered the instant petition
moot and academic. He likewise cited the "seven pillars"
enunciated by Justice Brandeis in Ashwander v. TVA, 297
U.S. 288 (1936) 4 as basis for the petition's dismissal.
In the case of Evelio B. Javier v. The Commission on
Elections and Arturo F. Pacificador, G.R. Nos. 68379-81,
September 22, 1986, We stated that:
The abolition of the Batasang Pambansa and
the disappearance of the office in dispute
between the petitioner and the private
respondents both of whom have gone their
separate ways could be a convenient

justification for dismissing the case. But there

are larger issues involved that must be
resolved now, once and for all, not only to
dispel the legal ambiguities here raised. The
more important purpose is to manifest in the
clearest possible terms that this Court will not
disregard and in effect condone wrong on the
simplistic and tolerant pretext that the case
has become moot and academic.
The Supreme Court is not only the highest
arbiter of legal questions but also the
conscience of the government. The citizen
comes to us in quest of law but we must also
give him justice. The two are not always the
same. There are times when we cannot grant
the latter because the issue has been settled
and decision is no longer possible according
to the law. But there are also times when
although the dispute has disappeared, as in
this case, it nevertheless cries out to be
resolved. Justice demands that we act then,
not only for the vindication of the outraged
right, though gone, but also for the guidance
of and as a restraint upon the future.
It is in the discharge of our role in society, as above-quoted,
as well as to avoid great disservice to national interest that
We take cognizance of this petition and thus deny public
respondents' motion to dismiss. Likewise noteworthy is the
fact that the new Constitution, ratified by the Filipino people
in the plebiscite held on February 2, 1987, carries verbatim
section 16[5], Article VIII of the 1973 Constitution under
Section 24[5], Article VI. And while Congress has not
officially reconvened, We see no cogent reason for further
delaying the resolution of the case at bar.

The exception taken to petitioners' legal standing deserves

scant consideration. The case of Pascual v. Secretary of
Public Works, et al., 110 Phil. 331, is authority in support of
petitioners' locus standi. Thus:
Again, it is well-settled that the validity of a
statute may be contested only by one who
will sustain a direct injury in consequence of
its enforcement. Yet, there are many
decisions nullifying at the instance of
taxpayers, laws providing for the
disbursement of public funds, upon the theory
that the expenditure of public funds by an
officer of the state for the purpose of
administering anunconstitutional
act constitutes a misapplication of such funds
which may be enjoined at the request of a
taxpayer. Although there are some decisions
to the contrary, the prevailing view in the
United States is stated in the American
Jurisprudence as follows:
In the determination of the
degree of interest essential to
give the requisite standing to
attack the constitutionality of a
statute, the general rule is that
not only persons individually
affected, but also taxpayers
have sufficient interest in
preventing the illegal
expenditures of moneys raised
by taxation and may therefore
question the constitutionality of
statutes requiring expenditure
of public moneys. [ 11 Am. Jur.
761, Emphasis supplied. ]

Moreover, in Tan v. Macapagal, 43 SCRA 677 and Sanidad

v. Comelec, 73 SCRA 333, We said that as regards
taxpayers' suits, this Court enjoys that open discretion to
entertain the same or not.
The conflict between paragraph 1 of Section 44 of
Presidential Decree No. 1177 and Section 16[5], Article VIII
of the 1973 Constitution is readily perceivable from a mere
cursory reading thereof. Said paragraph 1 of Section 44
provides:
The President shall have the authority to
transfer any fund, appropriated for the
different departments, bureaus, offices and
agencies of the Executive Department, which
are included in the General Appropriations
Act, to any program, project or activity of any
department, bureau, or office included in the
General Appropriations Act or approved after
its enactment.
On the other hand, the constitutional provision under
consideration reads as follows:
Sec. 16[5]. No law shall be passed
authorizing any transfer of appropriations,
however, the President, the Prime Minister,
the Speaker, the Chief Justice of the Supreme
Court, and the heads of constitutional commis
ions may by law be authorized to augment
any item in the general appropriations law for
their respective offices from savings in other
items of their respective appropriations.
The prohibition to transfer an appropriation for one item to
another was explicit and categorical under the 1973
Constitution. However, to afford the heads of the different

branches of the government and those of the constitutional

commissions considerable flexibility in the use of public
funds and resources, the constitution allowed the enactment
of a law authorizing the transfer of funds for the purpose of
augmenting an item from savings in another item in the
appropriation of the government branch or constitutional
body concerned. The leeway granted was thus limited. The
purpose and conditions for which funds may be transferred
were specified, i.e. transfer may be allowed for the purpose
of augmenting an item and such transfer may be made only
if there are savings from another item in the appropriation
of the government branch or constitutional body.
Paragraph 1 of Section 44 of P.D. No. 1177 unduly over
extends the privilege granted under said Section 16[5]. It
empowers the President to indiscriminately transfer funds
from one department, bureau, office or agency of the
Executive Department to any program, project or activity of
any department, bureau or office included in the General
Appropriations Act or approved after its enactment, without
regard as to whether or not the funds to be transferred are
actually savings in the item from which the same are to be
taken, or whether or not the transfer is for the purpose of
augmenting the item to which said transfer is to be made. It
does not only completely disregard the standards set in the
fundamental law, thereby amounting to an undue
delegation of legislative powers, but likewise goes beyond
the tenor thereof. Indeed, such constitutional infirmities
render the provision in question null and void.
"For the love of money is the root of all evil: ..." and money
belonging to no one in particular, i.e. public funds, provide
an even greater temptation for misappropriation and
embezzlement. This, evidently, was foremost in the minds
of the framers of the constitution in meticulously prescribing
the rules regarding the appropriation and disposition of
public funds as embodied in Sections 16 and 18 of Article
VIII of the 1973 Constitution. Hence, the conditions on the

release of money from the treasury [Sec. 18(1)]; the

restrictions on the use of public funds for public purpose
[Sec. 18(2)]; the prohibition to transfer an appropriation for
an item to another [See. 16(5) and the requirement of
specifications [Sec. 16(2)], among others, were all
safeguards designed to forestall abuses in the expenditure
of public funds. Paragraph 1 of Section 44 puts all these
safeguards to naught. For, as correctly observed by
petitioners, in view of the unlimited authority bestowed
upon the President, "... Pres. Decree No. 1177 opens the
floodgates for the enactment of unfunded appropriations,
results in uncontrolled executive expenditures, diffuses
accountability for budgetary performance and entrenches
the pork barrel system as the ruling party may well expand
[sic] public money not on the basis of development
priorities but on political and personal expediency." 5 The
contention of public respondents that paragraph 1 of
Section 44 of P.D. 1177 was enacted pursuant to Section
16(5) of Article VIII of the 1973 Constitution must perforce
fall flat on its face.
Another theory advanced by public respondents is that
prohibition will not lie from one branch of the government
against a coordinate branch to enjoin the performance of
duties within the latter's sphere of responsibility.
Thomas M. Cooley in his "A Treatise on the Constitutional
Limitations," Vol. 1, Eight Edition, Little, Brown and
Company, Boston, explained:
... The legislative and judicial are coordinate
departments of the government, of equal
dignity; each is alike supreme in the exercise
of its proper functions, and cannot directly or
indirectly, while acting within the limits of its
authority, be subjected to the control or
supervision of the other, without an
unwarrantable assumption by that other of

power which, by the Constitution, is not

conferred upon it. The Constitution apportions
the powers of government, but it does not
make any one of the three departments
subordinate to another, when exercising the
trust committed to it. The courts may declare
legislative enactments unconstitutional and
void in some cases, but not because the
judicial power is superior in degree or dignity
to the legislative. Being required to declare
what the law is in the cases which come
before them, they must enforce the
Constitution, as the paramount law, whenever
a legislative enactment comes in conflict with
it. But the courts sit, not to review or revise
the legislative action, but to enforce the
legislative will, and it is only where they find
that the legislature has failed to keep within
its constitutional limits, that they are at
liberty to disregard its action; and in doing so,
they only do what every private citizen may
do in respect to the mandates of the courts
when the judges assumed to act and to
render judgments or decrees without
jurisdiction. "In exercising this high authority,
the judges claim no judicial supremacy; they
are only the administrators of the public will.
If an act of the legislature is held void, it is
not because the judges have any control over
the legislative power, but because the act is
forbidden by the Constitution, and because
the will of the people, which is therein
declared, is paramount to that of their
representatives expressed in any law."
[Lindsay v. Commissioners, & c., 2 Bay, 38,
61; People v. Rucker, 5 Col. 5; Russ v. Com.,
210 Pa. St. 544; 60 Atl. 169, 1 L.R.A. [N.S.]
409, 105 Am. St. Rep. 825] (pp. 332-334).

Indeed, where the legislature or the executive branch is

acting within the limits of its authority, the judiciary cannot
and ought not to interfere with the former. But where the
legislature or the executive acts beyond the scope of its
constitutional powers, it becomes the duty of the judiciary
to declare what the other branches of the government had
assumed to do as void. This is the essence of judicial power
conferred by the Constitution "in one Supreme Court and in
such lower courts as may be established by law" [Art. VIII,
Section 1 of the 1935 Constitution; Art. X, Section 1 of the
1973 Constitution and which was adopted as part of the
Freedom Constitution, and Art. VIII, Section 1 of the 1987
Constitution] and which power this Court has exercised in
many instances. *
Public respondents are being enjoined from acting under a
provision of law which We have earlier mentioned to be
constitutionally infirm. The general principle relied upon
cannot therefore accord them the protection sought as they
are not acting within their "sphere of responsibility" but
without it.
The nation has not recovered from the shock, and worst,
the economic destitution brought about by the plundering of
the Treasury by the deposed dictator and his cohorts. A
provision which allows even the slightest possibility of a
repetition of this sad experience cannot remain written in
our statute books.
WHEREFORE, the instant petition is granted. Paragraph 1 of
Section 44 of Presidential Decree No. 1177 is hereby
declared null and void for being unconstitutional.
SO ORDER RED.

Teehankee, C.J., Yap, Narvasa, Melencio-Herrera, Alampay,

Gutierrez, Jr., Cruz, Paras, Feliciano, Gancayco, Padilla,
Bidin, Sarmiento and Cortes, JJ., concur.

Footnotes
1 Petition, p. 3, Rollo.
2 pp. 6-7, Rollo
3 p. 169, Rollo.
4 The relevant portions read as follows:
The Court developed, for its own governance
in the case confessedly within its jurisdiction,
a series of rules under which it has avoided
passing upon a large part of all the
constitutional questions pressed upon it for
decision. They are:
1. The Court will not pass upon the
constitutionality of legislation in a friendly,
non-adversary proceeding, declining because
to decide such questions "is legitimate only in
the last resort, and as a necessity in the
determination of real, earnest and vital
controversy between individuals. It never was
the thought tht, by means of a friendly suit, a
party beaten in the legislature could transfer
to the courts an inquiry as to the
constitutionality of the legislative act."
Chicago & Grand Trunk Ry. v. Wellman, 143
U.S. 339, 345.

2. The Court will not "anticipate question of

constitutional law in advance of the necessity
of deciding it." Liverpool. N.Y. & P.S.S. Co. v.
Emigration Commissioners, 113 U.S. 33, 39
... "It is not the habit of the Court to decide
questions of a constitutional nature unless
absolutely necessary to a decision of the
case. 'Burton v. United States. 196 U.S. 283,
295.
3. The Court will not formulate a rule of
constitutional law broader than is required by
the precise facts to which it is to be applied."
Liverpool, N.Y. & P.S.S. Co. v. Emigration
Commissioners, supra.
4. The Court will not pass upon a
constitutional question although properly
presented by the record, if there is also
present some other ground upon which the
case may be disposed of. This rule has found
most varied application. Thus, if a case can
be decided on either of two grounds, one
involving a constitutional question, the other
a question of statutory construction or
general law, the Court will decide only the
latter. Siler v. Louisville & Nashville R. Co.,
213 U.S. 175, 191; Light v. United States,
220 U.S. 523, 538. Appeals from the highest
court of a state challenging its decision of a
question under the Federal Constitution are
frequently dismissed because the judgment
can be sustained on an independent state
ground. Berea College v. Kentucky, 211 U.S.
45, 53.
5. The Court will not pass upon the validity of
a statute upon complaint of one who fails to

show that he is injured by its operation. Tyler

v. The Judges, 179 U.S. 405; Hendrick v.
Maryland, 235 U.S. 610, 621. Among the
many applications of this rule, none is more
striking than the denial of the right of
challenge to one who lacks a personal or
property right. Thus, the challenge by a public
official interested only in the performance of
his official duty will not be entertained..... In
Fairchild v. Hughes, 258 U.S. 126, the Court
affirmed the dismissal of a suit brought by a
citizenwho sought to have the Nineteenth
Amendment declared unconstitutional. In
Massachusetts v. Mellon, 262 U.S. 447, the
challenge of the federal Maternity Act was not
entertained although made by the
Commonwealth on behalf of all its citizens.
6. The Court will not pass upon the
constitutionality of a statute at the instance of
one who has availed himself of its benefits.
Great Falls Mfg. Co. v. Attorney General, 124,
U.S. 581 . . .
7. "When the validity of an act of the
Congress is drawn in question, and even if a
serious doubt of constitutionality is raised, it
is a cardinal principle that this Court will first
ascertain whether a construction of the
statute is fairly possible by which the question
may be avoided.' Cromwell v. Benson, 285
U.S. 22, 62." [pp. 176-177, Rollo].
5 p. 14, Rollo.
* Casanovas vs. Hord 8 Phil. 125; McGirr vs.
Hamilton, 30 Phil. 563; Compania General de

Tabacos vs. Board of Public Utility, 34 Phil.

136; Central Capiz vs. Ramirez, 40 Phil. 883;
Concepcion vs. Paredes, 42 Phil. 599; US vs.
Ang Tang Ho 43 Phil. 6; McDaniel vs.
Apacible, 44 Phil. 248; People vs. Pomar, 46
Phil. 440; Agcaoili vs. Suguitan, 48 Phil. 676;
Government of P.I. vs. Springer, 50 Phil. 259;
Manila Electric Co. vs. Pasay Transp. Co., 57
Phil. 600: People vs. Linsangan; 62 Phil. 464;
People and Hongkong & Shanghai Banking
Corp. vs. Jose O. Vera, 65 Phil. 56; People vs.
Carlos, 78 Phil. 535; City of Baguio vs.
Nawasa, 106 Phil. 144; City of Cebu vs.
Nawasa, 107 Phil, 1112; Rutter vs. Esteban
93 Phil. 68.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC

G.R. No. 113105 August 19, 1994

PHILIPPINE CONSTITUTION ASSOCIATION,
EXEQUIEL B. GARCIA and A. GONZALES, petitioners,
vs.
HON. SALVADOR ENRIQUEZ, as Secretary of Budget
and Management; HON. VICENTE T. TAN, as National
Treasurer and COMMISSION ON AUDIT, respondents.
G.R. No. 113174 August 19, 1994
RAUL S. ROCO, as Member of the Philippine Senate,
NEPTALI A. GONZALES, Chairman of the Committee
on Finance of the Philippine Senate, and EDGARDO J.
ANGARA, as President and Chief Executive of the
Philippine Senate, all of whom also sue as taxpayers,
in their own behalf and in representation of Senators
HEHERSON ALVAREZ, AGAPITO A. AQUINO, RODOLFO
G. BIAZON, JOSE D. LINA, JR., ERNESTO F. HERRERA,
BLAS F. OPLE, JOHN H. OSMENA, GLORIA
MACAPAGAL- ARROYO, VICENTE C. SOTTO III,
ARTURO M. TOLENTINO, FRANCISCO S. TATAD,
WIGBERTO E. TAADA and FREDDIE N.
WEBB, petitioners,
vs.
THE EXECUTIVE SECRETARY, THE DEPARTMENT OF
BUDGET AND MANAGEMENT, and THE NATIONAL
TREASURER, THE COMMISSION ON AUDIT, impleaded

herein as an unwilling
co-petitioner, respondents.
G.R. No. 113766 August 19, 1994
WIGBERTO E. TAADA and ALBERTO G. ROMULO, as
Members of the Senate and as taxpayers, and
FREEDOM FROM DEBT COALITION, petitioners,
vs.
HON. TEOFISTO T. GUINGONA, JR. in his capacity as
Executive Secretary, HON. SALVADOR ENRIQUEZ, JR.,
in his capacity as Secretary of the Department of
Budget and Management, HON. CARIDAD
VALDEHUESA, in her capacity as National Treasurer,
and THE COMMISSION ON AUDIT, respondents.
G.R. No. 113888 August 19, 1994
WIGBERTO E. TAADA and ALBERTO G. ROMULO, as
Members of the Senate and as taxpayers,petitioners,
vs.
HON. TEOFISTO T. GUINGONA, JR., in his capacity as
Executive Secretary, HON. SALVADOR ENRIQUEZ, JR.,
in his capacity as Secretary of the Department of
Budget and Management, HON. CARIDAD
VALDEHUESA, in her capacity as National Treasurer,
and THE COMMISSION ON AUDIT, respondents.
Ramon R. Gonzales for petitioners in G.R. No. 113105.
Eddie Tamondong for petitioners in G.R. Nos. 113766 &
113888.
Roco, Buag, Kapunan, Migallos & Jardeleza for petitioners
Raul S. Roco, Neptali A. Gonzales and Edgardo Angara.

Ceferino Padua Law Office fro intervenor Lawyers Against

Monopoly and Poverty (Lamp).

QUIASON, J.:
Once again this Court is called upon to rule on the
conflicting claims of authority between the Legislative and
the Executive in the clash of the powers of the purse and
the sword. Providing the focus for the contest between the
President and the Congress over control of the national
budget are the four cases at bench. Judicial intervention is
being sought by a group of concerned taxpayers on the
claim that Congress and the President have impermissibly
exceeded their respective authorities, and by several
Senators on the claim that the President has committed
grave abuse of discretion or acted without jurisdiction in the
exercise of his veto power.
I
House Bill No. 10900, the General Appropriation Bill of 1994
(GAB of 1994), was passed and approved by both houses of
Congress on December 17, 1993. As passed, it imposed
conditions and limitations on certain items of appropriations
in the proposed budget previously submitted by the
President. It also authorized members of Congress to
propose and identify projects in the "pork barrels" allotted
to them and to realign their respective operating budgets.
Pursuant to the procedure on the passage and enactment of
bills as prescribed by the Constitution, Congress presented
the said bill to the President for consideration and approval.
On December 30, 1993, the President signed the bill into
law, and declared the same to have become Republic Act

No. 7663, entitled "AN ACT APPROPRIATING FUNDS FOR

THE OPERATION OF THE GOVERNMENT OF THE
PHILIPPINES FROM JANUARY ONE TO DECEMBER THIRTY
ONE, NINETEEN HUNDRED AND NINETY-FOUR, AND FOR
OTHER PURPOSES" (GAA of 1994). On the same day, the
President delivered his Presidential Veto Message, specifying
the provisions of the bill he vetoed and on which he
imposed certain conditions.
No step was taken in either House of Congress to override
the vetoes.
In G.R. No. 113105, the Philippine Constitution Association,
Exequiel B. Garcia and Ramon A. Gonzales as taxpayers,
prayed for a writ of prohibition to declare as
unconstitutional and void: (a) Article XLI on the
Countrywide Development Fund, the special provision in
Article I entitled Realignment of Allocation for Operational
Expenses, and Article XLVIII on the Appropriation for Debt
Service or the amount appropriated under said Article
XLVIII in excess of the P37.9 Billion allocated for the
Department of Education, Culture and Sports; and (b) the
veto of the President of the Special Provision of
Article XLVIII of the GAA of 1994 (Rollo, pp. 88-90, 104105)
In G.R. No. 113174, sixteen members of the Senate led by
Senate President Edgardo J. Angara, Senator Neptali A.
Gonzales, the Chairman of the Committee on Finance, and
Senator Raul S. Roco, sought the issuance of the writs of
certiorari, prohibition and mandamus against the Executive
Secretary, the Secretary of the Department of Budget and
Management, and the National Treasurer.
Suing as members of the Senate and taxpayers, petitioners
question: (1) the constitutionality of the conditions imposed
by the President in the items of the GAA of 1994: (a) for the

Supreme Court, (b) Commission on Audit (COA), (c)

Ombudsman, (d) Commission on Human Rights (CHR), (e)
Citizen Armed Forces Geographical Units (CAFGU'S) and (f)
State Universities and Colleges (SUC's); and (2) the
constitutionality of the veto of the special provision in the
appropriation for debt service.
In G.R. No. 113766, Senators Alberto G. Romulo and
Wigberto Taada (a co-petitioner in G.R. No. 113174),
together with the Freedom from Debt Coalition, a non-stock
domestic corporation, sought the issuance of the writs of
prohibition and mandamus against the Executive Secretary,
the Secretary of the Department of Budget and
Management, the National Treasurer, and the COA.
Petitioners Taada and Romulo sued as members of the
Philippine Senate and taxpayers, while petitioner Freedom
from Debt Coalition sued as a taxpayer. They challenge the
constitutionality of the Presidential veto of the special
provision in the appropriations for debt service and the
automatic appropriation of funds therefor.
In G.R. No. 11388, Senators Taada and Romulo sought the
issuance of the writs of prohibition and mandamus against
the same respondents in G.R. No. 113766. In this petition,
petitioners contest the constitutionality of: (1) the veto on
four special provision added to items in the GAA of 1994 for
the Armed Forces of the Philippines (AFP) and the
Department of Public Works and Highways (DPWH); and (2)
the conditions imposed by the President in the
implementation of certain appropriations for the CAFGU's,
the DPWH, and the National Housing Authority (NHA).
Petitioners also sought the issuance of temporary
restraining orders to enjoin respondents Secretary of
Budget and Management, National Treasurer and COA from
enforcing the questioned provisions of the GAA of 1994, but

the Court declined to grant said provisional reliefs on the

time- honored principle of according the presumption of
validity to statutes and the presumption of regularity to
official acts.
In view of the importance and novelty of most of the issues
raised in the four petitions, the Court invited former Chief
Justice Enrique M. Fernando and former Associate Justice
Irene Cortes to submit their respective memoranda
as Amicus curiae, which they graciously did.
II
Locus Standi
When issues of constitutionality are raised, the Court can
exercise its power of judicial review only if the following
requisites are compresent: (1) the existence of an actual
and appropriate case; (2) a personal and substantial
interest of the party raising the constitutional question; (3)
the exercise of judicial review is pleaded at the earliest
opportunity; and (4) the constitutional question is the lis
mota of the case (Luz Farms v. Secretary of the Department
of Agrarian Reform, 192 SCRA 51 [1990]; Dumlao v.
Commission on Elections, 95 SCRA 392 [1980]; People v.
Vera, 65 Phil. 56 [1937]).
While the Solicitor General did not question the locus
standi of petitioners in G.R. No. 113105, he claimed that the
remedy of the Senators in the other petitions is political
(i.e., to override the vetoes) in effect saying that they do
not have the requisite legal standing to bring the suits.
The legal standing of the Senate, as an institution, was
recognized in Gonzales v. Macaraig, Jr., 191 SCRA 452
(1990). In said case, 23 Senators, comprising the entire
membership of the Upper House of Congress, filed a petition

to nullify the presidential veto of Section 55 of the GAA of

1989. The filing of the suit was authorized by Senate
Resolution No. 381, adopted on February 2, 1989, and
which reads as follows:
Authorizing and Directing the Committee on
Finance to Bring in the Name of the Senate of
the Philippines the Proper Suit with the
Supreme Court of the Philippines contesting
the Constitutionality of the Veto by the
President of Special and General Provisions,
particularly Section 55, of the General
Appropriation Bill of 1989 (H.B. No. 19186)
and For Other Purposes.
In the United States, the legal standing of a House of
Congress to sue has been recognized (United States v.
American Tel. & Tel. Co., 551 F. 2d 384, 391 [1976];
Notes: Congressional Access To The Federal Courts, 90
Harvard Law Review 1632 [1977]).
While the petition in G.R. No. 113174 was filed by 16
Senators, including the Senate President and the Chairman
of the Committee on Finance, the suit was not authorized by
the Senate itself. Likewise, the petitions in
G.R. Nos. 113766 and 113888 were filed without an
enabling resolution for the purpose.
Therefore, the question of the legal standing of petitioners
in the three cases becomes a preliminary issue before this
Court can inquire into the validity of the presidential veto
and the conditions for the implementation of some items in
the GAA of 1994.
We rule that a member of the Senate, and of the House of
Representatives for that matter, has the legal standing to

question the validity of a presidential veto or a condition

imposed on an item in an appropriation bill.
Where the veto is claimed to have been made without or in
excess of the authority vested on the President by the
Constitution, the issue of an impermissible intrusion of the
Executive into the domain of the Legislature arises
(Notes: Congressional Standing To Challenge Executive
Action, 122 University of Pennsylvania Law Review 1366
[1974]).
To the extent the power of Congress are impaired, so is the
power of each member thereof, since his office confers a
right to participate in the exercise of the powers of that
institution (Coleman v. Miller, 307 U.S. 433 [1939];
Holtzman v. Schlesinger, 484 F. 2d 1307 [1973]).
An act of the Executive which injures the institution of
Congress causes a derivative but nonetheless substantial
injury, which can be questioned by a member of Congress
(Kennedy v. Jones, 412 F. Supp. 353 [1976]). In such a
case, any member of Congress can have a resort to the
courts.
Former Chief Justice Enrique M. Fernando, as Amicus
Curiae, noted:
This is, then, the clearest case of the Senate
as a whole or individual Senators as such
having a substantial interest in the question
at issue. It could likewise be said that there
was the requisite injury to their rights as
Senators. It would then be futile to raise
any locus standi issue. Any intrusion into the
domain appertaining to the Senate is to be
resisted. Similarly, if the situation were
reversed, and it is the Executive Branch that

could allege a transgression, its officials could

likewise file the corresponding action. What
cannot be denied is that a Senator has
standing to maintain inviolate the
prerogatives, powers and privileges vested by
the Constitution in his office (Memorandum,
p. 14).
It is true that the Constitution provides a mechanism for
overriding a veto (Art. VI, Sec. 27 [1]). Said remedy,
however, is available only when the presidential veto is
based on policy or political considerations but not when the
veto is claimed to be ultra vires. In the latter case, it
becomes the duty of the Court to draw the dividing line
where the exercise of executive power ends and the bounds
of legislative jurisdiction begin.
III
G.R. No. 113105
1. Countrywide Development Fund
Article XLI of the GAA of 1994 sets up a Countrywide
Development Fund of P2,977,000,000.00 to "be used for
infrastructure, purchase of ambulances and computers and
other priority projects and activities and credit facilities to
qualified beneficiaries." Said Article provides:
COUNTRYWIDE DEVELOPMENT FUND
For Fund requirements of countrywide
development projects P 2,977,000,000

New Appropriations, by Purpose

Current Operating Expenditures

A. PURPOSE
Personal Maintenance Capital Total
Services and Other Outlays
Operating
Expenses
1. For Countrywide
Developments Projects P250,000,000
P2,727,000,000 P2,977,000,000
TOTAL NEW
APPROPRIATIONS P250,000,000
P2,727,000,000 P2,977,000,000
Special Provisions
1. Use and Release of Funds. The amount
herein appropriated shall be used for
infrastructure, purchase of ambulances and
computers and other priority projects and
activities, and credit facilities to qualified
beneficiaries as proposed and identified by
officials concerned according to the following
allocations: Representatives, P12,500,000
each; Senators, P18,000,000 each; VicePresident, P20,000,000; PROVIDED, That, the
said credit facilities shall be constituted as a
revolving fund to be administered by a
government financial institution (GFI) as a
trust fund for lending operations. Prior years
releases to local government units and
national government agencies for this
purpose shall be turned over to the
government financial institution which shall
be the sole administrator of credit facilities
released from this fund.

The fund shall be automatically released

quarterly by way of Advice of Allotments and
Notice of Cash Allocation directly to the
assigned implementing agency not later than
five (5) days after the beginning of each
quarter upon submission of the list of projects
and activities by the officials concerned.
2. Submission of Quarterly Reports. The
Department of Budget and Management shall
submit within thirty (30) days after the end of
each quarter a report to the Senate
Committee on Finance and the House
Committee on Appropriations on the releases
made from this Fund. The report shall include
the listing of the projects, locations,
implementing agencies and the endorsing
officials (GAA of 1994, p. 1245).
Petitioners claim that the power given to the members of
Congress to propose and identify the projects and activities
to be funded by the Countrywide Development Fund is an
encroachment by the legislature on executive power, since
said power in an appropriation act in implementation of a
law. They argue that the proposal and identification of the
projects do not involve the making of laws or the repeal and
amendment thereof, the only function given to the Congress
by the Constitution (Rollo, pp. 78- 86).
Under the Constitution, the spending power called by James
Madison as "the power of the purse," belongs to Congress,
subject only to the veto power of the President. The
President may propose the budget, but still the final say on
the matter of appropriations is lodged in the Congress.
The power of appropriation carries with it the power to
specify the project or activity to be funded under the

appropriation law. It can be as detailed and as broad as

Congress wants it to be.
The Countrywide Development Fund is explicit that it shall
be used "for infrastructure, purchase of ambulances and
computers and other priority projects and activities and
credit facilities to qualified beneficiaries . . ." It was
Congress itself that determined the purposes for the
appropriation.
Executive function under the Countrywide Development
Fund involves implementation of the priority projects
specified in the law.
The authority given to the members of Congress is only to
propose and identify projects to be implemented by the
President. Under Article XLI of the GAA of 1994, the
President must perforce examine whether the proposals
submitted by the members of Congress fall within the
specific items of expenditures for which the Fund was set
up, and if qualified, he next determines whether they are in
line with other projects planned for the locality. Thereafter,
if the proposed projects qualify for funding under the Funds,
it is the President who shall implement them. In short, the
proposals and identifications made by the members of
Congress are merely recommendatory.
The procedure of proposing and identifying by members of
Congress of particular projects or activities under Article XLI
of the GAA of 1994 is imaginative as it is innovative.
The Constitution is a framework of a workable government
and its interpretation must take into account the
complexities, realities and politics attendant to the
operation of the political branches of government. Prior to
the GAA of 1991, there was an uneven allocation of
appropriations for the constituents of the members of

Congress, with the members close to the Congressional

leadership or who hold cards for "horse-trading," getting
more than their less favored colleagues. The members of
Congress also had to reckon with an unsympathetic
President, who could exercise his veto power to cancel from
the appropriation bill a pet project of a Representative or
Senator.
The Countrywide Development Fund attempts to make
equal the unequal. It is also a recognition that individual
members of Congress, far more than the President and their
congressional colleagues are likely to be knowledgeable
about the needs of their respective constituents and the
priority to be given each project.
2. Realignment of Operating Expenses
Under the GAA of 1994, the appropriation for the Senate is
P472,000,000.00 of which P464,447,000.00 is appropriated
for current operating expenditures, while the appropriation
for the House of Representatives is P1,171,924,000.00 of
which P1,165,297,000.00 is appropriated for current
operating expenditures (GAA of 1994, pp. 2, 4, 9, 12).
The 1994 operating expenditures for the Senate are as
follows:
Personal Services
Salaries, Permanent 153,347
Salaries/Wage, Contractual/Emergency 6,870

Total Salaries and Wages 160,217

=======
Other Compensation

Step Increments 1,073

Honoraria and Commutable Allowances 3,731
Compensation Insurance Premiums 1,579
Pag-I.B.I.G. Contributions 1,184
Medicare Premiums 888
Bonus and Cash Gift 14,791
Terminal Leave Benefits 2,000
Personnel Economic Relief Allowance 10,266
Additional Compensation of P500 under A.O.
53 11,130
Others 57,173

Total Other Compensation 103,815

01 Total Personal Services 264,032

=======
Maintenance and Other Operating Expenses
02 Traveling Expenses 32,841
03 Communication Services 7,666
04 Repair and Maintenance of Government
Facilities 1,220
05 Repair and Maintenance of Government
Vehicles 318
06 Transportation Services 128
07 Supplies and Materials 20,189
08 Rents 24,584
14 Water/Illumination and Power 6,561
15 Social Security Benefits and Other Claims
3,270
17 Training and Seminars Expenses 2,225
18 Extraordinary and Miscellaneous Expenses
9,360
23 Advertising and Publication
24 Fidelity Bonds and Insurance Premiums

1,325
29 Other Services 89,778

Total Maintenance and Other Operating

Expenditures 200,415

Total Current Operating Expenditures 464,447

=======
(GAA of 1994, pp. 3-4)
The 1994 operating expenditures for the House of
Representatives are as follows:
Personal Services
Salaries, Permanent 261,557
Salaries/Wages, Contractual/Emergency
143,643

Total Salaries and Wages 405,200

=======
Other Compensation
Step Increments 4,312
Honoraria and Commutable
Allowances 4,764
Compensation Insurance
Premiums 1,159
Pag-I.B.I.G. Contributions 5,231
Medicare Premiums 2,281
Bonus and Cash Gift 35,669
Terminal Leave Benefits 29
Personnel Economic Relief
Allowance 21,150

Additional Compensation of P500 under A.O.

53
Others 106,140

Total Other Compensation 202,863

01 Total Personal Services 608,063

=======
Maintenance and Other Operating Expenses
02 Traveling Expenses 139,611
03 Communication Services 22,514
04 Repair and Maintenance of Government
Facilities 5,116
05 Repair and Maintenance of Government
Vehicles 1,863
06 Transportation Services 178
07 Supplies and Materials 55,248
10 Grants/Subsidies/Contributions 940
14 Water/Illumination and Power 14,458
15 Social Security Benefits and Other Claims
325
17 Training and Seminars Expenses 7,236
18 Extraordinary and Miscellaneous Expenses
14,474
20 Anti-Insurgency/Contingency Emergency
Expenses 9,400
23 Advertising and Publication 242
24 Fidelity Bonds and Insurance Premiums
1,420
29 Other Services 284,209

Total Maintenance and Other Operating

Expenditures 557,234

Total Current Operating Expenditures

1,165,297
=======
(GAA of 1994, pp. 11-12)
The Special Provision Applicable to the Congress of the
Philippines provides:
4. Realignment of Allocation for Operational
Expenses. A member of Congress may realign
his allocation for operational expenses to any
other expenses category provide the total of
said allocation is not exceeded. (GAA of 1994,
p. 14).
The appropriation for operating expenditures for each House
is further divided into expenditures for salaries, personal
services, other compensation benefits, maintenance
expenses and other operating expenses. In turn, each
member of Congress is allotted for his own operating
expenditure a proportionate share of the appropriation for
the House to which he belongs. If he does not spend for one
items of expense, the provision in question allows him to
transfer his allocation in said item to another item of
expense.
Petitioners assail the special provision allowing a member of
Congress to realign his allocation for operational expenses
to any other expense category (Rollo, pp. 82-92), claiming
that this practice is prohibited by Section 25(5), Article VI of
the Constitution. Said section provides:
No law shall be passed authorizing any
transfer of appropriations: however, the
President, the President of the Senate, the
Speaker of the House of Representatives, the
Chief Justice of the Supreme Court, and the

heads of Constitutional Commissions may, by

law, be authorized to augment any item in
the general appropriations law for their
respective offices from savings in other items
of their respective appropriations.
The proviso of said Article of the Constitution grants the
President of the Senate and the Speaker of the House of
Representatives the power to augment items in an
appropriation act for their respective offices from savings in
other items of their appropriations, whenever there is a law
authorizing such augmentation.
The special provision on realignment of the operating
expenses of members of Congress is authorized by Section
16 of the General Provisions of the GAA of 1994, which
provides:
Expenditure Components. Except by act of
the Congress of the Philippines, no change or
modification shall be made in the expenditure
items authorized in this Act and other
appropriation laws unless in cases
of augmentations from savings in
appropriations as authorized under Section
25(5) of Article VI of the Constitution (GAA of
1994, p. 1273).
Petitioners argue that the Senate President and the Speaker
of the House of Representatives, but not the individual
members of Congress are the ones authorized to realign the
savings as appropriated.
Under the Special Provisions applicable to the Congress of
the Philippines, the members of Congress only determine
the necessity of the realignment of the savings in the
allotments for their operating expenses. They are in the

best position to do so because they are the ones who know

whether there are savings available in some items and
whether there are deficiencies in other items of their
operating expenses that need augmentation. However, it is
the Senate President and the Speaker of the House of
Representatives, as the case may be, who shall approve the
realignment. Before giving their stamp of approval, these
two officials will have to see to it that:
(1) The funds to be realigned or transferred are actually
savings in the items of expenditures from which the same
are to be taken; and
(2) The transfer or realignment is for the purposes of
augmenting the items of expenditure to which said transfer
or realignment is to be made.
3. Highest Priority for Debt Service
While Congress appropriated P86,323,438,000.00 for debt
service (Article XLVII of the GAA of 1994), it appropriated
only P37,780,450,000.00 for the Department of Education
Culture and Sports. Petitioners urged that Congress cannot
give debt service the highest priority in the GAA of 1994
(Rollo, pp. 93-94) because under the Constitution it should
be education that is entitled to the highest funding. They
invoke Section 5(5), Article XIV thereof, which provides:
(5) The State shall assign the highest
budgetary priority to education and ensure
that teaching will attract and retain its rightful
share of the best available talents through
adequate remuneration and other means of
job satisfaction and fulfillment.

This issue was raised in Guingona, Jr. v. Carague, 196 SCRA

221 (1991), where this Court held that Section 5(5), Article
XIV of the Constitution, is merely directory, thus:
While it is true that under Section 5(5),
Article XIV of the Constitution, Congress is
mandated to "assign the highest budgetary
priority to education" in order to "insure that
teaching will attract and retain its rightful
share of the best available talents through
adequate remuneration and other means of
job satisfaction and fulfillment," it does not
thereby follow that the hands of Congress are
so hamstrung as to deprive it the power to
respond to the imperatives of the national
interest and for the attainment of other state
policies or objectives.
As aptly observed by respondents, since
1985, the budget for education has tripled to
upgrade and improve the facility of the public
school system. The compensation of teachers
has been doubled. The amount of
P29,740,611,000.00 set aside for the
Department of Education, Culture and Sports
under the General Appropriations Act (R.A.
No. 6381), is the highest budgetary allocation
among all department budgets. This is a clear
compliance with the aforesaid constitutional
mandate according highest priority to
education.
Having faithfully complied therewith,
Congress is certainly not without any power,
guided only by its good judgment, to provide
an appropriation, that can reasonably service
our enormous debt, the greater portion of
which was inherited from the previous

administration. It is not only a matter of

honor and to protect the credit standing of
the country. More especially, the very survival
of our economy is at stake. Thus, if in the
process Congress appropriated an amount for
debt service bigger than the share allocated
to education, the Court finds and so holds
that said appropriation cannot be thereby
assailed as unconstitutional.
G.R. No. 113105
G.R. No. 113174
Veto of Provision on Debt Ceiling
The Congress added a Special Provision to Article XLVIII
(Appropriations for Debt Service) of the GAA of 1994 which
provides:
Special Provisions
1. Use of the Fund. The appropriation
authorized herein shall be used for payment
of principal and interest of foreign and
domestic indebtedness; PROVIDED, That any
payment in excess of the amount herein
appropriated shall be subject to the approval
of the President of the Philippines with the
concurrence of the Congress of the
Philippines; PROVIDED, FURTHER, That in no
case shall this fund be used to pay for the
liabilities of the Central Bank Board of
Liquidators.
2. Reporting Requirement. The Bangko
Sentral ng Pilipinas and the Department of
Finance shall submit a quarterly report of

actual foreign and domestic debt service

payments to the House Committee on
Appropriations and Senate Finance
Committee within one (1) month after each
quarter (GAA of 1944, pp. 1266).
The President vetoed the first Special Provision, without
vetoing the P86,323,438,000.00 appropriation for debt
service in said Article. According to the President's Veto
Message:
IV. APPROPRIATIONS FOR DEBT SERVICE
I would like to emphasize that I concur fully
with the desire of Congress to reduce the
debt burden by decreasing the appropriation
for debt service as well as the inclusion of the
Special Provision quoted below. Nevertheless,
I believe that this debt reduction scheme
cannot be validly done through the 1994 GAA.
This must be addressed by revising our debt
policy by way of innovative and
comprehensive debt reduction programs
conceptualized within the ambit of the
Medium-Term Philippine Development Plan.
Appropriations for payment of public debt,
whether foreign or domestic, are
automatically appropriated pursuant to the
Foreign Borrowing Act and Section 31 of P.D.
No. 1177 as reiterated under Section 26,
Chapter 4, Book VI of E.O. No. 292, the
Administrative Code of 1987. I wish to
emphasize that the constitutionality of such
automatic provisions on debt servicing has
been upheld by the Supreme Court in the
case of "Teofisto T. Guingona, Jr., and

Aquilino Q. Pimentel, Jr. v. Hon. Guillermo N.

Carague, in his capacity as Secretary of
Budget and Management, et al.," G.R. No.
94571, dated April 22, 1991.
I am, therefore vetoing the following special
provision for the reason that the GAA is not
the appropriate legislative measure to amend
the provisions of the Foreign Borrowing Act,
P.D. No. 1177 and E.O. No. 292:
Use of the Fund. The
appropriation authorized herein
shall be used for payment of
principal and interest of foreign
and domestic
indebtedness: PROVIDED, That
any payment in excess of the
amount herein appropriated
shall be subject to the approval
of the President of the
Philippines with the
concurrence of the Congress of
the
Philippines:PROVIDED, FURTHE
R, That in no case shall this
fund be used to pay for the
liabilities of the Central Bank
Board of Liquidators (GAA of
1994, p. 1290).
Petitioners claim that the President cannot veto the Special
Provision on the appropriation for debt service without
vetoing the entire amount of P86,323,438.00 for said
purpose (Rollo, G.R. No. 113105, pp. 93-98; Rollo, G.R. No.
113174, pp. 16-18). The Solicitor General counterposed
that the Special Provision did not relate to the item of
appropriation for debt service and could therefore be the

subject of an item veto (Rollo, G.R. No. 113105, pp. 5460; Rollo, G.R. No. 113174, pp. 72-82).
This issue is a mere rehash of the one put to rest
in Gonzales v. Macaraig, Jr., 191 SCRA 452 (1990). In that
case, the issue was stated by the Court, thus:
The fundamental issue raised is whether or
not the veto by the President of Section 55 of
the 1989 Appropriations Bill (Section 55
FY '89), and subsequently of its counterpart
Section 16 of the 1990 Appropriations Bill
(Section 16 FY '90), is unconstitutional and
without effect.
The Court re-stated the issue, just so there would not be
any misunderstanding about it, thus:
The focal issue for resolution is whether or
not the President exceeded the item-veto
power accorded by the Constitution. Or
differently put, has the President the power to
veto "provisions" of an Appropriations Bill?
The bases of the petition in Gonzales, which are similar to
those invoked in the present case, are stated as follows:
In essence, petitioners' cause is anchored on
the following grounds: (1) the President's
line-veto power as regards appropriation bills
is limited to item/s and does not cover
provision/s; therefore, she exceeded her
authority when she vetoed Section 55 (FY
'89) and Section 16 (FY '90) which are
provisions; (2) when the President objects to
a provision of an appropriation bill, she
cannot exercise the item-veto power but

should veto the entire bill; (3) the item-veto

power does not carry with it the power to
strike out conditions or restrictions for that
would be legislation, in violation of the
doctrine of separation of powers; and (4) the
power of augmentation in Article VI, Section
25 [5] of the 1987 Constitution, has to be
provided for by law and, therefore, Congress
is also vested with the prerogative to impose
restrictions on the exercise of that power.
The restrictive interpretation urged by
petitioners that the President may not veto a
provision without vetoing the entire bill not
only disregards the basic principle that a
distinct and severable part of a bill may be
the subject of a separate veto but also
overlooks the Constitutional mandate that
any provision in the general appropriations
bill shall relate specifically to some particular
appropriation therein and that any such
provision shall be limited in its operation to
the appropriation to which it relates (1987
Constitution, Article VI, Section 25 [2]). In
other words, in the true sense of the term, a
provision in an Appropriations Bill is limited in
its operation to some particular appropriation
to which it relates, and does not relate to the
entire bill.
The Court went one step further and ruled that even
assuming arguendo that "provisions" are beyond the
executive power to veto, and Section 55
(FY '89) and Section 16 (FY '90) were not "provisions" in the
budgetary sense of the term, they are "inappropriate
provisions" that should be treated as "items" for the
purpose of the President's veto power.

The Court, citing Henry v. Edwards, La., 346 So. 2d 153

(1977), said that Congress cannot include in a general
appropriations bill matters that should be more properly
enacted in separate legislation, and if it does that, the
inappropriate provisions inserted by it must be treated as
"item", which can be vetoed by the President in the exercise
of his item-veto power.
It is readily apparent that the Special Provision applicable to
the appropriation for debt service insofar as it refers to
funds in excess of the amount appropriated in the bill, is an
"inappropriate" provision referring to funds other than the
P86,323,438,000.00 appropriated in the General
Appropriations Act of 1991.
Likewise the vetoed provision is clearly an attempt to repeal
Section 31 of P.D. No. 1177 (Foreign Borrowing Act) and
E.O. No. 292, and to reverse the debt payment policy. As
held by the Court in Gonzales, the repeal of these laws
should be done in a separate law, not in the appropriations
law.
The Court will indulge every intendment in favor of the
constitutionality of a veto, the same as it will presume the
constitutionality of an act of Congress (Texas Co. v. State,
254 P. 1060; 31 Ariz, 485, 53 A.L.R. 258 [1927]).
The veto power, while exercisable by the President, is
actually a part of the legislative process (Memorandum of
Justice Irene Cortes as Amicus Curiae, pp. 3-7). That is why
it is found in Article VI on the Legislative Department rather
than in Article VII on the Executive Department in the
Constitution. There is, therefore, sound basis to indulge in
the presumption of validity of a veto. The burden shifts on
those questioning the validity thereof to show that its use is
a violation of the Constitution.

Under his general veto power, the President has to veto the
entire bill, not merely parts thereof (1987 Constitution, Art.
VI, Sec. 27[1]). The exception to the general veto power is
the power given to the President to veto any particular item
or items in a general appropriations bill (1987 Constitution,
Art. VI,
Sec. 27[2]). In so doing, the President must veto the entire
item.
A general appropriations bill is a special type of legislation,
whose content is limited to specified sums of money
dedicated to a specific purpose or a separate fiscal unit
(Beckman, The Item Veto Power of the Executive,
31 Temple Law Quarterly 27 [1957]).
The item veto was first introduced by the Organic Act of the
Philippines passed by the U.S. Congress on August 29,
1916. The concept was adopted from some State
Constitutions.
Cognizant of the legislative practice of inserting provisions,
including conditions, restrictions and limitations, to items in
appropriations bills, the Constitutional Convention added the
following sentence to Section 20(2), Article VI of the 1935
Constitution:
. . . When a provision of an appropriation bill
affect one or more items of the same, the
President cannot veto the provision without at
the same time vetoing the particular item or
items to which it relates . . . .
In short, under the 1935 Constitution, the President was
empowered to veto separately not only items in an
appropriations bill but also "provisions".

While the 1987 Constitution did not retain the

aforementioned sentence added to Section 11(2) of Article
VI of the 1935 Constitution, it included the following
provision:
No provision or enactment shall be embraced
in the general appropriations bill unless it
relates specifically to some particular
appropriation therein. Any such provision or
enactment shall be limited in its operation to
the appropriation to which it relates (Art. VI,
Sec. 25[2]).
In Gonzales, we made it clear that the omission of that
sentence of Section 16(2) of the 1935 Constitution in the
1987 Constitution should not be interpreted to mean the
disallowance of the power of the President to veto a
"provision".
As the Constitution is explicit that the provision which
Congress can include in an appropriations bill must "relate
specifically to some particular appropriation therein" and
"be limited in its operation to the appropriation to which it
relates," it follows that any provision which does not relate
to any particular item, or which extends in its operation
beyond an item of appropriation, is considered "an
inappropriate provision" which can be vetoed separately
from an item. Also to be included in the category of
"inappropriate provisions" are unconstitutional provisions
and provisions which are intended to amend other laws,
because clearly these kind of laws have no place in an
appropriations bill. These are matters of general legislation
more appropriately dealt with in separate enactments.
Former Justice Irene Cortes, as Amicus Curiae, commented
that Congress cannot by law establish conditions for and
regulate the exercise of powers of the President given by
the Constitution for that would be an unconstitutional
intrusion into executive prerogative.

The doctrine of "inappropriate provision" was well elucidated

in Henry v. Edwards, supra., thus:
Just as the President may not use his itemveto to usurp constitutional powers conferred
on the legislature, neither can the legislature
deprive the Governor of the constitutional
powers conferred on him as chief executive
officer of the state by including in a general
appropriation bill matters more properly
enacted in separate legislation. The
Governor's constitutional power to veto bills
of general legislation . . . cannot be abridged
by the careful placement of such measures in
a general appropriation bill, thereby forcing
the Governor to choose between approving
unacceptable substantive legislation or
vetoing "items" of expenditures essential to
the operation of government.The legislature
cannot by location of a bill give it immunity
from executive veto. Nor can it circumvent
the Governor's veto power over substantive
legislation by artfully drafting general law
measures so that they appear to be true
conditions or limitations on an item of
appropriation. Otherwise, the legislature
would be permitted to impair the
constitutional responsibilities and functions of
a co-equal branch of government in
contravention of the separation of powers
doctrine . . . We are no more willing to allow
the legislature to use its appropriation power
to infringe on the Governor's constitutional
right to veto matters of substantive legislation
than we are to allow the Governor to
encroach on the Constitutional powers of the
legislature. In order to avoid this result, we
hold that,when the legislature inserts

inappropriate provisions in a general

appropriation bill, such provisions must be
treated as "items" for purposes of the
Governor's item veto power over general
appropriation bills.
xxx xxx xxx
. . . Legislative control cannot be exercised in
such a manner as to encumber the general
appropriation bill with veto-proof "logrolling
measures", special interest provisions which
could not succeed if separately enacted, or
"riders", substantive pieces of legislation
incorporated in a bill to insure passage
without veto . . . (Emphasis supplied).
Petitioners contend that granting arguendo that the veto of
the Special Provision on the ceiling for debt payment is
valid, the President cannot automatically appropriate funds
for debt payment without complying with the conditions for
automatic appropriation under the provisions of R.A. No.
4860 as amended by P.D. No. 81 and the provisions of P.D.
No. 1177 as amended by the Administrative Code of 1987
and P.D. No. 1967 (Rollo, G.R. No. 113766, pp. 9-15).
Petitioners cannot anticipate that the President will not
faithfully execute the laws. The writ of prohibition will not
issue on the fear that official actions will be done in
contravention of the laws.
The President vetoed the entire paragraph one of the
Special Provision of the item on debt service, including the
provisions that the appropriation authorized in said item
"shall be used for payment of the principal and interest of
foreign and domestic indebtedness" and that "in no case
shall this fund be used to pay for the liabilities of the Central

Bank Board of Liquidators." These provisions are germane

to and have a direct connection with the item on debt
service. Inherent in the power of appropriation is the power
to specify how the money shall be spent (Henry v. Edwards,
LA, 346 So., 2d., 153). The said provisos, being appropriate
provisions, cannot be vetoed separately. Hence the item
veto of said provisions is void.
We reiterate, in order to obviate any misunderstanding, that
we are sustaining the veto of the Special Provision of the
item on debt service only with respect to the proviso therein
requiring that "any payment in excess of the amount herein,
appropriated shall be subject to the approval of the
President of the Philippines with the concurrence of the
Congress of the Philippines . . ."
G.R. NO. 113174
G.R. NO. 113766
G.R. NO. 11388
1. Veto of provisions for revolving funds of SUC's.
In the appropriation for State Universities and Colleges
(SUC's), the President vetoed special provisions which
authorize the use of income and the creation, operation and
maintenance of revolving funds. The Special Provisions
vetoed are the following:
(H. 7) West Visayas State University
Equal Sharing of Income. Income earned by
the University subject to Section 13 of the
special provisions applicable to all State
Universities and Colleges shall be equally
shared by the University and the University
Hospital (GAA of 1994, p. 395).

xxx xxx xxx

(J. 3) Leyte State College
Revolving Fund for the Operation of LSC
House and Human Resources Development
Center (HRDC). The income of Leyte State
College derived from the operation of its LSC
House and HRDC shall be constituted into a
Revolving Fund to be deposited in an
authorized government depository bank for
the operational expenses of these
projects/services. The net income of the
Revolving Fund at the end of the year shall be
remitted to the National Treasury and shall
accrue to the General Fund. The
implementing guidelines shall be issued by
the Department of Budget and Management
(GAA of 1994, p. 415).
The vetoed Special Provisions applicable to all SUC's are the
following:
12. Use of Income from Extension Services.
State Universities and Colleges are authorized
to use their income from their extension
services. Subject to the approval of the Board
of Regents and the approval of a special
budget pursuant to Sec. 35, Chapter 5, Book
VI of E.O.
No. 292, such income shall be utilized solely
for faculty development, instructional
materials and work study program (GAA of
1994, p. 490).
xxx xxx xxx

13. Income of State Universities and Colleges.

The income of State Universities and Colleges
derived from tuition fees and other sources as
may be imposed by governing boards other
than those accruing to revolving funds
created under LOI Nos. 872 and 1026 and
those authorized to be recorded as trust
receipts pursuant to Section 40, Chapter 5,
Book VI of E.O. No. 292 shall be deposited
with the National Treasury and recorded as a
Special Account in the General Fund pursuant
to P.D. No. 1234 and P.D. No. 1437 for the
use of the institution, subject to Section 35,
Chapter 5, Book VI of E.O. No.
292L PROVIDED, That disbursements from
the Special Account shall not exceed the
amount actually earned and
deposited: PROVIDED, FURTHER, That a cash
advance on such income may be allowed
State half of income actually realized during
the preceding year and this cash advance
shall be charged against income actually
earned during the budget year: AND
PROVIDED, FINALLY, That in no case shall
such funds be used to create positions, nor
for payment of salaries, wages or allowances,
except as may be specifically approved by the
Department of Budge and Management for
income-producing activities, or to purchase
equipment or books, without the prior
approval of the President of the Philippines
pursuant to Letter of Implementation No. 29.
All collections of the State Universities and
Colleges for fees, charges and receipts
intended for private recipient units, including
private foundations affiliated with these
institutions shall be duly acknowledged with

official receipts and deposited as a trust

receipt before said income shall be subject to
Section 35, Chapter 5, Book VI of E.O. No.
292
(GAA of 1994, p. 490).
The President gave his reason for the veto thus:
Pursuant to Section 65 of the Government
Auditing Code of the Philippines, Section 44,
Chapter 5, Book VI of E.O. No. 292, s. 1987
and Section 22, Article VII of the Constitution,
all income earned by all Government offices
and agencies shall accrue to the General Fund
of the Government in line with the One Fund
Policy enunciated by Section 29 (1), Article VI
and Section 22, Article VII of the Constitution.
Likewise, the creation and establishment of
revolving funds shall be authorized by
substantive law pursuant to Section 66 of the
Government Auditing Code of the Philippines
and Section 45, Chapter 5, Book VI of E.O.
No. 292.
Notwithstanding the aforementioned
provisions of the Constitution and existing
law, I have noted the proliferation of special
provisions authorizing the use of agency
income as well as the creation, operation and
maintenance of revolving funds.
I would like to underscore the facts that such
income were already considered as integral
part of the revenue and financing sources of
the National Expenditure Program which I
previously submitted to Congress. Hence, the
grant of new special provisions authorizing

the use of agency income and the

establishment of revolving funds over and
above the agency appropriations authorized
in this Act shall effectively reduce the
financing sources of the 1994 GAA and, at the
same time, increase the level of expenditures
of some agencies beyond the wellcoordinated, rationalized levels for such
agencies. This corresponding increases the
overall deficit of the National Government
(Veto Message, p. 3).
Petitioners claim that the President acted with grave abuse
of discretion when he disallowed by his veto the "use of
income" and the creation of "revolving fund" by the Western
Visayas State University and Leyte State Colleges when he
allowed other government offices, like the National Stud
Farm, to use their income for their operating expenses
(Rollo, G.R. No. 113174, pp. 15-16).
There was no undue discrimination when the President
vetoed said special provisions while allowing similar
provisions in other government agencies. If some
government agencies were allowed to use their income and
maintain a revolving fund for that purpose, it is because
these agencies have been enjoying such privilege before by
virtue of the special laws authorizing such practices as
exceptions to the "one-fund policy" (e.g., R.A. No. 4618 for
the National Stud Farm, P.D. No. 902-A for the Securities
and Exchange Commission; E.O. No. 359 for the
Department of Budget and Management's Procurement
Service).
2. Veto of provision on 70% (administrative)/30%
(contract) ratio for road maintenance.

In the appropriation for the Department of Public Works and

Highways, the President vetoed the second paragraph of
Special Provision No. 2, specifying the 30% maximum ration
of works to be contracted for the maintenance of national
roads and bridges. The said paragraph reads as follows:
2. Release and Use of Road Maintenance
Funds. Funds allotted for the maintenance
and repair of roads which are provided in this
Act for the Department of Public Works and
Highways shall be released to the respective
Engineering District, subject to such rules and
regulations as may be prescribed by the
Department of Budget and Management.
Maintenance funds for roads and bridges shall
be exempt from budgetary reserve.
Of the amount herein appropriated for the
maintenance of national roads and bridges, a
maximum of thirty percent (30%) shall be
contracted out in accordance with guidelines
to be issued by the Department of Public
Works and Highways. The balance shall be
used for maintenance by force account.
Five percent (5%) of the total road
maintenance fund appropriated herein to be
applied across the board to the allocation of
each region shall be set aside for the
maintenance of roads which may be
converted to or taken over as national roads
during the current year and the same shall be
released to the central office of the said
department for eventual
sub-allotment to the concerned region and
district: PROVIDED, That any balance of the
said five percent (5%) shall be restored to the

regions on a pro-rata basis for the

maintenance of existing national roads.
No retention or deduction as reserves or
overhead expenses shall be made, except as
authorized by law or upon direction of the
President
(GAA of 1994, pp. 785-786; Emphasis
supplied).
The President gave the following reason for the veto:
While I am cognizant of the well-intended
desire of Congress to impose certain
restrictions contained in some special
provisions, I am equally aware that many
programs, projects and activities of agencies
would require some degree of flexibility to
ensure their successful implementation and
therefore risk their completion. Furthermore,
not only could these restrictions and
limitations derail and impede program
implementation but they may also result in a
breach of contractual obligations.
D.1.a. A study conducted by the
Infrastructure Agencies show that for
practical intent and purposes, maintenance by
contract could be undertaken to an optimum
of seventy percent (70%) and the remaining
thirty percent (30%) by force account.
Moreover, the policy of maximizing
implementation through contract maintenance
is a covenant of the Road and Road Transport
Program Loan from the Asian Development
Bank (ADB Loan No. 1047-PHI-1990) and
Overseas Economic Cooperation Fund (OECF

Loan No. PH-C17-199). The same is a

covenant under the World Bank (IBRD) Loan
for the Highway Management Project (IBRD
Loan
No. PH-3430) obtained in 1992.
In the light of the foregoing and considering
the policy of the government to encourage
and maximize private sector participation in
the regular repair and maintenance of
infrastructure facilities, I am directly vetoing
the underlined second paragraph of Special
Provision No. 2 of the Department of Public
Works and Highways (Veto Message, p. 11).
The second paragraph of Special Provision No. 2 brings to
fore the divergence in policy of Congress and the President.
While Congress expressly laid down the condition that only
30% of the total appropriation for road maintenance should
be contracted out, the President, on the basis of a
comprehensive study, believed that contracting out road
maintenance projects at an option of 70% would be more
efficient, economical and practical.
The Special Provision in question is not an inappropriate
provision which can be the subject of a veto. It is not alien
to the appropriation for road maintenance, and on the other
hand, it specified how the said item shall be expended
70% by administrative and 30% by contract.
The 1987 Constitution allows the addition by Congress of
special provisions, conditions to items in an expenditure bill,
which cannot be vetoed separately from the items to which
they relate so long as they are "appropriate" in the
budgetary sense (Art. VII, Sec. 25[2]).

The Solicitor General was hard put in justifying the veto of

this special provision. He merely argued that the provision
is a complete turnabout from an entrenched practice of the
government to maximize contract maintenance (Rollo, G.R.
No. 113888, pp. 85-86). That is not a ground to veto a
provision separate from the item to which it refers.
The veto of the second paragraph of Special Provision No. 2
of the item for the DPWH is therefore unconstitutional.
3. Veto of provision on purchase of medicines by
AFP.
In the appropriation for the Armed Forces of the Philippines
(AFP), the President vetoed the special provision on the
purchase by the AFP of medicines in compliance with the
Generics Drugs Law (R.A. No. 6675). The vetoed provision
reads:
12. Purchase of Medicines. The purchase of
medicines by all Armed Forces of the
Philippines units, hospitals and clinics shall
strictly comply with the formulary embodied
in the National Drug Policy of the Department
of Health (GAA of 1994, p. 748).
According to the President, while it is desirable to subject
the purchase of medicines to a standard formulary, "it is
believed more prudent to provide for a transition period for
its adoption and smooth implementation in the Armed
Forces of the Philippines" (Veto Message, p. 12).
The Special Provision which requires that all purchases of
medicines by the AFP should strictly comply with the
formulary embodied in the National Drug Policy of the
Department of Health is an "appropriate" provision. it is a
mere advertence by Congress to the fact that there is an

existing law, the Generics Act of 1988, that requires "the

extensive use of drugs with generic names through a
rational system of procurement and distribution." The
President believes that it is more prudent to provide for a
transition period for the smooth implementation of the law
in the case of purchases by the Armed Forces of the
Philippines, as implied by Section 11 (Education Drive) of
the law itself. This belief, however, cannot justify his veto of
the provision on the purchase of medicines by the AFP.
Being directly related to and inseparable from the
appropriation item on purchases of medicines by the AFP,
the special provision cannot be vetoed by the President
without also vetoing the said item (Bolinao Electronics
Corporation v. Valencia, 11 SCRA 486 [1964]).
4. Veto of provision on prior approval of Congress for
purchase of military equipment.
In the appropriation for the modernization of the AFP, the
President vetoed the underlined proviso of Special Provision
No. 2 on the "Use of Fund," which requires the prior
approval of Congress for the release of the corresponding
modernization funds, as well as the entire Special
Provisions
No. 3 on the "Specific Prohibition":
2. Use of the Fund. Of the amount herein
appropriated, priority shall be given for the
acquisition of AFP assets necessary for
protecting marine, mineral, forest and other
resources within Philippine territorial borders
and its economic zone, detection, prevention
or deterrence of air or surface intrusions and
to support diplomatic moves aimed at
preserving national dignity, sovereignty and
patrimony: PROVIDED, That the said

modernization fund shall not be released until

a Table of Organization and Equipment for FY
1994-2000 is submitted to and approved by
Congress.
3. Specific Prohibition. The said Modernization
Fund shall not be used for payment of six (6)
additional S-211 Trainer planes, 18 SF-260
Trainer planes and 150 armored personnel
carriers (GAA of 1994, p. 747).
As reason for the veto, the President stated that the said
condition and prohibition violate the Constitutional mandate
of non-impairment of contractual obligations, and if allowed,
"shall effectively alter the original intent of the AFP
Modernization Fund to cover all military equipment deemed
necessary to modernize the Armed Forces of the
Philippines" (Veto Message, p. 12).
Petitioners claim that Special Provision No. 2 on the "Use of
Fund" and Special Provision No. 3 are conditions or
limitations related to the item on the AFP modernization
plan.
The requirement in Special Provision No. 2 on the "Use of
Fund" for the AFP modernization program that the President
must submit all purchases of military equipment to
Congress for its approval, is an exercise of the
"congressional or legislative veto." By way of definition, a
congressional veto is a means whereby the legislature can
block or modify administrative action taken under a statute.
It is a form of legislative control in the implementation of
particular executive actions. The form may be either
negative, that is requiring disapproval of the executive
action, or affirmative, requiring approval of the executive
action. This device represents a significant attempt by
Congress to move from oversight of the executive to shared

administration (Dixon, The Congressional Veto and

Separation of Powers: The Executive on a Leash,
56 North Carolina Law Review, 423 [1978]).
A congressional veto is subject to serious questions
involving the principle of separation of powers.
However the case at bench is not the proper occasion to
resolve the issues of the validity of the legislative veto as
provided in Special Provisions Nos. 2 and 3 because the
issues at hand can be disposed of on other grounds. Any
provision blocking an administrative action in implementing
a law or requiring legislative approval of executive acts
must be incorporated in a separate and substantive bill.
Therefore, being "inappropriate" provisions, Special
Provisions Nos. 2 and 3 were properly vetoed.
As commented by Justice Irene Cortes in her memorandum
as Amicus Curiae: "What Congress cannot do directly by law
it cannot do indirectly by attaching conditions to the
exercise of that power (of the President as Commander-inChief) through provisions in the appropriation law."
Furthermore, Special Provision No. 3, prohibiting the use of
the Modernization Funds for payment of the trainer planes
and armored personnel carriers, which have been
contracted for by the AFP, is violative of the Constitutional
prohibition on the passage of laws that impair the obligation
of contracts (Art. III, Sec. 10), more so, contracts entered
into by the Government itself.
The veto of said special provision is therefore valid.
5. Veto of provision on use of savings to augment
AFP pension funds.

In the appropriation for the AFP Pension and Gratuity Fund,

the President vetoed the new provision authorizing the Chief
of Staff to use savings in the AFP to augment pension and
gratuity funds. The vetoed provision reads:
2. Use of Savings. The Chief of Staff, AFP, is
authorized, subject to the approval of the
Secretary of National Defense, to use savings
in the appropriations provided herein to
augment the pension fund being managed by
the AFP Retirement and Separation Benefits
System as provided under Sections 2(a) and
3 of P.D. No. 361 (GAA of 1994,
p. 746).
According to the President, the grant of retirement and
separation benefits should be covered by direct
appropriations specifically approved for the purpose
pursuant to Section 29(1) of Article VI of the Constitution.
Moreover, he stated that the authority to use savings is
lodged in the officials enumerated in Section 25(5) of Article
VI of the Constitution (Veto Message, pp. 7-8).
Petitioners claim that the Special Provision on AFP Pension
and Gratuity Fund is a condition or limitation which is so
intertwined with the item of appropriation that it could not
be separated therefrom.
The Special Provision, which allows the Chief of Staff to use
savings to augment the pension fund for the AFP being
managed by the AFP Retirement and Separation Benefits
System is violative of Sections 25(5) and 29(1) of the
Article VI of the Constitution.
Under Section 25(5), no law shall be passed authorizing any
transfer of appropriations, and under Section 29(1), no
money shall be paid out of

the Treasury except in pursuance of an appropriation made

by law. While Section 25(5) allows as an exception the
realignment of savings to augment items in the general
appropriations law for the executive branch, such right must
and can be exercised only by the President pursuant to a
specific law.
6. Condition on the deactivation of the CAFGU's.
Congress appropriated compensation for the CAFGU's,
including the payment of separation benefits but it added
the following Special Provision:
1. CAFGU Compensation and Separation
Benefit. The appropriation authorized herein
shall be used for the compensation of
CAFGU's including the payment of their
separation benefit not exceeding one (1) year
subsistence allowance for the 11,000
members who will be deactivated in 1994.
The Chief of Staff, AFP, shall, subject to the
approval of the Secretary of National Defense,
promulgate policies and procedures for the
payment of separation benefit (GAA of 1994,
p. 740).
The President declared in his Veto Message that the
implementation of this Special Provision to the item on the
CAFGU's shall be subject to prior Presidential approval
pursuant to P.D. No. 1597 and R.A.. No. 6758. He gave the
following reasons for imposing the condition:
I am well cognizant of the laudable intention
of Congress in proposing the amendment of
Special Provision No. 1 of the CAFGU.
However, it is premature at this point in time
of our peace process to earmark and declare

through special provision the actual number

of CAFGU members to be deactivated in CY
1994. I understand that the number to be
deactivated would largely depend on the
result or degree of success of the on-going
peace initiatives which are not yet precisely
determinable today. I have desisted,
therefore, to directly veto said provisions
because this would mean the loss of the
entire special provision to the prejudice of its
beneficient provisions. I therefore declare that
the actual implementation of this special
provision shall be subject to prior Presidential
approval pursuant to the provisions of P.D.
No. 1597 and
R.A. No. 6758 (Veto Message, p. 13).
Petitioners claim that the Congress has required the
deactivation of the CAFGU's when it appropriated the money
for payment of the separation pay of the members of
thereof. The President, however, directed that the
deactivation should be done in accordance to his timetable,
taking into consideration the peace and order situation in
the affected localities.
Petitioners complain that the directive of the President was
tantamount to an administrative embargo of the
congressional will to implement the Constitution's command
to dissolve the CAFGU's (Rollo, G.R. No. 113174,
p. 14; G.R. No. 113888, pp. 9, 14-16). They argue that the
President cannot impair or withhold expenditures authorized
and appropriated by Congress when neither the
Appropriations Act nor other legislation authorize such
impounding (Rollo, G.R. No. 113888, pp. 15-16).
The Solicitor General contends that it is the President, as
Commander-in-Chief of the Armed Forces of the Philippines,
who should determine when the services of the CAFGU's are

no longer needed (Rollo, G.R. No. 113888,

pp. 92-95.).
This is the first case before this Court where the power of
the President to impound is put in issue. Impoundment
refers to a refusal by the President, for whatever reason, to
spend funds made available by Congress. It is the failure to
spend or obligate budget authority of any type
(Notes: Impoundment of Funds, 86 Harvard Law Review
1505 [1973]).
Those who deny to the President the power to impound
argue that once Congress has set aside the fund for a
specific purpose in an appropriations act, it becomes
mandatory on the part of the President to implement the
project and to spend the money appropriated therefor. The
President has no discretion on the matter, for the
Constitution imposes on him the duty to faithfully execute
the laws.
In refusing or deferring the implementation of an
appropriation item, the President in effect exercises a veto
power that is not expressly granted by the Constitution. As
a matter of fact, the Constitution does not say anything
about impounding. The source of the Executive authority
must be found elsewhere.
Proponents of impoundment have invoked at least three
principal sources of the authority of the President. Foremost
is the authority to impound given to him either expressly or
impliedly by Congress. Second is the executive power drawn
from the President's role as Commander-in-Chief. Third is
the Faithful Execution Clause which ironically is the same
provision invoked by petitioners herein.
The proponents insist that a faithful execution of the laws
requires that the President desist from implementing the

law if doing so would prejudice public interest. An example

given is when through efficient and prudent management of
a project, substantial savings are made. In such a case, it is
sheer folly to expect the President to spend the entire
amount budgeted in the law (Notes: Presidential
Impoundment: Constitutional Theories and Political
Realities, 61 Georgetown Law Journal 1295 [1973];
Notes; Protecting the Fisc: Executive Impoundment and
Congressional Power, 82 Yale Law Journal 1686 [1973).
We do not find anything in the language used in the
challenged Special Provision that would imply that Congress
intended to deny to the President the right to defer or
reduce the spending, much less to deactivate 11,000 CAFGU
members all at once in 1994. But even if such is the
intention, the appropriation law is not the proper vehicle for
such purpose. Such intention must be embodied and
manifested in another law considering that it abrades the
powers of the Commander-in-Chief and there are existing
laws on the creation of the CAFGU's to be amended. Again
we state: a provision in an appropriations act cannot
be used to repeal or amend other laws, in this case, P.D.
No. 1597 and R.A. No. 6758.
7. Condition on the appropriation for the Supreme
Court, etc.
(a) In the appropriations for the Supreme Court,
Ombudsman, COA, and CHR, the Congress added the
following provisions:
The Judiciary
xxx xxx xxx
Special Provisions

1. Augmentation of any Item in the Court's

Appropriations. Any savings in the
appropriations for the Supreme Court and the
Lower Courts may be utilized by the Chief
Justice of the Supreme Court to augment any
item of the Court's appropriations for (a)
printing of decisions and publication of
"Philippine Reports"; (b) Commutable
terminal leaves of Justices and other
personnel of the Supreme Court and payment
of adjusted pension rates to retired Justices
entitled thereto pursuant to Administrative
Matter No. 91-8-225-C.A.; (c) repair,
maintenance, improvement and other
operating expenses of the courts' libraries,
including purchase of books and periodicals;
(d) purchase, maintenance and improvement
of printing equipment; (e) necessary
expenses for the employment of temporary
employees, contractual and casual
employees, for judicial administration; (f)
maintenance and improvement of the Court's
Electronic Data
Processing System; (g) extraordinary
expenses of the Chief Justice, attendance in
international conferences and conduct of
training programs; (h) commutable
transportation and representation allowances
and fringe benefits for Justices, Clerks of
Court, Court Administrator, Chiefs of Offices
and other Court personnel in accordance with
the rates prescribed by law; and (i)
compensation of attorney-deofficio: PROVIDED, That as mandated by LOI
No. 489 any increase in salary and allowances
shall be subject to the usual procedures and
policies as provided for under

P.D. No. 985 and other pertinent laws (GAA of

1994, p. 1128; Emphasis supplied).
xxx xxx xxx
Commission on Audit
xxx xxx xxx
5. Use of Savings. The Chairman of the
Commission on Audit is hereby authorized,
subject to appropriate accounting and
auditing rules and regulations, to use savings
for the payment of fringe benefits as may be
authorized by law for officials and personnel
of the Commission (GAA of 1994, p. 1161;
Emphasis supplied).
xxx xxx xxx
Office of the Ombudsman
xxx xxx xxx
6. Augmentation of Items in the appropriation
of the Office of the Ombudsman. The
Ombudsman is hereby authorized, subject to
appropriate accounting and auditing rules and
regulations to augment items of appropriation
in the Office of the Ombudsman from savings
in other items of appropriation actually
released, for: (a) printing and/or publication
of decisions, resolutions, training and
information materials; (b) repair,
maintenance and improvement of OMB
Central and Area/Sectoral facilities; (c)
purchase of books, journals, periodicals and

equipment;
(d) payment of commutable representation
and transportation allowances of officials and
employees who by reason of their positions
are entitled thereto and fringe benefits as
may be authorized specifically by law for
officials and personnel of OMB pursuant to
Section 8 of Article IX-B of the Constitution;
and (e) for other official purposes subject to
accounting and auditing rules and regulations
(GAA of 1994, p. 1174; Emphasis supplied).
xxx xxx xxx
Commission on Human Rights
xxx xxx xxx
1. Use of Savings. The Chairman of the
Commission on Human Rights (CHR) is
hereby authorized, subject to appropriate
accounting and auditing rules and regulations,
to augment any item of appropriation in the
office of the CHR from savings in other items
of appropriations actually released, for: (a)
printing and/or publication of decisions,
resolutions, training materials and educational
publications; (b) repair, maintenance and
improvement of Commission's central and
regional facilities; (c) purchase of books,
journals, periodicals and equipment, (d)
payment of commutable representation and
transportation allowances of officials and
employees who by reason of their positions
are entitled thereto and fringe benefits, as
may be authorized by law for officials and
personnel of CHR, subject to accounting and

auditing rules and regulations (GAA of 1994,

p. 1178; Emphasis supplied).
In his Veto Message, the President expressed his approval
of the conditions included in the GAA of 1994. He noted
that:
The said condition is consistent with the
Constitutional injunction prescribed under
Section 8, Article IX-B of the Constitution
which states that "no elective or appointive
public officer or employee shall receive
additional, double, or indirect compensation
unless specifically authorized by law." I am,
therefore, confident that the heads of the said
offices shall maintain fidelity to the law and
faithfully adhere to the well-established
principle on compensation standardization
(Veto Message, p. 10).
Petitioners claim that the conditions imposed by the
President violated the independence and fiscal autonomy of
the Supreme Court, the Ombudsman, the COA and the CHR.
In the first place, the conditions questioned by petitioners
were placed in the GAB by Congress itself, not by the
President. The Veto Message merely highlighted the
Constitutional mandate that additional or indirect
compensation can only be given pursuant to law.
In the second place, such statements are mere reminders
that the disbursements of appropriations must be made in
accordance with law. Such statements may, at worse, be
treated as superfluities.
(b) In the appropriation for the COA, the President imposed
the condition that the implementation of the budget of the

COA be subject to "the guidelines to be issued by the

President."
The provisions subject to said condition reads:
xxx xxx xxx
3. Revolving Fund. The income of the
Commission on Audit derived from sources
authorized by the Government Auditing Code
of the Philippines (P.D. No. 1445) not
exceeding Ten Million Pesos (P10,000,000)
shall be constituted into a revolving fund
which shall be used for maintenance,
operating and other incidental expenses to
enhance audit services and audit-related
activities. The fund shall be deposited in an
authorized government depository ban, and
withdrawals therefrom shall be made in
accordance with the procedure prescribed by
law and implementing rules and
regulations:PROVIDED, That any interests
earned on such deposit shall be remitted at
the end of each quarter to the national
Treasury and shall accrue to the General
Fund: PROVIDED FURTHER, That the
Commission on Audit shall submit to the
Department of Budget and Management a
quarterly report of income and expenditures
of said revolving fund (GAA of 1994, pp.
1160-1161).
The President cited the "imperative need to rationalize" the
implementation, applicability and operation of use of income
and revolving funds. The Veto Message stated:

. . . I have observed that there are old and

long existing special provisions authorizing
the use of income and the creation of
revolving funds. As a rule, such authorizations
should be discouraged. However, I take it
that these authorizations have legal/statutory
basis aside from being already a vested right
to the agencies concerned which should not
be jeopardized through the Veto Message.
There is, however, imperative need to
rationalize their implementation, applicability
and operation. Thus, in order to substantiate
the purpose and intention of said provisions, I
hereby declare that the operationalization of
the following provisions during budget
implementation shall be subject to
theguidelines to be issued by the
President pursuant to Section 35, Chapter 5,
Book VI of E.O. No. 292 and Sections 65 and
66 of P.D. No. 1445 in relation to Sections 2
and 3 of the General Provisions of this Act
(Veto Message, p. 6; Emphasis Supplied.)
(c) In the appropriation for the DPWH, the President
imposed the condition that in the implementation of DPWH
projects, the administrative and engineering overhead of
5% and 3% "shall be subject to the necessary
administrative guidelines to be formulated by the Executive
pursuant to existing laws." The condition was imposed
because the provision "needs further study" according to
the President.
The following provision was made subject to said condition:
9. Engineering and Administrative Overhead.
Not more than five percent (5%) of the
amount for infrastructure project released by
the Department of Budget and Management

shall be deducted by DPWH for administrative

overhead, detailed engineering and
construction supervision, testing and quality
control, and the like, thus insuring that at
least ninety-five percent (95%) of the
released fund is available for direct
implementation of the
project. PROVIDED, HOWEVER, That for
school buildings, health centers, day-care
centers and barangay halls, the deductible
amount shall not exceed three percent (3%).
Violation of, or non-compliance with, this
provision shall subject the government official
or employee concerned to administrative, civil
and/or criminal sanction under Sections 43
and 80, Book VI of E.O.
No. 292 (GAA of 1994, p. 786).
(d) In the appropriation for the National Housing Authority
(NHA), the President imposed the condition that allocations
for specific projects shall be released and disbursed "in
accordance with the housing program of the government,
subject to prior Executive approval."
The provision subject to the said condition reads:
3. Allocations for Specified Projects. The
following allocations for the specified projects
shall be set aside for corollary works and used
exclusively for the repair, rehabilitation and
construction of buildings, roads, pathwalks,
drainage, waterworks systems, facilities and
amenities in the area:PROVIDED, That any
road to be constructed or rehabilitated shall
conform with the specifications and standards
set by the Department of Public Works and

Highways for such kind of

road: PROVIDED,FURTHER, That savings that
may be available in the future shall be used
for road repair, rehabilitation and
construction:
(1) Maharlika
Village Road
Not less than
P5,000,000
(2) Tenement
Housing Project
(Taguig) Not
less than
P3,000,000
(3) Bagong
Lipunan
Condominium
Project (Taguig)
Not less than
P2,000,000
4. Allocation of Funds. Out of the amount
appropriated for the implementation of
various projects in resettlement areas, Seven
Million Five Hundred Thousand Pesos
(P7,500,000) shall be allocated to the
Dasmarias Bagong Bayan resettlement area,
Eighteen Million Pesos (P18,000,000) to the
Carmona Relocation Center Area (Gen.
Mariano Alvarez) and Three Million Pesos
(P3,000,000) to the Bulihan Sites and
Services, all of which will be for the
cementing of roads in accordance with DPWH
standards.

5. Allocation for Sapang Palay. An allocation

of Eight Million Pesos (P8,000,000) shall be
set aside for the asphalting of seven (7)
kilometer main road of Sapang Palay, San
Jose Del Monte, Bulacan
(GAA of 1994, p. 1216).
The President imposed the conditions: (a) that the
"operationalization" of the special provision on revolving
funds of the COA "shall be subject to guidelines to be issued
by the President pursuant to Section 35, Chapter 5,
Book VI of E.O. 292 and Sections 65 and 66 of P.D. No.
1445 in relation to Sections 2 and 3 of the General
Provisions of this Act" (Rollo, G.R.
No. 113174, pp. 5,7-8); (b) that the implementation of
Special Provision No. 9 of the DPWH on the mandatory
retention of 5% and 3% of the amounts released by said
Department "be subject to the necessary administrative
guidelines to be formulated by the Executive pursuant to
existing law" (Rollo, G.R. No. 113888; pp. 10, 14-16); and
(c) that the appropriations authorized for the NHA can be
released only "in accordance with the housing program of
the government subject to prior Executive approval" (Rollo,
G.R. No. 113888, pp. 10-11;
14-16).
The conditions objected to by petitioners are mere
reminders that the implementation of the items on which
the said conditions were imposed, should be done in
accordance with existing laws, regulations or policies. They
did not add anything to what was already in place at the
time of the approval of the GAA of 1994.
There is less basis to complain when the President said that
the expenditures shall be subject to guidelines he will issue.
Until the guidelines are issued, it cannot be determined
whether they are proper or inappropriate. The issuance of
administrative guidelines on the use of public funds

authorized by Congress is simply an exercise by the

President of his constitutional duty to see that the laws are
faithfully executed (1987 Constitution, Art. VII, Sec. 17;
Planas v. Gil 67 Phil. 62 [1939]). Under the Faithful
Execution Clause, the President has the power to take
"necessary and proper steps" to carry into execution the law
(Schwartz, On Constitutional Law, p. 147 [1977]). These
steps are the ones to be embodied in the guidelines.
IV
Petitioners chose to avail of the special civil actions but
those remedies can be used only when respondents have
acted "without or in excess" of jurisdiction, or "with grave
abuse of discretion," (Revised Rules of Court,
Rule 65, Section 2). How can we begrudge the President for
vetoing the Special Provision on the appropriation for debt
payment when he merely followed our decision in Gonzales?
How can we say that Congress has abused its discretion
when it appropriated a bigger sum for debt payment than
the amount appropriated for education, when it merely
followed our dictum in Guingona?
Article 8 of the Civil Code of Philippines, provides:
Judicial decisions applying or interpreting the
laws or the constitution shall from a part of
the legal system of the Philippines.
The Court's interpretation of the law is part of that law as of
the date of its enactment since the court's interpretation
merely establishes the contemporary legislative intent that
the construed law purports to carry into effect (People v.
Licera, 65 SCRA 270 [1975]). Decisions of the Supreme
Court assume the same authority as statutes (Floresca v.
Philex Mining Corporation, 136 SCRA 141 [1985]).

Even if Guingona and Gonzales are considered hard cases

that make bad laws and should be reversed, such reversal
cannot nullify prior acts done in reliance thereof.
WHEREFORE, the petitions are DISMISSED, except with
respect to
(1) G.R. Nos. 113105 and 113766 only insofar as they pray
for the annulment of the veto of the special provision on
debt service specifying that the fund therein appropriated
"shall be used for payment of the principal and interest of
foreign and domestic indebtedness" prohibiting the use of
the said funds "to pay for the liabilities of the Central Bank
Board of Liquidators", and (2) G.R. No. 113888 only insofar
as it prays for the annulment of the veto of: (a) the second
paragraph of Special Provision No. 2 of the item of
appropriation for the Department of Public Works and
Highways (GAA of 1994, pp. 785-786); and (b) Special
Provision No. 12 on the purchase of medicines by the Armed
Forces of the Philippines (GAA of 1994, p. 748), which is
GRANTED.
SO ORDERED.
Narvasa, C.J., Feliciano, Bidin, Regalado, Davide, Jr.,
Romero, Bellosillo, Melo, Puno, Kapunan and
Mendoza, JJ., concur.

Separate Opinions

PADILLA, J., concurring and dissenting:

I concur with the ponencia of Mr. Justice Camilo D. Quiason

except in so far as it re-affirms the Court's decision
inGonzalez v. Macaraig (191 SCRA 452).
Sec. 27(2), Art. VI of the Constitution states:
The President shall have the power to veto
any particular item or items in an
appropriation, revenue, or tariff bill, but the
veto shall not effect the item or items to
which he does not object.
In my dissenting opinion in Gonzalez, I stated that:
The majority opinion positions the veto
questioned in this case within the scope of
Section 27(2) [Article VI of the Constitution].
I do not see how this can be done without
doing violence to the constitutional design.
The distinction between an item-veto and
a provision veto has been traditionally
recognized in constitutional litigation and
budgetary practice. As stated by Mr. Justice
Sutherland, speaking for the U.S. Supreme
Court in Bengzon v. Secretary of Justice, 299
U.S. 410-416:
. . . An item of an appropriation
bill obviously means an item
which in itself is a specific
appropriation of money, not
some general provisions of law
which happens to be put into
an appropriation bill . . .
When the Constitution in Section 27(2)
empowers the President to veto any particular

item or items in the appropriation act, it does

not
confer in fact, it excludes the power to
veto any particular provision or provisions in
said act.
In an earlier case, Sarmiento v. Mison, et
al., 156 SCRA 549, this court referred to its
duty to construe the Constitution, not in
accordance with how the executive or the
legislative would want it construed, but in
accordance with what it says and provides.
When the Constitution states that the
President has the power to veto any particular
item or items in the appropriation act, this
must be taken as a component of that
delicate balance of power between the
executive and legislative, so that, for this
Court to construe Sec. 27(2) of the
Constitution as also empowering the
President to veto any particular provision or
provisions in the appropriations act, is to load
the scale in favor of the executive, at the
expense of that delicate balance of power.
I therefore disagree with the majority's pronouncements
which would validate the veto by the President of specific
provisions in the appropriations act based on the contention
that such are "inappropriate provisions." Even assuming, for
the sake of argument, that a provision in the appropriations
act is "inappropriate" from the Presidential standpoint, it is
still a provision, not an item, in an appropriations act and,
therefore, outside the veto power of the Executive.
VITUG, J., concurring:

I concur on the points so well expounded by a most

respected colleague, Mr. Justice Camilo D. Quiason. I should
like to highlight a bit, however, that part of
the ponencia dealing on the Countrywide Development Fund
or, so commonly referred to as, the infamous "pork barrel".
I agree that it lies with Congress to determine in an
appropriation act the activities and the projects that are
desirable and may thus be funded. Once, however, such
identification and the corresponding appropriation therefore
is done, the legislative act is completed and it ends there.
Thereafter, the Executive is behooved, with exclusive
responsibility and authority, to see to it that the legislative
will is properly carried out. I cannot subscribe to another
theory invoked by some quarters that, in so implementing
the law, the Executive does so only by way of delegation.
Congress neither may delegate what it does not have nor
may encroach on the powers of a co-equal, independent
and coordinate branch.
Within its own sphere, Congress acts as a body, not as the
individuals that comprise it, in any action or decision that
can bind it, or be said to have been done by it, under its
constitutional authority. Even assuming that overseeing the
laws it enacts continues to be a legislative process, one that
I find difficult to accept, it is Congress itself, not any of its
members, that must exercise that function.
I cannot debate the fact that the members of Congress,
more than the President and his colleagues, would have the
best feel on the needs of their own respective cosntituents.
I see no legal obstacle, however, in their making, just like
anyone else, the proper recommendations to albeit not
necessarily conclusive on, the President for the purpose.
Neother would it be objectionable for Congrss, by law, to
appropriate funds for specific projects as it may be minded;
to give that authoriy, however, to the individual members of

Congress in whatever guise, I am afraid, would be

constitutionality impermissible.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 208566

November 19, 2013

GRECO ANTONIOUS BEDA B. BELGICA, JOSE M.

VILLEGAS JR. JOSE L. GONZALEZ REUBEN M. ABANTE
and QUINTIN PAREDES SAN DIEGO, Petitioners,
vs.
HONORABLE EXECUTIVE SECRETARY PAQUITO N.
OCHOA JR. SECRETARY OF BUDGET AND
MANAGEMENT FLORENCIO B. ABAD, NATIONAL
TREASURER ROSALIA V. DE LEON SENATE OF THE
PHILIPPINES represented by FRANKLIN M. DRILON m
his capacity as SENATE PRESIDENT and HOUSE OF
REPRESENTATIVES represented by FELICIANO S.
BELMONTE, JR. in his capacity as SPEAKER OF THE
HOUSE, Respondents.
x-----------------------x
G.R. No. 208493
SOCIAL JUSTICE SOCIETY (SJS) PRESIDENT SAMSON
S. ALCANTARA, Petitioner,
vs.
HONORABLE FRANKLIN M. DRILON in his capacity as
SENATE PRESIDENT and HONORABLE FELICIANO S.
BELMONTE, JR., in his capacity as SPEAKER OF THE
HOUSE OF REPRESENTATIVES, Respondents.
x-----------------------x
G.R. No. 209251

PEDRITO M. NEPOMUCENO, Former Mayor-Boac,

Marinduque Former Provincial Board Member Province of Marinduque, Petitioner,
vs.
PRESIDENT BENIGNO SIMEON C. AQUINO III* and
SECRETARY FLORENCIO BUTCH ABAD, DEPARTMENT
OF BUDGET AND MANAGEMENT, Respondents.
DECISION
PERLAS-BERNABE, J.:
"Experience is the oracle of truth."1
-James Madison
Before the Court are consolidated petitions2 taken under
Rule 65 of the Rules of Court, all of which assail the
constitutionality of the Pork Barrel System. Due to the
complexity of the subject matter, the Court shall heretofore
discuss the systems conceptual underpinnings before
detailing the particulars of the constitutional challenge.
The Facts
I. Pork Barrel: General Concept.
"Pork Barrel" is political parlance of American English origin.3 Historically, its usage may be traced
to the degrading ritual of rolling out a barrel stuffed
with pork to a multitude of black slaves who would
cast their famished bodies into the porcine feast to
assuage their hunger with morsels coming from the
generosity of their well-fed master.4 This practice
was later compared to the actions of American
legislators in trying to direct federal budgets in favor
of their districts.5 While the advent of refrigeration

has made the actual pork barrel obsolete, it persists

in reference to political bills that "bring home the
bacon" to a legislators district and constituents.6 In
a more technical sense, "Pork Barrel" refers to an
appropriation of government spending meant for
localized projects and secured solely or primarily to
bring money to a representative's district.7 Some
scholars on the subject further use it to refer to
legislative control of local appropriations.8
In the Philippines, "Pork Barrel" has been commonly
referred to as lump-sum, discretionary funds of
Members of the Legislature,9 although, as will be
later discussed, its usage would evolve in reference
to certain funds of the Executive.
II. History of Congressional Pork Barrel in the Philippines.
A. Pre-Martial Law Era (1922-1972).
Act 3044,10 or the Public Works Act of 1922,
is considered11 as the earliest form of
"Congressional Pork Barrel" in the Philippines
since the utilization of the funds appropriated
therein were subjected to post-enactment
legislator approval. Particularly, in the area of
fund release, Section 312 provides that the
sums appropriated for certain public works
projects13"shall be distributed x x x subject to
the approval of a joint committee elected by
the Senate and the House of Representatives.
"The committee from each House may also
authorize one of its members to approve the
distribution made by the Secretary of
Commerce and Communications."14 Also, in
the area of fund realignment, the same
section provides that the said secretary, "with

the approval of said joint committee, or of the

authorized members thereof, may, for the
purposes of said distribution, transfer
unexpended portions of any item of
appropriation under this Act to any other item
hereunder."
In 1950, it has been documented15 that postenactment legislator participation broadened
from the areas of fund release and
realignment to the area of project
identification. During that year, the
mechanics of the public works act was
modified to the extent that the discretion of
choosing projects was transferred from the
Secretary of Commerce and Communications
to legislators. "For the first time, the law
carried a list of projects selected by Members
of Congress, they being the representatives
of the people, either on their own account or
by consultation with local officials or civil
leaders."16 During this period, the pork barrel
process commenced with local government
councils, civil groups, and individuals
appealing to Congressmen or Senators for
projects. Petitions that were accommodated
formed part of a legislators allocation, and
the amount each legislator would eventually
get is determined in a caucus convened by
the majority. The amount was then integrated
into the administration bill prepared by the
Department of Public Works and
Communications. Thereafter, the Senate and
the House of Representatives added their own
provisions to the bill until it was signed into
law by the President the Public Works
Act.17 In the 1960s, however, pork barrel
legislation reportedly ceased in view of the

stalemate between the House of

Representatives and the Senate.18
B. Martial Law Era (1972-1986).
While the previous" Congressional Pork
Barrel" was apparently discontinued in 1972
after Martial Law was declared, an era when
"one man controlled the legislature,"19 the
reprieve was only temporary. By 1982, the
Batasang Pambansa had already introduced a
new item in the General Appropriations Act
(GAA) called the" Support for Local
Development Projects" (SLDP) under the
article on "National Aid to Local Government
Units". Based on reports,20 it was under the
SLDP that the practice of giving lump-sum
allocations to individual legislators began,
with each assemblyman
receiving P500,000.00. Thereafter,
assemblymen would communicate their
project preferences to the Ministry of Budget
and Management for approval. Then, the said
ministry would release the allocation papers
to the Ministry of Local Governments, which
would, in turn, issue the checks to the city or
municipal treasurers in the assemblymans
locality. It has been further reported that
"Congressional Pork Barrel" projects under
the SLDP also began to cover not only public
works projects, or so- called "hard projects",
but also "soft projects",21 or non-public works
projects such as those which would fall under
the categories of, among others, education,
health and livelihood.22
C. Post-Martial Law Era:

Corazon Cojuangco Aquino Administration

(1986-1992).
After the EDSA People Power Revolution in
1986 and the restoration of Philippine
democracy, "Congressional Pork Barrel" was
revived in the form of the "Mindanao
Development Fund" and the "Visayas
Development Fund" which were created with
lump-sum appropriations of P480 Million
and P240 Million, respectively, for the funding
of development projects in the Mindanao and
Visayas areas in 1989. It has been
documented23 that the clamor raised by the
Senators and the Luzon legislators for a
similar funding, prompted the creation of the
"Countrywide Development Fund" (CDF)
which was integrated into the 1990
GAA24 with an initial funding ofP2.3 Billion to
cover "small local infrastructure and other
priority community projects."
Under the GAAs for the years 1991 and
1992,25 CDF funds were, with the approval of
the President, to be released directly to the
implementing agencies but "subject to the
submission of the required list of projects and
activities."Although the GAAs from 1990 to
1992 were silent as to the amounts of
allocations of the individual legislators, as well
as their participation in the identification of
projects, it has been reported26 that by 1992,
Representatives were receivingP12.5 Million
each in CDF funds, while Senators were
receiving P18 Million each, without any
limitation or qualification, and that they could
identify any kind of project, from hard or
infrastructure projects such as roads, bridges,

and buildings to "soft projects" such as

textbooks, medicines, and scholarships.27
D. Fidel Valdez Ramos (Ramos) Administration (19921998).
The following year, or in 1993,28 the GAA
explicitly stated that the release of CDF funds
was to be made upon the submission of the
list of projects and activities identified by,
among others, individual legislators. For the
first time, the 1993 CDF Article included an
allocation for the Vice-President.29 As such,
Representatives were allocated P12.5 Million
each in CDF funds, Senators, P18 Million
each, and the Vice-President, P20 Million.
In 1994,30 1995,31 and 1996,32 the GAAs
contained the same provisions on project
identification and fund release as found in the
1993 CDF Article. In addition, however, the
Department of Budget and Management
(DBM) was directed to submit reports to the
Senate Committee on Finance and the House
Committee on Appropriations on the releases
made from the funds.33
Under the 199734 CDF Article, Members of
Congress and the Vice-President, in
consultation with the implementing agency
concerned, were directed to submit to the
DBM the list of 50% of projects to be funded
from their respective CDF allocations which
shall be duly endorsed by (a) the Senate
President and the Chairman of the Committee
on Finance, in the case of the Senate, and (b)
the Speaker of the House of Representatives

and the Chairman of the Committee on

Appropriations, in the case of the House of
Representatives; while the list for the
remaining 50% was to be submitted within
six (6) months thereafter. The same article
also stated that the project list, which would
be published by the DBM,35 "shall be the basis
for the release of funds" and that "no funds
appropriated herein shall be disbursed for
projects not included in the list herein
required."
The following year, or in 1998,36 the foregoing
provisions regarding the required lists and
endorsements were reproduced, except that
the publication of the project list was no
longer required as the list itself sufficed for
the release of CDF Funds.
The CDF was not, however, the lone form of
"Congressional Pork Barrel" at that time.
Other forms of "Congressional Pork Barrel"
were reportedly fashioned and inserted into
the GAA (called "Congressional Insertions" or
"CIs") in order to perpetuate the ad
ministrations political agenda.37 It has been
articulated that since CIs "formed part and
parcel of the budgets of executive
departments, they were not easily identifiable
and were thus harder to monitor."
Nonetheless, the lawmakers themselves as
well as the finance and budget officials of the
implementing agencies, as well as the DBM,
purportedly knew about the
insertions.38 Examples of these CIs are the
Department of Education (DepEd) School
Building Fund, the Congressional Initiative
Allocations, the Public Works Fund, the El

Nio Fund, and the Poverty Alleviation

Fund.39 The allocations for the School Building
Fund, particularly, shall be made upon prior
consultation with the representative of the
legislative district concerned.40 Similarly, the
legislators had the power to direct how,
where and when these appropriations were to
be spent.41
E. Joseph Ejercito Estrada (Estrada) Administration (19982001).
In 1999,42 the CDF was removed in the GAA
and replaced by three (3) separate forms of
CIs, namely, the "Food Security Program
Fund,"43 the "Lingap Para Sa Mahihirap
Program Fund,"44and the "Rural/Urban
Development Infrastructure Program
Fund,"45 all of which contained a special
provision requiring "prior consultation" with
the Member s of Congress for the release of
the funds.
It was in the year 200046 that the "Priority
Development Assistance Fund" (PDAF)
appeared in the GAA. The requirement of
"prior consultation with the respective
Representative of the District" before PDAF
funds were directly released to the
implementing agency concerned was explicitly
stated in the 2000 PDAF Article. Moreover,
realignment of funds to any expense category
was expressly allowed, with the sole condition
that no amount shall be used to fund personal
services and other personnel benefits.47 The
succeeding PDAF provisions remained the
same in view of the re-enactment48 of the
2000 GAA for the year 2001.

F. Gloria Macapagal-Arroyo (Arroyo) Administration (20012010).

The 200249 PDAF Article was brief and
straightforward as it merely contained a
single special provision ordering the release of
the funds directly to the implementing agency
or local government unit concerned, without
further qualifications. The following year,
2003,50 the same single provision was
present, with simply an expansion of purpose
and express authority to realign.
Nevertheless, the provisions in the 2003
budgets of the Department of Public Works
and Highways51 (DPWH) and the
DepEd52 required prior consultation with
Members of Congress on the aspects of
implementation delegation and project list
submission, respectively. In 2004, the 2003
GAA was re-enacted.53
In 2005,54 the PDAF Article provided that the
PDAF shall be used "to fund priority programs
and projects under the ten point agenda of
the national government and shall be
released directly to the implementing
agencies." It also introduced the program
menu concept,55 which is essentially a list of
general programs and implementing agencies
from which a particular PDAF project may be
subsequently chosen by the identifying
authority. The 2005 GAA was re-enacted56 in
2006 and hence, operated on the same
bases. In similar regard, the program menu
concept was consistently integrated into the
2007,57 2008,58 2009,59 and 201060 GAAs.

Textually, the PDAF Articles from 2002 to

2010 were silent with respect to the specific
amounts allocated for the individual
legislators, as well as their participation in the
proposal and identification of PDAF projects to
be funded. In contrast to the PDAF Articles,
however, the provisions under the DepEd
School Building Program and the DPWH
budget, similar to its predecessors, explicitly
required prior consultation with the concerned
Member of Congress61anent certain aspects of
project implementation.
Significantly, it was during this era that
provisions which allowed formal participation
of non-governmental organizations (NGO) in
the implementation of government projects
were introduced. In the Supplemental Budget
for 2006, with respect to the appropriation for
school buildings, NGOs were, by law,
encouraged to participate. For such purpose,
the law stated that "the amount of at
least P250 Million of the P500 Million allotted
for the construction and completion of school
buildings shall be made available to NGOs
including the Federation of Filipino-Chinese
Chambers of Commerce and Industry, Inc. for
its "Operation Barrio School" program, with
capability and proven track records in the
construction of public school buildings x x
x."62 The same allocation was made available
to NGOs in the 2007 and 2009 GAAs under
the DepEd Budget.63 Also, it was in 2007 that
the Government Procurement Policy
Board64(GPPB) issued Resolution No. 12-2007
dated June 29, 2007 (GPPB Resolution 122007), amending the implementing rules and
regulations65 of RA 9184,66 the Government

Procurement Reform Act, to include, as a

form of negotiated procurement,67 the
procedure whereby the Procuring Entity68 (the
implementing agency) may enter into a
memorandum of agreement with an NGO,
provided that "an appropriation law or
ordinance earmarks an amount to be
specifically contracted out to NGOs."69
G. Present Administration (2010-Present).
Differing from previous PDAF Articles but
similar to the CDF Articles, the 201170 PDAF
Article included an express statement on
lump-sum amounts allocated for individual
legislators and the Vice-President:
Representatives were given P70 Million each,
broken down into P40 Million for "hard
projects" and P30 Million for "soft projects";
while P200 Million was given to each Senator
as well as the Vice-President, with a P100
Million allocation each for "hard" and "soft
projects." Likewise, a provision on
realignment of funds was included, but with
the qualification that it may be allowed only
once. The same provision also allowed the
Secretaries of Education, Health, Social
Welfare and Development, Interior and Local
Government, Environment and Natural
Resources, Energy, and Public Works and
Highways to realign PDAF Funds, with the
further conditions that: (a) realignment is
within the same implementing unit and same
project category as the original project, for
infrastructure projects; (b) allotment released
has not yet been obligated for the original
scope of work, and (c) the request for

realignment is with the concurrence of the

legislator concerned.71
In the 201272 and 201373 PDAF Articles, it is
stated that the "identification of projects
and/or designation of beneficiaries shall
conform to the priority list, standard or design
prepared by each implementing agency
(priority list requirement) x x x." However, as
practiced, it would still be the individual
legislator who would choose and identify the
project from the said priority list.74
Provisions on legislator allocations75 as well as
fund realignment76 were included in the 2012
and 2013 PDAF Articles; but the allocation for
the Vice-President, which was pegged at P200
Million in the 2011 GAA, had been deleted. In
addition, the 2013 PDAF Article now allowed
LGUs to be identified as implementing
agencies if they have the technical capability
to implement the projects.77 Legislators were
also allowed to identify programs/projects,
except for assistance to indigent patients and
scholarships, outside of his legislative district
provided that he secures the written
concurrence of the legislator of the intended
outside-district, endorsed by the Speaker of
the House.78 Finally, any realignment of PDAF
funds, modification and revision of project
identification, as well as requests for release
of funds, were all required to be favorably
endorsed by the House Committee on
Appropriations and the Senate Committee on
Finance, as the case may be.79
III. History of Presidential Pork Barrel in the Philippines.

While the term "Pork Barrel" has been typically

associated with lump-sum, discretionary funds of
Members of Congress, the present cases and the
recent controversies on the matter have, however,
shown that the terms usage has expanded to
include certain funds of the President such as the
Malampaya Funds and the Presidential Social Fund.
On the one hand, the Malampaya Funds was created
as a special fund under Section 880 of Presidential
Decree No. (PD) 910,81 issued by then President
Ferdinand E. Marcos (Marcos) on March 22, 1976. In
enacting the said law, Marcos recognized the need to
set up a special fund to help intensify, strengthen,
and consolidate government efforts relating to the
exploration, exploitation, and development of
indigenous energy resources vital to economic
growth.82 Due to the energy-related activities of the
government in the Malampaya natural gas field in
Palawan, or the "Malampaya Deep Water Gas-toPower Project",83 the special fund created under PD
910 has been currently labeled as Malampaya Funds.
On the other hand the Presidential Social Fund was
created under Section 12, Title IV84 of PD 1869,85 or
the Charter of the Philippine Amusement and Gaming
Corporation (PAGCOR). PD 1869 was similarly issued
by Marcos on July 11, 1983. More than two (2) years
after, he amended PD 1869 and accordingly issued
PD 1993 on October 31, 1985,86 amending Section
1287 of the former law. As it stands, the Presidential
Social Fund has been described as a special funding
facility managed and administered by the
Presidential Management Staff through which the
President provides direct assistance to priority
programs and projects not funded under the regular
budget. It is sourced from the share of the

government in the aggregate gross earnings of

PAGCOR.88
IV. Controversies in the Philippines.
Over the decades, "pork" funds in the Philippines
have increased tremendously,89 owing in no small
part to previous Presidents who reportedly used the
"Pork Barrel" in order to gain congressional
support.90 It was in 1996 when the first controversy
surrounding the "Pork Barrel" erupted. Former
Marikina City Representative Romeo Candazo
(Candazo), then an anonymous source, "blew the lid
on the huge sums of government money that
regularly went into the pockets of legislators in the
form of kickbacks."91 He said that "the kickbacks
were SOP (standard operating procedure) among
legislators and ranged from a low 19 percent to a
high 52 percent of the cost of each project, which
could be anything from dredging, rip rapping,
sphalting, concreting, and construction of school
buildings."92 "Other sources of kickbacks that
Candazo identified were public funds intended for
medicines and textbooks. A few days later, the tale
of the money trail became the banner story of the
Philippine Daily Inquirer issue of August 13, 1996,
accompanied by an illustration of a roasted
pig."93 "The publication of the stories, including those
about congressional initiative allocations of certain
lawmakers, including P3.6 Billion for a Congressman,
sparked public outrage."94
Thereafter, or in 2004, several concerned citizens
sought the nullification of the PDAF as enacted in the
2004 GAA for being unconstitutional. Unfortunately,
for lack of "any pertinent evidentiary support that
illegal misuse of PDAF in the form of kickbacks has

become a common exercise of unscrupulous

Members of Congress," the petition was dismissed.95
Recently, or in July of the present year, the National
Bureau of Investigation (NBI) began its probe into
allegations that "the government has been defrauded
of some P10 Billion over the past 10 years by a
syndicate using funds from the pork barrel of
lawmakers and various government agencies for
scores of ghost projects."96 The investigation was
spawned by sworn affidavits of six (6) whistleblowers who declared that JLN Corporation "JLN"
standing for Janet Lim Napoles (Napoles) had
swindled billions of pesos from the public coffers for
"ghost projects" using no fewer than 20 dummy
NGOs for an entire decade. While the NGOs were
supposedly the ultimate recipients of PDAF funds,
the whistle-blowers declared that the money was
diverted into Napoles private accounts.97 Thus, after
its investigation on the Napoles controversy, criminal
complaints were filed before the Office of the
Ombudsman, charging five (5) lawmakers for
Plunder, and three (3) other lawmakers for
Malversation, Direct Bribery, and Violation of the
Anti-Graft and Corrupt Practices Act. Also
recommended to be charged in the complaints are
some of the lawmakers chiefs -of-staff or
representatives, the heads and other officials of
three (3) implementing agencies, and the several
presidents of the NGOs set up by Napoles.98
On August 16, 2013, the Commission on Audit (CoA)
released the results of a three-year audit
investigation99 covering the use of legislators' PDAF
from 2007 to 2009, or during the last three (3) years
of the Arroyo administration. The purpose of the
audit was to determine the propriety of releases of
funds under PDAF and the Various Infrastructures

including Local Projects (VILP)100 by the DBM, the

application of these funds and the implementation of
projects by the appropriate implementing agencies
and several government-owned-and-controlled
corporations (GOCCs).101 The total releases covered
by the audit amounted to P8.374 Billion in PDAF
and P32.664 Billion in VILP, representing 58% and
32%, respectively, of the total PDAF and VILP
releases that were found to have been made
nationwide during the audit period.102 Accordingly,
the Co As findings contained in its Report No. 201203 (CoA Report), entitled "Priority Development
Assistance Fund (PDAF) and Various Infrastructures
including Local Projects (VILP)," were made public,
the highlights of which are as follows:103
Amounts released for projects identified by
a considerable number of legislators
significantly exceeded their respective
allocations.
Amounts were released for projects outside
of legislative districts of sponsoring members
of the Lower House.
Total VILP releases for the period exceeded
the total amount appropriated under the 2007
to 2009 GAAs.
Infrastructure projects were constructed on
private lots without these having been turned
over to the government.
Significant amounts were released to
implementing agencies without the latters
endorsement and without considering their

mandated functions, administrative and

technical capabilities to implement projects.
Implementation of most livelihood projects
was not undertaken by the implementing
agencies themselves but by NGOs endorsed
by the proponent legislators to which the
Funds were transferred.
The funds were transferred to the NGOs in
spite of the absence of any appropriation law
or ordinance.
Selection of the NGOs were not compliant
with law and regulations.
Eighty-Two (82) NGOs entrusted with
implementation of seven hundred seventy
two (772) projects amount to P6.156 Billion
were either found questionable, or submitted
questionable/spurious documents, or failed to
liquidate in whole or in part their utilization of
the Funds.
Procurement by the NGOs, as well as some
implementing agencies, of goods and services
reportedly used in the projects were not
compliant with law.
As for the "Presidential Pork Barrel", whistle-blowers
alleged that" at least P900 Million from royalties in
the operation of the Malampaya gas project off
Palawan province intended for agrarian reform
beneficiaries has gone into a dummy
NGO."104 According to incumbent CoA Chairperson
Maria Gracia Pulido Tan (CoA Chairperson), the CoA

is, as of this writing, in the process of preparing "one

consolidated report" on the Malampaya Funds.105
V. The Procedural Antecedents.
Spurred in large part by the findings contained in the
CoA Report and the Napoles controversy, several
petitions were lodged before the Court similarly
seeking that the "Pork Barrel System" be declared
unconstitutional. To recount, the relevant procedural
antecedents in these cases are as follows:
On August 28, 2013, petitioner Samson S. Alcantara
(Alcantara), President of the Social Justice Society, filed a
Petition for Prohibition of even date under Rule 65 of the
Rules of Court (Alcantara Petition), seeking that the "Pork
Barrel System" be declared unconstitutional, and a writ of
prohibition be issued permanently restraining respondents
Franklin M. Drilon and Feliciano S. Belmonte, Jr., in their
respective capacities as the incumbent Senate President and
Speaker of the House of Representatives, from further
taking any steps to enact legislation appropriating funds for
the "Pork Barrel System," in whatever form and by
whatever name it may be called, and from approving
further releases pursuant thereto.106 The Alcantara Petition
was docketed as G.R. No. 208493.
On September 3, 2013, petitioners Greco Antonious Beda B.
Belgica, Jose L. Gonzalez, Reuben M. Abante, Quintin
Paredes San Diego (Belgica, et al.), and Jose M. Villegas, Jr.
(Villegas) filed an Urgent Petition For Certiorari and
Prohibition With Prayer For The Immediate Issuance of
Temporary Restraining Order (TRO) and/or Writ of
Preliminary Injunction dated August 27, 2013 under Rule 65
of the Rules of Court (Belgica Petition), seeking that the
annual "Pork Barrel System," presently embodied in the
provisions of the GAA of 2013 which provided for the 2013

PDAF, and the Executives lump-sum, discretionary funds,

such as the Malampaya Funds and the Presidential Social
Fund,107 be declared unconstitutional and null and void for
being acts constituting grave abuse of discretion. Also, they
pray that the Court issue a TRO against respondents
Paquito N. Ochoa, Jr., Florencio B. Abad (Secretary Abad)
and Rosalia V. De Leon, in their respective capacities as the
incumbent Executive Secretary, Secretary of the
Department of Budget and Management (DBM), and
National Treasurer, or their agents, for them to immediately
cease any expenditure under the aforesaid funds. Further,
they pray that the Court order the foregoing respondents to
release to the CoA and to the public: (a) "the complete
schedule/list of legislators who have availed of their PDAF
and VILP from the years 2003 to 2013, specifying the use of
the funds, the project or activity and the recipient entities
or individuals, and all pertinent data thereto"; and (b) "the
use of the Executives lump-sum, discretionary funds,
including the proceeds from the x x x Malampaya Funds and
remittances from the PAGCOR x x x from 2003 to 2013,
specifying the x x x project or activity and the recipient
entities or individuals, and all pertinent data
thereto."108 Also, they pray for the "inclusion in budgetary
deliberations with the Congress of all presently off-budget,
lump-sum, discretionary funds including, but not limited to,
proceeds from the Malampaya Funds and remittances from
the PAGCOR."109 The Belgica Petition was docketed as G.R.
No. 208566.110
Lastly, on September 5, 2013, petitioner Pedrito M.
Nepomuceno (Nepomuceno), filed a Petition dated August
23, 2012 (Nepomuceno Petition), seeking that the PDAF be
declared unconstitutional, and a cease and desist order be
issued restraining President Benigno Simeon S. Aquino III
(President Aquino) and Secretary Abad from releasing such
funds to Members of Congress and, instead, allow their
release to fund priority projects identified and approved by
the Local Development Councils in consultation with the

executive departments, such as the DPWH, the Department

of Tourism, the Department of Health, the Department of
Transportation, and Communication and the National
Economic Development Authority.111 The Nepomuceno
Petition was docketed as UDK-14951.112
On September 10, 2013, the Court issued a Resolution of
even date (a) consolidating all cases; (b) requiring public
respondents to comment on the consolidated petitions; (c)
issuing a TRO (September 10, 2013 TRO) enjoining the
DBM, National Treasurer, the Executive Secretary, or any of
the persons acting under their authority from releasing (1)
the remaining PDAF allocated to Members of Congress
under the GAA of 2013, and (2) Malampaya Funds under
the phrase "for such other purposes as may be hereafter
directed by the President" pursuant to Section 8 of PD 910
but not for the purpose of "financing energy resource
development and exploitation programs and projects of the
government under the same provision; and (d) setting the
consolidated cases for Oral Arguments on October 8, 2013.
On September 23, 2013, the Office of the Solicitor General
(OSG) filed a Consolidated Comment (Comment) of even
date before the Court, seeking the lifting, or in the
alternative, the partial lifting with respect to educational
and medical assistance purposes, of the Courts September
10, 2013 TRO, and that the consolidated petitions be
dismissed for lack of merit.113
On September 24, 2013, the Court issued a Resolution of
even date directing petitioners to reply to the Comment.
Petitioners, with the exception of Nepomuceno, filed their
respective replies to the Comment: (a) on September 30,
2013, Villegas filed a separate Reply dated September 27,
2013 (Villegas Reply); (b) on October 1, 2013, Belgica, et
al. filed a Reply dated September 30, 2013 (Belgica Reply);

and (c) on October 2, 2013, Alcantara filed a Reply dated

October 1, 2013.
On October 1, 2013, the Court issued an Advisory providing
for the guidelines to be observed by the parties for the Oral
Arguments scheduled on October 8, 2013. In view of the
technicality of the issues material to the present cases,
incumbent Solicitor General Francis H. Jardeleza (Solicitor
General) was directed to bring with him during the Oral
Arguments representative/s from the DBM and Congress
who would be able to competently and completely answer
questions related to, among others, the budgeting process
and its implementation. Further, the CoA Chairperson was
appointed as amicus curiae and thereby requested to
appear before the Court during the Oral Arguments.
On October 8 and 10, 2013, the Oral Arguments were
conducted. Thereafter, the Court directed the parties to
submit their respective memoranda within a period of seven
(7) days, or until October 17, 2013, which the parties
subsequently did.
The Issues Before the Court
Based on the pleadings, and as refined during the Oral
Arguments, the following are the main issues for the Courts
resolution:
I. Procedural Issues.
Whether or not (a) the issues raised in the consolidated
petitions involve an actual and justiciable controversy; (b)
the issues raised in the consolidated petitions are matters of
policy not subject to judicial review; (c) petitioners have
legal standing to sue; and (d) the Courts Decision dated
August 19, 1994 in G.R. Nos. 113105, 113174, 113766, and
113888, entitled "Philippine Constitution Association v.

Enriquez"114 (Philconsa) and Decision dated April 24, 2012

in G.R. No. 164987, entitled "Lawyers Against Monopoly and
Poverty v. Secretary of Budget and Management"115 (LAMP)
bar the re-litigatio n of the issue of constitutionality of the
"Pork Barrel System" under the principles of res judicata
and stare decisis.
II. Substantive Issues on the "Congressional Pork Barrel."
Whether or not the 2013 PDAF Article and all other
Congressional Pork Barrel Laws similar thereto are
unconstitutional considering that they violate the principles
of/constitutional provisions on (a) separation of powers; (b)
non-delegability of legislative power; (c) checks and
balances; (d) accountability; (e) political dynasties; and (f)
local autonomy.
III. Substantive Issues on the "Presidential Pork Barrel."
Whether or not the phrases (a) "and for such other
purposes as may be hereafter directed by the President"
under Section 8 of PD 910,116 relating to the Malampaya
Funds, and (b) "to finance the priority infrastructure
development projects and to finance the restoration of
damaged or destroyed facilities due to calamities, as may
be directed and authorized by the Office of the President of
the Philippines" under Section 12 of PD 1869, as amended
by PD 1993, relating to the Presidential Social Fund, are
unconstitutional insofar as they constitute undue
delegations of legislative power.
These main issues shall be resolved in the order that they
have been stated. In addition, the Court shall also tackle
certain ancillary issues as prompted by the present cases.
The Courts Ruling

The petitions are partly granted.

I. Procedural Issues.
The prevailing rule in constitutional litigation is that no
question involving the constitutionality or validity of a law or
governmental act may be heard and decided by the Court
unless there is compliance with the legal requisites for
judicial inquiry,117 namely: (a) there must be an actual case
or controversy calling for the exercise of judicial power; (b)
the person challenging the act must have the standing to
question the validity of the subject act or issuance; (c) the
question of constitutionality must be raised at the earliest
opportunity ; and (d) the issue of constitutionality must be
the very lis mota of the case.118 Of these requisites, case
law states that the first two are the most important119 and,
therefore, shall be discussed forthwith.
A. Existence of an Actual Case or Controversy.
By constitutional fiat, judicial power operates only when
there is an actual case or controversy.120 This is embodied
in Section 1, Article VIII of the 1987 Constitution which
pertinently states that "judicial power includes the duty of
the courts of justice to settle actual controversies involving
rights which are legally demandable and enforceable x x x."
Jurisprudence provides that an actual case or controversy is
one which "involves a conflict of legal rights, an assertion of
opposite legal claims, susceptible of judicial resolution as
distinguished from a hypothetical or abstract difference or
dispute.121 In other words, "there must be a contrariety of
legal rights that can be interpreted and enforced on the
basis of existing law and jurisprudence."122 Related to the
requirement of an actual case or controversy is the
requirement of "ripeness," meaning that the questions
raised for constitutional scrutiny are already ripe for
adjudication. "A question is ripe for adjudication when the

act being challenged has had a direct adverse effect on the

individual challenging it. It is a prerequisite that something
had then been accomplished or performed by either branch
before a court may come into the picture, and the petitioner
must allege the existence of an immediate or threatened
injury to itself as a result of the challenged
action."123 "Withal, courts will decline to pass upon
constitutional issues through advisory opinions, bereft as
they are of authority to resolve hypothetical or moot
questions."124
Based on these principles, the Court finds that there exists
an actual and justiciable controversy in these cases.
The requirement of contrariety of legal rights is clearly
satisfied by the antagonistic positions of the parties on the
constitutionality of the "Pork Barrel System." Also, the
questions in these consolidated cases are ripe for
adjudication since the challenged funds and the provisions
allowing for their utilization such as the 2013 GAA for the
PDAF, PD 910 for the Malampaya Funds and PD 1869, as
amended by PD 1993, for the Presidential Social Fund are
currently existing and operational; hence, there exists an
immediate or threatened injury to petitioners as a result of
the unconstitutional use of these public funds.
As for the PDAF, the Court must dispel the notion that the
issues related thereto had been rendered moot and
academic by the reforms undertaken by respondents. A
case becomes moot when there is no more actual
controversy between the parties or no useful purpose can
be served in passing upon the merits.125 Differing from this
description, the Court observes that respondents proposed
line-item budgeting scheme would not terminate the
controversy nor diminish the useful purpose for its
resolution since said reform is geared towards the 2014
budget, and not the 2013 PDAF Article which, being a
distinct subject matter, remains legally effective and

existing. Neither will the Presidents declaration that he had

already "abolished the PDAF" render the issues on PDAF
moot precisely because the Executive branch of government
has no constitutional authority to nullify or annul its legal
existence. By constitutional design, the annulment or
nullification of a law may be done either by Congress,
through the passage of a repealing law, or by the Court,
through a declaration of unconstitutionality. Instructive on
this point is the following exchange between Associate
Justice Antonio T. Carpio (Justice Carpio) and the Solicitor
General during the Oral Arguments: 126
Justice Carpio: The President has taken an oath to faithfully
execute the law,127 correct? Solicitor General Jardeleza: Yes,
Your Honor.
Justice Carpio: And so the President cannot refuse to
implement the General Appropriations Act, correct?
Solicitor General Jardeleza: Well, that is our answer, Your
Honor. In the case, for example of the PDAF, the President
has a duty to execute the laws but in the face of the
outrage over PDAF, the President was saying, "I am not
sure that I will continue the release of the soft projects,"
and that started, Your Honor. Now, whether or not that
(interrupted)
Justice Carpio: Yeah. I will grant the President if there are
anomalies in the project, he has the power to stop the
releases in the meantime, to investigate, and that is Section
38 of Chapter 5 of Book 6 of the Revised Administrative
Code128 x x x. So at most the President can suspend, now if
the President believes that the PDAF is unconstitutional, can
he just refuse to implement it?
Solicitor General Jardeleza: No, Your Honor, as we were
trying to say in the specific case of the PDAF because of the

CoA Report, because of the reported irregularities and this

Court can take judicial notice, even outside, outside of the
COA Report, you have the report of the whistle-blowers, the
President was just exercising precisely the duty .
xxxx
Justice Carpio: Yes, and that is correct. Youve seen the CoA
Report, there are anomalies, you stop and investigate, and
prosecute, he has done that. But, does that mean that PDAF
has been repealed?
Solicitor General Jardeleza: No, Your Honor x x x.
xxxx
Justice Carpio: So that PDAF can be legally abolished only in
two (2) cases. Congress passes a law to repeal it, or this
Court declares it unconstitutional, correct?
Solictor General Jardeleza: Yes, Your Honor.
Justice Carpio: The President has no power to legally abolish
PDAF. (Emphases supplied)
Even on the assumption of mootness, jurisprudence,
nevertheless, dictates that "the moot and academic
principle is not a magical formula that can automatically
dissuade the Court in resolving a case." The Court will
decide cases, otherwise moot, if: first, there is a grave
violation of the Constitution; second, the exceptional
character of the situation and the paramount public interest
is involved; third, when the constitutional issue raised
requires formulation of controlling principles to guide the
bench, the bar, and the public; and fourth, the case is
capable of repetition yet evading review.129

The applicability of the first exception is clear from the

fundamental posture of petitioners they essentially allege
grave violations of the Constitution with respect to, inter
alia, the principles of separation of powers, non-delegability
of legislative power, checks and balances, accountability
and local autonomy.
The applicability of the second exception is also apparent
from the nature of the interests involved
the constitutionality of the very system within which
significant amounts of public funds have been and continue
to be utilized and expended undoubtedly presents a
situation of exceptional character as well as a matter of
paramount public interest. The present petitions, in fact,
have been lodged at a time when the systems flaws have
never before been magnified. To the Courts mind, the
coalescence of the CoA Report, the accounts of numerous
whistle-blowers, and the governments own recognition that
reforms are needed "to address the reported abuses of the
PDAF"130 demonstrates a prima facie pattern of abuse which
only underscores the importance of the matter. It is also by
this finding that the Court finds petitioners claims as not
merely theorized, speculative or hypothetical. Of note is the
weight accorded by the Court to the findings made by the
CoA which is the constitutionally-mandated audit arm of the
government. In Delos Santos v. CoA,131 a recent case
wherein the Court upheld the CoAs disallowance of
irregularly disbursed PDAF funds, it was emphasized that:
The COA is endowed with enough latitude to determine,
prevent, and disallow irregular, unnecessary, excessive,
extravagant or unconscionable expenditures of government
funds. It is tasked to be vigilant and conscientious in
safeguarding the proper use of the government's, and
ultimately the people's, property. The exercise of its general
audit power is among the constitutional mechanisms that

gives life to the check and balance system inherent in our

form of government.
It is the general policy of the Court to sustain the decisions
of administrative authorities, especially one which is
constitutionally-created, such as the CoA, not only on the
basis of the doctrine of separation of powers but also for
their presumed expertise in the laws they are entrusted to
enforce. Findings of administrative agencies are accorded
not only respect but also finality when the decision and
order are not tainted with unfairness or arbitrariness that
would amount to grave abuse of discretion. It is only when
the CoA has acted without or in excess of jurisdiction, or
with grave abuse of discretion amounting to lack or excess
of jurisdiction, that this Court entertains a petition
questioning its rulings. x x x. (Emphases supplied)
Thus, if only for the purpose of validating the existence of
an actual and justiciable controversy in these cases, the
Court deems the findings under the CoA Report to be
sufficient.
The Court also finds the third exception to be applicable
largely due to the practical need for a definitive ruling on
the systems constitutionality. As disclosed during the Oral
Arguments, the CoA Chairperson estimates that thousands
of notices of disallowances will be issued by her office in
connection with the findings made in the CoA Report. In this
relation, Associate Justice Marvic Mario Victor F. Leonen
(Justice Leonen) pointed out that all of these would
eventually find their way to the courts.132 Accordingly, there
is a compelling need to formulate controlling principles
relative to the issues raised herein in order to guide the
bench, the bar, and the public, not just for the expeditious
resolution of the anticipated disallowance cases, but more
importantly, so that the government may be guided on how
public funds should be utilized in accordance with
constitutional principles.

Finally, the application of the fourth exception is called for

by the recognition that the preparation and passage of the
national budget is, by constitutional imprimatur, an affair of
annual occurrence.133 The relevance of the issues before the
Court does not cease with the passage of a "PDAF -free
budget for 2014."134 The evolution of the "Pork Barrel
System," by its multifarious iterations throughout the
course of history, lends a semblance of truth to petitioners
claim that "the same dog will just resurface wearing a
different collar."135 In Sanlakas v. Executive
Secretary,136 the government had already backtracked on a
previous course of action yet the Court used the "capable of
repetition but evading review" exception in order "to
prevent similar questions from re- emerging."137The
situation similarly holds true to these cases. Indeed, the
myriad of issues underlying the manner in which certain
public funds are spent, if not resolved at this most
opportune time, are capable of repetition and hence, must
not evade judicial review.
B. Matters of Policy: the Political Question Doctrine.
The "limitation on the power of judicial review to actual
cases and controversies carries the assurance that "the
courts will not intrude into areas committed to the other
branches of government."138 Essentially, the foregoing
limitation is a restatement of the political question doctrine
which, under the classic formulation of Baker v.
Carr,139applies when there is found, among others, "a
textually demonstrable constitutional commitment of the
issue to a coordinate political department," "a lack of
judicially discoverable and manageable standards for
resolving it" or "the impossibility of deciding without an
initial policy determination of a kind clearly for non- judicial
discretion." Cast against this light, respondents submit that
the "the political branches are in the best position not only
to perform budget-related reforms but also to do them in
response to the specific demands of their constituents" and,

as such, "urge the Court not to impose a solution at this

stage."140
The Court must deny respondents submission.
Suffice it to state that the issues raised before the Court do
not present political but legal questions which are within its
province to resolve. A political question refers to "those
questions which, under the Constitution, are to be decided
by the people in their sovereign capacity, or in regard to
which full discretionary authority has been delegated to the
Legislature or executive branch of the Government. It is
concerned with issues dependent upon the wisdom, not
legality, of a particular measure."141 The intrinsic
constitutionality of the "Pork Barrel System" is not an issue
dependent upon the wisdom of the political branches of
government but rather a legal one which the Constitution
itself has commanded the Court to act upon. Scrutinizing
the contours of the system along constitutional lines is a
task that the political branches of government are incapable
of rendering precisely because it is an exercise of judicial
power. More importantly, the present Constitution has not
only vested the Judiciary the right to exercise judicial power
but essentially makes it a duty to proceed therewith.
Section 1, Article VIII of the 1987 Constitution cannot be
any clearer: "The judicial power shall be vested in one
Supreme Court and in such lower courts as may be
established by law. It includes the duty of the courts of
justice to settle actual controversies involving rights which
are legally demandable and enforceable, and to determine
whether or not there has been a grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of
any branch or instrumentality of the Government." In
Estrada v. Desierto,142 the expanded concept of judicial
power under the 1987 Constitution and its effect on the
political question doctrine was explained as follows:143

To a great degree, the 1987 Constitution has narrowed the

reach of the political question doctrine when it expanded the
power of judicial review of this court not only to settle
actual controversies involving rights which are legally
demandable and enforceable but also to determine whether
or not there has been a grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of
any branch or instrumentality of government. Heretofore,
the judiciary has focused on the "thou shalt not's" of the
Constitution directed against the exercise of its jurisdiction.
With the new provision, however, courts are given a greater
prerogative to determine what it can do to prevent grave
abuse of discretion amounting to lack or excess of
jurisdiction on the part of any branch or instrumentality of
government. Clearly, the new provision did not just grant
the Court power of doing nothing. x x x (Emphases
supplied)
It must also be borne in mind that when the judiciary
mediates to allocate constitutional boundaries, it does not
assert any superiority over the other departments; does not
in reality nullify or invalidate an act of the legislature or the
executive, but only asserts the solemn and sacred obligation
assigned to it by the Constitution."144 To a great extent, the
Court is laudably cognizant of the reforms undertaken by its
co-equal branches of government. But it is by constitutional
force that the Court must faithfully perform its duty.
Ultimately, it is the Courts avowed intention that a
resolution of these cases would not arrest or in any manner
impede the endeavors of the two other branches but, in
fact, help ensure that the pillars of change are erected on
firm constitutional grounds. After all, it is in the best
interest of the people that each great branch of
government, within its own sphere, contributes its share
towards achieving a holistic and genuine solution to the
problems of society. For all these reasons, the Court cannot
heed respondents plea for judicial restraint.

C. Locus Standi.
"The gist of the question of standing is whether a party
alleges such personal stake in the outcome of the
controversy as to assure that concrete adverseness which
sharpens the presentation of issues upon which the court
depends for illumination of difficult constitutional questions.
Unless a person is injuriously affected in any of his
constitutional rights by the operation of statute or
ordinance, he has no standing."145
Petitioners have come before the Court in their respective
capacities as citizen-taxpayers and accordingly, assert that
they "dutifully contribute to the coffers of the National
Treasury."146 Clearly, as taxpayers, they possess the
requisite standing to question the validity of the existing
"Pork Barrel System" under which the taxes they pay have
been and continue to be utilized. It is undeniable that
petitioners, as taxpayers, are bound to suffer from the
unconstitutional usage of public funds, if the Court so rules.
Invariably, taxpayers have been allowed to sue where there
is a claim that public funds are illegally disbursed or that
public money is being deflected to any improper purpose, or
that public funds are wasted through the enforcement of an
invalid or unconstitutional law,147 as in these cases.
Moreover, as citizens, petitioners have equally fulfilled the
standing requirement given that the issues they have raised
may be classified as matters "of transcendental importance,
of overreaching significance to society, or of paramount
public interest."148 The CoA Chairpersons statement during
the Oral Arguments that the present controversy involves
"not merely a systems failure" but a "complete breakdown
of controls"149 amplifies, in addition to the matters abovediscussed, the seriousness of the issues involved herein.
Indeed, of greater import than the damage caused by the
illegal expenditure of public funds is the mortal wound
inflicted upon the fundamental law by the enforcement of an

invalid statute.150 All told, petitioners have sufficient locus

standi to file the instant cases.
D. Res Judicata and Stare Decisis.
Res judicata (which means a "matter adjudged") and stare
decisis non quieta et movere (or simply, stare decisis which
means "follow past precedents and do not disturb what has
been settled") are general procedural law principles which
both deal with the effects of previous but factually similar
dispositions to subsequent cases. For the cases at bar, the
Court examines the applicability of these principles in
relation to its prior rulings in Philconsa and LAMP.
The focal point of res judicata is the judgment. The principle
states that a judgment on the merits in a previous case
rendered by a court of competent jurisdiction would bind a
subsequent case if, between the first and second actions,
there exists an identity of parties, of subject matter, and of
causes of action.151 This required identity is not, however,
attendant hereto since Philconsa and LAMP, respectively
involved constitutional challenges against the 1994 CDF
Article and 2004 PDAF Article, whereas the cases at bar call
for a broader constitutional scrutiny of the entire "Pork
Barrel System." Also, the ruling in LAMP is essentially a
dismissal based on a procedural technicality and, thus,
hardly a judgment on the merits in that petitioners therein
failed to present any "convincing proof x x x showing that,
indeed, there were direct releases of funds to the Members
of Congress, who actually spend them according to their
sole discretion" or "pertinent evidentiary support to
demonstrate the illegal misuse of PDAF in the form of
kickbacks and has become a common exercise of
unscrupulous Members of Congress." As such, the Court up
held, in view of the presumption of constitutionality
accorded to every law, the 2004 PDAF Article, and saw "no
need to review or reverse the standing pronouncements in
the said case." Hence, for the foregoing reasons, the res

judicata principle, insofar as the Philconsa and LAMP cases

are concerned, cannot apply.
On the other hand, the focal point of stare decisis is the
doctrine created. The principle, entrenched under Article
8152 of the Civil Code, evokes the general rule that, for the
sake of certainty, a conclusion reached in one case should
be doctrinally applied to those that follow if the facts are
substantially the same, even though the parties may be
different. It proceeds from the first principle of justice that,
absent any powerful countervailing considerations, like
cases ought to be decided alike. Thus, where the same
questions relating to the same event have been put forward
by the parties similarly situated as in a previous case
litigated and decided by a competent court, the rule of stare
decisis is a bar to any attempt to re-litigate the same
issue.153
Philconsa was the first case where a constitutional challenge
against a Pork Barrel provision, i.e., the 1994 CDF Article,
was resolved by the Court. To properly understand its
context, petitioners posturing was that "the power given to
the Members of Congress to propose and identify projects
and activities to be funded by the CDF is an encroachment
by the legislature on executive power, since said power in
an appropriation act is in implementation of the law" and
that "the proposal and identification of the projects do not
involve the making of laws or the repeal and amendment
thereof, the only function given to the Congress by the
Constitution."154 In deference to the foregoing submissions,
the Court reached the following main conclusions: one,
under the Constitution, the power of appropriation, or the
"power of the purse," belongs to Congress; two, the power
of appropriation carries with it the power to specify the
project or activity to be funded under the appropriation law
and it can be detailed and as broad as Congress wants it to
be; and, three, the proposals and identifications made by
Members of Congress are merely recommendatory. At once,

it is apparent that the Philconsa resolution was a limited

response to a separation of powers problem, specifically on
the propriety of conferring post-enactment identification
authority to Members of Congress. On the contrary, the
present cases call for a more holistic examination of (a) the
inter-relation between the CDF and PDAF Articles with each
other, formative as they are of the entire "Pork Barrel
System" as well as (b) the intra-relation of post-enactment
measures contained within a particular CDF or PDAF Article,
including not only those related to the area of project
identification but also to the areas of fund release and
realignment. The complexity of the issues and the broader
legal analyses herein warranted may be, therefore,
considered as a powerful countervailing reason against a
wholesale application of the stare decisis principle.
In addition, the Court observes that the Philconsa ruling was
actually riddled with inherent constitutional inconsistencies
which similarly countervail against a full resort to stare
decisis. As may be deduced from the main conclusions of
the case, Philconsas fundamental premise in allowing
Members of Congress to propose and identify of projects
would be that the said identification authority is but an
aspect of the power of appropriation which has been
constitutionally lodged in Congress. From this premise, the
contradictions may be easily seen. If the authority to
identify projects is an aspect of appropriation and the power
of appropriation is a form of legislative power thereby
lodged in Congress, then it follows that: (a) it is Congress
which should exercise such authority, and not its individual
Members; (b) such authority must be exercised within the
prescribed procedure of law passage and, hence, should not
be exercised after the GAA has already been passed; and
(c) such authority, as embodied in the GAA, has the force of
law and, hence, cannot be merely recommendatory. Justice
Vitugs Concurring Opinion in the same case sums up the
Philconsa quandary in this wise: "Neither would it be
objectionable for Congress, by law, to appropriate funds for

such specific projects as it may be minded; to give that

authority, however, to the individual members of Congress
in whatever guise, I am afraid, would be constitutionally
impermissible." As the Court now largely benefits from
hindsight and current findings on the matter, among others,
the CoA Report, the Court must partially abandon its
previous ruling in Philconsa insofar as it validated the postenactment identification authority of Members of Congress
on the guise that the same was merely recommendatory.
This postulate raises serious constitutional inconsistencies
which cannot be simply excused on the ground that such
mechanism is "imaginative as it is innovative." Moreover, it
must be pointed out that the recent case of Abakada Guro
Party List v. Purisima155 (Abakada) has effectively
overturned Philconsas allowance of post-enactment
legislator participation in view of the separation of powers
principle. These constitutional inconsistencies and the
Abakada rule will be discussed in greater detail in the
ensuing section of this Decision.
As for LAMP, suffice it to restate that the said case was
dismissed on a procedural technicality and, hence, has not
set any controlling doctrine susceptible of current
application to the substantive issues in these cases. In fine,
stare decisis would not apply.
II. Substantive Issues.
A. Definition of Terms.
Before the Court proceeds to resolve the substantive issues
of these cases, it must first define the terms "Pork Barrel
System," "Congressional Pork Barrel," and "Presidential Pork
Barrel" as they are essential to the ensuing discourse.
Petitioners define the term "Pork Barrel System" as the
"collusion between the Legislative and Executive branches

of government to accumulate lump-sum public funds in

their offices with unchecked discretionary powers to
determine its distribution as political largesse."156 They
assert that the following elements make up the Pork Barrel
System: (a) lump-sum funds are allocated through the
appropriations process to an individual officer; (b) the
officer is given sole and broad discretion in determining how
the funds will be used or expended; (c) the guidelines on
how to spend or use the funds in the appropriation are
either vague, overbroad or inexistent; and (d) projects
funded are intended to benefit a definite constituency in a
particular part of the country and to help the political
careers of the disbursing official by yielding rich patronage
benefits.157 They further state that the Pork Barrel System is
comprised of two (2) kinds of discretionary public funds:
first, the Congressional (or Legislative) Pork Barrel,
currently known as the PDAF;158 and, second, the
Presidential (or Executive) Pork Barrel, specifically, the
Malampaya Funds under PD 910 and the Presidential Social
Fund under PD 1869, as amended by PD 1993.159
Considering petitioners submission and in reference to its
local concept and legal history, the Court defines the Pork
Barrel System as the collective body of rules and practices
that govern the manner by which lump-sum, discretionary
funds, primarily intended for local projects, are utilized
through the respective participations of the Legislative and
Executive branches of government, including its members.
The Pork Barrel System involves two (2) kinds of lump-sum
discretionary funds:
First, there is the Congressional Pork Barrel which is herein
defined as a kind of lump-sum, discretionary fund wherein
legislators, either individually or collectively organized into
committees, are able to effectively control certain aspects of
the funds utilization through various post-enactment
measures and/or practices. In particular, petitioners
consider the PDAF, as it appears under the 2013 GAA, as

Congressional Pork Barrel since it is, inter alia, a postenactment measure that allows individual legislators to
wield a collective power;160 and
Second, there is the Presidential Pork Barrel which is herein
defined as a kind of lump-sum, discretionary fund which
allows the President to determine the manner of its
utilization. For reasons earlier stated,161 the Court shall
delimit the use of such term to refer only to the Malampaya
Funds and the Presidential Social Fund.
With these definitions in mind, the Court shall now proceed
to discuss the substantive issues of these cases.
B. Substantive Issues on the Congressional Pork Barrel.
1. Separation of Powers.
a. Statement of Principle.
The principle of separation of powers refers to the
constitutional demarcation of the three fundamental powers
of government. In the celebrated words of Justice Laurel in
Angara v. Electoral Commission,162 it means that the
"Constitution has blocked out with deft strokes and in bold
lines, allotment of power to the executive, the legislative
and the judicial departments of the government."163 To the
legislative branch of government, through
Congress,164belongs the power to make laws; to the
executive branch of government, through the
President,165 belongs the power to enforce laws; and to the
judicial branch of government, through the
Court,166 belongs the power to interpret laws. Because the
three great powers have been, by constitutional design,
ordained in this respect, "each department of the
government has exclusive cognizance of matters within its
jurisdiction, and is supreme within its own sphere." 167 Thus,

"the legislature has no authority to execute or construe the

law, the executive has no authority to make or construe the
law, and the judiciary has no power to make or execute the
law."168 The principle of separation of powers and its
concepts of autonomy and independence stem from the
notion that the powers of government must be divided to
avoid concentration of these powers in any one branch; the
division, it is hoped, would avoid any single branch from
lording its power over the other branches or the
citizenry.169 To achieve this purpose, the divided power
must be wielded by co-equal branches of government that
are equally capable of independent action in exercising their
respective mandates. Lack of independence would result in
the inability of one branch of government to check the
arbitrary or self-interest assertions of another or others.170
Broadly speaking, there is a violation of the separation of
powers principle when one branch of government unduly
encroaches on the domain of another. US Supreme Court
decisions instruct that the principle of separation of powers
may be violated in two (2) ways: firstly, "one branch may
interfere impermissibly with the others performance of its
constitutionally assigned function";171 and "alternatively, the
doctrine may be violated when one branch assumes a
function that more properly is entrusted to another." 172 In
other words, there is a violation of the principle when there
is impermissible (a) interference with and/or (b) assumption
of another departments functions.
The enforcement of the national budget, as primarily
contained in the GAA, is indisputably a function both
constitutionally assigned and properly entrusted to the
Executive branch of government. In Guingona, Jr. v. Hon.
Carague173 (Guingona, Jr.), the Court explained that the
phase of budget execution "covers the various operational
aspects of budgeting" and accordingly includes "the
evaluation of work and financial plans for individual
activities," the "regulation and release of funds" as well as

all "other related activities" that comprise the budget

execution cycle.174 This is rooted in the principle that the
allocation of power in the three principal branches of
government is a grant of all powers inherent in
them.175 Thus, unless the Constitution provides otherwise,
the Executive department should exclusively exercise all
roles and prerogatives which go into the implementation of
the national budget as provided under the GAA as well as
any other appropriation law.
In view of the foregoing, the Legislative branch of
government, much more any of its members, should not
cross over the field of implementing the national budget
since, as earlier stated, the same is properly the domain of
the Executive. Again, in Guingona, Jr., the Court stated that
"Congress enters the picture when it deliberates or acts on
the budget proposals of the President. Thereafter, Congress,
"in the exercise of its own judgment and wisdom,
formulates an appropriation act precisely following the
process established by the Constitution, which specifies that
no money may be paid from the Treasury except in
accordance with an appropriation made by law." Upon
approval and passage of the GAA, Congress law -making
role necessarily comes to an end and from there the
Executives role of implementing the national budget begins.
So as not to blur the constitutional boundaries between
them, Congress must "not concern it self with details for
implementation by the Executive."176
The foregoing cardinal postulates were definitively
enunciated in Abakada where the Court held that "from the
moment the law becomes effective, any provision of law
that empowers Congress or any of its members to play any
role in the implementation or enforcement of the law
violates the principle of separation of powers and is thus
unconstitutional."177 It must be clarified, however, that
since the restriction only pertains to "any role in the
implementation or enforcement of the law," Congress may

still exercise its oversight function which is a mechanism of

checks and balances that the Constitution itself allows. But
it must be made clear that Congress role must be confined
to mere oversight. Any post-enactment-measure allowing
legislator participation beyond oversight is bereft of any
constitutional basis and hence, tantamount to impermissible
interference and/or assumption of executive functions. As
the Court ruled in Abakada:178
Any post-enactment congressional measure x x x should be
limited to scrutiny and investigation.1wphi1 In particular,
congressional oversight must be confined to the following:
(1) scrutiny based primarily on Congress power of
appropriation and the budget hearings conducted in
connection with it, its power to ask heads of
departments to appear before and be heard by either
of its Houses on any matter pertaining to their
departments and its power of confirmation; and
(2) investigation and monitoring of the
implementation of laws pursuant to the power of
Congress to conduct inquiries in aid of legislation.
Any action or step beyond that will undermine the
separation of powers guaranteed by the Constitution.
(Emphases supplied)
b. Application.
In these cases, petitioners submit that the Congressional
Pork Barrel among others, the 2013 PDAF Article
"wrecks the assignment of responsibilities between the
political branches" as it is designed to allow individual
legislators to interfere "way past the time it should have
ceased" or, particularly, "after the GAA is passed."179 They
state that the findings and recommendations in the CoA

Report provide "an illustration of how absolute and

definitive the power of legislators wield over project
implementation in complete violation of the constitutional
principle of separation of powers."180 Further, they point out
that the Court in the Philconsa case only allowed the CDF to
exist on the condition that individual legislators limited their
role to recommending projects and not if they actually
dictate their implementation.181
For their part, respondents counter that the separations of
powers principle has not been violated since the President
maintains "ultimate authority to control the execution of the
GAA and that he "retains the final discretion to reject" the
legislators proposals.182 They maintain that the Court, in
Philconsa, "upheld the constitutionality of the power of
members of Congress to propose and identify projects so
long as such proposal and identification are
recommendatory."183 As such, they claim that "everything in
the Special Provisions [of the 2013 PDAF Article follows the
Philconsa framework, and hence, remains constitutional." 184
The Court rules in favor of petitioners.
As may be observed from its legal history, the defining
feature of all forms of Congressional Pork Barrel would be
the authority of legislators to participate in the postenactment phases of project implementation.
At its core, legislators may it be through project
lists,185 prior consultations186 or program menus187 have
been consistently accorded post-enactment authority to
identify the projects they desire to be funded through
various Congressional Pork Barrel allocations. Under the
2013 PDAF Article, the statutory authority of legislators to
identify projects post-GAA may be construed from the
import of Special Provisions 1 to 3 as well as the second
paragraph of Special Provision 4. To elucidate, Special

Provision 1 embodies the program menu feature which, as

evinced from past PDAF Articles, allows individual legislators
to identify PDAF projects for as long as the identified project
falls under a general program listed in the said menu.
Relatedly, Special Provision 2 provides that the
implementing agencies shall, within 90 days from the GAA
is passed, submit to Congress a more detailed priority list,
standard or design prepared and submitted by
implementing agencies from which the legislator may make
his choice. The same provision further authorizes legislators
to identify PDAF projects outside his district for as long as
the representative of the district concerned concurs in
writing. Meanwhile, Special Provision 3 clarifies that PDAF
projects refer to "projects to be identified by
legislators"188 and thereunder provides the allocation limit
for the total amount of projects identified by each legislator.
Finally, paragraph 2 of Special Provision 4 requires that any
modification and revision of the project identification "shall
be submitted to the House Committee on Appropriations
and the Senate Committee on Finance for favorable
endorsement to the DBM or the implementing agency, as
the case may be." From the foregoing special provisions, it
cannot be seriously doubted that legislators have been
accorded post-enactment authority to identify PDAF
projects.
Aside from the area of project identification, legislators have
also been accorded post-enactment authority in the areas of
fund release and realignment. Under the 2013 PDAF Article,
the statutory authority of legislators to participate in the
area of fund release through congressional committees is
contained in Special Provision 5 which explicitly states that
"all request for release of funds shall be supported by the
documents prescribed under Special Provision No. 1 and
favorably endorsed by House Committee on Appropriations
and the Senate Committee on Finance, as the case may
be"; while their statutory authority to participate in the area
of fund realignment is contained in: first , paragraph 2,

Special Provision 4189 which explicitly state s, among others,

that "any realignment of funds shall be submitted to the
House Committee on Appropriations and the Senate
Committee on Finance for favorable endorsement to the
DBM or the implementing agency, as the case may be ;
and, second , paragraph 1, also of Special Provision 4 which
authorizes the "Secretaries of Agriculture, Education,
Energy, Interior and Local Government, Labor and
Employment, Public Works and Highways, Social Welfare
and Development and Trade and Industry 190 x x x to
approve realignment from one project/scope to another
within the allotment received from this Fund, subject to
among others (iii) the request is with the concurrence of the
legislator concerned."

legislator identification on the guise that the same is merely

recommendatory and, as such, respondents reliance on the
same falters altogether.

Clearly, these post-enactment measures which govern the

areas of project identification, fund release and fund
realignment are not related to functions of congressional
oversight and, hence, allow legislators to intervene and/or
assume duties that properly belong to the sphere of budget
execution. Indeed, by virtue of the foregoing, legislators
have been, in one form or another, authorized to participate
in as Guingona, Jr. puts it "the various operational
aspects of budgeting," including "the evaluation of work and
financial plans for individual activities" and the "regulation
and release of funds" in violation of the separation of
powers principle. The fundamental rule, as categorically
articulated in Abakada, cannot be overstated from the
moment the law becomes effective, any provision of law
that empowers Congress or any of its members to play any
role in the implementation or enforcement of the law
violates the principle of separation of powers and is thus
unconstitutional.191 That the said authority is treated as
merely recommendatory in nature does not alter its
unconstitutional tenor since the prohibition, to repeat,
covers any role in the implementation or enforcement of the
law. Towards this end, the Court must therefore abandon its
ruling in Philconsa which sanctioned the conduct of

Justice Bernabe: Now, without the individual legislators

identification of the project, can the PDAF of the legislator
be utilized?

Besides, it must be pointed out that respondents have

nonetheless failed to substantiate their position that the
identification authority of legislators is only of
recommendatory import. Quite the contrary, respondents
through the statements of the Solicitor General during the
Oral Arguments have admitted that the identification of
the legislator constitutes a mandatory requirement before
his PDAF can be tapped as a funding source, thereby
highlighting the indispensability of the said act to the entire
budget execution process:192

Solicitor General Jardeleza: No, Your Honor.

Justice Bernabe: It cannot?
Solicitor General Jardeleza: It cannot (interrupted)
Justice Bernabe: So meaning you should have the
identification of the project by the individual legislator?
Solicitor General Jardeleza: Yes, Your Honor.
xxxx
Justice Bernabe: In short, the act of identification is
mandatory?

Solictor General Jardeleza: Yes, Your Honor. In the sense

that if it is not done and then there is no identification.
xxxx
Justice Bernabe: Now, would you know of specific instances
when a project was implemented without the identification
by the individual legislator?
Solicitor General Jardeleza: I do not know, Your Honor; I do
not think so but I have no specific examples. I would doubt
very much, Your Honor, because to implement, there is a
need for a SARO and the NCA. And the SARO and the NCA
are triggered by an identification from the legislator.
xxxx
Solictor General Jardeleza: What we mean by mandatory,
Your Honor, is we were replying to a question, "How can a
legislator make sure that he is able to get PDAF Funds?" It
is mandatory in the sense that he must identify, in that
sense, Your Honor. Otherwise, if he does not identify, he
cannot avail of the PDAF Funds and his district would not be
able to have PDAF Funds, only in that sense, Your Honor.
(Emphases supplied)
Thus, for all the foregoing reasons, the Court hereby
declares the 2013 PDAF Article as well as all other
provisions of law which similarly allow legislators to wield
any form of post-enactment authority in the implementation
or enforcement of the budget, unrelated to congressional
oversight, as violative of the separation of powers principle
and thus unconstitutional. Corollary thereto, informal
practices, through which legislators have effectively
intruded into the proper phases of budget execution, must
be deemed as acts of grave abuse of discretion amounting
to lack or excess of jurisdiction and, hence, accorded the

same unconstitutional treatment. That such informal

practices do exist and have, in fact, been constantly
observed throughout the years has not been substantially
disputed here. As pointed out by Chief Justice Maria Lourdes
P.A. Sereno (Chief Justice Sereno) during the Oral
Arguments of these cases:193
Chief Justice Sereno:
Now, from the responses of the representative of both, the
DBM and two (2) Houses of Congress, if we enforces the
initial thought that I have, after I had seen the extent of
this research made by my staff, that neither the Executive
nor Congress frontally faced the question of constitutional
compatibility of how they were engineering the budget
process. In fact, the words you have been using, as the
three lawyers of the DBM, and both Houses of Congress has
also been using is surprise; surprised that all of these things
are now surfacing. In fact, I thought that what the 2013
PDAF provisions did was to codify in one section all the past
practice that had been done since 1991. In a certain sense,
we should be thankful that they are all now in the PDAF
Special Provisions. x x x (Emphasis and underscoring
supplied)
Ultimately, legislators cannot exercise powers which they do
not have, whether through formal measures written into the
law or informal practices institutionalized in government
agencies, else the Executive department be deprived of
what the Constitution has vested as its own.
2. Non-delegability of Legislative Power.
a. Statement of Principle.
As an adjunct to the separation of powers
principle,194 legislative power shall be exclusively exercised
by the body to which the Constitution has conferred the

same. In particular, Section 1, Article VI of the 1987

Constitution states that such power shall be vested in the
Congress of the Philippines which shall consist of a Senate
and a House of Representatives, except to the extent
reserved to the people by the provision on initiative and
referendum.195Based on this provision, it is clear that only
Congress, acting as a bicameral body, and the people,
through the process of initiative and referendum, may
constitutionally wield legislative power and no other. This
premise embodies the principle of non-delegability of
legislative power, and the only recognized exceptions
thereto would be: (a) delegated legislative power to local
governments which, by immemorial practice, are allowed to
legislate on purely local matters;196 and (b) constitutionallygrafted exceptions such as the authority of the President to,
by law, exercise powers necessary and proper to carry out a
declared national policy in times of war or other national
emergency,197 or fix within specified limits, and subject to
such limitations and restrictions as Congress may impose,
tariff rates, import and export quotas, tonnage and
wharfage dues, and other duties or imposts within the
framework of the national development program of the
Government.198
Notably, the principle of non-delegability should not be
confused as a restriction to delegate rule-making authority
to implementing agencies for the limited purpose of either
filling up the details of the law for its enforcement
(supplementary rule-making) or ascertaining facts to bring
the law into actual operation (contingent rulemaking).199 The conceptual treatment and limitations of
delegated rule-making were explained in the case of People
v. Maceren200 as follows:
The grant of the rule-making power to administrative
agencies is a relaxation of the principle of separation of
powers and is an exception to the nondelegation of
legislative powers. Administrative regulations or

"subordinate legislation" calculated to promote the public

interest are necessary because of "the growing complexity
of modern life, the multiplication of the subjects of
governmental regulations, and the increased difficulty of
administering the law."
xxxx
Nevertheless, it must be emphasized that the rule-making
power must be confined to details for regulating the mode
or proceeding to carry into effect the law as it has been
enacted. The power cannot be extended to amending or
expanding the statutory requirements or to embrace
matters not covered by the statute. Rules that subvert the
statute cannot be sanctioned. (Emphases supplied)
b. Application.
In the cases at bar, the Court observes that the 2013 PDAF
Article, insofar as it confers post-enactment identification
authority to individual legislators, violates the principle of
non-delegability since said legislators are effectively allowed
to individually exercise the power of appropriation, which
as settled in Philconsa is lodged in Congress.201 That the
power to appropriate must be exercised only through
legislation is clear from Section 29(1), Article VI of the 1987
Constitution which states that: "No money shall be paid out
of the Treasury except in pursuance of an appropriation
made by law." To understand what constitutes an act of
appropriation, the Court, in Bengzon v. Secretary of Justice
and Insular Auditor202 (Bengzon), held that the power of
appropriation involves (a) the setting apart by law of a
certain sum from the public revenue for (b) a specified
purpose. Essentially, under the 2013 PDAF Article, individual
legislators are given a personal lump-sum fund from which
they are able to dictate (a) how much from such fund would
go to (b) a specific project or beneficiary that they

themselves also determine. As these two (2) acts comprise

the exercise of the power of appropriation as described in
Bengzon, and given that the 2013 PDAF Article authorizes
individual legislators to perform the same, undoubtedly,
said legislators have been conferred the power to legislate
which the Constitution does not, however, allow. Thus,
keeping with the principle of non-delegability of legislative
power, the Court hereby declares the 2013 PDAF Article, as
well as all other forms of Congressional Pork Barrel which
contain the similar legislative identification feature as herein
discussed, as unconstitutional.
3. Checks and Balances.
a. Statement of Principle; Item-Veto Power.
The fact that the three great powers of government are
intended to be kept separate and distinct does not mean
that they are absolutely unrestrained and independent of
each other. The Constitution has also provided for an
elaborate system of checks and balances to secure
coordination in the workings of the various departments of
the government.203
A prime example of a constitutional check and balance
would be the Presidents power to veto an item written into
an appropriation, revenue or tariff bill submitted to him by
Congress for approval through a process known as "bill
presentment." The Presidents item-veto power is found in
Section 27(2), Article VI of the 1987 Constitution which
reads as follows:
Sec. 27. x x x.
xxxx

(2) The President shall have the power to veto any

particular item or items in an appropriation, revenue, or
tariff bill, but the veto shall not affect the item or items to
which he does not object.
The presentment of appropriation, revenue or tariff bills to
the President, wherein he may exercise his power of itemveto, forms part of the "single, finely wrought and
exhaustively considered, procedures" for law-passage as
specified under the Constitution.204 As stated in Abakada,
the final step in the law-making process is the "submission
of the bill to the President for approval. Once approved, it
takes effect as law after the required publication." 205
Elaborating on the Presidents item-veto power and its
relevance as a check on the legislature, the Court, in
Bengzon, explained that:206
The former Organic Act and the present Constitution of the
Philippines make the Chief Executive an integral part of the
law-making power. His disapproval of a bill, commonly
known as a veto, is essentially a legislative act. The
questions presented to the mind of the Chief Executive are
precisely the same as those the legislature must determine
in passing a bill, except that his will be a broader point of
view.
The Constitution is a limitation upon the power of the
legislative department of the government, but in this
respect it is a grant of power to the executive department.
The Legislature has the affirmative power to enact laws; the
Chief Executive has the negative power by the constitutional
exercise of which he may defeat the will of the Legislature.
It follows that the Chief Executive must find his authority in
the Constitution. But in exercising that authority he may not
be confined to rules of strict construction or hampered by
the unwise interference of the judiciary. The courts will

indulge every intendment in favor of the constitutionality of

a veto in the same manner as they will presume the
constitutionality of an act as originally passed by the
Legislature. (Emphases supplied)
The justification for the Presidents item-veto power rests on
a variety of policy goals such as to prevent log-rolling
legislation,207 impose fiscal restrictions on the legislature, as
well as to fortify the executive branchs role in the
budgetary process.208 In Immigration and Naturalization
Service v. Chadha, the US Supreme Court characterized the
Presidents item-power as "a salutary check upon the
legislative body, calculated to guard the community against
the effects of factions, precipitancy, or of any impulse
unfriendly to the public good, which may happen to
influence a majority of that body"; phrased differently, it is
meant to "increase the chances in favor of the community
against the passing of bad laws, through haste,
inadvertence, or design."209
For the President to exercise his item-veto power, it
necessarily follows that there exists a proper "item" which
may be the object of the veto. An item, as defined in the
field of appropriations, pertains to "the particulars, the
details, the distinct and severable parts of the appropriation
or of the bill." In the case of Bengzon v. Secretary of Justice
of the Philippine Islands,210 the US Supreme Court
characterized an item of appropriation as follows:
An item of an appropriation bill obviously means an item
which, in itself, is a specific appropriation of money, not
some general provision of law which happens to be put into
an appropriation bill. (Emphases supplied)
On this premise, it may be concluded that an appropriation
bill, to ensure that the President may be able to exercise his
power of item veto, must contain "specific appropriations of

money" and not only "general provisions" which provide for

parameters of appropriation.
Further, it is significant to point out that an item of
appropriation must be an item characterized by singular
correspondence meaning an allocation of a specified
singular amount for a specified singular purpose, otherwise
known as a "line-item."211 This treatment not only allows
the item to be consistent with its definition as a "specific
appropriation of money" but also ensures that the President
may discernibly veto the same. Based on the foregoing
formulation, the existing Calamity Fund, Contingent Fund
and the Intelligence Fund, being appropriations which state
a specified amount for a specific purpose, would then be
considered as "line- item" appropriations which are
rightfully subject to item veto. Likewise, it must be
observed that an appropriation may be validly apportioned
into component percentages or values; however, it is crucial
that each percentage or value must be allocated for its own
corresponding purpose for such component to be considered
as a proper line-item. Moreover, as Justice Carpio correctly
pointed out, a valid appropriation may even have several
related purposes that are by accounting and budgeting
practice considered as one purpose, e.g., MOOE
(maintenance and other operating expenses), in which case
the related purposes shall be deemed sufficiently specific for
the exercise of the Presidents item veto power. Finally,
special purpose funds and discretionary funds would equally
square with the constitutional mechanism of item-veto for
as long as they follow the rule on singular correspondence
as herein discussed. Anent special purpose funds, it must be
added that Section 25(4), Article VI of the 1987 Constitution
requires that the "special appropriations bill shall specify the
purpose for which it is intended, and shall be supported by
funds actually available as certified by the National
Treasurer, or t o be raised by a corresponding revenue
proposal therein." Meanwhile, with respect to discretionary
funds, Section 2 5(6), Article VI of the 1987 Constitution

requires that said funds "shall be disbursed only for public

purposes to be supported by appropriate vouchers and
subject to such guidelines as may be prescribed by law."
In contrast, what beckons constitutional infirmity are
appropriations which merely provide for a singular lumpsum amount to be tapped as a source of funding for
multiple purposes. Since such appropriation type
necessitates the further determination of both the actual
amount to be expended and the actual purpose of the
appropriation which must still be chosen from the multiple
purposes stated in the law, it cannot be said that the
appropriation law already indicates a "specific appropriation
of money and hence, without a proper line-item which the
President may veto. As a practical result, the President
would then be faced with the predicament of either vetoing
the entire appropriation if he finds some of its purposes
wasteful or undesirable, or approving the entire
appropriation so as not to hinder some of its legitimate
purposes. Finally, it may not be amiss to state that such
arrangement also raises non-delegability issues considering
that the implementing authority would still have to
determine, again, both the actual amount to be expended
and the actual purpose of the appropriation. Since the
foregoing determinations constitute the integral aspects of
the power to appropriate, the implementing authority
would, in effect, be exercising legislative prerogatives in
violation of the principle of non-delegability.
b. Application.
In these cases, petitioners claim that "in the current x x x
system where the PDAF is a lump-sum appropriation, the
legislators identification of the projects after the passage of
the GAA denies the President the chance to veto that item
later on."212 Accordingly, they submit that the "item veto
power of the President mandates that appropriations bills
adopt line-item budgeting" and that "Congress cannot

choose a mode of budgeting which effectively renders the

constitutionally-given power of the President useless."213
On the other hand, respondents maintain that the text of
the Constitution envisions a process which is intended to
meet the demands of a modernizing economy and, as such,
lump-sum appropriations are essential to financially address
situations which are barely foreseen when a GAA is enacted.
They argue that the decision of the Congress to create some
lump-sum appropriations is constitutionally allowed and
textually-grounded.214
The Court agrees with petitioners.
Under the 2013 PDAF Article, the amount of P24.79 Billion
only appears as a collective allocation limit since the said
amount would be further divided among individual
legislators who would then receive personal lump-sum
allocations and could, after the GAA is passed, effectively
appropriate PDAF funds based on their own discretion. As
these intermediate appropriations are made by legislators
only after the GAA is passed and hence, outside of the law,
it necessarily means that the actual items of PDAF
appropriation would not have been written into the General
Appropriations Bill and thus effectuated without veto
consideration. This kind of lump-sum/post-enactment
legislative identification budgeting system fosters the
creation of a budget within a budget" which subverts the
prescribed procedure of presentment and consequently
impairs the Presidents power of item veto. As petitioners
aptly point out, the above-described system forces the
President to decide between (a) accepting the entireP24.79
Billion PDAF allocation without knowing the specific projects
of the legislators, which may or may not be consistent with
his national agenda and (b) rejecting the whole PDAF to the
detriment of all other legislators with legitimate projects.215

Moreover, even without its post-enactment legislative

identification feature, the 2013 PDAF Article would remain
constitutionally flawed since it would then operate as a
prohibited form of lump-sum appropriation abovecharacterized. In particular, the lump-sum amount
of P24.79 Billion would be treated as a mere funding source
allotted for multiple purposes of spending, i.e., scholarships,
medical missions, assistance to indigents, preservation of
historical materials, construction of roads, flood control, etc.
This setup connotes that the appropriation law leaves the
actual amounts and purposes of the appropriation for
further determination and, therefore, does not readily
indicate a discernible item which may be subject to the
Presidents power of item veto.

Petitioners further relate that the system under which

various forms of Congressional Pork Barrel operate defies
public accountability as it renders Congress incapable of
checking itself or its Members. In particular, they point out
that the Congressional Pork Barrel "gives each legislator a
direct, financial interest in the smooth, speedy passing of
the yearly budget" which turns them "from fiscalizers" into
"financially-interested partners."219 They also claim that the
system has an effect on re- election as "the PDAF excels in
self-perpetuation of elective officials." Finally, they add that
the "PDAF impairs the power of impeachment" as such
"funds are indeed quite useful, to well, accelerate the
decisions of senators."220
The Court agrees in part.

In fact, on the accountability side, the same lump-sum

budgeting scheme has, as the CoA Chairperson relays,
"limited state auditors from obtaining relevant data and
information that would aid in more stringently auditing the
utilization of said Funds."216 Accordingly, she recommends
the adoption of a "line by line budget or amount per
proposed program, activity or project, and per
implementing agency."217
Hence, in view of the reasons above-stated, the Court finds
the 2013 PDAF Article, as well as all Congressional Pork
Barrel Laws of similar operation, to be unconstitutional. That
such budgeting system provides for a greater degree of
flexibility to account for future contingencies cannot be an
excuse to defeat what the Constitution requires. Clearly, the
first and essential truth of the matter is that
unconstitutional means do not justify even commendable
ends.218
c. Accountability.

The aphorism forged under Section 1, Article XI of the 1987

Constitution, which states that "public office is a public
trust," is an overarching reminder that every instrumentality
of government should exercise their official functions only in
accordance with the principles of the Constitution which
embodies the parameters of the peoples trust. The notion
of a public trust connotes accountability,221 hence, the
various mechanisms in the Constitution which are designed
to exact accountability from public officers.
Among others, an accountability mechanism with which the
proper expenditure of public funds may be checked is the
power of congressional oversight. As mentioned in
Abakada,222 congressional oversight may be performed
either through: (a) scrutiny based primarily on Congress
power of appropriation and the budget hearings conducted
in connection with it, its power to ask heads of departments
to appear before and be heard by either of its Houses on
any matter pertaining to their departments and its power of
confirmation;223 or (b) investigation and monitoring of the
implementation of laws pursuant to the power of Congress
to conduct inquiries in aid of legislation.224

The Court agrees with petitioners that certain features

embedded in some forms of Congressional Pork Barrel,
among others the 2013 PDAF Article, has an effect on
congressional oversight. The fact that individual legislators
are given post-enactment roles in the implementation of the
budget makes it difficult for them to become disinterested
"observers" when scrutinizing, investigating or monitoring
the implementation of the appropriation law. To a certain
extent, the conduct of oversight would be tainted as said
legislators, who are vested with post-enactment authority,
would, in effect, be checking on activities in which they
themselves participate. Also, it must be pointed out that
this very same concept of post-enactment authorization
runs afoul of Section 14, Article VI of the 1987 Constitution
which provides that:
Sec. 14. No Senator or Member of the House of
Representatives may personally appear as counsel before
any court of justice or before the Electoral Tribunals, or
quasi-judicial and other administrative bodies. Neither shall
he, directly or indirectly, be interested financially in any
contract with, or in any franchise or special privilege
granted by the Government, or any subdivision, agency, or
instrumentality thereof, including any government-owned or
controlled corporation, or its subsidiary, during his term of
office. He shall not intervene in any matter before any office
of the Government for his pecuniary benefit or where he
may be called upon to act on account of his office.
(Emphasis supplied)
Clearly, allowing legislators to intervene in the various
phases of project implementation a matter before another
office of government renders them susceptible to taking
undue advantage of their own office.
The Court, however, cannot completely agree that the same
post-enactment authority and/or the individual legislators
control of his PDAF per se would allow him to perpetuate

himself in office. Indeed, while the Congressional Pork

Barrel and a legislators use thereof may be linked to this
area of interest, the use of his PDAF for re-election purposes
is a matter which must be analyzed based on particular
facts and on a case-to-case basis.
Finally, while the Court accounts for the possibility that the
close operational proximity between legislators and the
Executive department, through the formers post-enactment
participation, may affect the process of impeachment, this
matter largely borders on the domain of politics and does
not strictly concern the Pork Barrel Systems intrinsic
constitutionality. As such, it is an improper subject of
judicial assessment.
In sum, insofar as its post-enactment features dilute
congressional oversight and violate Section 14, Article VI of
the 1987 Constitution, thus impairing public accountability,
the 2013 PDAF Article and other forms of Congressional
Pork Barrel of similar nature are deemed as
unconstitutional.
4. Political Dynasties.
One of the petitioners submits that the Pork Barrel System
enables politicians who are members of political dynasties to
accumulate funds to perpetuate themselves in power, in
contravention of Section 26, Article II of the 1987
Constitution225 which states that:
Sec. 26. The State shall guarantee equal access to
opportunities for public service, and prohibit political
dynasties as may be defined by law. (Emphasis and
underscoring supplied)
At the outset, suffice it to state that the foregoing provision
is considered as not self-executing due to the qualifying

phrase "as may be defined by law." In this respect, said

provision does not, by and of itself, provide a judicially
enforceable constitutional right but merely specifies
guideline for legislative or executive action.226Therefore,
since there appears to be no standing law which crystallizes
the policy on political dynasties for enforcement, the Court
must defer from ruling on this issue.

functions and duties of local officials, and all other matters

relating to the organization and operation of the local units.

In any event, the Court finds the above-stated argument on

this score to be largely speculative since it has not been
properly demonstrated how the Pork Barrel System would
be able to propagate political dynasties.

Sec. 2. Declaration of Policy. (a) It is hereby declared the

policy of the State that the territorial and political
subdivisions of the State shall enjoy genuine and
meaningful local autonomy to enable them to attain their
fullest development as self-reliant communities and make
them more effective partners in the attainment of national
goals. Toward this end, the State shall provide for a more
responsive and accountable local government structure
instituted through a system of decentralization whereby
local government units shall be given more powers,
authority, responsibilities, and resources. The process of
decentralization shall proceed from the National
Government to the local government units.

5. Local Autonomy.
The States policy on local autonomy is principally stated in
Section 25, Article II and Sections 2 and 3, Article X of the
1987 Constitution which read as follows:
ARTICLE II
Sec. 25. The State shall ensure the autonomy of local
governments.
ARTICLE X
Sec. 2. The territorial and political subdivisions shall enjoy
local autonomy.
Sec. 3. The Congress shall enact a local government code
which shall provide for a more responsive and accountable
local government structure instituted through a system of
decentralization with effective mechanisms of recall,
initiative, and referendum, allocate among the different
local government units their powers, responsibilities, and
resources, and provide for the qualifications, election,
appointment and removal, term, salaries, powers and

Pursuant thereto, Congress enacted RA 7160,227 otherwise

known as the "Local Government Code of 1991" (LGC),
wherein the policy on local autonomy had been more
specifically explicated as follows:

xxxx
(c) It is likewise the policy of the State to require all
national agencies and offices to conduct periodic
consultations with appropriate local government units,
nongovernmental and peoples organizations, and other
concerned sectors of the community before any project or
program is implemented in their respective jurisdictions.
(Emphases and underscoring supplied)
The above-quoted provisions of the Constitution and the
LGC reveal the policy of the State to empower local
government units (LGUs) to develop and ultimately, become
self-sustaining and effective contributors to the national

economy. As explained by the Court in Philippine Gamefowl

Commission v. Intermediate Appellate Court: 228
This is as good an occasion as any to stress the
commitment of the Constitution to the policy of local
autonomy which is intended to provide the needed impetus
and encouragement to the development of our local political
subdivisions as "self - reliant communities." In the words of
Jefferson, "Municipal corporations are the small republics
from which the great one derives its strength." The
vitalization of local governments will enable their
inhabitants to fully exploit their resources and more
important, imbue them with a deepened sense of
involvement in public affairs as members of the body politic.
This objective could be blunted by undue interference by
the national government in purely local affairs which are
best resolved by the officials and inhabitants of such
political units. The decision we reach today conforms not
only to the letter of the pertinent laws but also to the spirit
of the Constitution.229 (Emphases and underscoring
supplied)
In the cases at bar, petitioners contend that the
Congressional Pork Barrel goes against the constitutional
principles on local autonomy since it allows district
representatives, who are national officers, to substitute
their judgments in utilizing public funds for local
development.230 The Court agrees with petitioners.
Philconsa described the 1994 CDF as an attempt "to make
equal the unequal" and that "it is also a recognition that
individual members of Congress, far more than the
President and their congressional colleagues, are likely to be
knowledgeable about the needs of their respective
constituents and the priority to be given each
project."231Drawing strength from this pronouncement,
previous legislators justified its existence by stating that
"the relatively small projects implemented under the

Congressional Pork Barrel complement and link the national

development goals to the countryside and grassroots as well
as to depressed areas which are overlooked by central
agencies which are preoccupied with megaprojects.232 Similarly, in his August 23, 2013 speech on the
"abolition" of PDAF and budgetary reforms, President
Aquino mentioned that the Congressional Pork Barrel was
originally established for a worthy goal, which is to enable
the representatives to identify projects for communities that
the LGU concerned cannot afford.233
Notwithstanding these declarations, the Court, however,
finds an inherent defect in the system which actually belies
the avowed intention of "making equal the unequal." In
particular, the Court observes that the gauge of PDAF and
CDF allocation/division is based solely on the fact of office,
without taking into account the specific interests and
peculiarities of the district the legislator represents. In this
regard, the allocation/division limits are clearly not based on
genuine parameters of equality, wherein economic or
geographic indicators have been taken into consideration.
As a result, a district representative of a highly-urbanized
metropolis gets the same amount of funding as a district
representative of a far-flung rural province which would be
relatively "underdeveloped" compared to the former. To
add, what rouses graver scrutiny is that even Senators and
Party-List Representatives and in some years, even the
Vice-President who do not represent any locality, receive
funding from the Congressional Pork Barrel as well. These
certainly are anathema to the Congressional Pork Barrels
original intent which is "to make equal the unequal."
Ultimately, the PDAF and CDF had become personal funds
under the effective control of each legislator and given unto
them on the sole account of their office.
The Court also observes that this concept of legislator
control underlying the CDF and PDAF conflicts with the
functions of the various Local Development Councils (LDCs)

which are already legally mandated to "assist the

corresponding sanggunian in setting the direction of
economic and social development, and coordinating
development efforts within its territorial
jurisdiction."234 Considering that LDCs are instrumentalities
whose functions are essentially geared towards managing
local affairs,235 their programs, policies and resolutions
should not be overridden nor duplicated by individual
legislators, who are national officers that have no lawmaking authority except only when acting as a body. The
undermining effect on local autonomy caused by the postenactment authority conferred to the latter was succinctly
put by petitioners in the following wise: 236
With PDAF, a Congressman can simply bypass the local
development council and initiate projects on his own, and
even take sole credit for its execution. Indeed, this type of
personality-driven project identification has not only
contributed little to the overall development of the district,
but has even contributed to "further weakening
infrastructure planning and coordination efforts of the
government."
Thus, insofar as individual legislators are authorized to
intervene in purely local matters and thereby subvert
genuine local autonomy, the 2013 PDAF Article as well as all
other similar forms of Congressional Pork Barrel is deemed
unconstitutional.
With this final issue on the Congressional Pork Barrel
resolved, the Court now turns to the substantive issues
involving the Presidential Pork Barrel.
C. Substantive Issues on the Presidential Pork Barrel.
1. Validity of Appropriation.

Petitioners preliminarily assail Section 8 of PD 910 and

Section 12 of PD1869 (now, amended by PD 1993), which
respectively provide for the Malampaya Funds and the
Presidential Social Fund, as invalid appropriations laws since
they do not have the "primary and specific" purpose of
authorizing the release of public funds from the National
Treasury. Petitioners submit that Section 8 of PD 910 is not
an appropriation law since the "primary and specific
purpose of PD 910 is the creation of an Energy
Development Board and Section 8 thereof only created a
Special Fund incidental thereto.237 In similar regard,
petitioners argue that Section 12 of PD 1869 is neither a
valid appropriations law since the allocation of the
Presidential Social Fund is merely incidental to the "primary
and specific" purpose of PD 1869 which is the amendment
of the Franchise and Powers of PAGCOR.238 In view of the
foregoing, petitioners suppose that such funds are being
used without any valid law allowing for their proper
appropriation in violation of Section 29(1), Article VI of the
1987 Constitution which states that: "No money shall be
paid out of the Treasury except in pursuance of an
appropriation made by law."239
The Court disagrees.
"An appropriation made by law under the contemplation of
Section 29(1), Article VI of the 1987 Constitution exists
when a provision of law (a) sets apart a determinate or
determinable240 amount of money and (b) allocates the
same for a particular public purpose. These two minimum
designations of amount and purpose stem from the very
definition of the word "appropriation," which means "to
allot, assign, set apart or apply to a particular use or
purpose," and hence, if written into the law, demonstrate
that the legislative intent to appropriate exists. As the
Constitution "does not provide or prescribe any particular
form of words or religious recitals in which an authorization
or appropriation by Congress shall be made, except that it

be made by law," an appropriation law may according to

Philconsa be "detailed and as broad as Congress wants it
to be" for as long as the intent to appropriate may be
gleaned from the same. As held in the case of Guingona,
Jr.:241
There is no provision in our Constitution that provides or
prescribes any particular form of words or religious recitals
in which an authorization or appropriation by Congress shall
be made, except that it be "made by law," such as precisely
the authorization or appropriation under the questioned
presidential decrees. In other words, in terms of time
horizons, an appropriation may be made impliedly (as by
past but subsisting legislations) as well as expressly for the
current fiscal year (as by enactment of laws by the present
Congress), just as said appropriation may be made in
general as well as in specific terms. The Congressional
authorization may be embodied in annual laws, such as a
general appropriations act or in special provisions of laws of
general or special application which appropriate public funds
for specific public purposes, such as the questioned decrees.
An appropriation measure is sufficient if the legislative
intention clearly and certainly appears from the language
employed (In re Continuing Appropriations, 32 P. 272),
whether in the past or in the present. (Emphases and
underscoring supplied)
Likewise, as ruled by the US Supreme Court in State of
Nevada v. La Grave:242
To constitute an appropriation there must be money placed
in a fund applicable to the designated purpose. The word
appropriate means to allot, assign, set apart or apply to a
particular use or purpose. An appropriation in the sense of
the constitution means the setting apart a portion of the
public funds for a public purpose. No particular form of
words is necessary for the purpose, if the intention to
appropriate is plainly manifested. (Emphases supplied)

Thus, based on the foregoing, the Court cannot sustain the

argument that the appropriation must be the "primary and
specific" purpose of the law in order for a valid
appropriation law to exist. To reiterate, if a legal provision
designates a determinate or determinable amount of money
and allocates the same for a particular public purpose, then
the legislative intent to appropriate becomes apparent and,
hence, already sufficient to satisfy the requirement of an
"appropriation made by law" under contemplation of the
Constitution.
Section 8 of PD 910 pertinently provides:
Section 8. Appropriations. x x x
All fees, revenues and receipts of the Board from any and
all sources including receipts from service contracts and
agreements such as application and processing fees,
signature bonus, discovery bonus, production bonus; all
money collected from concessionaires, representing unspent
work obligations, fines and penalties under the Petroleum
Act of 1949; as well as the government share representing
royalties, rentals, production share on service contracts and
similar payments on the exploration, development and
exploitation of energy resources, shall form part of a Special
Fund to be used to finance energy resource development
and exploitation programs and projects of the government
and for such other purposes as may be hereafter directed
by the President. (Emphases supplied)
Whereas Section 12 of PD 1869, as amended by PD 1993,
reads:
Sec. 12. Special Condition of Franchise. After deducting
five (5%) percent as Franchise Tax, the Fifty (50%) percent
share of the Government in the aggregate gross earnings of
the Corporation from this Franchise, or 60% if the

aggregate gross earnings be less than P150,000,000.00

shall be set aside and shall accrue to the General Fund to
finance the priority infrastructure development projects and
to finance the restoration of damaged or destroyed facilities
due to calamities, as may be directed and authorized by the
Office of the President of the Philippines. (Emphases
supplied)
Analyzing the legal text vis--vis the above-mentioned
principles, it may then be concluded that (a) Section 8 of PD
910, which creates a Special Fund comprised of "all fees,
revenues, and receipts of the Energy Development Board
from any and all sources" (a determinable amount) "to be
used to finance energy resource development and
exploitation programs and projects of the government and
for such other purposes as may be hereafter directed by the
President" (a specified public purpose), and (b) Section 12
of PD 1869, as amended by PD 1993, which similarly sets
aside, "after deducting five (5%) percent as Franchise Tax,
the Fifty (50%) percent share of the Government in the
aggregate gross earnings of PAGCOR, or 60%, if the
aggregate gross earnings be less than P150,000,000.00"
(also a determinable amount) "to finance the priority
infrastructure development projects and x x x the
restoration of damaged or destroyed facilities due to
calamities, as may be directed and authorized by the Office
of the President of the Philippines" (also a specified public
purpose), are legal appropriations under Section 29(1),
Article VI of the 1987 Constitution.
In this relation, it is apropos to note that the 2013 PDAF
Article cannot be properly deemed as a legal appropriation
under the said constitutional provision precisely because, as
earlier stated, it contains post-enactment measures which
effectively create a system of intermediate appropriations.
These intermediate appropriations are the actual
appropriations meant for enforcement and since they are
made by individual legislators after the GAA is passed, they

occur outside the law. As such, the Court observes that the
real appropriation made under the 2013 PDAF Article is not
the P24.79 Billion allocated for the entire PDAF, but rather
the post-enactment determinations made by the individual
legislators which are, to repeat, occurrences outside of the
law. Irrefragably, the 2013 PDAF Article does not constitute
an "appropriation made by law" since it, in its truest sense,
only authorizes individual legislators to appropriate in
violation of the non-delegability principle as aforediscussed.
2. Undue Delegation.
On a related matter, petitioners contend that Section 8 of
PD 910 constitutes an undue delegation of legislative power
since the phrase "and for such other purposes as may be
hereafter directed by the President" gives the President
"unbridled discretion to determine for what purpose the
funds will be used."243 Respondents, on the other hand,
urged the Court to apply the principle of ejusdem generis to
the same section and thus, construe the phrase "and for
such other purposes as may be hereafter directed by the
President" to refer only to other purposes related "to energy
resource development and exploitation programs and
projects of the government."244
The Court agrees with petitioners submissions.
While the designation of a determinate or determinable
amount for a particular public purpose is sufficient for a
legal appropriation to exist, the appropriation law must
contain adequate legislative guidelines if the same law
delegates rule-making authority to the Executive245 either
for the purpose of (a) filling up the details of the law for its
enforcement, known as supplementary rule-making, or (b)
ascertaining facts to bring the law into actual operation,
referred to as contingent rule-making.246 There are two (2)

fundamental tests to ensure that the legislative guidelines

for delegated rule-making are indeed adequate. The first
test is called the "completeness test." Case law states that a
law is complete when it sets forth therein the policy to be
executed, carried out, or implemented by the delegate. On
the other hand, the second test is called the "sufficient
standard test." Jurisprudence holds that a law lays down a
sufficient standard when it provides adequate guidelines or
limitations in the law to map out the boundaries of the
delegates authority and prevent the delegation from
running riot.247 To be sufficient, the standard must specify
the limits of the delegates authority, announce the
legislative policy, and identify the conditions under which it
is to be implemented.248
In view of the foregoing, the Court agrees with petitioners
that the phrase "and for such other purposes as may be
hereafter directed by the President" under Section 8 of PD
910 constitutes an undue delegation of legislative power
insofar as it does not lay down a sufficient standard to
adequately determine the limits of the Presidents authority
with respect to the purpose for which the Malampaya Funds
may be used. As it reads, the said phrase gives the
President wide latitude to use the Malampaya Funds for any
other purpose he may direct and, in effect, allows him to
unilaterally appropriate public funds beyond the purview of
the law. That the subject phrase may be confined only to
"energy resource development and exploitation programs
and projects of the government" under the principle of
ejusdem generis, meaning that the general word or phrase
is to be construed to include or be restricted to things
akin to, resembling, or of the same kind or class as those
specifically mentioned,249 is belied by three (3) reasons:
first, the phrase "energy resource development and
exploitation programs and projects of the government"
states a singular and general class and hence, cannot be
treated as a statutory reference of specific things from
which the general phrase "for such other purposes" may be

limited; second, the said phrase also exhausts the class it

represents, namely energy development programs of the
government;250 and, third, the Executive department has, in
fact, used the Malampaya Funds for non-energy related
purposes under the subject phrase, thereby contradicting
respondents own position that it is limited only to "energy
resource development and exploitation programs and
projects of the government."251 Thus, while Section 8 of PD
910 may have passed the completeness test since the policy
of energy development is clearly deducible from its text, the
phrase "and for such other purposes as may be hereafter
directed by the President" under the same provision of law
should nonetheless be stricken down as unconstitutional as
it lies independently unfettered by any sufficient standard of
the delegating law. This notwithstanding, it must be
underscored that the rest of Section 8, insofar as it allows
for the use of the Malampaya Funds "to finance energy
resource development and exploitation programs and
projects of the government," remains legally effective and
subsisting. Truth be told, the declared unconstitutionality of
the aforementioned phrase is but an assurance that the
Malampaya Funds would be used as it should be used
only in accordance with the avowed purpose and intention
of PD 910.
As for the Presidential Social Fund, the Court takes judicial
notice of the fact that Section 12 of PD 1869 has already
been amended by PD 1993 which thus moots the parties
submissions on the same.252 Nevertheless, since the
amendatory provision may be readily examined under the
current parameters of discussion, the Court proceeds to
resolve its constitutionality.
Primarily, Section 12 of PD 1869, as amended by PD 1993,
indicates that the Presidential Social Fund may be used "to
first, finance the priority infrastructure development
projects and second, to finance the restoration of damaged
or destroyed facilities due to calamities, as may be directed

and authorized by the Office of the President of the

Philippines." The Court finds that while the second indicated
purpose adequately curtails the authority of the President to
spend the Presidential Social Fund only for restoration
purposes which arise from calamities, the first indicated
purpose, however, gives him carte blanche authority to use
the same fund for any infrastructure project he may so
determine as a "priority". Verily, the law does not supply a
definition of "priority in frastructure development projects"
and hence, leaves the President without any guideline to
construe the same. To note, the delimitation of a project as
one of "infrastructure" is too broad of a classification since
the said term could pertain to any kind of facility. This may
be deduced from its lexicographic definition as follows: "the
underlying framework of a system, especially public services
and facilities (such as highways, schools, bridges, sewers,
and water-systems) needed to support commerce as well as
economic and residential development."253 In fine, the
phrase "to finance the priority infrastructure development
projects" must be stricken down as unconstitutional since
similar to the above-assailed provision under Section 8 of
PD 910 it lies independently unfettered by any sufficient
standard of the delegating law. As they are severable, all
other provisions of Section 12 of PD 1869, as amended by
PD 1993, remains legally effective and subsisting.
D. Ancillary Prayers. 1.
Petitioners Prayer to be Furnished Lists and Detailed
Reports.
Aside from seeking the Court to declare the Pork Barrel
System unconstitutional as the Court did so in the context
of its pronouncements made in this Decision petitioners
equally pray that the Executive Secretary and/or the DBM
be ordered to release to the CoA and to the public: (a) "the
complete schedule/list of legislators who have availed of
their PDAF and VILP from the years 2003 to 2013,

specifying the use of the funds, the project or activity and

the recipient entities or individuals, and all pertinent data
thereto" (PDAF Use Schedule/List);254 and (b) "the use of
the Executives lump-sum, discretionary funds, including the
proceeds from the x x x Malampaya Funds and remittances
from the PAGCOR x x x from 2003 to 2013, specifying the x
x x project or activity and the recipient entities or
individuals, and all pertinent data thereto"255 (Presidential
Pork Use Report). Petitioners prayer is grounded on Section
28, Article II and Section 7, Article III of the 1987
Constitution which read as follows:
ARTICLE II
Sec. 28. Subject to reasonable conditions prescribed by law,
the State adopts and implements a policy of full public
disclosure of all its transactions involving public interest.
ARTICLE III Sec. 7.
The right of the people to information on matters of public
concern shall be recognized. Access to official records, and
to documents and papers pertaining to official acts,
transactions, or decisions, as well as to government
research data used as basis for policy development, shall be
afforded the citizen, subject to such limitations as may be
provided by law.
The Court denies petitioners submission.
Case law instructs that the proper remedy to invoke the
right to information is to file a petition for mandamus. As
explained in the case of Legaspi v. Civil Service
Commission:256
While the manner of examining public records may be
subject to reasonable regulation by the government agency

in custody thereof, the duty to disclose the information of

public concern, and to afford access to public records cannot
be discretionary on the part of said agencies. Certainly, its
performance cannot be made contingent upon the discretion
of such agencies. Otherwise, the enjoyment of the
constitutional right may be rendered nugatory by any
whimsical exercise of agency discretion. The constitutional
duty, not being discretionary, its performance may be
compelled by a writ of mandamus in a proper case.
But what is a proper case for Mandamus to issue? In the
case before Us, the public right to be enforced and the
concomitant duty of the State are unequivocably set forth in
the Constitution.
The decisive question on the propriety of the issuance of the
writ of mandamus in this case is, whether the information
sought by the petitioner is within the ambit of the
constitutional guarantee. (Emphases supplied)
Corollarily, in the case of Valmonte v. Belmonte
Jr.257 (Valmonte), it has been clarified that the right to
information does not include the right to compel the
preparation of "lists, abstracts, summaries and the like." In
the same case, it was stressed that it is essential that the
"applicant has a well -defined, clear and certain legal right
to the thing demanded and that it is the imperative duty of
defendant to perform the act required." Hence, without the
foregoing substantiations, the Court cannot grant a
particular request for information. The pertinent portions of
Valmonte are hereunder quoted:258
Although citizens are afforded the right to information and,
pursuant thereto, are entitled to "access to official records,"
the Constitution does not accord them a right to compel
custodians of official records to prepare lists, abstracts,

summaries and the like in their desire to acquire

information on matters of public concern.
It must be stressed that it is essential for a writ of
mandamus to issue that the applicant has a well-defined,
clear and certain legal right to the thing demanded and that
it is the imperative duty of defendant to perform the act
required. The corresponding duty of the respondent to
perform the required act must be clear and specific Lemi v.
Valencia, G.R. No. L-20768, November 29,1968,126 SCRA
203; Ocampo v. Subido, G.R. No. L-28344, August 27,
1976, 72 SCRA 443.
The request of the petitioners fails to meet this standard,
there being no duty on the part of respondent to prepare
the list requested. (Emphases supplied)
In these cases, aside from the fact that none of the
petitions are in the nature of mandamus actions, the Court
finds that petitioners have failed to establish a "a welldefined, clear and certain legal right" to be furnished by the
Executive Secretary and/or the DBM of their requested
PDAF Use Schedule/List and Presidential Pork Use Report.
Neither did petitioners assert any law or administrative
issuance which would form the bases of the latters duty to
furnish them with the documents requested. While
petitioners pray that said information be equally released to
the CoA, it must be pointed out that the CoA has not been
impleaded as a party to these cases nor has it filed any
petition before the Court to be allowed access to or to
compel the release of any official document relevant to the
conduct of its audit investigations. While the Court
recognizes that the information requested is a matter of
significant public concern, however, if only to ensure that
the parameters of disclosure are properly foisted and so as
not to unduly hamper the equally important interests of the
government, it is constrained to deny petitioners prayer on
this score, without prejudice to a proper mandamus case

which they, or even the CoA, may choose to pursue through

a separate petition.
It bears clarification that the Courts denial herein should
only cover petitioners plea to be furnished with such
schedule/list and report and not in any way deny them, or
the general public, access to official documents which are
already existing and of public record. Subject to reasonable
regulation and absent any valid statutory prohibition, access
to these documents should not be proscribed. Thus, in
Valmonte, while the Court denied the application for
mandamus towards the preparation of the list requested by
petitioners therein, it nonetheless allowed access to the
documents sought for by the latter, subject, however, to the
custodians reasonable regulations,viz.:259
In fine, petitioners are entitled to access to the documents
evidencing loans granted by the GSIS, subject to reasonable
regulations that the latter may promulgate relating to the
manner and hours of examination, to the end that damage
to or loss of the records may be avoided, that undue
interference with the duties of the custodian of the records
may be prevented and that the right of other persons
entitled to inspect the records may be insured Legaspi v.
Civil Service Commission, supra at p. 538, quoting Subido
v. Ozaeta, 80 Phil. 383, 387. The petition, as to the second
and third alternative acts sought to be done by petitioners,
is meritorious.
However, the same cannot be said with regard to the first
act sought by petitioners, i.e.,
"to furnish petitioners the list of the names of the Batasang
Pambansa members belonging to the UNIDO and PDP-Laban
who were able to secure clean loans immediately before the
February 7 election thru the intercession/marginal note of
the then First Lady Imelda Marcos."

The Court, therefore, applies the same treatment here.

2. Petitioners Prayer to Include Matters in Congressional
Deliberations.
Petitioners further seek that the Court "order the inclusion
in budgetary deliberations with the Congress of all
presently, off-budget, lump sum, discretionary funds
including but not limited to, proceeds from the x x x
Malampaya Fund, remittances from the PAGCOR and the
PCSO or the Executives Social Funds."260
Suffice it to state that the above-stated relief sought by
petitioners covers a matter which is generally left to the
prerogative of the political branches of government. Hence,
lest the Court itself overreach, it must equally deny their
prayer on this score.
3. Respondents Prayer to Lift TRO; Consequential Effects of
Decision.
The final issue to be resolved stems from the interpretation
accorded by the DBM to the concept of released funds. In
response to the Courts September 10, 2013 TRO that
enjoined the release of the remaining PDAF allocated for the
year 2013, the DBM issued Circular Letter No. 2013-8 dated
September 27, 2013 (DBM Circular 2013-8) which
pertinently reads as follows:
3.0 Nonetheless, PDAF projects funded under the FY 2013
GAA, where a Special Allotment Release Order (SARO) has
been issued by the DBM and such SARO has been obligated
by the implementing agencies prior to the issuance of the
TRO, may continually be implemented and disbursements
thereto effected by the agencies concerned.

Based on the text of the foregoing, the DBM authorized the

continued implementation and disbursement of PDAF funds
as long as they are: first, covered by a SARO; and, second,
that said SARO had been obligated by the implementing
agency concerned prior to the issuance of the Courts
September 10, 2013 TRO.
Petitioners take issue with the foregoing circular, arguing
that "the issuance of the SARO does not yet involve the
release of funds under the PDAF, as release is only triggered
by the issuance of a Notice of Cash Allocation
[(NCA)]."261 As such, PDAF disbursements, even if covered
by an obligated SARO, should remain enjoined.
For their part, respondents espouse that the subject TRO
only covers "unreleased and unobligated allotments." They
explain that once a SARO has been issued and obligated by
the implementing agency concerned, the PDAF funds
covered by the same are already "beyond the reach of the
TRO because they cannot be considered as remaining
PDAF." They conclude that this is a reasonable
interpretation of the TRO by the DBM.262
The Court agrees with petitioners in part.
At the outset, it must be observed that the issue of whether
or not the Courts September 10, 2013 TRO should be lifted
is a matter rendered moot by the present Decision. The
unconstitutionality of the 2013 PDAF Article as declared
herein has the consequential effect of converting the
temporary injunction into a permanent one. Hence, from
the promulgation of this Decision, the release of the
remaining PDAF funds for 2013, among others, is now
permanently enjoined.
The propriety of the DBMs interpretation of the concept of
"release" must, nevertheless, be resolved as it has a

practical impact on the execution of the current Decision. In

particular, the Court must resolve the issue of whether or
not PDAF funds covered by obligated SAROs, at the time
this Decision is promulgated, may still be disbursed
following the DBMs interpretation in DBM Circular 2013-8.
On this score, the Court agrees with petitioners posturing
for the fundamental reason that funds covered by an
obligated SARO are yet to be "released" under legal
contemplation. A SARO, as defined by the DBM itself in its
website, is "aspecific authority issued to identified agencies
to incur obligations not exceeding a given amount during a
specified period for the purpose indicated. It shall cover
expenditures the release of which is subject to compliance
with specific laws or regulations, or is subject to separate
approval or clearance by competent authority."263
Based on this definition, it may be gleaned that a SARO only
evinces the existence of an obligation and not the directive
to pay. Practically speaking, the SARO does not have the
direct and immediate effect of placing public funds beyond
the control of the disbursing authority. In fact, a SARO may
even be withdrawn under certain circumstances which will
prevent the actual release of funds. On the other hand, the
actual release of funds is brought about by the issuance of
the NCA,264 which is subsequent to the issuance of a SARO.
As may be determined from the statements of the DBM
representative during the Oral Arguments:265
Justice Bernabe: Is the notice of allocation issued
simultaneously with the SARO?
xxxx
Atty. Ruiz: It comes after. The SARO, Your Honor, is only
the go signal for the agencies to obligate or to enter into
commitments. The NCA, Your Honor, is already the go

signal to the treasury for us to be able to pay or to liquidate

the amounts obligated in the SARO; so it comes after. x x x
The NCA, Your Honor, is the go signal for the MDS for the
authorized government-disbursing banks to, therefore, pay
the payees depending on the projects or projects covered
by the SARO and the NCA.
Justice Bernabe: Are there instances that SAROs are
cancelled or revoked?
Atty. Ruiz: Your Honor, I would like to instead submit that
there are instances that the SAROs issued are withdrawn by
the DBM.
Justice Bernabe: They are withdrawn?
Atty. Ruiz: Yes, Your Honor x x x. (Emphases and
underscoring supplied)
Thus, unless an NCA has been issued, public funds should
not be treated as funds which have been "released." In this
respect, therefore, the disbursement of 2013 PDAF funds
which are only covered by obligated SAROs, and without
any corresponding NCAs issued, must, at the time of this
Decisions promulgation, be enjoined and consequently
reverted to the unappropriated surplus of the general fund.
Verily, in view of the declared unconstitutionality of the
2013 PDAF Article, the funds appropriated pursuant thereto
cannot be disbursed even though already obligated, else the
Court sanctions the dealing of funds coming from an
unconstitutional source.
This same pronouncement must be equally applied to (a)
the Malampaya Funds which have been obligated but not
released meaning, those merely covered by a SARO
under the phrase "and for such other purposes as may be
hereafter directed by the President" pursuant to Section 8 of

PD 910; and (b) funds sourced from the Presidential Social

Fund under the phrase "to finance the priority infrastructure
development projects" pursuant to Section 12 of PD 1869,
as amended by PD 1993, which were altogether declared by
the Court as unconstitutional. However, these funds should
not be reverted to the general fund as afore-stated but
instead, respectively remain under the Malampaya Funds
and the Presidential Social Fund to be utilized for their
corresponding special purposes not otherwise declared as
unconstitutional.
E. Consequential Effects of Decision.
As a final point, it must be stressed that the Courts
pronouncement anent the unconstitutionality of (a) the
2013 PDAF Article and its Special Provisions, (b) all other
Congressional Pork Barrel provisions similar thereto, and (c)
the phrases (1) "and for such other purposes as may be
hereafter directed by the President" under Section 8 of PD
910, and (2) "to finance the priority infrastructure
development projects" under Section 12 of PD 1869, as
amended by PD 1993, must only be treated as prospective
in effect in view of the operative fact doctrine.
To explain, the operative fact doctrine exhorts the
recognition that until the judiciary, in an appropriate case,
declares the invalidity of a certain legislative or executive
act, such act is presumed constitutional and thus, entitled to
obedience and respect and should be properly enforced and
complied with. As explained in the recent case of
Commissioner of Internal Revenue v. San Roque Power
Corporation,266 the doctrine merely "reflects awareness that
precisely because the judiciary is the governmental organ
which has the final say on whether or not a legislative or
executive measure is valid, a period of time may have
elapsed before it can exercise the power of judicial review
that may lead to a declaration of nullity. It would be to
deprive the law of its quality of fairness and justice then, if

there be no recognition of what had transpired prior to such

adjudication."267 "In the language of an American Supreme
Court decision: The actual existence of a statute, prior to
such a determination of unconstitutionality, is an operative
fact and may have consequences which cannot justly be
ignored."268

insofar as it has conferred to the President the power to

appropriate funds intended by law for energy-related
purposes only to other purposes he may deem fit as well as
other public funds under the broad classification of "priority
infrastructure development projects," it has once more
transgressed the principle of non-delegability.

For these reasons, this Decision should be heretofore

applied prospectively.

For as long as this nation adheres to the rule of law, any of

the multifarious unconstitutional methods and mechanisms
the Court has herein pointed out should never again be
adopted in any system of governance, by any name or
form, by any semblance or similarity, by any influence or
effect. Disconcerting as it is to think that a system so
constitutionally unsound has monumentally endured, the
Court urges the people and its co-stewards in government
to look forward with the optimism of change and the
awareness of the past. At a time of great civic unrest and
vociferous public debate, the Court fervently hopes that its
Decision today, while it may not purge all the wrongs of
society nor bring back what has been lost, guides this
nation to the path forged by the Constitution so that no one
may heretofore detract from its cause nor stray from its
course. After all, this is the Courts bounden duty and no
others.

Conclusion
The Court renders this Decision to rectify an error which has
persisted in the chronicles of our history. In the final
analysis, the Court must strike down the Pork Barrel System
as unconstitutional in view of the inherent defects in the
rules within which it operates. To recount, insofar as it has
allowed legislators to wield, in varying gradations, nonoversight, post-enactment authority in vital areas of budget
execution, the system has violated the principle of
separation of powers; insofar as it has conferred unto
legislators the power of appropriation by giving them
personal, discretionary funds from which they are able to
fund specific projects which they themselves determine, it
has similarly violated the principle of non-delegability of
legislative power ; insofar as it has created a system of
budgeting wherein items are not textualized into the
appropriations bill, it has flouted the prescribed procedure
of presentment and, in the process, denied the President
the power to veto items ; insofar as it has diluted the
effectiveness of congressional oversight by giving legislators
a stake in the affairs of budget execution, an aspect of
governance which they may be called to monitor and
scrutinize, the system has equally impaired public
accountability ; insofar as it has authorized legislators, who
are national officers, to intervene in affairs of purely local
nature, despite the existence of capable local institutions, it
has likewise subverted genuine local autonomy ; and again,

WHEREFORE, the petitions are PARTLY GRANTED. In view of

the constitutional violations discussed in this Decision, the
Court hereby declares as UNCONSTITUTIONAL: (a) the
entire 2013 PDAF Article; (b) all legal provisions of past and
present Congressional Pork Barrel Laws, such as the
previous PDAF and CDF Articles and the various
Congressional Insertions, which authorize/d legislators
whether individually or collectively organized into
committees to intervene, assume or participate in any of
the various post-enactment stages of the budget execution,
such as but not limited to the areas of project identification,
modification and revision of project identification, fund
release and/or fund realignment, unrelated to the power of

congressional oversight; (c) all legal provisions of past and

present Congressional Pork Barrel Laws, such as the
previous PDAF and CDF Articles and the various
Congressional Insertions, which confer/red personal, lumpsum allocations to legislators from which they are able to
fund specific projects which they themselves determine; (d)
all informal practices of similar import and effect, which the
Court similarly deems to be acts of grave abuse of
discretion amounting to lack or excess of jurisdiction; and
(e) the phrases (1) "and for such other purposes as may be
hereafter directed by the President" under Section 8 of
Presidential Decree No. 910 and (2) "to finance the priority
infrastructure development projects" under Section 12 of
Presidential Decree No. 1869, as amended by Presidential
Decree No. 1993, for both failing the sufficient standard test
in violation of the principle of non-delegability of legislative
power.

utilized for their respective special purposes not otherwise

declared as unconstitutional.

Accordingly, the Courts temporary injunction dated

September 10, 2013 is hereby declared to be PERMANENT.
Thus, the disbursement/release of the remaining PDAF
funds allocated for the year 2013, as well as for all previous
years, and the funds sourced from (1) the Malampaya
Funds under the phrase "and for such other purposes as
may be hereafter directed by the President" pursuant to
Section 8 of Presidential Decree No. 910, and (2) the
Presidential Social Fund under the phrase "to finance the
priority infrastructure development projects" pursuant to
Section 12 of Presidential Decree No. 1869, as amended by
Presidential Decree No. 1993, which are, at the time this
Decision is promulgated, not covered by Notice of Cash
Allocations (NCAs) but only by Special Allotment Release
Orders (SAROs), whether obligated or not, are hereby
ENJOINED. The remaining PDAF funds covered by this
permanent injunction shall not be disbursed/released but
instead reverted to the unappropriated surplus of the
general fund, while the funds under the Malampaya Funds
and the Presidential Social Fund shall remain therein to be

The Court also DENIES petitioners prayer to order the

inclusion of the funds subject of these cases in the
budgetary deliberations of Congress as the same is a matter
left to the prerogative of the political branches of
government.

On the other hand, due to improper recourse and lack of

proper substantiation, the Court hereby DENIES petitioners
prayer seeking that the Executive Secretary and/or the
Department of Budget and Management be ordered to
provide the public and the Commission on Audit complete
lists/schedules or detailed reports related to the availments
and utilization of the funds subject of these cases.
Petitioners access to official documents already available
and of public record which are related to these funds must,
however, not be prohibited but merely subjected to the
custodians reasonable regulations or any valid statutory
prohibition on the same. This denial is without prejudice to
a proper mandamus case which they or the Commission on
Audit may choose to pursue through a separate petition.

Finally, the Court hereby DIRECTS all prosecutorial organs

of the government to, within the bounds of reasonable
dispatch, investigate and accordingly prosecute all
government officials and/or private individuals for possible
criminal offenses related to the irregular, improper and/or
unlawful disbursement/utilization of all funds under the Pork
Barrel System.
This Decision is immediately executory but prospective in
effect.
SO ORDERED.

ESTELA M. PERLAS-BERNABE
Associate Justice

JOSE CATRAL
MENDOZA
Associate Justice

WE CONCUR:
See Concurring Opinion
MARIA LOURDES P. A. SERENO
Chief Justice

See Concurring Opinion

ANTONIO T. CARPIO
Associate Justice

NO PART
PRESBITERO J.
VELASCO, JR.
Associate Justice

I concur and also join

the concurring opinion of
Justice Carpio.
TERESITA J.
LEONARDO-DE
CASTRO
Associate Justice

I join the Opinion of

Justice Carpio, subject to
my Concurring &
Dissenting Opinion.
ARTURO D. BRION
Associate Justice

DIOSDADO M.
PERALTA
Associate Justice

LUCAS P. BERSAMIN
Associate Justice

MARIANO C. DEL
CASTILLO
Associate Justice

I join the concurring

opinion of J. A.T. Carpio
of the ponencia
ROBERTO A. ABAD
Associate Justice

MARTIN S.
VILLARAMA, JR.
Associate Justice

JOSE PORTUGAL
PEREZ
Associate Justice

BIENVENIDO L. REYES
Associate Justice

See Concurring Opinion

MARVIC MARIO VICTOR F. LEONEN
Associate Justice
CERTIFICATION
I certify that the conclusions in the above Decision had been
reached in consultation before the cases were assigned to
the writer of the opinion of the Court.
MARIA LOURDES P. A. SERENO
Chief Justice

Footnotes
*Dropped as a party per Memorandum dated
October 17, 2013 filed by counsel for petitioners
Atty. Alfredo B. Molo III, et al. Rollo (G.R. No.
208566), p. 388.
** No part.
1

The Federalist Papers, Federalist No. 20.

Rollo (G.R. No. 208566), pp. 3-51; rollo (G.R. No.

208493), pp. 3-11; and rollo (G.R. No. 209251), pp.
2-8.

"Pork barrel spending, a term that traces its

origins back to the era of slavery before the U.S.
Civil War, when slave owners occasionally would
present a barrel of salt pork as a gift to their slaves.
In the modern usage, the term refers to
congressmen scrambling to set aside money for pet
projects in their districts." (Drudge, Michael W.
"Pork Barrel Spending Emerging as Presidential
Campaign Issue," August 1, 2008
http://iipdigital.usembassy.gov/st/english/article/20
08/08/20080801181504lcnirellep
0.1261713.html#axzz2iQrI8mHM> [visited October
17, 2013].)
4

Bernas, Joaquin G., S.J., The 1987 Constitution of

the Republic of the Philippines: A Commentary, 2003
Edition, p. 786, citing Bernas, "From Pork Barrel to
Bronze Caskets," Today, January 30, 1994.

Morton, Jean, "What is a Pork Barrel?" Global

Granary, Lifestyle Magazine and Common Place Book
Online: Something for Everyone, August 19, 2013.
<http://www.globalgranary.org/2013/08/19/whatis-a-pork-barrel/#.UnrnhFNavcw > (visited October
17, 2013).
9

Jison, John Raymond, "What does the 'pork barrel'

scam suggest about the Philippine government?"
International Association for Political Science
Students, September 10, 2013.
<http://www.iapss.org/ index.php/articles/item/93what-does-the-pork-barrel-scam-suggest-about-thephilippine-government> (visited October 17, 2013).
See also Llanes, Jonathan, "Pork barrel Knowing
the issue," Sunstar Baguio, October 23, 2013.
<http://www.sunstar.com.ph/
baguio/opinion/2013/09/05/llanes-pork- barrelknowing-issue-301598> (visited October 17, 2013).

Heaser, Jason, "Pulled Pork: The Three Part Attack

on Non-Statutory Earmarks," Journal of Legislation,
35 J. Legis. 32 (2009).
<http://heinonline.org/HOL/LandingPage?collection=
&handle =hein.journals/jleg35&div=6&id=&page=>
(visited October 17, 2013).
6

Nograles, Prospero C. and Lagman, Edcel C., House

of Representatives of the Philippines, "Understanding
the Pork Barrel," p. 2.
<http://www.congress.gov.ph/download/14th/pork_
barrel.pdf> (visited October 17, 2013).
7

Chua, Yvonne T. and Cruz, Booma, B., "Pork is a

Political, Not A Developmental, Tool."
<http://pcij.org/stories/2004/pork.html> [visited
October 22, 2013].) See also rollo (G.R. No.
208566), pp. 328-329.

10

Entitled "AN ACT MAKING APPROPRIATIONS FOR

PUBLIC WORKS," approved on March 10, 1922.
11

"Act 3044, the first pork barrel appropriation,

essentially divided public works projects into two
types. The first typenational and other buildings,
roads and bridges in provinces, and lighthouses,
buoys and beacons, and necessary mechanical
equipment of lighthousesfell directly under the
jurisdiction of the director of public works, for which
his office received appropriations. The second
grouppolice barracks, normal school and other
public buildings, and certain types of roads and
bridges, artesian wells, wharves, piers and other
shore protection works, and cable, telegraph, and
telephone linesis the forerunner of the infamous
pork barrel. Although the projects falling under the
second type were to be distributed at the discretion

of the secretary of commerce and communications,

he needed prior approval from a joint committee
elected by the Senate and House of Representatives.
The nod of either the joint committee or a committee
member it had authorized was also required before
the commerce and communications secretary could
transfer unspent portions of one item to another
item." (Emphases supplied) (Chua, Yvonne T. and
Cruz, Booma, B., "Pork by any name," VERA Files,
August 23, 2013. <http://verafiles.org/pork-by-anyname/> [visited October 14, 2013]).
12

Sec. 3. The sums appropriated in paragraphs (c),

(g), (l), and (s) of this Act shall be available for
immediate expenditure by the Director of Public
Works, but those appropriated in the other
paragraphs shall be distributed in the discretion of
the Secretary of Commerce and Communications,
subject to the approval of a joint committee elected
by the Senate and the House of Representatives. The
committee from each House may authorize one of its
members to approve the distribution made by the
Secretary of Commerce and Communications, who
with the approval of said joint committee, or of the
authorized members thereof may, for the purposes
of said distribution, transfer unexpended portions of
any item of appropriation. (Emphases supplied)
13

Those Section 1 (c), (g), (l), and (s) of Act 3044

"shall be available for immediate expenditure by the
Director of Public Works."
14

15

Section 3, Act 3044.

Chua, Yvonne T. and Cruz, Booma, B., "Pork by

any name," VERA Files, August 23, 2013.

<http://verafiles.org/pork-by-any-name/> (visited
October 14, 2013).
16

Id.

17

Id.

18

Id.

19

Nograles, Prospero C. and Lagman, Edcel C.,

House of Representatives of the Philippines,
"Understanding the Pork Barrel,"
<http://www.congress.gov.ph/download/
14th/pork_barrel.pdf > (visited October 17, 2013).
20

Chua, Yvonne T. and Cruz, Booma, B., "Pork by

any name," VERA Files, August 23, 2013.
<http://verafiles.org/pork-by-any-name/> (visited
October 14, 2013).
21

Id.

22

Priority Development Assistance Fund (PDAF) and

Various Infrastructures including Local Projects
(VILP), Special Audits Office Report No. 2012-03,
August 14, 2013 (CoA Report), p. 2.
23

Ilagan, Karol, "Data A Day; CIA, CDF, PDAF? Pork

is pork is pork," Moneypolitics, A Date Journalism
Project for the Philippine Center for Investigative
Journalism, August 1, 2013
<http://moneypolitics.pcij.org/data-a-day/cia-cdfpdaf-pork-is-pork-is-pork/> (visited October 14,
2013).
24

Republic Act No. (RA) 6831.

25

Special Provision 1, Article XLIV, RA 7078 (1991

CDF Article), and Special Provision 1, Article XLII
(1992), RA 7180 (1992 CDF Article) are similarly
worded as follows: Special Provision 1.
Use and Release of Funds. The amount herein
appropriated shall be used for infrastructure
and other priority projects and activities upon
approval by the President of the Philippines
and shall be released directly to the
appropriate implementing agency [(x x x for
1991)], subject to the submission of the
required list of projects and activities.
(Emphases supplied)
26

Chua, Yvonne T. and Cruz, Booma, B., "Pork by

any name," VERA Files, August 23, 2013.
<http://verafiles.org/pork-by-any-name/> (visited
October 14, 2013).
27

Id.

28

Special Provision 1, Article XXXVIII, RA 7645

(1993 CDF Article) provides:
Special Provision
1. Use and Release of Funds.
The amount herein appropriated shall be used
for infrastructure and other priority projects
and activities as proposed and identified by
officials concerned according to the following
allocations: Representatives, P12,500,000
each; Senators P18,000,000 each; VicePresident, P20,000,000. The fund shall be
automatically released quarterly by way of

Advice of Allotment and Notice of Cash

Allocation directly to the assigned
implementing agency not later than five (5)
days after the beginning of each quarter upon
submission of the list of projects and activities
by the officials concerned. (Emphases
supplied)
29

See Special Provision 1, 1993 CDF Article; id.

30

Special Provision 1, Article XLI, RA 7663 (1994

CDF Article) provides:
Special Provisions
1. Use and Release of Funds.
The amount herein appropriated shall be used
for infrastructure, purchase of ambulances
and computers and other priority projects and
activities, and credit facilities to qualified
beneficiaries as proposed and identified by
officials concerned according to the following
allocations: Representatives,P12,500,000
each; Senators P18,000,000 each; VicePresident, P20,000,000; PROVIDED, That, the
said credit facilities shall be constituted as a
revolving fund to be administered by a
government financial institution (GFI) as a
trust fund for lending operations. Prior years
releases to local government units and
national government agencies for this
purpose shall be turned over to the
government financial institution which shall
be the sole administrator of credit facilities
released from this fund.

The fund shall be automatically released

quarterly by way of Advice of Allotments and
Notice of Cash Allocation directly to the
assigned implementing agency not later than
five (5) days after the beginning of each
quarter upon submission of the list of projects
and activities by the officials concerned.
(Emphases supplied)

Special Provisions
1. Use and Release of Fund.
The amount herein appropriated shall be used
for infrastructure, purchase of equipment and
other priority projects and activities, including
current operating expenditures, except
creation of new plantilla positions, as
proposed and identified by officials concerned
according to the following allocations:
Representatives, Twelve Million Five Hundred
Thousand Pesos (P12,500,000) each;
Senators, Eighteen Million Pesos
(P18,000,000) each; Vice-President, Twenty
Million Pesos (P20,000,000).

31

Special Provision 1, Article XLII, RA 7845 (1995

CDF Article) provides:
Special Provisions
1. Use and Release of Funds.
The amount herein appropriated shall be used
for infrastructure, purchase of equipment and
other priority projects and activities as
proposed and identified by officials concerned
according to the following allocations:
Representatives, P12,500,000 each;
Senators P18,000,000 each; VicePresident, P20,000,000.
The fund shall be automatically released
semi-annually by way of Advice of Allotment
and Notice of Cash Allocation directly to the
designated implementing agency not later
than five (5) days after the beginning of each
semester upon submission of the list of
projects and activities by the officials
concerned. (Emphases supplied)
32

Special Provision 1, Article XLII, RA 8174 (1996

CDF Article) provides:

The Fund shall be released semi-annually by

way of Special Allotment Release Order and
Notice of Cash Allocation directly to the
designated implementing agency not later
than thirty (30) days after the beginning of
each semester upon submission of the list of
projects and activities by the officials
concerned. (Emphases supplied)
33

Special Provision 2 of the 1994 CDF Article,

Special Provision 2 of the 1995 CDF Article and
Special Provision 2 of the 1996 CDF Article are
similarly worded as follows:
2. Submission of [Quarterly (1994)/SemiAnnual (1995 and 1996)] Reports. The
Department of Budget and Management shall
submit within thirty (30) days after the end of
each [quarter (1994)/semester (1995 and
1996)] a report to the House Committee on

Appropriations and the Senate Committee on

Finance on the releases made from this Fund.
The report shall include the listing of the
projects, locations, implementing agencies
[stated (order of committees interchanged in
1994 and 1996)] and the endorsing officials.
(Emphases supplied)

circulation by the Department of Budget and

Management. No funds appropriated herein
shall be disbursed for projects not included in
the list herein required. (Emphases supplied)
35

See Special Provision 2, 1997 CDF Article; id.

36
34

Special Provision 2, Article XLII, RA 8250 (1997

CDF Article) provides:

Special Provision 2, Article XLII, RA 8522 (1998

CDF Article) provides:
Special Provisions

Special Provisions

xxxx

xxxx
2. Publication of Countrywide Development
Fund Projects. Within thirty (30) days after
the signing of this Act into law, the Members
of Congress and the Vice-President shall, in
consultation with the implementing agency
concerned, submit to the Department of
Budget and Management the list of fifty
percent (50%) of projects to be funded from
the allocation from the Countrywide
Development Fund which shall be duly
endorsed by the Senate President and the
Chairman of the Committee on Finance in the
case of the Senate and the Speaker of the
House of Representatives and the Chairman
of the Committee on Appropriations in the
case of the House of Representatives, and the
remaining fifty percent (50%) within six (6)
months thereafter. The list shall identify the
specific projects, location, implementing
agencies, and target beneficiaries and shall be
the basis for the release of funds. The said list
shall be published in a newspaper of general

2. Publication of Countrywide Development

Fund Projects. x x x PROVIDED, That said
publication is not a requirement for the
release of funds. x x x x (Emphases supplied)
37

Chua, Yvonne T. and Cruz, Booma, B., "Pork by

any name," VERA Files, August 23, 2013.
<http://verafiles.org/pork-by-any-name/> (visited
October 14, 2013).
38

Id.

49

Rollo (G.R. No. 208566), pp. 335-336, citing

Parreo, Earl, "Perils of Pork," Philippine Center for
Investigative Journalism, June 3-4, 1998. Available
at <http://pcij.org/stories/1998/pork.html>
40

Id.

41

Id.

42

RA 8745 entitled "AN ACT APPROPRIATING FUNDS

FOR THE OPERATION OF THE GOVERNMENT OF THE
REPUBLIC OF THE PHILIPPINES FROM JANUARY ONE
TO DECEMBER THIRTY ONE, NINETEEN HUNDRED
NINETY NINE, AND FOR OTHER PURPOSES."
43

Special Provision 1, Article XLII, Food Security

Program Fund, RA 8745 provides:

implementing agency upon prior consultation

with the Members of Congress concerned.
(Emphases supplied)
45

Special Provision 1, Article L, Rural/Urban

Development Infrastructure Program Fund, RA 8745
provides:
Special Provision

Special Provision
1. Use and Release of Fund. The amount
herein authorized shall be used to support the
Food Security Program of the government,
which shall include farm-to-market roads,
post harvest facilities and other agricultural
related infrastructures. Releases from this
fund shall be made directly to the
implementing agency subject to prior
consultation with the Members of Congress
concerned. (Emphases supplied)
44

Special Provision 1, Article XLIX,

Lingap Para sa Mahihirap
Program Fund, RA 8745 provides:
Special Provision
1. Use and Release of Fund. The amount
herein appropriated for the Lingap Para sa
Mahihirap Program Fund shall be used
exclusively to satisfy the minimum basic
needs of poor communities and
disadvantaged sectors: PROVIDED, That such
amount shall be released directly to the

1. Use and Release of Fund. The amount

herein authorized shall be used to fund
infrastructure requirements of the rural/urban
areas which shall be released directly to the
implementing agency upon prior consultation
with the respective Members of Congress.
(Emphases supplied)
46

Special Provision 1, Article XLIX, RA 8760 (2000

PDAF Article) provides:
Special Provision
1. Use and release of the Fund. The amount
herein appropriated shall be used to fund
priority programs and projects as indicated
under Purpose 1: PROVIDED, That such
amount shall be released directly to the
implementing agency concerned upon prior
consultation with the respective
Representative of the District: PROVIDED,
FURTHER, That the herein allocation may be
realigned as necessary to any expense
category: PROVIDED, FINALLY, That no
amount shall be used to fund personal
services and other personal benefits.
(Emphases supplied)

47

See Special Provision 1, 2000 PDAF Article; id.

programs and projects: PROVIDED, That such

amount shall be released directly to the
implementing agency or Local Government
Unit concerned: PROVIDED, FURTHER, That
the allocations authorized herein may be
realigned to any expense class, if deemed
necessary: PROVIDED, FURTHERMORE, That
a maximum of ten percent (10%) of the
authorized allocations by district may be used
for the procurement of rice and other basic
commodities which shall be purchased from
the National Food Authority.

48

Section 25 (7), Article VI, of the 1987 Philippine

Constitution (1987 Constitution) provides that
"if, by the end of any fiscal year, the
Congress shall have failed to pass the general
appropriations bill for the ensuing fiscal year,
the general appropriations law for the
preceding fiscal year shall be deemed
reenacted and shall remain in force and effect
until the general appropriations bill is passed
by the Congress." (Emphasis supplied)
49

Special Provision 1, Article L, RA 9162 (2002 PDAF

Article) provides:

51

Special Provision 1, Article XVIII, RA 9206

provides:
Special Provision No. 1 Restriction on the
Delegation of Project Implementation The
implementation of the projects funded herein
shall not be delegated to other agencies,
except those projects to be implemented by
the Engineering Brigades of the AFP and
inter-department projects undertaken by
other offices and agencies including local
government units with demonstrated
capability to actually implement the projects
by themselves upon consultation with the
Members of Congress concerned. In all cases
the DPWH shall exercise technical supervision
over projects. (Emphasis supplied)

1. Use and Release of the Fund. The amount

herein appropriated shall be used to fund
priority programs and projects or to fund
counterpart for foreign-assisted programs and
projects:
PROVIDED, That such amount shall be
released directly to the implementing agency
or Local Government Unit concerned.
(Emphases supplied)
50

Special Provision 1, Article XLVII, RA 9206, 2003

GAA (2003 PDAF Article) provides:
52

Special Provision
1. Use and Release of the Fund. The amount
herein appropriated shall be used to fund
priority programs and projects or to fund the
required counterpart for foreign-assisted

Special Provision 3, Article XLII, RA 9206

provides:
Special Provision No. 3 Submission of the
List of School Buildings Within 30 days after
the signing of this Act into law, (DepEd) after

consultation with the representative of the legislative district concerned, shall submit to DBM the list of 50% of
school buildings to be constructed every municipality x x x. The list as submitted shall be the basis for the release
of funds. (Emphasis supplied)
53

Rollo (G.R. No. 208566), p. 557.

54

Special Provision 1, Article L, RA 9336 (2005 PDAF Article) provides:

Special Provision(s)
1. Use and Release of the Fund. The amount appropriated herein shall be used to fund priority programs and
projects under the ten point agenda of the national government and shall be released directly to the
implementing agencies as indicated hereunder, to wit:
PARTICULARS

PROGRAM/PROJECT

IMPLEMENTING
AGENCY

A. Education

Purchase of IT Equipment

DepEd/TESDA/
CHED/SUCs/LGUs

Scholarship

TESDA/CHED/
SUCs/LGUs

Assistance to Indigent Patients Confined at the

Hospitals Under DOH Including Specialty
Hospitals

DOH/Specialty
Hospitals

B. Health

Assistance to Indigent Patients at the Hospitals LGUs

Devolved to LGUs and RHUs

C. Livelihood/
CIDSS

D. Rural
Electrification

Insurance Premium

Philhealth

Small & Medium Enterprise/Livelihood

DTI/TLRC/DA/CDA

Comprehensive Integrated Delivery of Social

Services

DSWD

Barangay/Rural Electrification

DOE/NEA

E. Water Supply

Construction of Water System

DPWH

Installation of Pipes/Pumps/Tanks

LGUs

F. Financial
Assistance

Specific Programs and Projects to Address the

Pro-Poor Programs of Government

LGUs

G. Public Work

Construction/Repair/ Rehabilitation of the

following: Roads and Bridges/Flood
Control/School buildings Hospitals Health
Facilities/Public Markets/Multi-Purpose
Buildings/Multi-Purpose Pavements

DPWH

H. Irrigation

Construction/Repair/ Rehabilitation of
Irrigation Facilities

DA-NIA

(Emphasis supplied)
55

Id.

58

See Special Provision 1, Article XLVI, RA 9498.

56

Rollo (G.R. No. 208566), p. 558.

59

See Special Provision 1, Article XLIX, RA 9524.

57

See Special Provision 1, Article XLVII, RA 9401.

60

See Special Provision 1, Article XLVII, RA 9970.

61

For instance, Special Provisions 2 and 3, Article

XLIII, RA 9336 providing for the 2005 DepEd School
Building Program, and Special Provisions 1 and 16,
Article XVIII, RA 9401 providing for the 2007 DPWH
Regular Budget respectively state: 2005 DepEd
School Building Program Special Provision No. 2
Allocation of School Buildings: The amount allotted

under Purpose 1 shall be apportioned as follows: (1)

fifty percent (50%) to be allocated pro-rata
according to each legislative districts student
population x x x; (2) forty percent (40%) to be
allocated only among those legislative districts with
classroom shortages x x x; (3) ten percent (10%) to
be allocated in accordance x x x.

Special Provision No. 3 Submission of the

List of School Buildings: Within 30 days after
the signing of this Act into law, the DepEd
after consultation with the representative of
the legislative districts concerned, shall
submit to DBM the list of fifty percent (50%)
of school buildings to be constructed in every

municipality x x x. The list as submitted shall

be the basis for the release of funds x x x.
(Emphases supplied)
2007 DPWH Regular Budget

Special Provision No. 1 Restriction on

Delegation of Project Implementation: The
implementation of the project funded herein
shall not be delegated to other agencies,
except those projects to be implemented by
the AFP Corps of Engineers, and interdepartment projects to be undertaken by
other offices and agencies, including local
government units (LGUs) with demonstrated
capability to actually implement the project
by themselves upon consultation with the
representative of the legislative district
concerned x x x.
Special Provision No. 16 Realignment of
Funds: The Secretary of Public Works and
Highways is authorized to realign funds
released from appropriations x x x from one
project/scope of work to another: PROVIDED,
that x x x (iii) the request is with the
concurrence of the legislator concerned

Section 63 of R.A. 9184, the GPPB shall have the

following duties and responsibilities: 1. To protect
national interest in all matters affecting public
procurement, having due regard to the country's
regional and international obligations; 2. To
formulate and amend public procurement policies,
rules and regulations, and amend, whenever
necessary, the implementing rules and regulations
Part A (IRR-A); 3. To prepare a generic procurement
manual and standard bidding forms for procurement;
4. To ensure the proper implementation by the
procuring entities of the Act, its IRR-A and all other
relevant rules and regulations pertaining to public
procurement; 5. To establish a sustainable training
program to develop the capacity of Government
procurement officers and employees, and to ensure
the conduct of regular procurement training
programs by the procuring entities; and 6. To
conduct an annual review of the effectiveness of the
Act and recommend any amendments thereto, as
may be necessary.
x x x x"
<http://www.gppb.gov.ph/about_us/gppb.html>
(visited October 23, 2013).

x x x. (Emphasis supplied)
62

Rollo (G.R. No. 208566) , p. 559, citing Section

2.A of RA 9358, otherwise known as the
"Supplemental Budget for 2006."
63

64

Id. at 559-560.

"As a primary aspect of the Philippine

Government's public procurement reform agenda,
the Government Procurement Policy Board (GPPB)
was established by virtue of Republic Act No. 9184
(R.A. 9184) as an independent inter-agency body
that is impartial, transparent and effective, with
private sector representation. As established in

65

Entitled "AMENDMENT OF SECTION 53 OF THE

IMPLEMENTING RULES AND REGULATIONS PART A
OF REPUBLIC ACT 9184 AND PRESCRIBING
GUIDELINES ON PARTICIPATION OF NONGOVERNMENTAL ORGANIZATIONS IN PUBLIC
PROCUREMENT," approved June 29, 2007.
66

Entitled "AN ACT PROVIDING FOR THE

MODERNIZATION, STANDARDIZATION AND
REGULATION OF THE PROCUREMENT ACTIVITIES OF
THE GOVERNMENT AND FOR OTHER PURPOSES."

67

Sec. 48. Alternative Methods. - Subject to the

prior approval of the Head of the Procuring Entity or
his duly authorized representative, and whenever
justified by the conditions provided in this Act, the
Procuring Entity may, in order to promote economy
and efficiency, resort to any of the following
alternative methods of Procurement:

2. Allocation of Funds. The total projects to be

identified by legislators and the Vice-President
shall not exceed the following amounts:
a. Total of Seventy Million Pesos
(P70,000,000) broken down into Forty Million
Pesos (P40,000,000) for Infrastructure
Projects and Thirty Million Pesos
(P30,000,000) for soft projects of
Congressional Districts or Party List
Representatives;

xxxx
(e) Negotiated Procurement - a method of
Procurement that may be resorted under the
extraordinary circumstances provided for in
Section 53 of this Act and other instances that
shall be specified in the IRR, whereby the
Procuring Entity directly negotiates a contract
with a technically, legally and financially
capable supplier, contractor or consultant.
xxxx
68

As defined in Section 5(o) of RA 9184, the term

"Procuring Entity" refers to any branch, department,
office, agency, or instrumentality of the government,
including state universities and colleges,
government-owned and/or - controlled corporations,
government financial institutions, and local
government units procuring Goods, Consulting
Services and Infrastructure Projects.
69

Rollo (G.R. No. 208566), p. 564, citing GPPB

Resolution 12-2007.
70

Special Provision 2, Article XLIV, RA 10147 (2011

PDAF Article) provides:

b. Total of Two Hundred Million Pesos

(P200,000,000) broken down into One
Hundred Million Pesos (P100,000,000) for
Infrastructure Projects and One Hundred
Million Pesos (P100,000,000) for soft projects
of Senators and the Vice President.
71

See Special Provision 4, 2011 PDAF Article.

72

Special Provision 2, Article XLIV, RA 10155 (2012

PDAF Article) provides: 2. Project Identification.
Identification of projects and/or designation of
beneficiaries shall conform to the priority list,
standard or design prepared by each implementing
agency. Furthermore, preference shall be given to
projects located in the 4th to 6th class municipalities
or indigents identified under the National Household
Targeting System for Poverty Reduction by the
DSWD.
For this purpose, the implementing agency
shall submit to Congress said priority list,
standard or design within ninety (90) days
from effectivity of this Act. (Emphasis
supplied)

73

RA 10352, passed and approved by Congress on

December 19, 2012 and signed into law by the
President on December 19, 2012. Special Provision
2, Article XLIV, RA 10352 (2013 PDAF Article)
provides:
2. Project Identification. Identification of
projects and/or designation of beneficiaries
shall conform to the priority list, standard or
design prepared by each implementing
agency: PROVIDED, That preference shall be
given to projects located in the 4th to 6th
class municipalities or indigents identified
under the NHTS-PR by the DSWD. For this
purpose, the implementing agency shall
submit to Congress said priority list, standard
or design within ninety (90) days from
effectivity of this Act. (Emphasis supplied)
74

The permissive treatment of the priority list

requirement in practice was revealed during the Oral
Arguments (TSN, October 10, 2013, p. 143):
Justice Leonen: x x x In Section 2 meaning,
Special Provision 2, it mentions priority list of
implementing agencies. Have the
implementing agencies indeed presented
priority list to the Members of Congress
before disbursement?
Solicitor General Jardeleza: My understanding
is, is not really, Your Honor. Justice Leonen:
So, in other words, the PDAF was expended
without the priority list requirements of the
implementing agencies?

Solicitor General Jardeleza: That is so much

in the CoA Report, Your Honor.
75

See Special Provision 3 of the 2012 PDAF Article

and Special Provision 3 of the 2013 PDAF Article.
76

Special Provision 6 of the 2012 PDAF Article

provides:
6. Realignment of Funds. Realignment under
this Fund may only be allowed once. The
Secretaries of Agriculture, Education, Energy,
Environment and Natural Resources, Health,
Interior and Local Government, Public Works
and Highways, and Social Welfare and
Development are also authorized to approve
realignment from one project/scope to
another within the allotment received from
this Fund, subject to the following: (i) for
infrastructure projects, realignment is within
the same implementing unit and same project
category as the original project; (ii) allotment
released has not yet been obligated for the
original project/scope of work; and (iii)
request is with the concurrence of the
legislator concerned. The DBM must be
informed in writing of any realignment
approved within five (5) calendar days from
its approval.
Special Provision 4 of the 2013 PDAF Article
provides:
4. Realignment of Funds. Realignment under
this Fund may only be allowed once. The
Secretaries of Agriculture, Education, Energy,
Interior and Local Government, Labor and

Employment, Public Works and Highways,

Social Welfare and Development and Trade
and Industry are also authorized to approve
realignment from one project/scope to
another within the allotment received from
this Fund, subject to the following: (i) for
infrastructure projects, realignment is within
the same implementing unit and same project
category as the original project; (ii) allotment
released has not yet been obligated for the
original project/scope of work; and (iii)
request is with the concurrence of the
legislator concerned. The DBM must be
informed in writing of any realignment
approved within five (5) calendar days from
approval thereof: PROVIDED, That any
realignment under this Fund shall be limited
within the same classification of soft or hard
programs/projects listed under Special
Provision 1 hereof: PROVIDED, FURTHER,
That in case of realignments, modifications
and revisions of projects to be implemented
by LGUs, the LGU concerned shall certify that
the cash has not yet been disbursed and the
funds have been deposited back to the BTr.
Any realignment, modification and revision of
the project identification shall be submitted to
the House Committee on Appropriations and
the Senate Committee on Finance, for
favorable endorsement to the DBM or the
implementing agency, as the case may be.
(Emphases supplied)
77

Special Provision 1 of the 2013 PDAF Article

provides:

Special Provision(s) 1. Use of Fund. The

amount appropriated herein shall be used to
fund the following priority programs and
projects to be implemented by the
corresponding agencies:
xxxx
PROVIDED, That this Fund shall not be used
for the payment of Personal Services
expenditures: PROVIDED, FURTHER, That all
procurement shall comply with the provisions
of R.A. No. 9184 and its Revised
Implementing Rules and Regulations:
PROVIDED, FINALLY, That for infrastructure
projects, LGUs may only be identified as
implementing agencies if they have the
technical capability to implement the same.
(Emphasis supplied)
78

Special Provision 2 of the 2013 PDAF Article

provides:
2. Project Identification. x x x.
xxxx
All programs/projects, except for assistance
to indigent patients and scholarships,
identified by a member of the House of
Representatives outside of his/her legislative
district shall have the written concurrence of
the member of the House of Representatives
of the recipient or beneficiary legislative
district, endorsed by the Speaker of the
House of Representatives.

79

See Special Provision 4 of the 2013 PDAF Article;

supra note 76.

PROVIDING FUNDS, THEREFOR, AND FOR OTHER

PURPOSES."

80

82

Sec. 8.
Appropriations. The sum of Five Million Pesos
out of any available funds from the National
Treasury is hereby appropriated and
authorized to be released for the organization
of the Board and its initial operations.
Henceforth, funds sufficient to fully carry out
the functions and objectives of the Board
shall be appropriated every fiscal year in the
General Appropriations Act.
All fees, revenues and receipts of the Board
from any and all sources including receipts
from service contracts and agreements such
as application and processing fees, signature
bonus, discovery bonus, production bonus; all
money collected from concessionaires,
representing unspent work obligations, fines
and penalties under the Petroleum Act of
1949; as well as the government share
representing royalties, rentals, production
share on service contracts and similar
payments on the exploration, development
and exploitation of energy resources, shall
form part of a Special Fund to be used to
finance energy resource development and
exploitation programs and projects of the
government and for such other purposes as
may be hereafter directed by the President.
(Emphasis supplied)

81

Entitled "CREATING AN ENERGY DEVELOPMENT

BOARD, DEFINING ITS POWERS AND FUNCTIONS,

See First Whereas Clause of PD 910.

83

See <http://malampaya.com/> (visited October

17, 2013).
84

Sec. 12. Special Condition of Franchise. After

deducting five (5%) percent as Franchise Tax, the
Fifty (50%) percent share of the Government in the
aggregate gross earnings of the Corporation from
this Franchise shall be immediately set aside and
allocated to fund the following infrastructure and
socio-civil projects within the Metropolitan Manila
Area:
(a) Flood Control
(b) Sewerage and Sewage
(c) Nutritional Control
(d) Population Control
(e) Tulungan ng Bayan Centers
(f) Beautification
(g) Kilusang Kabuhayan at Kaunlaran (KKK)
projects; provided, that should the aggregate
gross earning be less than P150,000,000.00,
the amount to be allocated to fund the abovementioned project shall be equivalent to sixty
(60%) percent of the aggregate gross
earning.

In addition to the priority infrastructure and

socio-civic projects with the Metropolitan
Manila specifically enumerated above, the
share of the Government in the aggregate
gross earnings derived by the Corporate from
this Franchise may also be appropriated and
allocated to fund and finance infrastructure
and/or socio-civic projects throughout the
Philippines as may be directed and authorized
by the Office of the President of the
Philippines.

earnings of the Corporation from this

Franchise, or 60% if the aggregate gross
earnings be less than P150,000,000.00 shall
immediately be set aside and shall accrue to
the General Fund to finance the priority
infrastructure development projects and to
finance the restoration of damaged or
destroyed facilities due to calamities, as may
be directed and authorized by the Office of
the President of the Philippines.
88

Rollo (G.R. No. 208566), p. 301.

89

CDF/PDAF ALLOCATION FROM 1990 -2013.

85

Entitled "CONSOLIDATING AND AMENDING

PRESIDENTIAL DECREE NOS. 1067-A, 1067-B, 1067C, 1399 AND 1632, RELATIVE TO THE FRANCHISE
AND POWERS OF THE PHILIPPINE AMUSEMENT AND
GAMING CORPORATION (PAGCOR)."
86

Entitled "AMENDING SECTION TWELVE OF

PRESIDENTIAL DECREE NO. 1869-CONSOLIDATING
AND AMENDING PRESIDENTIAL DECREE NOS. 1067A, 1067-B, 1067-C, 1399 AND 1632, R ELATIVE TO
THE F RANCHISE AND POWERS OF THE PHILIPPINE
AMUSEMENT AND G AMING CORPORATION
(PAGCOR)." While the parties have confined their
discussion to Section 12 of PD 1869, the Court takes
judicial notice of its amendment and perforce deems
it apt to resolve the constitutionality of the
amendatory provision.
87

Section 12 of PD 1869, as amended by PD 1993,

now reads:
Sec. 12. Special Condition of Franchise.
After deducting five (5%) percent as
Franchise Tax, the Fifty (50%) percent share
of the government in the aggregate gross

1990 P2,300,000,000.00
1991 P 2,300,000,000.00
1992 P 2,480,000,000.00
1993 P 2,952,000,000.00
1994 P 2,977,000,000.00
1995 P 3,002,000,000.00
1996 P 3,014,500,000.00
1997 P 2,583,450,000.00
1998 P 2,324,250,000.00
1999 P 1,517,800,000.00 (Food
Security Program Fund)

 P 2,500,000,000.00 (Lingap Para Sa

Mahihirap Program Fund)

accident, for instance, that the release of the

allocations often coincides with the passage of a
Palace-sponsored bill.

P 5,458,277,000.00 (Rural/Urban
Development Infrastructure Program Fund)

That pork funds have grown by leaps and

bounds in the last decade can be traced to
presidents in need of Congress support. The
rise in pork was particularly notable during
the Ramos administration, when the president
and House Speaker Jose de Venecia, Jr. used
generous fund releases to convince
congressmen to support Malacaang-initiated
legislation. The Ramos era, in fact, became
known as the golden age of pork.

2000 P 3,330,000,000.00
2001 2000 GAA re-enacted
2002 P 5,677,500,000.00
2003 P 8,327,000,000.00
2004 2003 GAA re-enacted

Through the years, though, congressmen

have also taken care to look after their very
own. More often than not, pork-barrel funds
are funneled to projects in towns and cities
where the lawmakers' own relatives have
been elected to public office; thus, pork is a
tool for building family power as well. COA
has come across many instances where porkfunded projects ended up directly benefiting
no less than the lawmaker or his or her
relatives."(CHUA, YVONNE T. and CRUZ,
BOOMA, "Pork is a Political, Not A
Developmental, Tool."
<http://pcij.org/stories/2004/pork.html>
[visited October 22, 2013].)

2005 P 6,100,000,000.00
2006 2005 GAA re-enacted
2007 P 11,445,645,000.00
2008 P 7,892,500,000.00
2009 P 9,665,027,000.00
2010 P 10,861,211,000.00
2011 P 24,620,000,000.00
91

2012 P 24,890,000,000.00
2013 P 24,790,000,000.00
90

"Pork as a tool for political patronage, however,

can extend as far as the executive branch. It is no

With reports from Inquirer Research and

Salaverria, Leila, "Candazo, first whistle-blower on
pork barrel scam, dies; 61," Philippine Daily Inquirer,
August 20, 2013, <http://newsinfo.
inquirer.net/469439/candazo-first-whistle-bloweron-pork-barrel-scam-dies-61> (visited October 21,
2013.)

92

Id.

93

Id.

94

Id.

Development Corporation (NLDC), National

Agribusiness Corporation (NABCOR), and the
Zamboanga del Norte Agricultural College (ZNAC)
Rubber Estate Corporation (ZREC). CoA
Chairpersons Memorandum. Rollo (G.R. No.
208566), p. 546. See also CoA Report, p. 14.

95

Lawyers Against Monopoly and Poverty (LAMP) v.

Secretary of Budget and Management, G.R. No.
164987, April 24, 2012, 670 SCRA 373, 387.

102

Id.

103

Id. at 546-547.

96

Carvajal, Nancy, " NBI probes P10-B scam,"

Philippine Daily Inquirer, July 12, 2013
<http://newsinfo.inquirer.net/443297/nbi-probesp10-b-scam> (visited October 21, 2013).
97

Id.

98

See NBI Executive Summary.

<http://www.gov.ph/2013/09/16/executivesummary-by-the-nbi-on-the- pdaf-complaints-filedagainst-janet-lim-napoles-et-al/> (visited October
22, 2013).
99

Pursuant to Office Order No. 2010-309 dated May

13, 2010.
100

During the Oral Arguments, the CoA Chairperson

referred to the VILP as "the source of the so called
HARD project, hard portion x x x "under the title the
Budget of the DPWH." TSN, October 8, 2013, p. 69.
101

These implementing agencies included the

Department of Agriculture, DPWH and the
Department of Social Welfare and Development
(DSWD). The GOCCs included Technology and
Livelihood Resource Center (TLRC)/Technology
Resource Center (TRC), National Livelihood

104

Carvajal, Nancy, Malampaya fund lost P900M in

JLN racket, Philippine Daily Inquirer, July 16, 2013
<http://newsinfo.inquirer.net/445585/malampayafund-lost-p900m-in-jln-racket> (visited October 21,
2013.)
105

TSN, October 8, 2013, p. 119.

106

Rollo (G.R. No. 208493), pp. 9 and 341.

107

The Court observes that petitioners have not

presented sufficient averments on the remittances
from the Philippine Charity Sweepstakes Office nor
have defined the scope of "the Executives Lump
Sum Discretionary Funds" (See rollo [G.R. No.
208566], pp. 47-49) which appears to be too broad
and all-encompassing. Also, while Villegas filed a
Supplemental Petition dated October 1, 2013
(Supplemental Petition, see rollo [G.R. No. 208566],
pp. 213-220, and pp. 462-464) particularly
presenting their arguments on the Disbursement
Acceleration Program, the same is the main subject
of G.R. Nos. 209135, 209136, 209155, 209164,
209260, 209287, 209442, 209517, and 209569 and
thus, must be properly resolved therein. Hence, for
these reasons, insofar as the Presidential Pork Barrel

is concerned, the Court is constrained not to delve

on any issue related to the above-mentioned funds
and consequently confine its discussion only with
respect to the issues pertaining to the Malampaya
Funds and the Presidential Social Fund.
108

118

Biraogo v. Philippine Truth Commission of 2010,

G.R. No. 192935, December 7, 2010, 637 SCRA 78,
148.
119

Joya v. Presidential Commission on Good

Government, supra note 117, at 575.

Rollo (G.R. No. 208566), pp. 48-49.

120

109

Id. at 48.

110

To note, Villegas Supplemental Petition was filed

on October 2, 2013.
111

Rollo, (G.R. No. 208566), p. 342; and rollo (G.R.

No. 209251), pp. 6-7.
112

Re-docketed as G.R. No. 209251 upon

Nepomucenos payment of docket fees on October
16, 2013 as reflected on the Official Receipt No.
0079340. Rollo (G.R. No. 209251) p. 409.
113

Rollo (G.R. No. 208566) p. 97.

114

G.R. Nos. 113105, 113174, 113766 & 113888,

August 19, 1994, 235 SCRA 506.
115

Supra note 95.

116

Entitled "CREATING AN ENERGY DEVELOPMENT

BOARD, DEFINING ITS POWERS AND FUNCTIONS,
PROVIDING FUNDS, THEREFOR, AND FOR OTHER
PURPOSES."

Southern Hemisphere Engagement Network, Inc.

v. Anti-Terrorism Council, G.R. Nos. 178552,
178554, 178581, 178890, 179157, and 179461,
October 5, 2010, 632 SCRA 146, 175.
121

Province of North Cotabato v. Government of the

Republic of the Philippines Peace Panel on Ancestral
Domain (GRP), G.R. Nos. 183591, 183752, 183893,
183951, and 183962, October 14, 2008, 568 SCRA
402, 450.
122

Id. at 450-451.

123

Francisco, Jr. v. Toll Regulatory Board, G.R. No.

166910, 169917, 173630, and 183599, October 19,
2010, 633 SCRA 470, 493, citing Province of North
Cotabato v. Government of the Republic of the
Philippines Peace Panel on Ancestral Domain (GRP),
G.R. Nos. 183591, 183752, 183893, 183951, and
183962, October 14, 2008, 568 SCRA 402, 405.
124

Id. at 492, citing Muskrat v. U.S., 219 U.S. 346

(1913).
125

Baldo, Jr. v. Commision on Elections, G.R. No.

176135, June 16, 2009, 589 SCRA 306, 310.

117

Joya v. Presidential Commission on Good

Government, G.R. No. 96541, August 24, 1993, 225
SCRA 568, 575.

126

TSN, October 10, 2013, pp. 79-81.

127

Section 17, Article VII of the 1987 Constitution

reads: Sec. 17. The President shall have control of all
the executive departments, bureaus, and offices. He
shall ensure that the laws be faithfully executed.
128

Sec. 38. Suspension of Expenditure of

Appropriations. Except as otherwise provided in
the General Appropriations Act and whenever in his
judgment the public interest so requires, the
President, upon notice to the head of office
concerned, is authorized to suspend or otherwise
stop further expenditure of funds allotted for any
agency, or any other expenditure authorized in the
General Appropriations Act, except for personal
services appropriations used for permanent officials
and employees.

including receipts from existing and proposed

revenue measures.
134

Rollo (G.R. No. 208566), p. 294.

135

Id. at 5.

136

G.R. No. 159085, February 3, 2004, 421 SCRA

656.
137

Id. at 665.

138

See Francisco, Jr. v. Toll Regulatory Board, supra

note 123, at 492.
139

369 US 186 82, S. Ct. 691, L. Ed. 2d. 663 [1962].

140

Rollo (G.R. No. 208566), pp. 295-296.

129

Mattel, Inc. v. Francisco, G.R. No. 166886, July

30, 2008, 560 SCRA 504, 514, citing Constantino v.
Sandiganbayan (First Division), G.R. Nos. 140656
and 154482, September 13, 2007, 533 SCRA 205,
219-220.

141

Taada v. Cuenco, 100 Phil. 1101 (1957)

unreported case.

130

Rollo (G.R. No. 208566), p. 292.

142

406 Phil. 1 (2001).

131

G.R. No. 198457, August 13, 2013.

143

Id. at 42-43.

132

TSN, October 10, 2013, p. 134.

144

Angara v. Electoral Commission, 63 Phil. 139, 158

(1936).

133

Section 22, Article VII of the 1987 Constitution

provides:
Sec. 22. The President shall submit to the
Congress within thirty days from the opening
of every regular session, as the basis of the
general appropriations bill, a budget of
expenditures and sources of financing,

145

La Bugal- Blaan Tribal Association, Inc. v. Sec.

Ramos, 465 Phil. 860, 890 (2004).
146

147

Rollo (G.R. No. 208566), p. 349.

Public Interest Center, Inc. v. Honorable Vicente

Q. Roxas, in his capacity as Presiding Judge, RTC of

Quezon City, Branch 227, G.R. No. 125509, January

31, 2007, 513 SCRA 457, 470.

160

Id. at 338.

161

See note 107.

148

Social Justice Society (SJS) v. Dangerous Drugs

Board, G.R. No. 157870, November 3, 2008, 570
SCRA 410, 421.

162

149

TSN, October 8, 2013, pp. 184-185.

163

Id. at 157.

150

People v. Vera, 65 Phil. 56, 89 (1937).

164

Section 1, Article VI, 1987 Constitution.

165

Section 1, Article VII, 1987 Constitution.

166

Section 1, Article VIII, 1987 Constitution.

151

See Lanuza v. CA, G.R. No. 131394, March 28,

2005, 454 SCRA 54, 61-62.

Angara v. Electoral Commission, supra note 144,

at 139.

152

ART. 8. Judicial decisions applying or interpreting

the laws or the Constitution shall form a part of the
legal system of the Philippines.
153

Chinese Young Mens Christian Association o f the

Philippine Islands v. Remington Steel Corporation,
G.R. No. 159422, March 28, 2008, 550 SCRA 180,
197-198.
154

Philconsa v. Enriquez, supra note 114, at 522.

155

G.R. No. 166715, August 14, 2008, 562 SCRA

251.
156

Rollo (G.R. No. 208566), p. 325.

157

Id.

158

Id. at 329.

159

Id. at 339.

167

Angara v. Electoral Commission, supra note 144,

at 156.
168

Government of the Philippine Islands v. Springer,

277 U.S. 189, 203 (1928).
169

Re: COA Opinion on the Computation of the

Appraised Value of the Properties Purchased by the
Retired Chief/Associate Justices of the Supreme
Court, A.M. No. 11-7-10-SC, July 31, 2012, 678
SCRA 1, 9-10, citing Carl Baar, Separate But
Subservient: Court Budgeting In The American
States 149-52 (1975), cited in Jeffrey Jackson,
Judicial Independence, Adequate Court Funding, and
Inherent Judicial Powers, 52 Md. L. Rev. 217 (1993).
170

Id. at 10, citing Jeffrey Jackson, Judicial

Independence, Adequate Court Funding, and
Inherent Judicial Powers, 52 Md. L. Rev. 217 (1993).

171

See Nixon v. Administrator of General Services,

433 U.S. 425, 441-446 and 451-452 (1977) and
United States v. Nixon, 418 U.S. 683 (1974), cited in
Justice Powells concurring opinion in Immigration
and Naturalization Service v. Chadha, 462 U.S. 919
(1983).

179

Rollo (G.R. No. 208566), p. 179.

180

Id. at 29.

181

Id. at 24.

182

Id. at 86.

183

Id. at 308.

184

Id.

172

See Youngstown Sheet & Tube Co. v. Sawyer 343

U.S. 579, 587 (1952), Springer v. Philippine Islands,
277 U.S. 189, 203 (1928) cited in Justice Powells
concurring opinion in Immigration and Naturalization
Service v. Chadha, 462 U.S. 919 (1983).
173

273 Phil. 443 (1991).

174

Id. at 461. "3. Budget Execution. Tasked on the

Executive, the third phase of the budget process
covers the various operational aspects of budgeting.
The establishment of obligation authority ceilings,
the evaluation of work and financial plans for
individual activities, the continuing review of
government fiscal position, the regulation of funds
releases, the implementation of cash payment
schedules, and other related activities comprise this
phase of the budget cycle."
175

Biraogo v. Philippine Truth Commission of 2010,

supra note 118, at 158.
176

Guingona, Jr. v. Carague, supra note 173, at 460461.

177

Abakada Guro Party List v. Purisima, supra note

155, at 294-296.
178

Id. at 287.

185

See CDF Articles for the years 1991, 1992, 1993,

1994, 1995, 1996, 1997, and 1998.
186

See PDAF Article for the year 2000 which was reenacted in 2001. See also the following 1999 CIAs:
"Food Security Program Fund," the " Lingap Para Sa
Mahihirap Program Fund," and the "Rural/Urban
Development Infrastructure Program Fund." See
further the 1997 DepEd School Building Fund.
187

See PDAF Article for the years 2005, 2006, 2007,

2008, 2009, 2010, 2011, and 2013.
188

Also, in Section 2.1 of DBM Circular No. 547

dated January 18, 2013 (DBM Circular 547-13), or
the "Guidelines on the Release of Funds Chargeable
Against the Priority Development Assistance Fund for
FY 2013," it is explicitly stated that the "PDAF shall
be used to fund priority programs and projects
identified by the Legislators from the Project Menu."
(Emphasis supplied)
189

To note, Special Provision 4 cannot as

respondents submit refer to realignment of

projects since the same provision subjects the

realignment to the condition that the "allotment
released has not yet been obligated for the original
project/scope of work". The foregoing proviso should
be read as a textual reference to the savings
requirement stated under Section 25(5), Article VI of
the 1987 Constitution which pertinently provides that
"x x x the President, the President of the Senate, the
Speaker of the House of Representatives, the Chief
Justice of the Supreme Court, and the heads of
Constitutional Commissions may, by law, be
authorized to augment any item in the general
appropriations law for their respective offices from
savings in other items of their respective
appropriations. In addition, Sections 4.2.3, 4.2.4 and
4.3.3 of DBM Circular 547-13, the implementing
rules of the 2013 PDAF Article, respectively require
that: (a) "the allotment is still valid or has not yet
lapsed"; (b) "requests for realignment of unobligated
allotment as of December 31, 2012 treated as
continuing appropriations in FY 2013 shall be
submitted to the DBM not later than June 30, 2013";
and (c) requests for realignment shall be supported
with, among others, a "certification of availability of
funds." As the letter of the law and the guidelines
related thereto evoke the legal concept of savings,
Special Provision 4 must be construed to be a
provision on realignment of PDAF funds, which would
necessarily but only incidentally include the projects
for which the funds have been allotted to. To
construe it otherwise would effectively allow PDAF
funds to be realigned outside the ambit of the
foregoing provision, thereby sanctioning a
constitutional aberration.
190

Aside from the sharing of the executives

realignment authority with legislators in violation of
the separation of powers principle, it must be

pointed out that Special Provision 4, insofar as it

confers fund realignment authority to department
secretaries, is already unconstitutional by itself. As
recently held in Nazareth v. Villar (Nazareth), G.R.
No. 188635, January 29, 2013, 689 SCRA 385, 403404, Section 25(5), Article VI of the 1987
Constitution, limiting the authority to augment, is
"strictly but reasonably construed as exclusive" in
favor of the high officials named therein. As such,
the authority to realign funds allocated to the
implementing agencies is exclusively vested in the
President, viz.:
It bears emphasizing that the exception in
favor of the high officials named in Section
25(5), Article VI of the Constitution limiting
the authority to transfer savings only to
augment another item in the GAA is strictly
but reasonably construed as exclusive. As the
Court has expounded in Lokin, Jr. v.
Commission on Elections:
When the statute itself enumerates the
exceptions to the application of the general
rule, the exceptions are strictly but
reasonably construed. The exceptions extend
only as far as their language fairly warrants,
and all doubts should be resolved in favor of
the general provision rather than the
exceptions. Where the general rule is
established by a statute with exceptions,
none but the enacting authority can curtail
the former. Not even the courts may add to
the latter by implication, and it is a rule that
an express exception excludes all others,
although it is always proper in determining
the applicability of the rule to inquire

whether, in a particular case, it accords with

reason and justice.

suggested, that under the presidential type of

government which we have adopted and
considering the departmental organization
established and continued in force by
paragraph 1, section 12, Article VII, of our
Constitution, all executive and administrative
organizations are adjuncts of the Executive
Department, the heads of the various
executive departments are assistants and
agents of the Chief Executive, and except in
cases where the Chief Executive is required
by the Constitution or the law to act in person
or the exigencies of the situation demand that
he act personally, the multifarious executive
and administrative functions of the Chief
Executive are performed by and through the
executive departments, and the acts of the
secretaries of such departments, performed
and promulgated in the regular course of
business, are, unless disapproved or
reprobated by the Chief Executive,
presumptively the acts of the Chief Executive.
(Emphases and underscoring supplied;
citations omitted)

The appropriate and natural office of the

exception is to exempt something from the
scope of the general words of a statute, which
is otherwise within the scope and meaning of
such general words. Consequently, the
existence of an exception in a statute clarifies
the intent that the statute shall apply to all
cases not excepted. Exceptions are subject to
the rule of strict construction; hence, any
doubt will be resolved in favor of the general
provision and against the exception. Indeed,
the liberal construction of a statute will seem
to require in many circumstances that the
exception, by which the operation of the
statute is limited or abridged, should receive
a restricted construction. (Emphases and
underscoring supplied)
The cogence of the Nazareth dictum is not
enfeebled by an invocation of the doctrine of
qualified political agency (otherwise known as
the "alter ego doctrine") for the bare reason
that the same is not applicable when the
Constitution itself requires the President
himself to act on a particular matter, such as
that instructed under Section 25(5), Article VI
of the Constitution. As held in the landmark
case of Villena v. Secretary of Interior (67
Phil. 451 [1987]), constitutional imprimatur is
precisely one of the exceptions to the
application of the alter ego doctrine, viz.:
After serious reflection, we have decided to
sustain the contention of the government in
this case on the board proposition, albeit not

191

Abakada Guro Party List v. Purisima, supra note

155, at 294-296.
192

TSN, October 10, 2013, pp. 16, 17, 18, and 23.

193

TSN, October 10, 2013, pp. 72-73.

194

Aside from its conceptual origins related to the

separation of powers principle, Corwin, in his
commentary on Constitution of the United States
made the following observations:

At least three distinct ideas have contributed

to the development of the principle that
legislative power cannot be delegated. One is
the doctrine of separation of powers: Why go
to the trouble of separating the three powers
of government if they can straightway
remerge on their own motion? The second is
the concept of due process of law, which
precludes the transfer of regulatory functions
to private persons. Lastly, there is the maxim
of agency "Delegata potestas non potest
delegari," which John Locke borrowed and
formulated as a dogma of political science . . .
Chief Justice Taft offered the following
explanation of the origin and limitations of
this idea as a postulate of constitutional law:
"The well-known maxim delegata potestas
non potest delefari, applicable to the law of
agency in the general common law, is well
understood and has had wider application in
the construction of our Federal and State
Constitutions than it has in private law . . .
The Federal and State Constitutions than it
has in private law . . . The Federal
Constitution and State Constitutions of this
country divide the governmental power into
three branches . . . In carrying out that
constitutional division . . . it is a breach of the
National fundamental law if Congress gives up
its legislative power and transfers it to the
President, or to the Judicial branch, or if by
law it attempts to invest itself or its members
with either executive power of judicial power.
This is not to say that the three branches are
not co-ordinate parts of one government and
that each in the field of its duties may not
invoke government and that each in the field
of its duties may not invoke the action of the

two other branches in so far as the action

invoked shall not be an assumption of the
constitutional field of action of another
branch. In determining what it may do in
seeking assistance from another branch, the
extent and character of that assistance must
be fixed according to common sense and the
inherent necessities of the governmental
coordination. (Emphases supplied)
195

Section 1, Article VI, 1987 Constitution.

196

See Rubi v. Provincial Board of Mindoro, 39 Phil.

660, 702 (1919).
197

See Section 23(2), Article VI of the 1987

Constitution.
198

See Section 28(2), Article VI of the 1987

Constitution.
199

Abakada Guro Party List v. Purisima, supra note

155, at 288.
200

169 Phil. 437, 447-448 (1977).

201

Philippine Constitution Association v. Enriquez,

supra note 114, at 522.
202

Bengzon v. Secretary of Justice and Insular

Auditor, 62 Phil. 912, 916 (1936).
203

Angara v. Electoral Commission, supra note 144,

at 156.

204

Abakada Guro Party List v. Purisima, supra note

155, at 287.
205

Id. at 292.

indivisible because the amount cannot be divided for

any purpose other than the specific purpose stated in
the item.
212

Rollo (G.R. No. 208566), p. 421.

Bengzon v. Secretary of Justice and Insular

Auditor, supra note 202, at 916-917.

213

Id.

207

214

Id. at 316.

215

Id. at 421.

216

Id. at 566.

217

Id. at 567.

206

"Log-rolling legislation refers to the process in

which several provisions supported by an individual
legislator or minority of legislators are combined into
a single piece of legislation supported by a majority
of legislators on a quid pro quo basis: no one
provision may command majority support, but the
total package will. See Rollo (G.R. No. 208566), p.
420, citing Briffault, Richard, The Item Veto in
State Courts, 66 Temp. L. Rev. 1171, 1177 (1993).
208

Passarello, Nicholas, "The Item Veto and the

Threat of Appropriations Bundling in Alaska," 30
Alaska Law Review 128 (2013), citing Blacks Law
Dictionary 1700 (9th ed. 2009).
<http://scholarship.law.duke.edu/alr/vol30/iss1/5>
(visited October 23, 2013).
209

Immigration and Naturalization Service v.

Chadha, 462 U.S. 919 (1983).
210

211

299 U.S. 410 (1937).

To note, in Gonzales v. Macaraig, Jr. (G.R. No.

87636, November 19, 1990, 191 SCRA 452, 465),
citing Commonwealth v. Dodson (11 S.E., 2d 120,
176 Va. 281), the Court defined an item of
appropriation as "an indivisible sum of money
dedicated to a stated purpose." In this relation,
Justice Carpio astutely explained that an "item" is

218

"It cannot be denied that most government

actions are inspired with noble intentions, all geared
towards the betterment of the nation and its people.
But then again, it is important to remember this
ethical principle: The end does not justify the
means. No matter how noble and worthy of
admiration the purpose of an act, but if the means to
be employed in accomplishing it is simply
irreconcilable with constitutional parameters, then it
cannot still be allowed. The Court cannot just turn a
blind eye and simply let it pass. It will continue to
uphold the Constitution and its enshrined principles.
The Constitution must ever remain supreme. All
must bow to the mandate of this law. Expediency
must not be allowed to sap its strength nor greed for
power debase its rectitude." (Biraogo v. Philippine
Truth Commission of 2010, supra note 118, 177;
citations omitted)
219

Rollo (G.R. No. 208566), p. 406.

220

Id. at 407.

221

Bernas, Joaquin G., S.J., The 1987 Constitution of

the Republic of the Philippines: A Commentary, 2003
Edition, p. 1108.

233

<http://www.gov.ph/2013/08/23/englishstatement-of-president-aquino-on-the-abolition-ofpdaf-august-23-2013/> (visited October 22, 2013).

234

222

Abakada Guro Party List v. Purisima, supra note

155.
223

See Section 22, Article VI, 1987 Constitution.

224

See Section 21, Article VI, 1987 Constitution.

225

Rollo (G.R. No. 208493), p. 9.

Sec. 106. Local Development Councils. (a)

Each local government unit shall have a
comprehensive multi-sectoral development
plan to be initiated by its development council
and approved by its sanggunian. For this
purpose, the development council at the
provincial, city, municipal, or barangal level,
shall assist the corresponding sanggunian in
setting the direction of economic and social
development, and coordinating development
efforts within its territorial jurisdiction.

226

See Pamatong v. Commission on Elections, G.R.

No. 161872, April 13, 2004, 427 SCRA 96, 100-101.
227

Entitled "AN ACT PROVIDING FOR A LOCAL

GOVERNMENT CODE OF 1991."

Section 106 of the LGC provides:

235

See Section 109 of the LGC.

236

Rollo (G.R. No. 208566), p. 423.

228

230 Phil. 379, 387-388 (1986).

237

Id. at 427.

229

Id.

238

Id. at 439-440.

230

Rollo (G.R. No. 208566), pp. 95-96.

239

Id. at 434 and 441.

231

Philconsa v. Enriquez, supra note 114, at 523.

240

232

Nograles, Prospero C. and Lagman, Edcel C.,

House of Representatives of the Philippines,
"Understanding the Pork Barrel,"
<http://www.congress.gov.ph/download/
14th/pork_barrel.pdf > (visited October 17, 2013).

See Guingona, Jr. v. Carague, supra note 173,

where the Court upheld the constitutionality of
certain automatic appropriation laws for debt
servicing although said laws did not readily indicate
the exact amounts to be paid considering that "the
amounts nevertheless are made certain by the
legislative parameters provided in the decrees";
hence, "the Executive is not of unlimited discretion
as to the amounts to be disbursed for debt

servicing." To note, such laws vary in great degree

with the way the 2013 PDAF Article works
considering that: (a) individual legislators and not
the executive make the determinations; (b) the
choice of both the amount and the project are to be
subsequently made after the law is passed and upon
the sole discretion of the legislator, unlike in
Guingona, Jr. where the amount to be appropriated
is dictated by the contingency external to the
discretion of the disbursing authority; and (c) in
Guingona, Jr. there is no effective control of the
funds since as long as the contingency arises money
shall be automatically appropriated therefor, hence
what is left is merely law execution and not
legislative discretion.
241

Id. at 462.

242

23 Nev. 25 (1895).

243

Rollo (G.R. No. 208566), p. 438.

244

Id. at 300.

245

The project identifications made by the Executive

should always be in the nature of law enforcement
and, hence, for the sole purpose of enforcing an
existing appropriation law. In relation thereto, it may
exercise its rule-making authority to greater
particularize the guidelines for such identifications
which, in all cases, should not go beyond what the
delegating law provides. Also, in all cases, the
Executives identification or rule-making authority,
insofar as the field of appropriations is concerned,
may only arise if there is a valid appropriation law
under the parameters as above-discussed.

246

Abakada Guro Party List v. Purisima, supra note

155.
247

See Bernas, Joaquin G., S.J., The 1987

Constitution of the Republic of the Philippines: A
Commentary, 2009 Edition, pp. 686-687, citing
Pelaez v. Auditor General, 15 SCRA 569, 576-577
(1965).
248

Id. at 277.

249

438 Ejusdem Generis ("of the same kind");

specific words; 82 C.J.S. Statutes 438.
250

Rollo (G.R. No. 208566), p. 437, citing 438

Ejusdem Generis ("of the same kind"); specific
words; 82 C.J.S. Statutes 438.
251

Based on a July 5, 2011 posting in the

governments website
<http://www.gov.ph/2011/07/05/budget-secretaryabad-clarifies-nature-of-malampaya-fund/>;
attached as Annex "A" to the Petitioners
Memorandum), the Malampaya Funds were also used
for non-energy related projects, to wit:
The rest of the 98.73 percent or P19.39 billion
was released for non-energy related projects:
1) in 2006, P1 billion for the Armed Forces
Modernization Fund; 2) in 2008, P4 billion for
the Department of Agriculture; 3) in 2009, a
total of P14.39 billion to various agencies,
including: P7.07 billion for the Department of
Public Works and Highways; P2.14 billion for
the Philippine National Police; P1.82 billion for
[the Department of Agriculture]; P1.4 billion
for the National Housing Authority; and P900

million for the Department of Agrarian

Reform.
252

For academic purposes, the Court expresses its

disagreement with petitioners argument that the
previous version of Section 12 of PD 1869
constitutes an undue delegation of legislative power
since it allows the President to broadly determine the
purpose of the Presidential Social Funds use and
perforce must be declared unconstitutional. Quite the
contrary, the 1st paragraph of the said provision
clearly indicates that the Presidential Social Fund
shall be used to finance specified types of priority
infrastructure and socio-civic projects, namely, Flood
Control, Sewerage and Sewage, Nutritional Control,
Population Control, Tulungan ng Bayan Centers,
Beautification and Kilusang Kabuhayan at Kaunlaran
(KKK) projects located within the Metropolitan Manila
area. However, with regard to the stated
geographical-operational limitation, the 2nd
paragraph of the same provision nevertheless allows
the Presidential Social Fund to finance "priority
infrastructure and socio-civic projects throughout the
Philippines as may be directed and authorized by the
Office of the President of the Philippines." It must,
however, be qualified that the 2nd paragraph should
not be construed to mean that the Office of the
President may direct and authorize the use of the
Presidential Social Fund to any kind of infrastructure
and socio-civic project throughout the Philippines.
Pursuant to the maxim of noscitur a sociis ,
(meaning, that a word or phrases "correct
construction may be made clear and specific by
considering the company of words in which it is
founded or with which it is associated"; see Chavez
v. Judicial and Bar Council, G.R. No. 202242, July
17, 2012, 676 SCRA 579, 598-599) the 2nd
paragraph should be construed only as an expansion

of the geographical-operational limitation stated in

the 1st paragraph of the same provision and not a
grant of carte blanche authority to the President to
veer away from the project types specified
thereunder. In other words, what the 2nd paragraph
merely allows is the use of the Presidential Social
Fund for Flood Control, Sewerage and Sewage,
Nutritional Control, Population Control, Tulungan ng
Bayan Centers, Beautification and Kilusang
Kabuhayan at Kaunlaran (KKK) projects even though
the same would be located outside the Metropolitan
Manila area. To deem it otherwise would be
tantamount to unduly expanding the rule-making
authority of the President in violation of the sufficient
standard test and, ultimately, the principle of nondelegability of legislative power.
253

Blacks Law Dictionary (7th Ed., 1999), p. 784.

254

Rollo (G.R. No. 208566), pp. 48-49.

255

Id.

256

234 Phil. 521, 533-534 (1987).

257

252 Phil. 264 (1989).

258

Id. at 279

259

Id. at 278.

260

Rollo (G.R. No. 208566), p. 463.

261

Id. at 459-462.

262

Id. at 304-305.

263

<http://www.dbm.gov.ph/wpcontent/uploads/BESE/BESE2013/Glossary.pdf>
(visited November 4, 2013).
264

Notice of Cash Allocation (NCA). Cash authority

issued by the DBM to central, regional and provincial
offices and operating units through the authorized
government servicing banks of the MDS,* to cover
the cash requirements of the agencies.
*MDS stands for Modified Disbursement
Scheme. It is a procedure whereby
disbursements by NG agencies chargeable
against the account of the Treasurer of the
Philippines are effected through GSBs.**
** GSB stands for Government Servicing
Banks. (Id.)
265

TSN, October 10, 2013, pp. 35-36.

266

Commissioner of Internal Revenue v. San Roque

Power Corporation, G.R. No. 187485, October 8,
2013, citing Serrano de Agbayani v. Philippine
National Bank, 148 Phil. 443, 447-448 (1971).
267

Id.

268

Id.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-23326

December 18, 1965

PHILIPPINE CONSTITUTION ASSOCIATION, INC.,

JOSE E. ROMERO, SALVADOR ARANETA, GUILLERMO
B. GUEVARA, PIO PEDROSA, CONRADO BENITEZ, JOSE
M. ARUEGO, SOTERO H. LAUREL, FELIXBERTO M.
SERRANO, and ROMAN OZAETA, petitioners,
vs.
PEDRO M. GIMENEZ, JOSE VELASCO, ELADIO SALITA
and JOSE AVILES, respondents.
Roman Ozaeta, Guillermo B. Guevara, Jose M. Aruego,
Sotero H. Laurel and Felixberto M. Serrano for themselves
and for other petitioners.
Office of the Solicitor General for respondents.
REGALA, J.:
We are called upon in this case to decide the grave and
fundamental problem of the constitutionality of Republic Act
No. 3836 "insofar as the same allows retirement gratuity
and commutation of vacation and sick leave to Senators and
Representatives, and to the elective officials of both houses
(of Congress)." The suit was instituted by the Philippine
Constitution Association, Inc. (Philconsa, for short), a nonprofit civic organization, duly incorporated under Philippine
laws, by way of a petition for prohibition with preliminary
injunction to restrain the Auditor General of the Philippines
and the disbursing officers of both Houses of Congress from

"passing in audit the vouchers, and from countersigning the

checks or treasury warrants for the payment to any former
Senator or former Member of the House of Representatives
of retirement and vacation gratuities pursuant to Republic
Act No. 3836; and likewise restraining the respondent
disbursing officers of the House and Senate, respectively,
and their successors in office from paying the said
retirement and vacation gratuities."
It is argued that the above-numbered Republic Act, at least
to the end that it provided for the retirement of the
members of Congress in the manner and terms that it did,
is unconstitutional and void. The challenge to the
constitutionality of the law is centered on the following
propositions:
1. The provision for the retirement of the members
and certain officers of Congress is not expressed in
the title of the bill, in violation of section 21 (1) of
Article VI of the Constitution.
2. The provision on retirement gratuity is an attempt
to circumvent the Constitutional ban on increase of
salaries of the members of Congress during their
term of office, contrary to the provisions of Article
VI, Section 14 of the Constitution.
3. The same provision constitutes "selfish class
legislation" because it allows members and officers
of Congress to retire after twelve (12) years of
service and gives them a gratuity equivalent to one
year salary for every four years of service, which is
not refundable in case of reinstatement or re-election
of the retiree, while all other officers and employees
of the government can retire only after at least
twenty (20) years of service and are given a gratuity
which is only equivalent to one month salary for

every year of service, which, in any case, cannot

exceed 24 months.
4. The provision on vacation and sick leave,
commutable at the highest rate received, insofar as
members of Congress are concerned, is another
attempt of the legislators to further increase their
compensation in violation of the Constitution.
The text of Republic Act No. 3836
The text of Republic Act No. 3836 reads:
AN ACT AMENDING SUBSECTION (c), SECTION
TWELVE OF COMMONWEALTH ACT NUMBERED ONE
HUNDRED EIGHTY-SIX, AS AMENDED BY REPUBLIC
ACT NUMBERED THIRTY HUNDRED NINETY-SIX:
Be it enacted by the Senate and House of
Representatives of the Philippines in Congress
assembled:
SECTION 1. Subsection (c), Section twelve of
Commonwealth Act Numbered One Hundred eightysix, as amended by Republic Act Numbered Thirty
hundred ninety-six, is further amended to read as
follows:
"(c) Retirement is likewise allowed to a member,
regardless of age, who has rendered at least twenty
years of service. The benefit shall, in addition to the
return of his personal contributions plus interest and
the payment of the corresponding employer's
premiums described in subsection (a) of Section five
hereof, without interest, be only a gratuity
equivalent to one month's salary for every year of
service, based on the highest rate received, but not

to exceed twenty-four months: Provided, That the

retiring officer or employee has been in the service
of the said employer or office for at least four years
immediately preceding his retirement.
"Retirement is also allowed to a senator or a member
of the House of Representatives and to an elective
officer of either House of the Congress, regardless of
age, provided that in the case of a Senator or
Member, he must have served at least twelve years
as a Senator and/or as a member of the House of
Representatives, and, in the case of an elective
officer of either House, he must have served the
government for at least twelve years, not less than
four years of which must have been rendered as
such elective officer: Provided, That the gratuity
payable to a retiring senator, member of the House
of Representatives, or elective officer, of either
House, shall be equivalent to one year's salary for
every four years of service in the government and
the same shall be exempt from any tax whatsoever
and shall be neither liable to attachment or
execution nor refundable in case of reinstatement or
re-election of the retiree.
"This gratuity is payable by the employer or office
concerned which is hereby authorized to provide the
necessary appropriation or pay the same from any
unexpended items of appropriations or savings in its
appropriations or saving in its appropriations.
"Elective or appointive officials and employees paid
gratuity under this subsection shall be entitled to the
commutation of the unused vacation and sick leave,
based on the highest rate received, which they may
have to their credit at the time of retirement."

SECTION 2. This Act shall take effect upon its

approval.
Approved, June 22, 1963.
The Solicitor General's Office, in representation of the
respondent, filed its answer on September 8, 1964, and
contends, by way of special and affirmative defenses that:
1. The grant of retirement or pension benefits under
Republic Act No. 3836 to the officers objected to by
the petitioner does not constitute "forbidden
compensation" within the meaning of Section 14 of
Article VI of the Philippine Constitution.
2. The title of the law in question sufficiently
complies with the provisions of Section 21, Article VI,
of the Constitution that "no bill which may be
enacted into law shall embrace more than one
subject which shall be expressed in the title of the
bill.
3. The law in question does not constitute legislation.
4. Certain indispensable parties, specifically the
elected officers of Congress who are authorized to
approve vouchers for payments for funds under the
law in question, and the claimants to the vouchers to
be presented for payment under said items, were not
included in the petition.
5. The petitioner has no standing to institute this
suit.
6. The payment of commutable vacation and sick
leave benefits under the said Act is merely "in the
nature of a basis for computing the gratuity due each

retiring member" and, therefore, is not an indirect

scheme to increase their salary.
A brief historical background of Republic Act No. 3836
Republic Act No. 3836 was originally House Bill No. 6051,
which was introduced by Congressmen Marcial R. Pimentel
of Camarines Norte and Marcelino R. Veloso of the Third
District of Leyte, on May 6, 1963. On the same date, it was
referred to the Committee on Civil Service. which on the
following May 8, submitted its REPORT No. 3129,
recommending approval of the bill with amendments,
among others, that the word "TWENTY" in the bill as filed
representing the number of years that a senator or member
must serve in Congress to entitle him to retirement under
the bill must be reduced to "TWELVE" years, and that the
following words were inserted, namely, "AND THE SAME
(referring to gratuity) SHALL BE EXEMPT FROM ANY TAX
WHATSOEVER AND SHALL NOT BE LIABLE FROM
ATTACHMENT OR EXECUTION NOR REFUNDABLE IN CASE
OF REINSTATEMENT OR REELECTION OF THE RETIREE." On
May 8, 1963, the bill with the proposed amendments was
approved on second reading. It was passed on third reading
on May 13, 1963, and on the same day was sent to the
Senate, which, in turn, on May 23, 1963, passed it without
amendment. The bill was finally approved on June 22, 1963.
As explained in the EXPLANATORY NOTE attached to the bill,
among others
The inclusion of members of Congress in subsection
(c), Section 12 of C.A. 186, as amended, will enable
them to retire voluntarily, regardless of age, after
serving a minimum of twenty years as a Member of
Congress. This gratuity will insure the security of the
family of the retiring member of Congress with the
latter engaging in other activities which may detract
from his exalted position and usefulness as
lawmaker. It is expected that with this assurance of

security for his loved ones, deserving and wellintentioned but poor men will be attracted to serve
their people in Congress.
As finally approved, the law (Subsection [c], paragraph 2,
Section 1, R.A. 3836) allows a Senator or a Member of the
House of Representatives and an elective officer of either
House of Congress to retire regardless of age. To be eligible
for retirement, he must have served for at least twelve
years as such Senator and/or as member of the House of
Representatives. For an elective officer of either House, he
must have served the government for at least twelve years,
of which not less than four years must have been rendered
as such elective officer. The gratuity payable by the
employer or office concerned is equivalent to one year's
salary for every four years of service in the government.
Said gratuity is exempt from taxation, not liable to
attachment or execution, and not refundable in case of
reinstatement or re-election of the retiree.
First legal point personality of the Petitioner to bring suit.
The first point to be considered is whether petitioner
Philconsa has a standing to institute this action. This Court
has not hesitated to examine past decisions involving this
matter. This Court has repeatedly held that when the
petitioner, like in this case, is composed of substantial
taxpayers, and the outcome will affect their vital interests,
they are allowed to bring this suit. (Pascual v. Secretary,
G.R. No. L-10405, December 29, 1960; and Gonzales v.
Hechanova, 60 Off. Gaz. 802 [1963]).
The petitioner, Philconsa, is precisely a non-profit, civic
organization composed of several leaders from all walks of
life whose main objective is to uphold the principles of the
Constitution.

In rejecting the motion to dismiss in the case of Pascual v.

Secretary, supra, this Court stated, among other things,
that "there are many decisions nullifying, at the instance of
the taxpayers, laws providing the disbursement of public
funds, upon the theory that the expenditure of public funds
by an officer of the State for the purpose of administering
an unconstitutional act constitutes a misappropriation of
such funds, which may be enjoined at the request of the
taxpayers."1 This legislation (Republic Act 3836) involves
the disbursement of public funds.
We are not, however, unmindful of the ruling laid down by
the Supreme Court of the United States in the case
ofMassachusetts v. Mellon, 262 U.S. 447, holding that:
... the relation of a taxpayer of the United States to
the Federal Government is very different. His interest
in the moneys of the Treasury partly realized from
taxation and partly from other sources is shared
with millions of others; is comparatively minute and
indeterminable; and the effect upon future taxation
of any payment out of the funds, so remote,
fluctuating and uncertain, that no basis is afforded
for an appeal to the preventive powers of equity.
The general view in the United States, which is followed
here, is stated in the American Jurisprudence, thus
In the determination of the degree of interest
essential to give the requisite standing to attack the
constitutionality of a statute the general rule is that
not only persons individually affected, but
also taxpayers have sufficient interest in preventing
the illegal expenditure of moneys raised by taxation
and may therefore question the constitutionality of
statutes requiring expenditure of public moneys. (11
Am. Jur. 761; emphasis supplied.)

As far as the first point is concerned, We hold, therefore,

that the contention of the Solicitor General is untenable.
Second legal point Whether or not Republic Act No. 3836
falls within the prohibition embodied in Art. VI, section 14 of
the Constitution.
The first constitutional question is whether Republic Act
3836 violates Section 14, Article VI, of the Constitution,
which reads as follows:
The senators and the Members of the House of
Representatives shall, unless otherwise provided by
law, receive an annual compensation of seven
thousand two hundred pesos each, including per
diems and other emoluments or allowances, and
exclusive only of travelling expenses to and from
their respective districts in the case of Members of
the House of Representative and to and from their
places of residence in the case of Senators, when
attending sessions of the Congress. No increase in
said compensation shall take effect until after the
expiration of the full term of all the Members of the
Senate and of the House of Representatives
approving such increase. Until otherwise provided by
law, the President of the Senate and the Speaker of
the House of Representatives shall each receive an
annual compensation of sixteen thousand pesos
(emphasis supplied)
Before discussing this point, it is worthy to note that the
Constitution embodies some limitations and prohibitions
upon the members of Congress, to wit:
1. They may not hold any other office or
employment in the Government without forfeiting
their respective seats;

2. They shall not be appointed, during the time for

which they are elected, to any civil office which may
have been created or the emoluments whereof shall
have been increased while they were members of
Congress; (Section 16, Article VI, Constitution)
3. They cannot be financially interested in any
franchise;
4. They cannot appear in any civil case wherein the
Government is an adverse party;
5. They cannot appear as counsel before any
Electoral Tribunal; and
6. They cannot appear as counsel in any criminal
case where an officer or employee of the
Government is accused. (Section 17, Article VI,
Constitution)
In addition to the above prohibitions, the Anti-Graft Law
(Republic Act 3019) also prohibits members of Congress to
have any special interest in any specific business which will
directly or indirectly be favored by any law or resolution
authored by them during their term of office.
It is thus clear that the Constitutional Convention wisely
surrounded the Constitution with these limitations and
prohibitions upon Members of Congress. This is a practical
demonstration or application of the principle of the and
balances which is one of the peculiar characteristics of our
Constitution. In the light of this background, can We
conclude that Congress can validly enact Republic Act 3836,
providing retirement benefits to its members, without
violating the provisions in the aforementioned Article VI,
Section 14, of the Constitution, regarding increase of the
compensation act including other emoluments?

It is worthy to note that the original salary for the members

of the National Assembly (unicameral body) was fixed at
P5,000.00 per annum each. This was raised to P7,200 per
annum by the enactment of the 1940 Constitutional
amendment, when the unicameral body, the National
Assembly, was changed to Congress, composed of two
bodies, the Senate and the House of Representatives.
Again, in 1964, by the enactment of Republic Act 4143, the
salary for the Members of Congress was raised to
P32,000.00 per annum for each of them; and for the
President of the Senate and the Speaker of the House of
Representatives, to P40,000.00 per annum each.

The Constitutional provision in the aforementioned Section

14, Article VI, includes in the term compensation "other
emoluments." This is the pivotal point on this fundamental
question as to whether the retirement benefits as provided
for in Republic Act 3836 fall within the purview of the term
"other emoluments."

Likewise, it is significant that, as stated above, when the

Constitutional Convention first determined the
compensation for the Members of Congress, the amount
fixed by it was only P5,000.00 per annum, but it embodies a
special proviso which reads as follows: "No increase in said
compensation shall take effect until after the expiration of
the full term of all the members of the National Assembly
elected subsequent to approval of such increase." In other
words, under the original constitutional provision regarding
the power of the National Assembly to increase the salaries
of its members, no increase would take effect until after the
expiration of the full term of the members of the Assembly
elected subsequent to the approval of such increase. (See
Aruego, The Framing of the Constitution, Vol. 1, pp. 296300; Sinco, Philippine Government and Political Law, 4th
ed., p. 187)

In another set of cases, "emolument" has been defined as

"the profit arising from office or employment; that which is
received as compensation for services, or which is annexed
to the possession of office, as salary, fees and perquisites;
advantage, gain, public or private." The gain, profit or
advantage which is contemplated in the definition or
significance of the word "emolument" as applied to public
officers, clearly comprehends, We think, a gain, profit, or
advantage which is pecuniary in character. (citing
Taxpayers' League of Cargon County v. McPherson, 54 P.
2d. 897, 90l.: 49 Wy. 26; 106 A.L.R. 767)

This goes to show how zealous were the members of the

Constitutional Convention in guarding against the
temptation for members of Congress to increase their
salaries. However, the original strict prohibition was
modified by the subsequent provision when the
Constitutional amendments were approved in 19402

Most of the authorities and decided cases have regarded

"emolument" as "the profit arising from office or
employment; that which is received as compensation for
services or which is annexed to the possession of an office,
as salary, fees and perquisites.3

In Schieffelin v. Berry, 216 N.Y.S. (citing Wright v. Craig,

202 App. Div. 684, 195 N.Y.S. 391, affirmed 234 N.Y. 548,
138 N.E. 441), it has been established that pensions and
retirement allowances are part of compensation of public
officials; otherwise their payment would be unconstitutional.
In another case, State v. Schmahl, 145 N.W. 795, 125
Minn. 104, it is stated that "as used in Article 4, section 9,
of the Constitution of Minnesota, providing that no Senator
or Representative shall hold any office, the emoluments of
which have been increased during the session of the
Legislature of which he was a member, until after the

expiration of his term of office in the Legislature, the word

"emoluments" does not refer to the fixed salary alone, but
includes fees and compensation as the incumbent of the
office is by law entitled to receive because he holds such
office and performed some service required of the occupant
thereof."

The principle of equal protection of law embodied in our

Constitution has been fully explained by Us in the case
ofPeople v. Vera, 65 Phil. 56, 126, where We stated that the
classification to be reasonable must be based upon
substantial distinctions which make real differences and
must be germane to the purposes of the law.

From the decisions of these cases, it is evident that

retirement benefit is a form or another species of
emolument, because it is a part of compensation for
services of one possessing any office.

As well stated by Willoughby on the Constitution of the

United States (second edition), p. 1937, the principle of the
requirement of equal protection of law applies to all persons
similarly situated. Why limit the application of the benefits
of Republic Act 3836 to the elected members of Congress?
We feel that the classification here is not reasonable. (See
also Sinco, Philippine Political Law, 11th ed. [1962];
Selected Essays on Constitutional Law [1938-62], p. 789;
The Equal Protection of the Laws, 37 Cal. Law Rev. 341.)

Republic Act No. 3836 provides for an increase in the

emoluments of Senators and Members of the House of
Representatives, to take effect upon the approval of said
Act, which was on June 22, 1963. Retirement benefits were
immediately available thereunder, without awaiting the
expiration of the full term of all the Members of the Senate
and the House of Representatives approving such increase.
Such provision clearly runs counter to the prohibition in
Article VI, Section 14 of the Constitution.
Third Legal Point Whether or not the law in question
violates the equal protection clause of the Constitution.
Another reason in support of the conclusion reached herein
is that the features of said Republic Act 3836 are patently
discriminatory, and therefore violate the equal protection
clause of the Constitution. (Art. III, Sec. 1, part. 1.)
In the first place, while the said law grants retirement
benefits to Senators and Members of the House of
Representatives who are elective officials, it does not
include other elective officials such as the governors of
provinces and the members of the provincial boards, and
the elective officials of the municipalities and chartered
cities.

Secondly, all members of Congress under Republic Act 3836

are given retirement benefits after serving twelve years, not
necessarily continuous, whereas, most government officers
and employees are given retirement benefits after serving
for at least twenty years. In fact, the original bill of Act
3836 provided for twenty years of service.
In the third place, all government officers and employees
are given only one retirement benefit irrespective of their
length of service in the government, whereas, under
Republic Act 3836, because of no age limitation, a Senator
or Member of the House of Representatives upon being
elected for 24 years will be entitled to two retirement
benefits or equivalent to six years' salary.
Also, while the payment of retirement benefits (annuity) to
an employee who had been retired and reappointed is
suspended during his new employment (under
Commonwealth Act 186, as amended), this is not so under
Republic Act 3836.

Lastly, it is peculiar that Republic Act 3836 grants

retirement benefits to officials who are not members of the
Government Service Insurance System. Most grantees of
retirement benefits under the various retirement laws have
to be members or must at least contribute a portion of their
monthly salaries to the System.4
The arguments advanced against the discriminatory
features of Republic Act 3836, as far as Members of
Congress are concerned, apply with equal force to the
elected officers of each House, such as the Secretaries and
the Sergeants-at-arms. Under Republic Act 3836, the
Secretaries and Sergeants-at-arms of each House are given
the benefits of retirement without having served for twenty
years as required with other officers and employees of the
Government.
Fourth Legal Point Whether or not the title of Republic Act
No. 3836 is germane to the subject matter expressed in the
act.
Another Constitutional point to determine is whether the
title of Republic Act 3836 complies with the requirement of
paragraph 1, section 21, Article VI of the Constitution,
which reads as follows:
No bill which may be enacted into law shall embrace
more than one subject which shall be expressed in
the title of the bill.
We are not unmindful of the fact that there has been a
general disposition in all courts to construe the
constitutional provision with reference to the subject and
title of the Act, liberally.
It is the contention of petitioner that the said title of
Republic Act 3836 gives no inkling or notice whatsoever to

the public regarding the retirement gratuities and

commutable vacation and sick leave privileges to members
of Congress. It is claimed that petitioner learned of this law
for the first time only when Jose Velasco, disbursing officer
of the House, testified on January 30, 1964, before Justice
Labrador, in connection with the hearing of the case, and he
revealed that in 1963, Congress enacted the retirement law
for its members. In fact the Appropriation Act for the fiscal
year 1964-65, Republic Act No. 4164, provides:
13. For payment of retirement gratuities of members
of the Senate pursuant to the provisions of Republic
Act No. 3836: PROVIDED, That no portion of this
Appropriation shall be transferred to any other item
until all approved claims shall have been paid
P210,000.00.
In the appropriations for the House of Representatives the
following items appear:
7. For government share of premiums on life
insurance and retirement of Members and employees
of the House of Representatives, as provided for
under Republic Act No. 1616 P300,000.00
8. For payment of the cash commutation of the
accumulated vacation and sick leaves as provided for
under Republic Act No. 611, and retirement
gratuities of Members and employees of the House of
Representatives under Republic Act No. 1616
P1,300,000.00.
In the Appropriations Act of 1965-1966 (Republic Act No.
4642), the following item appears in the appropriations for
the Senate:

13. For payment of retirement gratuities of Senate

personnel pursuant to the provisions of Republic Act
No. 1616: PROVIDED, That no portion of this
appropriation shall be transferred to any other item
until all approved claims shall have been paid
P100,000.00.
It is thus clear that in the Appropriations Act for 1965-1966,
the item in the Senate for P210,000.00 to implement
Republic Act 3836 was eliminated.
In the appropriations for the House (1965-1966), the
following items appear:
7. For government share of premiums on life
insurance and retirement of Members and employees
of the House Of Representatives as provided for
under Republic Act No. 1616 P1,200,000.00.
8. For payment of the cash commutation of the
accumulated vacation and sick leaves as provided for
under Republic Act No. 611, and retirement
gratuities of Members and employees of the House of
Representatives under Republic Act No. 1616
P1,700,000.00.
It is to be observed that under Republic Act 3836, amending
the first paragraph of section 12, subsection (c) of
Commonwealth Act 186, as amended by Republic Acts Nos.
660 and. 3096, the retirement benefits are granted to
members of the Government Service Insurance System,
who have rendered at least twenty years of service
regardless of age. This paragraph is related and germane to
the subject of Commonwealth Act No. 186.
On the other hand, the succeeding paragraph of Republic
Act 3836 refers to members of Congress and to elective

officers thereof who are not members of the Government

Service Insurance System. To provide retirement benefits,
therefore, for these officials, would relate to subject matter
which is not germane to Commonwealth Act No. 186. In
other words, this portion of the amendment (re retirement
benefits for Members of Congress and elected officers, such
as the Secretary and Sergeants-at-arms for each House) is
not related in any manner to the subject of Commonwealth
Act 186 establishing the Government Service Insurance
System and which provides for both retirement and
insurance benefits to its members.
Parenthetically, it may be added that the purpose of the
requirement that the subject of an Act should be expressed
in its title is fully explained by Cooley, thus: (1) to prevent
surprise or fraud upon the Legislature; and (2) to fairly
apprise the people, through such publication of legislation
that are being considered, in order that they may have the
opportunity of being heard thereon by petition or otherwise,
if they shall so desire (Cooley, Constitutional Limitations,
8th ed., Vol. 1, p. 162; See also Martin, Political Law
Reviewer, Book One [1965], p. 119)
With respect to sufficiency of title this Court has ruled in
two cases:
The Constitutional requirement with respect to titles
of statutes as sufficient to reflect their contents is
satisfied if all parts of a law relate to the subject
expressed in its title, and it is not necessary that the
title be a complete index of the content. (People v.
Carlos, 78 Phil. 535)
The Constitutional requirement that the subject of an
act shall be expressed in its title should be
reasonably construed so as not to interfere unduly
with the enactment of necessary legislation. It

should be given a practical, rather than technical,

construction. It should be a sufficient compliance
with such requirement if the title expresses the
general subject and all the provisions of the statute
are germane to that general subject. (Sumulong v.
The Commission on Elections, 73 Phil. 288, 291)
The requirement that the subject of an act shall be
expressed in its title is wholly illustrated and explained
inCentral Capiz v. Ramirez, 40 Phil. 883. In this case, the
question raised was whether Commonwealth Act 2784,
known as the Public Land Act, was limited in its application
to lands of the public domain or whether its provisions also
extended to agricultural lands held in private ownership.
The Court held that the act was limited to lands of the
public domain as indicated in its title, and did not include
private agricultural lands. The Court further stated that this
provision of the Constitution expressing the subject matter
of an Act in its title is not a mere rule of legislative
procedure, directory to Congress, but it is mandatory. It is
the duty of the Court to declare void any statute not
conforming to this constitutional provision. (See Walker v.
State, 49 Alabama 329; Cooley, Constitutional Limitations,
pp. 162-164;5 See also Agcaoili v. Suguitan, 48 Phil. 676;
Sutherland on Statutory Construction, Sec. 111.)

IN VIEW OF THE FOREGOING CONSIDERATIONS, Republic

Act No. 3836 is hereby declared null and void, in so far as it
refers to the retirement of Members of Congress and the
elected officials thereof, as being unconstitutional. The
restraining order issued in our resolution on December 6,
1965 is hereby made permanent. No costs.
Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L.,
Dizon, Makalintal, Bengzon, J.P. and Zaldivar, JJ.,concur.
Barrera, J., took no part.

Footnotes
1

Kubbs v. Thompson, 56 N.E. 2d 761; Reid v.

Smith, 375 Ill. 147, 30 N.E. 2d 908; Fergus v.
Russel, 270 Ill. 304, 110 N.E. 130; Burke v. Snively,
208 111. 328; Jones v. Connel, 266 Ill. 443, 107
N.E. 731; Dudick v. Baumann, 349 111. 46, 181 N.E
690.
2

In the light of the history and analysis of Republic Act 3836,

We conclude that the title of said Republic Act 3836 is void
as it is not germane to the subject matter and is a violation
of the aforementioned paragraph 1, section 21, Article VI of
the Constitution.
In short, Republic Act 3836 violates three constitutional
provisions, namely: first, the prohibition regarding increase
in the salaries of Members of Congress; second, the equal
protection clause; and third, the prohibition that the title of
a bill shall not embrace more than one subject.

Aruego, Know Your Constitution, p. 58.

3 Reals v. Smith, 56 P. 690, 8 Wy. 159; Apple
v. Crawford Country, 105 Pa. 300, 51 Am.
Rep. 205; 14 Skly. Notes Cas. 322, 41 Leg.
Int. 322; Vansant v. State, 53 A. 711, 714, 6
Md. 110; Town of Bruce v. Dickey, 6 N.E.
435.

In the case of Justices of the Supreme Court,

Justices of the Court of Appeals, Judges of courts of
record-all contribute a certain amount to the GSIS,
although under a different plan of premiums from

other members (See R.A. 910, as amended by R.A.

Nos. 1057 and 2614).
In the case of the Armed Forces, officers and
enlisted men are also members of the System
but their retirement benefits are provided for
under R.A. 340.
However, the Auditor General and the
Chairman and Members of the Commission on
Elections are entitled to retirement benefits,
under R.A. 1568, notwithstanding the fact
that they are not members of the System,
provided they have at least 20 years of
service.
5

18th Edition, Vol. I.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-75697 June 18, 1987
VALENTIN TIO doing business under the name and
style of OMI ENTERPRISES, petitioner,
vs.
VIDEOGRAM REGULATORY BOARD, MINISTER OF
FINANCE, METRO MANILA COMMISSION, CITY MAYOR
and CITY TREASURER OF MANILA, respondents.
Nelson Y. Ng for petitioner.
The City Legal Officer for respondents City Mayor and City
Treasurer.

MELENCIO-HERRERA, J.:
This petition was filed on September 1, 1986 by petitioner
on his own behalf and purportedly on behalf of other
videogram operators adversely affected. It assails the
constitutionality of Presidential Decree No. 1987 entitled "An
Act Creating the Videogram Regulatory Board" with broad
powers to regulate and supervise the videogram industry
(hereinafter briefly referred to as the BOARD). The Decree
was promulgated on October 5, 1985 and took effect on
April 10, 1986, fifteen (15) days after completion of its
publication in the Official Gazette.
On November 5, 1985, a month after the promulgation of
the abovementioned decree, Presidential Decree No. 1994

amended the National Internal Revenue Code

providing, inter alia:
SEC. 134. Video Tapes. There shall be
collected on each processed video-tape
cassette, ready for playback, regardless of
length, an annual tax of five pesos; Provided,
That locally manufactured or imported blank
video tapes shall be subject to sales tax.
On October 23, 1986, the Greater Manila Theaters
Association, Integrated Movie Producers, Importers and
Distributors Association of the Philippines, and Philippine
Motion Pictures Producers Association, hereinafter
collectively referred to as the Intervenors, were permitted
by the Court to intervene in the case, over petitioner's
opposition, upon the allegations that intervention was
necessary for the complete protection of their rights and
that their "survival and very existence is threatened by the
unregulated proliferation of film piracy." The Intervenors
were thereafter allowed to file their Comment in
Intervention.
The rationale behind the enactment of the DECREE, is set
out in its preambular clauses as follows:
1. WHEREAS, the proliferation and
unregulated circulation of videograms
including, among others, videotapes, discs,
cassettes or any technical improvement or
variation thereof, have greatly prejudiced the
operations of moviehouses and theaters, and
have caused a sharp decline in theatrical
attendance by at least forty percent (40%)
and a tremendous drop in the collection of
sales, contractor's specific, amusement and
other taxes, thereby resulting in substantial

losses estimated at P450 Million annually in

government revenues;
2. WHEREAS, videogram(s) establishments
collectively earn around P600 Million per
annum from rentals, sales and disposition of
videograms, and such earnings have not been
subjected to tax, thereby depriving the
Government of approximately P180 Million in
taxes each year;
3. WHEREAS, the unregulated activities of
videogram establishments have also affected
the viability of the movie industry, particularly
the more than 1,200 movie houses and
theaters throughout the country, and
occasioned industry-wide displacement and
unemployment due to the shutdown of
numerous moviehouses and theaters;
4. "WHEREAS, in order to ensure national
economic recovery, it is imperative for the
Government to create an environment
conducive to growth and development of all
business industries, including the movie
industry which has an accumulated
investment of about P3 Billion;
5. WHEREAS, proper taxation of the activities
of videogram establishments will not only
alleviate the dire financial condition of the
movie industry upon which more than 75,000
families and 500,000 workers depend for their
livelihood, but also provide an additional
source of revenue for the Government, and at
the same time rationalize the heretofore
uncontrolled distribution of videograms;

6. WHEREAS, the rampant and unregulated

showing of obscene videogram features
constitutes a clear and present danger to the
moral and spiritual well-being of the youth,
and impairs the mandate of the Constitution
for the State to support the rearing of the
youth for civic efficiency and the development
of moral character and promote their
physical, intellectual, and social well-being;
7. WHEREAS, civic-minded citizens and
groups have called for remedial measures to
curb these blatant malpractices which have
flaunted our censorship and copyright laws;
8. WHEREAS, in the face of these grave
emergencies corroding the moral values of
the people and betraying the national
economic recovery program, bold emergency
measures must be adopted with dispatch; ...
(Numbering of paragraphs supplied).
Petitioner's attack on the constitutionality of the DECREE
rests on the following grounds:
1. Section 10 thereof, which imposes a tax of
30% on the gross receipts payable to the
local government is a RIDER and the same is
not germane to the subject matter thereof;
2. The tax imposed is harsh, confiscatory,
oppressive and/or in unlawful restraint of
trade in violation of the due process clause of
the Constitution;

3. There is no factual nor legal basis for the

exercise by the President of the vast powers
conferred upon him by Amendment No. 6;
4. There is undue delegation of power and
authority;
5. The Decree is an ex-post facto law; and
6. There is over regulation of the video
industry as if it were a nuisance, which it is
not.
We shall consider the foregoing objections in seriatim.
1. The Constitutional requirement that "every bill shall
embrace only one subject which shall be expressed in the
title thereof" 1 is sufficiently complied with if the title be
comprehensive enough to include the general purpose
which a statute seeks to achieve. It is not necessary that
the title express each and every end that the statute wishes
to accomplish. The requirement is satisfied if all the parts of
the statute are related, and are germane to the subject
matter expressed in the title, or as long as they are not
inconsistent with or foreign to the general subject and
title. 2 An act having a single general subject, indicated in
the title, may contain any number of provisions, no matter
how diverse they may be, so long as they are not
inconsistent with or foreign to the general subject, and may
be considered in furtherance of such subject by providing
for the method and means of carrying out the general
object." 3 The rule also is that the constitutional
requirement as to the title of a bill should not be so
narrowly construed as to cripple or impede the power of
legislation. 4 It should be given practical rather than
technical construction. 5

Tested by the foregoing criteria, petitioner's contention that

the tax provision of the DECREE is a rider is without merit.
That section reads, inter alia:
Section 10. Tax on Sale, Lease or Disposition
of Videograms. Notwithstanding any
provision of law to the contrary, the province
shall collect a tax of thirty percent (30%) of
the purchase price or rental rate, as the case
may be, for every sale, lease or disposition of
a videogram containing a reproduction of any
motion picture or audiovisual program. Fifty
percent (50%) of the proceeds of the tax
collected shall accrue to the province, and the
other fifty percent (50%) shall acrrue to the
municipality where the tax is collected;
PROVIDED, That in Metropolitan Manila, the
tax shall be shared equally by the
City/Municipality and the Metropolitan Manila
Commission.
xxx xxx xxx
The foregoing provision is allied and germane to, and is
reasonably necessary for the accomplishment of, the
general object of the DECREE, which is the regulation of the
video industry through the Videogram Regulatory Board as
expressed in its title. The tax provision is not inconsistent
with, nor foreign to that general subject and title. As a tool
for regulation 6 it is simply one of the regulatory and control
mechanisms scattered throughout the DECREE. The express
purpose of the DECREE to include taxation of the video
industry in order to regulate and rationalize the heretofore
uncontrolled distribution of videograms is evident from
Preambles 2 and 5, supra. Those preambles explain the
motives of the lawmaker in presenting the measure. The
title of the DECREE, which is the creation of the Videogram
Regulatory Board, is comprehensive enough to include the

purposes expressed in its Preamble and reasonably covers

all its provisions. It is unnecessary to express all those
objectives in the title or that the latter be an index to the
body of the DECREE. 7
2. Petitioner also submits that the thirty percent (30%) tax
imposed is harsh and oppressive, confiscatory, and in
restraint of trade. However, it is beyond serious question
that a tax does not cease to be valid merely because it
regulates, discourages, or even definitely deters the
activities taxed. 8 The power to impose taxes is one so
unlimited in force and so searching in extent, that the
courts scarcely venture to declare that it is subject to any
restrictions whatever, except such as rest in the discretion
of the authority which exercises it. 9 In imposing a tax, the
legislature acts upon its constituents. This is, in general, a
sufficient security against erroneous and oppressive
taxation. 10
The tax imposed by the DECREE is not only a regulatory but
also a revenue measure prompted by the realization that
earnings of videogram establishments of around P600
million per annum have not been subjected to tax, thereby
depriving the Government of an additional source of
revenue. It is an end-user tax, imposed on retailers for
every videogram they make available for public viewing. It
is similar to the 30% amusement tax imposed or borne by
the movie industry which the theater-owners pay to the
government, but which is passed on to the entire cost of the
admission ticket, thus shifting the tax burden on the buying
or the viewing public. It is a tax that is imposed uniformly
on all videogram operators.
The levy of the 30% tax is for a public purpose. It was
imposed primarily to answer the need for regulating the
video industry, particularly because of the rampant film
piracy, the flagrant violation of intellectual property rights,
and the proliferation of pornographic video tapes. And while

it was also an objective of the DECREE to protect the movie

industry, the tax remains a valid imposition.
The public purpose of a tax may legally exist
even if the motive which impelled the
legislature to impose the tax was to favor one
industry over another. 11
It is inherent in the power to tax that a state
be free to select the subjects of taxation, and
it has been repeatedly held that "inequities
which result from a singling out of one
particular class for taxation or exemption
infringe no constitutional
limitation". 12 Taxation has been made the
implement of the state's police power.13
At bottom, the rate of tax is a matter better addressed to
the taxing legislature.
3. Petitioner argues that there was no legal nor factual basis
for the promulgation of the DECREE by the former President
under Amendment No. 6 of the 1973 Constitution providing
that "whenever in the judgment of the President ... , there
exists a grave emergency or a threat or imminence thereof,
or whenever the interim Batasang Pambansa or the regular
National Assembly fails or is unable to act adequately on
any matter for any reason that in his judgment requires
immediate action, he may, in order to meet the exigency,
issue the necessary decrees, orders, or letters of
instructions, which shall form part of the law of the land."
In refutation, the Intervenors and the Solicitor General's
Office aver that the 8th "whereas" clause sufficiently
summarizes the justification in that grave emergencies
corroding the moral values of the people and betraying the
national economic recovery program necessitated bold

emergency measures to be adopted with dispatch.

Whatever the reasons "in the judgment" of the then
President, considering that the issue of the validity of the
exercise of legislative power under the said Amendment still
pends resolution in several other cases, we reserve
resolution of the question raised at the proper time.
4. Neither can it be successfully argued that the DECREE
contains an undue delegation of legislative power. The grant
in Section 11 of the DECREE of authority to the BOARD to
"solicit the direct assistance of other agencies and units of
the government and deputize, for a fixed and limited period,
the heads or personnel of such agencies and units to
perform enforcement functions for the Board" is not a
delegation of the power to legislate but merely a
conferment of authority or discretion as to its execution,
enforcement, and implementation. "The true distinction is
between the delegation of power to make the law, which
necessarily involves a discretion as to what it shall be, and
conferring authority or discretion as to its execution to be
exercised under and in pursuance of the law. The first
cannot be done; to the latter, no valid objection can be
made." 14 Besides, in the very language of the decree, the
authority of the BOARD to solicit such assistance is for a
"fixed and limited period" with the deputized agencies
concerned being "subject to the direction and control of the
BOARD." That the grant of such authority might be the
source of graft and corruption would not stigmatize the
DECREE as unconstitutional. Should the eventuality occur,
the aggrieved parties will not be without adequate remedy
in law.
5. The DECREE is not violative of the ex post facto principle.
An ex post facto law is, among other categories, one which
"alters the legal rules of evidence, and authorizes conviction
upon less or different testimony than the law required at the
time of the commission of the offense." It is petitioner's
position that Section 15 of the DECREE in providing that:

All videogram establishments in the

Philippines are hereby given a period of fortyfive (45) days after the effectivity of this
Decree within which to register with and
secure a permit from the BOARD to engage in
the videogram business and to register with
the BOARD all their inventories of
videograms, including videotapes, discs,
cassettes or other technical improvements or
variations thereof, before they could be sold,
leased, or otherwise disposed of. Thereafter
any videogram found in the possession of any
person engaged in the videogram business
without the required proof of registration by
the BOARD, shall be prima facie evidence of
violation of the Decree, whether the
possession of such videogram be for private
showing and/or public exhibition.
raises immediately a prima facie evidence of violation of the
DECREE when the required proof of registration of any
videogram cannot be presented and thus partakes of the
nature of an ex post facto law.
The argument is untenable. As this Court held in the recent
case of Vallarta vs. Court of Appeals, et al. 15
... it is now well settled that "there is no
constitutional objection to the passage of a
law providing that the presumption of
innocence may be overcome by a contrary
presumption founded upon the experience of
human conduct, and enacting what evidence
shall be sufficient to overcome such
presumption of innocence" (People vs. Mingoa
92 Phil. 856 [1953] at 858-59, citing 1
COOLEY, A TREATISE ON THE
CONSTITUTIONAL LIMITATIONS, 639-641).

And the "legislature may enact that when

certain facts have been proved that they shall
be prima facie evidence of the existence of
the guilt of the accused and shift the burden
of proof provided there be a rational
connection between the facts proved and the
ultimate facts presumed so that the inference
of the one from proof of the others is not
unreasonable and arbitrary because of lack of
connection between the two in common
experience". 16
Applied to the challenged provision, there is no question
that there is a rational connection between the fact proved,
which is non-registration, and the ultimate fact presumed
which is violation of the DECREE, besides the fact that
the prima facie presumption of violation of the DECREE
attaches only after a forty-five-day period counted from its
effectivity and is, therefore, neither retrospective in
character.
6. We do not share petitioner's fears that the video industry
is being over-regulated and being eased out of existence as
if it were a nuisance. Being a relatively new industry, the
need for its regulation was apparent. While the underlying
objective of the DECREE is to protect the moribund movie
industry, there is no question that public welfare is at
bottom of its enactment, considering "the unfair competition
posed by rampant film piracy; the erosion of the moral fiber
of the viewing public brought about by the availability of
unclassified and unreviewed video tapes containing
pornographic films and films with brutally violent
sequences; and losses in government revenues due to the
drop in theatrical attendance, not to mention the fact that
the activities of video establishments are virtually untaxed
since mere payment of Mayor's permit and municipal license
fees are required to engage in business. 17

The enactment of the Decree since April 10, 1986 has not
brought about the "demise" of the video industry. On the
contrary, video establishments are seen to have proliferated
in many places notwithstanding the 30% tax imposed.
In the last analysis, what petitioner basically questions is
the necessity, wisdom and expediency of the DECREE.
These considerations, however, are primarily and
exclusively a matter of legislative concern.
Only congressional power or competence, not
the wisdom of the action taken, may be the
basis for declaring a statute invalid. This is as
it ought to be. The principle of separation of
powers has in the main wisely allocated the
respective authority of each department and
confined its jurisdiction to such a sphere.
There would then be intrusion not allowable
under the Constitution if on a matter left to
the discretion of a coordinate branch, the
judiciary would substitute its own. If there be
adherence to the rule of law, as there ought
to be, the last offender should be courts of
justice, to which rightly litigants submit their
controversy precisely to maintain unimpaired
the supremacy of legal norms and
prescriptions. The attack on the validity of the
challenged provision likewise insofar as there
may be objections, even if valid and cogent
on its wisdom cannot be sustained. 18
In fine, petitioner has not overcome the presumption of
validity which attaches to a challenged statute. We find no
clear violation of the Constitution which would justify us in
pronouncing Presidential Decree No. 1987 as
unconstitutional and void.

WHEREFORE, the instant Petition is hereby dismissed.

No costs.

6 United States vs. Sanchez, 340 U.S. 42, 44,

1950, cited in Bernas, Philippines
Constitutional Law, p. 594.

SO ORDERED.

7 People vs. Carlos, L-239, June 30, 1947, 78

Phil. 535.

Teehankee, (C.J.), Yap, Fernan, Narvasa, Gutierrez, Jr.,

Cruz, Paras, Feliciano, Gancayco, Padilla, Bidin, Sarmiento
and Cortes, JJ., concur.

8 U.S. vs. Sanchez, supra.

9 II Cooley, A Treatise on the Constitutional
Limitations, p. 986.
10 ibid., p. 987.

Footnotes
1 Section 19[1], Article VIII, 1973
Constitution; Section 26[l] Article VI, 1987
Constitution.
2 Sumulong vs. COMELEC, No. 48609,
October 10, 1941, 73 Phil. 288; Cordero vs.
Hon. Jose Cabatuando, et al., L-14542, Oct.
31, 1962,6 SCRA 418.
3 Public Service Co., Recktenwald, 290 III.
314, 8 ALR 466, 470.
4 Government vs. Hongkong & Shanghai
Banking Corporation, No. 44257, November
22, 1938, 66 Phil. 483; Cordero vs.
Cabatuando, et al., supra.

11 Magnano Co. vs. Hamilton, 292, U.S. 40.

12 Lutz vs. Araneta, L-7859, December 22,
1955, 98 Phil. 148, citing Carmichael vs.
Southern Coal and Coke Co., 301 U.S. 495,
81 L. Ed. 1245.
13 ibid., citing Great Atl. and Pacific Tea Co.
vs. Grosjean, 301 U.S. 412, 81 L. Ed. 1193;
U.S. vs. Butler, 297 U.S. 1, 80 L. Ed. 477;
M'Culloch vs. Maryland, 4 Wheat, 316,4 L. Ed.
579.
14 Cincinnati, W & Z.R. Co. vs. Clinton
County Comrs (1852) 1 Ohio St. 88.
15 G. R. No. L-40195, May 29, 1987.

5 Sumulong vs. Commission on Elections,

supra.

16 ibid., citing People vs. Mingoa, supra, See

also U.S. vs. Luling No. 11162, August 12,
1916,34 Phil. 725.

17 Solicitor General's Comments, p. 102,

Rollo.
18 Morfe vs. Mutuc, L-20387, January 31,
1968, 22 SCRA 424, 450-451.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC

G.R. No. 105371 November 11, 1993

THE PHILIPPINE JUDGES ASSOCIATION, duly rep. by
its President, BERNARDO P. ABESAMIS, VicePresident for Legal Affairs, MARIANO M. UMALI,
Director for Pasig, Makati, and Pasay, Metro Manila,
ALFREDO C. FLORES, and Chairman of the Committee
on Legal Aid, JESUS G. BERSAMIRA, Presiding Judges
of the Regional Trial Court, Branch 85, Quezon City
and Branches 160, 167 and 166, Pasig, Metro Manila,
respectively: the NATIONAL CONFEDERATION OF THE
JUDGES ASSOCIATION OF THE PHILIPPINES,
composed of the METROPOLITAN TRIAL COURT
JUDGES ASSOCIATION rep. by its President. REINATO
QUILALA of the MUNICIPAL TRIAL CIRCUIT COURT,
Manila; THE MUNICIPAL JUDGES LEAGUE OF THE
PHILIPPINES rep. by its President, TOMAS G.
TALAVERA; by themselves and in behalf of all the
Judges of the Regional Trial and Shari'a Courts,
Metropolitan Trial Courts and Municipal Courts
throughout the Country, petitioners,
vs.
HON. PETE PRADO, in his capacity as Secretary of the
Department of Transportation and Communications,
JORGE V. SARMIENTO, in his capacity as Postmaster
General, and the PHILIPPINE POSTAL
CORP., respondents.

CRUZ, J.:
The basic issue raised in this petition is the independence of
the Judiciary. It is asserted by the petitioners that this
hallmark of republicanism is impaired by the statute and
circular they are here challenging. The Supreme Court is
itself affected by these measures and is thus an interested
party that should ordinarily not also be a judge at the same
time. Under our system of government, however, it cannot
inhibit itself and must rule upon the challenge, because no
other office has the authority to do so. We shall therefore
act upon this matter not with officiousness but in the
discharge of an unavoidable duty and, as always, with
detachment and fairness.
The main target of this petition is Section 35 of R.A. No.
7354 as implemented by the Philippine Postal Corporation
through its Circular No.
92-28. These measures withdraw the franking privilege
from the Supreme Court, the Court of Appeals, the Regional
Trial Courts, the Metropolitan Trial Courts, the Municipal
Trial Courts, and the Land Registration Commission and its
Registers of Deeds, along with certain other government
offices.
The petitioners are members of the lower courts who feel
that their official functions as judges will be prejudiced by
the above-named measures. The National Land Registration
Authority has taken common cause with them insofar as its
own activities, such as sending of requisite notices in
registration cases, affect judicial proceedings. On its motion,
it has been allowed to intervene.
The petition assails the constitutionality of R.A. No. 7354 on
the grounds that: (1) its title embraces more than one
subject and does not express its purposes; (2) it did not
pass the required readings in both Houses of Congress and

printed copies of the bill in its final form were not

distributed among the members before its passage; and (3)
it is discriminatory and encroaches on the independence of
the Judiciary.

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."

We approach these issues with one important principle in

mind, to wit, the presumption of the constitutionality of
statutes. The theory is that as the joint act of the
Legislature and the Executive, every statute is supposed to
have first been carefully studied and determined to be
constitutional before it was finally enacted. Hence, unless it
is clearly shown that it is constitutionally flawed, the attack
against its validity must be rejected and the law itself
upheld. To doubt is to sustain.

The objectives of the law are enumerated in Section 3,

which provides:

I
We consider first the objection based on Article VI, Sec.
26(l), of the Constitution providing that "Every bill passed
by the Congress shall embrace only one subject which shall
be expressed in the title thereof."
The purposes of this rule are: (1) to prevent hodge-podge
or "log-rolling" legislation; (2) to prevent surprise or fraud
upon the legislature by means of provisions in bills of which
the title gives no intimation, and which might therefore be
overlooked and carelessly and unintentionally adopted; and
(3) to fairly apprise the people, through such publication of
legislative proceedings as is usually made, of the subject of
legislation that is being considered, in order that they may
have opportunity of being heard thereon, by petition or
otherwise, if they shall so desire. 1
It is the submission of the petitioners that Section 35 of
R.A. No. 7354 which withdrew the franking privilege from
the Judiciary is not expressed in the title of the law, nor
does it reflect its purposes.

The State shall pursue the following

objectives of a nationwide postal system:
a) to enable the economical and speedy
transfer of mail and other postal matters,
from sender to addressee, with full
recognition of their privacy or confidentiality;
b) to promote international interchange,
cooperation and understanding through the
unhampered flow or exchange of postal
matters between nations;
c) to cause or effect a wide range of postal
services to cater to different users and
changing needs, including but not limited to,
philately, transfer of monies and valuables,
and the like;
d) to ensure that sufficient revenues are
generated by and within the industry to
finance the overall cost of providing the
varied range of postal delivery and
messengerial services as well as the
expansion and continuous upgrading of
service standards by the same.
Sec. 35 of R.A. No. 7354, which is the principal target of the
petition, reads as follows:

Sec. 35. Repealing Clause. All acts,

decrees, orders, executive orders,
instructions, rules and regulations or parts
thereof inconsistent with the provisions of this
Act are repealed or modified accordingly.
All franking privileges authorized by law are
hereby repealed, except those provided for
under Commonwealth Act No. 265, Republic
Acts Numbered 69, 180, 1414, 2087 and
5059. The Corporation may continue the
franking privilege under Circular No. 35 dated
October 24, 1977 and that of the Vice
President, under such arrangements and
conditions as may obviate abuse or
unauthorized use thereof.
The petitioners' contention is untenable. We do not agree
that the title of the challenged act violates the Constitution.
The title of the bill is not required to be an index to the body
of the act, or to be as comprehensive as to cover every
single detail of the measure. It has been held that if the title
fairly indicates the general subject, and reasonably covers
all the provisions of the act, and is not calculated to mislead
the legislature or the people, there is sufficient compliance
with the constitutional requirement. 2
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. 3 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).
This is particularly true of the repealing clause, on which
Cooley writes: "The repeal of a statute on a given subject is
properly connected with the subject matter of a new statute
on the same subject; and therefore a repealing section in
the new statute is valid, notwithstanding that the title is
silent on the subject. It would be difficult to conceive of a
matter more germane to an act and to the object to be
accomplished thereby than the repeal of previous
legislations connected therewith." 4
The reason is that where a statute repeals a former law,
such repeal is the effect and not the subject of the statute;
and it is the subject, not the effect of a law, which is
required to be briefly expressed in its title. 5 As observed in
one case, 6 if the title of an act embraces only one subject,
we apprehend it was never claimed that every other act
which repeals it or alters by implication must be mentioned
in the title of the new act. Any such rule would be neither
within the reason of the Constitution, nor practicable.
We are convinced that the withdrawal of the franking
privilege from some agencies is germane to the
accomplishment of the principal objective of R.A. No. 7354,
which is the creation of a more efficient and effective postal
service system. Our ruling is that, by virtue of its nature as

a repealing clause, Section 35 did not have to be expressly

included in the title of the said law.
II
The petitioners maintain that the second paragraph of Sec.
35 covering the repeal of the franking privilege from the
petitioners and this Court under E.O. 207, PD 1882 and PD
26 was not included in the original version of Senate Bill No.
720 or House Bill No. 4200. As this paragraph appeared
only in the Conference Committee Report, its addition,
violates Article VI, Sec. 26(2) of the Constitution, reading as
follows:
(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 yeasand nays entered in the Journal.
The petitioners also invoke Sec. 74 of the Rules of the
House of Representatives, requiring that amendment to any
bill when the House and the Senate shall have differences
thereon may be settled by a conference committee of both
chambers. They stress that Sec. 35 was never a subject of
any disagreement between both Houses and so the second
paragraph could not have been validly added as an
amendment.
These argument are unacceptable.

While it is true that a conference committee is the

mechanism for compromising differences between the
Senate and the House, it is not limited in its jurisdiction to
this question. Its broader function is described thus:
A conference committee may, deal generally
with the subject matter or it may be limited
to resolving the precise differences between
the two houses. Even where the conference
committee is not by rule limited in its
jurisdiction, legislative custom severely limits
the freedom with which new subject matter
can be inserted into the conference bill. But
occasionally a conference committee produces
unexpected results, results beyond its
mandate, These excursions occur even where
the rules impose strict limitations on
conference committee jurisdiction. This is
symptomatic of the authoritarian power of
conference committee (Davies, Legislative
Law and Process: In a Nutshell, 1986 Ed.,
p.81).
It is a matter of record that the conference Committee
Report on the bill in question was returned to and duly
approved by both the Senate and the House of
Representatives. Thereafter, the bill was enrolled with its
certification by Senate President Neptali A. Gonzales and
Speaker Ramon V. Mitra of the House of Representatives as
having been duly passed by both Houses of Congress. It
was then presented to and approved by President Corazon
C. Aquino on April 3, 1992.
Under the doctrine of separation powers, the Court may not
inquire beyond the certification of the approval of a bill from
the presiding officers of Congress. Casco Philippine
Chemical Co. v. Gimenez 7 laid down the rule that the
enrolled bill, is conclusive upon the Judiciary (except in

matters that have to be entered in the journals like

the yeas and nayson the final reading of the
bill). 8 The journals are themselves also binding on the
Supreme Court, as we held in the old (but still valid) case
of U.S. vs. Pons, 9 where we explained the reason thus:
To inquire into the veracity of the journals of
the Philippine legislature when they are, as
we have said, clear and explicit, would be to
violate both the, letter and spirit of the
organic laws by which the Philippine
Government was brought into existence, to
invade a coordinate and independent
department of the Government, and to
interfere with the legitimate powers and
functions, of the Legislature.
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 form were 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.
III
The third and most serious challenge of the petitioners is
based on the equal protection clause.
It is alleged that R.A. No. 7354 is discriminatory because
while withdrawing the franking privilege from the Judiciary,
it retains the same for the President of the Philippines, the

Vice President of the Philippines; Senators and Members of

the House of Representatives, the Commission on Elections;
former Presidents of the Philippines; the National Census
and Statistics Office; and the general public in the filing of
complaints against public offices and officers. 10
The respondents counter that there is no discrimination
because the law is based on a valid classification in
accordance with the equal protection clause. In fact, the
franking privilege has been withdrawn not only from the
Judiciary but also the Office of Adult Education, the Institute
of National Language; the Telecommunications Office; the
Philippine Deposit Insurance Corporation; the National
Historical Commission; the Armed Forces of the Philippines;
the Armed Forces of the Philippines Ladies Steering
Committee; the City and Provincial Prosecutors; the
Tanodbayan (Office of Special Prosecutor); the Kabataang
Barangay; the Commission on the Filipino Language; the
Provincial and City Assessors; and the National Council for
the Welfare of Disabled Persons. 11
The equal protection of the laws is embraced in the concept
of due process, as every unfair discrimination offends the
requirements of justice and fair play. It has nonetheless
been embodied in a separate clause in Article III Sec. 1., of
the Constitution to provide for a more, specific guaranty
against any form of undue favoritism or hostility from the
government. Arbitrariness in general may be challenged on
the basis of the due process clause. But if the particular act
assailed partakes of an unwarranted partiality or prejudice,
the sharper weapon to cut it down is the equal protection
clause.
According to a long line of decisions, equal protection simply
requires that all persons or things similarly situated should
be treated alike, both as to rights conferred and
responsibilities imposed, 12 Similar subjects, in other words,

should not be treated differently, so as to give undue favor

to some and unjustly discriminate against others.
The equal protection clause does not require the universal
application of the laws on all persons or things without
distinction. This might in fact sometimes result in unequal
protection, as where, for example, a law prohibiting mature
books to all persons, regardless of age, would benefit the
morals of the youth but violate the liberty of adults. What
the clause requires is equality among equals as determined
according to a valid classification. By classification is meant
the grouping of persons or things similar to each other in
certain particulars and different from all others in these
same particulars. 13
What is the reason for the grant of the franking privilege in
the first place? Is the franking privilege extended to the
President of the Philippines or the Commission on Elections
or to former Presidents of the Philippines purely as
acourtesy from the lawmaking body? Is it offered because
of the importance or status of the grantee or because of
its need for the privilege? Or have the grantees been chosen
pell-mell, as it were, without any basis at all for the
selection?
We reject outright the last conjecture as there is no doubt
that the statute as a whole was carefully deliberated upon,
by the political departments before it was finally enacted.
There is reason to suspect, however, that not enough care
or attention was given to its repealing clause, resulting in
the unwitting withdrawal of the franking privilege from the
Judiciary.
We also do not believe that the basis of the classification
was mere courtesy, for it is unimaginable that the political
departments would have intended this serious slight to the
Judiciary as the third of the major and equal departments

the government. The same observations are made if the

importance or status of the grantee was the criterion used
for the extension of the franking privilege, which is enjoyed
by the National Census and Statistics Office and even some
private individuals but not the courts of justice.
In our view, the only acceptable reason for the grant of the
franking privilege was the perceived need of the grantee for
the accommodation, which would justify a waiver of
substantial revenue by the Corporation in the interest of
providing for a smoother flow of communication between
the government and the people.
Assuming that basis, we cannot understand why, of all the
departments of the government, it is the Judiciary, that has
been denied the franking privilege. There is no question that
if there is any major branch of the government that needs
the privilege, it is the Judicial Department, as the
respondents themselves point out. Curiously, the
respondents would justify the distinction on the basis
precisely of this need and, on this basis, deny the Judiciary
the franking privilege while extending it to others less
deserving.
In their Comment, the respondents point out that available
data from the Postal Service Office show that from January
1988 to June 1992, the total volume of frank mails
amounted to P90,424,175.00. Of this amount, frank mails
from the Judiciary and other agencies whose functions
include the service of judicial processes, such as the
intervenor, the Department of Justice and the Office of the
Ombudsman, amounted to P86,481,759. Frank mails
coming fromthe Judiciary amounted to P73,574,864.00, and
those coming from the petitioners reached the total amount
of P60,991,431.00. The respondents' conclusion is that
because of this considerable volume of mail from the
Judiciary, the franking privilege must be withdrawn from it.

The argument is self-defeating. The respondents are in

effect saying that the franking privilege should be extended
only to those who do not need it very much, if at all, (like
the widows of former Presidents) but not to those who need
it badly (especially the courts of justice). It is like saying
that a person may be allowed cosmetic surgery although it
is not really necessary but not an operation that can save
his life.
If the problem of the respondents is the loss of revenues
from the franking privilege, the remedy, it seems to us, is
to withdraw it altogether from all agencies of government,
including those who do not need it. The problem is not
solved by retaining it for some and withdrawing it from
others, especially where there is no substantial distinction
between those favored, which may or may not need it at all,
and the Judiciary, which definitely needs it. The problem is
not solved by violating the Constitution.
In lumping the Judiciary with the other offices from which
the franking privilege has been withdrawn, Section 35 has
placed the courts of justice in a category to which it does
not belong. If it recognizes the need of the President of the
Philippines and the members of Congress for the franking
privilege, there is no reason why it should not recognize a
similar and in fact greater need on the part of the Judiciary
for such privilege. While we may appreciate the withdrawal
of the franking privilege from the Armed Forces of the
Philippines Ladies Steering Committee, we fail to
understand why the Supreme Court should be similarly
treated as that Committee. And while we may concede the
need of the National Census and Statistics Office for the
franking privilege, we are intrigued that a similar if not
greater need is not recognized in the courts of justice.
(On second thought, there does not seem to be any
justifiable need for withdrawing the privilege from the
Armed Forces of the Philippines Ladies Steering Committee,

which, like former Presidents of the Philippines or their

widows, does not send as much frank mail as the Judiciary.)
It is worth observing that the Philippine Postal Corporation,
as a government-controlled corporation, was created and is
expected to operate for the purpose of promoting the public
service. While it may have been established primarily for
private gain, it cannot excuse itself from performing certain
functions for the benefit of the public in exchange for the
franchise extended to it by the government and the many
advantages it enjoys under its charter.14 Among the
services it should be prepared to extend is free carriage of
mail for certain offices of the government that need the
franking privilege in the discharge of their own public
functions.
We also note that under Section 9 of the law, the
Corporation is capitalized at P10 billion pesos, 55% of which
is supplied by the Government, and that it derives
substantial revenues from the sources enumerated in
Section 10, on top of the exemptions it enjoys. It is not
likely that the retention of the franking privilege of the
Judiciary will cripple the Corporation.
At this time when the Judiciary is being faulted for the delay
in the administration of justice, the withdrawal from it of the
franking privilege can only further deepen this serious
problem. The volume of judicial mail, as emphasized by the
respondents themselves, should stress the dependence of
the courts of justice on the postal service for communicating
with lawyers and litigants as part of the judicial process.
The Judiciary has the lowest appropriation in the national
budget compared to the Legislative and Executive
Departments; of the P309 billion budgeted for 1993, only
.84%, or less than 1%, is alloted for the judiciary. It should
not be hard to imagine the increased difficulties of our
courts if they have to affix a purchased stamp to every

process they send in the discharge of their judicial

functions.
We are unable to agree with the respondents that Section
35 of R.A. No. 7354 represents a valid exercise of discretion
by the Legislature under the police power. On the contrary,
we find its repealing clause to be a discriminatory provision
that denies the Judiciary the equal protection of the laws
guaranteed for all persons or things similarly situated. The
distinction made by the law is superficial. It is not based on
substantial distinctions that make real differences between
the Judiciary and the grantees of the franking privilege.
This is not a question of wisdom or power into which the
Judiciary may not intrude. It is a matter of arbitrariness that
this Court has the duty and power to correct.
IV
In sum, we sustain R.A. No. 7354 against the attack that its
subject is not expressed in its title and that it was not
passed in accordance with the prescribed procedure.
However, we annul Section 35 of the law as violative of
Article 3, Sec. 1, of the Constitution providing that no
person shall "be deprived of the equal protection of laws."
We arrive at these conclusions with a full awareness of the
criticism it is certain to provoke. While ruling against the
discrimination in this case, we may ourselves be accused of
similar discrimination through the exercise of our ultimate
power in our own favor. This is inevitable. Criticism of
judicial conduct, however undeserved, is a fact of life in the
political system that we are prepared to accept.. As judges,
we cannot debate with our detractors. We can only decide
the cases before us as law imposes on us the duty to be fair
and our own conscience gives us the light to be right.

ACCORDINGLY, the petition is partially GRANTED and

Section 35 of R.A. No. 7354 is declared
UNCONSTITUTIONAL. Circular No. 92-28 is SET ASIDE
insofar as it withdraws the franking privilege from the
Supreme Court, the Court of Appeals, the Regional trail
Courts, the Municipal trial Courts, and the National Land
Registration Authority and its Register of Deeds to all of
which offices the said privilege shall be RESTORED. The
temporary restraining order dated June 2, 1992, is made
permanent.
SO ORDERED.
Narvasa, C.J., Feliciano, Padilla, Bidin, Regalado, Davide,
Jr., Romero, Nocon, Melo, Quiason, Puno and Vitug, JJ.,
concur.
Bellosillo, J., is on leave.

# Footnotes
1 Cooley, Constitutional Limitations, 8th Ed.,
pp. 295-296; State vs. Dolan, 14 L.R.A.
1259; State v. Doherty, 29 Pac. 855.
2 Public Service Co. v. Recktenwald, 8 A.L.R.
466.
3 Cooley, Constitutional Limitations, 8th Ed.,
pp. 297.
4 Ibid., p. 302.
5 Southern Pac. Co. v. Bartine, 170 Fed. 737.

6 City of Winona v. School District, 41 N.W.

539.
7 7 SCRA 347.
8 Mabanag v. Lopez Vito, 78 Phil. 1.
9 34 Phil. 729
10 Rollo, pp. 8-9.
11 Ibid., pp. 209-210.
12 Ichong v. Hernandez, 101 Phil. 1155;
Sison v. Ancheta, 130 SCRA 654; Association
of Small Landowners in the Philippines v.
Secretary of Agrarian Reform, 175 SCRA 375.
13 International Harvester Co. v. Missouri,
234 US 199.
14 Sec. 14 of R.A. No. 7354

Republic of the Philippines

SUPREME COURT
Manila
EN BANC

G.R. No. 109289 October 3, 1994

RUFINO R. TAN, petitioner,
vs.
RAMON R. DEL ROSARIO, JR., as SECRETARY OF
FINANCE & JOSE U. ONG, as COMMISSIONER OF
INTERNAL REVENUE, respondents.
G.R. No. 109446 October 3, 1994
CARAG, CABALLES, JAMORA AND SOMERA LAW
OFFICES, CARLO A. CARAG, MANUELITO O. CABALLES,
ELPIDIO C. JAMORA, JR. and BENJAMIN A. SOMERA,
JR., petitioners,
vs.
RAMON R. DEL ROSARIO, in his capacity as
SECRETARY OF FINANCE and JOSE U. ONG, in his
capacity as COMMISSIONER OF INTERNAL
REVENUE, respondents.
Rufino R. Tan for and in his own behalf.
Carag, Caballes, Jamora & Zomera Law Offices for
petitioners in G.R. 109446.

VITUG, J.:

These two consolidated special civil actions for prohibition

challenge, in G.R. No. 109289, the constitutionality of
Republic Act No. 7496, also commonly known as the
Simplified Net Income Taxation Scheme ("SNIT"), amending
certain provisions of the National Internal Revenue Code
and, in
G.R. No. 109446, the validity of Section 6, Revenue
Regulations No. 2-93, promulgated by public respondents
pursuant to said law.
Petitioners claim to be taxpayers adversely affected by the
continued implementation of the amendatory legislation.
In G.R. No. 109289, it is asserted that the enactment of
Republic Act
No. 7496 violates the following provisions of the
Constitution:
Article VI, Section 26(1) Every bill passed
by the Congress shall embrace only one
subject which shall be expressed in the title
thereof.
Article VI, Section 28(1) The rule of
taxation shall be uniform and equitable. The
Congress shall evolve a progressive system of
taxation.
Article III, Section 1 No person shall be
deprived of . . . property without due process
of law, nor shall any person be denied the
equal protection of the laws.
In G.R. No. 109446, petitioners, assailing Section 6 of
Revenue Regulations No. 2-93, argue that public
respondents have exceeded their rule-making authority in
applying SNIT to general professional partnerships.

The Solicitor General espouses the position taken by public

respondents.
The Court has given due course to both petitions. The
parties, in compliance with the Court's directive, have filed
their respective memoranda.
G.R. No. 109289
Petitioner contends that the title of House Bill No. 34314,
progenitor of Republic Act No. 7496, is a misnomer or, at
least, deficient for being merely entitled, "Simplified Net
Income Taxation Scheme for the Self-Employed
and Professionals Engaged in the Practice of their
Profession" (Petition in G.R. No. 109289).
The full text of the title actually reads:
An Act Adopting the Simplified Net Income
Taxation Scheme For The Self-Employed and
Professionals Engaged In The Practice of Their
Profession, Amending Sections 21 and 29 of
the National Internal Revenue Code, as
Amended.
The pertinent provisions of Sections 21 and 29, so referred
to, of the National Internal Revenue Code, as now
amended, provide:
Sec. 21. Tax on citizens or residents.
xxx xxx xxx
(f) Simplified Net Income Tax for the SelfEmployed and/or Professionals Engaged in
the Practice of Profession. A tax is hereby
imposed upon the taxable net income as

determined in Section 27 received during

each taxable year from all sources, other than
income covered by paragraphs (b), (c), (d)
and (e) of this section by every individual
whether
a citizen of the Philippines or an alien residing
in the Philippines who is self-employed or
practices his profession herein, determined in
accordance with the following schedule:
Not over P10,000 3%
Over P10,000 P300 + 9%
but not over P30,000 of excess over P10,000
Over P30,000 P2,100 + 15%
but not over P120,00 of excess over P30,000
Over P120,000 P15,600 + 20%
but not over P350,000 of excess over
P120,000
Over P350,000 P61,600 + 30%
of excess over P350,000
Sec. 29. Deductions from gross income. In
computing taxable income subject to tax
under Sections 21(a), 24(a), (b) and (c); and
25 (a)(1), there shall be allowed as
deductions the items specified in paragraphs
(a) to (i) of this section: Provided, however,
That in computing taxable income subject to
tax under Section 21 (f) in the case of
individuals engaged in business or practice of
profession, only the following direct costs
shall be allowed as deductions:

(a) Raw materials, supplies and direct labor;

(b) Salaries of employees directly engaged in
activities in the course of or pursuant to the
business or practice of their profession;
(c) Telecommunications, electricity, fuel, light
and water;
(d) Business rentals;
(e) Depreciation;
(f) Contributions made to the Government
and accredited relief organizations for the
rehabilitation of calamity stricken areas
declared by the President; and
(g) Interest paid or accrued within a taxable
year on loans contracted from accredited
financial institutions which must be proven to
have been incurred in connection with the
conduct of a taxpayer's profession, trade or
business.
For individuals whose cost of goods sold and
direct costs are difficult to determine, a
maximum of forty per cent (40%) of their
gross receipts shall be allowed as deductions
to answer for business or professional
expenses as the case may be.
On the basis of the above language of the law, it would be
difficult to accept petitioner's view that the amendatory law
should be considered as having now adopted
a gross income, instead of as having still retained
the netincome, taxation scheme. The allowance for

deductible items, it is true, may have significantly been

reduced by the questioned law in comparison with that
which has prevailed prior to the amendment; limiting,
however, allowable deductions from gross income is neither
discordant with, nor opposed to, the net income tax
concept. The fact of the matter is still that various
deductions, which are by no means inconsequential,
continue to be well provided under the new law.
Article VI, Section 26(1), of the Constitution has been
envisioned so as (a) to prevent log-rolling legislation
intended to unite the members of the legislature who favor
any one of unrelated subjects in support of the whole act,
(b) to avoid surprises or even fraud upon the legislature,
and (c) to fairly apprise the people, through such
publications of its proceedings as are usually made, of the
subjects of legislation. 1 The above objectives of the
fundamental law appear to us to have been sufficiently met.
Anything else would be to require a virtual compendium of
the law which could not have been the intendment of the
constitutional mandate.
Petitioner intimates that Republic Act No. 7496 desecrates
the constitutional requirement that taxation "shall be
uniform and equitable" in that the law would now attempt to
tax single proprietorships and professionals differently from
the manner it imposes the tax on corporations and
partnerships. The contention clearly forgets, however, that
such a system of income taxation has long been the
prevailing rule even prior to Republic Act No. 7496.
Uniformity of taxation, like the kindred concept of equal
protection, merely requires that all subjects or objects of
taxation, similarly situated, are to be treated alike both in
privileges and liabilities (Juan Luna Subdivision vs.
Sarmiento, 91 Phil. 371). Uniformity does not forfend
classification as long as: (1) the standards that are used
therefor are substantial and not arbitrary, (2) the

categorization is germane to achieve the legislative

purpose, (3) the law applies, all things being equal, to both
present and future conditions, and (4) the classification
applies equally well to all those belonging to the same class
(Pepsi Cola vs. City of Butuan, 24 SCRA 3; Basco vs.
PAGCOR, 197 SCRA 52).
What may instead be perceived to be apparent from the
amendatory law is the legislative intent to increasingly shift
the income tax system towards the schedular approach 2 in
the income taxation of individual taxpayers and to maintain,
by and large, the present global treatment 3 on taxable
corporations. We certainly do not view this classification to
be arbitrary and inappropriate.
Petitioner gives a fairly extensive discussion on the merits
of the law, illustrating, in the process, what he believes to
be an imbalance between the tax liabilities of those covered
by the amendatory law and those who are not. With the
legislature primarily lies the discretion to determine the
nature (kind), object (purpose), extent (rate), coverage
(subjects) and situs (place) of taxation. This court cannot
freely delve into those matters which, by constitutional fiat,
rightly rest on legislative judgment. Of course, where a tax
measure becomes so unconscionable and unjust as to
amount to confiscation of property, courts will not hesitate
to strike it down, for, despite all its plenitude, the power to
tax cannot override constitutional proscriptions. This stage,
however, has not been demonstrated to have been reached
within any appreciable distance in this controversy before
us.
Having arrived at this conclusion, the plea of petitioner to
have the law declared unconstitutional for being violative of
due process must perforce fail. The due process clause may
correctly be invoked only when there is a clear
contravention of inherent or constitutional limitations in the

exercise of the tax power. No such transgression is so

evident to us.
G.R. No. 109446
The several propositions advanced by petitioners revolve
around the question of whether or not public respondents
have exceeded their authority in promulgating Section 6,
Revenue Regulations No. 2-93, to carry out Republic Act No.
7496.
The questioned regulation reads:
Sec. 6. General Professional Partnership
The general professional partnership (GPP)
and the partners comprising the GPP are
covered by R. A. No. 7496. Thus, in
determining the net profit of the partnership,
only the direct costs mentioned in said law
are to be deducted from partnership income.
Also, the expenses paid or incurred by
partners in their individual capacities in the
practice of their profession which are not
reimbursed or paid by the partnership but are
not considered as direct cost, are not
deductible from his gross income.
The real objection of petitioners is focused on the
administrative interpretation of public respondents that
would apply SNIT to partners in general professional
partnerships. Petitioners cite the pertinent deliberations in
Congress during its enactment of Republic Act No. 7496,
also quoted by the Honorable Hernando B. Perez, minority
floor leader of the House of Representatives, in the latter's
privilege speech by way of commenting on the questioned
implementing regulation of public respondents following the
effectivity of the law, thusly:

MR. ALBANO, Now Mr. Speaker,

I would like to get the correct
impression of this bill. Do we
speak here of individuals who
are earning, I mean, who earn
through business enterprises
and therefore, should file an
income tax return?
MR. PEREZ. That is correct, Mr.
Speaker. This does not apply to
corporations. It applies only to
individuals.
(See Deliberations on H. B. No. 34314,
August 6, 1991, 6:15 P.M.; Emphasis ours).
Other deliberations support this
position, to wit:
MR. ABAYA . . . Now, Mr.
Speaker, did I hear the
Gentleman from Batangas say
that this bill is intended to
increase collections as far as
individuals are concerned and
to make collection of taxes
equitable?

This bill, Mr. President, is not

applicable to business
corporations or to partnerships;
it is only with respect to
individuals and professionals.
(Emphasis ours)
The Court, first of all, should like to correct the apparent
misconception that general professional partnerships are
subject to the payment of income tax or that there is a
difference in the tax treatment between individuals engaged
in business or in the practice of their respective professions
and partners in general professional partnerships. The fact
of the matter is that a general professional partnership,
unlike an ordinary business partnership (which is treated as
a corporation for income tax purposes and so subject to the
corporate income tax), is not itself an income taxpayer. The
income tax is imposed not on the professional partnership,
which is tax exempt, but on the partners themselves in their
individual capacity computed on their distributive shares of
partnership profits. Section 23 of the Tax Code, which has
not been amended at all by Republic Act 7496, is explicit:

(Id. at 6:40 P.M.; Emphasis ours).

Sec. 23. Tax liability of members of general

professional partnerships. (a) Persons
exercising a common profession in general
partnership shall be liable for income tax only
in their individual capacity, and the share in
the net profits of the general professional
partnership to which any taxable partner
would be entitled whether distributed or
otherwise, shall be returned for taxation and
the tax paid in accordance with the provisions
of this Title.

In fact, in the sponsorship speech of Senator

Mamintal Tamano on the Senate version of
the SNITS, it is categorically stated, thus:

(b) In determining his distributive share in

the net income of the partnership, each
partner

MR. PEREZ. That is correct, Mr.

Speaker.

(1) Shall take into account

separately his distributive share
of the partnership's income,
gain, loss, deduction, or credit
to the extent provided by the
pertinent provisions of this
Code, and
(2) Shall be deemed to have
elected the itemized
deductions, unless he declares
his distributive share of the
gross income undiminished by
his share of the deductions.
There is, then and now, no distinction in income tax liability
between a person who practices his profession alone or
individually and one who does it through partnership
(whether registered or not) with others in the exercise of a
common profession. Indeed, outside of the gross
compensation income tax and the final tax on passive
investment income, under the present income tax system
all individuals deriving income from any source whatsoever
are treated in almost invariably the same manner and under
a common set of rules.
We can well appreciate the concern taken by petitioners if
perhaps we were to consider Republic Act No. 7496 as an
entirely independent, not merely as an amendatory, piece
of legislation. The view can easily become myopic, however,
when the law is understood, as it should be, as only forming
part of, and subject to, the whole income tax concept and
precepts long obtaining under the National Internal Revenue
Code. To elaborate a little, the phrase "income taxpayers" is
an all embracing term used in the Tax Code, and it
practically covers all persons who derive taxable income.
The law, in levying the tax, adopts the most comprehensive
tax situs of nationality and residence of the taxpayer (that

renders citizens, regardless of residence, and resident aliens

subject to income tax liability on their income from all
sources) and of the generally accepted and internationally
recognized income taxable base (that can subject nonresident aliens and foreign corporations to income tax on
their income from Philippine sources). In the process, the
Code classifies taxpayers into four main groups, namely:
(1) Individuals, (2) Corporations, (3) Estates under Judicial
Settlement and (4) Irrevocable Trusts (irrevocable both as
to corpus and as to income).
Partnerships are, under the Code, either "taxable
partnerships" or "exempt partnerships." Ordinarily,
partnerships, no matter how created or organized, are
subject to income tax (and thus alluded to as "taxable
partnerships") which, for purposes of the above
categorization, are by law assimilated to be within the
context of, and so legally contemplated as, corporations.
Except for few variances, such as in the application of the
"constructive receipt rule" in the derivation of income, the
income tax approach is alike to both juridical persons.
Obviously, SNIT is not intended or envisioned, as so
correctly pointed out in the discussions in Congress during
its deliberations on Republic Act 7496, aforequoted, to cover
corporations and partnerships which are independently
subject to the payment of income tax.
"Exempt partnerships," upon the other hand, are not
similarly identified as corporations nor even considered as
independent taxable entities for income tax purposes. A
general professional partnership is such an example. 4Here,
the partners themselves, not the partnership (although it is
still obligated to file an income tax return [mainly for
administration and data]), are liable for the payment of
income tax in their individual capacity computed on their
respective and distributive shares of profits. In the
determination of the tax liability, a partner does so as
an individual, and there is no choice on the matter. In fine,

under the Tax Code on income taxation, the general

professional partnership is deemed to be no more than a
mere mechanism or a flow-through entity in the generation
of income by, and the ultimate distribution of such income
to, respectively, each of the individual partners.
Section 6 of Revenue Regulation No. 2-93 did not alter, but
merely confirmed, the above standing rule as now so
modified by Republic Act
No. 7496 on basically the extent of allowable deductions
applicable to all individual income taxpayers on their noncompensation income. There is no evident intention of the
law, either before or after the amendatory legislation, to
place in an unequal footing or in significant variance the
income tax treatment of professionals who practice their
respective professions individually and of those who do it
through a general professional partnership.
WHEREFORE, the petitions are DISMISSED. No special
pronouncement on costs.
SO ORDERED.
Narvasa, C.J., Cruz, Feliciano, Regalado, Davide, Jr.,
Romero, Bellosillo, Melo, Quiason, Puno, Kapunan and
Mendoza, JJ., concur.
Padilla and Bidin, JJ., are on leave.

#Footnotes
1 Justice Isagani A. Cruz on Philippine Political
Law 1993 edition, pp. 146-147, citing with
approval Cooley on Constitutional Limitations.

2 A system employed where the income tax

treatment varies and made to depend on the
kind or category of taxable income of the
taxpayer.
3 A system where the tax treatment views
indifferently the tax base and generally treats
in common all categories of taxable income of
the taxpayer.
4 A general professional partnership, in this
context, must be formed for the sole purpose
of exercising a common profession, no part of
the income of which is derived from its
engaging in any trade business; otherwise, it
is subject to tax as an ordinary business
partnership or, which is to say, as a
corporation and thereby subject to the
corporate income tax. The only other exempt
partnership is a joint venture for undertaking
construction projects or engaging in
petroleum operations pursuant to an
operating agreement under a service contract
with the government (see Sections 20, 23
and 24, National Internal Revenue Code).

Republic of the Philippines

SUPREME COURT
Manila
EN BANC

G.R. No. L-114783 December 8, 1994

ROBERT V. TOBIAS, RAMON M. GUZMAN, TERRY T.
LIM, GREGORIO D. GABRIEL, and ROBERTO R.
TOBIAS, JR. petitioners,
vs.
HON. CITY MAYOR BENJAMIN S. ABALOS, CITY
TREASURER WILLIAM MARCELINO, and THE
SANGGUNIANG PANLUNGSOD, all of the City of
Mandaluyong, Metro Manila, respondents.
Estrella, Bautista & Associates for petitioners.

BIDIN, J.:
Invoking their rights as taxpayers and as residents of
Mandaluyong, herein petitioners assail the constitutionality
of Republic Act No. 7675, otherwise known as "An Act
Converting the Municipality of Mandaluyong into a Highly
Urbanized City to be known as the City of Mandaluyong."
Prior to the enactment of the assailed statute, the
municipalities of Mandaluyong and San Juan belonged to
only one legislative district. Hon. Ronaldo Zamora, the
incumbent congressional representative of this legislative
district, sponsored the bill which eventually became R.A.

No. 7675. President Ramos signed R.A. No. 7675 into law
on February 9, 1994.
Pursuant to the Local Government Code of 1991, a
plebiscite was held on April 10, 1994. The people of
Mandaluyong were asked whether they approved of the
conversion of the Municipality of Mandaluyong into a highly
urbanized city as provided under R.A. No. 7675. The turnout
at the plebiscite was only 14.41% of the voting population.
Nevertheless, 18,621 voted "yes" whereas 7,911 voted
"no." By virtue of these results, R.A. No. 7675 was deemed
ratified and in effect.
Petitioners now come before this Court, contending that
R.A. No. 7675, specifically Article VIII, Section 49 thereof, is
unconstitutional for being violative of three specific
provisions of the Constitution.
Article VIII, Section 49 of R.A. No. 7675 provides:
As a highly-urbanized city, the City of
Mandaluyong shall have its own legislative
district with the first representative to be
elected in the next national elections after the
passage of this Act. The remainder of the
former legislative district of San
Juan/Mandaluyong shall become the new
legislative district of San Juan with its first
representative to be elected at the same
election.
Petitioner's first objection to the aforequoted provision of
R.A. No. 7675 is that it contravenes the "one subject-one
bill" rule, as enunciated in Article VI, Section 26(1) of the
Constitution, to wit:

Sec. 26(1). Every bill passed by the Congress

shall embrace only one subject which shall be
expressed in the title thereof.
Petitioners allege that the inclusion of the assailed Section
49 in the subject law resulted in the latter embracing two
principal subjects, namely: (1) the conversion of
Mandaluyong into a highly urbanized city; and (2) the
division of the congressional district of San
Juan/Mandaluyong into two separate districts.
Petitioners contend that the second aforestated subject is
not germane to the subject matter of R.A. No. 7675 since
the said law treats of the conversion of Mandaluyong into a
highly urbanized city, as expressed in the title of the law.
Therefore, since Section 49 treats of a subject distinct from
that stated in the title of the law, the "one subject-one bill"
rule has not been complied with.
Petitioners' second and third objections involve Article VI,
Sections 5(1) and (4) of the Constitution, which provide, to
wit:
Sec. 5(1). The House of Representatives shall
be composed of not more than two hundred
and fifty members, unless otherwise fixed by
law, who shall be elected from legislative
districts apportioned among the provinces,
cities, and the Metropolitan Manila area in
accordance with the number of their
respective inhabitants, and on the basis of a
uniform and progressive ratio, and those who,
as provided by law, shall be elected through a
party list system of registered national,
regional and sectoral parties or organizations.

Sec. 5(4). Within three years following the

return of every census, the Congress shall
make a reapportionment of legislative
districts based on the standard provided in
this section.
Petitioners argue that the division of San Juan and
Mandaluyong into separate congressional districts under
Section 49 of the assailed law has resulted in an increase in
the composition of the House of Representatives beyond
that provided in Article VI, Sec. 5(1) of the Constitution.
Furthermore, petitioners contend that said division was not
made pursuant to any census showing that the subject
municipalities have attained the minimum population
requirements. And finally, petitioners assert that Section 49
has the effect of preempting the right of Congress to
reapportion legislative districts pursuant to Sec. 5(4) as
aforecited.
The contentions are devoid of merit.
Anent the first issue, we agree with the observation of the
Solicitor General that the statutory conversion of
Mandaluyong into a highly urbanized city with a population
of not less than two hundred fifty thousand indubitably
ordains compliance with the "one city-one representative"
proviso in the Constitution:
. . . Each city with a population of at least two
hundred fifty thousand, or each province,
shall have at least one representative"
(Article VI, Section 5(3), Constitution).
Hence, it is in compliance with the aforestated constitutional
mandate that the creation of a separate congressional
district for the City of Mandaluyong is decreed under Article
VIII, Section 49 of R.A. No. 7675.

Contrary to petitioners' assertion, the creation of a separate

congressional district for Mandaluyong is not a subject
separate and distinct from the subject of its conversion into
a highly urbanized city but is a natural and logical
consequence of its conversion into a highly urbanized city.
Verily, the title of R.A. No. 7675, "An Act Converting the
Municipality of Mandaluyong Into a Highly Urbanized City of
Mandaluyong" necessarily includes and contemplates the
subject treated under Section 49 regarding the creation of a
separate congressional district for Mandaluyong.
Moreover, a liberal construction of the "one title-one
subject" rule has been invariably adopted by this court so as
not to cripple or impede legislation. Thus, in Sumulong v.
Comelec (73 Phil. 288 [1941]), we ruled that the
constitutional requirement as now expressed in Article VI,
Section 26(1) "should be given a practical rather than a
technical construction. It should be sufficient compliance
with such requirement if the title expresses the general
subject and all the provisions are germane to that general
subject."
The liberal construction of the "one title-one subject" rule
had been further elucidated in Lidasan v. Comelec (21 SCRA
496 [1967]), to wit:
Of course, the Constitution does not require
Congress to employ in the title of an
enactment, language of such precision as to
mirror, fully index or catalogue all the
contents and the minute details therein. It
suffices if the title should serve the purpose of
the constitutional demand that it inform the
legislators, the persons interested in the
subject of the bill and the public, of the
nature, scope and consequences of the
proposed law and its operation" (emphasis
supplied).

Proceeding now to the other constitutional issues raised by

petitioners to the effect that there is no mention in the
assailed law of any census to show that Mandaluyong and
San Juan had each attained the minimum requirement of
250,000 inhabitants to justify their separation into two
legislative districts, the same does not suffice to strike down
the validity of R.A. No. 7675. The said Act enjoys the
presumption of having passed through the regular
congressional processes, including due consideration by the
members of Congress of the minimum requirements for the
establishment of separate legislative districts. At any rate, it
is not required that all laws emanating from the legislature
must contain all relevant data considered by Congress in
the enactment of said laws.
As to the contention that the assailed law violates the
present limit on the number of representatives as set forth
in the Constitution, a reading of the applicable provision,
Article VI, Section 5(1), as aforequoted, shows that the
present limit of 250 members is not absolute. The
Constitution clearly provides that the House of
Representatives shall be composed of not more than 250
members, "unless otherwise provided by law." The
inescapable import of the latter clause is that the present
composition of Congress may be increased, if Congress
itself so mandates through a legislative enactment.
Therefore, the increase in congressional representation
mandated by R.A. No. 7675 is not unconstitutional.
Thus, in the absence of proof that Mandaluyong and San
Juan do not qualify to have separate legislative districts, the
assailed Section 49 of R.A.
No. 7675 must be allowed to stand.
As to the contention that Section 49 of R.A. No. 7675 in
effect preempts the right of Congress to reapportion
legislative districts, the said argument borders on the
absurd since petitioners overlook the glaring fact that it was

Congress itself which drafted, deliberated upon and enacted

the assailed law, including Section 49 thereof. Congress
cannot possibly preempt itself on a right which pertains to
itself.

Narvasa, C.J., Padilla, Regalado, Davide, Jr., Romero,

Bellosillo, Melo, Quiason, Puno, Vitug, Kapunan and
Mendoza, JJ., concur.
Feliciano, J., is on leave.

Aside from the constitutional objections to R.A. No. 7675,

petitioners present further arguments against the validity
thereof.
Petitioners contend that the people of San Juan should have
been made to participate in the plebiscite on R.A. No. 7675
as the same involved a change in their legislative district.
The contention is bereft of merit since the principal subject
involved in the plebiscite was the conversion of
Mandaluyong into a highly urbanized city. The matter of
separate district representation was only ancillary thereto.
Thus, the inhabitants of San Juan were properly excluded
from the said plebiscite as they had nothing to do with the
change of status of neighboring Mandaluyong.
Similarly, petitioners' additional argument that the subject
law has resulted in "gerrymandering," which is the practice
of creating legislative districts to favor a particular
candidate or party, is not worthy of credence. As correctly
observed by the Solicitor General, it should be noted that
Rep. Ronaldo Zamora, the author of the assailed law, is the
incumbent representative of the former San
Juan/Mandaluyong district, having consistently won in both
localities. By dividing San Juan/Mandaluyong, Rep.
Zamora's constituency has in fact been diminished, which
development could hardly be considered as favorable to
him.
WHEREFORE, the petition is hereby DISMISSED for lack of
merit.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
EN BANC
G.R. No. 168056 September 1, 2005
ABAKADA GURO PARTY LIST (Formerly AASJAS)
OFFICERS SAMSON S. ALCANTARA and ED VINCENT S.
ALBANO, Petitioners,
vs.
THE HONORABLE EXECUTIVE SECRETARY EDUARDO
ERMITA; HONORABLE SECRETARY OF THE
DEPARTMENT OF FINANCE CESAR PURISIMA; and
HONORABLE COMMISSIONER OF INTERNAL REVENUE
GUILLERMO PARAYNO, JR., Respondent.
x-------------------------x
G.R. No. 168207
AQUILINO Q. PIMENTEL, JR., LUISA P. EJERCITO-ESTRADA,
JINGGOY E. ESTRADA, PANFILO M. LACSON, ALFREDO S.
LIM, JAMBY A.S. MADRIGAL, AND SERGIO R. OSMEA III,
Petitioners,
vs.
EXECUTIVE SECRETARY EDUARDO R. ERMITA, CESAR
V. PURISIMA, SECRETARY OF FINANCE, GUILLERMO L.
PARAYNO, JR., COMMISSIONER OF THE BUREAU OF
INTERNAL REVENUE, Respondent.
x-------------------------x
G.R. No. 168461
ASSOCIATION OF PILIPINAS SHELL DEALERS, INC.
represented by its President, ROSARIO ANTONIO; PETRON

DEALERS ASSOCIATION represented by its President, RUTH

E. BARBIBI; ASSOCIATION OF CALTEX DEALERS OF THE
PHILIPPINES represented by its President, MERCEDITAS A.
GARCIA; ROSARIO ANTONIO doing business under the
name and style of "ANB NORTH SHELL SERVICE STATION";
LOURDES MARTINEZ doing business under the name and
style of "SHELL GATE N. DOMINGO"; BETHZAIDA TAN
doing business under the name and style of "ADVANCE
SHELL STATION"; REYNALDO P. MONTOYA doing business
under the name and style of "NEW LAMUAN SHELL SERVICE
STATION"; EFREN SOTTO doing business under the name
and style of "RED FIELD SHELL SERVICE STATION";
DONICA CORPORATION represented by its President, DESI
TOMACRUZ; RUTH E. MARBIBI doing business under the
name and style of "R&R PETRON STATION"; PETER M.
UNGSON doing business under the name and style of
"CLASSIC STAR GASOLINE SERVICE STATION"; MARIAN
SHEILA A. LEE doing business under the name and style of
"NTE GASOLINE & SERVICE STATION"; JULIAN CESAR P.
POSADAS doing business under the name and style of
"STARCARGA ENTERPRISES"; ADORACION MAEBO doing
business under the name and style of "CMA MOTORISTS
CENTER"; SUSAN M. ENTRATA doing business under the
name and style of "LEONAS GASOLINE STATION and
SERVICE CENTER"; CARMELITA BALDONADO doing business
under the name and style of "FIRST CHOICE SERVICE
CENTER"; MERCEDITAS A. GARCIA doing business under
the name and style of "LORPED SERVICE CENTER";
RHEAMAR A. RAMOS doing business under the name and
style of "RJRAM PTT GAS STATION"; MA. ISABEL VIOLAGO
doing business under the name and style of "VIOLAGO-PTT
SERVICE CENTER"; MOTORISTS HEART CORPORATION
represented by its Vice-President for Operations, JOSELITO
F. FLORDELIZA; MOTORISTS HARVARD CORPORATION
represented by its Vice-President for Operations, JOSELITO
F. FLORDELIZA; MOTORISTS HERITAGE CORPORATION
represented by its Vice-President for Operations, JOSELITO
F. FLORDELIZA; PHILIPPINE STANDARD OIL CORPORATION

represented by its Vice-President for Operations, JOSELITO

F. FLORDELIZA; ROMEO MANUEL doing business under the
name and style of "ROMMAN GASOLINE STATION";
ANTHONY ALBERT CRUZ III doing business under the name
and style of "TRUE SERVICE STATION", Petitioners,
vs.
CESAR V. PURISIMA, in his capacity as Secretary of
the Department of Finance and GUILLERMO L.
PARAYNO, JR., in his capacity as Commissioner of
Internal Revenue, Respondent.
x-------------------------x
G.R. No. 168463
FRANCIS JOSEPH G. ESCUDERO, VINCENT CRISOLOGO,
EMMANUEL JOEL J. VILLANUEVA, RODOLFO G. PLAZA,
DARLENE ANTONINO-CUSTODIO, OSCAR G. MALAPITAN,
BENJAMIN C. AGARAO, JR. JUAN EDGARDO M. ANGARA,
JUSTIN MARC SB. CHIPECO, FLORENCIO G. NOEL, MUJIV S.
HATAMAN, RENATO B. MAGTUBO, JOSEPH A. SANTIAGO,
TEOFISTO DL. GUINGONA III, RUY ELIAS C. LOPEZ,
RODOLFO Q. AGBAYANI and TEODORO A. CASIO,
Petitioners,
vs.
CESAR V. PURISIMA, in his capacity as Secretary of
Finance, GUILLERMO L. PARAYNO, JR., in his capacity
as Commissioner of Internal Revenue, and EDUARDO
R. ERMITA, in his capacity as Executive
Secretary, Respondent.
x-------------------------x
G.R. No. 168730
BATAAN GOVERNOR ENRIQUE T. GARCIA, JR. Petitioner,
vs.

HON. EDUARDO R. ERMITA, in his capacity as the Executive

Secretary; HON. MARGARITO TEVES, in his capacity as
Secretary of Finance; HON. JOSE MARIO BUNAG, in his
capacity as the OIC Commissioner of the Bureau of Internal
Revenue; and HON. ALEXANDER AREVALO, in his capacity
as the OIC Commissioner of the Bureau of Customs,
Respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
The expenses of government, having for their object the
interest of all, should be borne by everyone, and the more
man enjoys the advantages of society, the more he ought to
hold himself honored in contributing to those expenses.
-Anne Robert Jacques Turgot (1727-1781)
French statesman and economist
Mounting budget deficit, revenue generation, inadequate
fiscal allocation for education, increased emoluments for
health workers, and wider coverage for full value-added tax
benefits these are the reasons why Republic Act No. 9337
(R.A. No. 9337)1 was enacted. Reasons, the wisdom of
which, the Court even with its extensive constitutional
power of review, cannot probe. The petitioners in these
cases, however, question not only the wisdom of the law,
but also perceived constitutional infirmities in its passage.
Every law enjoys in its favor the presumption of
constitutionality. Their arguments notwithstanding,
petitioners failed to justify their call for the invalidity of the
law. Hence, R.A. No. 9337 is not unconstitutional.
LEGISLATIVE HISTORY

R.A. No. 9337 is a consolidation of three legislative bills

namely, House Bill Nos. 3555 and 3705, and Senate Bill No.
1950.
House Bill No. 35552 was introduced on first reading on
January 7, 2005. The House Committee on Ways and Means
approved the bill, in substitution of House Bill No. 1468,
which Representative (Rep.) Eric D. Singson introduced on
August 8, 2004. The President certified the bill on January
7, 2005 for immediate enactment. On January 27, 2005,
the House of Representatives approved the bill on second
and third reading.
House Bill No. 37053 on the other hand, substituted
House Bill No. 3105 introduced by Rep. Salacnib F. Baterina,
and House Bill No. 3381 introduced by Rep. Jacinto V.
Paras. Its "mother bill" is House Bill No. 3555. The House
Committee on Ways and Means approved the bill on
February 2, 2005. The President also certified it as urgent
on February 8, 2005. The House of Representatives
approved the bill on second and third reading on February
28, 2005.
Meanwhile, the Senate Committee on Ways and Means
approved Senate Bill No. 19504 on March 7, 2005, "in
substitution of Senate Bill Nos. 1337, 1838 and 1873,
taking into consideration House Bill Nos. 3555 and 3705."
Senator Ralph G. Recto sponsored Senate Bill No. 1337,
while Senate Bill Nos. 1838 and 1873 were both sponsored
by Sens. Franklin M. Drilon, Juan M. Flavier and Francis N.
Pangilinan. The President certified the bill on March 11,
2005, and was approved by the Senate on second and third
reading on April 13, 2005.
On the same date, April 13, 2005, the Senate agreed to the
request of the House of Representatives for a committee

conference on the disagreeing provisions of the proposed

bills.
Before long, the Conference Committee on the Disagreeing
Provisions of House Bill No. 3555, House Bill No. 3705, and
Senate Bill No. 1950, "after having met and discussed in full
free and conference," recommended the approval of its
report, which the Senate did on May 10, 2005, and with the
House of Representatives agreeing thereto the next day,
May 11, 2005.
On May 23, 2005, the enrolled copy of the consolidated
House and Senate version was transmitted to the President,
who signed the same into law on May 24, 2005. Thus, came
R.A. No. 9337.
July 1, 2005 is the effectivity date of R.A. No. 9337. 5 When
said date came, the Court issued a temporary restraining
order, effective immediately and continuing until further
orders, enjoining respondents from enforcing and
implementing the law.
Oral arguments were held on July 14, 2005. Significantly,
during the hearing, the Court speaking through Mr. Justice
Artemio V. Panganiban, voiced the rationale for its issuance
of the temporary restraining order on July 1, 2005, to wit:
J. PANGANIBAN : . . . But before I go into the details of
your presentation, let me just tell you a little background.
You know when the law took effect on July 1, 2005, the
Court issued a TRO at about 5 oclock in the afternoon. But
before that, there was a lot of complaints aired on television
and on radio. Some people in a gas station were
complaining that the gas prices went up by 10%. Some
people were complaining that their electric bill will go up by
10%. Other times people riding in domestic air carrier were
complaining that the prices that theyll have to pay would

have to go up by 10%. While all that was being aired, per

your presentation and per our own understanding of the
law, thats not true. Its not true that the e-vat law
necessarily increased prices by 10% uniformly isnt it?

services are hit differently. So its not correct to say that all
prices must go up by 10%.

ATTY. BANIQUED : No, Your Honor.

J. PANGANIBAN : Now. For instance, Domestic Airline

companies, Mr. Counsel, are at present imposed a Sales Tax
of 3%. When this E-Vat law took effect the Sales Tax was
also removed as a mitigating measure. So, therefore, there
is no justification to increase the fares by 10% at best 7%,
correct?

J. PANGANIBAN : It is not?
ATTY. BANIQUED : Its not, because, Your Honor, there is
an Executive Order that granted the Petroleum companies
some subsidy . . . interrupted

ATTY. BANIQUED : Youre right, Your Honor.

ATTY. BANIQUED : I guess so, Your Honor, yes.

J. PANGANIBAN : Thats correct . . .
ATTY. BANIQUED : . . . and therefore that was meant to
temper the impact . . . interrupted
J. PANGANIBAN : . . . mitigating measures . . .
ATTY. BANIQUED : Yes, Your Honor.
J. PANGANIBAN : As a matter of fact a part of the mitigating
measures would be the elimination of the Excise Tax and
the import duties. That is why, it is not correct to say that
the VAT as to petroleum dealers increased prices by 10%.
ATTY. BANIQUED : Yes, Your Honor.
J. PANGANIBAN : And therefore, there is no justification for
increasing the retail price by 10% to cover the E-Vat tax. If
you consider the excise tax and the import duties, the Net
Tax would probably be in the neighborhood of 7%? We are
not going into exact figures I am just trying to deliver a
point that different industries, different products, different

J. PANGANIBAN : There are other products that the people

were complaining on that first day, were being increased
arbitrarily by 10%. And thats one reason among many
others this Court had to issue TRO because of the confusion
in the implementation. Thats why we added as an issue in
this case, even if its tangentially taken up by the pleadings
of the parties, the confusion in the implementation of the Evat. Our people were subjected to the mercy of that
confusion of an across the board increase of 10%, which
you yourself now admit and I think even the Government
will admit is incorrect. In some cases, it should be 3% only,
in some cases it should be 6% depending on these
mitigating measures and the location and situation of each
product, of each service, of each company, isnt it?
ATTY. BANIQUED : Yes, Your Honor.
J. PANGANIBAN : Alright. So thats one reason why we had
to issue a TRO pending the clarification of all these and we
wish the government will take time to clarify all these by
means of a more detailed implementing rules, in case the
law is upheld by this Court. . . .6

The Court also directed the parties to file their respective

Memoranda.
G.R. No. 168056
Before R.A. No. 9337 took effect, petitioners ABAKADA
GURO Party List, et al., filed a petition for prohibition on
May 27, 2005. They question the constitutionality of
Sections 4, 5 and 6 of R.A. No. 9337, amending Sections
106, 107 and 108, respectively, of the National Internal
Revenue Code (NIRC). Section 4 imposes a 10% VAT on
sale of goods and properties, Section 5 imposes a 10% VAT
on importation of goods, and Section 6 imposes a 10% VAT
on sale of services and use or lease of properties. These
questioned provisions contain a uniform provisoauthorizing
the President, upon recommendation of the Secretary of
Finance, to raise the VAT rate to 12%, effective January 1,
2006, after any of the following conditions have been
satisfied, to wit:
. . . That the President, upon the recommendation of the
Secretary of Finance, shall, effective January 1, 2006, raise
the rate of value-added tax to twelve percent (12%), after
any of the following conditions has been satisfied:
(i) Value-added tax collection as a percentage of Gross
Domestic Product (GDP) of the previous year exceeds two
and four-fifth percent (2 4/5%); or
(ii) National government deficit as a percentage of GDP of
the previous year exceeds one and one-half percent (1
%).
Petitioners argue that the law is unconstitutional, as it
constitutes abandonment by Congress of its exclusive
authority to fix the rate of taxes under Article VI, Section
28(2) of the 1987 Philippine Constitution.

G.R. No. 168207

On June 9, 2005, Sen. Aquilino Q. Pimentel, Jr., et al., filed
a petition for certiorari likewise assailing the
constitutionality of Sections 4, 5 and 6 of R.A. No. 9337.
Aside from questioning the so-called stand-by authority of
the President to increase the VAT rate to 12%, on the
ground that it amounts to an undue delegation of legislative
power, petitioners also contend that the increase in the VAT
rate to 12% contingent on any of the two conditions being
satisfied violates the due process clause embodied in Article
III, Section 1 of the Constitution, as it imposes an unfair
and additional tax burden on the people, in that: (1) the
12% increase is ambiguous because it does not state if the
rate would be returned to the original 10% if the conditions
are no longer satisfied; (2) the rate is unfair and
unreasonable, as the people are unsure of the applicable
VAT rate from year to year; and (3) the increase in the VAT
rate, which is supposed to be an incentive to the President
to raise the VAT collection to at least 2 4/5 of the GDP of the
previous year, should only be based on fiscal adequacy.
Petitioners further claim that the inclusion of a stand-by
authority granted to the President by the Bicameral
Conference Committee is a violation of the "no-amendment
rule" upon last reading of a bill laid down in Article VI,
Section 26(2) of the Constitution.
G.R. No. 168461
Thereafter, a petition for prohibition was filed on June 29,
2005, by the Association of Pilipinas Shell Dealers, Inc.,et
al., assailing the following provisions of R.A. No. 9337:
1) Section 8, amending Section 110 (A)(2) of the NIRC,
requiring that the input tax on depreciable goods shall be

amortized over a 60-month period, if the acquisition,

excluding the VAT components, exceeds One Million Pesos
(P1, 000,000.00);
2) Section 8, amending Section 110 (B) of the NIRC,
imposing a 70% limit on the amount of input tax to be
credited against the output tax; and
3) Section 12, amending Section 114 (c) of the NIRC,
authorizing the Government or any of its political
subdivisions, instrumentalities or agencies, including
GOCCs, to deduct a 5% final withholding tax on gross
payments of goods and services, which are subject to 10%
VAT under Sections 106 (sale of goods and properties) and
108 (sale of services and use or lease of properties) of the
NIRC.
Petitioners contend that these provisions are
unconstitutional for being arbitrary, oppressive, excessive,
and confiscatory.
Petitioners argument is premised on the constitutional right
of non-deprivation of life, liberty or property without due
process of law under Article III, Section 1 of the
Constitution. According to petitioners, the contested
sections impose limitations on the amount of input tax that
may be claimed. Petitioners also argue that the input tax
partakes the nature of a property that may not be
confiscated, appropriated, or limited without due process of
law. Petitioners further contend that like any other property
or property right, the input tax credit may be transferred or
disposed of, and that by limiting the same, the government
gets to tax a profit or value-added even if there is no profit
or value-added.
Petitioners also believe that these provisions violate the
constitutional guarantee of equal protection of the law

under Article III, Section 1 of the Constitution, as the

limitation on the creditable input tax if: (1) the entity has a
high ratio of input tax; or (2) invests in capital equipment;
or (3) has several transactions with the government, is not
based on real and substantial differences to meet a valid
classification.
Lastly, petitioners contend that the 70% limit is anything
but progressive, violative of Article VI, Section 28(1) of the
Constitution, and that it is the smaller businesses with
higher input tax to output tax ratio that will suffer the
consequences thereof for it wipes out whatever meager
margins the petitioners make.
G.R. No. 168463
Several members of the House of Representatives led by
Rep. Francis Joseph G. Escudero filed this petition
forcertiorari on June 30, 2005. They question the
constitutionality of R.A. No. 9337 on the following grounds:
1) Sections 4, 5, and 6 of R.A. No. 9337 constitute an
undue delegation of legislative power, in violation of Article
VI, Section 28(2) of the Constitution;
2) The Bicameral Conference Committee acted without
jurisdiction in deleting the no pass on provisions present in
Senate Bill No. 1950 and House Bill No. 3705; and
3) Insertion by the Bicameral Conference Committee of
Sections 27, 28, 34, 116, 117, 119, 121, 125, 7 148, 151,
236, 237 and 288, which were present in Senate Bill No.
1950, violates Article VI, Section 24(1) of the Constitution,
which provides that all appropriation, revenue or tariff bills
shall originate exclusively in the House of Representatives
G.R. No. 168730

On the eleventh hour, Governor Enrique T. Garcia filed a

petition for certiorari and prohibition on July 20, 2005,
alleging unconstitutionality of the law on the ground that
the limitation on the creditable input tax in effect allows
VAT-registered establishments to retain a portion of the
taxes they collect, thus violating the principle that tax
collection and revenue should be solely allocated for public
purposes and expenditures. Petitioner Garcia further claims
that allowing these establishments to pass on the tax to the
consumers is inequitable, in violation of Article VI, Section
28(1) of the Constitution.
RESPONDENTS COMMENT
The Office of the Solicitor General (OSG) filed a Comment in
behalf of respondents. Preliminarily, respondents contend
that R.A. No. 9337 enjoys the presumption of
constitutionality and petitioners failed to cast doubt on its
validity.
Relying on the case of Tolentino vs. Secretary of Finance,
235 SCRA
630 (1994), respondents argue that the procedural issues
raised by petitioners, i.e., legality of the bicameral
proceedings, exclusive origination of revenue measures and
the power of the Senate concomitant thereto, have already
been settled. With regard to the issue of undue delegation
of legislative power to the President, respondents contend
that the law is complete and leaves no discretion to the
President but to increase the rate to 12% once any of the
two conditions provided therein arise.
Respondents also refute petitioners argument that the
increase to 12%, as well as the 70% limitation on the
creditable input tax, the 60-month amortization on the
purchase or importation of capital goods

exceedingP1,000,000.00, and the 5% final withholding tax

by government agencies, is arbitrary, oppressive, and
confiscatory, and that it violates the constitutional principle
on progressive taxation, among others.
Finally, respondents manifest that R.A. No. 9337 is the
anchor of the governments fiscal reform agenda. A reform
in the value-added system of taxation is the core revenue
measure that will tilt the balance towards a sustainable
macroeconomic environment necessary for economic
growth.
ISSUES
The Court defined the issues, as follows:
PROCEDURAL ISSUE
Whether R.A. No. 9337 violates the following provisions of
the Constitution:
a. Article VI, Section 24, and
b. Article VI, Section 26(2)
SUBSTANTIVE ISSUES
1. Whether Sections 4, 5 and 6 of R.A. No. 9337, amending
Sections 106, 107 and 108 of the NIRC, violate the
following provisions of the Constitution:
a. Article VI, Section 28(1), and
b. Article VI, Section 28(2)

2. Whether Section 8 of R.A. No. 9337, amending Sections

110(A)(2) and 110(B) of the NIRC; and Section 12 of R.A.
No. 9337, amending Section 114(C) of the NIRC, violate the
following provisions of the Constitution:

tax payable.13 Under the "tax credit method," an entity can

credit against or subtract from the VAT charged on its sales
or outputs the VAT paid on its purchases, inputs and
imports.14

a. Article VI, Section 28(1), and

It was only in 1987, when President Corazon C. Aquino

issued Executive Order No. 273, that the VAT system was
rationalized by imposing a multi-stage tax rate of 0% or
10% on all sales using the "tax credit method."15

b. Article III, Section 1

RULING OF THE COURT
As a prelude, the Court deems it apt to restate the general
principles and concepts of value-added tax (VAT), as the
confusion and inevitably, litigation, breeds from a fallacious
notion of its nature.
The VAT is a tax on spending or consumption. It is levied on
the sale, barter, exchange or lease of goods or properties
and services.8 Being an indirect tax on expenditure, the
seller of goods or services may pass on the amount of tax
paid to the buyer,9 with the seller acting merely as a tax
collector.10 The burden of VAT is intended to fall on the
immediate buyers and ultimately, the end-consumers.
In contrast, a direct tax is a tax for which a taxpayer is
directly liable on the transaction or business it engages in,
without transferring the burden to someone
else.11 Examples are individual and corporate income taxes,
transfer taxes, and residence taxes.12
In the Philippines, the value-added system of sales taxation
has long been in existence, albeit in a different mode. Prior
to 1978, the system was a single-stage tax computed under
the "cost deduction method" and was payable only by the
original sellers. The single-stage system was subsequently
modified, and a mixture of the "cost deduction method" and
"tax credit method" was used to determine the value-added

E.O. No. 273 was followed by R.A. No. 7716 or the

Expanded VAT Law,16 R.A. No. 8241 or the Improved VAT
Law,17 R.A. No. 8424 or the Tax Reform Act of 1997,18 and
finally, the presently beleaguered R.A. No. 9337, also
referred to by respondents as the VAT Reform Act.
The Court will now discuss the issues in logical sequence.
PROCEDURAL ISSUE
I.
Whether R.A. No. 9337 violates the following provisions of
the Constitution:
a. Article VI, Section 24, and
b. Article VI, Section 26(2)
A. The Bicameral Conference Committee
Petitioners Escudero, et al., and Pimentel, et al., allege that
the Bicameral Conference Committee exceeded its authority
by:

1) Inserting the stand-by authority in favor of the President

in Sections 4, 5, and 6 of R.A. No. 9337;
2) Deleting entirely the no pass-on provisions found in both
the House and Senate bills;
3) Inserting the provision imposing a 70% limit on the
amount of input tax to be credited against the output tax;
and

In resolving the differences with the Senate, the House

panel shall, as much as possible, adhere to and support the
House Bill. If the differences with the Senate are so
substantial that they materially impair the House Bill, the
panel shall report such fact to the House for the latters
appropriate action.
Sec. 89. Conference Committee Reports. . . . Each report
shall contain a detailed, sufficiently explicit statement of the
changes in or amendments to the subject measure.

4) Including the amendments introduced only by Senate Bill

No. 1950 regarding other kinds of taxes in addition to the
value-added tax.

...

Petitioners now beseech the Court to define the powers of

the Bicameral Conference Committee.

The Chairman of the House panel may be interpellated on

the Conference Committee Report prior to the voting
thereon. The House shall vote on the Conference Committee
Report in the same manner and procedure as it votes on a
bill on third and final reading.

It should be borne in mind that the power of internal

regulation and discipline are intrinsic in any legislative body
for, as unerringly elucidated by Justice Story, "[i]f the
power did not exist, it would be utterly impracticable
to transact the business of the nation, either at all, or
at least with decency, deliberation, and order."19Thus,
Article VI, Section 16 (3) of the Constitution provides that
"each House may determine the rules of its proceedings."
Pursuant to this inherent constitutional power to promulgate
and implement its own rules of procedure, the respective
rules of each house of Congress provided for the creation of
a Bicameral Conference Committee.
Thus, Rule XIV, Sections 88 and 89 of the Rules of House of
Representatives provides as follows:
Sec. 88. Conference Committee. In the event that the
House does not agree with the Senate on the amendment to
any bill or joint resolution, the differences may be settled by
the conference committees of both chambers.

Rule XII, Section 35 of the Rules of the Senate states:

Sec. 35. In the event that the Senate does not agree with
the House of Representatives on the provision of any bill or
joint resolution, the differences shall be settled by a
conference committee of both Houses which shall meet
within ten (10) days after their composition. The President
shall designate the members of the Senate Panel in the
conference committee with the approval of the Senate.
Each Conference Committee Report shall contain a detailed
and sufficiently explicit statement of the changes in, or
amendments to the subject measure, and shall be signed by
a majority of the members of each House panel, voting
separately.
A comparative presentation of the conflicting House and
Senate provisions and a reconciled version thereof with the

explanatory statement of the conference committee shall be

attached to the report.
...
The creation of such conference committee was apparently
in response to a problem, not addressed by any
constitutional provision, where the two houses of Congress
find themselves in disagreement over changes or
amendments introduced by the other house in a legislative
bill. Given that one of the most basic powers of the
legislative branch is to formulate and implement its own
rules of proceedings and to discipline its members, may the
Court then delve into the details of how Congress complies
with its internal rules or how it conducts its business of
passing legislation? Note that in the present petitions, the
issue is not whether provisions of the rules of both houses
creating the bicameral conference committee are
unconstitutional, but whether the bicameral conference
committee has strictly complied with the rules of both
houses, thereby remaining within the jurisdiction
conferred upon it by Congress.
In the recent case of Farias vs. The Executive
Secretary,20 the Court En Banc, unanimously reiterated
and emphasized its adherence to the "enrolled bill doctrine,"
thus, declining therein petitioners plea for the Court to go
behind the enrolled copy of the bill. Assailed in said case
was Congresss creation of two sets of bicameral conference
committees, the lack of records of said committees
proceedings, the alleged violation of said committees of the
rules of both houses, and the disappearance or deletion of
one of the provisions in the compromise bill submitted by
the bicameral conference committee. It was argued that
such irregularities in the passage of the law nullified R.A.
No. 9006, or the Fair Election Act.

Striking down such argument, the Court held thus:

Under the "enrolled bill doctrine," the signing of a bill by the
Speaker of the House and the Senate President and the
certification of the Secretaries of both Houses of Congress
that it was passed are conclusive of its due enactment. A
review of cases reveals the Courts consistent adherence to
the rule. The Court finds no reason to deviate from the
salutary rule in this case where the irregularities
alleged by the petitioners mostly involved the internal
rules of Congress, e.g., creation of the 2nd or
3rd Bicameral Conference Committee by the
House. This Court is not the proper forum for the
enforcement of these internal rules of Congress,
whether House or Senate. Parliamentary rules are
merely procedural and with their observance the
courts have no concern. Whatever doubts there may
be as to the formal validity of Rep. Act No. 9006 must
be resolved in its favor. The Court reiterates its ruling
in Arroyo vs. De Venecia, viz.:
But the cases, both here and abroad, in varying forms
of expression, all deny to the courts the power to
inquire into allegations that, in enacting a law, a
House of Congress failed to comply with its own rules,
in the absence of showing that there was a violation
of a constitutional provision or the rights of private
individuals. In Osmea v. Pendatun, it was held: "At any
rate, courts have declared that the rules adopted by
deliberative bodies are subject to revocation, modification
or waiver at the pleasure of the body adopting them. And
it has been said that "Parliamentary rules are merely
procedural, and with their observance, the courts
have no concern. They may be waived or disregarded
by the legislative body." Consequently, "mere failure
to conform to parliamentary usage will not invalidate
the action (taken by a deliberative body) when the

requisite number of members have agreed to a

particular measure."21(Emphasis supplied)
The foregoing declaration is exactly in point with the
present cases, where petitioners allege irregularities
committed by the conference committee in introducing
changes or deleting provisions in the House and Senate
bills. Akin to the Farias case,22 the present petitions also
raise an issue regarding the actions taken by the conference
committee on matters regarding Congress compliance with
its own internal rules. As stated earlier, one of the most
basic and inherent power of the legislature is the power to
formulate rules for its proceedings and the discipline of its
members. Congress is the best judge of how it should
conduct its own business expeditiously and in the most
orderly manner. It is also the sole
concern of Congress to instill discipline among the members
of its conference committee if it believes that said members
violated any of its rules of proceedings. Even the expanded
jurisdiction of this Court cannot apply to questions
regarding only the internal operation of Congress, thus, the
Court is wont to deny a review of the internal proceedings
of a co-equal branch of government.

House Bill No. 3555

Moreover, as far back as 1994 or more than ten years ago,

in the case of Tolentino vs. Secretary of Finance,23the Court
already made the pronouncement that "[i]f a change is
desired in the practice [of the Bicameral Conference
Committee] it must be sought in Congress since this
question is not covered by any constitutional
provision but is only an internal rule of each
house." 24 To date, Congress has not seen it fit to make
such changes adverted to by the Court. It seems, therefore,
that Congress finds the practices of the bicameral
conference committee to be very useful for purposes of
prompt and efficient legislative action.
Nevertheless, just to put minds at ease that no blatant
irregularities tainted the proceedings of the bicameral
conference committees, the Court deems it necessary to
dwell on the issue. The Court observes that there was a
necessity for a conference committee because a comparison
of the provisions of House Bill Nos. 3555 and 3705 on one
hand, and Senate Bill No. 1950 on the other, reveals that
there were indeed disagreements. As pointed out in the
petitions, said disagreements were as follows:

House Bill No.3705

Senate Bill No. 1950
With regard to "Stand-By Authority" in favor of President
Provides for 12% VAT on every sale
Provides for 12% VAT in general on sales
Provides for a single rate of 10% VAT
of goods or properties (amending
of goods or properties and reduced rates
on sale of goods or properties
Sec. 106 of NIRC); 12% VAT on
for sale of certain locally manufactured
(amending Sec. 106 of NIRC), 10%
importation of goods (amending
goods and petroleum products and raw
VAT on sale of services including sale
Sec. 107 of NIRC); and 12% VAT on
materials to be used in the manufacture
of electricity by generation
sale of services and use or lease of
thereof (amending Sec. 106 of NIRC);
companies, transmission and
properties (amending Sec. 108 of
12% VAT on importation of goods and
distribution companies, and use or
NIRC)
reduced rates for certain imported
lease of properties (amending Sec.
products including petroleum products
108 of NIRC)

No similar provision

(amending Sec. 107 of NIRC); and 12%

VAT on sale of services and use or lease
of properties and a reduced rate for
certain services including power
generation (amending Sec. 108 of NIRC)
With regard to the "no pass-on" provision
Provides that the VAT imposed on power
generation and on the sale of petroleum
products shall be absorbed by generation
companies or sellers, respectively, and
shall not be passed on to consumers

Provides that the VAT imposed on

sales of electricity by generation
companies and services of
transmission companies and
distribution companies, as well as
those of franchise grantees of electric
utilities shall not apply to residential
end-users. VAT shall be absorbed by
generation, transmission, and
distribution companies.

Provides that the input tax credit for

capital goods on which a VAT has
been paid shall be equally
distributed over 5 years or the
depreciable life of such capital
goods; the input tax credit for goods
and services other than capital
goods shall not exceed 5% of the
total amount of such goods and
services; and for persons engaged in
retail trading of goods, the allowable
input tax credit shall not exceed
11% of the total amount of goods
purchased.

With regard to 70% limit on input tax credit

No similar provision
Provides that the input tax credit for
capital goods on which a VAT has
been paid shall be equally distributed
over 5 years or the depreciable life of
such capital goods; the input tax
credit for goods and services other
than capital goods shall not exceed
90% of the output VAT.

With regard to amendments to be made to NIRC provisions regarding income and excise taxes
No similar provision

No similar provision

The disagreements between the provisions in the House bills

and the Senate bill were with regard to (1) what rate of VAT
is to be imposed; (2) whether only the VAT imposed on
electricity generation, transmission and distribution
companies should not be passed on to consumers, as
proposed in the Senate bill, or both the VAT imposed on
electricity generation, transmission and distribution
companies and the VAT imposed on sale of petroleum
products should not be passed on to consumers, as
proposed in the House bill; (3) in what manner input tax
credits should be limited; (4) and whether the NIRC
provisions on corporate income taxes, percentage, franchise
and excise taxes should be amended.
There being differences and/or disagreements on the
foregoing provisions of the House and Senate bills, the
Bicameral Conference Committee was mandated by the
rules of both houses of Congress to act on the same by
settling said differences and/or disagreements. The
Bicameral Conference Committee acted on the disagreeing
provisions by making the following changes:
1. With regard to the disagreement on the rate of VAT to be
imposed, it would appear from the Conference Committee
Report that the Bicameral Conference Committee tried to
bridge the gap in the difference between the 10% VAT rate
proposed by the Senate, and the various rates with 12% as
the highest VAT rate proposed by the House, by striking a
compromise whereby the present 10% VAT rate would be

Provided for amendments to several

NIRC provisions regarding corporate
income, percentage, franchise and
excise taxes

retained until certain conditions arise, i.e., the value-added

tax collection as a percentage of gross domestic product
(GDP) of the previous year exceeds 2 4/5%, or National
Government deficit as a percentage of GDP of the previous
year exceeds 1%, when the President, upon
recommendation of the Secretary of Finance shall raise the
rate of VAT to 12% effective January 1, 2006.
2. With regard to the disagreement on whether only the
VAT imposed on electricity generation, transmission and
distribution companies should not be passed on to
consumers or whether both the VAT imposed on electricity
generation, transmission and distribution companies and the
VAT imposed on sale of petroleum products may be passed
on to consumers, the Bicameral Conference Committee
chose to settle such disagreement by altogether deleting
from its Report any no pass-on provision.
3. With regard to the disagreement on whether input tax
credits should be limited or not, the Bicameral Conference
Committee decided to adopt the position of the House by
putting a limitation on the amount of input tax that may be
credited against the output tax, although it crafted its own
language as to the amount of the limitation on input tax
credits and the manner of computing the same by providing
thus:
(A) Creditable Input Tax. . . .

...
Provided, The input tax on goods purchased or imported in
a calendar month for use in trade or business for which
deduction for depreciation is allowed under this Code, shall
be spread evenly over the month of acquisition and the
fifty-nine (59) succeeding months if the aggregate
acquisition cost for such goods, excluding the VAT
component thereof, exceeds one million Pesos
(P1,000,000.00): PROVIDED, however, that if the estimated
useful life of the capital good is less than five (5) years, as
used for depreciation purposes, then the input VAT shall be
spread over such shorter period: . . .
(B) Excess Output or Input Tax. If at the end of any
taxable quarter the output tax exceeds the input tax, the
excess shall be paid by the VAT-registered person. If the
input tax exceeds the output tax, the excess shall be carried
over to the succeeding quarter or quarters: PROVIDED that
the input tax inclusive of input VAT carried over from the
previous quarter that may be credited in every quarter shall
not exceed seventy percent (70%) of the output VAT:
PROVIDED, HOWEVER, THAT any input tax attributable to
zero-rated sales by a VAT-registered person may at his
option be refunded or credited against other internal
revenue taxes, . . .
4. With regard to the amendments to other provisions of the
NIRC on corporate income tax, franchise, percentage and
excise taxes, the conference committee decided to include
such amendments and basically adopted the provisions
found in Senate Bill No. 1950, with some changes as to the
rate of the tax to be imposed.
Under the provisions of both the Rules of the House of
Representatives and Senate Rules, the Bicameral
Conference Committee is mandated to settle the differences

between the disagreeing provisions in the House bill and the

Senate bill. The term "settle" is synonymous to "reconcile"
and "harmonize."25 To reconcile or harmonize disagreeing
provisions, the Bicameral Conference Committee may then
(a) adopt the specific provisions of either the House bill or
Senate bill, (b) decide that neither provisions in the House
bill or the provisions in the Senate bill would
be carried into the final form of the bill, and/or (c) try to
arrive at a compromise between the disagreeing provisions.
In the present case, the changes introduced by the
Bicameral Conference Committee on disagreeing provisions
were meant only to reconcile and harmonize the disagreeing
provisions for it did not inject any idea or intent that is
wholly foreign to the subject embraced by the original
provisions.
The so-called stand-by authority in favor of the President,
whereby the rate of 10% VAT wanted by the Senate is
retained until such time that certain conditions arise when
the 12% VAT wanted by the House shall be imposed,
appears to be a compromise to try to bridge the difference
in the rate of VAT proposed by the two houses of Congress.
Nevertheless, such compromise is still totally within the
subject of what rate of VAT should be imposed on
taxpayers.
The no pass-on provision was deleted altogether. In the
transcripts of the proceedings of the Bicameral Conference
Committee held on May 10, 2005, Sen. Ralph Recto,
Chairman of the Senate Panel, explained the reason for
deleting the no pass-on provision in this wise:
. . . the thinking was just to keep the VAT law or the VAT
bill simple. And we were thinking that no sector should be a
beneficiary of legislative grace, neither should any sector be

discriminated on. The VAT is an indirect tax. It is a pass

on-tax. And lets keep it plain and simple. Lets not confuse
the bill and put a no pass-on provision. Two-thirds of the
world have a VAT system and in this two-thirds of the
globe, I have yet to see a VAT with a no pass-though
provision. So, the thinking of the Senate is basically simple,
lets keep the VAT simple.26 (Emphasis supplied)
Rep. Teodoro Locsin further made the manifestation that
the no pass-on provision "never really enjoyed the support
of either House."27
With regard to the amount of input tax to be credited
against output tax, the Bicameral Conference Committee
came to a compromise on the percentage rate of the
limitation or cap on such input tax credit, but again, the
change introduced by the Bicameral Conference Committee
was totally within the intent of both houses to put a cap on
input tax that may be
credited against the output tax. From the inception of the
subject revenue bill in the House of Representatives, one of
the major objectives was to "plug a glaring loophole in the
tax policy and administration by creating vital restrictions
on the claiming of input VAT tax credits . . ." and "[b]y
introducing limitations on the claiming of tax credit, we are
capping a major leakage that has placed our collection
efforts at an apparent disadvantage."28
As to the amendments to NIRC provisions on taxes other
than the value-added tax proposed in Senate Bill No. 1950,
since said provisions were among those referred to it, the
conference committee had to act on the same and it
basically adopted the version of the Senate.

Thus, all the changes or modifications made by the

Bicameral Conference Committee were germane to subjects
of the provisions referred
to it for reconciliation. Such being the case, the Court does
not see any grave abuse of discretion amounting to lack or
excess of jurisdiction committed by the Bicameral
Conference Committee. In the earlier cases of Philippine
Judges Association vs. Prado29 and Tolentino vs. Secretary
of Finance,30 the Court recognized the long-standing
legislative practice of giving said conference committee
ample latitude for compromising differences between the
Senate and the House. Thus, in the Tolentino case, it was
held that:
. . . it is within the power of a conference committee to
include in its report an entirely new provision that is not
found either in the House bill or in the Senate bill. If the
committee can propose an amendment consisting of one or
two provisions, there is no reason why it cannot propose
several provisions, collectively considered as an
"amendment in the nature of a substitute," so long as such
amendment is germane to the subject of the bills before the
committee. After all, its report was not final but needed the
approval of both houses of Congress to become valid as an
act of the legislative department. The charge that in this
case the Conference Committee acted as a third
legislative chamber is thus without any
basis.31 (Emphasis supplied)
B. R.A. No. 9337 Does Not Violate Article VI, Section 26(2)
of the Constitution on the "No-Amendment Rule"
Article VI, Sec. 26 (2) of the Constitution, states:
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.
Petitioners argument that the practice where a bicameral
conference committee is allowed to add or delete provisions
in the House bill and the Senate bill after these had passed
three readings is in effect a circumvention of the "no
amendment rule" (Sec. 26 (2), Art. VI of the 1987
Constitution), fails to convince the Court to deviate from its
ruling in the Tolentino case that:
Nor is there any reason for requiring that the Committees
Report in these cases must have undergone three readings
in each of the two houses. If that be the case, there would
be no end to negotiation since each house may seek
modification of the compromise bill. . . .
Art. VI. 26 (2) must, therefore, be construed as
referring only to bills introduced for the first time in
either house of Congress, not to the conference
committee report.32 (Emphasis supplied)
The Court reiterates here that the "no-amendment rule"
refers only to the procedure to be followed by each
house of Congress with regard to bills initiated in
each of said respective houses, before said bill is
transmitted to the other house for its concurrence or
amendment. Verily, to construe said provision in a way as
to proscribe any further changes to a bill after one house
has voted on it would lead to absurdity as this would mean
that the other house of Congress would be deprived of its
constitutional power to amend or introduce changes to said

bill. Thus, Art. VI, Sec. 26 (2) of the Constitution cannot be

taken to mean that the introduction by the Bicameral
Conference Committee of amendments and modifications to
disagreeing provisions in bills that have been acted upon by
both houses of Congress is prohibited.
C. R.A. No. 9337 Does Not Violate Article VI, Section 24 of
the Constitution on Exclusive Origination of Revenue Bills
Coming to the issue of the validity of the amendments
made regarding the NIRC provisions on corporate income
taxes and percentage, excise taxes. Petitioners refer to the
following provisions, to wit:
Section 27
28(A)(1)
28(B)(1)
34(B)(1)
116
117
119
121
148
151
236
237
288

Rates of Income Tax on Domestic Corporation

Tax on Resident Foreign Corporation
Inter-corporate Dividends
Inter-corporate Dividends
Tax on Persons Exempt from VAT
Percentage Tax on domestic carriers and keepers of Garage
Tax on franchises
Tax on banks and Non-Bank Financial Intermediaries
Excise Tax on manufactured oils and other fuels
Excise Tax on mineral products
Registration requirements
Issuance of receipts or sales or commercial invoices
Disposition of Incremental Revenue

Petitioners claim that the amendments to these provisions

of the NIRC did not at all originate from the House. They
aver that House Bill No. 3555 proposed amendments only
regarding Sections 106, 107, 108, 110 and 114 of the NIRC,
while House Bill No. 3705 proposed amendments only to
Sections 106, 107,108, 109, 110 and 111 of the NIRC;
thus, the other sections of the NIRC which the Senate
amended but which amendments were not found in the

House bills are not intended to be amended by the House of

Representatives. Hence, they argue that since the proposed
amendments did not originate from the House, such
amendments are a violation of Article VI, Section 24 of the
Constitution.
The argument does not hold water.
Article VI, Section 24 of the Constitution reads:
Sec. 24. 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.
In the present cases, petitioners admit that it was indeed
House Bill Nos. 3555 and 3705 that initiated the move for
amending provisions of the NIRC dealing mainly with the
value-added tax. Upon transmittal of said House bills to the
Senate, the Senate came out with Senate Bill No. 1950
proposing amendments not only to NIRC provisions on the
value-added tax but also amendments to NIRC provisions
on other kinds of taxes. Is the introduction by the Senate of
provisions not dealing directly with the value- added tax,
which is the only kind of tax being amended in the House
bills, still within the purview of the constitutional provision
authorizing the Senate to propose or concur with
amendments to a revenue bill that originated from the
House?
The foregoing question had been squarely answered in
the Tolentino case, wherein the Court held, thus:
. . . To begin with, it is not the law but the revenue bill
which is required by the Constitution to "originate
exclusively" in the House of Representatives. It is important

to emphasize this, because a bill originating in the House

may undergo such extensive changes in the Senate that the
result may be a rewriting of the whole. . . . At this point,
what is important to note is that, as a result of the Senate
action, a distinct bill may be produced. To insist that a
revenue statute and not only the bill which initiated
the legislative process culminating in the enactment
of the law must substantially be the same as the
House bill would be to deny the Senates power not
only to "concur with amendments" but also to
"propose amendments." It would be to violate the
coequality of legislative power of the two houses of
Congress and in fact make the House superior to the
Senate.

Given, then, the power of the Senate to propose

amendments, the Senate can propose its own version
even with respect to bills which are required by the
Constitution to originate in the House.
...
Indeed, what the Constitution simply means is that the
initiative for filing revenue, tariff or tax bills, bills
authorizing an increase of the public debt, private bills and
bills of local application must come from the House of
Representatives on the theory that, elected as they are
from the districts, the members of the House can be
expected to be more sensitive to the local needs and
problems. On the other hand, the senators, who are
elected at large, are expected to approach the same
problems from the national perspective. Both views
are thereby made to bear on the enactment of such
laws.33 (Emphasis supplied)

Since there is no question that the revenue bill exclusively

originated in the House of Representatives, the Senate was
acting within its
constitutional power to introduce amendments to the House
bill when it included provisions in Senate Bill No. 1950
amending corporate income taxes, percentage, excise and
franchise taxes. Verily, Article VI, Section 24 of the
Constitution does not contain any prohibition or limitation
on the extent of the amendments that may be introduced
by the Senate to the House revenue bill.
Furthermore, the amendments introduced by the Senate to
the NIRC provisions that had not been touched in the House
bills are still in furtherance of the intent of the House in
initiating the subject revenue bills. The Explanatory Note of
House Bill No. 1468, the very first House bill introduced on
the floor, which was later substituted by House Bill No.
3555, stated:
One of the challenges faced by the present administration is
the urgent and daunting task of solving the countrys
serious financial problems. To do this, government
expenditures must be strictly monitored and controlled and
revenues must be significantly increased. This may be
easier said than done, but our fiscal authorities are still
optimistic the government will be operating on a balanced
budget by the year 2009. In fact, several measures that will
result to significant expenditure savings have been
identified by the administration. It is supported with a
credible package of revenue measures that include
measures to improve tax administration and control
the leakages in revenues from income taxes and the
value-added tax (VAT). (Emphasis supplied)
Rep. Eric D. Singson, in his sponsorship speech for House
Bill No. 3555, declared that:

In the budget message of our President in the year 2005,

she reiterated that we all acknowledged that on top of our
agenda must be the restoration of the health of our fiscal
system.
In order to considerably lower the consolidated public sector
deficit and eventually achieve a balanced budget by the
year 2009, we need to seize windows of opportunities
which might seem poignant in the beginning, but in
the long run prove effective and beneficial to the
overall status of our economy. One such opportunity
is a review of existing tax rates, evaluating the
relevance given our present conditions.34(Emphasis
supplied)
Notably therefore, the main purpose of the bills emanating
from the House of Representatives is to bring in sizeable
revenues for the government
to supplement our countrys serious financial problems, and
improve tax administration and control of the leakages in
revenues from income taxes and value-added taxes. As
these house bills were transmitted to the Senate, the latter,
approaching the measures from the point of national
perspective, can introduce amendments within the purposes
of those bills. It can provide for ways that would soften the
impact of the VAT measure on the consumer,i.e., by
distributing the burden across all sectors instead of putting
it entirely on the shoulders of the consumers. The
sponsorship speech of Sen. Ralph Recto on why the
provisions on income tax on corporation were included is
worth quoting:
All in all, the proposal of the Senate Committee on Ways
and Means will raise P64.3 billion in additional revenues
annually even while by mitigating prices of power, services
and petroleum products.

However, not all of this will be wrung out of VAT. In fact,

only P48.7 billion amount is from the VAT on twelve goods
and services. The rest of the tab P10.5 billion- will be
picked by corporations.
What we therefore prescribe is a burden sharing between
corporate Philippines and the consumer. Why should the
latter bear all the pain? Why should the fiscal salvation be
only on the burden of the consumer?
The corporate worlds equity is in form of the increase in the
corporate income tax from 32 to 35 percent, but up to 2008
only. This will raise P10.5 billion a year. After that, the rate
will slide back, not to its old rate of 32 percent, but two
notches lower, to 30 percent.
Clearly, we are telling those with the capacity to pay,
corporations, to bear with this emergency provision that will
be in effect for 1,200 days, while we put our fiscal house in
order. This fiscal medicine will have an expiry date.
For their assistance, a reward of tax reduction awaits them.
We intend to keep the length of their sacrifice brief. We
would like to assure them that not because there is a light
at the end of the tunnel, this government will keep on
making the tunnel long.
The responsibility will not rest solely on the weary shoulders
of the small man. Big business will be there to share the
burden.35
As the Court has said, the Senate can propose amendments
and in fact, the amendments made on provisions in the tax
on income of corporations are germane to the purpose of
the house bills which is to raise revenues for the
government.

Likewise, the Court finds the sections referring to other

percentage and excise taxes germane to the reforms to the
VAT system, as these sections would cushion the effects of
VAT on consumers. Considering that certain goods and
services which were subject to percentage tax and excise
tax would no longer be VAT-exempt, the consumer would
be burdened more as they would be paying the VAT in
addition to these taxes. Thus, there is a need to amend
these sections to soften the impact of VAT. Again, in his
sponsorship speech, Sen. Recto said:
However, for power plants that run on oil, we will reduce to
zero the present excise tax on bunker fuel, to lessen the
effect of a VAT on this product.
For electric utilities like Meralco, we will wipe out the
franchise tax in exchange for a VAT.
And in the case of petroleum, while we will levy the VAT on
oil products, so as not to destroy the VAT chain, we will
however bring down the excise tax on socially sensitive
products such as diesel, bunker, fuel and kerosene.
...
What do all these exercises point to? These are not
contortions of giving to the left hand what was taken from
the right. Rather, these sprang from our concern of
softening the impact of VAT, so that the people can cushion
the blow of higher prices they will have to pay as a result of
VAT.36
The other sections amended by the Senate pertained to
matters of tax administration which are necessary for the
implementation of the changes in the VAT system.

To reiterate, the sections introduced by the Senate are

germane to the subject matter and purposes of the house
bills, which is to supplement our countrys fiscal deficit,
among others. Thus, the Senate acted within its power to
propose those amendments.
SUBSTANTIVE ISSUES
I.
Whether Sections 4, 5 and 6 of R.A. No. 9337, amending
Sections 106, 107 and 108 of the NIRC, violate the
following provisions of the Constitution:
a. Article VI, Section 28(1), and
b. Article VI, Section 28(2)
A. No Undue Delegation of Legislative Power
Petitioners ABAKADA GURO Party List, et al., Pimentel,
Jr., et al., and Escudero, et al. contend in common that
Sections 4, 5 and 6 of R.A. No. 9337, amending Sections
106, 107 and 108, respectively, of the NIRC giving the
President the stand-by authority to raise the VAT rate from
10% to 12% when a certain condition is met, constitutes
undue delegation of the legislative power to tax.
The assailed provisions read as follows:
SEC. 4. Sec. 106 of the same Code, as amended, is hereby
further amended to read as follows:
SEC. 106. Value-Added Tax on Sale of Goods or Properties.

(A) Rate and Base of Tax. There shall be levied, assessed

and collected on every sale, barter or exchange of goods or
properties, a value-added tax equivalent to ten percent
(10%) of the gross selling price or gross value in money of
the goods or properties sold, bartered or exchanged, such
tax to be paid by the seller or transferor:provided,
that the President, upon the recommendation of the
Secretary of Finance, shall, effective January 1, 2006,
raise the rate of value-added tax to twelve percent
(12%), after any of the following conditions has been
satisfied.
(i) value-added tax collection as a percentage of
Gross Domestic Product (GDP) of the previous year
exceeds two and four-fifth percent (2 4/5%) or
(ii) national government deficit as a percentage of
GDP of the previous year exceeds one and one-half
percent (1 %).
SEC. 5. Section 107 of the same Code, as amended, is
hereby further amended to read as follows:
SEC. 107. Value-Added Tax on Importation of Goods.
(A) In General. There shall be levied, assessed and
collected on every importation of goods a value-added tax
equivalent to ten percent (10%) based on the total value
used by the Bureau of Customs in determining tariff and
customs duties, plus customs duties, excise taxes, if any,
and other charges, such tax to be paid by the importer prior
to the release of such goods from customs custody:
Provided, That where the customs duties are determined on
the basis of the quantity or volume of the goods, the valueadded tax shall be based on the landed cost plus excise
taxes, if any: provided, further, that the President,
upon the recommendation of the Secretary of

Finance, shall, effective January 1, 2006, raise the

rate of value-added tax to twelve percent (12%) after
any of the following conditions has been satisfied.

by Congress of its exclusive power to tax because such

delegation is not within the purview of Section 28 (2),
Article VI of the Constitution, which provides:

(i) value-added tax collection as a percentage of

Gross Domestic Product (GDP) of the previous year
exceeds two and four-fifth percent (2 4/5%) or

The Congress may, by law, authorize the President to fix

within specified limits, and may impose, tariff rates, import
and export quotas, tonnage and wharfage dues, and other
duties or imposts within the framework of the national
development program of the government.

(ii) national government deficit as a percentage of

GDP of the previous year exceeds one and one-half
percent (1 %).
SEC. 6. Section 108 of the same Code, as amended, is
hereby further amended to read as follows:
SEC. 108. Value-added Tax on Sale of Services and Use or
Lease of Properties
(A) Rate and Base of Tax. There shall be levied, assessed
and collected, a value-added tax equivalent to ten percent
(10%) of gross receipts derived from the sale or exchange
of services: provided, that the President, upon the
recommendation of the Secretary of Finance, shall,
effective January 1, 2006, raise the rate of valueadded tax to twelve percent (12%), after any of the
following conditions has been satisfied.
(i) value-added tax collection as a percentage of
Gross Domestic Product (GDP) of the previous year
exceeds two and four-fifth percent (2 4/5%) or
(ii) national government deficit as a percentage of
GDP of the previous year exceeds one and one-half
percent (1 %). (Emphasis supplied)
Petitioners allege that the grant of the stand-by authority to
the President to increase the VAT rate is a virtual abdication

They argue that the VAT is a tax levied on the sale, barter
or exchange of goods and properties as well as on the sale
or exchange of services, which cannot be included within
the purview of tariffs under the exempted delegation as the
latter refers to customs duties, tolls or tribute payable upon
merchandise to the government and usually imposed on
goods or merchandise imported or exported.
Petitioners ABAKADA GURO Party List, et al., further
contend that delegating to the President the legislative
power to tax is contrary to republicanism. They insist that
accountability, responsibility and transparency should
dictate the actions of Congress and they should not pass to
the President the decision to impose taxes. They also argue
that the law also effectively nullified the Presidents power
of control, which includes the authority to set aside and
nullify the acts of her subordinates like the Secretary of
Finance, by mandating the fixing of the tax rate by the
President upon the recommendation of the Secretary of
Finance.
Petitioners Pimentel, et al. aver that the President has
ample powers to cause, influence or create the conditions
provided by the law to bring about either or both the
conditions precedent.

On the other hand, petitioners Escudero, et al. find bizarre

and revolting the situation that the imposition of the 12%
rate would be subject to the whim of the Secretary of
Finance, an unelected bureaucrat, contrary to the principle
of no taxation without representation. They submit that the
Secretary of Finance is not mandated to give a favorable
recommendation and he may not even give his
recommendation. Moreover, they allege that no guiding
standards are provided in the law on what basis and as to
how he will make his recommendation. They claim,
nonetheless, that any recommendation of the Secretary of
Finance can easily be brushed aside by the President since
the former is a mere alter ego of the latter, such that,
ultimately, it is the President who decides whether to
impose the increased tax rate or not.

of a Senate and a House of Representatives." The powers

which Congress is prohibited from delegating are those
which are strictly, or inherently and exclusively, legislative.
Purely legislative power, which can never be delegated, has
been described as the authority to make a complete law
complete as to the time when it shall take effect
and as to whom it shall be applicable and to
determine the expediency of its enactment.40 Thus, the
rule is that in order that a court may be justified in holding
a statute unconstitutional as a delegation of legislative
power, it must appear that the power involved is purely
legislative in nature that is, one appertaining exclusively
to the legislative department. It is the nature of the power,
and not the liability of its use or the manner of its exercise,
which determines the validity of its delegation.

A brief discourse on the principle of non-delegation of

powers is instructive.

Nonetheless, the general rule barring delegation of

legislative powers is subject to the following recognized
limitations or exceptions:

The principle of separation of powers ordains that each of

the three great branches of government has exclusive
cognizance of and is supreme in matters falling within its
own constitutionally allocated sphere.37 A logical
corollary to the doctrine of separation of powers is the
principle of non-delegation of powers, as expressed in the
Latin maxim: potestas delegata non delegari potest which
means "what has been delegated, cannot be
delegated."38 This doctrine is based on the ethical principle
that such as delegated power constitutes not only a right
but a duty to be performed by the delegate through the
instrumentality of his own judgment and not through the
intervening mind of another.39
With respect to the Legislature, Section 1 of Article VI of the
Constitution provides that "the Legislative power shall be
vested in the Congress of the Philippines which shall consist

(1) Delegation of tariff powers to the President under

Section 28 (2) of Article VI of the Constitution;
(2) Delegation of emergency powers to the President under
Section 23 (2) of Article VI of the Constitution;
(3) Delegation to the people at large;
(4) Delegation to local governments; and
(5) Delegation to administrative bodies.
In every case of permissible delegation, there must be a
showing that the delegation itself is valid. It is valid only if
the law (a) is complete in itself, setting forth therein the
policy to be executed, carried out, or implemented by the
delegate;41 and (b) fixes a standard the limits of which

are sufficiently determinate and determinable to which

the delegate must conform in the performance of his
functions.42 A sufficient standard is one which defines
legislative policy, marks its limits, maps out its boundaries
and specifies the public agency to apply it. It indicates the
circumstances under which the legislative command is to be
effected.43 Both tests are intended to prevent a total
transference of legislative authority to the delegate, who is
not allowed to step into the shoes of the legislature and
exercise a power essentially legislative.44
In People vs. Vera,45 the Court, through eminent Justice
Jose P. Laurel, expounded on the concept and extent of
delegation of power in this wise:
In testing whether a statute constitutes an undue delegation
of legislative power or not, it is usual to inquire whether the
statute was complete in all its terms and provisions when it
left the hands of the legislature so that nothing was left to
the judgment of any other appointee or delegate of the
legislature.
...
The true distinction, says Judge Ranney, is between
the delegation of power to make the law, which
necessarily involves a discretion as to what it shall
be, and conferring an authority or discretion as to its
execution, to be exercised under and in pursuance of
the law. The first cannot be done; to the latter no
valid objection can be made.
...
It is contended, however, that a legislative act may be
made to the effect as law after it leaves the hands of the
legislature. It is true that laws may be made effective on

certain contingencies, as by proclamation of the executive

or the adoption by the people of a particular community. In
Wayman vs. Southard, the Supreme Court of the United
States ruled that the legislature may delegate a power not
legislative which it may itself rightfully exercise.The power
to ascertain facts is such a power which may be
delegated. There is nothing essentially legislative in
ascertaining the existence of facts or conditions as
the basis of the taking into effect of a law. That is a
mental process common to all branches of the
government. Notwithstanding the apparent tendency,
however, to relax the rule prohibiting delegation of
legislative authority on account of the complexity arising
from social and economic forces at work in this modern
industrial age, the orthodox pronouncement of Judge Cooley
in his work on Constitutional Limitations finds restatement
in Prof. Willoughby's treatise on the Constitution of the
United States in the following language speaking of
declaration of legislative power to administrative
agencies: The principle which permits the legislature
to provide that the administrative agent may
determine when the circumstances are such as
require the application of a law is defended upon the
ground that at the time this authority is granted, the
rule of public policy, which is the essence of the
legislative act, is determined by the legislature. In
other words, the legislature, as it is its duty to do,
determines that, under given circumstances, certain
executive or administrative action is to be taken, and
that, under other circumstances, different or no
action at all is to be taken. What is thus left to the
administrative official is not the legislative
determination of what public policy demands, but
simply the ascertainment of what the facts of the
case require to be done according to the terms of the
law by which he is governed. The efficiency of an Act
as a declaration of legislative will must, of course,
come from Congress, but the ascertainment of the

contingency upon which the Act shall take effect may

be left to such agencies as it may designate. The
legislature, then, may provide that a law shall take
effect upon the happening of future specified
contingencies leaving to some other person or body
the power to determine when the specified
contingency has arisen.(Emphasis supplied).46
In Edu vs. Ericta,47 the Court reiterated:
What cannot be delegated is the authority under the
Constitution to make laws and to alter and repeal them; the
test is the completeness of the statute in all its terms and
provisions when it leaves the hands of the legislature. To
determine whether or not there is an undue delegation of
legislative power, the inquiry must be directed to the scope
and definiteness of the measure enacted. The legislative
does not abdicate its functions when it describes
what job must be done, who is to do it, and what is
the scope of his authority. For a complex economy, that
may be the only way in which the legislative process can go
forward. A distinction has rightfully been made
between delegation of power to make the laws which
necessarily involves a discretion as to what it shall
be, which constitutionally may not be done, and
delegation of authority or discretion as to its
execution to be exercised under and in pursuance of
the law, to which no valid objection can be made. The
Constitution is thus not to be regarded as denying the
legislature the necessary resources of flexibility and
practicability. (Emphasis supplied).48
Clearly, the legislature may delegate to executive officers or
bodies the power to determine certain facts or conditions, or
the happening of contingencies, on which the operation of a
statute is, by its terms, made to depend, but the legislature
must prescribe sufficient standards, policies or limitations
on their authority.49 While the power to tax cannot be

delegated to executive agencies, details as to the

enforcement and administration of an exercise of such
power may be left to them, including the power to
determine the existence of facts on which its operation
depends.50
The rationale for this is that the preliminary ascertainment
of facts as basis for the enactment of legislation is not of
itself a legislative function, but is simply ancillary to
legislation. Thus, the duty of correlating information and
making recommendations is the kind of subsidiary activity
which the legislature may perform through its members, or
which it may delegate to others to perform. Intelligent
legislation on the complicated problems of modern society is
impossible in the absence of accurate information on the
part of the legislators, and any reasonable method of
securing such information is proper.51 The Constitution as a
continuously operative charter of government does not
require that Congress find for itself
every fact upon which it desires to base legislative action or
that it make for itself detailed determinations which it has
declared to be prerequisite to application of legislative policy
to particular facts and circumstances impossible for
Congress itself properly to investigate.52
In the present case, the challenged section of R.A. No. 9337
is the common proviso in Sections 4, 5 and 6 which reads
as follows:
That the President, upon the recommendation of the
Secretary of Finance, shall, effective January 1, 2006, raise
the rate of value-added tax to twelve percent (12%), after
any of the following conditions has been satisfied:

(i) Value-added tax collection as a percentage of Gross

Domestic Product (GDP) of the previous year exceeds two
and four-fifth percent (2 4/5%); or
(ii) National government deficit as a percentage of GDP of
the previous year exceeds one and one-half percent (1
%).
The case before the Court is not a delegation of legislative
power. It is simply a delegation of ascertainment of facts
upon which enforcement and administration of the increase
rate under the law is contingent. The legislature has made
the operation of the 12% rate effective January 1, 2006,
contingent upon a specified fact or condition. It leaves the
entire operation or non-operation of the 12% rate upon
factual matters outside of the control of the executive.
No discretion would be exercised by the President.
Highlighting the absence of discretion is the fact that the
wordshall is used in the common proviso. The use of the
word shall connotes a mandatory order. Its use in a statute
denotes an imperative obligation and is inconsistent with
the idea of discretion.53 Where the law is clear and
unambiguous, it must be taken to mean exactly what it
says, and courts have no choice but to see to it that the
mandate is obeyed.54
Thus, it is the ministerial duty of the President to
immediately impose the 12% rate upon the existence of any
of the conditions specified by Congress. This is a duty which
cannot be evaded by the President. Inasmuch as the law
specifically uses the word shall, the exercise of discretion by
the President does not come into play. It is a clear directive
to impose the 12% VAT rate when the specified conditions
are present. The time of taking into effect of the 12% VAT
rate is based on the happening of a certain specified
contingency, or upon the ascertainment of certain facts or

conditions by a person or body other than the legislature

itself.
The Court finds no merit to the contention of
petitioners ABAKADA GURO Party List, et al. that the law
effectively nullified the Presidents power of control over the
Secretary of Finance by mandating the fixing of the tax rate
by the President upon the recommendation of the Secretary
of Finance. The Court cannot also subscribe to the position
of petitioners
Pimentel, et al. that the word shall should be interpreted to
mean may in view of the phrase "upon the recommendation
of the Secretary of Finance." Neither does the Court find
persuasive the submission of petitioners Escudero, et
al. that any recommendation by the Secretary of Finance
can easily be brushed aside by the President since the
former is a mere alter ego of the latter.
When one speaks of the Secretary of Finance as the alter
ego of the President, it simply means that as head of the
Department of Finance he is the assistant and agent of the
Chief Executive. The multifarious executive and
administrative functions of the Chief Executive are
performed by and through the executive departments, and
the acts of the secretaries of such departments, such as the
Department of Finance, performed and promulgated in the
regular course of business, are, unless disapproved or
reprobated by the Chief Executive, presumptively the acts
of the Chief Executive. The Secretary of Finance, as such,
occupies a political position and holds office in an advisory
capacity, and, in the language of Thomas Jefferson, "should
be of the President's bosom confidence" and, in the
language of Attorney-General Cushing, is "subject to the
direction of the President."55

In the present case, in making his recommendation to the

President on the existence of either of the two conditions,
the Secretary of Finance is not acting as the alter ego of the
President or even her subordinate. In such instance, he is
not subject to the power of control and direction of the
President. He is acting as the agent of the legislative
department, to determine and declare the event upon which
its expressed will is to take effect.56The Secretary of Finance
becomes the means or tool by which legislative policy is
determined and implemented, considering that he
possesses all the facilities to gather data and information
and has a much broader perspective to properly evaluate
them. His function is to gather and collate statistical data
and other pertinent information and verify if any of the two
conditions laid out by Congress is present. His personality in
such instance is in reality but a projection of that of
Congress. Thus, being the agent of Congress and not of the
President, the President cannot alter or modify or nullify, or
set aside the findings of the Secretary of Finance and to
substitute the judgment of the former for that of the latter.
Congress simply granted the Secretary of Finance the
authority to ascertain the existence of a fact, namely,
whether by December 31, 2005, the value-added tax
collection as a percentage of Gross Domestic Product (GDP)
of the previous year exceeds two and four-fifth percent
(24/5%) or the national government deficit as a percentage
of GDP of the previous year exceeds one and one-half
percent (1%). If either of these two instances has
occurred, the Secretary of Finance, by legislative mandate,
must submit such information to the President. Then the
12% VAT rate must be imposed by the President effective
January 1, 2006. There is no undue delegation of
legislative power but only of the discretion as to the
execution of a law. This is constitutionally
permissible.57 Congress does not abdicate its functions or
unduly delegate power when it describes what job must be
done, who must do it, and what is the scope of his

authority; in our complex economy that is frequently the

only way in which the legislative process can go forward.58
As to the argument of petitioners ABAKADA GURO Party
List, et al. that delegating to the President the legislative
power to tax is contrary to the principle of republicanism,
the same deserves scant consideration. Congress did not
delegate the power to tax but the mere implementation of
the law. The intent and will to increase the VAT rate to 12%
came from Congress and the task of the President is to
simply execute the legislative policy. That Congress chose
to do so in such a manner is not within the province of the
Court to inquire into, its task being to interpret the law. 59
The insinuation by petitioners Pimentel, et al. that the
President has ample powers to cause, influence or create
the conditions to bring about either or both the conditions
precedent does not deserve any merit as this argument is
highly speculative. The Court does not rule on allegations
which are manifestly conjectural, as these may not exist at
all. The Court deals with facts, not fancies; on realities, not
appearances. When the Court acts on appearances instead
of realities, justice and law will be short-lived.
B. The 12% Increase VAT Rate Does Not Impose an Unfair
and Unnecessary Additional Tax Burden
Petitioners Pimentel, et al. argue that the 12% increase in
the VAT rate imposes an unfair and additional tax burden on
the people. Petitioners also argue that the 12% increase,
dependent on any of the 2 conditions set forth in the
contested provisions, is ambiguous because it does not
state if the VAT rate would be returned to the original 10%
if the rates are no longer satisfied. Petitioners also argue
that such rate is unfair and unreasonable, as the people are
unsure of the applicable VAT rate from year to year.

Under the common provisos of Sections 4, 5 and 6 of R.A.

No. 9337, if any of the two conditions set forth therein are
satisfied, the President shall increase the VAT rate to 12%.
The provisions of the law are clear. It does not provide for a
return to the 10% rate nor does it empower the President to
so revert if, after the rate is increased to 12%, the VAT
collection goes below the 24/5 of the GDP of the previous
year or that the national government deficit as a percentage
of GDP of the previous year does not exceed 1%.
Therefore, no statutory construction or interpretation is
needed. Neither can conditions or limitations be introduced
where none is provided for. Rewriting the law is a forbidden
ground that only Congress may tread upon.60
Thus, in the absence of any provision providing for a return
to the 10% rate, which in this case the Court finds none,
petitioners argument is, at best, purely speculative. There
is no basis for petitioners fear of a fluctuating VAT rate
because the law itself does not provide that the rate should
go back to 10% if the conditions provided in Sections 4, 5
and 6 are no longer present. The rule is that where the
provision of the law is clear and unambiguous, so that there
is no occasion for the court's seeking the legislative intent,
the law must be taken as it is, devoid of judicial addition or
subtraction.61
Petitioners also contend that the increase in the VAT rate,
which was allegedly an incentive to the President to raise
the VAT collection to at least 2 4/5 of the GDP of the
previous year, should be based on fiscal adequacy.
Petitioners obviously overlooked that increase in VAT
collection is not the only condition. There is another
condition, i.e., the national government deficit as a
percentage of GDP of the previous year exceeds one and
one-half percent (1 %).

Respondents explained the philosophy behind these

alternative conditions:
1. VAT/GDP Ratio > 2.8%
The condition set for increasing VAT rate to 12% have
economic or fiscal meaning. If VAT/GDP is less than 2.8%, it
means that government has weak or no capability of
implementing the VAT or that VAT is not effective in the
function of the tax collection. Therefore, there is no value to
increase it to 12% because such action will also be
ineffectual.
2. Natl Govt Deficit/GDP >1.5%
The condition set for increasing VAT when deficit/GDP is
1.5% or less means the fiscal condition of government has
reached a relatively sound position or is towards the
direction of a balanced budget position. Therefore, there is
no need to increase the VAT rate since the fiscal house is in
a relatively healthy position. Otherwise stated, if the ratio is
more than 1.5%, there is indeed a need to increase the VAT
rate.62
That the first condition amounts to an incentive to the
President to increase the VAT collection does not render it
unconstitutional so long as there is a public purpose for
which the law was passed, which in this case, is mainly to
raise revenue. In fact, fiscal adequacy dictated the need for
a raise in revenue.
The principle of fiscal adequacy as a characteristic of a
sound tax system was originally stated by Adam Smith in
his Canons of Taxation (1776), as:
IV. Every tax ought to be so contrived as both to take out
and to keep out of the pockets of the people as little as

possible over and above what it brings into the public

treasury of the state.63

challenged. In fact, ultimately, the question is our ability to

access the financial markets.

It simply means that sources of revenues must be adequate

to meet government expenditures and their variations.64

When the President made her speech in July last year, the
environment was not as bad as it is now, at least based on
the forecast of most financial institutions. So, we were
assuming that raising 80 billion would put us in a position
where we can then convince them to improve our ability to
borrow at lower rates. But conditions have changed on us
because the interest rates have gone up. In fact, just within
this room, we tried to access the market for a billion dollars
because for this year alone, the Philippines will have to
borrow 4 billion dollars. Of that amount, we have borrowed
1.5 billion. We issued last January a 25-year bond at 9.7
percent cost. We were trying to access last week and the
market was not as favorable and up to now we have not
accessed and we might pull back because the conditions are
not very good.

The dire need for revenue cannot be ignored. Our country is

in a quagmire of financial woe. During the Bicameral
Conference Committee hearing, then Finance Secretary
Purisima bluntly depicted the countrys gloomy state of
economic affairs, thus:
First, let me explain the position that the Philippines finds
itself in right now. We are in a position where 90 percent of
our revenue is used for debt service. So, for every peso of
revenue that we currently raise, 90 goes to debt service.
Thats interest plus amortization of our debt. So clearly, this
is not a sustainable situation. Thats the first fact.
The second fact is that our debt to GDP level is way out of
line compared to other peer countries that borrow money
from that international financial markets. Our debt to GDP is
approximately equal to our GDP. Again, that shows you that
this is not a sustainable situation.
The third thing that Id like to point out is the environment
that we are presently operating in is not as benign as what
it used to be the past five years.
What do I mean by that?
In the past five years, weve been lucky because we were
operating in a period of basically global growth and low
interest rates. The past few months, we have seen an
inching up, in fact, a rapid increase in the interest rates in
the leading economies of the world. And, therefore, our
ability to borrow at reasonable prices is going to be

So given this situation, we at the Department of Finance

believe that we really need to front-end our deficit
reduction. Because it is deficit that is causing the increase
of the debt and we are in what we call a debt spiral. The
more debt you have, the more deficit you have because
interest and debt service eats and eats more of your
revenue. We need to get out of this debt spiral. And the
only way, I think, we can get out of this debt spiral is really
have a front-end adjustment in our revenue base.65
The image portrayed is chilling. Congress passed the law
hoping for rescue from an inevitable catastrophe. Whether
the law is indeed sufficient to answer the states economic
dilemma is not for the Court to judge. In theFarias case,
the Court refused to consider the various arguments raised
therein that dwelt on the wisdom of Section 14 of R.A. No.
9006 (The Fair Election Act), pronouncing that:

. . . policy matters are not the concern of the Court.

Government policy is within the exclusive dominion of the
political branches of the government. It is not for this Court
to look into the wisdom or propriety of legislative
determination. Indeed, whether an enactment is wise or
unwise, whether it is based on sound economic theory,
whether it is the best means to achieve the desired results,
whether, in short, the legislative discretion within its
prescribed limits should be exercised in a particular manner
are matters for the judgment of the legislature, and the
serious conflict of opinions does not suffice to bring them
within the range of judicial cognizance.66

life, liberty of property without due process of law, as

embodied in Article III, Section 1 of the Constitution.

In the same vein, the Court in this case will not dawdle on
the purpose of Congress or the executive policy, given that
it is not for the judiciary to "pass upon questions of wisdom,
justice or expediency of legislation."67

Section 8 of R.A. No. 9337, amending Section 110(B) of the

NIRC imposes a limitation on the amount of input tax that
may be credited against the output tax. It states, in part:
"[P]rovided, that the input tax inclusive of the input VAT
carried over from the previous quarter that may be credited
in every quarter shall not exceed seventy percent (70%) of
the output VAT: "

II.
Whether Section 8 of R.A. No. 9337, amending Sections
110(A)(2) and 110(B) of the NIRC; and Section 12 of R.A.
No. 9337, amending Section 114(C) of the NIRC, violate the
following provisions of the Constitution:
a. Article VI, Section 28(1), and
b. Article III, Section 1
A. Due Process and Equal Protection Clauses
Petitioners Association of Pilipinas Shell Dealers, Inc., et
al. argue that Section 8 of R.A. No. 9337, amending
Sections 110 (A)(2), 110 (B), and Section 12 of R.A. No.
9337, amending Section 114 (C) of the NIRC are arbitrary,
oppressive, excessive and confiscatory. Their argument is
premised on the constitutional right against deprivation of

Petitioners also contend that these provisions violate the

constitutional guarantee of equal protection of the law.
The doctrine is 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.68

Input Tax is defined under Section 110(A) of the NIRC, as

amended, as the value-added tax due from or paid by a
VAT-registered person on the importation of goods or local
purchase of good and services, including lease or use of
property, in the course of trade or business, from a VATregistered person, and Output Tax is the value-added
tax due on the sale or lease of taxable goods or properties
or services by any person registered or required to register
under the law.
Petitioners claim that the contested sections impose
limitations on the amount of input tax that may be claimed.
In effect, a portion of the input tax that has already been
paid cannot now be credited against the output tax.

Petitioners argument is not absolute. It assumes that the

input tax exceeds 70% of the output tax, and therefore, the
input tax in excess of 70% remains uncredited. However, to
the extent that the input tax is less than 70% of the output
tax, then 100% of such input tax is still creditable.
More importantly, the excess input tax, if any, is retained in
a businesss books of accounts and remains creditable in the
succeeding quarter/s. This is explicitly allowed by Section
110(B), which provides that "if the input tax exceeds the
output tax, the excess shall be carried over to the
succeeding quarter or quarters." In addition, Section 112(B)
allows a VAT-registered person to apply for the issuance of
a tax credit certificate or refund for any unused input taxes,
to the extent that such input taxes have not been applied
against the output taxes. Such unused input tax may be
used in payment of his other internal revenue taxes.
The non-application of the unutilized input tax in a given
quarter is not ad infinitum, as petitioners exaggeratedly
contend. Their analysis of the effect of the 70% limitation is
incomplete and one-sided. It ends at the net effect that
there will be unapplied/unutilized inputs VAT for a given
quarter. It does not proceed further to the fact that such
unapplied/unutilized input tax may be credited in the
subsequent periods as allowed by the carry-over provision
of Section 110(B) or that it may later on be refunded
through a tax credit certificate under Section 112(B).
Therefore, petitioners argument must be rejected.
On the other hand, it appears that petitioner Garcia failed to
comprehend the operation of the 70% limitation on the
input tax. According to petitioner, the limitation on the
creditable input tax in effect allows VAT-registered
establishments to retain a portion of the taxes they collect,

which violates the principle that tax collection and revenue

should be for public purposes and expenditures
As earlier stated, the input tax is the tax paid by a person,
passed on to him by the seller, when he buys goods. Output
tax meanwhile is the tax due to the person when he sells
goods. In computing the VAT payable, three possible
scenarios may arise:
First, if at the end of a taxable quarter the output taxes
charged by the seller are equal to the input taxes that he
paid and passed on by the suppliers, then no payment is
required;
Second, when the output taxes exceed the input taxes, the
person shall be liable for the excess, which has to be paid to
the Bureau of Internal Revenue (BIR);69 and
Third, if the input taxes exceed the output taxes, the excess
shall be carried over to the succeeding quarter or quarters.
Should the input taxes result from zero-rated or effectively
zero-rated transactions, any excess over the output taxes
shall instead be refunded to the taxpayer or credited against
other internal revenue taxes, at the taxpayers option. 70
Section 8 of R.A. No. 9337 however, imposed a 70%
limitation on the input tax. Thus, a person can credit his
input tax only up to the extent of 70% of the output tax. In
laymans term, the value-added taxes that a
person/taxpayer paid and passed on to him by a seller can
only be credited up to 70% of the value-added taxes that is
due to him on a taxable transaction. There is no retention of
any tax collection because the person/taxpayer has already
previously paid the input tax to a seller, and the seller will
subsequently remit such input tax to the BIR. The party
directly liable for the payment of the tax is the
seller.71 What only needs to be done is for the

person/taxpayer to apply or credit these input taxes, as

evidenced by receipts, against his output taxes.

SEC. 110. Tax Credits.

(A) Creditable Input Tax.

Petitioners Association of Pilipinas Shell Dealers, Inc., et

al. also argue that the input tax partakes the nature of a
property that may not be confiscated, appropriated, or
limited without due process of law.
The input tax is not a property or a property right within the
constitutional purview of the due process clause. A VATregistered persons entitlement to the creditable input tax is
a mere statutory privilege.
The distinction between statutory privileges and vested
rights must be borne in mind for persons have no vested
rights in statutory privileges. The state may change or take
away rights, which were created by the law of the state,
although it may not take away property, which was vested
by virtue of such rights.72
Under the previous system of single-stage taxation, taxes
paid at every level of distribution are not recoverable from
the taxes payable, although it becomes part of the cost,
which is deductible from the gross revenue. When Pres.
Aquino issued E.O. No. 273 imposing a 10% multi-stage tax
on all sales, it was then that the crediting of the input tax
paid on purchase or importation of goods and services by
VAT-registered persons against the output tax was
introduced.73 This was adopted by the Expanded VAT Law
(R.A. No. 7716),74 and The Tax Reform Act of 1997 (R.A.
No. 8424).75 The right to credit input tax as against the
output tax is clearly a privilege created by law, a privilege
that also the law can remove, or in this case, limit.
Petitioners also contest as arbitrary, oppressive, excessive
and confiscatory, Section 8 of R.A. No. 9337, amending
Section 110(A) of the NIRC, which provides:

Provided, That the input tax on goods purchased or

imported in a calendar month for use in trade or business
for which deduction for depreciation is allowed under this
Code, shall be spread evenly over the month of acquisition
and the fifty-nine (59) succeeding months if the aggregate
acquisition cost for such goods, excluding the VAT
component thereof, exceeds One million pesos
(P1,000,000.00): Provided, however, That if the estimated
useful life of the capital goods is less than five (5) years, as
used for depreciation purposes, then the input VAT shall be
spread over such a shorter period: Provided, finally, That in
the case of purchase of services, lease or use of properties,
the input tax shall be creditable to the purchaser, lessee or
license upon payment of the compensation, rental, royalty
or fee.
The foregoing section imposes a 60-month period within
which to amortize the creditable input tax on purchase or
importation of capital goods with acquisition cost of P1
Million pesos, exclusive of the VAT component. Such spread
out only poses a delay in the crediting of the input tax.
Petitioners argument is without basis because the taxpayer
is not permanently deprived of his privilege to credit the
input tax.
It is worth mentioning that Congress admitted that the
spread-out of the creditable input tax in this case amounts
to a 4-year interest-free loan to the government.76 In the
same breath, Congress also justified its move by saying that
the provision was designed to raise an annual revenue of
22.6 billion.77 The legislature also dispelled the fear that the
provision will fend off foreign investments, saying that
foreign investors have other tax incentives provided by law,

and citing the case of China, where despite a 17.5% noncreditable VAT, foreign investments were not
deterred.78 Again, for whatever is the purpose of the 60month amortization, this involves executive economic policy
and legislative wisdom in which the Court cannot intervene.
With regard to the 5% creditable withholding tax imposed
on payments made by the government for taxable
transactions, Section 12 of R.A. No. 9337, which amended
Section 114 of the NIRC, reads:
SEC. 114. Return and Payment of Value-added Tax.
(C) Withholding of Value-added Tax. The Government or
any of its political subdivisions, instrumentalities or
agencies, including government-owned or controlled
corporations (GOCCs) shall, before making payment on
account of each purchase of goods and services which are
subject to the value-added tax imposed in Sections 106 and
108 of this Code, deduct and withhold a final value-added
tax at the rate of five percent (5%) of the gross payment
thereof: Provided, That the payment for lease or use of
properties or property rights to nonresident owners shall be
subject to ten percent (10%) withholding tax at the time of
payment. For purposes of this Section, the payor or person
in control of the payment shall be considered as the
withholding agent.
The value-added tax withheld under this Section shall be
remitted within ten (10) days following the end of the
month the withholding was made.
Section 114(C) merely provides a method of collection, or
as stated by respondents, a more simplified VAT withholding
system. The government in this case is constituted as a
withholding agent with respect to their payments for goods
and services.

Prior to its amendment, Section 114(C) provided for

different rates of value-added taxes to be withheld -- 3% on
gross payments for purchases of goods; 6% on gross
payments for services supplied by contractors other than by
public works contractors; 8.5% on gross payments for
services supplied by public work contractors; or 10% on
payment for the lease or use of properties or property rights
to nonresident owners. Under the present Section 114(C),
these different rates, except for the 10% on lease or
property rights payment to nonresidents, were deleted, and
a uniform rate of 5% is applied.
The Court observes, however, that the law the used the
word final. In tax usage, final, as opposed to creditable,
means full. Thus, it is provided in Section 114(C): "final
value-added tax at the rate of five percent (5%)."
In Revenue Regulations No. 02-98, implementing R.A. No.
8424 (The Tax Reform Act of 1997), the concept of final
withholding tax on income was explained, to wit:
SECTION 2.57. Withholding of Tax at Source
(A) Final Withholding Tax. Under the final withholding tax
system the amount of income tax withheld by the
withholding agent is constituted as full and final
payment of the income tax due from the payee on the said
income. The liability for payment of the tax rests primarily
on the payor as a withholding agent. Thus, in case of his
failure to withhold the tax or in case of underwithholding,
the deficiency tax shall be collected from the
payor/withholding agent.
(B) Creditable Withholding Tax. Under the creditable
withholding tax system, taxes withheld on certain income
payments are intended to equal or at least approximate the
tax due of the payee on said income. Taxes withheld on

income payments covered by the expanded withholding tax

(referred to in Sec. 2.57.2 of these regulations) and
compensation income (referred to in Sec. 2.78 also of these
regulations) are creditable in nature.
As applied to value-added tax, this means that taxable
transactions with the government are subject to a 5% rate,
which constitutes as full payment of the tax payable on the
transaction. This represents the net VAT payable of the
seller. The other 5% effectively accounts for the standard
input VAT (deemed input VAT), in lieu of the actual input
VAT directly or attributable to the taxable transaction.79
The Court need not explore the rationale behind the
provision. It is clear that Congress intended to treat
differently taxable transactions with the government.80 This
is supported by the fact that under the old provision, the
5% tax withheld by the government remains creditable
against the tax liability of the seller or contractor, to wit:

one-half percent (8.5%): Provided, further, That the

payment for lease or use of properties or property rights to
nonresident owners shall be subject to ten percent (10%)
withholding tax at the time of payment. For this purpose,
the payor or person in control of the payment shall be
considered as the withholding agent.
The valued-added tax withheld under this Section shall be
remitted within ten (10) days following the end of the
month the withholding was made. (Emphasis supplied)
As amended, the use of the word final and the deletion of
the word creditable exhibits Congresss intention to treat
transactions with the government differently. Since it has
not been shown that the class subject to the 5% final
withholding tax has been unreasonably narrowed, there is
no reason to invalidate the provision. Petitioners, as
petroleum dealers, are not the only ones subjected to the
5% final withholding tax. It applies to all those who deal
with the government.

SEC. 114. Return and Payment of Value-added Tax.

(C) Withholding of Creditable Value-added Tax. The
Government or any of its political subdivisions,
instrumentalities or agencies, including government-owned
or controlled corporations (GOCCs) shall, before making
payment on account of each purchase of goods from sellers
and services rendered by contractors which are subject to
the value-added tax imposed in Sections 106 and 108 of
this Code, deduct and withhold the value-added tax due at
the rate of three percent (3%) of the gross payment for the
purchase of goods and six percent (6%) on gross receipts
for services rendered by contractors on every sale or
installment payment which shall becreditable against the
value-added tax liability of the seller or contractor:
Provided, however, That in the case of government public
works contractors, the withholding rate shall be eight and

Moreover, the actual input tax is not totally lost or

uncreditable, as petitioners believe. Revenue Regulations
No. 14-2005 or the Consolidated Value-Added Tax
Regulations 2005 issued by the BIR, provides that should
the actual input tax exceed 5% of gross payments, the
excess may form part of the cost. Equally, should the actual
input tax be less than 5%, the difference is treated as
income.81
Petitioners also argue that by imposing a limitation on the
creditable input tax, the government gets to tax a profit or
value-added even if there is no profit or value-added.
Petitioners stance is purely hypothetical, argumentative,
and again, one-sided. The Court will not engage in a legal
joust where premises are what ifs, arguments, theoretical

and facts, uncertain. Any disquisition by the Court on this

point will only be, as Shakespeare describes life
in Macbeth,82 "full of sound and fury, signifying nothing."
Whats more, petitioners contention assumes the
proposition that there is no profit or value-added. It need
not take an astute businessman to know that it is a matter
of exception that a business will sell goods or services
without profit or value-added. It cannot be overstressed
that a business is created precisely for profit.
The equal protection clause under the Constitution means
that "no person or class of persons shall be deprived of the
same protection of laws which is enjoyed by other persons
or other classes in the same place and in like
circumstances."83
The power of the State to make reasonable and natural
classifications for the purposes of taxation has long been
established. Whether it relates to the subject of taxation,
the kind of property, the rates to be levied, or the amounts
to be raised, the methods of assessment, valuation and
collection, the States power is entitled to presumption of
validity. As a rule, the judiciary will not interfere with such
power absent a clear showing of unreasonableness,
discrimination, or arbitrariness.84
Petitioners point out that the limitation on the creditable
input tax if the entity has a high ratio of input tax, or
invests in capital equipment, or has several transactions
with the government, is not based on real and substantial
differences to meet a valid classification.
The argument is pedantic, if not outright baseless. The law
does not make any classification in the subject of taxation,
the kind of property, the rates to be levied or the amounts
to be raised, the methods of assessment, valuation and

collection. Petitioners alleged distinctions are based on

variables that bear different consequences. While the
implementation of the law may yield varying end results
depending on ones profit margin and value-added, the
Court cannot go beyond what the legislature has laid down
and interfere with the affairs of business.
The equal protection clause does not require the universal
application of the laws on all persons or things without
distinction. This might in fact sometimes result in unequal
protection. What the clause requires is equality among
equals as determined according to a valid classification. By
classification is meant the grouping of persons or things
similar to each other in certain particulars and different
from all others in these same particulars.85
Petitioners brought to the Courts attention the introduction
of Senate Bill No. 2038 by Sens. S.R. Osmea III and Ma.
Ana Consuelo A.S. Madrigal on June 6, 2005, and House
Bill No. 4493 by Rep. Eric D. Singson. The proposed
legislation seeks to amend the 70% limitation by increasing
the same to 90%. This, according to petitioners, supports
their stance that the 70% limitation is arbitrary and
confiscatory. On this score, suffice it to say that these are
still proposed legislations. Until Congress amends the law,
and absent any unequivocal basis for its unconstitutionality,
the 70% limitation stays.
B. Uniformity and Equitability of Taxation
Article VI, Section 28(1) of the Constitution reads:
The rule of taxation shall be uniform and equitable. The
Congress shall evolve a progressive system of taxation.
Uniformity in taxation means that all taxable articles or
kinds of property of the same class shall be taxed at the

same rate. Different articles may be taxed at different

amounts provided that the rate is uniform on the same class
everywhere with all people at all times.86
In this case, the tax law is uniform as it provides a standard
rate of 0% or 10% (or 12%) on all goods and services.
Sections 4, 5 and 6 of R.A. No. 9337, amending Sections
106, 107 and 108, respectively, of the NIRC, provide for a
rate of 10% (or 12%) on sale of goods and properties,
importation of goods, and sale of services and use or lease
of properties. These same sections also provide for a 0%
rate on certain sales and transaction.
Neither does the law make any distinction as to the type of
industry or trade that will bear the 70% limitation on the
creditable input tax, 5-year amortization of input tax paid
on purchase of capital goods or the 5% final withholding tax
by the government. It must be stressed that the rule of
uniform taxation does not deprive Congress of the power to
classify subjects of taxation, and only demands uniformity
within the particular class.87
R.A. No. 9337 is also equitable. The law is equipped with a
threshold margin. The VAT rate of 0% or 10% (or 12%)
does not apply to sales of goods or services with gross
annual sales or receipts not
exceeding P1,500,000.00.88Also, basic marine and
agricultural food products in their original state are still not
subject to the tax,89 thus ensuring that prices at the
grassroots level will remain accessible. As was stated
in Kapatiran ng mga Naglilingkod sa Pamahalaan ng
Pilipinas, Inc. vs. Tan:90
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.
It is admitted that R.A. No. 9337 puts a premium on
businesses with low profit margins, and unduly favors those
with high profit margins. Congress was not oblivious to this.
Thus, to equalize the weighty burden the law entails, the
law, under Section 116, imposed a 3% percentage tax on
VAT-exempt persons under Section 109(v), i.e.,
transactions with gross annual sales and/or receipts not
exceeding P1.5 Million. This acts as a equalizer because in
effect, bigger businesses that qualify for VAT coverage and
VAT-exempt taxpayers stand on equal-footing.
Moreover, Congress provided mitigating measures to
cushion the impact of the imposition of the tax on those
previously exempt. Excise taxes on petroleum
products91 and natural gas92 were reduced. Percentage tax
on domestic carriers was removed.93 Power producers are
now exempt from paying franchise tax.94
Aside from these, Congress also increased the income tax
rates of corporations, in order to distribute the burden of
taxation. Domestic, foreign, and non-resident corporations
are now subject to a 35% income tax rate, from a previous
32%.95 Intercorporate dividends of non-resident foreign
corporations are still subject to 15% final withholding tax
but the tax credit allowed on the corporations domicile was
increased to 20%.96 The Philippine Amusement and Gaming
Corporation (PAGCOR) is not exempt from income taxes
anymore.97 Even the sale by an artist of his works or
services performed for the production of such works was not
spared.

All these were designed to ease, as well as spread out, the

burden of taxation, which would otherwise rest largely on
the consumers. It cannot therefore be gainsaid that R.A.
No. 9337 is equitable.
C. Progressivity of Taxation
Lastly, petitioners contend that the limitation on the
creditable input tax is anything but regressive. It is the
smaller business with higher input tax-output tax ratio that
will suffer the consequences.
Progressive taxation is built on the principle of the
taxpayers ability to pay. This principle was also lifted from
Adam Smiths Canons of Taxation, and it states:
I. The subjects of every state ought to contribute towards
the support of the government, as nearly as possible, in
proportion to their respective abilities; that is, in proportion
to the revenue which they respectively enjoy under the
protection of the state.
Taxation is progressive when its rate goes up depending on
the resources of the person affected.98
The VAT is an antithesis of progressive taxation. By its very
nature, it is regressive. The principle of progressive taxation
has no relation with the VAT system inasmuch as the VAT
paid by the consumer or business for every goods bought or
services enjoyed is the same regardless of income. In
other words, the VAT paid eats the same portion of an
income, whether big or small. The disparity lies in the
income earned by a person or profit margin marked by a
business, such that the higher the income or profit margin,
the smaller the portion of the income or profit that is eaten
by VAT. A converso, the lower the income or profit margin,

the bigger the part that the VAT eats away. At the end of
the day, it is really the lower income group or businesses
with low-profit margins that is always hardest hit.
Nevertheless, the Constitution does not really prohibit the
imposition of indirect taxes, like the VAT. What it simply
provides is that Congress shall "evolve a progressive system
of taxation." The Court stated in the Tolentino case, thus:
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)99
CONCLUSION

It has been said that taxes are the lifeblood of the

government. In this case, it is just an enema, a first-aid
measure to resuscitate an economy in distress. The Court is
neither blind nor is it turning a deaf ear on the plight of the
masses. But it does not have the panacea for the malady
that the law seeks to remedy. As in other cases, the Court
cannot strike down a law as unconstitutional simply because
of its yokes.
Let us not be overly influenced by the plea that for every
wrong there is a remedy, and that the judiciary should
stand ready to afford relief. There are undoubtedly many
wrongs the judicature may not correct, for instance, those
involving political questions. . . .

There being no constitutional impediment to the full

enforcement and implementation of R.A. No. 9337, the
temporary restraining order issued by the Court on July 1,
2005 is LIFTED upon finality of herein decision.
SO ORDERED.
MA. ALICIA AUSTRIA-MARTINEZ
Associate Justice
WE CONCUR:
HILARIO G. DAVIDE, JR.

Let us likewise disabuse our minds from the notion that the
judiciary is the repository of remedies for all political or
social ills; We should not forget that the Constitution has
REYNATO S. PUNO
judiciously allocated the powers of government to three
distinct and separate compartments; and that judicial
interpretation has tended to the preservation of theAssociate Justice
independence of the three, and a zealous regard ofLEONARDO
the
A. QUISUMBING
prerogatives of each, knowing full well that one is not the
guardian of the others and that, for official wrong-doing,
Associate Justice
each may be brought to account, either by impeachment,
ANGELINA SANDOVAL-GUTIERREZ
trial or by the ballot box.100
Associate Justice
The words of the Court in Vera vs. Avelino101 holds true
RENATO C. CORONA
then, as it still holds true now. All things considered, there
is no raison d'tre for the unconstitutionality of R.A. No.
Associate Justice
9337.
ROMEO J. CALLEJO, SR.
WHEREFORE, Republic Act No. 9337 not being
unconstitutional, the petitions in G.R. Nos. 168056,Associate
168207, Justice
DANTE O. TINGA
168461, 168463, and 168730, are hereby DISMISSED.
Associate Justice

Chief Justice
ARTEMIO V. PANGANIBAN
Associate Justice
CONSUELO YNARES-SANTIAGO
Associate Justice
ANTONIO T. CARPIO
Associate Justice
CONCHITA CARPIO-MORALES
Associate Justice
ADOLFO S. AZCUNA
Associate Justice
MINITA V. CHICO-NAZARIO
Associate Justice

CANCIO C. GARCIA
Associate Justice
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, it is
hereby certified that the conclusions in the above Decision
were reached in consultation before the case was assigned
to the writer of the opinion of the Court.
HILARIO G. DAVIDE, JR.
Chief Justice

Entitled, "An Act Amending Sections 27, 28, 34,

106, 108, 109, 110, 112, 113, 114, 116, 117, 119,
121, 125, 148, 151, 236, 237 and 288 of the
National Internal Revenue Code of 1997, As
Amended, and For Other Purposes."
5

Section 26, R.A. No. 9337.

TSN, July 14, 2005.

Section 125 of the National Internal Revenue Code,

as amended, was not amended by R.A. No. 9337, as
can be gleaned from the title and body of the law.
8

Section 105, National Internal Revenue of the

Philippines, as amended.
9

Footnotes
1

Entitled "An Act Amending Sections 27, 28, 34,

106, 107, 108, 109, 110, 111, 112, 113, 114, 116,
117, 119, 121, 148, 151, 236, 237, and 288 of the
National Internal Revenue Code of 1997, As
Amended and For Other Purposes."
2

Entitled, "An Act Restructuring the Value-Added

Tax, Amending for the Purpose Sections 106, 107,
108, 110 and 114 of the National Internal Revenue
Code of 1997, As Amended, and For Other
Purposes."
3

Entitled, "An Act Amending Sections 106, 107, 108,

109, 110 and 111 of the National Internal Revenue
Code of 1997, As Amended, and For Other
Purposes."

Ibid.

10

Deoferio, Jr., V.A. and Mamalateo, V.C., The Value

Added Tax in the Philippines (First Edition 2000).
11

Maceda vs. Macaraig, Jr., G.R. No. 88291, May 31,

1991, 197 SCRA 771.
12

Maceda vs. Macaraig, Jr., G.R. No. 88291, June 8,

1993, 223 SCRA, 217.
13

Id., Deoferio, Jr., V.A. and Mamalateo, V.C., The

Value Added Tax in the Philippines (First Edition
2000).
14

Commissioner of Internal Revenue vs. Seagate,

G.R. No. 153866, February 11, 2005.

15

Kapatiran ng mga Naglilingkod sa Pamahalaan ng

Pilipinas, Inc. vs. Tan, G.R. Nos. L-81311, L-81820,
L-81921, L-82152, June 30, 1988, 163 SCRA 371.

26

16

27

Entitled, "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."

TSN, Bicameral Conference Committee on the

Disagreeing Provisions of Senate Bill No. 1950 and
House Bill Nos. 3705 and 3555, May 10, 2005, p. 4.
Id., p. 3.

28

Sponsorship Speech of Representative Teves, in

behalf of Representative Jesli Lapus, TSN, January 7,
2005, pp. 34-35.
29

17

Entitled, "An Act Amending Republic Act No. 7716,

otherwise known as the Value-Added Tax Law and
Other Pertinent Provisions of the National Internal
Revenue Code, as Amended."

G.R. No. 105371, November 11, 1993, 227 SCRA

703.
30

Supra, Note 23.

31

Id., p. 668.

32

Id., p. 671.

33

Id., pp. 661-663.

18

Entitled, "An Act Amending the National Internal

Revenue Code, as Amended, and for other
Purposes."
19

Story, Commentaries 835 (1833).

20

G.R. No. 147387, December 10, 2003, 417 SCRA

503.
21

Id., pp. 529-530.

22

Supra., Note 20.

23

G.R. No. 115455, August 25, 1994, 235 SCRA

630.
24

25

Id., p. 670.

Westers Third New International Dictionary, p.

1897.

34

Transcript of Session Proceedings, January 7,

2005, pp. 19-20.
35

Journal of the Senate, Session No. 67, March 7,

2005, pp. 727-728.
36

Id., p. 726.

37

See Angara vs. Electoral Commission, No. 45081,

July 15, 1936, 63 Phil. 139, 156.
38

Defensor-Santiago vs. Commission on Elections,

G.R. No. 127325, March 19, 1997, 270 SCRA 106,
153; People vs. Rosenthal, Nos. 46076 & 46077,
June 12, 1939, 68 Phil. 328; ISAGANI A. CRUZ,

Philippine Political Law 86 (1996). Judge Cooley

enunciates the doctrine in the following oft-quoted
language: "One of the settled maxims in
constitutional law is, that the power conferred upon
the legislature to make laws cannot be delegated by
that department to any other body or authority.
Where the sovereign power of the state has located
the authority, there it must remain; and by the
constitutional agency alone the laws must be made
until the Constitution itself is changed. The power
to whose judgment, wisdom, and patriotism
this high prerogative has been intrusted cannot
relieve itself of the responsibility by choosing
other agencies upon which the power shall be
devolved, nor can it substitute the judgment,
wisdom, and patriotism of any other body for
those to which alone the people have seen fit
to confide this sovereign trust." (Cooley on
Constitutional Limitations, 8th ed., Vol. I, p. 224)

887; People vs. Jolliffee, No. L-9553, May 13, 1959,

105 Phil 677; People vs. Vera, No. 45685, November
16, 1937, 65 Phil. 56; U.S. vs. Nag Tang Ho, No. L17122, February 27, 1922, 43 Phil. 1; Compaia
General de Tabacos vs. Board of Public Utility, No.
11216, March 6, 1916, 34 Phil. 136 et seq.

39

United States vs. Barrias, No. 4349, September

24, 1908, 11 Phil. 327, 330.
40

16 Am Jur 2d, Constitutional Law, 337.

43

Edu vs. Ericta, No. L-32096, October 24, 1970, 35

SCRA 481, 497.
44

Eastern Shipping Lines, Inc. vs. POEA, No. L76633, October 18, 1988, 166 SCRA 533, 543-544.
45

No. 45685, November 16, 1937, 65 Phil. 56.

46

Id., pp. 115-120.

47

Supra, note 43.

48

Id., pp. 496-497.

49

16 C.J.S., Constitutional Law, 138.

50

Ibid.

51

16 Am Jur 2d, Constitutional Law 340.

41

Pelaez vs. Auditor General, No. L-23825,

December 24, 1965, 122 Phil. 965, 974 citing
Calalang vs. Williams, No. 47800, December 2,
1940, 70 Phil. 726; Pangasinan Transp. Co. vs.
Public Service Commission, No. 47065, June 26,
1940, 70 Phil. 221; Cruz vs. Youngberg, No. 34674,
October 26, 1931, 56 Phil. 234; Alegre vs. Collector
of Customs, No. 30783, August 27, 1929, 53 Phil.
394 et seq.
42

Pelaez vs. Auditor General, supra, citing People vs.

Lim Ho, No. L-12091-2, January 28, 1960, 106 Phil.

52

Yajus vs. United States, 321 US 414, 88 L Ed 834,

64 S Ct. 660, 28 Ohio Ops 220.
53

Province of Batangas vs. Romulo, G.R. No.

152774, May 27, 2004; Enriquez vs. Court of
Appeals, G.R. No. 140473, January 28, 2003, 396
SCRA 377; Codoy vs. Calugay, G.R. No. 123486,
August 12, 1999, 312 SCRA 333.

54

Province of Batangas vs. Romulo, supra;

Quisumbing vs. Meralco, G.R. No. 142943, April 3,
2002, 380 SCRA 195; Agpalo, Statutory
Construction, 1990 ed., p. 45.

61

62

Respondents Memorandum, pp. 168-169.

55

63

The Wealth of Nations, Book V, Chapter II.

Villena vs. Secretary of Interior, No. 46570, April

21, 1939, 67 Phil 451, 463-464.

Acting Commissioner of Customs vs. MERALCO,

No. L-23623, June 30, 1977, 77 SCRA 469, 473.

64
56

Alunan vs. Mirasol, G.R. No. 108399, July 31,

1997, 276 SCRA 501, 513-514, citing Panama
Refining Co. vs. Ryan, 293 U.S. 388, 79 L.Ed. 469
(1935).
57

Compaia General de Tabacos de Filipinas vs. The

Board of Public Utility Commissioners, No. 11216, 34
Phil. 136; Cruz vs. Youngberg, No. 34674, October
26, 1931, 56 Phil. 234; People vs. Vera, No. 45685,
November 16, 1937, 65 Phil. 56, 113; Edu vs. Ericta,
No. L-32096, October 24, 1970, 35 SCRA 481; Tatad
vs. Secretary of the Department of Energy, G.R. No.
124360, November 5, 1997, 281 SCRA 330; Alunan
vs. Mirasol, supra.
58

Bowles vs. Willinghan, 321 US 503, 88 l Ed 892,

64 S Ct 641, 28 Ohio Ops 180.
59

United Residents of Dominican Hill, Inc. vs.

Commission on the Settlement of Land Problems,
G.R. No. 135945, March 7, 2001, 353 SCRA 782;
Commissioner of Internal Revenue vs. Santos, G.R.
No. 119252, August 18, 1997, 277 SCRA 617, 630.

Chavez vs. Ongpin, G.R. No. 76778, June 6, 1990,

186 SCRA 331, 338.
65

TSN, Bicameral Conference Committee on the

Disagreeing Provisions of Senate Bill No. 1950 and
House Bill Nos. 3705 and 3555, April 25, 2005, pp.
5-6.
66

G.R. No. 147387, December 10, 2003, 417 SCRA

503, 524.
67

National Housing Authority vs. Reyes, G.R. No. L49439, June 29, 1983, 123 SCRA 245, 249.
68

Sison vs. Ancheta, G.R. No. L-59431, July 25,

1984, 130 SCRA 654, 661.
69

Section 8, R.A. No. 9337, amending Section

110(A)(B),NIRC.
70

Ibid.

71

Commissioner of Internal Revenue vs. Benguet

Corp., G.R. Nos. 134587 & 134588, July 8, 2005.

60

Commission on Internal Revenue vs. American

Express International, Inc. (Philippine Branch), G.R.
No. 152609, June 29, 2005.

72

United Paracale Mining Co. vs. Dela Rosa, G.R.

Nos. 63786-87, April 7, 1993, 221 SCRA 108, 115.
73

E.O. No. 273, Section 1.

74

Section 5.

88

Section 7, R.A. No. 9337.

75

Section 110(B).

89

Ibid.

90

No. L-81311, June 30, 1988, 163 SCRA 371, 383.

76

Journal of the Senate, Session No. 71, March 15,

2005, p. 803.

91

Section 17, R.A. No. 9337, amending Section 148,

NIRC.

77

Id., Session No. 67, March 7, 2005, p. 726.

78

Id., Session No. 71, March 15, 2005, p. 803.

92

Section 18, amending Section 151, NIRC.

79

Revenue Regulations No. 14-2005, 4.114-2(a).

93

Section 14, amending Section 117, NIRC.

94

Section 15, amending Section 119, NIRC.

80

Commissioner of Internal Revenue vs. Philam,

G.R. No. 141658, March 18, 2005.

95
81

Revenue Regulations No. 14-2005, Sec. 4. 114-2.

82

Act V, Scene V.

83

Philippine Rural Electric Cooperatives Association,

Inc. vs. DILG, G.R. No. 143076, June 10, 2003, 403
SCRA 558, 565.
84

Aban, Benjamin, Law of Basic Taxation in the

Philippines (First Edition 1994).
85

Philippine Judges Association case, supra., note

29.
86

Commissioner of Internal Revenue vs. Court of

Appeals, G.R. No. 119761, August 29, 1996, 261
SCRA 236, 249.
87

Kee vs. Court of Tax Appeals, No. L-18080, April

22, 1963, 117 Phil 682, 688.

Sections 1 and 2, amending Sections 27 and 28,

NIRC.
96

Section 2, amending Section 28, NIRC.

97

Section 1, amending Section 27(C), NIRC.

98

Reyes vs. Almanzor, G.R. Nos. 49839-46, April 26,

1991, 196 SCRA 322, 327.
99

Tolentino vs. Secretary of Finance, G.R. No.

115455, October 30, 1995, 249 SCRA 628, 659.
100

Vera vs. Avelino, G.R. No. L-543, August 31,

1946, 77 Phil. 365.
101

Ibid.

EN BANC
G.R. No. 168056 - ABAKADA GURO PARTY LIST, ET AL.
V. EXECUTIVE SECRETARY EDUARDO R. ERMITA, ET
AL.
G.R. No. 168207 - AQUILINO PIMENTEL, JR., ET AL. V.
EXECUTIVE SECRETARY EDUARDO ERMITA, ET AL.
G.R. No. 168461 - ASSOCIATION OF PILIPINAS SHELL
DEALERS, INC, ET AL. V. CESAR V. PURISIMA, ET AL.
G.R. No. 168463 - FRANCIS JOSEPH G. ESCUDERO, ET
AL. V. CESAR V. PURISIMA, ET AL.
X- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ----------X
SEPARATE CONCURRING
AND DISSENTING OPINION
DAVIDE, JR., C.J.:
While I still hold on to my position expressed in my
dissenting opinion in the first VAT cases,1 I partly yield to
the application to the cases at bar of the rule on
"germaneness" therein enunciated. Thus, I concur with
the ponenciaof my highly-esteemed colleague Mme. Justice
Ma. Alicia Austria-Martinez except as regards its ruling on
the issue of whether Republic Act No. 9337 violates Section
24, Article VI of the Constitution.
R.A. No. 9337 primarily aims to restructure the value-added
tax (VAT) system by broadening its base and raising the
rate so as to generate more revenues for the government

that can assuage the economic predicament that our

country is now facing. This recently enacted law stemmed
from three legislative bills: House Bill (HB) No. 3555, HB
No. 3705, and Senate Bill (SB) 1950. The first (HB No.
3555) called for the amendment of Sections 106, 107, 108,
109, 110, and 111 of the National Internal Revenue Code
(NIRC) as amended; while the second (HB No. 3705)
proposed amendments to Sections 106, 107, 108, 110, and
114 of the NIRC, as amended. It is significant to note that
all these Sections specifically deal with VAT. And
indubitably, these bills are revenue bills in that they are
intended to levy taxes and raise funds for the government.2
On the other hand, SB No. 1950 introduced amendments to
"Sections 27, 28, 34, 106, 108, 109, 110, 111, 112, 113,
114, 116, 117, 118, 119, 125, 148, 236, 237, and 288" of
the NIRC, as amended. Among the provisions sought to be
amended, only Sections 106, 108, 109, 110, 111, 112, 113,
114, and 116 pertain to VAT. And while Sections 236, 237,
and 288 are administrative provisions pertaining to
registration requirements and issuance of receipts
commercial invoices, the proposed amendments thereto are
related to VAT. Hence, the proposed amendments to these
Sections were validly taken cognizance of and properly
considered by the Bicameral Conference Committee (BCC).
However, I am of the opinion that the inclusion into the law
of the amendments proposed in SB No. 1950 to the
following provisions (with modifications on the rates of
taxes) is invalid.
Provision Subject matter
Section 27 Rate of income tax on domestic corporations
Section 28(A)(1) Rate of income tax on resident foreign
corporation

Section 28(B)(1) Rate of income tax on non-resident foreign

corporation

the House of Representatives but the Senate may propose

or concur with amendments.

Section 28(B)(5-b) Rate of income tax on intra-corporate

dividends received by non-resident foreign corporation

Moreover, Sections 121 (Percentage Tax on Banks and NonBank Financial Intermediaries) and 151 (Excise Tax on
Mineral Products) of the NIRC, as amended, have been
included by the BCC in R.A. N0. 9337 even though they
were not found in the Senate and House Bills.

Section 34(B)(1) Deductions from gross income

Section 117 Percentage tax on domestic carriers and
keepers of garages
Section 119 Tax on franchises
Section 148 Excise tax on manufactured oils and other fuels
Obviously, these provisions do not deal with VAT. It must be
noted that the House Bills initiated amendments to
provisions pertaining to VAT only. Doubtless, the Senate
has the constitutional power to concur with the
amendments to the VAT provisions introduced in the House
Bills or even to propose its own version of VAT measure.
But that power does not extend to initiation of other tax
measures, such as introducing amendments to provisions
on corporate income taxes, percentage taxes, franchise
taxes, and excise taxes like what the Senate did in these
cases. It was beyond the ambit of the authority of the
Senate to propose amendments to provisions not covered
by the House Bills or not related to the subject matter of the
House Bills, which is VAT. To allow the Senate to do so
would be tantamount to vesting in it the power to initiate
revenue bills -- a power that exclusively pertains to the
House of Representatives under Section 24, Article VI of the
Constitution, which provides:
Sec. 24. All appropriation, revenue or tariff bills, bills
authorizing increase of the public debt, bills of local
application, and private bills shall originate exclusively in

In Philippine Judges Association v. Prado,3 the Court

described the function of a conference committee in this
wise: "A conference committee may deal generally with the
subject matter or it may be limited to resolving the precise
differences between the two houses. Even where the
conference committee is not by rule limited in its
jurisdiction, legislative custom severely limits the
freedom with which new subject matter can be
inserted into the conference bill."
The limitation on the power of a conference committee to
insert new provisions was laid down in Tolentino v.
Secretary of Finance.4 There, the Court, while recognizing
the power of a conference committee to include in its report
an entirely new provision that is not found either in the
House bill or in the Senate bill, held that the exercise of that
power is subject to the condition that the said provision is
"germane to the subject of the House andSenate
bills."
As pointed out by the petitioners, Tolentino differs from the
present cases in the sense that in that case the
amendments introduced in the Senate bill were on
the same subject matter treated in the House bill, which
was VAT, and the new provision inserted by the conference
committee had relation to that subject matter. Specifically,
HB No. 11197 called for the (1) amendment of Sections
99,100,102,103,104,105,106,107, 108, 110, 112,115, 116,

236,237, and 238 of the NIRC, as amended; and (2) repeal

of Sections 113 and 114 of the NIRC, as amended. SB No.
1630, on the other hand, proposed the (1) amendment of
Sections 99,100,102,103,104,105,107, 108, 110, 112, 236,
237, and 238 of the NIRC, as amended; and (2) repeal of
Sections 113, 114, and 116 of the NIRC, as amended. In
short, all the provisions sought to be changed in the Senate
bill were covered in the House bill. Although the new
provisions inserted by the conference committee were not
found in either the House or Senate bills, they were
germane to the general subject of the bills.
In the present cases, the provisions inserted by the BCC,
namely, Sections 121 (Percentage Tax on Banks and NonBank Financial Intermediaries) and 151 (Excise Tax on
Mineral Products) of the NIRC, as amended, are
undoubtedly germane to SB No. 1950, which introduced
amendments to the provisions on percentage and excise
taxes -- but foreign to HB Nos. 3555 and 3705, which dealt
with VAT only. Since the proposed amendments in the
Senate bill relating to percentage and excise taxes cannot
themselves be sustained because they did not take their
root from, or are not related to the subject of, HB Nos. 3705
and 3555, in violation of Section 24, Article VI of the
Constitution, the new provisions inserted by the BCC on
percentage and excise taxes would have no leg to stand on.
I understand very well that the amendments of the Senate
and the BCC relating to corporate income, percentage,
franchise, and excise taxes were designed to "soften the
impact of VAT measure on the consumer, i.e., by
distributing the burden across all sectors instead of putting
it entirely on the shoulders of the consumers" and to
alleviate the countrys financial problems by bringing more
revenues for the government. However, these
commendable intentions do not justify a deviation from the
Constitution, which mandates that the initiative for filing
revenue bills should come from the House of

Representatives, not from the Senate. After all, these aims

may still be realized by means of another bill that may later
be initiated by the House of Representatives.
Therefore, I vote to declare R.A. No. 9337
as constitutional insofar as it amends provisions
pertaining to VAT. However, I vote to declare
as unconstitutional Sections 1, 2, 3, 14, 15, 16, 17, and
18 thereof which, respectively, amend Sections 27, 28, 34,
117, 119, 121, 148, and 151 of the NIRC, as amended
because these amendments deal with subject matters which
were not touched or covered by the bills emanating from
the House of Representatives, thereby violating Section 24
of Article VI of the Constitution.
HILARIO G. DAVIDE, JR.

Footnotes
1

Tolentino v. Secretary of Finance, G.R. No. 115455,

25 August 1994, 235 SCRA 630, and companion
cases.
2

ISAGANI A. CRUZ, POLITICAL LAW 154 (2002 ed.)

citing U.S. v. Nortorn, 91 U.S. 566.
3

G.R. No. 105371, 11 November 1993, 27 SCRA

703, 708, citing Davies, Legislative Law and Process:
In a Nutshell 81 (1986 ed.)
4

Supra note 1.

G.R. No. 168056 ABAKADA GURO PARTY LIST, ET

AL. VS. EXECUTIVE SECRETARY EDUARDO ERMITA,ET
AL.
G.R. No. 168207 AQUILINO PIMENTEL, JR., ET
AL. VS. EXECUTIVE SECRETARY EDUARDO ERMITA, ET
AL.
G.R. No. 168461 ASSOCIATION OF PILIPINAS
SHELL DEALERS, INC., ET AL. VS. CESAR V.
PURISIMA, ET AL.
G.R. No. 168463 FRANCIS JOSEPH G. ESCUDERO, ET
AL. VS. CESAR V. PURISIMA, ET AL.
Promulgated: September 1, 2005
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - --------------x
CONCURRING AND
DISSENTING OPINION
PUNO, J.:
The main opinion of Madam Justice Martinez exhaustively
discusses the numerous constitutional and legal issues
raised by the petitioners. Be that as it may, I wish to raise
the following points, viz:

First. Petitioners assail sections 4 to 6 of Republic Act No.

9337 as violative of the principle of non-delegation of
legislative power. These sections authorize the President,
upon recommendation of the Secretary of Finance, to raise
the value-added tax (VAT) rate to 12% effective January
1, 2006, upon satisfaction of the following conditions: viz:
(i) Value-added tax collection as a percentage of Gross
Domestic Product (GDP) of the previous year exceeds two
and four-fifth percent (2 4/5%); or
(ii) National government deficit as a percentage of GDP of
the previous year exceeds one and one-half percent (1
%).
The power of judicial review under Article VIII, section 5(2)
of the 1987 Constitution is limited to the review of "actual
cases and controversies."1 As rightly stressed by retired
Justice Vicente V. Mendoza, this requirement gives the
judiciary "the opportunity, denied to the legislature, of
seeing the actual operation of the statute as it is applied to
actual facts and thus enables it to reach sounder judgment"
and "enhances public acceptance of its role in our system of
government."2 It also assures that the judiciary does not
intrude on areas committed to the other branches of
government and is confined to its role as defined by the
Constitution.3 Apposite thereto is the doctrine
of ripeness whose basic rationale is "to prevent the courts,
through premature adjudication, from entangling
themselves in abstract disagreements."4 Central to the
doctrine is the determination of "whether the case
involvesuncertain or contingent future events that may
not occur as anticipated, or indeed may not occur at
all."5 The ripeness requirement must be satisfied for each
challenged legal provision and parts of a statute so that
those which are "not immediately involved are not
thereby thrown open for a judicial determination of
constitutionality."6

It is manifest that the constitutional challenge to sections 4

to 6 of R.A. No. 9337 cannot hurdle the requirement of
ripeness. These sections give the President the power
to raise the VAT rate to 12% on January 1, 2006 upon
satisfaction of certain fact-based conditions. We are
not endowed with the infallible gift of prophesy to know
whether these conditions are certain to happen. The power
to adjust the tax rate given to the President is futuristic and
may or may not be exercised. The Court is therefore
beseeched to render a conjectural judgment based on
hypothetical facts. Such a supplication has to be rejected.
Second. With due respect, I submit that the most
important constitutional issue posed by the petitions at bar
relates to the parameters of power of a Bicameral
Conference Committee. Most of the issues in the petitions
at bar arose because the Bicameral Conference Committee
concerned exercised powers that went beyond reconciling
the differences between Senate Bill No. 1950 and House
Bill Nos. 3705 and 3555. In Tolentino v. Secretary of
Finance,7 I ventured the view that a Bicameral Conference
Committee has limited powers and cannot be allowed to
act as if it were a "third house" of Congress. I further
warned that unless its roving powersare reigned in, a
Bicameral Conference Committee can wreck the lawmaking
process which is a cornerstone of the democratic, republican
regime established in our Constitution. The passage of time
fortifies my faith that there ought to be no legal u-turn on
this preeminent principle. I wish, therefore, to reiterate my
reasons for this unbending view, viz:8
Section 209, Rule XII of the Rules of the Senate provides:
In the event that the Senate does not agree with the House
of Representatives on the provision of any bill or joint
resolution, the differences shall be settled by a conference
committee of both Houses which shall meet within ten days
after their composition.

Each Conference Committee Report shall contain a detailed

and sufficiently explicit statement of the changes in or
amendments to the subject measure, and shall be signed by
the conferees. (Emphasis supplied)
The counterpart rule of the House of Representatives is cast
in near identical language. Section 85 of the Rules of the
House of Representatives pertinently provides:
In the event that the House does not agree with the Senate
on the amendments to any bill or joint resolution, the
differences may be settled by a conference committee of
both chambers.
x x x. Each report shall contain a detailed, sufficiently
explicit statement of the changes in or amendments to the
subject measure. (Emphasis supplied)
The Jeffersons Manual has been adopted as a supplement
to our parliamentary rules and practice. Section 456 of
Jeffersons Manual similarly confines the powers of a
conference committee, viz:
The managers of a conference must confine themselves to
the differences committed to them and may not include
subjects not within the disagreements, even though
germane to a question in issue.
This rule of antiquity has been honed and honored in
practice by the Congress of the United States. Thus, it is
chronicled by Floyd Biddick, Parliamentarian Emeritus of the
United States Senate, viz:
Committees of conference are appointed for the sole
purpose of compromising and adjusting the differing and
conflicting opinions of the two Houses and the committees
of conference alone can grant compromises and modify

propositions of either Houses within the limits of the

disagreement. Conferees are limited to the consideration of
differences between the two Houses.

exclusively to the Senate and the House, the Constitution

used the word "shall." Its command for a Congress of two
houses is mandatory. It is not mandatory sometimes.

Congress shall not insert in their report matters not

committed to them by either House, nor shall they strike
from the bill matters agreed to by both Houses. No matter
on which there is nothing in either the Senate or House
passed versions of a bill may be included in the conference
report and actions to the contrary would subject the report
to a point of order. (Emphasis ours)

In vesting legislative power to the Senate, the Constitution

means the Senate " composed of twenty-four Senators
xxx elected at large by the qualified voters of the Philippines
" Similarly, when the Constitution vested the legislative
power to the House, it means the House " composed of
not more than two hundred and fifty members xxx who
shall be elected from legislative districts xxx and those who
xxx shall be elected through a party-list system of
registered national, regional, and sectoral parties or
organizations." The Constitution thus, did not vest on a
Bicameral Conference Committee with an ad
hoc membership the power to legislate for it exclusively
vested legislative power to the Senate and the House as coequal bodies. To be sure, the Constitution does not mention
the Bicameral Conference Committees of Congress. No
constitutional status is accorded to them. They are not even
statutory creations. They owe their existence from the
internal rules of the two Houses of Congress. Yet,
respondents peddle the disconcerting idea that they should
be recognized as a Third Chamber of Congress and with ex
post veto power at that.

In fine, there is neither a sound nor a syllable in the Rules

of the Senate and the House of Representatives to support
the thesis of the respondents that a bicameral conference
committee is clothed with an ex post veto power.
But the thesis that a Bicameral Conference Committee can
wield ex post veto power does not only contravene the rules
of both the Senate and the House. It wages war against our
settled ideals of representative democracy. For the
inevitable, catastrophic effect of the thesis is to install a
Bicameral Conference Committee as the Third Chamber of
our Congress, similarly vested with the power to make laws
but with the dissimilarity that its laws are not the subject of
a free and full discussion of both Houses of Congress. With
such a vagrant power, a Bicameral Conference Committee
acting as a Third Chamber will be a constitutional
monstrosity.
It needs no omniscience to perceive that our Constitution
did not provide for a Congress composed of three
chambers. On the contrary, section 1, Article VI of the
Constitution provides in clear and certain language: "The
legislative power shall be vested in the Congress of the
Philippines which shall consist of a Senate and a House of
Representatives " Note that in vesting legislative power

The thesis that a Bicameral Conference Committee can

exercise law making power with ex post veto power is
freighted with mischief. Law making is a power that can be
used for good or for ill, hence, our Constitution carefully laid
out a plan and a procedure for its exercise. Firstly, it
vouchsafed that the power to make laws should be
exercised by no other body except the Senate and the
House. It ought to be indubitable that what is contemplated
is the Senate acting as a full Senate and the House acting
as a full House. It is only when the Senate and the House
act as whole bodies that they truly represent the people.
And it is only when they represent the people that they can

legitimately pass laws. Laws that are not enacted by the

peoples rightful representatives subvert the peoples
sovereignty. Bicameral Conference Committees, with
their ad hoc character and limited membership, cannot pass
laws for they do not represent the people. The Constitution
does not allow the tyranny of the majority. Yet, the
respondents will impose the worst kind of tyranny the
tyranny of the minority over the majority. Secondly, the
Constitution delineated in deft strokes the steps to be
followed in making laws. The overriding purpose of these
procedural rules is to assure that only bills that successfully
survive the searching scrutiny of the proper committees of
Congress and the full and unfettered deliberations of both
Houses can become laws. For this reason, a bill has to
undergo three (3) mandatory separate readings in each
House. In the case at bench, the additions and deletions
made by the Bicameral Conference Committee did not enjoy
the enlightened studies of appropriate committees. It is
meet to note that the complexities of modern day
legislations have made our committee system a significant
part of the legislative process. Thomas Reed called the
committee system as "the eye, the ear, the hand, and very
often the brain of the house." President Woodrow Wilson of
the United States once referred to the government of the
United States as "a government by the Chairmen of the
Standing Committees of Congress " Neither did these
additions and deletions of the Bicameral Conference
Committee pass through the coils of collective deliberation
of the members of the two Houses acting separately. Due to
this shortcircuiting of the constitutional procedure of making
laws, confusion shrouds the enactment of R.A. No. 7716.
Who inserted the additions and deletions remains a
mystery. Why they were inserted is a riddle. To use a
Churchillian phrase, lawmaking should not be a riddle
wrapped in an enigma. It cannot be, for Article II, section
28 of the Constitution mandates the State to adopt and
implement a "policy of full public disclosure of all its
transactions involving public interest." The Constitution

could not have contemplated a Congress of invisible and

unaccountable John and Mary Does. A law whose rationale
is a riddle and whose authorship is obscure cannot bind the
people.
All these notwithstanding, respondents resort to the legal
cosmetology that these additions and deletions should
govern the people as laws because the Bicameral
Conference Committee Report was anyway submitted to
and approved by the Senate and the House of
Representatives. The submission may have some merit with
respect to provisions agreed upon by the Committee in the
process of reconciling conflicts between S.B. No. 1630 and
H.B. No. 11197. In these instances, the conflicting
provisions had been previously screened by the proper
committees, deliberated upon by both Houses and approved
by them. It is, however, a different matter with respect to
additions and deletions which were entirely new and which
were made not to reconcile inconsistencies between S.B.
No. 1630 and H.B. No. 11197. The members of the
Bicameral Conference Committee did not have any authority
to add new provisions or delete provisions already approved
by both Houses as it was not necessary to discharge their
limited task of reconciling differences in bills. At that late
stage of law making, the Conference Committee cannot
add/delete provisions which can become laws without
undergoing the study and deliberation of both chambers
given to bills on 1st, 2nd, and 3rd readings. Even the
Senate and the House cannot enact a law which will not
undergo these mandatory three (3) readings required by
the Constitution. If the Senate and the House cannot enact
such a law, neither can the lesser Bicameral Conference
Committee.
Moreover, the so-called choice given to the members of
both Houses to either approve or disapprove the said
additions and deletions is more of an optical illusion. These
additions and deletions are not submitted separately for

approval. They are tucked to the entire bill. The vote is on

the bill as a package, i.e., together with the insertions and
deletions. And the vote is either "aye" or "nay," without any
further debate and deliberation. Quite often, legislators vote
"yes" because they approve of the bill as a whole although
they may object to its amendments by the Conference
Committee. This lack of real choice is well observed by
Robert Luce:
Their power lies chiefly in the fact that reports of conference
committees must be accepted without amendment or else
rejected in toto. The impulse is to get done with the matter
and so the motion to accept has undue advantage, for some
members are sure to prefer swallowing unpalatable
provisions rather than prolong controversy. This is the more
likely if the report comes in the rush of business toward the
end of a session, when to seek further conference might
result in the loss of the measure altogether. At any time in
the session there is some risk of such a result following the
rejection of a conference report, for it may not be possible
to secure a second conference, or delay may give opposition
to the main proposal chance to develop more strength.

internal rules. In our jurisdiction, Article VI, section 16(3) of

the Constitution provides that "Each House may determine
the rules of its proceedings x x x." But it is hornbook law
that the sources of Rules of Procedure are many and
hierarchical in character. Mason laid them down as follows:
xxx
1. Rules of Procedure are derived from several sources. The
principal sources are as follows:
a. Constitutional rules.
b. Statutory rules or charter provisions.
c. Adopted rules.
d. Judicial decisions.
e. Adopted parliamentary authority.
f. Parliamentary law.

In a similar vein, Prof. Jack Davies commented that

"conference reports are returned to assembly and Senate on
a take-it or leave-it-basis, and the bodies are generally
placed in the position that to leave-it is a practical
impossibility." Thus, he concludes that "conference
committee action is the most undemocratic procedure in the
legislative process."
The respondents also contend that the additions and
deletions made by the Bicameral Conference Committee
were in accord with legislative customs and usages. The
argument does not persuade for it misappreciates the value
of customs and usages in the hierarchy of sources of
legislative rules of procedure. To be sure, every legislative
assembly has the inherent right to promulgate its own

g. Customs and usages.

2. The rules from the different sources take precedence in
the order listed above except that judicial decisions, since
they are interpretations of rules from one of the other
sources, take the same precedence as the source
interpreted. Thus, for example, an interpretation of a
constitutional provision takes precedence over a statute.
3. Whenever there is conflict between rules from these
sources the rule from the source listed earlier prevails over
the rule from the source listed later. Thus, where the
Constitution requires three readings of bills, this provision

controls over any provision of statute, adopted rules,

adopted manual, or of parliamentary law, and a rule of
parliamentary law controls over a local usage but must give
way to any rule from a higher source of authority.
(Emphasis ours)
As discussed above, the unauthorized additions and
deletions made by the Bicameral Conference Committee
violated the procedure fixed by the Constitution in the
making of laws. It is reasonless for respondents therefore to
justify these insertions as sanctioned by customs and
usages.
Finally, respondents seek sanctuary in the conclusiveness of
an enrolled bill to bar any judicial inquiry on whether
Congress observed our constitutional procedure in the
passage of R.A. No. 7716. The enrolled bill theory is a
historical relic that should not continuously rule us from the
fossilized past. It should be immediately emphasized that
the enrolled bill theory originated in England where there is
no written constitution and where Parliament is supreme. In
this jurisdiction, we have a written constitution and the
legislature is a body of limited powers. Likewise, it must be
pointed out that starting from the decade of the 40s, even
American courts have veered away from the rigidity and
unrealism of the conclusiveness of an enrolled bill. Prof.
Sutherland observed:
xxx
Where the failure of constitutional compliance in the
enactment of statutes is not discoverable from the face of
the act itself but may be demonstrated by recourse to the
legislative journals, debates, committee reports or papers of
the governor, courts have used several conflicting theories
with which to dispose of the issue. They have held: (1) that
the enrolled bill is conclusive and like the sheriffs return

cannot be attacked; (2) that the enrolled bill is prima

facie correct and only in case the legislative journal shows
affirmative contradiction of the constitutional requirement
will the bill be held invalid; (3) that although the enrolled
bill is prima facie correct, evidence from the journals, or
other extrinsic sources is admissible to strike the bill down;
(4) that the legislative journal is conclusive and the enrolled
bills is valid only if it accords with the recital in the journal
and the constitutional procedure.
Various jurisdictions have adopted these alternative
approaches in view of strong dissent and dissatisfaction
against the philosophical underpinnings of the
conclusiveness of an enrolled bill. Prof. Sutherland further
observed:
x x x. Numerous reasons have been given for this rule.
Traditionally, an enrolled bill was "a record" and as such
was not subject to attack at common law. Likewise, the rule
of conclusiveness was similar to the common law rule of the
inviolability of the sheriffs return. Indeed, they had the
same origin, that is, the sheriff was an officer of the king
and likewise the parliamentary act was a regal act and no
official might dispute the kings word. Transposed to our
democratic system of government, courts held that as the
legislature was an official branch of government the court
must indulge every presumption that the legislative act was
valid. The doctrine of separation of powers was advanced as
a strong reason why the court should treat the acts of a coordinate branch of government with the same respect as it
treats the action of its own officers; indeed, it was thought
that it was entitled to even greater respect, else the court
might be in the position of reviewing the work of a
supposedly equal branch of government. When these
arguments failed, as they frequently did, the doctrine of
convenience was advanced, that is, that it was not only an
undue burden upon the legislature to preserve its records to
meet the attack of persons not affected by the procedure of

enactment, but also that it unnecessarily complicated

litigation and confused the trial of substantive issues.
Although many of these arguments are persuasive and are
indeed the basis for the rule in many states today, they are
not invulnerable to attack. The rule most relied on the
sheriffs return or sworn official rule did not in civil
litigation deprive the injured party of an action, for always
he could sue the sheriff upon his official bond. Likewise,
although collateral attack was not permitted, direct attack
permitted raising the issue of fraud, and at a later date
attack in equity was also available; and that the evidence of
the sheriff was not of unusual weight was demonstrated by
the fact that in an action against the sheriff no presumption
of its authenticity prevailed.
The argument that the enrolled bill is a "record" and
therefore unimpeachable is likewise misleading, for the
correction of records is a matter of established judicial
procedure. Apparently, the justification is either the
historical one that the kings word could not be questioned
or the separation of powers principle that one branch of the
government must treat as valid the acts of another.
Persuasive as these arguments are, the tendency today is to
avoid reaching results by artificial presumptions and thus it
would seem desirable to insist that the enrolled bill stand or
fall on the basis of the relevant evidence which may be
submitted for or against it. (Emphasis ours)
Thus, as far back as the 1940s, Prof. Sutherland confirmed
that "x x x the tendency seems to be toward the
abandonment of the conclusive presumption rule and the
adoption of the third rule leaving only a prima
faciepresumption of validity which may be attacked by any
authoritative source of information.

Third. I respectfully submit that it is only by

strictly following the contours of powers of a Bicameral
Conference Committee, as delineated by the rules of the
House and the Senate, that we can prevent said
Committee from acting as a "third" chamber of Congress.
Under the clear rules of both the Senate and House, its
power can go no further than settling differences in
their bills or joint resolutions. Sections 88 and 89, Rule XIV
of theRules of the House of Representatives provide as
follows:
Sec. 88. Conference Committee. In the event that the
House does not agree with the Senate on the amendment to
any bill or joint resolution, the differences may be settled by
the conference committees of both chambers.
In resolving the differences with the Senate, the House
panel shall, as much as possible, adhere to and support the
House Bill. If the differences with the Senate are so
substantial that they materially impair the House Bill, the
panel shall report such fact to the House for the latters
appropriate action.
Sec. 89. Conference Committee Reports. - . . . Each report
shall contain a detailed, sufficiently explicit statement of the
changes in or amendments to the subject measure.
...
The Chairman of the House panel may be interpellated on
the Conference Committee Report prior to the voting
thereon. The House shall vote on the Conference Committee
Report in the same manner and procedure as it votes a bill
on third and final reading.
Section 35, Rule XII of the Rules of the Senate states:

Sec. 35. In the event that the Senate does not agree with
the House of Representatives on the provision of any bill or
joint resolution, the differences shall be settled by a
conference committee of both Houses which shall meet
within ten (10) days after their composition. The President
shall designate the members of the Senate Panel in the
conference committee with the approval of the Senate.
Each Conference Committee Report shall contain a detailed
and sufficiently explicit statement of the changes in, or
amendments to the subject measure, and shall be signed by
a majority of the members of each House panel, voting
separately.
The House rule brightlines the following: (1) the power of
the Conference Committee is limited . . . it is only to
settle differences with the Senate; (2) if the differences
are substantial, the Committee must report to the House
for the latters appropriate action; and (3) the Committee
report has to be voted upon in the same manner and
procedure as a bill on third and final reading. Similarly,
the Senate rule underscores in crimson that (1) the power
of the Committee is limited - - - to settle differences with
the House; (2) it can make changes or amendmentsonly in
the discharge of this limited power to settle differences with
the House; and (3) the changes or amendments are
merely recommendatory for they still have to be approved
by the Senate.
Under both rules, it is obvious that a Bicameral
Conference Committee is a mere agent of the House or the
Senate with limited powers. The House contingent in the
Committee cannot, on its own, settle differences
which are substantial in character. If it is confronted
with substantial differences, it has to go back to the
chamber that created it "for the latters appropriate
action." In other words, it must take the proper
instructions from the chambers that created it. It cannot

exercise its unbridled discretion. Where there is no

differencebetween the bills, it cannot make any change.
Where the difference is substantial, it has to return to
the chamber of its origin and ask for appropriate
instructions. It ought to be indubitable that it cannot
create a new law, i.e., that which has never been
discussed in either chamber of Congress. Its parameters
of power are not porous, for they are hedged by the clear
limitation that its only power is to settle differences in bills
and joint resolutions of the two chambers of Congress.
Fourth. Prescinding from these premises, I respectfully
submit that the following acts of the Bicameral Conference
Committee constitute grave abuse of discretion amounting
to lack or excess of jurisdiction and should be struck down
as unconstitutional nullities, viz:
a. Its deletion of the pro poor "no pass on provision"
which is common in both Senate Bill No. 1950 and House
Bill No. 3705.
Sec. 1 of House Bill No. 37059 provides:
Section 106 of the National Internal Revenue Code of 1997,
as amended, is hereby further amended to read as follows:
SEC. 106. Value-added Tax on Sale of Goods or Properties.

xxx
Provided, further, that notwithstanding the provision of the
second paragraph of Section 105 of this Code, the Valueadded Tax herein levied on the sale of petroleum products
under Subparagraph (1) hereof shall be paid and absorbed
by the sellers of petroleum products who shall be
prohibited from passing on the cost of such tax

payments, either directly or indirectly[,] to any

consumer in whatever form or manner, it being the
express intent of this act that the Value-added Tax shall be
borne and absorbed exclusively by the sellers of petroleum
products x x x.

transmission and distribution companies concerned. The

said companies shall not pass on such tax payments
to NAPOCOR or ultimately to the consumers, including
but not limited to residential end users, either as costs or in
any other form whatsoever, directly or indirectly. x x x.

Sec. 3 of the same House bill provides:

Even the faintest eye contact with the above provisions

will reveal that: (a) both the House bill and the Senate
bill prohibited the passing on to consumers of the VAT on
sales of electricity and (b) the House bill prohibited the
passing on to consumers of the VAT on sales
of petroleum products while the Senate bill is silent on the
prohibition.

Section 108 of the National Internal Revenue Code of 1997,

as amended, is hereby further amended to read as follows:
Sec. 108. Value-added Tax on Sale of Goods or Properties.

Provided, further, that notwithstanding the provision of the

second paragraph of Section 105 of this Code, the Valueadded Tax imposed under this paragraph shall be paid and
absorbed by the subject generation companies who
shall be prohibited from passing on the cost of such
tax payments, either directly or indirectly[,] to any
consumer in whatever form or manner, it being the
express intent of this act that the Value-added Tax shall be
borne and absorbed exclusively [by] the power-generating
companies.
In contrast and comparison, Sec. 5 of Senate Bill No. 1950
provides:
Value-added Tax on sale of Services and Use or Lease of
Properties.
x x x Provided, that the VAT on sales of electricity by
generation companies, and services of transmission
companies and distribution companies, as well as those of
franchise grantees of electrical utilities shall not apply to
residential end-users: Provided, that the Value-added Tax
herein levied shall be absorbed and paid by the generation,

In the guise of reconciling disagreeing provisions of the

House and the Senate bills on the matter, the Bicameral
Conference Committee deleted the "no pass on
provision" on both the sales of electricity and
petroleum products. This action by the Committee is not
warranted by the rules of either the Senate or the House.
As aforediscussed, the only power of a Bicameral
Conference Committee is to reconcile disagreeing provisions
in the bills or joint resolutions of the two houses of
Congress. The House and the Senate bills bothprohibited
the passing on to consumers of the VAT on sales of
electricity. The Bicameral ConferenceCommittee cannot
override this unequivocal decision of the Senate and
the House. Nor is it clear that there is a conflict between
the House and Senate versions on the "no pass on
provisions" of the VAT on sales of petroleum
products. The House version contained a "no pass on
provision" but the Senate had none.Elementary logic will
tell us that while there may be a difference in the two
versions, it does not necessarily mean that there is a
disagreement or conflict between the Senate and the
House. The silence of the Senate on the issue cannot be
interpreted as an outright opposition to the House
decision prohibiting the passing on of the VAT to the

consumers on sales of petroleum products. Silence can even

be conformity, albeit implicit in nature. But granting for the
nonce that there is conflict between the two versions, the
conflict cannot escape the characterization as
a substantial difference. The seismic consequence of the
deletion of the "no pass on provision" of the VAT on sales of
petroleum products on the ability of our consumers,
especially on the roofless and the shirtless of our society, to
survive the onslaught of spiraling prices ought to be
beyond quibble. The rules require that the Bicameral
Conference Committee should not, on its own, act on this
substantial conflict. It has to seek guidance from the
chamber that created it. It must receive proper instructions
from its principal, for it is the law of nature that no spring
can rise higher than its source. The records of both the
Senate and the House do not reveal that this step was
taken by the members of the Bicameral Conference
Committee. They bypassed their principal and ran riot with
the exercise of powers that the rules never bestowed on
them.
b. Even more constitutionally obnoxious are the added
restrictions on local governments use of incremental
revenue from the VAT in Section 21 of R.A. No.
9337 which were not present in the Senate or House
Bills. Section 21 of R.A. No. 9337 provides:
Fifty percent of the local government units share from VAT
shall be allocated and used exclusively for the following
purposes:
1. Fifteen percent (15%) for public elementary and
secondary education to finance the construction of
buildings, purchases of school furniture and in-service
teacher trainings;

2. Ten percent (10%) for health insurance premiums of

enrolled indigents as a counterpart contribution of the local
government to sustain the universal coverage of the
national health insurance program;
3. Fifteen percent (15%) for environmental conservation to
fully implement a comprehensive national reforestation
program; and
4. Ten percent (10%) for agricultural modernization to
finance the construction of farm-to-market roads and
irrigation facilities.
Such allocations shall be segregated as separate trust funds
by the national treasury and shall be over and above the
annual appropriation for similar purposes.
These amendments did not harmonize conflicting
provisions between the constituent bills of R.A. No. 9337
but are entirely new and extraneous concepts which fall
beyond the median thereof. They transgress the limits of
the Bicameral Conference Committees authority and must
be struck down.
I cannot therefore subscribe to the thesis of the majority
that "the changes introduced by the Bicameral Conference
Committee on disagreeing provisions were meant only to
reconcile and harmonize the disagreeing provisions for it
did not inject any idea or intent that is wholly foreign
to the subject embraced by the original provisions."
Fifth. The majority further defends the constitutionality of
the above provisions by holding that "all the changes or
modifications were germane to subjects of the provisions
referred to it for reconciliation."

With due respect, it is high time to re-examine the test of

germaneness proffered in Tolentino.

On this point, Mr. Robert Luces disconcerting

observations are apropos:

The test of germaneness is overly broad and is

the fountainhead of mischief for it allows the Bicameral
Conference Committee to change provisions in the bills of
the House and the Senate when they are not even in
disagreement. Worse still, it enables the Committee to
introduce amendments which are entirely new and have not
previously passed through the coils of scrutiny of the
members of both houses. The Constitution did not establish
a Bicameral Conference Committee that can act as a "third
house" of Congress with super veto power over bills
passed by the Senate and the House. We cannot concede
that super veto power without wrecking the delicate
architecture of legislative power so carefully laid down in
our Constitution. The clear intent of our fundamental law is
to install a lawmaking structure composed only of two
houses whose members wouldthoroughly
debate proposed legislations in representation of the will of
their respective constituents. The institution of this
lawmaking structure is unmistakable from the following
provisions: (1) requiring that legislative power shall be
vested in a bicameral legislature;10 (2) providing for quorum
requirements;11 (3) requiring that appropriation, revenue or
tariff bills, bills authorizing increase of public debt, bills of
local application, and private bills originate exclusively in
the House of Representatives;12 (4) requiring
that bills embrace one subject expressed in the title
thereof;13 and (5) mandating that bills undergo three
readings on separate days in each House prior to passage
into law and prohibiting amendments on the last reading
thereof.14 A Bicameral Conference Committee with
untrammeled powers will destroy this lawmaking structure.
At the very least, it will diminish the free and open debate
of proposed legislations and facilitate the smuggling of
what purports to be laws.

"Their power lies chiefly in the fact that reports of

conference committees must be accepted without
amendment or else rejected in toto. The impulse is to get
done with the matters and so the motion to accept
has undue advantage, for some members are sure to
prefer swallowing unpalatable provisions rather than
prolong controversy. This is more likely if the report
comes in the rush of business toward the end of the
session, when to seek further conference might result in the
loss of the measure altogether. At any time in the session
there is some risk of such a result following the rejection of
a conference report, for it may not be possible to secure a
second conference, or delay may give opposition to the
main proposal chance to develop more strength.
xxx xxx xxx
Entangled in a network of rule and custom, the
Representative who resents and would resist this theft of his
rights, finds himself helpless. Rarely can be vote, rarely can
he voice his mind, in the matter of any fraction of the bill.
Usually he cannot even record himself as protesting against
some one feature while accepting the measure as whole.
Worst of all, he cannot by argument or suggested change,
try to improve what the other branch has done.
This means more than the subversion of individual rights. It
means to a degree the abandonment of whatever
advantage the bicameral system may have. By so
much it in effect transfers the lawmaking power to
small group of members who work out in private a
decision that almost always prevails. What is worse,
these men are not chosen in a way to ensure the wisest
choice. It has become the practice to name as conferees the

ranking members of the committee, so that the accident of

seniority determines. Exceptions are made, but in general it
is not a question of who are most competent to serve.
Chance governs, sometimes giving way to favor, rarely to
merit.
xxx xxx xxx
Speaking broadly, the system of legislating by conference
committee is unscientific and therefore defective.Usually it
forfeits the benefit of scrutiny and judgment by all
the wisdom available. Uncontrolled, it is inferior to
that process by which every amendment is secured
independent discussion and vote. . . ."15
It cannot be overemphasized that in a republican form of
government, laws can only be enacted by all the duly
elected representatives of the people. It cuts against
conventional wisdom in democracy to lodge this
power in the hands of a few or in the claws of a
committee. It is for these reasons that the argument that
we should overlook the excesses of the Bicameral
Conference Committee because its report is anyway
approved by both houses is a futile attempt to square the
circle for an unconstitutional act is void and cannot be
redeemed by any subsequent ratification.
Neither can we shut our eyes to the unconstitutional acts of
the Bicameral Conference Committee by holding that the
Court cannot interpose its checking powers over mere
violations of the internal rules of Congress. In Arroyo, et
al. v. de Venecia, et al.,16 we ruled that when the
violations affect private rights or impair the
Constitution,the Court has all the power, nay, the
duty to strike them down.

In conclusion, I wish to stress that this is not the first time

nor will it be last that arguments will be foisted for the
Court to merely wink at assaults
on the Constitution on the ground of some national interest,
sometimes clear and at other times inchoate. To be sure, it
cannot be gainsaid that the country is in the vortex of a
financial crisis. The broadsheets scream the disconcerting
news that our debt payments for the year 2006 will exceed
Pph1 billion daily for interest alone. Experts underscore
some factors that will further drive up the debt service
expenses such as the devaluation of the peso, credit
downgrades and a spike in interest rates.17 But no
doomsday scenario will ever justify the thrashing of the
Constitution. The Constitution is meant to be our rule both
in good times as in bad times. It is the Courts
uncompromising obligation to defend the Constitution at all
times lest it be condemned as an irrelevant relic.
WHEREFORE, I concur with the majority but dissent on the
following points:
a) I vote to withhold judgment on the constitutionality of
the "standby authority" in Sections 4 to 6 of Republic Act
No. 9337 as this issue is not ripe for adjudication.;
b) I vote to declare unconstitutional the deletion by the
Bicameral Conference Committee of the pro poor "no pass
on provision" on electricity to residential consumers as it
contravened the unequivocal intent of both Houses of
Congress; and
c) I vote to declare Section 21 of Republic Act No. 9337 as
unconstitutional as it contains extraneous provisions not
found in its constituent bills.
REYNATO S. PUNO

Associate Justice

H.B. No. 3555 has no "no pass on provision."

House Bill No. 3705 expresses the latest intent of the
House on the matter.
10

Footnotes
1

Angara v. Electoral Commission, 63 Phil. 139

(1936); See also Tribe, American Constitutional Law,
pp. 311-314 (3rd ed.).
2

Mendoza, Judicial Review of Constitutional

Questions: Cases and Materials, p. 86 (2004).
3

Id. at 87.

Abbott Laboratories v. Gardner, 387 U.S. 136

(1967); I Tribe, American Constitutional Law, p. 334
(3rd ed.).
5

Texas v. United States, 523 U.S. 296 (1998);

Thomas v. Union Carbide Agricultural Products Co.,
473 U.S. 568 (1985); I Tribe, American
Constitutional Law, pp. 335-336 (3rd ed.).
6

Communist Party of the United States v.

Subversive Activities Control Bd., 367 U.S. 1, 71
(1961); I Tribe, American Constitutional Law, p. 336
(3rd ed.); See also concurring opinion of Justice
Brandeis in Ashwander v. Tennessee Valley
Authority, 297 U.S. 288 (1936).
7

235 SCRA 630 (1994).

See Opinion in 235 SCRA 630, 805-825.

1 Sutherland Statutory Construction 6:2 (6th

ed.): The provision requiring that legislative power
shall be vested in a bicameral legislature seeks to
"assure sound judgment that comes from separate
deliberations and actions in the respective bodies
that check and balance each other."
11

Const., Article VI, Section 16(2) (1987): "(2) A

majority of each House shall constitute a quorum to
do business, but a smaller number may adjourn from
day to day and may compel the attendance of absent
Members in such manner, and under such penalties,
as such House may provide."
12

Const., Article VI, Section 24 (1987); 1 Sutherland

Statutory Construction 9:6 (6th ed.): The provision
helps guarantee that the exercise of the taxing
power is well studied as the lower house is
"presumably more representative in character."
13

Const., Article VI, Section 26(1) (1987); I Cooley,

A Treatise on Constitutional Limitations, p. 143;
Central Capiz v. Ramirez, 40 Phil. 883 (1920): "In
the construction and application of this constitutional
restriction the courts have kept steadily in view the
correction of the mischief against which it was
aimed. The object is to prevent the practice, which
was common in all legislative bodies where no such
restrictions existed of embracing in the same bill
incongruous matters having no relation to each other
or to the subject specified in the title, by which
measures were often adopted without attracting
attention. Such distinct subjects represented diverse

interests, and were combined in order to unite the

members of the legislature who favor either in
support of all. These combinations were corruptive of
the legislature and dangerous to the State. Such
omnibus bills sometimes included more than a
hundred sections on as many different subjects, with
a title appropriate to the first section, and for other
purposes."
"The failure to indicate in the title of the bill the
object intended to be accomplished by the legislation
often resulted in members voting ignorantly for
measures which they would not knowingly have
approved; and not only were legislators thus misled,
but the public also; so that legislative provisions
were steadily pushed through in the closing hours of
a session, which, having no merit to commend them,
would have been made odious by popular discussion
and remonstrance if their pendency had been
seasonably announced. The constitutional clause
under discussion is intended to correct these evils; to
prevent such corrupting aggregations of incongruous
measures, by confining each act to one subject or
object; to prevent surprise and inadvertence by
requiring that subject or object to be expressed in
the title."

the Constitutional Limitations, pp. 286-287(8th ed.);

Smith v. Mitchell, 69 W.Va 481, 72 S.E. 755 (1911):
"The purpose of this provision of the Constitution is
to inform legislators and people of legislation
proposed by a bill, and to prevent hasty legislation."
15

235 SCRA 630, 783-784 citing Luce, Legislative

Procedure, pp. 404-405, 407 (1922); See
also Davies, Legislative Law and Process, p. 81 (2nd
ed.): "conference reports are returned to assembly
and Senate on a take-it or leave-it-basis, and the
bodies are generally placed in the position that to
leave-it is a practical impossibility." Thus, he
concludes that "conference committee action is the
most undemocratic procedure in the legislative
process."
16

268 SCRA 269, 289 (1997).

17

The Manila Standard Today, August 26, 2005, p.

1.

EN BANC

14

Const., Article VI, Section 26(2) (1987); 1

Sutherland Statutory Construction 10:4 (6th
ed.); See also IV Laurel, Journal of the (1935)
Constitutional Convention, pp. 436-437, 440-441
where the 1934 Constitutional Convention noted the
anomalous legislative practice of railroading bills on
the last day of the legislative year when members of
Congress were eager to go home. By this irregular
procedure, legislators were able to successfully insert
matters into bills which would not otherwise stand
scrutiny in leisurely debate; I Cooley, A Treatise on

GR No. 168056 -- ABAKADA GURO PARTY LIST, etc. et

al. v. HON. EXECUTIVE SECRETARY EDUARDO R.
ERMITA et al.
GR No. 168207 -- AQUILINO Q. PIMENTEL JR. et al. v.
EXECUTIVE SECRETARY EDUARDO R. ERMITA et al.
GR No. 168461 -- ASSOCIATION OF PILIPINAS SHELL
DEALERS, INC., etc. et al. v. CESAR V. PURISIMA, etc.
et al.

GR No. 168463 -- FRANCIS JOSEPH G. ESCUDERO et

al. v. CESAR V. PURISIMA etc., et al.
GR No. 168730 -- BATAAN GOVERNOR ENRIQUE T.
GARCIA JR. v. HON. EDUARDO R. ERMITA, etc. et al.
Promulgated: September 1, 2005
x -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- - -- -- -- -- x
SEPARATE OPINION
PANGANIBAN, J.:
The ponencia written by the esteemed Madame Justice Ma.
Alicia Austria-Martinez declares that the enrolled bill
doctrine has been historically and uniformly upheld in our
country. Cited as recent reiterations of this doctrine are the
two Tolentino v. Secretary of
Finance judgments1 and Farias v. Executive Secretary.2
Precedence of Mandatory
Constitutional Provisions
Over the Enrolled Bill Doctrine
I believe, however, that the enrolled bill doctrine3 is not
absolute. It may be all-encompassing in some countries like
Great Britain,4 but as applied to our jurisdiction, it must
yield to mandatory provisions of our 1987 Constitution. The
Court can take judicial notice of the form of government 5 in
Great Britain.6 It is unlike that in our country and, therefore,
the doctrine from which it originated7 could be modified
accordingly by our Constitution.

In fine, the enrolled bill doctrine applies mainly to the

internal rules and processes followed by Congress in its
principal duty of lawmaking. However, when the
Constitution imposes certain conditions, restrictions or
limitations on the exercise of congressional prerogatives,
the judiciary has both the power and the duty to strike
down congressional actions that are done in plain
contravention of such conditions, restrictions or
limitations.8 Insofar as the present case is concerned, the
three most important restrictions or limitations to the
enrolled bill doctrine are the "origination," "no-amendment"
and "three-reading" rules which I will discuss later.
Verily, these restrictions or limitations to the enrolled bill
doctrine are safeguarded by the expanded9 constitutional
mandate of the judiciary "to determine whether or not there
has been a grave abuse of discretion amounting to lack or
excess of jurisdiction on the part of any branch or
instrumentality of the government."10 Even
the ponenteof Tolentino,11 the learned Mr. Justice Vicente V.
Mendoza, concedes in another decision that each house
"may not by its rules ignore constitutional restraints or
violate fundamental rights, and there should be a
reasonable relation between the mode or method of
proceeding established by the rule and the result which is
sought to be attained."12
The Bicameral Conference Committee (BCC) created by
Congress to iron out differences between the Senate and
the House of Representatives versions of the E-VAT bills13 is
one such "branch or instrumentality of the government,"
over which this Court may exercise certiorari review to
determine whether or not grave abuse of discretion has
been committed; and, specifically, to find out whether the
constitutional conditions, restrictions and limitations on lawmaking have been violated.

In general, the BCC has at least five options in performing

its functions: (1) adopt the House version in part or in
toto, (2) adopt the Senate version in part or in toto, (3)
consolidate the two versions, (4) reject nonconflictingprovisions, and (5) adopt completely new
provisions not found in either version. This, therefore, is the
simple question: In the performance of its function of
reconciling conflicting provisions, has the Committee
blatantly violated the Constitution?
My short answer is: No, except those relating to income
taxes referred to in Sections 1, 2 and 3 of Republic Act (RA)
No. 9337. Let me explain.
Adopting the House
Version in Part or in Toto
First, the BCC had the option of adopting the House bills
either in part or in toto, endorsing them without changes.
Since these bills had passed the three-reading
requirement14 under the Constitution,15 it readily becomes
apparent that no procedural impediment would arise. There
would also be no question as to their origination,16because
the bills originated exclusively from the House of
Representatives itself.
In the present case, the BCC did not ignore the Senate and
adopt any of the House bills in part or in toto. Therefore,
this option was not taken by the BCC.
Adopting the Senate
Version in Part or in Toto
Second, the BCC may choose to adopt the Senate version
either

in part or in toto, endorsing it also without changes. In so

doing, the question of origination arises. Under the 1987
Constitution, all "revenue x x x bills x x x shall originate
exclusively in the House of Representatives, but the Senate
may propose or concur with amendments."17
If the revenue bill originates exclusively from the Senate,
then obviously the origination provision18 of the Constitution
would be violated. If, however, it originates exclusively from
the House and presumably passes the three-reading
requirement there, then the question to contend with is
whether the Senate amendments complied with the
"germane" principle.
While in the Senate, the House version may, per Tolentino,
undergo extensive changes, such that the Senate may
rewrite not only portions of it but even all of it. 19 I believe
that such rewriting is limited by the "germane" principle:
although "relevant"20 or "related"21 to the general subject of
taxation, the Senate version is not necessarily "germane" all
the time. The "germane" principle requires a legal -- not
necessarily an economic22 or political -- interpretation.
There must be an "inherent logical connection."23 What may
be germane in an economic or political sense is not
necessarily germane in the legal sense. Otherwise, any
provision in the Senate version that is entirely new and
extraneous, or that is remotely or even slightly connected,
to the vast and perplexing subject of taxation, would always
be germane. Under this interpretation, the origination
principle would surely be rendered inutile.
To repeat, in Tolentino, the Court said that the Senate may
even write its own version, which in effect would be an
amendment by substitution.24 The Court went further by
saying that "the Constitution does not prohibit the filing in
the Senate of a substitute bill in anticipation of its receipt of
the bill from the House, so long as action by the Senate as a
body is withheld pending receipt of the House bill."25 After

all, the initiative for filing a revenue bill must come from the
House26 on the theory that, elected as its members are from
their respective districts, the House is more sensitive to
local needs and problems. By contrast, the Senate whose
members are elected at large approaches the matter from a
national perspective,27 with a broader and more circumspect
outlook.28
Even if I have some reservations on the foregoing sweeping
pronouncements in Tolentino, I shall not comment any
further, because the BCC, in reconciling conflicting
provisions, also did not take the second option of ignoring
the House bills completely and of adopting only the Senate
version in part or in toto. Instead, the BCC used or applied
the third option as will be discussed below.
Compromising
by Consolidating
As a third option, the BCC may reach a compromise by
consolidating both the Senate and the House versions. It
can adopt some parts and reject other parts of both bills,
and craft new provisions or even a substitute bill. I believe
this option is viable, provided that there is no violation of
the origination and germane principles, as well as the threereading rule. After all, the report generated by the BCC will
not become a final valid act of the Legislative Department
until the BCC obtains the approval of both houses of
Congress.29
Standby Authority. I believe that the BCC did not exceed
its authority when it crafted the so-called "standby
authority" of the President. The originating bills from the
House imposed a 12 percent VAT rate,30 while the bill from
the Senate retained the
original 10 percent.31 The BCC opted to initially use the 10

percent Senate provision and to increase this rate to the 12

percent House provision, effective January 1, 2006, upon
the occurrence of a predetermined factual scenario as
follows:
"(i) [VAT] collection as a percentage of Gross Domestic
Product (GDP) of the previous year exceeds two and fourfifth percent (2 4/5%) or
(ii) National Government Deficit as a percentage of GDP of
the previous year exceeds one and one-half percent
(11/2%)."32
In the computation of the percentage requirements in the
alternative conditions under the law, the amounts of the
VAT collection, National Deficit,33 and GDP34 -- as well as
the interrelationship among them -- can easily be derived
by the finance secretary from the proper government bodies
charged with their determination. The law is complete and
standards have been fixed.35 Only the fact-finding
mathematical computation for its implementation on
January 1, 2006, is necessary.
Once either of the factual and mathematical events
provided in the law takes place, the President has no choice
but to implement the increase of the VAT rate to 12
percent.36 This eventuality has been predetermined by
Congress.37
The taxing power has not been delegated by Congress to
either or both the President and the finance secretary. What
was delegated
was only the power to ascertain the facts in order to bring
the law into operation. In fact, there was really no
"delegation to speak of;

__________________
Culled from the same record, the following excerpts show
the position of public respondents:
"Justice Panganiban: It will be based on actual figures?
"Usec. Bonoan: It will be based on actual figures.
"Justice Panganiban: That creates a problem[,] because
where do you get the actual figures[?]
"Usec. Bonoan: I understand that[,] traditionally[,] we
can come in March, but there is no impediment to
speeding up the gathering.
"Justice Panganiban: Speed it up. February 15?
"Usec. Bonoan: Even within January, Your Honor, I think
this can be.
"Justice Panganiban: Alright at the end of January, its just
estimate to get the figures in January.
"Usec. Bonoan: Yes, Your Honor (pp. 661-662); and
xxx
"Justice Panganiban: My only point is, I raised this earlier
and I promised counsel for the petitioner whom I was
questionin[g] that I will raise it with you, whether the
date January 1, 2006 would present an impossibility
of a condition happening.
"Usec. Bonoan: It will not, Your Honor.

"Justice Panganiban: So, your position [is] it will not present

an impossibility. Elaborate on it in your memorandum.
"Usec. Bonoan: Yes, Your Honor.
"Justice Panganiban: Because it is important. The
administrative regulations are important[,] because
they clarify the law and it will guide taxpayers. So[,]
by January 1[,] [taxpayers] would not be wondering. Do we
charge the end consumers 10 [percent] or 12 [percent]?
The regulations should be able to spell that out [i]n the
same manner that even now the various consumers of
various products and services must be able to get from your
there was merely a declaration of an administrative, not
a legislative, function.38
I concur with the ponencia in that there was no undue
delegation of legislative power in the increase from 10
percent to 12 percent of the VAT rate. I respectfully
disagree, however, with the statements therein that, first,
the secretary of finance is "acting as the agent of the
legislative department" or an "agent of Congress" in
determining and declaring the event upon which its
expressed will is to take effect; and, second, that the
secretarys personality "is in reality but a projection of that
of Congress."

The secretary of finance is not an alter ego of Congress, but

of the President. The mandate given by RA 9337 to the
secretary is not equipollent to an authority to make laws. In
passing this law, Congress did not restrict or curtail the
constitutional power of the President to retain control and
supervision over the entire Executive Department. The law
should be construed to be merely asking the President, with

a recommendation from the Presidents alter ego in finance

matters, to determine the factual bases for making the
increase in VAT rate operative.39 Indeed, as I have
mentioned earlier, the fact-finding condition is a
mere administrative, not legislative, function.
The ponencia states that Congress merely delegates the
implementation of the law to the secretary of finance. How
then can the latter be its agent? Making a law is different
from implementing it. While the first (the making of laws)
may be delegated under certain conditions and only in
specific instances provided under the Constitution,
the second (the implementation of laws) may not be done
by Congress. After all, the legislature does not have the
power to implement laws. Therefore, congressional agency
arises only in the first, not in the second. The first is a
legislative function; the second, an executive one.
Petitioners argument is that because the GDP does not
account for the economic effects of so-called underground
businesses, it is an inaccurate indicator of either economic
growth or slowdown in transitional economies.40 Clearly,
this matter is within the confines of lawmaking. This Court
is neither a substitute for the wisdom, or lack of it, in
Congress,41 nor an arbiter of flaws within the latters
internal rules.42 Policy matters lie within the domain of the
political branches of government,43 outside the range of
judicial cognizance.44 "[T]he right to select the measure and
objects of taxation devolves upon the Congress, and not
upon the courts, and such selections are valid unless
constitutional limitations are overstepped."45 Moreover,
each house of Congress has the power and authority to
determine the rules of its proceedings.46 The contention that
this case is not ripe for determination because there is no
violation yet of the Constitution regarding the exercise of
the Presidents standby authority has no basis. The question
raised is whether the BCC, in passing the law, committed
grave abuse of discretion, not whether the provision in

question had been violated. Hence, this case is not

premature and is, in fact, subject to judicial determination.
Amendments on Income Taxes. I respectfully submit
that the amendments made by the BCC (that were culled
from the Senate version) regarding income taxes 47 are not
legally germane to the subject matter of the House bills.
Revising the income tax rates on domestic, resident foreign
and nonresident foreign corporations; increasing the tax
credit against taxes due from nonresident foreign
corporations on intercorporate dividends; and reducing the
allowable deduction for interest expense are legally
unrelated and not germane to the subject matter contained
in the House bills; they violate the origination
principle.48 The reasons are as follows:
One, an income tax is a direct tax imposed on actual or
presumed income -- gross or net -- realized by a taxpayer
during a given taxable year,49 while a VAT is an indirect
tax not in the context of who is directly and legally liable for
its payment, but in terms of its nature as "a tax on
consumption."50 The former cannot be passed on to the
consumer, but the latter can.51 It is too wide a stretch of the
imagination to even relate one concept with the other. In
like manner, it is inconceivable how the provisions that
increase corporate income taxes can be considered
asmitigating measures for increasing the VAT and, as I will
explain later, for effectively imposing a maximum of 3
percent tax on gross sales or revenues because of the 70
percent cap. Even the argument that the corporate income
tax rates will be reduced to 30 percent does not hold water.
This reduction will take effect only in 2009, not 2006 when
the 12 percent VAT rate will have been implemented.
Two, taxes on intercorporate dividends are final, but the
input VAT is generally creditable. Under a finalwithholding
tax system, the amount of income tax that is withheld by a
withholding agent is constituted as a full and final payment

of the income tax due from the payee on said income.52 The
liability for the tax primarily rests upon the payor as a
withholding agent.53 Under a creditable withholding tax
system, taxes withheld on certain payments are meant to
approximate the tax that is due of the payee on said
payments.54 The liability for the tax rests upon the payee
who is mandated by law to still file a tax return, report the
tax base, and pay the difference between the tax withheld
and the tax due.55
From this observation alone, it can already be seen that not
only are dividends alien to the tax base upon which the VAT
is imposed, but their respective methods of withholding are
totally different. VAT-registered persons may not always be
nonresident foreign corporations that declare and pay
dividends, while intercorporate dividends are certainly not
goods or properties for sale, barter, exchange, lease or
importation. Certainly, input VAT credits are different from
tax credits on dividends received by nonresident foreign
corporations.
Three, itemized deductions from gross income partake of
the nature of a tax exemption.56 Interest -- which is among
such deductions -- refers to the amount paid by a debtor to
a creditor for the use or forbearance of money.57 It is an
expense item that is paid or incurred within a given taxable
year on indebtedness in connection with a taxpayers trade,
business or exercise of profession.58 In order to reduce
revenue losses, Congress enacted RA 842459 which reduces
the amount of interest expense deductible by a taxpayer
from gross income, equal to the applicable percentage of
interest income subject to final tax.60 To assert that
reducing the allowable deduction in interest expense is a
matter that is legally related to the proposed VAT
amendments is too far-fetched. Interest expenses are not
allowed as credits against output VAT. Neither are VATregistered persons always liable for interest.

Having argued on the unconstitutionality (nongermaneness) of the BCC insertions on income taxes, let
me now proceed to the other provisions that were attacked
by petitioners.
No Pass-on Provisions. I agree with the ponencia that the
BCC did not exceed its authority when it deleted the no
pass-on provisions found in the congressional bills. Its
authority to make amendments not only implies the power
to make insertions, but also deletions, in order to
resolve conflicting provisions.
The no pass-on provision in House Bill (HB) No. 3705
referred to the petroleum products subject to excise tax
(and the raw materials used in the manufacture of such
products), the sellers of petroleum products, and the
generation companies.61 The analogous provision in Senate
Bill (SB) No. 1950 dealt with electricity, businesses other
than generation companies, and services of franchise
grantees of electric utilities.62 In contrast, there was a
marked absence of the no pass-on provision in HB 3555.
Faced with such variances, the BCC had the option of
retaining or modifying the no pass-on provisions and
determining their extent, or of deleting them altogether. In
opting for deletion to resolve the variances, it was merely
acting within its discretion. No grave abuse may be imputed
to the BCC.
The 70 Percent Cap on Input Tax and the 5 Percent
Final Withholding VAT. Deciding on the 70 percent cap
and the 5 percent final withholding VAT in the consolidated
bill is also within the power of the BCC. While HB 3555
included limits of 5 percent and 11 percent on input
tax,63 SB 1950 proposed an even spread over 60
months.64The decision to put a cap and fix its rate, so as to
harmonize or to find a compromise in settling the apparent
differences in these versions,65 was within the sound
discretion of the BCC.

In like manner, HB 3555 contained provisions on the

withholding of creditable VAT at the rates of 5 percent, 8
percent, 10.5 percent, and 12 percent.66 HB 3705 had no
such equivalent amendment, and SB 1950 pegged the rates
at only 5 percent and 10 percent.67 I believe that the
decision to impose a final (not creditable) VAT and to fix the
rates at 5 percent and 10 percent, so as to harmonize the
apparent differences in all three versions, was also within
the sound discretion of the BCC.
Indeed, the tax credit method under our VAT system is not
only practical, but also principally used in almost all taxing
jurisdictions. This does not mean, however, that in the eyes
of Congress through the BCC, our country can neither
deviate from this method nor modify its application to suit
our fiscal requirements. The VAT is usuallycollected through
the tax credit method (and in the past, even through the
cost deduction method or a mixture of these two
methods),68 but there is no hard and fast rule that 100
percent of the input taxes will always be allowed as a tax
credit.
In fact, it was Maurice Laur, a French engineer,69 who
invented the VAT. In 1954, he had the idea of imposing an
indirect tax on consumption, called taxe sur la valeur
ajoute,70 which was quickly adopted by the Direction
Gnrale des Impost, the new French tax authority of which
he became joint director. Consequently, taxpayers at all
levels in the production process, rather than retailers or tax
authorities, were forced to administer and account for the
tax themselves.71
Since the unutilized input VAT can be carried over to
succeeding quarters, there is no undue deprivation of
property. Alternatively, it can be passed on to the
consumers;72 there is no law prohibiting that. Merely
speculative and unproven, therefore, is the contention that
the law is arbitrary and oppressive.73 Laws that impose

taxes are necessarily burdensome, compulsory, and

involuntary.
The deferred input tax account -- which accumulates the
unutilized input VAT -- remains an asset in the accounting
records of a business. It is not at all confiscated by the
government. By deleting Section 112(B) of the Tax
Code,74 Congress no longer made available tax credit
certificates for such asset account until retirement from or
cessation of business, or changes in or cessation of VATregistered status.75 This is a matter of policy, not legality.
The Court cannot step beyond the confines of its
constitutional power, if there is absolutely no clear showing
of grave abuse of discretion in the enactment of the law.
That the unutilized input VAT would be rendered useless is
merely speculative.76 Although it is recorded as a deferred
asset in the books of a company, it remains to be a mere
privilege. It may be written off or expensed outright; it may
also be denied as a tax credit.
There is no vested right in a deferred input tax account; it is
a mere statutory privilege.77 The State may modify or
withdraw such privilege, which is merely an asset granted
by operation of law.78 Moreover, there is no vested right in
generally accepted accounting principles.79 These refer to
accounting concepts, measurement techniques, and
standards of presentation in a companys financial
statements, and are not rooted in laws of nature, as are the
laws of physical science, for these are merely developed and
continually modified by local and international regulatory
accounting bodies.80 To state otherwise and recognize such
asset account as a vested right is to limit the taxing power
of the State. Unlimited, plenary, comprehensive and
supreme, this power cannot be unduly restricted by mere
creations of the State.

That the unutilized input VAT would also have an unequal

effect on businesses -- some with low, others with high,
input-output ratio -- is not a legal ground for invalidating
the law. Profit margins are a variable of sound business
judgment, not of legal doctrine. The law applies equally to
all businesses; it is up to each of them to determine the
best formula for selling their goods or services in the face of
stiffer competition. There is, thus, no violation of the equal
protection clause. If the implementation of the 70 percent
cap would cause an ad infinitum deferment of input taxes or
an unequal effect upon different types of businesses with
varying profit margins and capital requirements, then the
remedy would be an amendment of the law -- not an
unwarranted and outright declaration of unconstitutionality.
The matter of business establishments shouldering 30
percent of output tax and remitting the amount, as
computed, to the government is in effect imposing a tax
that is equivalent to a maximum of 3 percent of gross sales
or revenues.81 This imposition is arguably another tax on
gross -- not net -- income and thus a deviation from the
concept of VAT as a tax on consumption; it also assumes
that sales or revenues are on cash basis or, if on credit,
given credit terms shorter than a quarter of a year.
However, such additional imposition and assumption are
also arguably within the power of Congress to make. The
State may in fact choose to impose an additional 3 percent
tax on gross income, in lieu of the 70 percent cap, and thus
subject the income of businesses to two types of taxes -one on gross, the other on net. These impositions may
constitute double taxation,82 which is not constitutionally
proscribed.83
Besides, prior to the amendments introduced by the BCC,
already extant in the Tax Code was a 3 percentpercentage
tax on the gross quarterly sales or receipts of persons who
were not VAT-registered, and whose sales or receipts were
exempt from VAT.84 This is another type of tax imposed by

the Tax Code, in addition to the tax on their respective

incomes. No question as to its validity was raised before;
none is being brought now. More important, there is a
presumption in favor of constitutionality,85 "rooted in the
doctrine of separation of powers which enjoins upon the
three coordinate departments of the Government a
becoming courtesy for each others acts."86
As to the argument that Section 8 of RA 9337 contravenes
Section 1 of Article III and Section 20 of Article II of the
1987 Constitution, I respectfully disagree.
One, petitioners have not been denied due process or, as I
have illustrated earlier, equal protection. In the exercise of
its inherent power to tax, the State validly interferes with
the right to property of persons, natural or artificial. Those
similarly situated are affected in the same way and treated
alike, "both as to privileges conferred and liabilities
enforced."87
RA 9337 was enacted precisely to achieve the objective of
raising revenues to defray the necessary expenses of
government.88 The means that this law employs are
reasonably related to the accomplishment of such objective,
and not unduly oppressive. The reduction of tax credits is a
question of economic policy, not of legal perlustration. Its
determination is vested in Congress, not in this Court. Since
the purpose of the law is to raise revenues, it cannot be
denied that the means employed is reasonably related to
the achievement of that purpose. Moreover, the proper
congressional procedure for its enactment was
followed;89 neither public notice nor public hearings were
denied.
Two, private enterprises are not discouraged. Tax burdens
are never delightful, but with the imposition of the 70
percent cap, there will be an assurance of a steady cash

flow to the government, which can be translated to the

production of improved goods, rendition of better services,
and construction of better facilities for the people, including
all private enterprises. Perhaps, Congress deems it best to
make our economy depend more on businesses that are
easier to monitor, so there will be a more efficient collection
of taxes. Whatever is expected of the outcome of the law,
or its wisdom, should be the sole responsibility of the
representatives chosen by the electorate.
The profit margin rates of various industries generally do
not change. However, the profit margin figures do, because
these are obviously monetary variables that affect business,
along with the level of competition, the quality of goods and
services offered, and the cost of their production. And there
will inevitably be a conscious desire on the part of those
who engage in business and those who consume their
output to adapt or adjust accordingly to any congressional
modification of the VAT system.
In addition, it is contended that the VAT should be
proportional in nature. I submit that this proportionality
pertains to the rate imposable, not the credit allowable.
Private enterprises are subjected to a proportional VAT rate,
but VAT credits need not be. The VAT is, after all, a human
concept that is neither immutable nor invariable. In fact, it
has changed after it was adopted as a system of indirect
taxation by other countries. Again unlike the laws of
physical science, the VAT system can always be modified to
suit modern fiscal demands. The State, through the
Legislative Department, may even choose to do away with it
and revert to our previous system of turnover taxes, sales
taxes and compensating taxes, in which credits may be
disallowed altogether.
Not expensed, but amortized over its useful life, is capital
equipment, which is purchased or treated as capital leases
by private enterprises. Aimed at achieving the twin

objectives of profitability and solvency, such purchase or

lease is a matter of prudence in business decision-making.
Hence, business judgments, sales volume, and their effect
on competition are for businesses to determine and for
Congress to regulate -- not for this Court to interfere with,
absent a clear showing that constitutional provisions have
been violated. Tax collection and administrative feasibility
are for the executive branch to focus on, again not for this
Court to dwell upon.
The Transcript of the Oral Arguments on July 14, 2005
clearly point out in a long line of relevant questioning that,
absent a violation of constitutional provisions, the Court
cannot interfere with the 70 percent cap, the 5 percent final
withholding tax, and the 60-month amortization, there
being other extra-judicial remedies available to petitioners,
thus:
"Atty. Baniqued: But if your profit margin is low as i[n] the
case of the petroleum dealers, x x x then we would have a
serious problem, Your Honor.
"Justice Panganiban: Isnt the solution to increase the price
then?
"Atty. Baniqued: If you increase the price which you can
very well do, Your Honor, then that [will] be deflationary
and it [will] have a cascading effect on all other basic
commodities[, especially] because what is involved here is
petroleum, Your Honor.
"Justice Panganiban: That may be true[,] but its not
unconstitutional?
"Atty. Baniqued: That may be true, Your Honor, but the
very limitation of the [seventy percent] input [VAT], when

applied to the case of the petroleum dealers[,] is

oppressive[.] [I]ts unjust and its unreasonable, Your
Honor.
"Justice Panganiban: But it can be passed as a part of sales,
sales costs rather.
"Atty. Baniqued: But the petroleum dealers here
themselves interrupted
"Justice Panganiban: In your [b]alance [s]heet, it could be
reflected as Cost of Sales and therefore the price will go up?
"Atty. Baniqued: Even if it were to be reflected as part of
the Cost of Sales, Your Honor, the [input VAT] that you
cannot claim, the benefit to you is only to the extent of the
corporate tax rate which is 32 now 35 [percent].
"Justice Panganiban: Yes.
"Atty. Baniqued: Its not 100 [percent] credi[ta]bility[,]
unlike if it were applied against your [output VAT], you get
to claim 100 [percent] of it, Your Honor.
"Justice Panganiban: That might be true, but we are talking
about whether that particular provision would be
unconstitutional. You say its oppressive, but you have a
remedy, you just pass it on to the customer. I am not
sayin[g] its good[.] [N]either am I saying its wise[.] [A]ll
Im talking about is, whether its constitutional or not.
"Atty. Baniqued: Yes, in fact we acknowledge, Your
Honor, that that is a remedy available to the petroleum
dealers, but considering the impact of that limitation[,] and
were just talking of the 70 [percent cap] on [input VAT] in
the level of the petroleum dealers. Were not even talking

yet of the limitation on the [input VAT] available to the

manufacturers, so, what if they pass that on as well?
"Justice Panganiban: Yes.
"Atty. Baniqued: Then, it would complicate interrupted
"Justice Panganiban: What I am saying is, there is a
remedy, which is business in character. The mere fact that
the government is imposing that [seventy percent] cap does
not make the law unconstitutional, isnt it?
"Atty. Baniqued: It does, Your Honor, if it can be shown.
And as we have shown, it is oppressive and unreasonable, it
is excessive, Your Honor interrupted
"Justice Panganiban: If you have no way of recouping it. If
you have no way of recouping that amount, then it will be
oppressive, but you have a business way of recouping it[.] I
am saying that, not advising that its good. All I am saying
is, is it constitutional or not[?] Were not here to determine
the wisdom of the law, thats up for Congress. As pointed
out earlier, if the law is not wise, the law makers will be
changed by the people[.] [T]hat is their solution t[o] the
lack of wisdom of a law. If the law is unconstitutional[,]
then the Supreme Court will declare it unconstitutional and
void it, but[,] in this case[,] there seems to be a business
remedy in the same manner that Congress may just impose
that tax straight without saying its [VAT]. If Congress will
just say all petroleum will pay 3 [percent] of their Gross
Sales, but you dont bear that, you pass that on, isnt it?
"Atty. Baniqued: We acknowledge your concern, Your
Honor, but we should not forget that when the petroleum
dealers pass these financial burden or this tax differential to
the consumers, they themselves are consumers in their own
right. As a matter of fact, they filed this case both as

petroleum dealer[s] and as taxpayers. If they pass if on,

they themselves would ultimately bear the burden[,
especially] in increase[d] cost of electricity, land transport,
food, everything, Your Honor.
"Justice Panganiban: Yes, but the issue here in this Court, is
whether that act of Congress is unconstitutional.
"Atty. Baniqued: Yes, we believe it is unconstitutional, Your
Honor.
"Justice Panganiban: You have a right to complain that it is
oppressive, it is excessive, it burdens the people too much,
but is it unconstitutional?
"Atty. Baniqued: Besides, passing it on, Your Honor, may
not be as simple as it may seem. As a matter of fact, at the
strike of midnight on June 30, when petroleum prices were
being changed upward, the [s]ecretary of [the] Department
of Energy was going around[.] [H]e was seen on TV going
around just to check that prices dont go up. And as a
matter of fact, he had pronouncements that, the increase in
petroleum price should only be limited to the effect of 10
[percent] E-VAT.
"Justice Panganiban: Its becaus[e] the implementing rules
were not clear and were not extensive enough to cover how
much really should be the increase for various oil products,
refined oil products. Its up for the dealers to guess, and the
dealers were guessing to their advantage by saying plus 10
[percent] anyway, right?
"Atty. Baniqued: In fact, the petroleum dealers, Your
Honors, are not only faced with constitutional issues before
this Court. They are also faced with a possibility of the
Department of Energy not allowing them to pass it on[,]

because this would be an unreasonable price increase. And

so, they are being hit from both sidesinterrupted
"Justice Panganiban: Thats why I say, that there is need to
refine the implementing rules so that everyone will know,
the customers will know how much to pay for gasoline, not
only gasoline, gasoline, and so on, diesel and all kinds of
products, so therell be no confusion and therell be no
undue taking advantage. There will be a smooth
implementation[,] if the law were to be upheld by the Court.
In your case, as I said, it may be unwise to pass that on to
the customers, but definitely, the dealers will not bear that
[--] to suffer the loss that you mentioned in your
consolidated balance sheets. Certainly, the dealers will not
bear that [cost], isnt it?
"Atty. Baniqued: It will be a very hard decision to make,
Your Honor.
"Justice Panganiban: Why, you will not pass it on?
"Atty. Baniqued: I cannot speak for the dealers.
interrupted.
"Justice Panganiban: As a consumer, I will thank you if you
dont pass it on[;] but you or your clients as businessm[e]n,
I know, will pass it on.
"Atty. Baniqued: As I have said, Your Honor, there are
many constraints on their ability to do that[,] and that is
why the first step that we are seeking is to seek redress
from this Honorable Court[,] because we feel that the
imposition is excessive and oppressive.. interrupted
"Justice Panganiban: You can find redress here, only if you
can show that the law is unconstitutional.

"Atty. Baniqued: We realized that, Your Honor.

"Justice Panganiban: Alright. Lets talk about the 5
[percent] [d]epreciation rate, but that applies only to
the capital equipment worth over a million?
"Atty. Baniqued: Yes, Your Honor.
"Justice Panganiban: And that doesnt apply at all times,
isnt it?
"Atty. Baniqued: Well
"Justice Panganiban: That doesnt at all times?
"Atty. Baniqued: For capital goods costing less than 1
million, Your Honor, then.
"Justice Panganiban: That will not apply?
"Atty. Baniqued: That will not apply, but you will have the
70 [percent] cap on input [VAT], Your Honor.
"Justice Panganiban: Yes, but we talked already about the
70 [percent].
"Atty. Baniqued: Yes, Your Honor.
"Justice Panganiban: When you made your presentation on
the balance sheet, it is as if every capital expenditure you
made is subject to the 5 [percent,] rather the [five year]
depreciation schedule[.] [T]hats not so. So, the
presentation you made is a little inaccurate and misleading.

"Atty. Baniqued: At the start of our presentation, Your

Honor[,] we stated clearly that this applies only to capital
goods costing more than one [million].
"Justice Panganiban: Yes, but you combined it later on with
the 70 [percent] cap to show that the dealers are so
disadvantaged. But you didnt tell us that that will apply
only when capital equipment or goods is one million or
more. And in your case, what kind of capital goods will be
worth one million or more in your existing gas stations?
"Atty. Baniqued: Well, you would have petroleum dealers,
Your Honor, who would have[,] aside from sale of
petroleum[,] they would have their service centers[,]
like[] to service cars and they would have those
equipments, they are, Your Honor.
"Justice Panganiban: But thats a different profit center,
thats not from the sale of
"Atty. Baniqued: No, they would form part of their
[VATable] sale, Your Honor.
Justice Panganiban: Its a different profit center[;] its not in
the sale of petroleum products. In fact the mode now is to
put up super stores in huge gas stations. I do not begrudge
the gas station[.] [A]ll I am saying is it should be presented
to us in perspective. Neither am I siding with the
government. All I am saying is, when I saw your
complicated balance sheet and mathematics, I saw that you
were to put in all the time the depreciation that should be
spread over [five] years. But we have agreed that that
applies only to capital equipment [-- ]not to any kind of
goods [--] but to capital equipment costing over 1 million
pesos.

"Atty. Baniqued: Yes, Your Honor, we apologize if it has

caused a little confusion.
"Justice Panganiban: Again the solution could b[e] to
pass that on, because thats an added cost, isnt it?
"Atty. Baniqued: Well, yes, you can pass it on.
"Justice Panganiban: I am not teaching you, I am just
saying that you have a remedy I am not saying either that
the remedy is wise or should be done, because[,] as a
consumer[,] I wouldnt want that to be done to me.

"Justice Panganiban: Sales of petroleum products.

"Atty. Baniqued: in the case of NTC, Your Honor, it
would come back to us by way of increase[d] cost, Your
Honor.
"Justice Panganiban: Okay, lets see. You sell, lets say[,]
your petroleum products to the Supreme Court, as a gas
station that sells gasoline to us here. Under this law, the 5
[percent] withholding tax will have to be charged, right?
"Atty. Baniqued: Yes, Your Honor.

"Atty. Baniqued: We realiz[e] that, Your Honor, but the fact

remain[s] that whether it is in the hands of the petroleum
dealers or in the hands of the consumers[,] if this
imposition is unreasonable and oppressive, it will remain so,
even after it is passed on, Your Honor.

"Justice Panganiban: You will charge that[.] [T]herefore[,]

the sales to the Supreme Court by that gas station will
effectively be higher?

"Justice Panganiban: Alright. Lets go to the third. The 5

[percent] withholding tax, [f]inal [w]ithholding [t]ax, but
this applies to sales to government?

"Justice Panganiban: So, the Supreme Court will pay more,

you will not [be] going to [absorb] that 5 [percent], will
you?

"Atty. Baniqued: Yes, Your Honor.

"Atty. Baniqued; If it is passed on, Your Honor, thats of

course we agree. Interrupted.

"Justice Panganiban: So, you can pass on this 5

[percent] to the [g]overnment. After all, that 5
[percent] will still go back to the government.
"Atty. Baniqued: Then it will come back to haunt us, Your
Honor..
"Justice Panganiban: Why?
"Atty. Baniqued: By way of, for example sales to NAPOCOR
or NTC. interrupted

"Atty. Baniqued: Yes, Your Honor.

"Justice Panganiban: Not if, you can pass it on.

"Atty. Baniqued: Yes, we can. interrupted
"Justice Panganiban: There is no prohibition to passing it
on[.] [P]robably the gas station will simply pass it on to the
Supreme Court and say[,] well[,] there is this 5 [percent]
final VAT on you so[,] therefore, for every tank full you
buy[,] well just have to [charge] you 5 [percent] more.
Well, the Supreme Court will probably say, well, anyway,

that 5 [percent] that we will pay the gas dealer, will be paid
back to the government, isnt it[?] So, how [will] you be
affected?
"Atty. Baniqued: I hope the passing on of the burden, Your
Honor, doesnt come back to party litigants by way of
increase in docket fees, Your Honor.

"Justice Panganiban: For agreeing to it, because the wisdom

of a law is not for the Supreme Court to pass upon.
"Atty. Baniqued: It just so happens, Your Honor, that what
is [involved] here is a commodity that when it goes up, it
affects everybody.
"Justice Panganiban: Yes, inflationary and inflammatory.

"Justice Panganiban: But thats quite another m[a]tter,

though(laughs) [W]hat I am saying, Mr. [C]ounsel is, you
still have to show to us that your remedy is to declare the
law unconstitutional[,] and its not business in character.
"Atty. Baniqued: Yes, Your Honor, it is our submission that
this limitation in the input [VAT] credit as well as the
amortization.
"Justice Panganiban: All you talk about is equal protection
clause, about due process, depreciation of property without
observance of due process[,] could really be a remedy than
a business way.
"Atty. Baniqued: Business in the level of the petroleum
dealers, Your Honor, or in the level of Congress, Your
Honor.
"Justice Panganiban: Yes, you can pass them on to
customers[,] in other words. Its the customers who should
[complain].
"Atty. Baniqued: Yes, Your Honor interrupted
"Justice Panganiban: And perhaps will not elect their
representatives anymore[.]
"Atty. Baniqued: Yes, Your Honor..

"Atty. Baniqued: just like what Justice Puno says it shakes

the entire economic foundation, Your Honor.
"Justice Panganiban: Yes, its inflationary[,] brings up the
prices of everything
"Atty. Baniqued: And it is our submission that[,] if the
petroleum dealers cannot absorb it and they pass it on to
the customers, a lot of consumers would neither be in a
position to absorb it too and that[s] why we patronize, Your
Honor.
"Justice Panganiban: There might be wisdom in what youre
saying, but is that unconstitutional?
"Atty. Baniqued: Yes, because as I said, Your Honor, there
are even constraints in the petroleum dealers to pass it on,
and we[]re not even sure whether.interrupted
"Justice Panganiban: Are these constraints [--] legal
constraints?
"Atty. Baniqued: Well, it would be a different story, Your
Honor[.] [T]hats something we probably have to take
up with the Department of Energy, lest [we may] be
accused of ..

"Justice Panganiban: In other words, thats your remedy

[--] to take it up with the Department of Energy
"Atty. Baniqued: ..unreasonable price increases, Your
Honor.
"Justice Panganiban: Not for us to declare those provisions
unconstitutional.
"Atty. Baniqued: We, again, wish to stress that the
petroleum dealers went to this Court[,] both as
businessmen and as consumers. And as consumers, [were]
also going to bear the burden of whatever they themselves
pass on.
"Justice Panganiban: You know[,] as a consumer, I wish you
can really show that the laws are unconstitutional, so I dont
have to pay it. But as a magistrate of this Court, I will have
to pass upon judgment on the basis of [--] whether the law
is unconstitutional or not. And I hope you can in your
memorandum show that.
"Atty. Baniqued: We recognized that, Your Honor."
(boldface supplied, pp. 386-410).
Amendments on Other Taxes and Administrative
Matters. Finally, the BCCs amendments regarding other
taxes90 are both germane in a legal sense and reasonably
necessary in an economic sense. This fact is evident,
considering that the proposed changes in the VAT law will
have inevitable implications and repercussions on such
taxes, as well as on the procedural requirements and the
disposition of incremental revenues, in the Tax Code.
Either mitigating measures91 have to be put in place
or increased rates imposed, in order to achieve the purpose
of the law, cushion the impact of increased taxation, and

still maintain the equitability desired of any other revenue

law.92 Directly related to the proposed VAT changes, these
amendments are expected also to have a salutary effect on
the national economy.
The no-amendment rule93 in the Constitution was not
violated by the BCC, because no completely new provision
was inserted in the approved bill. The amendments may be
unpopular or even work hardship upon everyone (this writer
included). If so, the remedy cannot be prescribed by this
Court, but by Congress.
Rejecting Non-Conflicting
Provisions
Fourth, the BCC may choose neither to adopt nor to
consolidate the versions presented to it by both houses of
Congress, but instead to reject non-conflicting provisions in
those versions. In other words, despite the lack of conflict in
them, such provisions are still eliminated entirely from the
consolidated bill. There may be a constitutional problem
here.
The no pass-on provisions in the congressional bills are the
only item raised by petitioners concerning deletion.94As I
have already mentioned earlier, these provisions were in
conflict. Thus, the BCC exercised its prerogative to remove
them. In fact, congressional rules give the BCC the power to
reconcile disagreeing provisions, and in the process of
reconciliation, to delete them. No other non-conflicting
provision was deleted.
At this point, and after the extensive discussion above, it
can readily be seen no non-conflicting provisions of the EVAT bills were rejected indiscriminately by the BCC.

Approving and Inserting

Completely New Provisions
Fifth, the BCC had the option of inserting completely new
provisions not found in any of the provisions of the bills of
either house of Congress, or make and endorse an entirely
new bill as a substitute. Taking this option may be a blatant
violation of the Constitution, for not only will the
surreptitious insertion or unwarranted creation contravene
the "origination" principle; it may likewise desecrate the
three-reading requirement and the no-amendment rule.95
Fortunately, however, the BCC did not approve or insert
completely new provisions. Thus, no violation of the
Constitution was committed in this regard.
Summary
The enrolled bill doctrine is said to be conclusive not only as
to the provisions of a law, but also to its due enactment. It
is not absolute, however, and must yield to mandatory
provisions of the 1987 Constitution. Specifically, this Court
has the duty of striking down provisions of a law that in
their enactment violate conditions, restrictions or limitations
imposed by the Constitution.96 The Bicameral Conference
Committee (BCC) is a mere creation of Congress. Hence,
the BCC may resolve differences only in conflicting
provisions of congressional bills that are referred to it; and
it may do so only on the condition that such resolution does
not violate the origination, the three-reading, and the noamendment rules of the Constitution.
In crafting RA 9337, the BCC opted to reconcile the
conflicting provisions of the Senate and House bills,
particularly those on the 70 percent cap on input tax; the 5
percent final withholding tax; percentage taxes on domestic

carriers, keepers of garages and international carriers;

franchise taxes; amusement taxes; excise taxes on
manufactured oils and other fuels; registration
requirements; issuance of receipts or sales or commercial
invoices; and disposition of incremental revenues. To my
mind, these changes do not violate the origination or the
germaneness principles.
Neither is there undue delegation of legislative power in the
standby authority given by Congress to the President. The
law is complete, and the standards are fixed. While I concur
with the ponencias view that the President was given
merely the power to ascertain the facts to bring the law into
operation -- clearly an administrative, not a legislative,
function -- I stress that the finance secretary remains the
Chief Executives alter ego, not an agent of Congress.
The BCC exercised its prerogative to delete the no pass-on
provisions, because these were in conflict. I believe,
however, that it blatantly violated the origination and the
germaneness principles when it inserted provisions not
found in the House versions of the E-VAT Law: (1)
increasing the tax rates on domestic, resident foreign and
nonresident foreign corporations; (2) increasing the tax
credit against taxes due from nonresident foreign
corporations on intercorporate dividends; and (3) reducing
the allowable deduction for interest expense. Hence, I find
these insertions unconstitutional.
Some have criticized the E-VAT Law as oppressive to our
already suffering people. On the other hand, respondents
have justified it by comparing it to bitter medicine that
patients must endure to be healed eventually of their
maladies. The advantages and disadvantages of the E-VAT
Law, as well as its long-term effects on the economy, are
beyond the reach of judicial review. The economic
repercussions of the statute are policy in nature and are
beyond the power of the courts to pass upon.

I have combed through the specific points raised in the

Petitions. Other than the three items on income taxes that I
respectfully submit are unconstitutional, I cannot otherwise
attribute grave abuse of discretion to the BCC, or Congress
for that matter, for passing the law.
"[T]he Court -- as a rule -- is deferential to the actions
taken by the other branches of government that have
primary responsibility for the economic development of our
country."97 Thus, in upholding the Philippine ratification of
the treaty establishing the World Trade Organization
(WTO), Taada v. Angara held that "this Court never forgets
that the Senate, whose act is under review, is one of two
sovereign houses of Congress and is thus entitled to great
respect in its actions. It is itself a constitutional body,
independent and coordinate, and thus its actions are
presumed regular and done in good faith. Unless convincing
proof and persuasive arguments are presented to overthrow
such presumption, this Court will resolve every doubt in its
favor."98 As pointed our inCawaling Jr. v. Comelec, the
grounds for nullity of the law "must be beyond reasonable
doubt, for to doubt is to sustain."99 Indeed, "there must be
clear and unequivocal showing that what the Constitutions
prohibits, the statute permits."100
WHEREFORE, I vote to GRANT the Petitions in part and to
declare Sections 1, 2, and 3 of Republic Act No. 9337
unconstitutional, insofar as these sections (a) amend the
rates of income tax on domestic, resident foreign, and
nonresident foreign corporations; (b) amend the tax
credit against taxes due from nonresident foreign
corporations on intercorporate dividends; and (c) reduce the
allowable deduction for interest expense. The other
provisions are constitutional, and as to these I vote
to DISMISS the Petitions.
ARTEMIO V. PANGANIBAN

Associate Justice

Footnotes
1

235 SCRA 630, August 25, 1994; and 249 SCRA

628, October 30, 1995. The second case is an en
banc Resolution on the Motions for Reconsideration
of the first case.
2

417 SCRA 503, December 10, 2003.

"[I]t is well settled that the enrolled bill doctrine is

conclusive upon the courts as regards the tenor of
the measure passed by Congress and approved by
the President." Resins Inc. v. Auditor General, 134
Phil. 697, 700, October 29, 1968, per Fernando, J.,
later CJ.; (citing Casco Philippine Chemical Co., Inc.
v. Gimenez, 117 Phil. 363, 366, February 28, 1963,
per Concepcin, J., later CJ.). It is a doctrine that
flows as a corollary to the separation of powers, and
by which due respect is given by one branch of
government to the actions of the others. See Morales
v. Subido, 136 Phil. 405, 412, February 27, 1969.
Following Field v. Clark (143 US 649, 12 S.Ct. 495,
February 29, 1892), such conclusiveness refers not
only to the provisions of the law, but also to its due
enactment. Mabanag v. Lopez Vito, 78 Phil. 1, 1318, March 5, 1947.
"[T]he signing of a bill by the Speaker of the House
and the Senate President and the certification of the
Secretaries of both [h]ouses of Congress that it was
passed are conclusive of its due enactment." Farias

v. Executive Secretary, supra, p. 529, per Callejo

Sr., J.
4

Mabanag v. Lopez Vito, supra, p. 12.

1 of Rule 129 of the Rules of Court.

www.parliament.uk; and
http://encyclopedia.thefreedictionary.com/British+Pa
rliament (Last visited August 4, 2005, 11:30am
PST).
7

See Dissenting Opinion of Puno, J. in Tolentino v.

Secretary of Finance, supra, p. 818.

The United Kingdom has an uncodified Constitution,

consisting of both written and unwritten sources,
capable of evolving to be responsive to political and
social change, and found partly in conventions and
customs and partly in statute. Its Parliament has the
power to change or abolish any written or unwritten
element of the Constitution. There is neither
separation of powers nor formal checks and
balances. Every bill drafted has to be approved by
both the House of Commons and the House of Lords,
before it receives the Royal Assent and becomes an
Act of Parliament. The House of Lords is the second
chamber that complements the work of the
Commons, whose members are elected to represent
their constituents. The first is the House of Commons
that alone may start bills to raise taxes or authorize
expenditures. Each bill goes through several stages
in each House. The first stage, called the first
reading, is a mere formality. The second -- the
second reading -- is when general principles of the
bill are debated upon. At the second reading, the
House may vote to reject the bill. Once the House
considers the bill, the third reading follows. In the
House of Commons, no further amendments may be
made, and the passage of the motion amounts to
passage of the whole bill. The House of Lords,
however, may not amend a bill so as to insert a
provision relating to taxation.
http://en.wikipedia.org/wiki/Constitution_of_the_Uni
ted_Kingdom; http://
www.oefre.unibe.ch/law/icl/uk00000_.html;

Cf. Francisco Jr. v. House of Representatives, 415

SCRA 44, November 10, 2003.
9

Tolentino v. Secretary of Finance, supra.

10

2nd paragraph, 1 of Article VIII of the 1987

Constitution.
11

Tolentino v. Secretary of Finance, supra.

12

Arroyo v. De Venecia, 343 Phil. 42, 61-62, August

14, 1997, per Mendoza, J.
13

These refer to House Bill Nos. 3555 & 3705; and

Senate Bill No. 1950.
14

15

26(2) of Article VI of the 1987 Constitution.

"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." Tolentino v. Secretary of Finance, supra, p. 647,
October 30, 1995, per Mendoza, J.

16

24 of Article VI of the 1987 Constitution.

17

24 of Article VI of the 1987 Constitution.

24

Tolentino v. Secretary of Finance, supra, p. 663,

August 25, 1994. See Cruz, Philippine Political
Law(2002), p. 154.

The power of the Senate to propose or concur with

amendments is, apparently, without restriction. By
virtue of this power, the Senate can practically
rewrite a bill that is required to come from the House
and leave only a trace of the original bill. See Flint v.
Stone Tracy Co., 220 US 107, 31 S.Ct. 342, March
13, 1911.

25

18

28

24 of Article VI of the 1987 Constitution.

Tolentino v. Secretary of Finance, supra, August

25, 1994, per Mendoza, J.
26

Cruz, Philippine Political Law (2002), p. 155.

27

Tolentino v. Secretary of Finance, supra, August

25, 1994.
Cruz, Philippine Political Law (2002), p. 111.

19

Tolentino v. Secretary of Finance, supra, p. 661,

August 25, 1994.

29

20

There is no allegation in any of the memoranda

submitted to this Court that the consolidated bill was
not approved. In fact, both houses of Congress voted
separately and majority of each house approved it.

Garner (ed. in chief), Blacks Law Dictionary (8th

ed., 2004), p. 708.
21

Statsky, Wests Legal

Thesaurus/Dictionary (1986), p. 348.

Tolentino v. Secretary of Finance, supra, p. 668,

August 25, 1994.

30
22

To argue that the raising of revenues makes the

non-VAT provisions of a VAT bill automatically
germane is to bring legal analysis within the
penumbra of economic scrutiny. The burden or
impact of any tax depends on the relative elasticities
of supply and demand and is chiefly a matter of
policy confined within the august halls of
Congress. See Pindyck and
Rubinfeld, Microeconomics (5th ed., 2003), pp. 314317.
23

Exxon Mobil Corp. v. Allapattah Services, Inc., 125

S.Ct. 2611, 2622, June 23, 2005, per Kennedy, J.

On the one hand, 1-3 of House Bill (HB) No.

3555 seek to amend 106, 107 & 108 the Tax Code
by increasing the VAT rate to 12% on every sale,
barter or exchange of goods or properties;
importation of goods; and sale or exchange of
services, including the use or lease of properties.
1-3 of HB 3705, on the other, seek to amend
106, 107 & 108 the Tax Code by
also increasing the VAT rate to 12% on every sale,
barter or exchange of goods or properties;
importation of goods; and sale or exchange of
services, including the use or lease of properties,
but decreasing such rate to 8% on every importation
of certain goods; 6% on the sale, barter or exchange

of certain locally manufactured goods; and 4% on

the sale, barter or exchange, as well as importation,
of petroleum products subject to excise tax and raw
materials to be used in their manufacture (subject to
subsequent increases of such reduced rates), and on
the gross receipts derived from services rendered on
the sale of generated power.

GDP
33

A negative budget surplus, or an excess of

expenditure over revenues, is a budget deficit.
Dornbusch, Fischer, and
Startz, Macroeconomics (9th ed., 2005), p. 231.
34

The Tax Code referred to in this case is RA 8424,

otherwise known as the "Tax Reform Act of 1997."
31

4-5 of Senate Bill (SB) No. 1950 seek to amend

106 & 108 of the Tax Code by retaining the VAT
rate of 10% on every sale, barter or exchange of
goods or properties; and on the sale or exchange of
services, including the use or lease of properties, and
the sale of electricity by generation, transmission,
and distribution companies.

GDP refers to the value of all goods and services

produced domestically; the sum of gross value added
of all resident institutional units engaged in
production (plus any taxes, and minus any subsidies,
on products not included in the values of their
outputs). www.nscb.gov.ph/sna/default.asp (Last
visited July 14, 2005 10am PST).
35

See Pelaez v. Auditor General, 122 Phil. 965, 974,

December 24, 1965.
36

32

4-6 of the consolidated bill amending 106108 of the Tax Code, respectively. Conference
Committee Report on HBs 3555 & 3705, and SB
1950, pp. 4-7.
The predetermined factual scenario in the abovecited sections of the consolidated bill also appears in
4-6 of Republic Act (RA) No. 9337, amending the
same provisions of the Tax Code. Mathematically, it
is expressed as follows:

The acts of retroactively implementing the 12

percent VAT rate, should the finance secretary be
able to make recommendation only weeks or months
after the end of fiscal year 2005, or reverting to 10
percent if both conditions are not met, are best
addressed to the political branches of government.
The following excerpts from the Transcript of the
Oral Arguments in GR Nos. 168461,
168463, 168056, and 168207, held on July 14, 2005
at the Supreme Court Session Hall, are instructive on
the position of petitioners:

VAT Collection > 2.8%

or

"Atty. Gorospe: [Its] supposed to be 2005, Your

Honor, but apparently, it [will] be impossible to
determine GDP the first day of 2006, Your
Honor." (p. 57);

National Government Deficit > 1.5%

xxx

GDP

"Justice Panganiban: Now [lets see] when it is

possible then to determine this formula. It cannot be
on the first day of January 2006, because the year
[2005] ended just the midnight before, isnt it?

"Atty. Gana: Well, they anticipated it, would take

at most by March." (p. 193); and

"Atty. Gorospe: Yes, Your Honor.

"Justice Panganiban: March, I will ask the

government later on when they argue.

"Justice Panganiban: x x x if its only determined on

March 1[,] then how can the law become effective
January 1[.] In other words, how will the [people be]
able to pay the tax if ever that formula is exceeded x
x x?" (pp. 59-60);
xxx
"Atty. Gana: Well, x x x it would take a grace
period of 6 to 8 months[,] because obviously,
determination could not be made on January 1,
2006. Yes, they were under the impression that at
the earliest it would take 30 days.
"Justice Panganiban: Historically, when [will] these
figures [be] available[:] the GDP, [VAT] collection?"
(p. 192);
xxx
"Justice Panganiban: But certainly not on January 1.
Therefore, by January 1, people would not know
whether the rate would be increased or not,
even if there is no discretion?
"Atty. Gana: Thats true, Your Honor, even if there
is no discretion.
"Justice Panganiban: It will take weeks, or months to
be able to determine that?

xxx

"Atty. Gana: As early as January but not later

than 60 to 90 days." (boldface supplied; p. 194).
37

38

regulations how much they [would] be charged,

how much should gasoline stations charge in addition
to their correct prices, how much carriers should
charge[,] so there [would] be no confusion.
"Usec. Bonoan: Yes, Your Honor." (boldface
supplied; pp. 665-666).
37 Using available statistics, it is approximated that
the 24/5 percent has been reached. VAT collection (in
million pesos) for the first quarter alone of 2004 is
83,542.83, or 83 percent of revenue collections
amounting to 100,654.01. Divided into GDP of
13,053, the quotient is already 6.4 percent.
http://www.nscb.gov.ph/sna/2005/1stQ2005/2005p
er1.asp; and the 2003 Bureau of Internal Revenue
(BIR) Annual Report found on www.bir.gov.ph (Last
visited July 14, 2005, 10:45am PST).
[38] Besides, the use of the word "shall" in
106(A), 107(A) & 108(A) of the Tax Code, as
amended respectively by 4, 5 & 6 of RA 9337, is
mandatory, imperative and compulsory. See

Agpalo, Statutory Construction (4th ed., 1998), p.

333.
39

See Separate Opinion (Concurring and Dissenting)

of Panganiban, J., in Southern Cross Cement Corp. v.
Philippine Cement Manufacturers Corp., GR No.
158540, August 3, 2005, p. 31.
40

Escudero Memorandum, pp. 38-39.

GDP data are far from perfect measures of either

economic output or welfare. There are three major
problems: (1) some outputs are poorly measured
because they are not traded in the market, and
government services are not directly priced by such
market; (2) some activities measured as additions to
GDP in fact only represent the use of resources in
order to avoid crime or risks to national security; and
(3) it is difficult to account correctly for
improvements in the quality of goods. Dornbusch,
Fischer, and Startz,Macroeconomics (9th ed., 2005),
pp. 35-36.

courts." Tolentino v. Secretary of Finance, supra, p.

650, October 30, 1995, per Mendoza, J.;
(citing Missouri, K. & T. Ry. Co. v. May, 194 US 267,
270, 24 S.Ct. 638, 639, May 2, 1904, per
Holmes, J.)
44

Farias v. Executive Secretary, 417 SCRA, 503,

524, December 10, 2003.
45

Flint v. Stone Tracy Co., 220 US 107, 167, 31

S.Ct. 342, 355, March 13, 1911, per Day, J.
46

16(3) of Article VI of the 1987 Constitution.

"Parliamentary rules are merely procedural, and with

their observance, the courts have no concern. They
may be waived or disregarded by the legislative
body." Arroyo v. De Venecia, supra, p. 61, August
14, 1997, per Mendoza, J.; (citing Osmea Jr. v.
Pendatun, 109 Phil 863, 870-871, October 28, 1960,
per Bengzon,J.).
47

41

Farias v. Executive Secretary, 417 SCRA, 503,

530, December 10, 2003.
42

"Any meaningful change in the method and

procedures of Congress or its committees must x x x
be sought in that body itself." Tolentino v. Secretary
of Finance, supra, p. 650, October 30, 1995, per
Mendoza, J.

HBs 3555 & 3705 do not contain any provision

that seeks to revise non-VAT provisions of the Tax
Code, but SB 1950 has 1-3 that seek to amend
the rates of income tax on domestic, resident foreign
and nonresident foreign corporations at 35% (30%
in 2009), with a tax credit on intercorporate
dividends at 20% (15% in 2009); and to reduce the
allowable deductions for interest expense by 42%
(33% in 2009) of the interest income subject to final
tax.

43

The necessity, desirability or expediency of a law

must be addressed to Congress as the body that is
responsible to the electorate, for "legislators are the
ultimate guardians of the liberties and welfare of the
people in quite as great a degree [as the]

48

The amendments to income taxes also partake of

the nature of taxation without representation. As I
will discuss in the succeeding paragraphs of this
Opinion, they did not emanate from the House of

Representatives that, under 24 of Article VI of the

1987 Constitution, is the only body from which
revenue bills should exclusively originate.
49

Mamalateo, Philippine Income Tax (2004), p. 1.

50

Commissioner of Internal Revenue v. American

Express International, Inc. (Philippine Branch), GR
No. 152609, p. 20, June 29, 2005, per
Panganiban, J. See Deoferio Jr. & Mamalateo, The
Value Added Tax in the Philippines (2000), p. 36.

59

RA 8424 refers to the Tax Reform Act of 1997.

60

The 42 percent reduction rate under 3 of RA

9337, amending 34(B)(1) of the Tax Code, is
derived by first subtracting the 20 percent tax on
interest income from the increased tax rate of 35
percent imposed on domestic, resident foreign, and
nonresident foreign corporations, and then dividing
the difference obtained by the increased rate. Hence,
it is computed as follows:
35% - 20% = 15%

51

De Leon, The Fundamentals of Taxation (12th ed.,

1998), pp. 92 & 132.

15% : 35% = 42%, the amount of reduction.

52

61

Mamalateo, Philippine Income Tax (2004), p. 379.

53

Vitug, Tax Law and Jurisprudence (2nd ed., 2000),

p. 188.
54

Mamalateo, Philippine Income Tax (2004), p. 380.

55

De Leon, The Law on Transfer and Business

Taxation with Illustrations, Problems, and
Solutions (1998), pp. 195-196 & 222-224.
56

Mamalateo, Philippine Income Tax (2004), p. 173.

57

See 78 of Revenue Regulations No. 2-1940,

recommended by Bibiano L. Meer, then Collector of
Internal Revenue, and promulgated by Manuel
Roxas, then Secretary of Finance, later President of
the Republic of the Philippines, on February 11,
1941, XXXIX OG 18, 325.
58

62

5 of SB 1950. There seems to be a discrepancy

between the Conference Committee Report and the
various pleadings before this Court. While such
report, attaching a copy of the bill as reconciled and
approved by its conferees, as well as the report
submitted by the Senates Committee on Ways &
Means to the Senate President on March 7, 2005,
show that SB 1950 does not contain a no-pass on
provision, the petitioners and respondents show that
it does (Pimentel Memorandum, Annex A showing a
"Matrix on the Disagreeing Provisions of the [VAT]
Bills," pp. 9-11; Escudero Memorandum, p. 42; and
Respondents Memorandum, pp. 109-110). Notably,
the qualified dissent of Senator Joker Arroyo to the
Bicameral Conference Report states that the Senate
version prohibits the power companies from passing
on the VAT that they will pay.
63

Mamalateo, Philippine Income Tax (2004), p. 196.

1-3 of HB 3705.

4 of HB 3555 seeks to amend 110(A) of the Tax

Code by limiting to 5% and 11% of their respective

total amounts the claim for input tax credit of capital

goods, through equal distribution of the amount of
such claim over their depreciable lives; and of goods
and services other than capital goods, and goods
purchased by persons engaged in retail trade.

creditable against their respective VAT liabilities -10.5%, in case of government public works
contractors; and 12% of the payments for the lease
or use of properties or property rights to nonresident
owners.

64

67

7 of SB 1950 seeks to amend 110 of the Tax

Code by also limiting the claim for input tax credit of
goods purchased or imported for use in trade or
business, through an even depreciation or
amortization over the month of acquisition and the
59 succeeding months, if the aggregate acquisition
cost of such goods exceeds P 660,000.
The depreciation or amortization in the amendments
is referred to as a "spread-out" in an unnumbered
Revenue Memorandum Circular dated July 12, 2005,
submitted to this Court by public respondents in their
Compliance dated August 16, 2005. Such spread-out
recognizes industries where capital assets are
constructed or assembled.
65

66

No cap is found in HB 3705.

5 of HB 3555 seeks to amend 114 of the Tax

Code by requiring that the VAT be deducted and
withheld by the government or by any of its political
subdivisions, instrumentalities or agencies -including government-owned-and-controlled
corporations (GOCCs) -- before making any payment
on account of each purchase of goods from sellers
and services rendered by contractors. The VAT
deducted and withheld shall be at the rates of 5% of
the gross payment for the purchase of goods and 8%
of the gross receipts for services rendered by
contractors on every sale or installment payment.
The VAT that is deducted and withheld shall be

11 of SB 1950 seeks to amend 114 of the Tax

Code by requiring that the VAT be deducted and
withheld by the government or by any of its political
subdivisions, instrumentalities or agencies -including government-owned or -controlled
corporations (GOCCs) -- before making any payment
on account of each purchase of goods from sellers
and services rendered by contractors. The VAT
deducted and withheld shall be at the rates of 5% of
the gross payment for the purchase of goods and on
the gross receipts for services rendered by
contractors, including public works contractors. The
VAT that is deducted and withheld shall be creditable
against the VAT liability of the seller; and 10% of the
gross payment for the lease or use of properties or
property rights to nonresident owners.
68

Deoferio Jr. & Mamalateo, The Value Added Tax in

the Philippines (2000), pp. 34-35 & 44.
69

http://explanation-guide.info/meaning/MauriceLaur.html (Last visited August 23, 2005, 3:25pm

PST).
70

This refers to a "tax on value added" -- TVA in

French and VAT in English.
71

http://en.wikipedia.org/wiki/ Maurice-Laur
(Last visited August 23, 2005, 3:20pm PST).

72

The Transcript of the Oral Arguments in GR Nos.

168461, 168463, 168056, and 168207, held on July
14, 2005 at the Supreme Court Session Hall, show
that the act of passing on to consumers is a mere
cash flow problem, as agreed to by counsel for
petitioners in GR No. 168461:

76

"Justice Panganiban: So, the final consumer pays the

tax?

77

"Atty. Baniqued: Yes, Your Honor.

78

"Justice Panganiban: The trade people in between

the middlemen just take it as an input and then
[collect] it as output, isnt it?
Atty. Baniqued: Yes, Your Honor.

That the unutilized input VAT can be considered an

ordinary and necessary expense for which a
corresponding deduction will be allowed against
gross income under 34(A)(1) of the Tax Code -instead of a deferred asset -- is another matter to be
adjudicated upon in proper cases.
See United Paracale Mining Co. v. De la Rosa, 221
SCRA 108, 115, April 7, 1993.
The law referred to is not only the Tax Code, but
also RA 9298, otherwise known as the "Philippine
Accountancy Act of 2004."
79

These are based on pronouncements of recognized

bodies involved in setting accounting principles.
Greatest weight shall be given to their
pronouncements in the order listed below:

"Justice Panganiban: Its just a cash flow problem for

them, essentially?

1. Securities and Exchange Commission (SEC);

"Atty. Baniqued: Yes x x x." (p. 375).

2. Accounting Standards Council;

73

The 5 percent final withholding tax may also be

charged as part of a suppliers Cost of Sales.

3. Standards issued by the International Accounting

Standards Board (now Committee); and

74

4. Accounting principles and practices for which there

has been a long history of acceptance and usage.

This refers to RA 8424, as amended.

75

In fact, 112(B) of the Tax Code, prior to and after

its amendment by 10 of RA 9337, does not at all
prohibit the application of unused input taxes against
other internal revenue taxes. The manner of
application is determined though by the BIR through
4.112-1(b) of Revenue Regulations No. 14-2005,
otherwise known as the "Consolidated VAT
Regulations of 2005," dated June 22, 2005.

If there appears to be a conflict between any of the

bodies listed above, the pronouncements of the first
listed body shall be applied. SEC Securities
Regulation Code Rule 68(1)(b)(iv) as amended, cited
in Appendix C of Morales, The Philippine Securities
Regulation Code (Annotated), [2005], p. 578.

Recommended by the World Bank and the Asian

Development Bank, and increasingly recognized
worldwide, international accounting standards (IAS)
have been merely adopted by Philippine regulatory
bodies and accredited professional organizations. The
SEC, for instance, complies with the agreement
among co-members of the International Organization
of Securities Commissions to adopt IAS in order to
ensure high-quality and transparent financial
reporting, with full disclosure as a means to promote
credibility and efficiency in the capital markets. In
implementing the General Agreement on Trade in
Services, the Professional Regulatory Board of
Accountancy (PRBOA) of the Professional Regulatory
Commission supports the adoption of IAS. The
Philippine Institute of Certified Public Accountants, a
member of the International Accounting Standards
Committee (IASC), also has the commitment to
support the work of the IASC and uses best
endeavors to foster compliance with IAS.
http://www.picpa.com.ph/adb/index.htm (Last
visited August 23, 2005, 3:15pm PST).

81

80

Meigs & Meigs, Accounting: The Basis for Business

Decisions (1981), pp. 28 & 515.

30% x 10% = 3% of gross sales, receipts or

revenues.

Under 9(b) & (g) of RA 9298, the PRBOA shall

supervise the practice of accountancy in the
Philippines and adopt measures -- such as the
promulgation of accounting and auditing standards,
rules and regulations, and best practices -- that may
be deemed proper for the enhancement and
maintenance of high professional, ethical,
accounting, and auditing standards that include
international accounting and auditing standards and
generally accepted best practices.

82

The VAT is collected on each sale of goods or

properties or upon the actual or constructive receipt
of consideration for services, starting from the
production stage, followed by the intermediate
stages in the distribution process, and culminating
with the sale to the final consumer. This is the
essence of a VAT; it is a tax on the value added, that
is, on the excess of sales over
purchases. See Deoferio Jr. & Mamalateo, The Value
Added Tax in the Philippines (2000), pp. 33-34. With
the 70 percent cap on output tax that is allowable as
an input tax credit, the remaining 30 percent
becomes an outright expense that is, however,
immediately payable and remitted by the business
establishment to the government. This amount can
never be recovered or passed on to the consumer,
but it can be an allowable deduction from gross
income under 34(A)(1) of the Tax Code. In effect, it
is a tax computed by multiplying 30 percent to the
10 percent VAT that is imposed on gross sales,
receipts or revenues. It is not a tax on tax and,
mathematically, it is derived as follows:

"Double taxation means taxing the same property

[or subject matter] twice when it should be taxed
only once; that is, taxing the same person twice by
the same jurisdiction for the same
thing." Commissioner of Internal Revenue v.
Solidbank Corp., 416 SCRA 436, November 25,
2003, per Panganiban, J.; (citing Afisco Insurance
Corp. v. CA, 361 Phil. 671, 687, January 25, 1999,
per Panganiban, J.). See Commissioner of Internal
Revenue v. Bank of Commerce, GR No. 149636, pp.
17-18, June 8, 2005.

83

"The rule x x x is well settled that there is no

constitutional prohibition against double
taxation." China Banking Corp. v. CA, 403 SCRA 634,
664, June 10, 2003, per Carpio, J.
Cruz, Constitutional Law (1998), p. 89.

amusement taxes in 125; excise taxes on

manufactured oils and other fuels in 148;
registration requirements in 236; issuance of
receipts or sales or commercial invoices in 237; and
disposition of incremental revenues in 288.

84

91

116 of the Tax Code as amended.

85

"[C]ourts accord the presumption of

constitutionality to legislative enactments, not only
because the legislature is presumed to abide by the
Constitution[,] but also because the judiciary[,] in
the determination of actual cases and
controversies[,] must reflect the wisdom and justice
of the people as expressed through their
representatives in the executive and legislative
departments of the government." Angara v. Electoral
Commission, 63 Phil. 139, 158-159, July 15, 1936,
per Laurel, J.; (cited in Francisco Jr. v. House of
Representatives, supra, pp. 121-122.)

"[T]he removal of the excise tax on diesel x x x

and other socially sensitive products such as
kerosene and fuel oil substantially lessened the
impact of VAT. The reduction in import duty x x x
also eased the impact of VAT." Manila Bulletin,
"Impact of VAT on prices of oil products should be
less than 10%, says DoE," by James A. Loyola,
Business Bulletin B-3, Friday, July 1, 2005, attached
as Annex A to the Memorandum filed by the
Association of Pilipinas Shell Dealers, Inc.
The Transcript of the Oral Arguments in GR Nos.
168461, 168463, 168056, and 168207 on July 14,
2005 also reveals the effect of mitigating
measures upon petitioners in GR No. 168461:

86

Cawaling Jr. v. COMELEC, 420 Phil. 524, 530,

October 26, 2001, per Sandoval-Gutierrez, J.
87

Ichong v. Hernandez, 101 Phil. 1155, 1164, May

31, 1957, per Labrador, J.

"Justice Panganiban: As a matter of fact[,] a part of

the mitigating measures would be the elimination of
the [e]xcise [t]ax and the import duties. That is
[why] it is not correct to say that the [VAT] as to
petroleum dealers increase to 10 [percent].

88

De Leon, The Fundamentals of Taxation (12th ed.,

1998), p. 1.
89

Except, as earlier discussed, for Sections 1, 2 and

3 of the law.
90

13-20 of SB 1950 seek to amend Tax Code

provisions on percentage taxes on domestic carriers
and keepers of garages in 117, and on international
carriers in 118; franchise taxes in 119;

"Atty. Baniqued: Yes, Your Honor.

"Justice Panganiban: And[,] therefore, there is no
justification for increasing the retail price by 10
[percent] to cover the E-[VAT.] [I]f you consider the
excise tax and the import duties, the [n]et [t]ax
would probably be in the neighborhood of 7
[percent]? We are not going into exact figures[.] I
am just trying to deliver a point that different

industries, different products, different services are

hit differently. So its not correct to say that all
prices must go up by 10 [percent].

98

338 Phil. 546, 604-605, May 2, 1997, per

Panganiban, J.
99

"Atty. Baniqued: Youre right, Your Honor.

"Justice Panganiban: Now. For instance, [d]omestic
[a]irline companies, Mr. Counsel, are at present
imposed a [s]ales [t]ax of 3 [percent]. When this E[VAT] law took effect[,] the [s]ales [t]ax was also
removed as a mitigating measure. So, therefore,
there is no justification to increase the fares by 10
[percent;] at best 7 [percent], correct?
"Atty. Baniqued: I guess so, Your Honor, yes." (pp.
367-368).
92

28(1) of Article VI of the 1987 Constitution.

93

26(2) of Article VI of the 1987 Constitution.

94

These bills refer to HB 3705 and SB 1950.

95

26(2), supra.

96

"Each house may not by its rules ignore

constitutional restraints or violate fundamental
rights, and there should be a reasonable relation
between the mode or method of proceeding
established by the rule and the result which is sought
to be attained." US v. Ballin, 144 US 1, 5, 12 S.Ct.
507, 509, February 29, 1892, per Brewer, J.
97

Panganiban, Leveling the Playing Field (2004),

PRINTTOWN Group of Companies, pp. 46-47.

420 Phil. 525, 531, October 26, 2001, per

Sandoval-Gutierrez, J.; (citing The Philippine Judges
Association v. Prado, 227 SCRA 703, 706, November
11, 1993, per Cruz, J.).
100

Veterans Federation Party v. COMELEC, 396 Phil.

419, 452-453, October 6, 2000, per Panganiban, J.;
(citing Garcia v. COMELEC, 227 SCRA 100, 107-108,
October 5, 1993).

The Lawphil Project - Arellano Law Foundation

EN BANC
G.R. No. 168056 --- ABAKADA Guro Party List
(Formerly AASJAS) Officers Samson S. Alcantara and
Ed Vincent S. Albano, Petitioners, versus The Honorable
Executive Secretary Eduardo Ermita, et
al.,Respondents.
G.R. No. 168207 --- Aquilino Q. Pimentel, Jr., et al.,
Petitioners, versus Executive Secretary Eduardo R.
Ermita, et al., Respondents.
G.R. No. 168461 --- Association of Pilipinas Shell
Dealers, Inc., et al., Petitioners, versus Cesar V.
Purisima, et al., Respondents.
G.R. No. 168463 --- Francis Joseph G. Escudero, et al.,
Petitioners, versus Cesar V. Purisima, et al.,Respondents.

G.R. No. 168730 --- Bataan Governor Enrique T. Garcia,

Jr., et al., Petitioners, versus Hon. Eduardo R. Ermita, et
al., Respondents.
Promulgated:
September 1, 2005
x --------------------------------------------------------------------------------------- x
CONCURRING AND DISSENTING OPINION
YNARES-SANTIAGO, J.:
The ponencia states that under the provisions of the Rules
of the House of Representatives and the Senate Rules, the
Bicameral Conference Committee is mandated to settle
differences between the disagreeing provisions in the House
bill and Senate bill. However, the ponencia construed the
term "settle" as synonymous to "reconcile" and
"harmonize," and as such, the Bicameral Conference
Committee may either (a) adopt the specific provisions of
either the House bill or Senate bill, (b) decide that neither
provisions in the House bill or the provisions in the Senate
bill would be carried into the final form of the bill,
and/or (c) try to arrive at a compromise between the
disagreeing provisions.
I beg to differ on the third proposition.
Indeed, Section 16(3), Article VI of the 1987 Constitution
explicitly allows each House to determine the rules of its
proceedings. However, the rules must not contravene
constitutional provisions. The rule-making power of
Congress should take its bearings from the Constitution. If
in the exercise of this rule-making power, Congress failed to

set parameters in the functions of the committee and

allowed the latter unbridled authority to perform acts which
Congress itself is prohibited, like the passage of a law
without undergoing the requisite three-reading and the socalled no-amendment rule, then the same amount to grave
abuse of discretion which this Court is empowered to correct
under its expanded certiorari jurisdiction. Notwithstanding
the doctrine of separation of powers, therefore, it is the
duty of the Court to declare as void a legislative
enactment, either from want of constitutional power to
enact or because the constitutional forms or
conditions have not been observed.1 When the Court
declares as unconstitutional a law or a specific provision
thereof because procedural requirements for its passage
were not complied, the Court is by no means asserting its
ascendancy over the Legislature, but simply affirming the
supremacy of the Constitution as repository of the sovereign
will.2 The judicial branch must ensure that constitutional
norms for the exercise of powers vested upon the two other
branches are properly observed. This is the very essence of
judicial authority conferred upon the Court under Section 1,
Article VII of the 1987 Constitution.
The Rules of the House of Representatives and the Rules of
the Senate provide that in the event there is disagreement
between the provisions of the House and Senate bills, the
differences shall be settled by a bicameral conference
committee.
By this, I fully subscribe to the theory advanced in the
Dissenting Opinion of Chief Justice Hilario G. Davide, Jr.
inTolentino v. Secretary of Finance3 that the authority of the
bicameral conference committee was limited to the
reconciliation of disagreeing provisions or the resolution of
differences or inconsistencies. Thus, it could only either (a)
restore, wholly or partly, the specific provisions of the
House bill amended by the Senate bill, (b) sustain,
wholly or partly, the Senates amendments, or (c) by

way of a compromise, to agree that neither provisions

in the House bill amended by the Senate nor the
latters amendments thereto be carried into the final
form of the former.
Otherwise stated, the Bicameral Conference Committee is
authorized only to adopt either the version of the House bill
or the Senate bill, or adopt neither. It cannot, as
the ponencia proposed, "try to arrive at a compromise",
such as introducing provisions not included in either the
House or Senate bill, as it would allow a mere ad hoc
committee to substitute the will of the entire Congress and
without undergoing the requisite three-reading, which are
both constitutionally proscribed. To allow the committee
unbridled discretion to overturn the collective will of the
whole Congress defies logic considering that the bills are
passed presumably after study, deliberation and debate in
both houses. A lesser body like the Bicameral Conference
Committee should not be allowed to substitute its judgment
for that of the entire Congress, whose will is expressed
collectively through the passed bills.
When the Bicameral Conference Committee goes beyond its
limited function by substituting its own judgment for that of
either of the two houses, it violates the internal rules of
Congress and contravenes material restrictions imposed by
the Constitution, particularly on the passage of law. While
concededly, the internal rules of both Houses do not
explicitly limit the Bicameral Conference Committee to a
consideration only of conflicting provisions, it is understood
that the provisions of the Constitution should be read into
these rules as imposing limits on what the committee can or
cannot do. As such, it cannot perform its delegated function
in violation of the three-reading requirement and the noamendment rule.
Section 26(2) of Article VI of the 1987 Constitution provides
that:

(2) No bill shall be 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
hereto shall be allowed, and the vote thereon shall be taken
immediately thereafter, and the yeas and nays entered in
the Journal.
Thus, before a bill becomes a law, it must pass three
readings. Hence, the ponencias submission that despite its
limited authority, the Bicameral Conference Committee
could "compromise the disagreeing provisions" by
substituting it with its own version clearly violate the
three-reading requirement, as the committees version
would no longer undergo the same since it would be
immediately put into vote by the respective houses. In
effect, it is not a bill that was passed by the entire Congress
but by the members of the ad hoc committee only, which of
course is constitutionally infirm.
I disagree that the no-amendment rule referred only to "the
procedure to be followed by each house of Congress with
regard to bills initiated in each of said respective houses"
because it would relegate the no-amendment rule to a mere
rule of procedure. To my mind, the no-amendment rule
should be construed as prohibiting the Bicameral
Conference Committee from introducing amendments and
modifications to non-disagreeing provisions of the House
and Senate bills. In sum, the committee could only either
adopt the version of the House bill or the Senate bill, or
adopt neither. As Justice Reynato S. Puno said in his
Dissenting Opinion in Tolentino v. Secretary of
Finance,4 there is absolutely no legal warrant for the bold
submission that a Bicameral Conference Committee
possesses the power to add/delete provisions in bills already

approved on third reading by both Houses or an ex

post veto power.
In view thereof, it is my submission that the amendments
introduced by the Bicameral Conference Committee which
are not found either in the House or Senate versions of the
VAT reform bills, but are inserted merely by the Bicameral
Conference Committee and thereafter included in Republic
Act No. 9337, should be declared unconstitutional. The
insertions and deletions made do not merely settle
conflicting provisions but materially altered the bill, thus
giving rise to the instant petitions.
I, therefore, join the concurring and dissenting opinion of
Mr. Justice Reynato S. Puno.
CONSUELO YNARES-SANTIAGO
Associate Justice

The Lawphil Project - Arellano Law Foundation

G.R. NO. 168056 ABAKADA GURO PARTY LIST

(FORMERLY AASJAS) OFFICERS SAMSON S. ALCANTARA
AND ED VINCENT S. ALBANO, petitioners versus THE
HONORABLE EXECUTIVE SECRETARY EDUARDO ERMITA, ET
AL., respondents.
G.R. NO. 168207 AQUILINO Q. PIMENTEL, JR., ET
AL., petitioners versus THE HONORABLE EXECUTIVE
SECRETARY EDUARDO ERMITA, ET AL., respondents.
G.R. NO. 168461 ASSOCIATION OF PILIPINAS SHELL
DEALERS, INC., ET AL., petitioners versus CESAR V.
PURISIMA, ET AL., respondents.
G.R. NO. 168463 FRANCIS JOSEPH G. ESCUDERO, ET
AL., petitioners versus CESAR V. PURISIMA, ET
AL., respondents.

Footnotes
1

Cooley on Constitutional Limitations, 8th Ed., Vol.

I, p. 332.

G.R. NO. 168730 BATAAN GOVERNOR ENRIQUE T.

GARCIA, JR., ET AL., petitioners versus HONORABLE
EXECUTIVE SECRETARY EDUARDO ERMITA, ET
AL., respondents.

Angara v. Electoral Commission, 63 Phil. 139, 158

[1936].

Promulgated:

September 1, 2005

G.R. Nos. 115455, 115525, 115543, 115544,

115754, 115781, 115852, 115873, 115931, 25
August 1994, 235 SCRA 630, 750.
4

Supra, p. 811.

x---------------------------------------------------------------------------------------------x
CONCURRING AND DISSENTING OPINION

SANDOVAL GUTIERREZ, J.:

Adam Smith, the great 18th century political economist,
enunciated the dictum that "the subjects of every state
ought to contribute to the support of government, as nearly
as possible, in proportion to their respective abilities; that
is, in proportion to the revenue which they respectively
enjoy under the protection of the state."1 At no other time
this dictum becomes more urgent and obligatory as in the
present time, when the Philippines is in its most precarious
fiscal position.
At this juncture, may I state that I join Mr. Senior Justice
Reynato S. Puno in his Opinion, specifically on the following
points:
1. It is "high time to re-examine the test of germaneness
proffered in Tolentino;"
2. The Bicameral Conference Committee "cannot exercise its
unbridled discretion," "it cannot create a new law," and its
deletion of the "no pass on provision" common in both
Senate Bill No. 1950 and House Bill No. 3705 is
"unconstitutional."
In addition to the above points raised by Mr. Senior Justice
Puno, may I expound on the issues specified hereunder:
There is no reason to rush and stamp the imprimatur of
validity to a tax law, R.A. 9337, that contains patently
unconstitutional provisions. I refer to Sections 4 to 6 which
violate the principle of non-delegation of legislative power.
These Sections authorize the President, upon
recommendation of the Secretary of Finance, to raise the
VAT rate from
10% to 12% effective January 1, 2006, if the conditions
specified therein are met, thus:

. . . That the President, upon the recommendation of the

Secretary of Finance, shall, effective January 1, 2006, raise
the rate of value-added tax to twelve percent (12%) after
any of the following conditions has been satisfied:
(i) Value-added tax collection as a percentage of
Gross Domestic Product (GDP) of the previous year
exceeds two and four-fifth percent (2 4/5%); or
(ii) National government deficit as a percentage of
GDP of the previous year exceeds one and one-half
percent (1 %).
This proviso on the authority of the President is uniformly
appended to Sections 4, 5 and 6 of R.A. No. 9337,
provisions amending Sections 106, 107 and 108 of the
NIRC, respectively. Section 4 imposes a 10% VAT on sales
of goods and properties, Section 5 imposes a 10% VAT on
importation of goods, and Section 6 imposes a 10% VAT on
sale of services and use or lease of properties.
Petitioners in G.R. Nos. 168056,2 1682073 and
1684634 assail the constitutionality of the above provisions
on the ground that such stand-by authority granted to the
President constitutes: (1) undue delegation of legislative
power; (2) violation of due process; and (3) violation of
the principle of "exclusive origination." They cited as their
basis Article VI, Section 28 (2); Article III, Section 1; and
Article VI, Section 24 of the Constitution.
I
Undue Delegation of Legislative Power
Taxation is an inherent attribute of sovereignty.5 It is a
power that is purely legislative and which the central
legislative body cannot delegate either to the executive or

judicial department of government without infringing upon

the theory of separation of powers.6 The rationale of this
doctrine may be traced from the democratic principle of "no
taxation without representation." The power of taxation
being so pervasive, it is in the best interest of the people
that such power be lodged only in the Legislature.
Composed of the peoples representatives, it is "closer to
the pulse of the people and are therefore in a better
position to determine both the extent of the legal burden
the people are capable of bearing and the benefits they
need."7 Also, this set-up provides security against the abuse
of power. As Chief Justice Marshall said: "In imposing a tax,
the legislature acts upon its constituents. The power may be
abused; but the interest, wisdom, and justice of the
representative body, and its relations with its constituents,
furnish a sufficient security."
Consequently, Section 24, Article VI of our Constitution
enshrined the principle of "no taxation without
representation" by providing that "all revenue bills shall
originate exclusively in the House of Representatives, but
the Senate may propose or concur with amendments." This
provision generally confines the power of taxation to the
Legislature.
R.A. No. 9337, in granting to the President the standby authority to increase the VAT rate from 10% to 12%,
the Legislature abdicated its power by delegating it to the
President. This is constitutionally impermissible. The
Legislature may not escape its duties and responsibilities by
delegating its power to any other body or authority. Any
attempt to abdicate the power is unconstitutional and void,
on the principle that potestas delegata non delegare
potest.8 As Judge Cooley enunciated:
"One of the settled maxims in constitutional law is, that the
power conferred upon the legislature to make laws cannot
be delegated by that department to any other body or

authority. Where the sovereign power of the state has

located the authority, there it must remain; and by
the constitutional agency alone the laws must be
made until the Constitution itself is changed. The
power to whose judgment, wisdom, and patriotism this high
prerogative has been entrusted cannot relieve itself of the
responsibility by choosing other agencies upon which the
power shall be devolved, nor can it substitute the judgment,
wisdom, and patriotism of any other body for those to which
alone the people have seen fit to confide this sovereign
trust."9
Of course, the rule which forbids the delegation of the
power of taxation is not absolute and inflexible. It admits of
exceptions. Retired Justice Jose C. Vitug enumerated such
exceptions, to wit: (1) delegations to local governments (to
be exercised by the local legislative bodies thereof) or
political subdivisions; (2) delegations allowed by the
Constitution; and (3) delegations relating merely to
administrative implementation that may call for some
degree of discretionary powers under a set of sufficient
standards expressed by law.10
Patently, the act of the Legislature in delegating its power to
tax does not fall under any of the exceptions.
First, it does not involve a delegation of taxing power to the
local government. It is a delegation to the President.
Second, it is not allowed by the Constitution. Section 28
(2), Article VI of the Constitution enumerates the charges or
duties, the rates of which may be fixed by the President
pursuant to a law passed by Congress, thus:
The Congress may, by law, authorize the President to fix
within specified limits, and subject to such limitations
and restrictions as it may impose, tariff

rates, import and export

quotas, tonnage and wharfage dues, and other duties
or imposts within the framework of the national
development program of the Government.

previous year exceeds two and four-fifths percent (2 4/5%)

or (ii) National Government deficit as a percentage of GDP
of the previous year exceeds one and one-half percent (1
%).

Noteworthy is the absence of tax rates or VAT rates in the

enumeration. If the intention of the Framers of the
Constitution is to permit the delegation of the power to
fix tax rates or VAT rates to the President, such could
have been easily achieved by the mere inclusion of the term
"tax rates" or "VAT rates" in the enumeration. It is a
dictum in statutory construction that what is expressed
puts an end to what is implied. Expressium facit cessare
tacitum.11 This is a derivative of the more familiar
maxim express mention is implied
exclusion orexpressio unius est exclusio
alterius. Considering that Section 28 (2), Article VI
expressly speaks only of "tariff rates,12 import13 and export
quotas,14 tonnage15 and wharfage dues16 and other duties
and imposts,17" by no stretch of imagination can this
enumeration be extended to include the VAT.

At first glance, the two conditions may appear to be definite

standards sufficient to guide the President. However, to my
mind, they are ineffectual and malleable as they give the
President ample opportunity to exercise herauthority in
arbitrary and discretionary fashion.

And third, it does not relate merely to the administrative

implementation of R.A. No. 9337.
In testing whether a statute constitutes an undue delegation
of legislative power or not, it is usual to inquire whether the
statute was complete in all its terms and provisions when it
left the hands of the Legislature so that nothing was left to
the judgment of any other appointee or delegate of the
legislature.18
In the present case, the President is the delegate of the
Legislature, endowed with the power to raise the VAT rate
from 10 % to 12% if any of the following conditions, to
reiterate, has been satisfied: (i) value-added tax collection
as a percentage of gross domestic product (GDP) of the

The two conditions set forth by law would have been

sufficient had it not been for the fact that the President,
being at the helm of the entire officialdom, has more than
enough power of control to bring about the existence of
such conditions. Obviously, R.A. No. 9337 allows the
President to determine for herself whether the VAT rate
shall be increased or not at all. The fulfillment of the
conditions is entirely placed in her hands. If she wishes to
increase the VAT rate, all she has to do is to strictly enforce
the VAT collection so as to exceed the 2 4/5% ceiling. The
same holds true with the national government deficit. She
will just limit government expenses so as not to exceed the
1 % ceiling. On the other hand, if she does not wish to
increase the VAT rate, she may discourage the Secretary of
Finance from making the recommendation.
That the Presidents exercise of an authority is practically
within her control is tantamount to giving no conditions at
all. I believe this amounts to a virtual surrender of
legislative power to her. It must be stressed that the
validity of a law is not tested by what has been done but
by what may be done under its provisions.19
II
Violation of Due Process

The constitutional safeguard of due process is briefly

worded in Section 1, Article III of the Constitution which
states that, "no person shall be deprived of life, liberty or
property without due process of law."20
Substantive due process requires the intrinsic validity of the
law in interfering with the rights of the person to his
property. The inquiry in this regard is not whether or not
the law is being enforced in accordance with the prescribed
manner but whether or not, to begin with, it is a
proper exercise of legislative power.
To be so, the law must have a valid governmental
objective, i.e., the interest of the public as distinguished
from those of a particular class, requires the intervention of
the State. This objective must be pursued in a lawful
manner, or in other words, the means employed must be
reasonably related to the accomplishment of the purpose
and not unduly oppressive.
There is no doubt that R.A. No. 9337 was enacted pursuant
to a valid governmental objective, i.e. to raise revenues for
the government. However, with respect to the means
employed to accomplish such objective, I am convinced that
R.A. No. 9337, particularly Sections 4, 5 and 6 thereof, are
arbitrary and unduly oppressive.

threatening to punish on the imposed condition No. 1 the

public or the President?
Senator Recto. That is not a punishment, that is
supposed to be a reward system.
Senator Lacson. Yes, an incentive. So we are offering
an incentive to the Chief Executive.
Senator Recto. That is right.
Senator Lacson. in order for her to be able to raise
the VAT to 12 %.
Senator Recto. That is right. That is the intention, yes.
xxxxxx
Senator Osmena. All right. Therefore, with the lifting
of exemptions it stands to reason that Value-added
tax collections as a percentage of GDP will be much
higher than Now, if it is higher than 2.5%, in other
words, because they collected more, we will allow
them to even tax more. Is that the meaning of this
particular phrase?

A reading of the Senate deliberation reveals that the first

condition constitutes a reward to the President for her
effective collection of VAT. Thus, the President may increase
the VAT rate from 10% to 12% if her VAT collection during
the previous year exceeds 2 4/5% of the Gross Domestic
Product. I quote the deliberation:

Senator Recto. Yes, Mr. President, that is why it is as

low as 2.8%. It is like if a person has a son and his
son asks him for an allowance, I do not think that he
would immediately give his son an increase in
allowance unless he tells his son, You better improve
your grades and I will give you an allowance. That is
the analogy of this.

Senator Lacson. Thank you, Mr. President. Now, I will go

back to my original question, my first question. Who are we

xxxxxx

Senator Osmena. So the gentleman is telling the

President, If you collect more than 138 billion, I will
give you additional powers to tax the people.
Senator Recto. x x x We are saying, kung mataas and
grade mo, dadagdagan ko an allowance mo. Katulad
ng sinabi natin ditto. What we are saying here is you
prove to me that you can collect it, then we will
increase your rate, you can raise your rate. It is an
incentive.21
Why authorize the President to increase the VAT rate on the
premise alone that she deserves an "incentive" or "reward"?
Indeed, why should she be rewarded for performing a duty
reposed upon her by law?
The rationale stated by Senator Recto is flawed. One of the
principles of sound taxation is fiscal adequacy. The proceeds
of tax revenue should coincide with, and approximate the
needs of, government expenditures. Neither
an excess nor a deficiency of revenue vis--vis the
needs of government would be in keeping with the
principle.22
Equating the grant of authority to the President to increase
the VAT rate with the grant of additional allowance to a
studious son is highly inappropriate. Our Senators must
have forgotten that for every increase of taxes, the burden
always redounds to the people. Unlike the additional
allowance given to a studious son that comes from the
pocket of the granting parent alone, the increase in the VAT
rate would be shouldered by the masses. Indeed,
mandating them to pay the increased rate as an award to
the President is arbitrary and unduly oppressive. Taxation is
not a power to be exercised at ones whim.
III

Exclusive Origination from the

House of Representatives
Section 24, Article VI of the Constitution provides:
SEC. 24. All appropriations, 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.
In Tolentino vs. Secretary of Finance,23 this Court
expounded on the foregoing provision by holding that:
"x x x To begin with, it is not the law but the revenue bill
which is required by the Constitution to originate
exclusively in the House of Representatives. It is important
to emphasize this, because a bill originating the in the
House may undergo such extensive changes in the Senate
that the result may be a rewriting of the whole x x x. At this
point, what is important to note is that, as a result of the
Senate action, a distinct bill may be produced. To insist that
a revenue statute -- and not only the bill which initiated the
legislative process culminating in the enactment of the law
must substantially be the same as the House Bill would be
to deny the Senates power not only to concur with
amendments: but also to propose amendments. It would
be to violate the co-equality of the legislative power of the
two houses of Congress and in fact, make the House
superior to the Senate."
The case at bar gives us an opportunity to take a second
hard look at the efficacy of the foregoing jurisprudence.
Section 25, Article VI is a verbatim re-enactment of Section
18, Article VI of the 1935 Constitution. The latter provision

was modeled from Section 7 (1), Article I of the United

States Constitution, which states:
"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."
The American people, in entrusting what James Madison
termed "the power of the purse" to their elected
representatives, drew inspiration from the British practice
and experience with the House of Commons. As one
commentator puts it:
"They knew the inestimable value of the House of
Commons, as a component branch of the British parliament;
and they believed that it had at all times furnished the best
security against the oppression of the crown and the
aristocracy. While the power of taxation, of revenue,
and of supplies remained in the hands of a popular
branch, it was difficult for usurpation to exist for any
length of time without check, and prerogative must
yield of that necessity which controlled at once the
sword and the purse."
But while the fundamental principle underlying the vesting
of the power to propose revenue bills solely in the House of
Representatives is present in both the Philippines and US
Constitutions, stress must be laid on the differences
between the two quoted provisions. For one, the word
"exclusively" appearing in Section 24, Article VI of our
Constitution is nowhere to be found in Section 7 (1), Article
I of the US Constitution. For another, the phrase "as on
other bills," present in the same provision of the US
Constitution, is not written in our Constitution.
The adverb "exclusively" means "in an exclusive
manner."24 The term "exclusive" is defined as "excluding or

having power to exclude; limiting to or limited to; single,

sole, undivided, whole."25 In one case, this Court define the
term "exclusive" as "possessed to the exclusion of others;
appertaining to the subject alone, not including, admitting,
or pertaining to another or others."26
As for the term "originate," its meaning are "to cause the
beginning of; to give rise to; to initiate; to start on a
course or journey; to take or have origin; to be
deprived; arise; begin or start."27
With the foregoing definitions in mind, it can be reasonably
concluded that when Section 24, Article VI provides that
revenue bills shall originate exclusively from the House of
Representatives, what the Constitution mandates is that any
revenue statute must begin or start solely and only in the
House. Not the Senate. Not both Chambers of Congress.
But there is more to it than that. It also means that "an
act for taxation must pass the House first." It is no
consequence what amendments the Senate adds.28
A perusal of the legislative history of R.A. No. 9337 shows
that it did not "exclusively originate" from the House of
Representatives.
The House of Representatives approved House Bill Nos.
355529 and 370530. These Bills intended to amend Sections
106, 107, 108, 109, 110, 111 and 114 of the NIRC. For its
part, the Senate approved Senate Bill No.1950,31 taking
into consideration House Bill Nos. 3555 and 3705. It
intended to amend Sections 27, 28, 34, 106, 108, 109, 110,
112, 113, 114, 116, 117, 119, 121, 125, 148, 151, 236,
237 and 288 of the NIRC.
Thereafter, on April 13, 2005, a Committee Conference was
created to thresh out the disagreeing provisions of the three
proposed bills.

In less than a month, the Conference Committee "after

having met and discussed in full free and conference," came
up with a report and recommended the approval of the
consolidated version of the bills. The Senate and the House
of Representatives approved it.
On May 23, 2005, the enrolled copy of the consolidated
version of the bills was transmitted to President Arroyo, who
signed it into law. Thus, the enactment of R.A. No. 9337,
entitled "An Act Amending Sections 27, 28, 34, 106, 107,
108, 109, 110, 111, 112, 113, 114, 116, 117, 119, 121,
148, 151, 236, 237 and 288 of the National Internal
Revenue Code of 1997, As Amended and For Other
Purposes."
Clearly, Senate Bill No. 1950 is not based on any bill passed
by the House of Representatives. It has a legislative identity
and existence separate and apart from House Bills No. 3555
and 3705. Instead of concurring or proposing amendments,
Senate Bill No. 1950 merely "takes into consideration"
the two House Bills. To take into consideration means "to
take into account." Consideration, in this sense, means
"deliberation, attention, observation or
contemplation.32 Simply put, the Senate in passing Senate
Bill No. 1950, a tax measure, merely took into account
House Bills No. 3555 and 3705, but did not concur with or
amend either or both bills. As a matter of fact, it did not
even take these two House Bills as a frame of reference.
In Tolentino, the majority subscribed to the view that
Senate may amend the House revenue bill by substitution
or by presenting its own version of the bill. In either case,
the result is "two bills on the same subject."33 This is the
source of the "germaneness" rule which states that the
Senate bill must be germane to the bill originally passed by
the House of Representatives. In Tolentino, this was not
really an issue as both the House and Senate Bills in
question had one subject the VAT.

The facts obtaining here is very much different

from Tolentino. It is very apparent that House Bills No.
3555 and 3705 merely intended to amend Sections 106,
107, 108, 109, 110, 111 and 114 of the NIRC of 1997,
pertaining to the VAT provisions. On the other hand, Senate
Bill No. 1950 intended to amend Sections 27, 28, 34, 106,
108, 109, 110, 112, 113, 114, 116, 117, 119, 121, 125,
148, 151, 236, 237 and 288 of the NIRC, pertaining to
matters outside of VAT, such as income tax, percentage tax,
franchise tax, taxes on banks and other financial
intermediaries, excise taxes, etc.
Thus, I am of the position that the Senate could not,
without violating the germaneness rule and the principle of
"exclusive origination," propose tax matters not included in
the House Bills.
WHEREFORE, I vote to CONCUR with the majority opinion
except with respect to the points above-mentioned.
ANGELINA SANDOVAL-GUTIERREZ
Associate Justice

Footnotes
1

Book V of The Wealth of Nations.

ABAKADA GURO Party List (Formerly AASJAS),

Officers Samson S. Alcantara and Ed Vincent S.
Albano.

Aquilino Q. Pimentel, Jr., Luisa P. Ejercito-Estrada,

Jinggoy E. Estrada, Panfilo M. Lacson, Alfredo S. Lim,
Jamby A.S. Madrigal and Sergio R. Osmena III.

11

12

Francis Joseph G. Escudero, Vincent Crisologo,

Emmanuel Joel J. Villanueva, Rodolfo G. Plaza,
Darlene Antonino-Custodio, Oscar G. Malapitan,
Benjamin C. Agarao, Jr., Juan Edgardo M. Angara,
Justin Marc SB. Chipeco, Florencio G. Noel, Mujiv S.
Hataman, Renato B. Magtubo, Joseph A. Santiago,
Teofisto DL. Guingona III, Ruy Elias C. Lopez,
Rodolfo Q. Agbayani and Teodoro A. Casino.
5

Luzon Stevedoring Co. vs. Court of Tax Appeals, L302332, July 29, 1998, 163 SCRA 647 cited in Vitug,
Acosta, Tax Law and Jurisprudence, Second Edition,
at 7.
6

Pepsi Cola Bottling Company of the Philippines vs.

Municipality of Tanauan, Leyte, G.R. No. L-31156,
February 27, 1976, 69 SCRA 460. See also National
Power Corporation vs. Albay, G.R. No. 87479, June
4, 1990, 186 SCRA 198.
7

Bernas, SJ, The 1987 Constitution of the Republic

of the Philippines, A Commentary, 1996 Edition, at
687.
8

People vs. Vera, 65 Phil. 56 (1937).

Cooley on Constitutional Limitations, 8th ed., Vol. I,

p. 224.
10

Vitug, Acosta, Tax Law and Jurisprudence, Second

Edition, at 8-9.

Espiritu vs. Cipriano, G.R. No. 32743, February 15,

1974, 55 SCRA 533, 538, citing Sutherlands
Statutory Construction, Vol. 2, Section 4945, p. 412.
A tariff is a list or schedule of articles on which a
duty is imposed upon their importation, with the
rates at which they are severally taxed, it is also the
custom or duty payable on such articles. (Blacks
Law Dictionary [6th Edition], 1990, at 1456).
13

An import quota is a quantitative restriction on the

importation of an article into a country, and is a
remedy available to the executive department upon
its determination that an imported article threatens
serious injury to a domestic industry. (Id. at 755).
14

An export quota is an amount of specific goods

which may be exported and are set by the
government for purposes of national defense,
economic stability and price support. (Id. at 579).
15

Tonnage dues are duties laid upon vessels

according to their tonnage or cubical capacity. (Id. at
1488).
16

Wharfage dues are generally understood to be the

fees paid for landing goods upon or loading them
from a wharf. It is a charge for the use of the wharf
and may be treated either as rent or compensation.
(Marine Lighterage Corp. vs. Luckenbach S.S.
Co., 119 Misc. 612, 248 NYS 71).
17

A duty is generally understood to be a tax on the

importation or exportation of goods, merchandise
and other commodities, while imposts are duties or
impositions levied for various reasons. (Crew Levick

Co. vs. Commonwealth of Pennsylvania, 245 US 292,

62 L. Ed. 295, 38 S. Ct. 126).
18

People vs. Vera, supra.

19

Walter E. Olsen & Co. vs. Aldanese and

Trinidad (1922), 43 Phil., 259; 12 C. J., p. 786.
20

Cruz, Constitutional Law, 1987 Edition, at 101.

21

TSN, May 10, 2005, Annex E" of the Petition in

G.R. No. 168056.
22

Vitug, Acosta, Tax Law and Jurisprudence, Second

Edition, at 3.
23

G.R. No. 115455, August 25, 1994, 235 SCRA

630.
24

Merriam-Websters Third New International

Dictionary (1993 Ed.), at 793.
25

Id.

108, 110 and 114 of the National Internal Revenue

Code of 1997, As amended, and For Other
Purposes." Approved on January 27, 2005.
30

Entitled "An Act Amending Sections 106, 107, 108,

109, 110 and 111 of the National Internal Revenue
Code of 1997, As Amended, and For Other
Purposes." Approved on February 28, 2005.
31

Entitled "An Act Amending Sections 27, 28, 34,

106,108, 109,110, 112, 113, 114, 116, 117, 119,
121, 125, 148, 151, 236, 237 and 288 of the
National Internal Revenue Code of 1997, As
Amended, and For Other Purposes." Approved on
April1 3, 2005.
32

Merriam-Websters Third New International

Dictionary (1993 Ed.), at 484.
33

Supra.

The Lawphil Project - Arellano Law Foundation

26

City Mayor vs. The Chief of Philippine

Constabulary, G.R. No. 20346, October 31, 1967, 21
SCRA 665, 673.
27

Merriam-Websters Third New International

Dictionary (1993 Ed.), at 1592.
28

Davies, Legislative Law and Process, (2d. Ed.

1986), at 89.
29

Entitled "An Act Restructuring the Value-Added

Tax, Amending for the Purpose Sections 106, 107,

G.R. No. 168056 (Abakada Guro Party List

[Formerly AASJAS] Officers Samson S. Alcantara and
Ed Vincent S. Albano v. The Hon. Executive Secretary
Eduardo Ermita, et al.)
G.R. No. 168207 (Aquilino Q. Pimentel, Jr., et al. v.
Executive Secretary Eduardo R. Ermita, et al.)
G.R. No. 168461 (Association of Filipinas Shell
Dealers, Inc., et al. v. Cesar V. Purisima, et al.)

G.R. No. 168463 (Francis Joseph G. Escudero, et al.

v. Cesar V. Purisima, et al.)
G.R. No. 168730 (Bataan Governor Enrique T.
Garcia, Jr. v. Hon. Eduardo R. Ermita, et al.)
Promulgated:
September 1, 2005
X-------------------------------------------------X
CONCURRING AND DISSENTING OPINION
CALLEJO, SR., J.:
I join the concurring and dissenting opinion of Mr. Justice
Reynato S. Puno as I concur with the majority opinion but
vote to declare as unconstitutional the deletion of the "nopass on provision" contained in Senate Bill No. 1950 and
House Bill No. 3705 (the constituent bills of Republic Act No.
9337).
The present petitions provide an opportune
occasion for the Court to re-examine
Tolentino v. Secretary of Finance
In ruling that Congress, in enacting R.A. No. 9337, complied
with the formal requirements of the Constitution,
theponencia relies mainly on the Courts rulings in Tolentino
v. Secretary of Finance.1 To recall, Tolentino involved
Republic Act No. 7716, which similarly amended the NIRC
by widening the tax base of the VAT system. The procedural

attacks against R.A. No. 9337 are substantially the same as

those leveled against R.A. No. 7716, e.g., violation of the
"Origination Clause" (Article VI, Section 24) and the "ThreeReading Rule" and the "No-Amendment Rule" (Article VI,
Section 26[2]) of the Constitution.
The present petitions provide an opportune occasion for the
Court to re-examine its rulings in Tolentinoparticularly with
respect to the scope of the powers of the Bicameral
Conference Committee vis--vis Article VI, Section 26(2) of
the Constitution.
The crucial issue posed by the present petitions is whether
the Bicameral Conference Committee may validly introduce
amendments that were not contained in the respective bills
of the Senate and the House of Representatives. As a
corollary, whether it may validly delete provisions uniformly
contained in the respective bills of the Senate and the
House of Representatives.
In Tolentino, the Court declared as valid amendments
introduced by the Bicameral Conference Committee even if
these were not contained in the Senate and House bills. The
majority opinion therein held:
As to the possibility of an entirely new bill emerging out of a
Conference Committee, it has been explained:
Under congressional rules of procedures, conference
committees are not expected to make any material change
in the measure at issue, either by deleting provisions to
which both houses have already agreed or by inserting new
provisions. But this is a difficult provision to enforce. Note
the problem when one house amends a proposal originating
in either house by striking out everything following the
enacting clause and substituting provisions which make it
an entirely new bill. The versions are now altogether

different, permitting a conference committee to draft

essentially a new bill
The result is a third version, which is considered an
"amendment in the nature of a substitute," the only
requirement for which being that the third version be
germane to the subject of the House and Senate bills.
Indeed, this Court recently held that it is within the power
of a conference committee to include in its report an
entirely new provision that is not found either in the House
bill or in the Senate Bill. If the committee can propose an
amendment consisting of one or two provisions, collectively
considered as an "amendment in the nature of a substitute,"
so long as such an amendment is germane to the subject of
the bills before the committee. After all, its report was not
final but needed the approval of both houses of Congress to
become valid as an act of the legislative department. The
charge that in this case the Conference Committee acted a
third legislative chamber is thus without any basis.2
The majority opinion in Tolentino relied mainly on the
practice of the United States legislature in making the
foregoing disquisition. It was held, in effect, that following
the US Congress practice where a conference committee is
permitted to draft a bill that is entirely different from the
bills of either the House of Representatives or Senate, the
Bicameral Conference Committee is similarly empowered to
make amendments not found in either the House or Senate
bills.
The ponencia upholds the acts of the Bicameral Conference
Committee with respect to R.A. No. 9337, following the said
ruling in Tolentino.
To my mind, this unqualified adherence by the majority
opinion in Tolentino, and now by the ponencia, to the

practice of the US Congress and its conference committee

system ought to be re-examined. There are significant
textual differences between the US Federal Constitutions
and our Constitutions prescribed congressional procedure
for enacting laws. Accordingly, the degree of freedom
accorded by the US Federal Constitution to the US Congress
markedly differ from that accorded by our Constitution to
the Philippine Congress.
Section 7, Article I of the US Federal Constitution reads:
[1] 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.
[2] Every Bill which shall have passed the House of
Representatives and the Senate, shall, before it become a
Law, be presented to the President of the United States; If
he approve he shall it, but if not he shall return it, with his
Objections to the House in which it shall have originated,
who shall enter the Objections at large on their Journal, and
proceed to reconsider it. If after such Reconsideration two
thirds of that House shall agree to pass the Bill, it shall be
sent together with the Objections, to the other House, by
which it shall, likewise, be reconsidered, and if approved by
two thirds of that House, it shall become a Law. But in all
such Cases the Votes of both Houses shall be determined by
yeas and Nays, and the Names of the Persons voting for
and against the Bill shall be entered on the Journal of each
House respectively. If any Bill shall not be returned by the
President within ten Days (Sundays excepted) after it shall
have been presented to him, the Same shall be a Law, in
like Manner as if he had signed it, unless the Congress by
their Adjournment prevent its return in which Case it shall
not be a Law.

[3] Every Order, Resolution, or Vote to Which the

Concurrence of the Senate and House of Representatives
may be necessary (except on a question of Adjournment)
shall be presented to the President of the United States;
and before the Same shall take Effect, shall be approved by
him, or being disapproved by him, shall be repassed by two
thirds of the Senate and House of Representatives,
according to the Rules and Limitations prescribed in the
Case of a Bill.
On the other hand, Article VI of our Constitution prescribes
for the following procedure for enacting a law:
Sec. 26. (1) Every bill passed by Congress shall embrace
only one subject which shall be expressed in the title
thereof.
(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.
Sec. 27. (1) Every bill passed by Congress shall, before it
becomes a law, be presented to the President. If he
approves the same, he shall sign it; otherwise, he shall veto
it and return the same with his objections to the House
where it originated, which shall enter the objections at large
in its Journal and proceed to reconsider it. If, after such
reconsideration, two-thirds of all the Members of such
House shall agree to pass the bill, it shall be sent, together
with the objections, to the other House by which it shall
likewise be reconsidered, and if approved by two-thirds of

all the Members of that House, it shall become a law. In all

such cases, the votes of each House shall be determined
by yeas and nays, and the names of the Members voting for
or against shall be entered in its Journal. The President shall
communicate his veto of any bill to the House where it
originated within thirty days after the date of receipt
thereof; otherwise, it shall become a law as if he had signed
it.
(2) The President shall have the power to veto any
particular item or items in an appropriation, revenue, or
tariff bill, but the veto shall not affect the item or items to
which he does not object.
Two distinctions are readily apparent between the two
procedures:
1. Unlike the US Federal Constitution, our Constitution
prescribes the "three-reading" rule or that no bill shall
become a law unless it shall have been read on three
separate days in each house except when its urgency is
certified by the President; and
2. Unlike the US Federal Constitution, our Constitution
prescribes the "no-amendment" rule or that no
amendments shall be allowed upon the last reading of the
bill.
American constitutional experts have lamented that certain
congressional procedures have not been entrenched in the
US Federal Constitution. According to a noted constitutional
law professor, the absence of the "three-reading"
requirement as well as similar legislative-procedure rules
from the US Federal Constitution is a "cause for regret." 3

In this connection, it is interesting to note that the

conference committee system in the US Congress has been
described in this wise:
Conference Committees
Another main mechanism of joint House and Senate action
is the conference committee. Inherited from the English
Constitution, the conference committee system is an
evolutionary product whose principal threads were woven
on the loom of congressional practice into a unified pattern
by the middle of the nineteenth century. "By 1852," writes
Ada McCown, historian of the origin and development of the
conference committee, "the customs of presenting identical
reports from the committees of conference in both houses,
of granting high privilege to these conference reports, of
voting upon the conference report as a whole and
permitting no amendment of it, of keeping secret the
discussions carried on in the meetings of the conference
committee, had become established in American
parliamentary practice."
Conference committees are composed of Senators and
Representatives, usually three each, appointed by the
presiding officers of both houses, for the purpose of
adjusting differences between bills they have passed. This
device has been extensively used by every Congress since
1789. Of the 1157 laws enacted by the 78th Congress, for
example, 107 went through conference and, of these, 36
were appropriation bills on which the House had disagreed
to Senate amendments. In practice, most important
legislation goes through the conference closet and is there
revised, sometimes beyond recognition, by the all-powerful
conferees or managers, as they are styled. A large body of
law and practice has been built up over the years governing
conference procedure and reports.

Suffice it to say here that serious evils have marked the

development of the conference committee system. In the
first place, it is highly prodigal of members time.
McConachie calculated that the average time consumed in
conference was 33 days per bill. Bills are sent to conference
without reading the amendments of the other
chamber. Despite rules to the contrary, conferees do not
confine themselves to matters in dispute, but often initiate
entirely new legislation and even strike out identical
provisions previously approved by both houses. This
happened during the 78th Congress, for instance, when an
important amendment to the surplus property bill, which
had been approved by both houses, was deleted in
conference.
Conference committees, moreover, suffer like other
committees from the seniority rule. The senior members of
the committees concerned, who are customarily appointed
as managers on the part of the House and Senate, are not
always the best informed on the questions at issue, nor do
they always reflect the majority sentiment of their
houses. Furthermore, conference reports must be accepted
or rejected in toto without amendment and they are often
so complex and obscure that they are voted upon without
knowledge of their contents. What happens in practice is
that Congress surrenders its legislative function to
irresponsible committees of conference. The standing rules
against including new and extraneous matter in conference
reports have been gradually whittled away in recent years
by the decisions of presiding officers. Senate riders attached
to appropriation bills enable conference committees to
legislate and the House usually accepts them rather than
withhold supply, thus putting it, as Senator Hoar once
declared, under a degrading duress.
It is also alleged that under this secret system lobbyist are
able to kill legislation they dislike and that "jokers" designed
to defeat the will of Congress can be inserted without

detection. Senator George W. Norris once characterized the

conference committee as a third house of Congress. "The
members of this house, he said, "are not elected by the
people. The people have no voice as to who these members
shall be ... This conference committee is many times, in
very important matters of legislation, the most important
branch of our legislature.There is no record kept of the
workings of the conference committee. Its work is
performed, in the main, in secret.No constituent has any
definite knowledge as to how members of this conference
committee vote, and there is no record to prove the attitude
of any member of the conference committee ... As a
practical proposition we have legislation, then, not by the
voice of the members of the Senate, not by the members of
the House of Representatives, but we have legislation by
the voice of five or six men. And for practical purposes, in
most cases, it is impossible to defeat the legislation
proposed by this conference committee. Every experienced
legislator knows that it is the hardest thing in the world to
defeat a conference report."
Despite these admitted evils, impartial students of the
conference committee system defend it on net balance as
an essential part of the legislative process. Some
mechanism for reconciling differences under bicameral
system is obviously indispensable. The remedy for the
defects of the device is not to abolish it, but to keep it under
congressional control. This can be done by enforcing the
rules which prohibit the inclusion in conference reports of
matter not committed to them by either house and forbid
the deletion of items approved by both bodies; by
permitting conference managers to report necessary new
matter separately and the houses to consider it apart from
the conference report; by fixing a deadline toward the close
of a session after which no bills could be sent to conference,
so as to eliminate congestion at the end of the session a
suggestion made by the elder Senator La Follete in 1919;
by holding conferences in sessions open to the public,

letting conference reports lie over longer, and printing them

in bill form (with conference changes in italics) so as to
allow members more time to examine them and discover
"jokers."4
The "three-reading" and "no-amendment" rules, absent in
the US Federal Constitution, but expressly mandated by
Article VI, Section 26(2) of our Constitution are mechanisms
instituted to remedy the "evils" inherent in a bicameral
system of legislature, including the conference committee
system.
Sadly, the ponencias refusal to apply Article VI, Section
26(2) of the Constitution on the Bicameral Conference
Committee and the amendments it introduced to R.A. No.
9337 has "effectively dismantled" the "three-reading rule"
and "no-amendment rule." As posited by Fr. Joaquin
Bernas, a member of the Constitutional Commission:
In a bicameral system, bills are independently processed by
both House of Congress. It is not unusual that the final
version approved by one House differs from what has been
approved by the other. The "conference committee,"
consisting of members nominated from both Houses, is an
extra-constitutional creation of Congress whose function is
to propose to Congress ways of reconciling conflicting
provisions found in the Senate version and in the House
version of a bill. It performs a necessary function in a
bicameral system. However, since conference committees
have merely delegated authority from Congress, they
should not perform functions that Congress itself may not
do. Moreover, their proposals need confirmation by both
Houses of Congress.
In Tolentino v. Secretary of Finance, the Court had the
opportunity to delve into the limits of what conference
committees may do. The petitioners contended that the

consolidation of the House and Senate bills made by the

conference committee contained provisions which neither
the Senate bill nor the House bill had. In her dissenting
opinion, Justice Romero laid out in great detail the
provisions that had been inserted by the conference
committee. These provisions, according to the petitioners
had been introduced "surreptitiously" during a closed door
meeting of the committee.
The Courts answer to this was that in United States practice
conference committees could be held in executive sessions
and amendments germane to the purpose of the bill could
be introduced even if these were not in either original bill.
But the Court did not bother to check whether perhaps the
American practice was based on a constitutional text
different from that of the Philippine Constitution.
There are as a matter of fact significant differences in the
degree of freedom American and Philippine legislators have.
The only rule that binds the Federal Congress is that it may
formulate its own rules of procedure. For this reason, the
Federal Congress is master of its own procedures. It is
different with the Philippine Congress. Our Congress indeed
is also authorized to formulate its own rules of procedure
but within limits not found in American law. For instance,
there is the "three readings on separate days" rule. Another
important rule is that no amendments may be introduced by
either house during third reading. These limitations were
introduced by the 1935 and 1973 Constitutions and
confirmed by the 1987 Constitution as a defense against the
inventiveness of the stealthy and surreptitious. These,
however, were disregarded by the Court in Tolentino in
favor of contrary American practice.
This is not to say that conference committees should not be
allowed. But an effort should be made to lay out the scope
of what conference committees may do according to the
requirements and the reasons of the Philippine Constitution

and not according to the practice of the American Congress.

For instance, if the two Houses are not allowed to introduce
and debate amendments on third reading, can they
circumvent this rule by coursing new provisions through the
instrumentality of a conference committee created by
Congress and meeting in secret? The effect of the Courts
uncritical embrace of the practice of the American Congress
and its conference committees is to dismantle the noamendment rule.5
The task at hand for the Court, but which
the ponencia eschews, is to circumscribe the powers of the
Bicameral Conference Committee in light of the "threereading" and "no-amendment" rules in Article VI, Section
26(2) of the Constitution.
The Bicameral Conference Committee, in
deleting the "no pass on provision" contained in
Senate Bill No. 1950 and House Bill No. 3705,
violated Article VI , Section 26(2) of the Constitution
Pertinently, in his dissenting opinion in Tolentino, Justice
Davide (now Chief Justice) opined that the duty of the
Bicameral Conference Committee was limited to the
reconciliation of disagreeing provisions or the resolution of
differences or inconsistencies. This proposition still applies
as can be gleaned from the following text of Sections 88
and 89, Rule XIV of the Rules of the House of
Representatives:
Sec. 88. Conference Committee. In the event that the
House does not agree with the Senate on the amendments
to any bill or joint resolution, the differences may be settled
by the conference committees of both chambers.

In resolving the differences with the Senate, the House

panel shall, as much as possible, adhere to and support the
House Bill. If the differences with the Senate are so
substantial that they materially impair the House Bill, the
panel shall report such fact to the House for the latters
appropriate action.
Sec. 89. Conference Committee Reports. - Each report
shall contain a detailed, sufficiently explicit statement of the
changes in or amendments to the subject measure.

The Chairman of the House panel may be interpellated on

the Conference Committee Report prior to the voting
thereon. The House shall vote on the Conference Committee
report in the same manner and procedure as it votes on a
bill on third and final reading.
and Rule XII, Section 35 of the Rules of the Senate:
Sec. 35. In the event that the Senate does not agree with
the House of Representatives on the provision of any bill or
joint resolution, the differences shall be settled by a
conference committee of both Houses which shall meet
within ten (10) days after their composition. The President
shall designate the members of the Senate Panel in the
conference committee with the approval of the Senate.
Each Conference Committee Report shall contain a detailed
and sufficiently explicit statement of the changes in, or
amendments to the subject measure, and shall be signed by
a majority of the members of each House panel, voting
separately.
Justice Davide further explained that under its limited
authority, the Bicameral Conference Committee could only

(a) restore, wholly or partly, the specific provisions of the

House Bill amended by the Senate Bill; (b) sustain, wholly
or partly, the Senates amendments, or (c) by way of
compromise, to agree that neither provisions in the House
Bill amended by the Senate nor the latters amendments
thereto be carried into the final form of the former. Justice
Romero, who also dissented in Tolentino, added that the
conference committee is not authorized to initiate or
propose completely new matters although under certain
legislative rules like the Jeffersons Manual, a conference
committee may introduce germane matters in a particular
bill. However, such matters should be circumscribed by the
committees sole authority and function to reconcile
differences.
In the case of R.A. No. 9337, the Bicameral Conference
Committee made an "amendment by deletion" with respect
to the "no pass on provision" contained in both House Bill
(HB) No. 3705 and Senate Bill (SB) No. 1950. HB 3705
proposed to amend Sections 106 and 108 of the NIRC by
expressly stating therein that sellers of petroleum products
and power generation companies selling electricity are
prohibited from passing on the VAT to the consumers. SB
1950 proposed to amend Section 108 by likewise prohibiting
power generation companies from passing on the VAT to the
consumers. However, these "no pass on provisions" were
altogether deleted by the Bicameral Conference Committee.
At the least, since there was no disagreement between HB
3705 and SB 1950 with respect to the "no pass on
provision" on the sale of electricity, the Bicameral
Conference Committee acted beyond the scope of its
authority in deleting the pertinent proviso.
At this point, it is well to recall the rationale for the "noamendment rule" and the "three-reading rule" in Article VI,
Section 26(2) of the Constitution. The proscription on
amendments upon the last reading is intended to subject all
bills and their amendments to intensive deliberation by the

legislators and the ample ventilation of issues to afford the

public an opportunity to express their opinions or objections
thereon.6 Analogously, it is said that the "three-reading
rule" operates "as a self-binding mechanism that allows the
legislature to guard against the consequences of its own
future passions, myopia, or herd behavior. By requiring that
bills be read and debated on successive days, legislature
may anticipate and forestall future occasions on which it will
be seized by deliberative pathologies."7 As Jeremy
Bentham, a noted political analyst, put it: "[t]he more
susceptible a people are of excitement and being led astray,
so much the more ought they to place themselves under the
protection of forms which impose the necessity of reflection,
and prevent surprises."8

Report. Nonetheless, Congress approved it without even

thoroughly discussing the reservations or qualifications
expressed by the conferees therein.

Reports of the Bicameral Conference Committee, especially

in cases where substantial amendments, or in this case
deletions, have been made to the respective bills of either
house of Congress, ought to undergo the "three-reading"
requirement in order to give effect to the letter and spirit of
Article VI, Section 26(2) of the Constitution.

Ratification by Congress did not cure the

The Bicameral Conference Committee Report that

eventually became R.A. No. 9337, in fact, bolsters the
argument for the strict compliance by Congress of the
legislative procedure prescribed by the Constitution. As can
be gleaned from the said Report, of the 9 SenatorsConferees,9 only 5 Senators10 unqualifiedly approved it.
Senator Joker P. Arroyo expressed his qualified dissent
while Senators Sergio R. Osmea III and Juan Ponce Enrile
approved it with reservations. On the other hand, of the
twenty-eight (28) Members of the House of
Representatives-Conferees,11 fourteen (14)12 approved the
same with reservations while three13 voted no. All the
reservations expressed by the conferees relate to the
deletion of the "no pass on provision." Only eleven (11)
unqualifiedly approved it. In other words, even among
themselves, the conferees were not unanimous on their

This "take it or leave it" stance vis--vis conference

committee reports opens the possibility of amendments,
which are substantial and not even germane to the original
bills of either house, being introduced by the conference
committees and voted upon by the legislators without
knowledge of their contents. This practice cannot be
countenanced as it patently runs afoul of the essence of
Article VI, Section 26(2) of the Constitution. Worse, it is
tantamount to Congress surrendering its legislative
functions to the conference committees.

unconstitutional act of the Bicameral Conference

Committee of deleting the "no pass on provision"
That both the Senate and the House of Representatives
approved the Bicameral Conference Committee Report
which deleted the "no pass on provision" did not cure the
unconstitutional act of the said committee. As succinctly put
by Chief Justice Davide in his dissent in Tolentino, "[t]his
doctrine of ratification may apply to minor procedural flaws
or tolerable breaches of the parameters of the bicameral
conference committees limited powers but never to
violations of the Constitution. Congress is not above the
Constitution."14
Enrolled Bill Doctrine is not applicable where, as in
this case, there is grave violation of the Constitution

As expected, the ponencia invokes the enrolled bill doctrine

to buttress its refusal to pass upon the validity of the
assailed acts of the Bicameral Conference Committee. Under
the "enrolled bill doctrine," the signing of a bill by the
Speaker of the House and the Senate President and the
certification of the Secretaries of both houses of Congress
that it was passed are conclusive of its due enactment. In
addition to Tolentino, the ponencia citesFarias v. Executive
Secretary15 where the Court declined to go behind the
enrolled bill vis--vis the allegations of the petitioners
therein that irregularities attended the passage of Republic
Act No. 9006, otherwise known as the Fair Election Act.
Reliance by the ponencia on Farias is quite misplaced. The
Courts adherence to the enrolled bill doctrine in the said
case was justified for the following reasons:
The Court finds no reason to deviate from the salutary in
this case where the irregularities alleged by the petitioners
mostly involved the internal rules of Congress, whether
House or Senate. Parliamentary rules are merely procedural
and with their observance the courts have no concern.
Whatever doubts there may be as to the formal validity of
Rep. Act No. 9006 must be resolved in its favor. The Court
reiterates its ruling in Arroyo v. De Venecia, viz.:
But the cases, both here and abroad, in varying forms of
expression, all deny to the courts the power to inquire into
the allegations that, in enacting a law, a House of Congress
failed to comply with its own rules, in the absence of
showing that there was a violation of a constitutional
provision or the rights of private individuals. In Osmea v.
Pendatun, it was held: "At any rate, courts have declared
that the rules adopted by deliberative bodies are subject to
revocation, modification or waiver at the pleasure of the
body adopting them. And it has been said that
Parliamentary rules are merely procedural, and with their
observance, the courts have no concern. They may be

waived or disregarded by the legislative body.

Consequently, mere failure to conform to parliamentary
usage will not invalidate the action (taken by a deliberative
body) when the requisite number of members have agreed
to a particular measure.16
Thus, in Farias, the Courts refusal to go behind the
enrolled bill was based on the fact that the alleged
irregularities that attended the passage of R.A. No. 9006
merely involved the internal rules of both houses of
Congress. The procedural irregularities allegedly committed
by the conference committee therein did not amount to a
violation of a provision of the Constitution.17
In contrast, the act of the Bicameral Conference Committee
of deleting the "no pass on provision" of SB 1950 and HB
3705 infringe Article VI, Section 26(2) of the Constitution.
The violation of this constitutional provision warrants the
exercise by the Court of its constitutionally-ordained power
to strike down any act of a branch or instrumentality of
government or any of its officials done with grave abuse of
discretion amounting to lack or excess of jurisdiction.18
ACCORDINGLY, I join the concurring and dissenting
opinion of Mr. Justice Reynato S. Puno and vote to dismiss
the petitions with respect to Sections 4, 5 and 6 of Republic
Act No. 9337 for being premature. Further, I vote to declare
as unconstitutional Section 21 thereof and the deletion of
the "no pass on provision" contained in the constituent bills
of Republic Act No. 9337.
ROMEO J. CALLEJO, SR.
Associate Justice

Footnotes
1

G.R. No. 115455, 25 August 1994, 235 SCRA 630.

Tolentino v. Secretary of Finance, supra, at 667668.

Eduardo G. Gullas, Joey Sarte Salceda, Prospero C.

Nograles, Exequiel B. Javier, Rolando G. Andaya, Jr.,
Guillermo P. Cua, Arthur D. Defensor, Raul V. Del
Mar, Ronaldo B. Zamora, Rolex P. Suplico, Jacinto V.
Paras, Vincent P. Crisologo, Alan Peter S. Cayetano,
Joseph Santiago, Oscar G. Malapitan, Catalino
Figueroa, Antonino P. Roman and Imee R. Marcos.

See, for example, Vermuele, A., The Constitutional

Law of Congressional Procedure, 71 U. Chi. L. Rev.
361 (Spring 2004).

12

Representatives Suarez, Fuentebella, Cua, Locsin,

Jr., Teves, Gullas, Javier, Cua, Defensor, Crisologo,
Cayetano, Santiago, Malapitan and Marcos.

Galloway, G., Congress at the Crossroads, pp. 98100.

5

Bernas SJ, J., The 1987 Constitution of the Republic

of the Philippines, A Commentary, pp. 702-703
(1996 Ed.).

13

Representatives Del Mar, Suplico and Paras.

14

Dissenting Opinion in Tolentino, supra.

15

G.R. No. 147387, 10 December 2003, 417 SCRA

503.

Dissenting Opinion of Justice Romero

in Tolentino, supra.

16

Vermuele, supra.

17

Id. citing Bentham, J., Political Tactics.

Senators Ralph G. Recto, Joker P. Arroyo, Manuel

B. Villar, Richard J. Gordon, Rodolfo G. Biazon,
Edgardo G. Angara, M.A. Madrigal, Sergio R. Osmena
III, Juan Ponce Enrile.
10

11

Senators Recto, Villar, Gordon, Biazon.

Representatives Jesli A. Lapus, Danilo E. Suarez,

Arnulfo P. Fuentebella, Eric D. Singson, Junie E. Cua,
Teodoro L. Locsin, Jr., Salacnib Baterina, Edcel C.
Lagman, Luis R. Villafuerte, Herminio G. Teves,

Id., pp. 529-530. (Emphases mine.)

By way of explanation, the constitutional issues

raised in Farias were (1) whether Section 14 of R.A.
No. 9006 was a rider or that it violated Article VI,
Section 26(1) of the Constitution requiring that
"[e]very bill passed by Congress shall embrace only
one subject which shall be expressed in the title
thereof;" and (2) whether Section 14 of R.A. No.
9006 violated the equal protection clause of the
Constitution. On both issues the Court ruled in the
negative. To reiterate, unlike in the present cases,
the acts of the conference committee with respect to
R.A. No. 9006 in Farias allegedly violated the
internal rules of either house of Congress, but it was
not alleged therein that they amounted to a violation
of any constitutional provision on legislative
procedure.

18

Article VIII, Section 1, CONSTITUTION.

The Lawphil Project - Arellano Law Foundation

EN BANC
G.R. No. 168056 (ABAKADA Guro Party List [formerly
ASSJS] Officers Samson S. Alcantara, et al. v. Hon.
Executive Secretary Eduardo Ermita, et al.);
G.R. No. 168207 (Aquilino Q. Pimentel, Jr., et al. v.
Executive Secretary Eduardo R. Ermita, et al.);
G.R. No. 168461 (Association of Pilipinas Shell
Dealers, Inc., etc., et al. v. Cesar V. Purisima, etc., et
al.);
G.R. No. 168463 (Francis Joseph G. Escudero, et al. v.
Cesar V. Purisima, etc., et al.); and
G.R. No. 168730 (Bataan Governor Enrique T. Garcia,
Jr. v. Hon. Eduardo R. Ermita, etc., et al.)
Promulgated:
September 1, 2005
X---------------------------------------------------------------------------------------X
CONCURRING AND DISSENTING OPINION

AZCUNA, J.:
Republic Act No. 9337, the E-VAT law, is assailed as an
unconstitutional abdication of Congress of its power to tax
through its delegation to the President of the decision to
increase the rate of the tax from 10% to 12%, effective
January 1, 2006, after any of two conditions has been
satisfied.1
The two conditions are:
(i) Value-added tax collection as a percentage of Gross
Domestic Product (GDP) of the previous year exceeds two
and four-fifth percent (2 4/5%); or
(ii) National government deficit as a percentage of GDP of
the previous year exceeds one and one-half percent (1
%).2
A scrutiny of these "conditions" shows that one of them
is certain to happen on January 1, 2006.
The first condition is that the collection from the E-VAT
exceeds 2 4/5% of the Gross Domestic Product (GDP) of the
previous year, a ratio that is known as the tax effort.
The second condition is that the national government deficit
exceeds 1 % of the GDP of the previous year.
Note that the law says that the rate shall be increased
if any of the two conditions happens, i.e., if condition
(i) orcondition (ii) occurs.
Now, in realistic terms, considering the short time-frame
given, the only practicable way that the present deficit of
the national government can be reduced to 1 % or lower,
thus preventing condition (ii) from happening, is to increase

the tax effort, which mainly has to come from the E-VAT.
But increasing the tax effort through the E-VAT, to the
extent needed to reduce the national deficit to 1 % or
less, will trigger the happening of condition (i) under the
law. Thus, the happening of condition (i) or condition (ii) is
in reality certain and unavoidable, as of January 1, 2006.
This becomes all the more clear when we consider the
figures provided during the oral arguments.
The Gross Domestic Product for 2005 is estimated at P5.3
Trillion pesos.
The tax effort of the present VAT is now at 1.5%.
The national budgetary deficit against the GDP is now at
3%.
So to reduce the deficit to 1.5% from 3%, one has to
increase the tax effort from VAT, now at 1.5%, to at least
3%, thereby exceeding the 2 4/5 percent ceiling in condition
(i), making condition (i) happen.
If, on the other hand, this is not done, then condition (ii)
happens the budget deficit remains over 1.5%.
What is the result of this? The result is that in reality, the
law does not impose any condition, or the rate increase
thereunder, from 10% to 12%, effective January 1, 2006, is
unconditional. For a condition is an event that may or may
not happen, or one whose occurrence is uncertain.3 Now
while condition (i) is indeed uncertain and condition (ii) is
likewise uncertain, the combination of both makes the
occurrence of one of them certain.
Accordingly, there is here no abdication by Congress of its
power to fix the rate of the tax since the rate increase

provided under the law, from 10% to 12%, is definite and

certain to occur, effective January 1, 2006. All that the
President will do is state which of the two conditions
occurred and thereupon implement the rate increase.
At first glance, therefore, it would appear that the decision
to increase the rate is to be made by the President, or that
the increase is still uncertain, as it is subject to the
happening of any of two conditions.
Nevertheless, the contrary is true and thus it would be best
in these difficult and critical times to let our people know
precisely what burdens they are being asked to bear as the
necessary means to recover from a crisis that calls for a
heroic sacrifice by all.
It is for this reason that the Court required respondents to
submit a copy of the rules to implement the E-VAT,
particularly as to the impact of the tax on prices of affected
commodities, specially oil and electricity. For the onset of
the law last July 1, 2005 was confusing, resulting in acrossthe-board increases of 10% in the prices of commodities.
This is not supposed to be the effect of the law, as was
made clear during the oral arguments, because the law also
contains provisions that mitigate the impact of the E-VAT
through reduction of other kinds of taxes and duties, and
other similar measures, specially as to goods that go into
the supply chain of the affected products. A proper
implementation of the E-VAT, therefore, should cause only
the appropriate incremental increase in prices, reflecting the
net incremental effect of the tax, which is not necessarily
10%, but possibly less, depending on the products involved.
The introduction of the mitigating or cushioning measures
through the Senate or through the Bicameral Conference
Committee, is also being questioned by petitioners as
unconstitutional for violating the rule against amendments

after third reading and the rule that tax measures must
originate exclusively in the House of Representatives (Art.
VI, Secs. 24 and 26 [2], Constitution). For my part, I would
rather give the necessary leeway to Congress, as long as
the changes are germane to the bill being changed, the bill
which
originated from the House of Representatives, and these are
so, since these were precisely the mitigating measures that
go hand-on-hand with the E-VAT, and are, therefore,
essential -- and hopefully sufficient -- means to enable our
people to bear the sacrifices they are being asked to make.
Such an approach is in accordance with the Enrolled Bill
Doctrine that is the prevailing rule in this jurisdiction.
(Tolentino v. Secretary of Finance, 249 SCRA 628 [1994]).
The exceptions I find are the provisions on corporate
income taxes, which are not germane to the E-VAT law, and
are not found in the Senate and House bills.
I thus agree with Chief Justice Hilario G. Davide, Jr. in his
separate opinion that the following are not germane to the
E-VAT legislation:
Amended TAX
CODE Provision Subject Matter
Section 27 Rate of income tax on domestic corporations

Section 28(B)(5-b) Rate of income tax on intercorporate

dividends received by non-resident foreign corporations
Section 34(B)(1) Deduction from gross income
Similarly, I agree with Justice Artemio V. Panganiban in his
separate opinion that the following are not germane to the
E-VAT law:
"Sections 1, 2, and 3 of the Republic Act No. 9337, in so
far as these sections (a) amend the rates of income taxon
domestic, resident foreign, and nonresident foreign
corporations; (b) amend the tax credit against taxes due
from nonresident foreign corporations on the intercorporate
dividends; and (c) reduce the allowable deduction from
interest expense."
Respondents should, in any case, now be able to implement
the E-VAT law without confusion and thereby achieve its
purpose.4
I vote to GRANT the petitions to the extent of declaring
unconstitutional the provisions in Republic Act. No. 9337
that are not germane to the subject matter and DENY said
petitions as to the rest of the law, which are constitutional.
ADOLFO S. AZCUNA
Associate Justice

Section 28(A)(1) Rate of income tax on resident foreign

corporations
Section 28(B)(1) Rate of income tax on non-resident foreign
corporations

Footnotes

The Constitution states that "Congress may, by

law, allow the President to fix within specified limits,
and subject to such limitations and restrictions as it
may impose, tariff rates, import and export quotas,
tonnage and wharfage dues, and other duties as
imposts within the framework of the national
development program of the Government." (Art. VI,
Sec. 28 [2], emphasis supplied.)

"(i) Value-added tax collection as a percentage of

Gross Domestic Product (GDP) of the previous year
exceeds two and four-fifth percent (2 4/5%); or
"(ii) National government deficit as a percentage of
GDP of the previous year exceeds one and one-half
percent (1 %)."
3

Petitioners claim that the power does not extend to

fixing the rates of taxes, since taxes are not tariffs,
import and export quotas, tonnage and wharfage
dues, or other duties or imposts.
2

Section 4, Republic Act No. 9337. The pertinent

portion of the provision states:

Condition has been defined by Escriche as "every

future and uncertain event upon which an obligation
or provision is made to depend." It is a future and
uncertain event upon which the acquisition or
resolution of rights is made to depend by those who
execute the juridical act. Futurity and uncertainty
must concur as characteristics of the event.
...

SEC. 4. Section 106 of the same Code, as amended,

is hereby further amended to read as follows:
"SEC. 106. Value-added Tax on Sale of Goods or
Properties.
"(A) Rate and Base of Tax. There shall be levied,
assessed and collected on every sale, barter or
exchange of goods or properties, a value-added tax
equivalent to ten percent (10%) of the gross selling
price or gross value in money of the goods or
properties sold, bartered or exchanged, such tax to
be paid by the seller or transferor: Provided, That
the President, upon the recommendation of the
Secretary of Finance, shall, effective January 1,
2006, raise the rate of value-added tax to twelve
percent (12%), after any of the following conditions
has been satisfied:

An event which is not uncertain but must necessarily

happen cannot be a condition; the obligation will be
considered as one with a term. (IV TOLENTINO,
COMMENTARIES AND JURISPRUDENCE ON THE
CIVIL CODE OF THE PHILIPPINES, 144).
4

I voted for the issuance of the temporary

restraining order to prevent the disorderly
implementation of the law that would have defeated
its very purpose and disrupted the entire VAT
system, resulting in less revenues. The rationale,
therefore, of the rule against enjoining the collection
of taxes, that taxes are the lifeblood of Government,
leaned in favor of the temporary restraining order.

GR No. 168056 - (ABAKADA GURO PARTY LIST

(Formerly AASJAS) OFFICERS SAMSON S. ALCANTARA
and ED VINCENT S. ALBANO v. THE HONORABLE
EXECUTIVE SECRETARY EDUARDO ERMITA;
HONORABLE SECRETARY OF THE DEPARTMENT OF
FINANCE CESAR PURISIMA; and HONORABLE
COMMISSIONER OF INTERNAL REVENUE GUILLERMO
PARAYNO, JR.)
GR No. 168207 (AQUILINO Q. PIMENTEL, JR., LUISA
P. EJERCITO-ESTRADA, JINGGOY E. ESTRADA,
PANFILO M. LACSON, ALFREDO S. LIM, JAMBY A.S.
MADRIGAL, and SERGIO R. OSMEA III v. EXECUTIVE
SECRETARY EDUARDO R. ERMITA, CESAR V.
PURISIMA, SECRETARY OF FINANCE, GUILLERMO L.
PARAYNO, JR., COMMISSIONER OF THE BUREAU OF
INTERNAL REVENUE)
GR No. 168461 ASSOCIATION OF PILIPINAS SHELL
DEALERS, INC. represented by its President, ROSARIO
ANTONIO; PETRON DEALERS ASSOCIATION
represented by its President, RUTH E. BARBIBI;
ASSOCIATION OF CALTEX DEALERS OF THE
PHILIPPINES represented by its President,
MERCEDITAS A. GARCIA; ROSARIO ANTONIO doing
business under the name and style of "ANB NORTH
SHELL SERVICE STATION"; LOURDES MARTINEZ doing
business under the name and style of "SHELL GATE
N. DOMINGO"; BETHZAIDA TAN doing business under
the name and style of "ADVANCED SHELL STATION";
REYNALDO P. MONTOYA doing business under the
name and style of "NEW LAMUAN SHELL SERVICE
STATION"; EFREN SOTTO doing business under the
name and style of "REDFIELD SHELL SERVICE
STATION"; DONICA CORPORATION represented by its
President, DESI TOMACRUZ; RUTH E. MARBIBI doing
business under the name and style of "R&R PETRO
STATION"; PETER M. UNGSON doing business under

the name and style of "CLASSIC STAR GASOLINE

SERVICE STATION"; MARIAN SHEILA A. LEE doing
business under the name and style "NTE GASOLINE &
SERVICE STATION"; JULIAN CESAR P. POSADAS doing
business under the name and style of "STARCARGA
ENTERPRISES"; ADORACION MAEBO doing business
under the name and style of "CMA MOTORISTS
CENTER"; SUSAN M. ENTRATA doing business under
the name and style of "LEONAS GASOLINE STATION
and SERVICE CENTER"; CARMELITA BALDONADO
doing business under the name and style of "FIRST
CHOICE SERVICE CENTER: RHEAMAR A. RAMOS doing
business under the name and style of "RJAM PTT GAS
STATION"; MA. ISABEL VIOLAGO doing business
under the name and style of "VIOLAGO-PTT SERVICE
CENTER"; MOTORISTS HEART CORPORATON
represented by its Vice-President for Operations,
JOSELITO F. FLORDELIZA; MOTORISTS HARVARD
CORPORATION represented by its Vice-President for
Operations, JOSELITO F. FLORDELIZA; MOTORISTS
HERITAGE CORPORATION represented by its VicePresident for Operations, JOSELITO F. FLORDELIZA;
PHILIPPINE STANDARD OIL CORPORATION
represented by its Vice-President for Operations,
JOSELITO F. FLORDELIZA; ROMEO MANUEL doing
business under the name and style of "ROMMAN
GASOLINE STATION"; ANTHONY ALBERT CRUZ III
doing business under the name and style of "TRUE
SERVICE STATION" v. CESAR V. PURISIMA, in his
capacity as Secretary of the Department of Finance
and GUILLERMO L. PARAYNO, JR., in his capacity as
Commissioner of Internal Revenue.
GR No. 168463 FRANCIS JOSEPH G. ESCUDERO,
VINCENT CRISOLOGO, EMMANUEL JOSEL J.
VILLANUEVA, RODOLFO G. PLAZA, DARLENE
ANTONINO-CUSTODIO, OSCAR G. MALAPITAN,
BENJAMIN C. AGARAO, JR., JUAN EDGARDO M.

ANGARA, JUSTIN MARC SB. CHIPECO, FLORENCIOI G.

NOEL, MUJIV S. HATAMAN, RENATO B. MAGTUBO,
JOSEPH A. SANTIAGO, TEOFISTO DL. GUINGONA III,
RUY ELIAS C. LOPEZ, RODOLFO Q. AGBAYANI and
TEODORO A. CASIO, v. CESAR V. PURISIMA, in his
capacity as Secretary of Finance, GUILLERMO L.
PARAYNO, JR., in his capacity as Commissioner of
Internal Revenue, and EDUARDO R. ERMITA, in his
capacity as Executive Secretary.
GR. No. 168730 BATAAN GOVERNOR ENRIQUE T.
GARCIA, JR. v. HON. EDUARDO R. ERMITA, in his
capacity as the Executive Secretary; HON.
MARGARITO TEVES, in his capacity as Secretary of
Finance; HON. JOSE MARIO BUNAG, in his capacity as
the OIC Commissioner of the Bureau of Customs.
x------------------------------------------------------------------x
DISSENTING OPINION
Tinga, J.:
The E-VAT Law,1 as it stands, will exterminate our
countrys small to medium enterprises. This will be the
net effect of affirming Section 8 of the law, which amends
Sections 110 of the National Internal Revenue Code (NIRC)
by imposing a seventy percent (70%) cap on the creditable
input tax a VAT-registered person may apply every quarter
and a mandatory sixty (60) -month amortization period on
the input tax on goods purchased or imported in a calendar
month if the acquisition cost of such goods exceeds One
Million Pesos (P1,000,000.00).
Taxes may be inherently punitive, but when the fine
line between damage and destruction is crossed, the

courts must step forth and cut the hangmans

noose. Justice Holmes once confidently asserted that "the
power to tax is not the power to destroy while this Court
sits", and we should very well live up to this expectation not
only of the revered Holmes, but of the Filipino people who
rely on this Court as the guardian of their rights. At stake
is the right to exist and subsist despite taxes, which
is encompassed in the due process clause.
I respectfully submit these views while maintaining the
deepest respect for the prerogative of the legislature to
impose taxes, and of the national government to chart
economic policy. Such respect impels me to vote to deny
the petitions in G.R. Nos. 168056, 168207, 168463, 2 and
168730, even as I acknowledge certain merit in the
challenges against the E-VAT law that are asserted in those
petitions. In the final analysis, petitioners therein are unable
to convincingly demonstrate the constitutional infirmity of
the provisions they seek to assail. The only exception is
Section 21 of the law, which I consider unconstitutional, for
reasons I shall later elaborate.
However, I see the petition in G.R. No. 168461 as
meritorious and would vote to grant it. Accordingly, I
dissent and hold as unconstitutional Section 8 of Republic
Act No. 9337, insofar as it amends Section 110(A) and (B)
of the National Internal Revenue Code (NIRC) as well as
Section 12 of the same law, with respect to its amendment
of Section 114(C) of the NIRC.
The first part of my discussion pertains to the petitions in
G.R. Nos. 168056, 168207, 168463, and 168730, while the
second part is devoted to what I deem the most crucial
issue before the Court, the petition in G.R. No. 168461.
I.

Undue Delegation and the Increase

ascertain the rates, subjects, and conditions of taxation may

not be delegated away by Congress.

Of the VAT Rate

My first point pertains to whether or not Sections 4, 5 and 6
of the E-VAT Law constitutes an undue delegation of
legislative power. In appreciating the aspect of undue
delegation as regards taxation statutes, the fundamental
point remains that the power of taxation is inherently
legislative,3 and may be imposed or revoked only by the
legislature.4 In tandem with Section 1, Article VI of the
Constitution which institutionalizes the law-making power of
Congress, Section 24 under the same Article crystallizes this
principle, as it provides that "[a]ll appropriation, revenue or
tariff bills shall originate exclusively in the House of
Representatives."5
Consequently, neither the executive nor judicial branches of
government may originate tax measures. Even if the
President desires to levy new taxes, the imposition cannot
be done by mere executive fiat. In such an instance, the
President would have to rely on Congress to enact tax laws.
Moreover, this plenary power of taxation cannot be
delegated by Congress to any other branch of government
or private persons, unless its delegation is authorized by the
Constitution itself.6 In this regard, the situation stands
different from that in the recent case Southern Cross v.
PHILCEMCOR,7 wherein I noted in my ponencia that the
Tariff Commission and the DTI Secretary may be regarded
as agents of Congress for the purpose of imposing
safeguard measures. That pronouncement was made in
light of Section 28(2) Article VI, which allows Congress to
delegate to the President through law the power to impose
tariffs and imposts, subject to limitations and restrictions as
may be ordained by Congress. In the case of taxes, no such
constitutional authorization exists, and the discretion to

However, as the majority correctly points out, the power to

ascertain the facts or conditions as the basis of the taking
into effect of a law may be delegated by Congress,8 and
that the details as to the enforcement and administration of
an exercise of taxing power may be delegated to executive
agencies, including the power to determine the existence of
facts on which its operation depends.9
Proceeding from these principles, Sections 4, 5, and 6 of the
E-VAT Law warrant examination. The provisions read:
SEC. 4. Sec. 106 of the same Code, as amended, is hereby
further amended to read as follows:
SEC. 106. Value-Added Tax on Sale of Goods or Properties.

(A) Rate and Base of Tax. There shall be levied, assessed

and collected on every sale, barter or exchange of goods or
properties, a value-added tax equivalent to ten percent
(10%) of the gross selling price or gross value in money of
the goods or properties sold, bartered or exchanged, such
tax to be paid by the seller or transferor;provided, that
the President, upon the recommendation of the
Secretary of Finance, shall, effective January 1, 2006,
raise the rate of value-added tax to twelve percent
(12%), after any of the following conditions has been
satisfied.
(i) value-added tax collection as a percentage of
Gross Domestic Product (GDP) of the previous year
exceeds two and four-fifth percent (2 4/5%) or

(ii) national government deficit as a percentage of

GDP of the previous year exceeds one and one-half
percent 1 %).
Sec. 5. Section 107 of the same Code, as amended, is
hereby further amended to read as follows:
SEC. 107. Value-Added Tax on Importation of Goods.
(a) In General. There shall be levied, assessed and
collected on every importation of goods a value-added tax
equivalent to ten percent (10%) based on the total value
used by the Bureau of Customs in determining tariff and
customs duties, plus customs duties, excise taxes, if any,
and other charges, such tax to be paid by the importer prior
to the release of such goods from customs custody:
Provided, That where the customs duties are determined on
the basis of the quantity or volume of the goods, the valueadded tax shall be based on the landed cost plus excise
taxes, if any: provided, further, that the President,
upon the recommendation of the Secretary of
Finance, shall, effective January 1, 2006, raise the
rate of value-added tax to twelve percent (12%) after
any of the following conditions has been satisfied.
(i) national value-added tax collection as a
percentage of Gross Domestic Product (GDP) of the
previous year exceeds two and four-fifth percent (2
4/5%) or
(ii) government deficit as a percentage of GDP of the
previous year exceeds one and one-half percent (1
%).
SEC. 6. Section 108 of the same Code, as amended, is
hereby further amended to read as follows:

SEC. 108. Value-added Tax on Sale of Services and

Use of Lease of Properties(A) Rate and Base of Tax. There shall be levied,
assessed and collected, a value-added tax equivalent
to ten percent (10%) of gross receipts derived from
the sale or exchange of services;provided, that the
President, upon the recommendation of the Secretary of
Finance, shall, effective January 1, 2006, raise the rate of
value-added tax to twelve percent (12%), after any of the
following conditions has been satisfied.
(i) value-added tax collection as a percentage of Gross
Domestic Product (GDP) of the previous year exceeds two
and four-fifth percent (2 4/5%) or
(ii) national government deficit as a percentage of GDP of
the previous year exceed same and on-half percent (1
%).
The petitioners deem as noxious the proviso common to
these provisions that "the President, upon the
recommendation of the Secretary of Finance, shall, effective
January 1, 2006, raise the rate of value-added tax to twelve
percent (12%)," after the satisfaction of the twin conditions
that value-added tax collection as a percentage of Gross
Domestic Product (GDP) of the previous year exceeds two
and four-fifth percent (2 4/5%); or that the national
government deficit as a percentage of GDP of the previous
year exceed same and on-half percent (1 %).
At first blush, it does seem that the assailed provisions are
constitutionally deficient. It is Congress, and not the
President, which is authorized to raise the rate of VAT from
10% to 12%, no matter the circumstance. Yet a closer
analysis of the proviso reveals that this is not exactly the
operative effect of the law. The qualifier "shall" denotes a

mandatory, rather than discretionary function on the part of

the President to raise the rate of VAT to 12% upon the
existence of any of the two listed conditions.
Since the President is not given any discretion in refusing to
raise the VAT rate to 12%, there is clearly no delegation of
the legislative power to tax by Congress to the executive
branch. The use of the word "shall" obviates any logical
construction that would allow the President leeway in not
raising the tax rate. More so, it is accepted that the
principle of constitutional construction that every
presumption should be indulged in favor of constitutionality
and the court in considering the validity of the 'statute in
question should give it such reasonable construction as can
be reached to bring it within the fundamental law.10 While
all reasonable doubts should be resolved in favor, of the
constitutionality of a statute,11 it should necessarily follow
that the construction upheld should be one that is not itself
noxious to the Constitution.
Congress should be taken to task for imperfect
draftsmanship at least. Much trouble would have been
avoided had the provisos instead read: "that effective
January 1, 2006, the rate of value-added tax shall be raised
to twelve percent (12%), after any of the following
conditions has been satisfied xxx." This, after all is the
operative effect of the provision as it stands. In relation to
the operation of the tax increase, the denominated role of
the President and the Secretary of Finance may be regarded
as a superfluity, as their imprimatur as a precondition to the
increase of the VAT rate must have no bearing.
Nonetheless, I cannot ignore the fact that both the
President and the Secretary of Finance have designated
roles in the implementation of the tax increase. Considering
that it is Congress, and not these officials, which properly
have imposed the increase in the VAT rate, how should
these roles be construed?

The enactment of a law should be distinguished from its

implementation. Even if it is Congress which exercises the
plenary power of taxation, it is not the body that
administers the implementation of the tax. Under Section 2
of the National Internal Revenue Code (NIRC), the
assessment and collection of all national internal revenue
taxes, and the enforcement of all forefeitures, penalties and
fines connected therewith had been previously delegated to
the Bureau of Internal Revenue, under the supervision and
control of the Department of Finance.12
Moreover, as intimated earlier, Congress may delegate to
other components of the government the power to ascertain
the facts or conditions as the basis of the taking into effect
of a law. It follows that ascertainment of the existence of
the two conditions precedent for the increase as stated in
the law could very well be delegated to the President or the
Secretary of Finance.13
Nonetheless, the apprehensions arise that the process of
ascertainment of the listed conditions delegated to the
Secretary of Finance and the President effectively vest
discretionary authority to raise the VAT rate on the
President, through the subterfuges that may be employed
to delay the determination, or even to manipulate the
factual premises. Assuming arguendo that these feared
abuses may arise, I think it possible to seek judicial
enforcement of the increased VAT rate, even without the
participation or consent of the President or Secretary of
Finance, upon indubitable showing that any of the two listed
conditions do exist. After all, the Court is ruling that the
increase in the VAT rate is mandatory and beyond the
discretion of the President to impose or delay.
The majority states that in making the recommendation to
the President on the existence of either of the two
conditions, the Secretary of Finance is acting as the agent
of the legislative branch, to determine and declare the

event upon which its expressed will is to take effect.14 This

recognition of agency must be qualified. I do not doubt the
ability of Congress to delegate to the Secretary of Finance
administrative functions in the implementation of tax laws,
as it does under Section 2 of the NIRC. Yet it would be
impermissible for Congress to delegate to the Secretary of
Finance the plenary function of enacting a tax law. As stated
earlier, the situation stands different from that in Southern
Cross wherein the Constitution itself authorizes the
delegation by Congress through a law to the President of
the discretion to impose tariff measures, subject to
restrictions and limitations provided in the law.15 Herein,
Congress cannot delegate to either the President or the
Secretary of Finance the discretion to raise the tax, as such
power belongs exclusively to the legislative branch.
Perhaps the term "agency" is not most suitable in describing
the delegation exercised by Congress in this case, for
agency implies that the agent takes on attributes of the
principal by reason of representative capacity. In this case,
whatever "agency" that can be appreciated would be of
severely limited capacity, encompassing as it only could the
administration, not enactment, of the tax measure.
I do not doubt the impression left by the provisions that it is
the President, and not Congress, which is authorized to
raise the VAT rate. On paper at least, these imperfect
provisions could be multiple sources of mischief. On the
political front, whatever blame or scorn that may be
attended with the increase of the VAT rate would fall on the
President, and not on Congress which actually increased the
tax rate. On the legal front, a President averse to increasing
the VAT rate despite the existence of the two listed
conditions may take refuge in the infelicities of the
provision, and refuse to do so on the ground that the law,
as written, implies some form of discretion on the part of
the President who was, after all, "authorized" to increase

the tax rate. It is critical for the Court to disabuse this

notion right now.
The Continued Viability of
Tolentino v. Secretary of Finance
One of the more crucial issues now before us, one that has
seriously divided the Court, pertains to the ability of the
Bicameral Conference Committee to introduce amendments
to the final bill which were not contained in the House bill
from which the E-VAT Law originated. Most of the points
addressed by the petitioners have been settled in our ruling
in Tolentino v. Secretary of Finance,16 yet a revisit of that
precedent is urged upon this Court. On this score, I offer
my qualified concurrence with the ponencia.
Two key provisions of the Constitution come into play:
Sections 24 and 26(2), Article VI of the Constitution. They
read:
Section 24: 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.
Section 26(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.

Section 24 is also known as the origination clause, which

derives origin from British practice. From the assertion that
the power to tax the public at large must reside in the
representatives of the people, the principle evolved that
money bills must originate in the House of Commons and
may not be amended by the House of Lords.17 The principle
was adopted across the shores in the United States, and
was famously described by James Madison inThe Federalist
Papers as follows:
This power over the purse, may in fact be regarded as the
most compleat and effectual weapon with which any
constitution can arm the immediate representatives of the
people, for obtaining a redress of every grievance, and for
carrying into effect every just and salutary measure.18
There is an eminent difference from the British system from
which the principle emerged, and from our own polity. To
this day, only members of the British House of Commons
are directly elected by the people, with the members of the
House of Lords deriving their seats from hereditary peerage.
Even in the United States, members of the Senate were not
directly elected by the people, but chosen by state
legislatures, until the adoption of the Seventeenth
Amendment in 1913. Hence, the rule assured the British
and American people that tax legislation arises with the
consent of the sovereign people, through their directly
elected representatives. In our country though, both
members of the House and Senate are directly elected by
the people, hence the vitality of the original conception of
the rule has somewhat lost luster.
Still, the origination clause deserves obeisance in this
jurisdiction, simply because it is provided in the
Constitution. At the same time, its proper interpretation is
settled precedent, as enunciated in Tolentino:

To begin with, it is not the law but the revenue bill

which is required by the Constitution to "originate
exclusively" in the House of Representatives. It is important
to emphasize this, because a bill originating in the House
may undergo such extensive changes in the Senate that the
result may be a rewriting of the whole. The possibility of a
third version by the conference committee will be discussed
later. At this point, what is important to note is that, as a
result of the Senate action, a distinct bill may be produced.
To insist that a revenue statute and not only the bill
which initiated the legislative process culminating in the
enactment of the law must substantially be the same as
the House bill would be to deny the Senate's power not only
to "concur with amendments" but also to " propose
amendments." It would be to violate the coequality of
legislative power of the two houses of Congress and in fact
make the House superior to the Senate.19
The vested power of the Senate to " propose or concur with
amendments" necessarily implies the ability to adduce
transformations from the original House bill into the final
law. Since the House and Senate sit separately in sessions,
the only opportunity for the Senate to introduce its
amendments would be in the Bicameral Conference
Committee, which emerges only after both the House and
the Senate have approved their respective bills.
In the present petitions, Tolentino comes under fire on two
fronts. The first controversy arises from the adoption
inTolentino of American legislative practices relating to
bicameral committees despite the difference in
constitutional frameworks, particularly the limitation under
Section 26(2), Article VI which does not exist in the
American Constitution.
The majority points out that the "no amendment rule" refers
only to the procedure to be followed by each house of
Congress with regard to bills initiated in the house

concerned, before said bills are transmitted to the other

house for its concurrence or amendment. I agree with this
statement. Clearly, the procedure under Section 26(2),
Article VI only relates to the passage of a bill before the
House and Senate, and not the process undertaken
afterwards in the Bicameral Conference Committee.
Indeed, Sections 26 and 27 of Article VI, which detail the
procedure how a bill becomes a law, are silent as to what
occurs between the passage by both houses of their
respective bills, and the presentation to the President of
"every bill passed by the Congress".20 Evidently, "Congress"
means both Houses, such that a bill approved by the Senate
but not by the House is not presented to the President for
approval. There is obviously a need for joint concurrence by
the House and Senate of a bill before it is transmitted to the
President, but the Constitution does not provide how such
concurrence is acquired. This lacuna has to be filled,
otherwise no bill may be transmitted to the President.
Even if the Bicameral Conference Committee is not a
constitutionally organized body, it has existed as the
necessary conclave for both chambers of Congress to
reconcile their respective versions of a prospective law. The
members of the Bicameral Conference Committee may
possess in them the capacity to represent their particular
chamber, yet the collective is neither the House nor the
Senate. Hence, the procedure contained in Section 26(2),
Article VI cannot apply to the Bicameral Conference
Committee.
Tellingly, the version approved by the Bicameral Conference
Committee still undergoes deliberation and approval by both
Houses. Only one vote is taken to approve the reconciled
bill, just as only one vote is taken in order to approve the
original bill. Certainly, it could not be contended that this

final version surreptitiously evades approval of either the

House or Senate.
The second front concerns the scope and limitations of the
Bicameral Conference Committee to amend, delete, or
otherwise modify the bills as approved by the House and
the Senate.
Tolentino adduced the principle, adopted from American
practice, that the version as approved by the Bicameral
Conference Committee need only be germane to the subject
of the House and Senate bills in order to be valid. 21The
majority, in applying the test of germaneness, upholds the
contested provisions of the E-VAT Law. Even the members
of the Court who prepared to strike down provisions of the
law applying germaneness nonetheless accept the basic
premise that such test is controlling.
I agree that any amendment made by the Bicameral
Conference Committee that is not germane to the subject
matter of the House or Senate Bills is not valid. It is the
only valid ground by which an amendment introduced by
the Bicameral Conference Committee may be judicially
stricken.
The germaneness standard which should guide Congress or
the Bicameral Conference Committee should be appreciated
in its normal but total sense. In that regard, my views
contrast with that of Justice Panganiban, who asserts that
provisions that are not "legally germane" should be stricken
down. The legal notion of germaneness is just but one
component, along with other factors such as
economics and politics, which guides the Bicameral
Conference Committee, or the legislature for that
matter, in the enactment of laws. After all, factors such
as economics or politics are expected to cast a pervasive
influence on the legislative process in the first place, and it

is essential as well to allow such "non-legal" elements to be

considered in ascertaining whether Congress has complied
with the criteria of germaneness.
Congress is a political body, and its rationale for
legislating may be guided by factors other than
established legal standards. I deem it unduly
restrictive on the plenary powers of Congress to
legislate, to coerce the body to adhere to judge-made
standards, such as a standard of "legal
germaneness". The Constitution is the only legal
standard that Congress is required to abide by in its
enactment of laws.
Following these views, I cannot agree with the position
maintained by the Chief Justice, Justices Panganiban and
Azcuna that the provisions of the law that do not pertain to
VAT should be stricken as unconstitutional. These would
include, for example, the provisions raising corporate
income taxes. The Bicameral Conference Committee, in
evaluating the proposed amendments, necessarily takes
into account not just the provisions relating to the VAT, but
the entire revenue generating mechanism in place. If, for
example, amendments to non-VAT related provisions of the
NIRC were intended to offset the expanded coverage for the
VAT, then such amendments are germane to the purpose of
the House and Senate Bills.
Moreover, it would be myopic to consider that the subject
matter of the House Bill is solely the VAT system, rather
than the generation of revenue. The majority has
sufficiently demonstrated that the legislative intent behind
the bills that led to the E-VAT Law was the generation of
revenue to counter the countrys dire fiscal situation.
The mere fact that the law is popularly known as the E-VAT
Law, or that most of its provisions pertain to the VAT, or

indirect taxes, does not mean that any and all amendments
which are introduced by the Bicameral Conference
Committee must pertain to the VAT system. As the Court
noted in Tatad v. Secretary of Energy:22
[I]t is contended that section 5(b) of R.A. No. 8180 on tariff
differential violates the provision 17 of the Constitution
requiring every law to have only one subject which should
be expressed in its title. We do not concur with this
contention. As a policy, this Court has adopted a liberal
construction of the one title - one subject rule. We
have consistently ruled that the title need not mirror,
fully index or catalogue all contents and minute
details of a law. A law having a single general subject
indicated in the title may contain any number of
provisions, no matter how diverse they may be, so
long as they are not inconsistent with or foreign to
the general subject, and may be considered in
furtherance of such subject by providing for the
method and means of carrying out the general
subject. We hold that section 5(b) providing for tariff
differential is germane to the subject of R.A. No. 8180
which is the deregulation of the downstream oil industry.
The section is supposed to sway prospective investors to
put up refineries in our country and make them rely less on
imported petroleum.23
I submit that if the amendments are attuned to the goal of
revenue generation, the stated purpose of the original
House Bills, then the test of germaneness is satisfied. It
might seem that the goal of revenue generation, which is
stated in virtually all tax or tariff bills, is so encompassing in
scope as to justify the inclusion by the Bicameral
Conference Committee of just about any revenue
generation measure. This may be so, but it does not mean
that the test of germaneness would be rendered inutile
when it comes to revenue laws.

I do believe that the test of germaneness was violated by

the E-VAT Law in one regard. Section 21 of the law, which
was not contained in either the House or Senate Bills,
imposes restrictions on the use by local government units of
their incremental revenue from the VAT. These restrictions
are alien to the principal purposes of revenue generation, or
the purposes of restructuring the VAT system. I could not
see how the provision, which relates to budgetary
allocations, is germane to the E-VAT Law. Since it was
introduced only in the Bicameral Conference Committee, the
test of germaneness is essential, and the provision does not
pass muster. I join Justice Puno and the Chief Justice in
voting to declare Section 21 as unconstitutional.
I also offer this brief comment regarding the deletion of the
so-called "no pass on" provisions, which several of my
colleagues deem unconstitutional. Both the House and
Senate Bills contained these provisions that would prohibit
the seller/producer from passing on the cost of the VAT
payments to the consumers. However, an examination of
the said bills reveal that the "no pass on" provisions in the
House Bill affects a different subject of taxation from that of
the Senate Bill. In the House Bill No. 3705, the taxpayers
who are prohibited from passing on the VAT payments are
the sellers of petroleum products and electricity/power
generation companies. In Senate Bill No. 1950, no
prohibition was adopted as to sellers of petroleum products,
but enjoined therein are electricity/power generation
companies but also transmission and distribution
companies.
I consider such deletions as valid, for the same reason that
I deem the amendments valid. The deletion of the two
disparate "no pass on" provisions which were approved by
the House in one instance, and only by the Senate in the
other, remains in the sphere of compromise that ultimately
guides the approval of the final version. Again, I point out
that even while the two provisions may have been originally

approved by the House and Senate respectively, their

subsequent deletion by the Bicameral Conference
Committee is still subject to approval by both chambers of
Congress when the final version is submitted for
deliberation and voting.
Moreover, the fact that the nature of the "no pass on"
provisions adopted by the House essentially differs from
that of the Senate necessarily required the corrective relief
from the Bicameral Conference Committee. The Committee
could have either insisted on the House version, the Senate
version, or both versions, and it is not difficult to divine that
any of these steps would have obtained easy approval.
Hence, the deletion altogether of the "no pass on"
provisions existed as a tangible solution to the possible
impasse, and the Committee should be accorded leeway to
implement such a compromise, especially considering that
the deletion would have remained germane to the law, and
would not be constitutionally prohibited since the prohibition
on amendments under Section 26(2), Article VI does not
apply to the Committee.
An outright declaration that the deletion of the two
elementally different "no-pass on" provisions is
unconstitutional, is of dubious efficacy in this case. Had
such pronouncement gained endorsement of a majority of
the Court, it could not result in the ipso facto restoration of
the provision, the omission of which was ultimately
approved in both the House and Senate. Moreover, since
the House version of the "no pass on" is quite different from
that of the Senate, there would be a question as to whether
the House version, the Senate version, or both versions
would be reinstated. And of course, if it were the Court
which would be called upon to choose, such would be way
beyond the bounds of judicial power.
Indeed, to intimate that the Court may require Congress to
reinstate a provision that failed to meet legislative approval

would result in a blatant violation of the principle of

separation of powers, with the Court effectively dictating to
Congress the content of its legislation. The Court cannot
simply decree to Congress what laws or provisions to enact,
but is limited to reviewing those enactments which are
actually ratified by the legislature.
II.
My earlier views, as are the submissions I am about to
offer, are rooted in nothing more than constitutional
interpretation. Perhaps my preceding discussion may lead to
an impression that I whole-heartedly welcome the passage
of the E-VAT Law. Yet whatever relief I may have over the
enactment of a law designed to relieve our countrys
financial woes are sadly obviated with the realization that a
key amendment introduced in the law is not only
unconstitutional, but of fatal consequences. The clarion call
of judicial review is most critical when it stands as the sole
barrier against the deprivation of life, liberty and property
without due process of law. It becomes even more impelling
now as we are faced with provisions of the E-VAT Law
which, though in bland disguise, would operate as the most
destructive of tax measures enacted in generations.
Tax Statutes and the Due Process Clause
It is the duty of the courts to nullify laws that contravene
the due process clause of the Bill of Rights. This task is at
the heart not only of judicial review, but of the democratic
system, for the fundamental guarantees in the Bill of Rights
become merely hortatory if their judicial enforcement is
unavailing. Even if the void law in question is a tax statute,
or one that encompasses national economic policy, the
courts should not shirk from striking it down
notwithstanding any notion of deference to the executive or
legislative branch on questions of policy. Neither Congress

nor the President has the right to enact or enforce

unconstitutional laws.
The Bill of Rights is by no means the only constitutional
yardstick by which the validity of a tax law can be
measured. Nonetheless, it stands as the most unyielding of
constitutional standards, given its position of primacy in the
fundamental law way above the articles on governmental
power.24 If the question lodged, for example, hinges on the
proper exercise of legislative powers in the enactment of
the tax law, leeway can be appreciated in favor of affirming
the legislatures inherent power to levy taxes. On the other
hand, no quarter can be ceded, no concession yielded, on
the peoples fundamental rights as enshrined in the Bill of
Rights, even if the sacrifice is ostensibly made "in the
national interest." It is my understanding that "the national
interests," however comported, always subsumes in the first
place recognition and enforcement of the Bill of Rights,
which manifests where we stand as a democratic society.
The constitutional safeguard of due process is embodied in
the fiat "No person shall be deprived of life, liberty or
property without due process of law".25 The purpose of the
guaranty is to prevent governmental encroachment against
the life, liberty and property of individuals; to secure the
individual from the arbitrary exercise of the powers of the
government, unrestrained by the established principles of
private rights and distributive justice; to protect property
from confiscation by legislative enactments, from seizure,
forfeiture, and destruction without a trial and conviction by
the ordinary mode of judicial procedure; and to secure to all
persons equal and impartial justice and the benefit of the
general law.26
In Magnano Co. v. Hamilton,27 the U.S. Supreme Court
recognized that the due process clause may be utilized to
strike down a taxation statute, "if the act be so arbitrary as
to compel the conclusion that it does not involve an exertion

of the taxing power, but constitutes, in substance and

effect, the direct exertion of a different and forbidden
power, as, for example, the confiscation of
property."28 Locally, Sison v. Ancheta29 has long provided
sanctuary for persons assailing the constitutionality of
taxing statutes. The oft-quoted pronouncement of Justice
Fernando follows:
2. The power to tax moreover, to borrow from Justice
Malcolm, "is an attribute of sovereignty. It is the strongest
of all the powers of government." It is, of course, to be
admitted that for all its plenitude, the power to tax is
not unconfined. There are restrictions. The
Constitution sets forth such limits. Adversely
affecting as it does property rights, both the due
process and equal protection clauses may properly be
invoked, as petitioner does, to invalidate in
appropriate cases a revenue measure. If it were
otherwise, there would be truth to the 1803 dictum of Chief
Justice Marshall that "the power to tax involves the power
to destroy." In a separate opinion in Graves v. New York,
Justice Frankfurter, after referring to it as an "unfortunate
remark," characterized it as "a flourish of rhetoric
[attributable to] the intellectual fashion of the times
[allowing] a free use of absolutes." This is merely to
emphasize that it is not and there cannot be such a
constitutional mandate. Justice Frankfurter could rightfully
conclude: "The web of unreality spun from Marshall's
famous dictum was brushed away by one stroke of Mr.
Justice Holmes's pen: 'The power to tax is not the power to
destroy while this Court sits.'" So it is in the Philippines.
3. This Court then is left with no choice. The Constitution
as the fundamental law overrides any legislative or
executive act that runs counter to it. In any case
therefore where it can be demonstrated that the
challenged statutory provision as petitioner here
alleges fails to abide by its command, then this

Court must so declared and adjudge it null. The inquiry

thus is centered on the question of whether the imposition
of a higher tax rate on taxable net income derived from
business or profession than on compensation is
constitutionally infirm.
4. 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.
5. It is undoubted that the due process clause may be
invoked where a taxing statute is so arbitrary that it
finds no support in the Constitution. An obvious
example is where it can be shown to amount to the
confiscation of property. That would be a clear abuse
of power. It then becomes the duty of this Court to
say that such an arbitrary act amounted to the
exercise of an authority not conferred. That properly
calls for the application of the Holmes dictum. It has
also been held that where the assailed tax measure is
beyond the jurisdiction of the state, or is not for a
public purpose, or, in case of a retroactive statute is
so harsh and unreasonable, it is subject to attack on
due process grounds.30
Sison pronounces more concretely how a tax statute may
contravene the due process clause. Arbitrariness,
confiscation, overstepping the states jurisdiction, and lack

of a public purpose are all grounds for nullity encompassed

under the due process invocation.
Yet even these more particular standards as enunciated
in Sison are quite exacting, and difficult to reach. Even the
constitutional challenge posed in Sison failed to pass
muster. The majority cites Sison in asserting that due
process and equal protection are broad standards which
need proof of such persuasive character to lead to such a
conclusion.
It is difficult though to put into quantifiable terms how
onerous a taxation statute must be before it contravenes
the due process clause.31 After all, the inherent nature of
taxation is to cause pain and injury to the taxpayer, albeit
for the greater good of society. Perhaps whatever collective
notion there may be of what constitutes an arbitrary,
confiscatory, and unreasonable tax might draw more from
the fairy tale/legend traditions of absolute monarchs and
the oppressed peasants they tax. Indeed, it is easier to
jump to the conclusion that a tax is oppressive and unfair if
it is imposed by a tyrant or an authoritarian state.
But could an arbitrary, confiscatory or unreasonable tax
actually be enacted by a democratic state such as ours? Of
course it could, but these would exist in more palatable
guises. In a democratic society wherein statutes are
enacted by a representative legislature only after debate
and deliberation, tax statutes will most likely, on their face,
seem fair and even-handed. After all, if Congress passes a
tax law that on facial examination is obviously harsh and
unfair, it faces the wrath of the voting public, to say nothing
of the media.
In testing the validity of a tax statute as against the due
process clause, I think that the Court should go beyond a
facial examination of the statute, and seek to understand

how exactly it would operate. The express terms of a

statute, especially tax laws, are usually inadequate in
spelling out the practical effects of its implementation. The
devil is usually in the details.
Admittedly, the degree of difficulty involved of judicial
review of tax laws has increased with the growing
complexities of business, economic and accounting
practices. These are sciences which laymen are not
normally equipped by their general education to fully grasp,
hence the possible insecurity on their part when confronted
with such questions on these fields.
However, we should not cede ground to those
transgressions of the peoples fundamental rights simply
because the mechanism employed to violate constitutional
guarantees is steeped in disciplines not normally associated
with the legal profession. Venality cannot be allowed to
triumph simply due to its sophistication. This petition
imputes in the E-VAT Law unconstitutional oppression of the
fatal variety, but in order to comprehend exactly how and
why that is so, one has to delve into the complex milieu of
the VAT system. The party alleging the laws
unconstitutionality of course has the burden to demonstrate
the violations in understandable terms, but if such proof is
presented, the Courts duty is to engage accordingly.
The Viability of the Clear and Present
Danger Doctrine as Counterweight
To the Shibboleths of Speculation
and Wisdom
I do not see as an impediment to the annulment of a tax
law the fact that it has yet to be implemented, or the fear

that doing so constitutes an undue attack on the wisdom,

rather than the legality of a statute. However, my position
in this petition has been challenged on those grounds, and I
see it fit to refute these preemptive allegations before
delving into the operative aspect of the E-VAT Law.

cause injury, owing to the presence of a clear and present

danger of a substantive evil which the State has the right to
prevent. It has even extended the "clear and present
danger rule" beyond the confines of freedom of expression
to the

If there is cause to characterize my arguments as

speculative, it is only because the E-VAT Law has yet
to be implemented. No person as of yet can claim to have
sustained actual injury by reason of the implementation of
the assailed provisions in G.R. No. 168461. Yet this should
not mean that the Court is impotent from declaring a
provision of law as violative of the due process clause if it is
clear that its implementation will cause the illegal
deprivation of life, liberty or property without due process of

realm of freedom of religion, as noted by Justice Puno in

his ponencia in Estrada v. Escritor.32

law. This is especially so if, as in this case, the injury is of

mathematical certainty, and the extent of the loss
quantifiable through easy reference to the most basic of
business practices.
These arguments are conjectural for the same reason
that the bare statement "firing a gunshot into the
head will cause a fatal wound" would be conjectural.
Some people are lucky enough to survive gunshot wounds
to the head, while many others are not. Yet just because
the fear of mortality would be merely speculative, it does
not mean that there should be less compulsion to avoid a
situation of getting shot in the head.
Indeed, the Court has long responded to strike down
prospective actions, even if the injury has not yet even
occurred. One of the most significant legal principles
of the last century, the "clear and present danger"
doctrine in free speech cases, in fact emanates from
the prospectivity, and not the actuality of danger. The
Court has not been hesitant to nullify acts which might

Justice Teodoro Padilla goes further in his concurring

opinion in Basco v. PAGCOR, and asserts that the clear and
present danger test squarely applies to the due process
clause: "The courts, as the decision states, cannot
inquire into the wisdom, morality or expediency of
policies adopted by the political departments of
government in areas which fall within their authority,
except only when such policies pose a clear and
present danger to the life, liberty or property of the
individual."
I see no reason why the clear and present danger test
cannot apply in this case, or any case wherein a
taxing statute poses a clear and present danger to the
life, liberty or property of the individual. The
application of this standard frees the Court from
inutility in the face of patently unconstitutional tax
laws that have been enacted but are yet to be fully
operational.
If for example, Congress deems it wise to impose the most
draconian of tax measures such as trebling the income
taxes of all persons over 40, raising the gross sales tax rate
to 50%, or penalizing delinquent taxpayers with 50 lashes
of the whip there certainly would be a massive public
outcry, and an expectation that the Court would
immediately nullify the offensive measures even before they
are actually imposed. Applying the clear and present danger

test, the Court is empowered to strike down the noxious

measures even before they are implemented. Yet with this
"bar on speculativeness" as argued by the majority, the
Court could easily refuse to pay heed to the prayers for
injunctive relief, and instead demand that the taxing
subjects must first suffer before the Court can act.
In the same vein, the claim that my arguments strike at the
wisdom, rather than the constitutionality of the law are
misplaced. Concededly, the assailed provisions of the E-VAT
law are basically unwise. But any provision of law that
directly contradicts the Constitution, especially the Bill of
Rights, are similarly unwise, as they run inconsistent with
the fundamental law of the land, the enunciated state
policies and the elemental guarantees assured by the State
to its people. Not every unwise law is unconstitutional,
but every unconstitutional law is unwise, for an
unconstitutional law contravenes a primordial
principle or guarantee on which our polity is founded.
If it can be shown that the E-VAT Law violates these
provisions of the Constitution, especially the due process
clause, then the Court should accordingly act and nullify.
Such is the essence of judicial review, which stands as the
sole barrier to the implementation of an unconstitutional
law.
The Separate Opinion of Justice Panganiban notes that
"[t]he Court cannot step beyond the confines of its
constitutional power, if there is absolutely no clear showing
of grave abuse of discretion in the enactment of the law" 33.
This, I feel, is an unduly narrow view of judicial review,
implying that such merely encompasses the procedural
aspect by which a law is enacted. If the policy of the law,
and/or the means by which such policy is implemented run
counter to the Constitution, then the Court is empowered to
strike down the law, even if the legislative and executive

branches act within their discretion in legislating and signing

the law.
It is also asserted that if the implementation of the 70% cap
imposes an unequal effect on different types of businesses
with varying profit margins and capital requirements, then
the remedy would be an amendment of the law.34 Of
course, the remedy of legislative amendment applies to
even the most unconstitutional of laws. But if our society
can take cold comfort in the ability of the legislature to
amend its enactments as the defense against
unconstitutional laws, what remains then as the function of
judicial review? This legislative capacity to amend
unconstitutional laws runs concurrently with the judicial
capacity to strike down unconstitutional laws. In fact, the
long-standing tradition has been reliance on the judicial
branch, and not the legislative branch, for salvation from
unconstitutional laws.
I do recognize that the Separate Opinion of Justice
Panganiban ultimately proceeds from the premise that the
assailed provisions of the E-VAT Law may be merely unwise,
but not unconstitutional. Hence, its preference to rely on
Congress to amend the offending provisions rather than
judicial nullification. But I maintain that the assailed
provisions of the E-VAT Law violate the due process clause
of the Constitution and must be stricken down.
The Nature of VAT
To understand why Sections 8 and 12 of the E-VAT law
contravenes the due process clause, it is essential to
understand the nature of the value-added tax itself. Filipino
consumers may comprehend VAT at its elemental form,
having been accustomed for several years now in paying an
extra 10% of the listed selling price for a wide class of
consumer goods. From the perspective of the end

consumer, such as the patron who purchases a meal from a

fastfood restaurant, VAT is simply a tax on transactions
involving the sale of goods. The tax is shouldered by the
buyer, and is based on a percentage of the purchase price.
Since an excise or percentage tax shares the same
characteristics, there could be some confusion as between
such taxes and the VAT.
However, VAT is distinguishable from the standard excise or
percentage taxes in that it is imposable not only on the final
transaction involving the end user, but on previous stages
as well so long as there was a sale involved. Thus, VAT does
not simply pertain to the extra percentage paid by the
buyer of a fast-food meal, but also that paid by restaurant
itself to its suppliers of raw food products. This multi-stage
system is more acclimated to the vagaries of the modern
industrial climate, which has long surpassed the stage when
there was only one level of transfer between the farmer who
harvests the crop and the person who eats the crop.
Indeed, from the extraction or production of the raw
material to its final consumption by a user, several
transactions or sales materialize. The VAT system assures
that the government shall reap income for every transaction
that is had, and not just on the final sale or transfer.
The European Union, which has long required its member
states to apply the VAT system, provided the following
definition of the tax which I deem clear and comprehensive:
The principle of the common system of value added tax
involves the application to goods and services of a general
tax on consumption exactly proportional to the price of
the goods and services, whatever the number of
transactions that take place in the production and
distribution process before the stage at which tax is
charged.

On each transaction, value added tax, calculated on the

price of the goods or services at the rate applicable to such
goods or services, shall be chargeable after deduction
of the amount of value added tax borne directly by
the various cost components.35
The above definition alludes to a key characteristic of the
VAT system, that the imposable tax remains proportional to
the price of goods and services no matter the number of
transactions that takes place.
There is another key characteristic of the VAT that no
matter how many the taxable transactions that precede the
final purchase or sale, it is the end-user, or the consumer,
that ultimately shoulders the tax. Despite its name, VAT is
generally not intended to be a tax on value added, but
rather as a tax on consumption. Hence, there is a
mechanism in the VAT system that enables firms to offset
the tax they have paid on their own purchases of goods and
services against the tax they charge on their sales of goods
and services.36 Section 105 of the NIRC assures that "the
amount of tax may be shifted or passed on to the buyer,
transferee or lessee of the goods, properties or services."
The assailed provisions of the E-VAT law strike at the heart
of this accepted principle.
And there is one final basic element of the VAT system
integral to this disquisition: the mode by which the tax is
remitted to the government. In simple theory, the VAT
payable can be remitted to the government immediately
upon the occurrence of the transaction, but such a demand
proves excessively unwieldy. The number of VAT covered
transactions a modern enterprise may contract in a single
day, plus the recognized principle that it is the final end
user who ultimately shoulders the tax; render the
remittance of the tax on a per transaction basis impossible.

Thus, the VAT is delivered by the purchaser not directly to

the government but to the seller, who then collates the VAT
received and remits it to the government every quarter. The
process may seem simple if cast in this manner, but there is
a wrinkle, due to the offsetting mechanism designed to
ultimately make the end consumer bear the cost of the VAT.

amount of 10% of the purchase price as VAT. As to the

business, this VAT payments it collects from the consumer
represents output VAT, which is formally described under
Section 110(A) of the NIRC as "the value-added tax due on
the sale or lease of taxable goods or properties or services
by" by any VAT-registered person.

The Concepts of Input and

The output VAT collected by the business from the

consumers accumulates, until the end of every quarter,
when the enterprise is obliged to remit the collected output
VAT to the government. This is where the crediting
mechanism comes into play. Since the business is entitled
to recover the prepaid input VAT, it does so in every quarter
by applying the amount of prepaid input VAT against the
collected output VAT which is to be remitted. If the output
VAT collected exceeds the prepaid input VAT, then the
amount of input VAT is deducted from the output VAT, and
it is entitled to remit only the remainder as output VAT to
the government. To illustrate, if Business X
collects P1,000,000.00 as output VAT and
incurs P500,000.00 as input VAT, the P500,000.00 is
deducted from the P1,000,000.00 output VAT, and X is
required to remit only P500,000.00 of the output VAT it
collected from customers.

Output VAT
This mechanism is employed through the introduction of
two concepts, the input tax and the output tax. Section
110(A) of the National Internal Revenue Code defines the
input tax as the VAT due from or paid by a VAT-registered
person on the importation of goods or local purchase of
goods and services in the course of trade or business, from
a VAT registered person.
Let us put this in operational terms. A VAT registered
person, engaged in an enterprise, necessarily purchases
goods such as raw materials and machinery in order to
produce consumer goods. The purchase of such raw
materials and machineries is subject to VAT, hence the
enterprise pays an additional 10% of the purchase price to
the supplier as VAT. This extra amount paid by the
enterprise constitutes its input VAT. The enterprise likewise
pays input VAT when it purchases services covered by the
tax, or rentals of property.
Since VAT is a final tax that is supposed to be ultimately
shouldered by the end consumer, the VAT system allows for
a mechanism by which the business is able to recover the
input VAT that it paid. This comes into play when the
business, having transformed the raw materials into
consumer goods, sells these goods to the public. As widely
known, the consumer pays to the business an additional

On the other hand, if the input VAT prepaid exceeds the

output VAT collected, then the business need not remit any
amount as output VAT for the quarter. Moreover, the
difference between the input VAT and the output VAT may
be credited as input VAT by the business in the succeeding
quarter. Thus, if in the First Quarter of a year, Business X
prepays P1,000,000.00 as input VAT, and collects
only P500,000.00 as output VAT, it need not remit any
amount of output VAT to the government. Moreover, in the
Second Quarter, Business X can credit the
remaining P500,000.00 as part of its input VAT for that
quarter. Hence, if in the Second Quarter, X actually
prepays P400,000.00 as input VAT, and

collects P500,000.00 as output VAT, it may add

the P500,000.00 input VAT from the previous quarter to
the P400,000.00 prepaid in the current quarter, bringing the
total input VAT it could claim to P900,000.00. Since the
input VAT of P900,000.00 now exceeds the output VAT
collected ofP500,000, then X need not remit any output VAT
as well to the government for the Second Quarter.
However, reality is far bleaker than that befaced by
Business X. The VAT collected and remitted is not the most
relevant statistic evaluated by the business. The figure of
primary concern of the enterprise would be the profit
margin, which is simply the excess of revenue less
expenditures. Revenue is derived from the gross sales of
the business. Expenditures encompass all expenses incurred
by the business including overhead expenses, wages and
purchases of capital goods. Crucially, expenditures would
include the input VAT prepaid by the business on its capital
expenditures.
Since a significant amount of the capital outlay incurred by
a business is subjected to the prepayment of input taxes,
the necessity of recovering these losses through the output
VAT collected becomes more impelling. These output taxes
are obviously proportional to the volume of gross sales
the higher the gross sales, the higher the output VAT
collected. The output taxes collected on sales answer
for not only those input taxes paid on the purchase of
the raw materials, but also for the input taxes paid on
the multifarious overhead expenses covered by
VAT. The burden carried by the sales volume on the
stability, if not survival of the business thus just became
more crucial. The maintenance of the proper equilibrium is
not an easy matter. Increasing the selling price of the goods
sold does not necessarily increase the gross sales, as it
could have the counter-effect of repelling the consumer and
diminishing the number of goods sold. At the same time,

keeping the selling price low may increase the volume of

goods sold, but not necessarily the amount of gross sales.
Profit is a chancy matter, and in cases of small to medium
enterprises, usually small if any. It is quite common for
retail and distribution enterprises to incur profits of less
than 1% of their gross revenues. Low profitability is not an
automatic badge of poor business skills, but a reality
dictated by the laws of the marketplace. The probability of
profit is lower than that of capital expenditures, and
ultimately, many business establishments end up with a
higher input tax than output tax in a given quarter. This
would be especially true for small to medium enterprises
who do not reap sufficient profits from its business in the
first place, and for those firms that opt to also invest in
capital expenses in addition to the overhead. Whatever
miniscule profit margins that can be obtained usually spell
the difference between life and death of the business.
The possibility of profit is further diminished by the fact that
businesses have to shoulder the input VAT in the purchase
of their capital expenses. Yet the erstwhile VAT system
was not tainted by the label of oppressiveness and
neither did it bear the confiscatory mode. This was
because of the immediate relief afforded from the
input taxes paid by the crediting system. In theory,
VAT is not supposed to affect the profit margin. If
such margin is affected, it is only because of the
prepayment of the input taxes, and this should be
remedied by the immediate recovery through the
crediting system of the settled input taxes.
The new E-VAT law changes all that, and puts in
jeopardy the survival of small to medium enterprises.
The Effects of the 70% Cap on Creditable Input VAT

The first radical shift introduced by the E-VAT law to the

creditable input system the 70% cap on the creditable
input tax that may be carried over into the next quarter is
provided in Section 8 of the law, which amends Section
110(A) of the NIRC, among others. Section 110(A) as
amended would now read:
Sec. 110. Tax Credits.
(B) Excess Output or Input Tax. If at the end of any
taxable quarter the output tax exceeds the input tax, the
excess shall be paid by the VAT-registered person. If the
input tax exceeds the output tax, the excess shall be carried
over to the succeeding quarter or quarters. Provided, That
the input tax inclusive of input VAT carried over from
the previous quarter that may be credited in every
quarter shall not exceed seventy percent (70%) of
the output VAT: Provided, however, That any input tax
attributable to zero rated sales by a VAT-registered person
may at his option be refunded or credited against other
internal revenue taxes, subject to the provisions of Section
112. (emphasis supplied)
All hope for entrepreneurial stability is dashed with the
imposition of the 70% cap. Under the E-VAT Law, the
business, regardless of stability or financial capability, is
obliged to remit to the government every quarter at least

30% of the output VAT collected from customers, or roughly

3% of the amount of gross sales. Thus, if a quarterly gross
sales of Y Business totaled P1,000,000, and Y is prudent
enough to keep its capital expenses down toP980,000, it
would then appear on paper that Y incurred a profit
of P20,000. However, with the 70% cap, Y would be obliged
to remit to the government P30,000, thus wiping out the
profit margin for the quarter. Y would be entitled to credit
the excess input VAT it prepaid for the next quarter, but the
continuous operation of the 70% cap obviates whatever
benefits this may give, and cause the accumulation of the
unutilized creditable input VAT which should be returned to
the business.
The difference is even more dramatic if seen how the
unutilized creditable input VAT accumulates over a one year
period. To illustrate, Business Y prepays the following
amounts of input VAT over a one-year period: P100,000.00
- First Quarter; P100,000.00 2nd Quarter; P34,000.00
3rd Quarter; and P50,000.00 4th Quarter. On the other
hand, Y collects the following amounts of output VAT from
consumers: P60,000.00 - First Quarter;P60,000.00 2nd
Quarter; P100,000.00 3rd Quarter; and P50,000.00 4th
Quarter. Applying the 70% cap, which would limit the
amount of the declarable input VAT to 70% in a quarter, the
following results obtain, as presented in tabular form:

Particulars
Output VAT
Input VAT
(Actual) +
Carry Over

1st Quarter
2nd Quarter
60,000
60,000
100,000 100,000 [input]
+58,000
[excess
creditable]
158,000

DeclarableInput (60,000x70%)
VAT (70% of
output VAT)
42,000
Lower of actual
(60,000 and 70% cap
42,000)
allowable
18,000
VAT
Payable
CreditableInput
VAT

3rd Quarter
100,000
34,000

4th Quarter
50,000
50,000

[input]

[input]

+116,000

+80,000

[excess
creditable]

[excess
creditable]

150,000
130,000
(60,000x70%) (100,000x70%) (50,000x70%)
42,000
(60,000 42,000)

70,000
(100,00070,000)

35,000
(50,00035,000)

18,000

30,000

15,000

(100,000
42,000)

(158,000
42,000)

(150,000-

(130,00035,000)

58,000

116,000

70,000)
95,000
80,000
This stands in contrast to same business VAT accountability under the present system, using the same variables of output VAT
and input VAT. The need to distinguish a declarable input VAT is obviated with the elimination of the 70% cap.
Particulars 1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Output VAT
60,000
60,000
100,000
50,000

Input VAT
(Actual) +
Carry Over

100,000

100,000
[input]

34,000

50,000

[input]

[input]

+80,000

+ 14,000

[excess
creditable]

(excess

+40,000
[excess
creditable]
140,000

114,000
VAT Payable
Creditable

0
40,000

0
80,000

0
14,000

creditable)
50,000
0
14,000

Input VAT

The difference is dramatic, as is the impact on the

businesss profit margin and available cash on hand. Under
normal conditions, small to medium enterprises are already
encumbered with the likelihood of obtaining only a minimal
profit margin. Without the 70% cap, those businesses would
nonetheless be able to expect an immediate return on its
input taxes earlier advanced, taxes which under the VAT
system it is not supposed to shoulder in the first place.
However, with the 70% cap in place, the unutilized input
taxes would continue to accumulate, and the enterprise
precluded from immediate recovery thereof. The inability
to utilize these input taxes, which could spell the
difference between profit and loss, solvency and
insolvency, will eventually impair, if not kill off the
enterprise.
The majority fails to consider one of the most important
concepts in finance, time value for money.37 Simply put, the
value of one peso is worth more today than in 2006. Money

that you hold today is worth more because you can invest it
and earn interest.38 By reason of the 70% cap, the amount
of input VAT credit that remains unutilized would continue
accumulate for months and years. The longer the amount
remains unutilized, the higher the degree of its depreciation
in value, in accordance with the concept of time value of
money. Even assuming that the business eventually
recovers the input VAT credit, the sum recovered would
have decreased in practical value.
It would be sad, but fair, if a business ceases because
of its inability to compete with other businesses. It
would be utter malevolence to condemn an enterprise
to death solely through the employment of a
deceptive accounting wizardry. For the raison
detre of this 70% cap is to make it appear on paper
that the government is more solvent than it actually
is. Conceding for the nonce, there is a temporary advantage
gained by the government by this 70% cap, as the steady
remittance by businesses of the 30% output VAT would
assure a cash flow. Such collection may only momentarily

resolve an endemic problem in our local tax system, the

problem of collection itself.
If the 70% cap was designed in order to enhance revenue
collection, then I submit that the means employed stand
beyond reason. If sheer will proves insufficient in assuring
that the State all taxes due it, there should be allowable
discretion for the government to formulate creative means
to enhance collection. But to do so by depriving low profit
enterprises of whatever meager income earned and
consequently assuring the death of these industries goes
beyond any valid State purpose.
Only stable businesses with substantial cash flows, or
extraordinarily successful enterprises will be able to remain
in operation should the 70% cap be retained. The effect of
the 70% cap is to effectively impose a tax amounting to 3%
of gross revenue. The amount may seem insignificant to
those without working knowledge of the ways of business,
but anybody who is actually familiar with business would be
well aware the profit margins of the retailing and
distribution sectors typically amount to less than 1% of the
gross revenues. A taxpayer has to earn a margin of at least
3% on gross revenue in order to recoup the losses
sustained due to the 70% cap. But as stated earlier, profits
are chancy, and the entrepreneur does not have full control
of the conditions that lead to profit.
Even more galling is the fact that the 70% cap, oppressive
as it already is to the business establishment, even limits
the options of the business to recover the unutilized input
VAT credit. During the deliberations, the argument was
raised that the problem presented by the 70% cap was a
business problem, which can only be solved by business.
Yet there is only one viable option for the enterprise to
resolve the problem, and that is to increase the selling price
of goods.39 It would be incorrect to assume that increase
the volume of the goods sold could solve the problem, since

for items with the same purchasing cost, the effect of the
70% cap remains constant regardless of an increase in
volume.
But the additional burden is not limited to the increase of
prices by the retailer to the end consumer. Since VAT is a
transaction tax, every level of distribution becomes subject
not only to the VAT, but also to the 70% cap. The problem
increases due to a cascading effect as the number of
distribution levels increases since it will result in the
collection of an effective 3% percentage tax at every
distribution level.
In analyzing the effects of the 70% cap, and appreciating
how it violates the due process clause, we should not focus
solely on the end consumers. Undoubtedly, consumers will
face hardships due to the increased prices, but their
threshold of physical survival, as individual people, is
significantly less than that of enterprises. Somehow, I do
not think the new E-VAT would generally deprive consumers
of the bare necessities such as food, water, shelter and
clothing. There may be significant deprivation of comfort as
a result, but not of life.
The same does not hold true for businesses. The standard
of "deprivation of life" of juridical persons employs different
variables than that of natural persons. What food and water
may be for persons, profit is for an enterprise the bare
necessity for survival. For businesses, the implementation
of the same law, with the 70% cap and 60-month
amortization period, would mean the deprivation of profit,
which is the determinative necessity for the survival of a
business.
It is easy to admonish both the consumer and the
enterprise to cut back on expenditures to survive the new
E-VAT Law. However, this can be realistically expected only

of the consumer. The small/medium enterprise cannot just

cut back easily on expenditures in order to survive the
implementation of the E-VAT Law. For such businesses,
expenditures do not normally contemplate unnecessary
expenses such as executive perks which can be dispensed
with without injury to the enterprises. These expenditures
pertain to expenses necessary for the survival of the
enterprise, such as wages, overhead and purchase of raw
materials. Those three basic items of expenditure cannot
simply be reduced, as to do so with impair the ability of the
business to operate on a daily basis.

Among the enunciated State policies in the Constitution, as

stated in Section 20, Article II, is that "the State
recognizes the indispensable role of the private
sector, encourages private enterprise, and provides
incentives to needed investments."41 The provision, as
with other declared State policies in the Constitution, have
sufficient import and consequence such that in assessing
the constitutionality of the governmental action, these
provisions should be considered and weighed as against the
rationale for the assailed State action.42 The incompatibility
of the 70% cap with this provision is patent.

And reduction of expenditures is not the exclusive antidote

to these impositions under the E-VAT Law, as there must
also be a corresponding increase in the amount of gross
sales. To do so though, would require an increase in the
selling price, dampening consumer enthusiasm, and further
impairing the ability of the enterprise to recover from the EVAT Law. This is your basic Catch-2240 situation no
matter which means the enterprise employs to recover from
the E-VAT Law, it will still go down in flames.

Pilipinas Shell Dealers, on whom the burden to establish the

violation of due process and equal protection lies, offers the
following chart of the income statement of a typical
petroleum dealer:
QUARTERLY PROFIT AND LOSS STATEMENT

Section 8 of the E-VAT law, while ostensibly even-handed in

application, fails to appreciate valid substantial distinctions
between large scale enterprises and small and medium Sales/Output
Cost of Sales
enterprises. The latter group, owing to the limited capability
Gross Margin
for capital investment, subsists on modest profit margins,
whereas the former expects, by reason of its substantial
Operating Expenses
capital investments, a high margin. In essentially
Non-vatable items
prohibiting the recovery of small profit margins, the
E-VAT law effectively sends the message that onlyVatable Items
high margin businesses are welcome to do business
Total Cost
in the Philippines. It stifles any entrepreneurial
ambitions of Filipinos unfortunate enough to haveNet Profit
been born poor yet seek a better life by sacrificingTotal
all Input Tax
to start a small business.
VAT Payable

DEALER "A"
Price
32,748,534
31,834,717
913,817
536,249

VAT (without 70%

cap)
3,274,853.40
3,183,471.70

VAT (with 70%

cap)
3,274,853.40

31,758.40

317,584
853,833
59,984
3,215,230.10
59,623.30

2,292,397.38
982,456.02

Unutilized Input VAT 922,832.72

*computed by multiplying output VAT by 70%
[3,274,853.40 x 70% = 2,292.397.38]
The presentation of the Pilipinas Shell Dealers more or less
jibes with my own observations on the impact of the 70%
cap. The dealer whose income is illustrated above has to
outlay a cash amount of P922,832.72 more than what
would have been shelled out if the 70% cap were not in
place. Considering that the net profit of the dealer is
only P59,984.00, the consequences could very well be fatal,
especially if these state of events persist in succeeding
quarters.
The burden of proof was on the Pilipinas Shell Dealers to
prove their allegations, and accordingly, these figures have
been duly presented to the Court for appreciation and
evaluation. Instead, the majority has shunted aside these
presentations as being merely theoretical, despite the fact
that they present a clear and present danger to the very life
of our nations enterprises. The majoritys position would
have been more credible had it faced the issue squarely,

and endeavored to demonstrate in like numerical fashion

why the 70% cap is not oppressive, confiscatory, or
otherwise violative of the due process clause.
Sadly, the majority refuses to confront the figures or
engage in a meaningful demonstration of how these
assailed provisions truly operate. Instead, it counters with
platitudes and bromides that do not intellectually satisfy.
Considering that the very vitality, if not life of our domestic
economy is at stake, I think it derelict to our duty to block
out these urgent concerns presented to the Court with blind
faith tinged with irrational Panglossian43optimism.
The obligation of the majority to refute on the merits the
arguments of the Petroleum Dealers becomes even more
grave considering that the respondents have abjectly failed
to convincingly dispute the claims. During oral arguments,
respondents attempted to counter the arguments that the
70% cap was oppressive and confiscatory by presenting the
following illustration, which I fear is severely misleading:

Slide 1
Item Cost VAT

Sales 1,000,000.00 100,000.00

Purchases 800,000.00 80,000.00

Due BIR without cap Due BIR with 70% cap

Output VAT 100,000.00 Output VAT 100,000.00
Actual Input VAT 80,000.00 Allowable Input VAT 70,000.00
Net VAT Payable 20,000.00 Net VAT Payable 30,000.00
Excess Input VAT 10,000.00
Carry-over to next quarter
Slide 2

___________________________________________
Item Cost VAT
Sales 1,000,000.00 100,000.00
Purchases 600,000.00 60,000.00
Due BIR without cap Due BIR with 70% cap
Output VAT 100,000.00 Output VAT 100,000.00
Actual Input VAT (60% of output VAT) 60,000.00 Allowable
Input VAT 60,000.00

Payable 40,000.00

Net VAT Payable 40,000.00 Net VAT

Excess Input VAT 0

Carry-over to next quarter
This presentation of the respondents is grossly deceptive, as it fails to account for the excess creditable input VAT that remains
unutilized due to the 70% cap. This excess or creditable input VAT is supposed to be carried over for the computation of the
input VAT of the next quarter. Instead, this excess or creditable input VAT magically disappears from the table of the
respondents. In their memorandum, the Pilipinas Shell Dealers counter with their own presentation using the same variables as
respondents, but taking into account the excess creditable input VAT and extending the situation over a one-year period. I cite
with approval the following chart44 of the Pilipinas Shell Dealers:
Slide 1
Quarter 1
Item No. Cost VAT

Sales 1,000,000.00 100,000.00

Purchases 800,000.00 80,000.00
Due BIR with 70% cap
Output VAT 100,000.00
Allowable Input VAT 70,000.00
Net VAT Payable 30,000.00
Excess Input Vat
Carry-over to next quarter 10,000.00
Quarter 2
Cost VAT
Sales 1,000,000.00 100,000.00
Purchases 800,000.00 80,000.00
Due BIR with 7-% cap
Output VAT 100,000.00
Less: Input VAT
Excess Input VAT fr. 1st Quarter 10,000.00
Input VAT-Current Qtr. 80,000.00
Total Available Input VAT 90,000.00

Allowable Input VAT (100,000 x 70%) 70,000.00 70,000.00

Net VAT Payable 30,000.00
=========
Total Available Input VAT 90,000.00
Allowable Input VAT 70,000.00
Excess Input VAT to be carried over to next
Quarter 20,000.00
=========
Quarter 3
Cost VAT
Sales 1,000,000.00 100,000.00
Purchases 800,000.00 80,000.00
Due BIR with 70% cap
Output VAT 100,000.00
Less: Input VAT
Excess Input VAT fr. 2nd Qtr. 20,000.00
Input VAT-Current Qtr. 80,000.00
Total Available Input VAT 100,000.00

Allowable Input VAT (100,000 x 70%) 70,000.00 70,000.00

Net VAT Payable 30,000.00
=========
Total Available Input VAT 100,000.00
Allowable Input VAT 70,000.00
Excess Input VAT to be carried over to next quarter 30,000.00
==========
Quarter 4
Cost VAT
Sales 1,000,000.00 100,000.00
Purchases 800,000.00 80,000.00
Due BIR with 70% cap
Output VAT 100,000.00
Less: Input VAT
Excess Input VAT fr. 3rd Qtr. 30,000.00
Input VAT-Current Qtr. 80,000.00
Total Available Input VAT 110,000.00
Allowable Input VAT (100,000 x 70%) 70,000.00 70,000.00

Net VAT Payable 30,000.00

========
Total Available Input VAT 110,000.00
Allowable Input VAT 70,000.00
Excess Input VAT to be carried over to next quarter 40,000.00
==========
The 70% cap is not merely an unwise imposition. It is
a burden designed, either through sheer heedlessness
or cruel calculation, to kill off the small and medium
enterprises that are the soul, if not the heart, of our
economy. It is not merely an undue taking of
property, but constitutes an unjustified taking of life
as well.
And what legitimate, germane purposes does this
lethal 70% cap serve? It certainly does not increase
the governments revenue since the unutilized
creditable input VAT should be entered in the
government books as a debt payable as it is supposed
to be eventually repaid to the taxpayer, and so on the
contrary it increases the governments debts. I do see
that the 70% cap temporarily allows the government
to brag to the world of an increased cash flow. But
this situation would be akin to the provincial man
who borrows from everybody in the barrio in order to
show off money and maintain the pretense of
prosperity to visiting city relatives. The illusion of
wealth is hardly a legitimate state purpose, especially
if projected at the expense of the very business life of
the country.

The majority, in an effort to belittle these concerns, points

out that that the excess input tax remains creditable in
succeeding quarters. However, as seen in the above
illustration, the actual application of the excess input tax
will always be limited by the amount of output taxes
collected in a quarter, as a result of the 70% cap. Thus, it is
entirely possible that a VAT-registered person, through the
accumulation of unutilized input taxes, would have in a
quarter an express creditable input tax of P50,000,000, but
would be allowed to actually credit only P70,000 if the
output tax collected for that quarter were only P100,000.
The burden of the VAT may fall at first to the immediate
buyers, but it is supposed to be eventually shifted to the
end-consumer. The 70% cap effectively prevents this from
happening, as it limits the ability of the business to recover
the prepaid input taxes. This is unconscionable, since in the
first place, these intervening
players the manufacturers, producers, traders, retailers
are not even supposed to sustain the losses incurred by
reason of the prepayment of the input taxes. Worse, they
would be obliged every quarter to pay to the government
from out of their own pockets the equivalent of 30% of the
output taxes, no matter their own particular financial

condition. Worst, this twin yoke on the taxpayer of having

to sustain a debit equivalent to 30% of output taxes, and
having to await forever in order to recover the prepaid taxes
would impair the cash flow and prove fatal for a shocking
number of businesses which, as they now stand, have to
make do with a minimum profit that stands to be wiped out
with the introduction of the 70% cap.
Nonetheless, the majority notes that the excess creditable
input tax may be the subject of a tax credit certificate,
which then could be used in payment of internal revenue
taxes, or a refund to the extent that such input taxes have
not been applied against output taxes.45 What the
majority fails to mention is that under Section 10 of
the E-VAT Law, which amends Section 112 of the
NIRC, such credit or refund may not be done while
the enterprise remains operational:
SEC. 10. Section 112 of the same Code, as amended, is
hereby further amended to read as follows:
SEC. 112. Refunds or Tax Credits of Input Tax.
xxx
"(B) Cancellation of VAT Registration. A person whose
registration has been cancelled due to retirement
from or cessation of business or due to changes or
cessation of status under Section 106(C) of this Code
may, within two (2) years from the date of
cancellation, apply for the issuance of a tax credit
certificate for any unused input tax which may be
used in payment of his other internal revenue taxes.
xxx

This stands in marked contrast to Section 112(B) of the

NIRC as it read prior to this amendment. Under the previous
rule, a VAT-registered person was entitled to apply for the
tax credit certificate or refund paid on capital goods even
while it remained in operation:
SEC. 112. Refunds or Tax Credits of Input Tax.
xxx
"(B) Capital Goods . A VAT-registered person may apply
for the issuance of a tax credit certificate or refund of input
taxes paid on capital goods imported or locally purchased,
to the extent that such input taxes have not been applied
against output taxes. The application may be made only
within two (2) years after the close of the taxable quarter
when the importation or purchase was made.
This provision, which could have provided foreseeable and
useful relief to the VAT-registered person, was deleted
under the new E-VAT Law. At present, the refund or tax
credit certificate may only be issued upon two instances: on
zero-rated or effectively zero-rated sales, and upon
cancellation of VAT registration due to retirement from or
cessation of business.46 This is the cruelest cut of all.
Only after the business ceases to be may the State be
compelled to repay the entire amount of the
unutilized input tax. It is like a macabre form of
sweepstakes wherein the winner is to be paid his
fortune only when he is already dead. Aanhin pa ang
damo kung patay na ang kabayo.
Moreover, the inability to immediately credit or otherwise
recover the unutilized input VAT could cause such prepaid
amount to actually be recognized in the accounting books as
a loss. Under international accounting practices, the
unutilized input VAT due to the 70% cap would not even be

recognized as a deferred asset. The same would not hold

true if the 70% cap were eliminated. Under the
International Accounting Standards47, the unutilized input
VAT credit is recognized as an asset "to the extent that it is
probable that future taxable profit will be available against
which the unused tax losses and unused tax credits can be
utili[z]ed"48 Thus, if the immediate accreditation of the input
VAT credit can be obtained, as it would without the 70%
cap, the asset could be recognized.
However, the same Standards hold that "[t]o the extent
that it is not probable that taxable profit will be available
against which the unused tax losses or unused tax credits
can be utilised, the deferred tax asset is not
recognised".49 As demonstrated, the continuous operation of
the 70% cap precludes the recovery of input VAT prepaid
months or years prior. Moreover, the inability to claim a
refund or tax credit certificate until after the business has
already ceased virtually renders it improbable for the input
VAT to be recovered. As such, under the International
Accounting Standards, it is with all likelihood that the
prepaid input VAT, ostensibly creditable, would actually be
reflected as a loss.50 What heretofore was recognized as an
asset would now, with the imposition of the 70% cap, be
now considered as a loss, enhancing the view that the 70%
cap is ultimately confiscatory in nature.
This leads to my next point. The majority asserts that the
input tax is not a property or property right within the
purview of the due process clause.51 I respectfully but
strongly disagree.
Tellingly, the BIR itself has recognized that unutilized input
VAT is one of those assets, corporate attributes or property
rights that, in the event of a merger, are transferred to the
surviving corporation by operation of law.52Assets would fall
under the purview of property under the due process
clause, and if the taxing arm of the State recognizes that

such property belongs to the taxpayer and not to the State,

then due respect should be given to such expert opinion.
Even under the International Accounting Standards I
adverted to above, the unutilized input VAT credit may be
recognized as an asset "to the extent that it is probable that
future taxable profit will be available against which the
unused tax losses and unused tax credits can be
utilised"53 If not probable, it would be recognized as a
loss.54Since these international standards, duly recognized
by the Securities and Exchange Commission as controlling
in this jurisdiction, attribute tangible gain or loss to the VAT
credit, it necessarily follows that there is proprietary value
attached to such gain or loss.
Moreover, the prepaid input tax represents unutilized profit,
which can only be utilized if it is refunded or credited to
output taxes. To assert that the input VAT is merely a
privilege is to correspondingly claim that the business profit
is similarly a mere privilege. The Constitution itself
recognizes the right to profit by private enterprises. As I
stated earlier, one of the enunciated State policies under
the Constitution is the recognition of the indispensable role
of the private sector, the encouragement of private
enterprise, and the provision of incentives to needed
investments.55 Moreover, the Constitution also requires
the State to recognize the right of enterprises to
reasonable returns on investments, and to expansion
and growth.56 This, I believe, encompasses profit.
60-Month Amortization Period
Another portion of Section 8 of the E-VAT Law is
unconstitutional, essentially for the same reasons as above.
The relevant portion reads:

SEC. 8. Section 110 of the same Code, as amended, is

hereby further amended to read as follows:
"SEC. 110. Tax Credits.
(A) Creditable Input Tax.
....
Provided, That the input tax on goods purchased or
imported in a calendar month for use in trade or
business for which deduction for depreciation is
allowed under this Code, shall be spread evenly over
the month of acquisition and the fifty-nine (59)
succeeding months if the aggregate acquisition cost
for such goods, excluding the VAT component thereof,
exceeds One million pesos
(P1,000,000): Provided,however, That if the estimated
useful life of the capital good is less than five (5) years, as
used for depreciation purposes, then the input VAT shall be
spread over such a shorter period: Provided, finally, that in
the case of purchase of services, lease or use of properties,
the input tax shall be creditable to the purchaser, lessee or
licensee upon payment of the compensation, rental, royalty
or fee.
Again, this provision unreasonably severely limits the ability
of an enterprise to recover its prepaid input VAT. On its
face, it might appear injurious primarily to high margin
enterprises, whose purchase of capital goods in a given
quarter would routinely exceed P1,000,000.00. The
amortization over a five-year period of the input VAT on
these capital goods would definitely eat up into their profit
margin. But it is still possible for such big businesses to
survive despite this new restriction, and their financial pain
alone may not be sufficient to cause the invalidity of a
taxing statute.

However, this amortization plan will prove especially

fatal to start-ups and other new businesses, which
need to purchase capital goods in order to start up
their new businesses. It is a known fact in the financial
community that a majority of businesses start earning profit
only after the second or third year, and many enterprises do
not even get to survive that long. The first few years of a
business are the most crucial to its survival, and any
financial benefits it can obtain in those years, no matter
how miniscule, may spell the difference between life and
death. For such emerging businesses, it is already difficult
under the present system to recover the prepaid input VAT
from the output VAT collected from customers because
initial sales volumes are usually low. With this further
limitation, diminishing as it does any opportunity to have a
sustainable cash flow, the ability of new businesses to
survive the first three years becomes even more
endangered.
Even existing small to medium enterprises are imperiled by
this 60 month amortization restriction, especially
considering the application of the 70% cap. The additional
purchase of capital goods bears as a means of adding value
to the consumer good, as a means to justify the increased
selling price. However, the purchase of capital goods in
excess of P1,000,000.00 would impose another burden on
the small to medium enterprise by further restricting their
ability to immediately recover the entire prepaid input VAT
(which would exceed at leastP100,000.00), as they would
be compelled to wait for at least five years before they can
do so. Another hurdle is imposed for such small to medium
enterprise to obtain the profit margin critical to
survival. For some lucky enterprises who may be able
to survive the injury brought about by the 70% cap,
this 60 month amortization period might instead
provide the mortal head wound.

Moreover, the increased administrative burden on the

taxpayer should not be discounted, considering this Courts
previous recognition of the aims of the VAT system to
"rationalize the system of taxes on goods and services,
[and] simplify tax administration".57 With the amortization
requirement, the taxpayer would be forced to segregate
assets into several classes and strictly monitor the useful
life of assets so that proper classification can be made. The
administrative requirements of the taxpayer in order to
monitor the input VAT from the purchase of capital assets
thus has exponentially increased.
5% Withholding VAT on Sales
Pilipinas Shell Dealers argue that Section 12 of the E-VAT
law, which amends Section 114(C) of the NIRC, is also
unconstitutional. The provision is supremely unwise,
oppressive and confiscatory in nature, and ruinous to
private enterprise and even State development. The
provision reads:
SEC. 12. Section 114 of the same Code, as amended, is
hereby further amended to read as follows:
"SEC. 114. Return and Payment of Value-Added Tax.
xxx
"(C) Withholding of Value-added Tax. The Government or
any of its political subdivisions, instrumentalities or
agencies, including government-owned or controlled
corporations (GOCCs) shall, before making payment on
account of each purchase of goods and services which are
subject to the value-added tax imposed in Sections 106 and
108 of this Code, deduct and withhold a final value-added
tax at the rate of five percent (5%) of the gross payment
thereof: Provided, That the payment for lease or use of

properties or property rights to nonresident owners shall be

subject to ten percent (10%) withholding tax at the time of
payment. For purposes of this Section, the payor or person
in control of the payment shall be considered as the
withholding payment. xxx
The principle that the Government and its subsidiaries may
deduct and withhold a final value-added tax on its purchase
of goods and services is not new, as the NIRC had allowed
such deduction and withholding at the rate of 3% of the
gross payment for the purchase of goods, and 6% of the
gross receipts for services. However, the NIRC had also
provided that this tax withheld would also be
creditable against the VAT liability of the seller or
contractor, a mechanism that was deleted by the EVAT law. The deletion of this credit apparatus
effectively compels the private enterprise transacting
with the government to shoulder the output VAT that
should have been paid by the government in excess of
5% of the gross selling price, and at the same time
unduly burdens the private enterprise by precluding it
from applying any creditable input VAT on the same
transaction.
Notably, the removal of the credit mechanism runs contrary
to the essence of the VAT system, which characteristically
allows the crediting of input taxes against output
taxes. Without such crediting mechanism, which
allows the shifting of the VAT to only the final end
user, the tax becomes a straightforward tax on
business or income. The effect on the enterprise
doing business with the government would be that
two taxes would be imposed on the income by the
business derived on such transaction: the regular
personal or corporate income tax on such income, and
this final withholding tax of 5%.

Granted that Congress is not bound to adopt with strict

conformity the VAT system, and that it has to power to
impose new taxes on business income, this amendment to
Section 114(C) of the NIRC still remains unconstitutional. It
unfairly discriminates against entities which contract
with the government by imposing an additional tax on
the income derived from such transactions. The end
result of such discrimination is double taxation on
income that is both oppressive and confiscatory.
It is a legitimate purpose of a tax law to devise a
manner by which the government could save money
on its own transactions, but it is another matter if a
private enterprise is punished for doing business with
the government. The erstwhile NIRC worked towards such
advantage, by allowing the government to reduce its cash
outlay on purchases of goods and services by withholding
the payment of a percentage thereof. While the new E-VAT
law retains this benefit to the government, at the same time
it burdens the private enterprise with an additional tax by
refusing to allow the crediting of this tax withheld to the
businesss input VAT.
This imposition would be grossly unfair for private entities
that transact with the government, especially on a regular
basis. It might be argued that the provision, even if
concededly unwise, nonetheless fails to meet the standard
of unconstitutionality, as it affects only those persons or
establishments that choose to do business with the
government. However, it is an acknowledged fact that the
government and its subsidiaries rely on contracts with
private enterprises in order to be able to carry out
innumerable functions of the State. This provision
effectively discourages private enterprises to do
business with the State, as it would impose on the
business a higher rate of tax if it were to transact
with the State, as compared to transactions with
other private entities.

Established industries with track records of quality

performance could very well be dissuaded from doing
further business with government entities as the higher tax
rate would make no economic sense. Only those enterprises
which really need the money, such as those with
substandard track records that have affected their viability
in the marketplace, would bother seeking out government
contracts. The corresponding sacrifice in quality would
eventually prove detrimental to the State. Our society can ill
afford shoddy infrastructures such as roads, bridges and
buildings that would unnecessarily pose danger to the public
at large simply because the government wanted to skimp
on expenses.
The provision squarely contradicts Section 20, Article
II of the Constitution as it vacuously discourages
private enterprise, and provides disincentives to
needed investments such as those expected by the
State from private businesses. Whatever advantages
may be gained by the temporary increase in the
government coffers would be overturned by the
disadvantages of having a reduced pool of private
enterprises willing to do business with the government.
Moreover, since government contracts with private
enterprises will still remain a necessary fact of life, the
amendment to Section 114(C) of the NIRC introduced by
the E-VAT Law.
Double taxation means taxing for the same tax period the
same thing or activity twice, when it should be taxed but
once, for the same purpose and with the same kind of
character of tax.58 Double taxation is not expressly
forbidden in our constitution, but the Court has recognized
it as obnoxious "where the taxpayer is taxed twice for the
benefit of the same governmental entity or by the same
jurisdiction for the same purpose."59 Certainly, both the 5%
final tax withheld and the general corporate income tax are
both paid for the benefit of the national government, and

for the same incidence of taxation, the sale/lease of goods

and services to the government.
The Court, in Re: Request of Atty. Bernardo Zialcita60 had
cause to make the following observation I submitapropos to
the case at bar, on double taxation in a case involving the
attempt of the BIR to tax the commuted accumulated leave
credits of a government lawyer upon his retirement:
Section 284 of the Revised Administrative Code grants to a
government employee 15 days vacation leave and 15 days
sick leave for every year of service. Hence, even if the
government employee absents himself and exhausts his
leave credits, he is still deemed to have worked and to have
rendered services. His leave benefits are already
imputed in, and form part of, his salary which in turn
is subject to withholding tax on income. He is taxed
on the entirety of his salaries without any deductions
for any leaves not utilized. It follows then that the
money values corresponding to these leave benefits
both the used and unused have already been taxed
during the year that they were earned. To tax them
again when the retiring employee receives their
money value as a form of government concern and
appreciation plainly constitutes an attempt to tax the
employee a second time. This is tantamount to double
taxation.61
Conclusions
The VAT system, in itself, is intelligently designed, and
stands as a fair means to raise revenue. It has been
adopted worldwide by countries hoping to employ an
efficient means of taxation. The concerns I have raised do
not detract from my general approval of the VAT system.

I do lament though that our governments wholehearted

adoption of the VAT system is endemic of what I deem a
flaw in our national tax policy in the last few decades. The
power of taxation, inherent in the State and ever so
powerful, has been generally employed by our financial
planners for a solitary purpose: the raising of revenue.
Revenue generation is a legitimate purpose of taxation, but
standing alone, it is a woefully unsophisticated design.
Intelligent tax policy should extend beyond the singularminded goal of raising State funds the old-time
philosophy behind the taxing schemes of war-mongering
monarchs and totalitarian states and should sincerely
explore the concept of taxation as a means of providing
genuine incentives to private enterprise to spur economic
growth; of promoting egalitarian social justice that would
allow everyone to their fair share of the nations wealth.
Instead, we are condemned by a national policy driven by
the monomania for State revenue. It may be beyond my
oath as a Justice to compel the government to adopt an
economic policy in consonance with my personal views, but
I offer these observations since they lie at the very heart of
the noxiousness of the assailed provisions of the E-VAT law.
The 70% cap, the 60-month amortization period and the
5% withholding tax on government transactions were
selfishly designed to increase government revenue at the
expense of the survival of local industries.
I am not insensitive to the concerns raised by the
respondents as to the dire consequences to the economy
should the E-VAT law be struck down. I am aware that the
granting of the petition in G.R. No. 168461 will negatively
affect the cash flow of the government. If that were the
only relevant concern at stake, I would have no problems
denying the petition. Unfortunately, under the device
employed in the E-VAT law, the price to be paid for a
more sustainable liquidity of the governments
finances will be the death of local business, and

correspondingly, the demise of our society. It is a

measure just as draconian as the standard issue
taxes of medieval tyrants.
I am not normally inclined towards the language of the
overwrought, yet if the sky were indeed truly falling, how
else could that fact be communicated. The E-VAT Law is of
multiple fatal consequences. How are we to survive as a
nation without the bulwark of private industries? Perhaps
the larger scale, established businesses may ultimately
remain standing, but they will be unable to sustain the void
left by the demise of small to medium enterprises. Or
worse, domestic industry would be left in the absolute
control of monopolies, combines or cartels, whether
dominated by foreigners or local oligarchs. The destruction
of subsisting industries would be bad enough, the
destruction of opportunity and the entrepreneurial spirit
would be even more grievous and tragic, as it would mark
as well the end of hope. Taxes may be the lifeblood of the
state, but never at the expense of the life of its subjects.
Accordingly, I VOTE to:
1) DENY the Petitions in G.R. Nos. 168056, 168207, and
168730 for lack of merit;
2) PARTIALLY GRANT the Petition in G.R. Nos. 168463 and
declare Section 21 of the E-VAT Law as unconstitutional;
3) GRANT the Petition in G.R. No. 168461 and declare as
unconstitutional Section 8 of Republic Act No. 9337, insofar
as it amends Section 110(A) and (B) of the National
Internal Revenue Code (NIRC) as well as Section 12 of the
same law, with respect to its amendment of Section 114(C)
of the NIRC.
DANTE O. TINGA

Associate Justice

Footnotes
1

Republic Act No. 9337. Referred to intext as "E-VAT

Law."
2

Except insofar as it prays that Section 21 of the EVAT Law be declared unconstitutional. Infra.
3

J. Vitug and E. Acosta, Tax Law and Jurisprudence

(2nd ed., 2000), at 7-8.
4

See National Power Corporation v. Province of

Albay, G.R. No. 87479, 4 June 1990, 186 SCRA 198,
203.
5

See Section 24, Article VI, Constitution.

The recognized exceptions, both expressly provided

by the Constitution, being the tariff clause under
Section 28(2), Article VI, and the powers of taxation
of local government units under Section 5, Article X.
7

G.R. No. 158540, 8 July 2005, 434 SCRA 65.

See People v. Vera, 65 Phil. 56, 117 (1937).

Decision, infra.

10

Carpio v. Executive Secretary, GR No. 96409

February 14,1992, 206 SCRA 290, 298; citing In re
Guarina, 24 Phil. 37.

11

People v. Vera, supra note 8.

12

See Section 2, National Internal Revenue Code.

18

The Federalist No. 58, at 394 (J. Madison) (J.Cooke

ed. 1961), cited in J. M. Medina, The Orignation
Clause in the American Constitution: A Comparative
Survey, 23 Tulsa Law Journal 2, at 165.

13

There are two eminent tests for valid delegation,

the "completeness test" and the "sufficient standard
test". The law must be complete in its essential
terms and conditions when it leaves the legislature
so that there will be nothing left for the delegate to
do when it reaches him except enforce it. U.S. v. Ang
Tang Ho, 43 Phil. 1, 6-7 (1922). On the other hand,
a sufficient standard is intended to map out the
boundaries of the delegates authority by defining
legislative policy and indicating the circumstances
under which it is to be pursued and effected;
intended to prevent a total transference of legislative
power from the legislature to the delegate.
14

Decision, infra, citing Alunan v. Mirasol, G.R. No.

108399, 31 July 1997, 276 SCRA 501, 513-514.
15

Notwithstanding, the Court in Southern Cross did

rule that Section 5 of the Safeguard Measures Act,
which required a positive final determination by the
Tariff Commission before the DTI or Agriculture
Secretaries could impose general safeguard
measures, operated as a valid restriction and
limitation on the exercise by the executive branch of
government of its tariff powers.
16

17

G.R. No. 115455, 25 August 1994, 235 SCRA 630.

M. Evans, A Source of Frequent and Obstinate

Altercations: The History and Application of the
Origination Clause.

19

Tolentino v. Secretary of Finance, supra note 16 at

661.
20

See Section 27(1), Article VI, Constitution.

21

Tolentino v. Secretary of Finance, supra note 16 at

668.
22

G.R. No. 124360, 5 November 1997, 281 SCRA

330.
23

Id. at 349-350.

24

People v. Tudtud, G.R. No. 144037, 26 September

2003, 412 SCRA 142, 168.
25

See Section 1, Article III, Constitution. Private

corporations and partnerships are persons within the
scope of the guaranty insofar as their property is
concerned. Smith Bell & Co. v. Natividad, 40 Phil.
136, 145 (1919).
26

16 C.J.S., at 1150-1151.

27

292 U.S. 40 (1934).

28

Id. at 44.

29

G.R. No. L-59431, 25 July 1984, 130 SCRA 654.

30

Id. at 660-662.

31

Justice Isagani Cruz offers the following examples

of taxes that contravene the due process clause: "A
tax, for example, that would claim 80 percent of a
persons net income would clearly be oppressive and
could unquestionably struck down as a deprivation of
his property without due process of law. A property
tax retroacting to as long as fifty years back would
by tyrannical and unrealistic, as the property might
not yet have been then in the possession of the
taxpayer nor, presumably, would he have acquired it
had he known of the tax to be imposed on it." I.
Cruz, Constitutional Law, p. 85.

35

Art. 2, European Commission First Council Directive

67/227 of 11 April 1967 on the Harmonization of
Legislation of Member States Concerning Turnover
Taxes, 1971 O.J. (L 71) 1301.
36

Liam & Ebrill, The Modern VAT.

37

"The most basic law in finance!" Understand the

Time Value of Money. http://www.free-financialadvice.net/time-value-of-money.html. Last visited,
30 August 2005.
38

32

"After defining religion, the Court, citing Tanada

and Fernando, made this statement, viz:
The constitutional guaranty of the free exercise and
enjoyment of religious profession and worship carries
with it the right to disseminate religious information.
Any restraint of such right can only be justified like
other restraints of freedom of expression on the
grounds that there is a clear and present danger of
any substantive evil which the State has the right to
prevent. (Tanada and Fernando on the Constitution
of the Philippines, vol. 1, 4th ed., p. 297) (emphasis
supplied)
This was the Court's maiden unequivocal affirmation
of the "clear and present danger" rule in the religious
freedom area, and in Philippine jurisprudence, for
that matter." Estrada v. Escritor, A.M. No. P-021651, 4 August 2003, 408 SCRA 1.

Time Value of Money.

http://www.jetobjects.com/components/finance/
TVM/concepts.html. Last visited, 30 August 2005.
39

There is also the option for the business to go

underground and avoid VAT registration, and
consequently avoid remitting VAT payments to the
government. It would be facetious though for a
Justice of the Supreme Court to characterize this
illegal option as "viable."
40

In Joseph Hellers Catch-22, Yossarian, a World

War II pilot reasoned that if he feigned insanity, he
would be necessarily exempt from assignment to
dangerous bombing runs in enemy territory.
However, his superiors reasoned that if he were truly
insane, he then would be heedless enough to be sent
on those dangerous bombing runs he had sought to
avoid in the first place.
41

33

Separate Opinion, infra.

Section 20, Article II, Constitution.

42
34

Ibid.

The due process clause alone is sufficient to

invalidate any contravening taxing statute. On the
other hand, Section 20, Article II on its own might

not be similarly sufficient. However, if the taxing

statute violates both the due process clause and
Section 20, Article II, then the impetus to strike
down the offending law becomes even more
compelling, so as to defeat the generalist invocation
of the States inherent powers of taxation.
43

Pangloss was a famed character ridiculed in

Voltaires Candide, renowned for his absolute blind
faith in optimism, no matter how dire the
circumstances.
44

Id. at 29-30.

45

Decision, infra.

business or change in the status of the

taxpayer as a VAT registered taxpayer. As
provided for in Section 112(B0, in case of
cancellation of VAT registration due to cessation of
business or change in status of taxpayer, the only
recourse given to such taxpayer is to apply for the
issuance of TCC on his excess input tax credits which
may be used in payment of his other internal
revenue taxes, application for refund thereof is not
an option."
See Annexes "18-N" and "18-O", Compliance dated
12 July 2005.
47

See SRC Rule 68(1)(b)(c), Implementing Rules and

Regulations to the Securities and Regulations Code.

46

This is confirmed by the BIR in its draft Revenue

Memorandum Circular dated 12 July 2005, submitted
by respondents in its Compliance dated 16 August
2005:
"[Q]: Is there a way by which such unapplied excess
input tax credits can be claimed for refund or
issuance of TCC?
[A]: The only time application for
refund/issuance of TCC is allowed for input
taxes incurred on the purchase of domestic
goods/services is when the same are directly
attributable to zero-rated or effectively zerorated sales (of goods/services). xxx
For those engaged purely in domestic
transactions, the only time that unapplied input
taxes may be applied for the issuance of TCC is
when the VAT registration of the taxpayer is
cancelled due to retirement or cessation of

48

Section 34, International Accounting Standards 12.

49

Section 36, id.

50

In his Separate Opinion, Justice Panganiban asserts

that the deferred input tax credit is not really
confiscated by the government, as it remains an
asset in the accounting records of a
business. SeeSeparate Opinion, infra. By the same
logic, a law requiring all businesses to surrender to
the government 100% of its gross sales subject to
reimbursement only after a five year period, would
pass muster, since the amount is "not really
confiscated by the government as it remains an
asset in the accounting records of a business."
51

Justice Panganiban cites United Paracale Mining Co.

v. De la Rosa (cited as 221 SCRA 108, 115, April 7,
1993) to bolster his stated position that ""[t]here is
no vested right in a deferred input tax account; it is

a mere statutory privilege". Separate

Opinion, infra. United Paracale does not pertain to
any deferred input taxes, but instead to "mining
claims which according to [petitioners] is private
property would constitute impairment of vested
rights since by shifting the forum of the petitioners
case from the courts to the Bureau of Mines[the]
substantive rights to full protection of its property
rights shall be greatly impaired." United Paracale
Mining Co. v. Hon. Dela Rosa, G.R. Nos. 63786-87, 7
April 1993, 221 SCRA 108, `115. Clearly,United
Paracale is not even a tax case, involving as it does,
questions of the jurisdiction of the Bureau of Mines.
52

See Part III, Paragraph 3, Revenue Memorandum

Ruling No. 1-2002.
53

Section 32, International Accounting Standards 12.

54

Supra note 47.

55

Supra note 9.

56

Section 3, Article XIII, Constitution.

57

Kapatiran ng Mga Naglilingkod sa Pamahalaan ng

Pilipinas, Inc. et al. v. Tan, G.R. No. L-81311, 30
June 1988.
58

59

J. Vitug and E. Acosta, supra note 3 at 41.

Pepsi-Cola Bottling Co. of the Philippines, Inc. v.

Municipality of Tanauan, G.R. No. L-31156, 27
February 1976, 69 SCRA 460, 466-67; citing CIR v.
Lednicky, L-18169, July 31, 1964, 11 SACRA 609
and SMB, Inc. v. City of Cebu, L-20312, February 26,
1972, 43 SCRA 280.

60

A.M. No. 90-6-015-SC, 18 October 1990, 190 SCRA

851.
61

Id. at 856.

The Lawphil Project - Arellano Law Foundation

EN BANC
G.R. No. 168056 ABAKADA GURO PARTY LIST
(Formerly AASJAS) OFFICERS SAMSON S. ALCANTARA
and ED VINCENT S. ALBANO v. THE HONORABLE
EXECUTIVE SECRETARY EDUARDO ERMITA, ET AL.
G.R. No. 168207 AQUILINO Q. PIMENTEL, JR., ET
AL. v. EXECUTIVE SECRETARY EDUARDO R. ERMITA
G.R. No. 168461 ASSOCIATION OF PILIPINAS
SHELL DEALERS, INC., ET AL. v. CESAR V. PURISIMA,
ET AL.
G.R. No. 168463 FRANCIS JOSEPH G. ESCUDERO, ET
AL. v. CESAR V. PURISIMA, ET AL.
G.R. No. 168730 BATAAN GOVERNOR ENRIQUE T.
GARCIA, JR., ET AL. v. HON. EDUARDO R. ERMITA, ET
AL.
Promulgated:
September 1, 2005

x-------------------------------------------------x
CONCURRING OPINION
CHICO-NAZARIO, J.:
Five petitions were filed before this Court questioning the
constitutionality of Republic Act No. 9337. Rep. Act No.
9337, which amended certain provisions of the National
Internal Revenue Code of 1997,1 by essentially increasing
the tax rates and expanding the coverage of the ValueAdded Tax (VAT). Undoubtedly, during these financially
difficult times, more taxes would be additionally
burdensome to the citizenry. However, like a bitter pill, all
Filipino citizens must bear the burden of these new taxes so
as to raise the much-needed revenue for the ailing
Philippine economy. Taxation is the indispensable and
inevitable price for a civilized society, and without taxes, the
government would be paralyzed.2 Without the tax reforms
introduced by Rep. Act No. 9337, the then Secretary of the
Department of Finance, Cesar V. Purisima, assessed that
"all economic scenarios point to the National Governments
inability to sustain its precarious fiscal position, resulting in
severe erosion of investor confidence and economic
stagnation."3
Finding Rep. Act No. 9337 as not unconstitutional, both in
its procedural enactment and in its substance, I hereby
concur in full in the foregoing majority opinion, penned by
my esteemed colleague, Justice Ma. Alicia Austria-Martinez.
According to petitioners, the enactment of Rep. Act No.
9337 by Congress was riddled with irregularities and
violations of the Constitution. In particular, they alleged
that: (1) The Bicameral Conference Committee exceeded its
authority to merely settle or reconcile the differences

among House Bills No. 3555 and 3705 and Senate Bill No.
1950, by including in Rep. Act No. 9337 provisions not
found in any of the said bills, or deleting from Rep. Act No.
9337 or amending provisions therein even though they were
not in conflict with the provisions of the other bills; (2) The
amendments introduced by the Bicameral Conference
Committee violated Article VI, Section 26(2), of the
Constitution which forbids the amendment of a bill after it
had passed third reading; and (3) Rep. Act No. 9337
contravened Article VI, Section 24, of the Constitution which
prescribes that revenue bills should originate exclusively
from the House of Representatives.
Invoking the expanded power of judicial review granted to it
by the Constitution of 1987, petitioners are calling upon this
Court to look into the enactment of Rep. Act No. 9337 by
Congress and, consequently, to review the applicability of
the enrolled bill doctrine in this jurisdiction. Under the said
doctrine, the enrolled bill, as signed by the Speaker of the
House of Representatives and the Senate President, and
certified by the Secretaries of both Houses of Congress,
shall be conclusive proof of its due enactment.4
Petitioners arguments failed to convince me of the wisdom
of abandoning the enrolled bill doctrine. I believe that it is
more prudent for this Court to remain conservative and to
continue its adherence to the enrolled bill doctrine, for to
abandon the said doctrine would be to open a Pandoras
Box, giving rise to a situation more fraught with evil and
mischief. Statutes enacted by Congress may not attain
finality or conclusiveness unless declared so by this Court.
This would undermine the authority of our statutes because
despite having been signed and certified by the designated
officers of Congress, their validity would still be in doubt
and their implementation would be greatly hampered by
allegations of irregularities in their passage by the
Legislature. Such an uncertainty in the statutes would
indubitably result in confusion and disorder. In all

probability, it is the contemplation of such a scenario that

led an American judge to proclaim, thus
. . . Better, far better, that a provision should occasionally
find its way into the statute through mistake, or even fraud,
than, that every Act, state and national, should at any and
all times be liable to put in issue and impeached by the
journals, loose papers of the Legislature, and parol
evidence. Such a state of uncertainty in the statute laws of
the land would lead to mischiefs absolutely intolerable. . . . 5
Moreover, this Court must attribute good faith and accord
utmost respect to the acts of a co-equal branch of
government. While it is true that its jurisdiction has been
expanded by the Constitution, the exercise thereof should
not violate the basic principle of separation of powers. The
expanded jurisdiction does not contemplate judicial
supremacy over the other branches of government. Thus, in
resolving the procedural issues raised by the petitioners,
this Court should limit itself to a determination of
compliance with, or conversely, the violation of a specified
procedure in the Constitution for the passage of laws by
Congress, and not of a mere internal rule of proceedings of
its Houses.
It bears emphasis that most of the irregularities in the
enactment of Rep. Act No. 9337 concern the amendments
introduced by the Bicameral Conference Committee. The
Constitution is silent on such a committee, it neither
prescribes the creation thereof nor does it prohibit it. The
creation of the Bicameral Conference Committee is
authorized by the Rules of both Houses of Congress. That
the Rules of both Houses of Congress provide for the
creation of a Bicameral Conference Committee is within the
prerogative of each House under the Constitution to
determine its own rules of proceedings.

The Bicameral Conference Committee is a creation of

necessity and practicality considering that our Congress is
composed of two Houses, and it is highly improbable that
their respective bills on the same subject matter shall
always be in accord and consistent with each other. Instead
of all their members, only the appointed representatives of
both Houses shall meet to reconcile or settle the differences
in their bills. The resulting bill from their meetings,
embodied in the Bicameral Conference Report, shall be
subject to approval and ratification by both Houses, voting
separately.
It does perplex me that members of both Houses would
again ask the Court to define and limit the powers of the
Bicameral Conference Committee when such committee is
of their own creation. In a number of cases,6 this Court
already made a determination of the extent of the powers of
the Bicameral Conference Committee after taking into
account the existing Rules of both Houses of Congress. In
gist, the power of the Bicameral Conference Committee to
reconcile or settle the differences in the two Houses
respective bills is not limited to the conflicting provisions of
the bills; but may include matters not found in the original
bills but germane to the purpose thereof. If both Houses
viewed the pronouncement made by this Court in such
cases as extreme or beyond what they intended, they had
the power to amend their respective Rules to clarify or limit
even further the scope of the authority which they grant to
the Bicameral Conference Committee. Petitioners grievance
that, unfortunately, they cannot bring about such an
amendment of the Rules on the Bicameral Conference
Committee because they are members of the minority,
deserves scant consideration. That the majority of the
members of both Houses refuses to amend the Rules on the
Bicameral Conference Committee is an indication that it is
still satisfied therewith. At any rate, this is how democracy
works the will of the majority shall be controlling.

Worth reiterating herein is the concluding paragraph

in Arroyo v. De Venecia,7 which reads
It would be unwarranted invasion of the prerogative of a
coequal department for this Court either to set aside a
legislative action as void because the Court thinks the house
has disregarded its own rules of procedure, or to allow
those defeated in the political arena to seek a rematch in
the judicial forum when petitioners can find remedy in that
department. The Court has not been invested with a roving
commission to inquire into complaints, real or imagined, of
legislative skullduggery. It would be acting in excess of its
power and would itself be guilty of grave abuse of its
discretion were it to do so. . . .
Present jurisprudence allows the Bicameral Conference
Committee to amend, add, and delete provisions of the Bill
under consideration, even in the absence of conflict thereon
between the Senate and House versions, but only so far as
said provisions are germane to the purpose of the
Bill.8 Now, there is a question as to whether the Bicameral
Conference Committee, which produced Rep. Act No. 9337,
exceeded its authority when it included therein amendments
of provisions of the National Internal Revenue Code of 1997
not related to VAT.
Although House Bills No. 3555 and 3705 were limited to the
amendments of the provisions on VAT of the National
Internal Revenue Code of 1997, Senate Bill No. 1950 had a
much wider scope and included amendments of other
provisions of the said Code, such as those on income,
percentage, and excise taxes. It should be borne in mind
that the very purpose of these three Bills and,
subsequently, of Rep. Act No. 9337, was to raise additional
revenues for the government to address the dire economic
situation of the country. The National Internal Revenue
Code of 1997, as its title suggests, is the single Code that
governs all our national internal revenue taxes. While it

does cover different taxes, all of them are imposed and

collected by the national government to raise revenues. If
we have one Code for all our national internal revenue
taxes, then there is no reason why we cannot have a single
statute amending provisions thereof even if they involve
different taxes under separate titles. I hereby submit that
the amendments introduced by the Bicameral Conference
Committee to non-VAT provisions of the National Internal
Revenue Code of 1997 are not unconstitutional for they are
germane to the purpose of House Bills No. 3555 and 3705
and Senate Bill No. 1950, which is to raise national
revenues.
Furthermore, the procedural issues raised by the petitioners
were already addressed and resolved by this Court
inTolentino v. Executive Secretary.9 Since petitioners failed
to proffer novel factual or legal argument in support of their
positions that were not previously considered by this Court
in the same case, then I am not compelled to depart from
the conclusions made therein.
The majority opinion has already thoroughly discussed each
of the substantial issues raised by the petitioners. I would
just wish to discuss additional matters pertaining to the
petition of the petroleum dealers in G.R. No. 168461.
They claim that the provision of Rep. Act No. 9337 limiting
their input VAT credit to only 70% of their output VAT
deprives them of their property without due process of law.
They argue further that such 70% cap violates the equal
protection and uniformity of taxation clauses under Article
III, Section 1, and Article VI, Section 28(1), respectively, of
the Constitution, because it will unduly prejudice taxpayers
who have high input VAT and who, because of the cap,
cannot fully utilize their input VAT as credit.

I cannot sustain the petroleum dealers position for the

following reasons
First, I adhere to the view that the input VAT is not a
property to which the taxpayer has vested rights. Input VAT
consists of the VAT a VAT-registered person had paid on his
purchases or importation of goods, properties, and services
from a VAT-registered supplier; more simply, it is VAT
paid. It is not, as averred by petitioner petroleum dealers,
a property that the taxpayer acquired for valuable
consideration.10 A VAT-registered person incurs input VAT
because he complied with the National Internal Revenue
Code of 1997, which imposed the VAT and made the
payment thereof mandatory; and not because he paid for it
or purchased it for a price.
Generally, when one pays taxes to the government, he
cannot expect any direct and concrete benefit to himself for
such payment. The benefit of payment of taxes shall
redound to the society as a whole. However, by virtue of
Section 110(A) of the National Internal Revenue Code of
1997, prior to its amendment by Rep. Act No. 9337, a VATregistered person is allowed, subject to certain
substantiation requirements, to credit his input VAT against
his output VAT.
Output VAT is the VAT imposed by the VAT-registered
person on his own sales of goods, properties, and services
or the VAT he passes on to his buyers. Hence, the VATregistered person selling the goods, properties, and services
does not pay for the output VAT; said output VAT is paid for
by his consumers and he only collects and remits the same
to the government.
The crediting of the input VAT against the output VAT is a
statutory privilege, granted by Section 110 of the National
Internal Revenue Code of 1997. It gives the VAT-registered

person the opportunity to recover the input VAT he had

paid, so that, in effect, the input VAT does not constitute an
additional cost for him. While it is true that input VAT
credits are reported as assets in a VAT-registered persons
financial statements and books of account, this accounting
treatment is still based on the statutory provision
recognizing the input VAT as a credit. Without Section 110
of the National Internal Revenue Code of 1997, then the
accounting treatment of any input VAT will also change and
may no longer be booked outright as an asset. Since the
privilege of an input VAT credit is granted by law, then an
amendment of such law may limit the exercise of or may
totally withdraw the privilege.
The amendment of Section 110 of the National Internal
Revenue Code of 1997 by Rep. Act No. 9337, which
imposed the 70% cap on input VAT credits, is a legitimate
exercise by Congress of its law-making power. To say that
Congress may not trifle with Section 110 of the National
Internal Revenue Code of 1997 would be to violate a basic
precept of constitutional law that no law is
irrepealable.11 There can be no vested right to the continued
existence of a statute, which precludes its change or
repeal.12
It bears to emphasize that Rep. Act No. 9337 does not
totally remove the privilege of crediting the input VAT
against the output VAT. It merely limits the amount of input
VAT one may credit against his output VAT per quarter to
an amount equivalent to 70% of the output VAT. What is
more, any input VAT in excess of the 70% cap may be
carried-over to the next quarter.13 It is certainly a departure
from the VAT crediting system under Section 110 of the
National Internal Revenue Code of 1997, but it is an
innovation that Congress may very well introduce, because

VAT will continue to evolve from its pioneering original

structure. Dynamically, it will be subjected to reforms that
will make it conform to many factors, among which are: the
changing requirements of government revenue; the social,
economic and political vicissitudes of the times; and the
conflicting interests in our society. In the course of its
evolution, it will be injected with some oddities and
inevitably transformed into a structure which its revisionists
believe will be an improvement overtime.14
Second, assuming for the sake of argument, that the input
VAT credit is indeed a property, the petroleum dealers right
thereto has not vested. A right is deemed vested and
subject to constitutional protection when
". . . [T]he right to enjoyment, present or prospective, has
become the property of some particular person or persons
as a present interest. The right must be absolute, complete,
and unconditional, independent of a contingency, and a
mere expectancy of future benefit, or a contingent interest
in property founded on anticipated continuance of existing
laws, does not constitute a vested right. So, inchoate rights
which have not been acted on are not vested." (16 C. J. S.
214-215)15
Under the National Internal Revenue Code of 1997, before it
was amended by Rep. Act No. 9337, the sale or importation
of petroleum products were exempt from VAT, and instead,
were subject to excise tax.16 Petroleum dealers did not
impose any output VAT on their sales to consumers. Since
they had no output VAT against which they could credit
their input VAT, they shouldered the costs of the input VAT
that they paid on their purchases of goods, properties, and
services. Their sales not being subject to VAT, the
petroleum dealers had no input VAT credits to speak of.

It is only under Rep. Act No. 9337 that the sales by the
petroleum dealers have become subject to VAT and only in
its implementation may they use their input VAT as credit
against their output VAT. While eager to use their input VAT
credit accorded to it by Rep. Act No. 9337, the petroleum
dealers reject the limitation imposed by the very same law
on such use.
It should be remembered that prior to Rep. Act No. 9337,
the petroleum dealers input VAT credits were inexistent
they were unrecognized and disallowed by law. The
petroleum dealers had no such property called input VAT
credits. It is only rational, therefore, that they cannot
acquire vested rights to the use of such input VAT credits
when they were never entitled to such credits in the first
place, at least, not until Rep. Act No. 9337.
My view, at this point, when Rep. Act No. 9337 has not yet
even been implemented, is that petroleum dealers right to
use their input VAT as credit against their output VAT
unlimitedly has not vested, being a mere expectancy of a
future benefit and being contingent on the continuance of
Section 110 of the National Internal Revenue Code of 1997,
prior to its amendment by Rep. Act No. 9337.
Third, although the petroleum dealers presented figures and
computations to support their contention that the cap shall
lead to the demise of their businesses, I remain
unconvinced.
Rep. Act No. 9337, while imposing the 70% cap on input
VAT credits, allows the taxpayer to carry-over to the
succeeding quarters any excess input VAT. The petroleum
dealers presented a situation wherein their input VAT would
always exceed 70% of their output VAT, and thus, their
excess input VAT will be perennially carried-over and would
remain unutilized. Even though they consistently questioned

the 70% cap on their input VAT credits, the petroleum

dealers failed to establish what is the average ratio of their
input VAT vis--vis their output VAT per quarter. Without
such fact, I consider their objection to the 70% cap
arbitrary because there is no basis therefor.
On the other, I find that the 70% cap on input VAT credits
was not imposed by Congress arbitrarily. Members of the
Bicameral Conference Committee settled on the said
percentage so as to ensure that the government can collect
a minimum of 30% output VAT per taxpayer. This is to put
a VAT-taxpayer, at least, on equal footing with a VATexempt taxpayer under Section 109(V) of the National
Internal Revenue Code, as amended by Rep. Act No.
9337.17 The latter taxpayer is exempt from VAT on the basis
that his sale or lease of goods or properties or services do
not exceed P1,500,000; instead, he is subject to pay a
three percent (3%) tax on his gross receipts in lieu of the
VAT.18 If a taxpayer with presumably a smaller business is
required to pay three percent (3%) gross receipts tax, a
type of tax which does not even allow for any crediting, a
VAT-taxpayer with a bigger business should be obligated,
likewise, to pay a minimum of 30% output VAT (which
should be equivalent to 3% of the gross selling price per
good or property or service sold). The cap assures the
government a collection of at least 30% output VAT,
contributing to an improved cash flow for the government.
Attention is further called to the fact that the output VAT is
the VAT imposed on the sales by a VAT-taxpayer; it is paid
by the purchasers of the goods, properties, and services,
and merely collected through the VAT-registered seller. The
latter, therefore, serves as a collecting agent for the
government. The VAT-registered seller is merely being
required to remit to the government a minimum of 30% of
his output VAT collection.

Fourth, I give no weight to the figures and computations

presented before this Court by the petroleum dealers,
particularly the supposed quarterly profit and loss statement
of a "typical dealer." How these data represent the financial
status of a typical dealer, I would not know when there was
no effort to explain the manner by which they were
surveyed, collated, and averaged out. Without establishing
their source therefor, the figures and computations
presented by the petroleum dealers are merely self-serving
and unsubstantiated, deserving scant consideration by this
Court. Even assuming that these figures truly represent the
financial standing of petroleum dealers, the introduction and
application thereto of the VAT factor, which forebode the
collapse of said petroleum dealers businesses, would be
nothing more than an anticipated damage an injury that
may or may not happen. To resolve their petition on this
basis would be premature and contrary to the established
tenet of ripeness of a cause of action before this Court could
validly exercise its power of judicial review.
Fifth, in response to the contention of the petroleum dealers
during oral arguments before this Court that they cannot
pass on to the consumers the VAT burden and increase the
prices of their goods, it is worthy to quote below this Courts
ruling in Churchill v. Concepcion,19 to wit
It will thus be seen that the contention that the rates
charged for advertising cannot be raised is purely
hypothetical, based entirely upon the opinion of the
plaintiffs, unsupported by actual test, and that the plaintiffs
themselves admit that a number of other persons have
voluntarily and without protest paid the tax herein
complained of. Under these circumstances, can it be held as
a matter of fact that the tax is confiscatory or that, as a
matter of law, the tax is unconstitutional? Is the exercise of
the taxing power of the Legislature dependent upon and
restricted by the opinion of two interested witnesses? There
can be but one answer to these questions, especially in view

of the fact that others are paying the tax and presumably
making reasonable profit from their business.
As a final observation, I perceive that what truly underlies
the opposition to Rep. Act No. 9337 is not the question of
its constitutionality, but rather the wisdom of its enactment.
Would it truly raise national revenue and benefit the entire
country, or would it only increase the burden of the Filipino
people? Would it contribute to a revival of our economy or
only contribute to the difficulties and eventual closure of
businesses? These are issues that we cannot resolve as the
Supreme Court. As this Court explained in Agustin v.
Edu,20 to wit
It does appear clearly that petitioners objection to this
Letter of Instruction is not premised on lack of power, the
justification for a finding of unconstitutionality, but on the
pessimistic, not to say negative, view he entertains as to its
wisdom. That approach, it put it at its mildest, is
distinguished, if that is the appropriate word, by its
unorthodoxy. It bears repeating "that this Court, in the
language of Justice Laurel, does not pass upon questions of
wisdom, justice or expediency of legislation. As expressed
by Justice Tuason: It is not the province of the courts to
supervise legislation and keep it within the bounds of
propriety and common sense. That is primarily and
exclusively a legislative concern. There can be no possible
objection then to the observation of Justice Montemayor:
As long as laws do not violate any Constitutional provision,
the Courts merely interpret and apply them regardless of
whether or not they are wise or salutary. For they,
according to Justice Labrador, are not supposed to override
legitimate policy and * * * never inquire into the wisdom of
the law. It is thus settled, to paraphrase Chief Justice
Concepcion in Gonzales v. Commission on Elections, that
only congressional power or competence, not the wisdom of
the action taken, may be the basis for declaring a statute
invalid. This is as it ought to be. The principle of separation

of powers has in the main wisely allocated the respective

authority of each department and confined its jurisdiction to
such sphere. There would then be intrusion not allowable
under the Constitution if on a matter left to the discretion of
a coordinate branch, the judiciary would substitute its
own"21
To reiterate, we cannot substitute our discretion for
Congress, and even though there are provisions in Rep. Act
No. 9337 which we may believe as unwise or iniquitous, but
not unconstitutional, we cannot strike them off by invoking
our power of judicial review. In such a situation, the
recourse of the people is not judicial, but rather political. If
they severely doubt the wisdom of the present Congress for
passing a statute such as Rep. Act No. 9337, then they
have the power to hold the members of said Congress
accountable by using their voting power in the next
elections.
In view of the foregoing, I vote for the denial of the present
petitions and the upholding of the constitutionality of Rep.
Act No. 9337 in its entirety.
MINITA V. CHICO-NAZARIO
Associate Justice

Footnotes
1

Presidential Decree No. 1158, as amended up to

Rep. Act No. 8424.
2

Commissioner of Internal Revenue v. Algue, Inc.,

G.R. No. L-28896, 17 February 1988, 158 SCRA 9.

Paragraph 3.3 of the Verification and Affidavit of

Merit, executed by the then Secretary of the
Department of Finance, Cesar V. Purisima, dated 04
July 2005, attached as Annex A of the Very Urgent
Motion to Lift Temporary Restraining Order, filed by
the Office of the Solicitor General on 04 July 2005.
4

Farias v. Executive Secretary, G.R. No. 147387,

10 December 2003, 417 SCRA 503, 529.
5

Justice Sawyer, in Sherman v. Story, 30 Cal. 253,

256, as quoted in Marshall Field & Co. v. Clark, 143
U.S. 294, 304.
6

Tolentino v. Secretary of Finance, G.R. No. 115544,

25 August 1994, 235 SCRA 630; Philippine Judges
Association v. Prado, G.R. No. 105371, 11 November
1993, 227 SCRA 703.

12

Traux v. Corrigan, 257 U.S. 312, 66 L. Ed. 254, as

quoted in Asociacion de Agricultores de Talisay-Silay,
Inc. v. Talisay-Silay Milling Co., Inc., Id., p. 452.
13

Section 110(B) of the National Internal Revenue

Code of 1997, as amended by Section 8 of Rep. Act
No. 9337.
14

Victorio A. Deoferio, Jr. and Victorino C.

Mamalateo, The Value Added Tax in the Philippines
48 (2000).
15

Benguet Consolidated Mining Co. v. Pineda, 98 Phil

711, 722 (1956).
16

Section 109(e) of the National Internal Revenue

Code of 1997.
17

G.R. No. 127255, 14 August 1997, 277 SCRA 268,

299.
8

Supra, note 6.

18

Section 116 of the National Internal Revenue

Code, as amended by Rep. Act No. 9337.
19

TSN, 18 April 2005, IV-2, p. 5.

Supra, note 3.

34 Phil. 969, 973 (1916).

20
10

Petition for Prohibition (Under Rule 65 with Prayer

for the Issuance of a Temporary Restraining Order
and/or Writ of Preliminary Injunction) in G.R. No.
168461 entitled, Association of Pilipinas Shell
Dealers, Inc., et al. v. Purisima, et al., p. 17,
paragraph 52.
11

Asociacion de Agricultores de Talisay-Silay, Inc. v.

Talisay-Silay Milling Co., Inc., G.R. No. L-19937, 19
February 1979, 88 SCRA 294; Duarte v. Dade, 32
Phil. 36 (1915).

G.R. No. L-49112, 02 February 1979, 88 SCRA

195.
21

Id., pp. 210-211.

Republic of the Philippines

SUPREME COURT
EN BANC
G.R. No. 168056 October 18, 2005
Agenda for Item No. 45
G.R. No. 168056 (ABAKADA Guro Party List Officer
Samson S. Alcantara, et al. vs. The Hon. Executive
Secretary Eduardo R. Ermita); G.R. No. 168207
(Aquilino Q. Pimentel, Jr., et al. vs. Executive
Secretary Eduardo R. Ermita, et al.); G.R. No. 168461
(Association of Pilipinas Shell Dealers, Inc., et
al. vs. Cesar V. Purisima, et al.); G.R. No. 168463
(Francis Joseph G. Escudero vs. Cesar V. Purisima, et
al); and G.R. No. 168730 (Bataan Governor Enrique T.
Garcia, Jr. vs. Hon. Eduardo R. Ermita, et al.)
RESOLUTION
For resolution are the following motions for reconsideration
of the Courts Decision dated September 1, 2005 upholding
the constitutionality of Republic Act No. 9337 or the VAT
Reform Act1:
1) Motion for Reconsideration filed by petitioners in G.R. No.
168463, Escudero, et al., on the following grounds:
A. THE DELETION OF THE "NO PASS ON PROVISIONS" FOR
THE SALE OF PETROLEUM PRODUCTS AND POWER
GENERATION SERVICES CONSTITUTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION ON THE PART OF THE BICAMERAL
CONFERENCE COMMITTEE.

B. REPUBLIC ACT NO. 9337 GROSSLY VIOLATES THE

CONSTITUTIONAL IMPERATIVE ON EXCLUSIVE
ORIGINATION OF REVENUE BILLS UNDER 24, ARTICLE VI,
1987 PHILIPPINE CONSTITUTION.
C. REPUBLIC ACT NO. 9337S STAND-BY AUTHORITY TO
THE EXECUTIVE TO INCREASE THE VAT RATE, ESPECIALLY
ON ACCOUNT OF THE EFFECTIVE RECOMMENDATORY
POWER GRANTED TO THE SECRETARY OF FINANCE,
CONSTITUTES UNDUE DELEGATION OF LEGISLATIVE
AUTHORITY.
2) Motion for Reconsideration of petitioner in G.R. No.
168730, Bataan Governor Enrique T. Garcia, Jr., with the
argument that burdening the consumers with significantly
higher prices under a VAT regime vis--vis a 3% gross tax
renders the law unconstitutional for being arbitrary,
oppressive and inequitable.
and
3) Motion for Reconsideration by petitioners Association of
Pilipinas Shell Dealers, Inc. in G.R. No. 168461, on the
grounds that:
I. This Honorable Court erred in upholding the
constitutionality of Section 110(A)(2) and Section 110(B) of
the NIRC, as amended by the EVAT Law, imposing
limitations on the amount of input VAT that may be claimed
as a credit against output VAT, as well as Section 114(C) of
the NIRC, as amended by the EVAT Law, requiring the
government or any of its instrumentalities to withhold a 5%
final withholding VAT on their gross payments on purchases
of goods and services, and finding that the questioned
provisions:

A. are not arbitrary, oppressive and consfiscatory as to

amount to a deprivation of property without due process of
law in violation of Article III, Section 1 of the 1987
Philippine Constitution;
B. do not violate the equal protection clause prescribed
under Article III, Section 1 of the 1987 Philippine
Constitution; and
C. apply uniformly to all those belonging to the same class
and do not violate Article VI, Section 28(1) of the 1987
Philippine Constitution.
II. This Honorable Court erred in upholding the
constitutionality of Section 110(B) of the NIRC, as amended
by the EVAT Law, imposing a limitation on the amount of
input VAT that may be claimed as a credit against output
VAT notwithstanding the finding that the tax is not
progressive as exhorted by Article VI, Section 28(1) of the
1987 Philippine Constitution.
Respondents filed their Consolidated Comment. Petitioner
Garcia filed his Reply.
Petitioners Escudero, et al., insist that the bicameral
conference committee should not even have acted on the no
pass-on provisions since there is no disagreement between
House Bill Nos. 3705 and 3555 on the one hand, and Senate
Bill No. 1950 on the other, with regard to the no passon provision for the sale of service for power generation
because both the Senate and the House were in agreement
that the VAT burden for the sale of such service shall not be
passed on to the end-consumer. As to the no passon provision for sale of petroleum products, petitioners
argue that the fact that the presence of such a no passon provision in the House version and the absence thereof
in the Senate Bill means there is no conflict because "a

House provision cannot be in conflict with something that

does not exist."
Such argument is flawed. Note that the rules of both houses
of Congress provide that a conference committee shall
settle the "differences" in the respective bills of each house.
Verily, the fact that a no pass-on provision is present in one
version but absent in the other, and one version intends two
industries, i.e., power generation companies and petroleum
sellers, to bear the burden of the tax, while the other
version intended only the industry of power generation,
transmission and distribution to be saddled with such
burden, clearly shows that there are indeed differences
between the bills coming from each house, which
differences should be acted upon by the bicameral
conference committee. It is incorrect to conclude that there
is no clash between two opposing forces with regard to
the no pass-on provision for VAT on the sale of petroleum
products merely because such provision exists in the House
version while it is absent in the Senate version. It is
precisely the absence of such provision in the Senate bill
and the presence thereof in the House bills that causes the
conflict. The absence of the provision in the Senate bill
shows the Senates disagreement to the intention of the
House of Representatives make the sellers of petroleum
bear the burden of the VAT. Thus, there are indeed two
opposing forces: on one side, the House of Representatives
which wants petroleum dealers to be saddled with the
burden of paying VAT and on the other, the Senate which
does not see it proper to make that particular industry bear
said burden. Clearly, such conflicts and differences between
the no pass-on provisions in the Senate and House bills had
to be acted upon by the bicameral conference committee as
mandated by the rules of both houses of Congress.
Moreover, the deletion of the no pass-on provision made the
present VAT law more in consonance with the very nature of
VAT which, as stated in the Decision promulgated on

September 1, 2005, is a tax on spending or consumption,

thus, the burden thereof is ultimately borne by the endconsumer.

Section 24 speaks of origination of certain bills from the

House of Representatives which has been interpreted in
the Tolentino case as follows:

Escudero, et al., then claim that there had been changes

introduced in the Rules of the House of Representatives
regarding the conduct of the House panel in a bicameral
conference committee, since the time of Tolentino vs.
Secretary of Finance2 to act as safeguards against possible
abuse of authority by the House members of the bicameral
conference committee. Even assuming that the rule
requiring the House panel to report back to the House if
there are substantial differences in the House and Senate
bills had indeed been introduced afterTolentino, the Court
stands by its ruling that the issue of whether or not the
House panel in the bicameral conference committee
complied with said internal rule cannot be inquired into by
the Court. To reiterate, "mere failure to conform to
parliamentary usage will not invalidate the action (taken by
a deliberative body) when the requisite number of members
have agreed to a particular measure."3

To begin with, it is not the law but the revenue bill

which is required by the Constitution to "originate
exclusively" in the House of Representatives. It is important
to emphasize this, because a bill originating in the House
may undergo such extensive changes in the Senate that the
result may be a rewriting of the whole At this point, what
is important to note is that, as a result of the Senate action,
a distinct bill may be produced. To insist that a revenue
statute and not only the bill which initiated the legislative
process culminating in the enactment of the law must
substantially be the same as the House bill would be to
deny the Senate's power not only to "concur with
amendments" but also to " propose amendments." It would
be to violate the coequality of legislative power of the two
houses of Congress and in fact make the House superior to
the Senate.

Escudero, et. al., also contend that Republic Act No. 9337
grossly violates the constitutional imperative on exclusive
origination of revenue bills under Section 24 of Article VI of
the Constitution when the Senate introduced amendments
not connected with VAT.
The Court is not persuaded.
Article VI, Section 24 of the Constitution provides:
Sec. 24 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.

Given, then, the power of the Senate to propose

amendments, the Senate can propose its own version even
with respect to bills which are required by the Constitution
to originate in the House.
...
Indeed, what the Constitution simply means is that the
initiative for filing revenue, tariff, or tax bills, bills
authorizing an increase of the public debt, private bills and
bills of local application must come from the House of
Representatives on the theory that, elected as they are
from the districts, the members of the House can be
expected to be more sensitive to the local needs and
problems. On the other hand, the senators, who are elected
at large, are expected to approach the same problems from

the national perspective. Both views are thereby made to

bear on the enactment of such laws.4
Clearly, after the House bills as approved on third reading
are duly transmitted to the Senate, the Constitution states
that the latter can propose or concur with amendments. The
Court finds that the subject provisions found in the Senate
bill are within the purview of such constitutional provision as
declared in the Tolentino case.
The intent of the House of Representatives in initiating
House Bill Nos. 3555 and 3705 was to solve the countrys
serious financial problems. It was stated in the respective
explanatory notes that there is a need for the government
to make significant expenditure savings and a credible
package of revenue measures. These measures include
improvement of tax administration and control and leakages
in revenues from income taxes and value added tax. It is
also stated that one opportunity that could be beneficial to
the overall status of our economy is to review existing tax
rates, evaluating the relevance given our present
conditions. Thus, with these purposes in mind and to
accomplish these purposes for which the house bills were
filed, i.e., to raise revenues for the government, the Senate
introduced amendments on income taxes, which as
admitted by Senator Ralph Recto, would yield about P10.5
billion a year.
Moreover, since the objective of these house bills is to raise
revenues, the increase in corporate income taxes would be
a great help and would also soften the impact of VAT
measure on the consumers by distributing the burden
across all sectors instead of putting it entirely on the
shoulders of the consumers.
As to the other National Internal Revenue Code (NIRC)
provisions found in Senate Bill No. 1950, i.e., percentage

taxes, franchise taxes, amusement and excise taxes, these

provisions are needed so as to cushion the effects of VAT on
consumers. As we said in our decision, certain goods and
services which were subject to percentage tax and excise
tax would no longer be VAT exempt, thus, the consumer
would be burdened more as they would be paying the VAT
in addition to these taxes. Thus, there is a need to amend
these sections to soften the impact of VAT. The Court finds
no reason to reverse the earlier ruling that the Senate
introduced amendments that are germane to the subject
matter and purposes of the house bills.
Petitioners Escudero, et al., also reiterate that R.A. No.
9337s stand- by authority to the Executive to increase the
VAT rate, especially on account of the recommendatory
power granted to the Secretary of Finance, constitutes
undue delegation of legislative power. They submit that the
recommendatory power given to the Secretary of Finance in
regard to the occurrence of either of two events using the
Gross Domestic Product (GDP) as a benchmark necessarily
and inherently required extended analysis and evaluation,
as well as policy making.
There is no merit in this contention. The Court reiterates
that in making his recommendation to the President on the
existence of either of the two conditions, the Secretary of
Finance is not acting as the alter ego of the President or
even her subordinate. He is acting as the agent of the
legislative department, to determine and declare the event
upon which its expressed will is to take effect. The
Secretary of Finance becomes the means or tool by which
legislative policy is determined and implemented,
considering that he possesses all the facilities to gather data
and information and has a much broader perspective to
properly evaluate them. His function is to gather and collate
statistical data and other pertinent information and verify if
any of the two conditions laid out by Congress is present.
Congress granted the Secretary of Finance the authority to

ascertain the existence of a fact, namely, whether by

December 31, 2005, the value-added tax collection as a
percentage of GDP of the previous year exceeds two and
four-fifth percent (24/5%) or the national government deficit
as a percentage of GDP of the previous year exceeds one
and one-half percent (1%). If either of these two
instances has occurred, the Secretary of Finance, by
legislative mandate, must submit such information to the
President. Then the 12% VAT rate must be imposed by the
President effective January 1, 2006. Congress does not
abdicate its functions or unduly delegate power when it
describes what job must be done, who must do it, and what
is the scope of his authority; in our complex economy that
is frequently the only way in which the legislative process
can go forward.There is no undue delegation of legislative
power but only of the discretion as to the execution of a
law. This is constitutionally permissible. Congress did not
delegate the power to tax but the mere implementation of
the law. The intent and will to increase the VAT rate to 12%
came from Congress and the task of the President is to
simply execute the legislative policy. That Congress chose
to use the GDP as a benchmark to determine economic
growth is not within the province of the Court to inquire
into, its task being to interpret the law.
With regard to petitioner Garcias arguments, the Court also
finds the same to be without merit. As stated in the assailed
Decision, the Court recognizes the burden that the
consumers will be bearing with the passage of R.A. No.
9337. But as was also stated by the Court, it cannot strike
down the law as unconstitutional simply because of its
yokes. The legislature has spoken and the only role that the
Court plays in the picture is to determine whether the law
was passed with due regard to the mandates of the
Constitution. Inasmuch as the Court finds that there are no
constitutional infirmities with its passage, the validity of the
law must therefore be upheld.

Finally, petitioners Association of Pilipinas Shell Dealers,

Inc. reiterated their arguments in the petition, citing this
time, the dissertation of Associate Justice Dante O. Tinga in
his Dissenting Opinion.
The glitch in petitioners arguments is that it presents
figures based on an event that is yet to happen. Their
illustration of the possible effects of the 70% limitation,
while seemingly concrete, still remains theoretical. Theories
have no place in this case as the Court must only deal
with an existing case or controversy that is
appropriate or ripe for judicial determination, not one
that is conjectural or merely anticipatory.5 The Court
will not intervene absent an actual and substantial
controversy admitting of specific relief through a decree
conclusive in nature, as distinguished from an opinion
advising what the law would be upon a hypothetical state of
facts.6
The impact of the 70% limitation on the creditable input tax
will ultimately depend on how one manages and operates its
business. Market forces, strategy and acumen will dictate
their moves. With or without these VAT provisions, an
entrepreneur who does not have the ken to adapt to
economic variables will surely perish in the competition. The
arguments posed are within the realm of business, and the
solution lies also in business.
Petitioners also reiterate their argument that the input tax is
a property or a property right. In the same breath, the
Court reiterates its finding that it is not a property or a
property right, and a VAT-registered persons entitlement to
the creditable input tax is a mere statutory privilege.
Petitioners also contend that even if the right to credit the
input VAT is merely a statutory privilege, it has already
evolved into a vested right that the State cannot remove.

As the Court stated in its Decision, the right to credit the

input tax is a mere creation of law. Prior to the enactment
of multi-stage sales taxation, the sales taxes paid at every
level of distribution are not recoverable from the taxes
payable. With the advent of Executive Order No. 273
imposing a 10% multi-stage tax on all sales, it was only
then that the crediting of the input tax paid on purchase or
importation of goods and services by VAT-registered
persons against the output tax was established. This
continued with the Expanded VAT Law (R.A. No. 7716), and
The Tax Reform Act of 1997 (R.A. No. 8424). The right to
credit input tax as against the output tax is clearly a
privilege created by law, a privilege that also the law can
limit. It should be stressed that a person has no vested
right in statutory privileges.7
The concept of "vested right" is a consequence of the
constitutional guaranty of due process that expresses a
present fixed interest which in right reason and natural
justice is protected against arbitrary state action; it includes
not only legal or equitable title to the enforcement of a
demand but also exemptions from new obligations created
after the right has become vested. Rights are considered
vested when the right to enjoyment is a present interest,
absolute, unconditional, and perfect or fixed and
irrefutable.8 As adeptly stated by Associate Justice Minita V.
Chico-Nazario in her Concurring Opinion, which the Court
adopts, petitioners right to the input VAT credits has not
yet vested, thus
It should be remembered that prior to Rep. Act No. 9337,
the petroleum dealers input VAT credits were inexistent
they were unrecognized and disallowed by law. The
petroleum dealers had no such property called input VAT
credits. It is only rational, therefore, that they cannot
acquire vested rights to the use of such input VAT credits
when they were never entitled to such credits in the first
place, at least, not until Rep. Act No. 9337.

My view, at this point, when Rep. Act No. 9337 has not yet
even been implemented, is that petroleum dealers right to
use their input VAT as credit against their output VAT
unlimitedly has not vested, being a mere expectancy of a
future benefit and being contingent on the continuance of
Section 110 of the National Internal Revenue Code of 1997,
prior to its amendment by Rep. Act No. 9337.
The elucidation of Associate Justice Artemio V. Panganiban
is likewise worthy of note, to wit:
Moreover, there is no vested right in generally accepted
accounting principles. These refer to accounting concepts,
measurement techniques, and standards of presentation in
a companys financial statements, and are not rooted in
laws of nature, as are the laws of physical science, for these
are merely developed and continually modified by local and
international regulatory accounting bodies. To state
otherwise and recognize such asset account as a vested
right is to limit the taxing power of the State. Unlimited,
plenary, comprehensive and supreme, this power cannot be
unduly restricted by mere creations of the State.
More importantly, the assailed provisions of R.A. No. 9337
already involve legislative policy and wisdom. So long as
there is a public end for which R.A. No. 9337 was passed,
the means through which such end shall be accomplished is
for the legislature to choose so long as it is within
constitutional bounds. As stated in Carmichael vs. Southern
Coal & Coke Co.:
If the question were ours to decide, we could not say that
the legislature, in adopting the present scheme rather than
another, had no basis for its choice, or was arbitrary or
unreasonable in its action. But, as the state is free to
distribute the burden of a tax without regard to the
particular purpose for which it is to be used, there is no

warrant in the Constitution for setting the tax aside because

a court thinks that it could have distributed the burden
more wisely. Those are functions reserved for the
legislature.9
WHEREFORE, the Motions for Reconsideration are
hereby DENIED WITH FINALITY. The temporary
restraining order issued by the Court is LIFTED.
SO ORDERED.
(The Justices who filed their respective concurring and
dissenting opinions maintain their respective positions.
Justice Dante O. Tinga filed a dissenting opinion to the
present Resolution; while Justice Consuelo Ynares- Santiago
joins him in his dissenting opinion.)

Footnotes
1

Also referred to as the EVAT Law.

G.R. Nos. 115455, 115525, 115543, 115544,

115754, 115781, 115852, 115873 and 115931,
August 25, 1994, 235 SCRA 630.
3

Farias vs. The Executive Secretary, G.R. No.

147387, December 10, 2003, 417 SCRA 503, 530.
4

Supra, note no. 2, pp. 661-663.

Velarde vs. Social Justice Society, G.R. No. 159357,

April 28, 2004, 428 SCRA 283.

Information Technology Foundation of the Phils. vs.

COMELEC, G.R. No. 159139, June 15, 2005.
7

Lahom vs. Sibulo, G.R. No. 143989, July 14, 2003,

406 SCRA 135.
8

Ibid.

301 U.S. 495.

The Lawphil Project - Arellano Law Foundation

GR No. 168056 - (ABAKADA GURO PARTY LIST (Formerly

AASJAS) OFFICERS SAMSON S. ALCANTARA and ED
VINCENT S. ALBANO v. THE HON. EXECUTIVE SECRETARY
EDUARDO ERMITA, ET AL.)
GR No. 168207 (AQUILINO Q. PIMENTEL, JR., ET. AL. v.
EXECUTIVE SECRETARY EDUARDO R. ERMITA, ET. AL.)
GR No. 168461 ASSOCIATION OF PILIPINAS SHELL
DEALERS, INC. represented by its President, ROSARIO
ANTONIO, ET AL. v. CESAR V. PURISIMA, in his capacity as
Secretary of the Department of Finance and GUILLERMO L.
PARAYNO, JR., in his capacity as Commissioner of Internal
Revenue.
GR No. 168463 FRANCIS JOSEPH G. ESCUDERO, ET AL. v.
CESAR V. PURISIMA, in his capacity as Secretary of
Finance, GUILLERMO L. PARAYNO, JR., in his capacity as
Commissioner of Internal Revenue, and EDUARDO R.
ERMITA, in his capacity as Executive Secretary.

GR. No. 168730 BATAAN GOVERNOR ENRIQUE T.

GARCIA, JR. v. HON. EDUARDO R. ERMITA, in his capacity
as the Executive Secretary; HON. MARGARITO TEVES, in his
capacity as Secretary of Finance; HON. JOSE MARIO
BUNAG, in his capacity as the OIC Commissioner of the
Bureau of Customs.
x------------------------------------------------------------------x
DISSENTING OPINION
Tinga, J.:
Once again, the majority has refused to engage and refute
in any meaningful fashion the arguments raised by the
petitioners in G.R. No. 168461. The de minimis appreciation
exhibited by the majority of the issues of 70% cap, the 60month amortization period, and 5% withholding VAT on
transactions made with the national government is
regrettable, with ruinous consequences for the nation. I see
no reason to turn back from any of the views expressed in
my Dissenting Opinion, and I accordingly dissent from the
denial of the Motion for Reconsideration filed by the
petitioners in G.R. No. 168461.1
The reasons for my vote have been comprehensively
discussed in my previous Dissenting Opinion, and I do not
see the need to replicate them herein. However, I wish to
stress a few points.
Tax Statutes May Be Invalidated
If They Pose a Clear and Present Danger
To the Deprivation of Life, Liberty and

Property Without Due Process of Law

The majority again dismisses the arguments of the
petitioners as "theoretical", "conjectural" or merely
"anticipatory," notwithstanding that the injury to the
taxpayers resulting from Section 8 and 12 of the E-VAT Law
is ascertainable with mathematical certainty. In support of
this view, the majority cites the Courts Resolution dated 15
June 2005 in Information Technology Foundation v.
COMELEC,2 one of the rulings issued in that case
subsequent to the main Decision rendered on 13 January
2004. The reference is grievously ironic, considering that in
the 13 January 2004 Decision, the Court, over vigorous
dissents, chose anyway to intervene and grant the petition
despite the fact that the petitioners therein did not allege
any violation of any constitutional provision or letter of
statute.3 In this case, the petitioners have squarely invoked
the violation of the Bill of Rights of the Constitution, and yet
the majority is suddenly timid, unlike in Infotech.
Still, the formulation of the majority unfortunately leaves
the impression that any statute, taxing or otherwise, is
beyond judicial attack prior to its implementation. If the tax
measure in question provided that the taxpayer shall remit
all income earned to the government beginning 1 January
2008, would this mean that the Court can take cognizance
of the legal challenge only starting 2 January 2008?
I do not share the majoritys penchant for awaiting the
blood spurts before taking action even when the knifes
edge already dangles. As I maintained in my Dissenting
Opinion, a tax measure may be validly challenged and
stricken down even before its implementation if it poses a
clear and present danger to the deprivation of life, liberty or
property of the taxpayer without due process of law. This is
the expectation of every citizen who wishes to maintain
trust in all the branches of government. In the enforcement
of the constitutional rights of all persons, the commonsense

expectation is that the Court, as guardian of these rights, is

empowered to step in even before the prospective violation
takes place. Hence, the evolution of the "clear and present
danger" doctrine and other analogous principles, without
which, the Court would be seen as inutile in the face of
constitutional violation.
Of course, not every anticipatory threat to constitutional
liberties can be assailed prior to implementation, hence the
employment of the "clear and present danger" standard to
separate the wheat from the chaff. Still, the Court should
not be so readily dismissive of the petitioners posture
herein merely because it is anticipatory. There should have
been a meaningful engagement by the majority of the facts
and formulae presented by the petitioners before the
reasonable conclusion could have been reached on the
maturity of the claim. That the majority has not bothered to
do so is ultimately of tragic consequence.

improbable, considering that the E-VAT Law allows its

recovery only after the business has ceased to exist. Even
the Bureau of Internal Revenue itself has long recognized
the unutilized input VAT as an asset.
The majority fails to realize that even under the new E-VAT
Law, the State recognizes that the persons who pre-pay
that input VAT, usually the dealers or retailers, are not the
persons who are liable to pay for the tax. The VAT system,
as implemented through the previous VAT law and the new
E-VAT Law, squarely holds the end consumer as the
taxpayer liable to shoulder the input VAT. Nonetheless,
under the mechanism foisted in the new E-VAT Law, the
dealer or retailer who pre-pays the input VAT is virtually
precluded from recovering the pre-paid input VAT, since the
law only allows such recovery upon the cessation of the
business. Indeed, the only way said class of taxpayers can
recover this pre-paid input VAT was if it were to cease
operations at the end of every quarter.

70% Input VAT Credit

An Impaired Asset
The ponencia, joined by Justices Panganiban and ChicoNazario, express the belief that no property rights attach to
the input VAT paid by the taxpayer. This is a bizarre view
that assumes that all income earned by private persons
preternaturally belongs to the government, and whatever is
retained by the person after taxes is acquired as a matter of
privilege. This is the sort of thinking that has fermented
revolutions throughout history, such as the American
Revolution of 1776.
I pointed out in my Dissenting Opinion that under current
accepted international accounting standards, the 30%
prepaid input VAT would be recorded as a loss in the
accounting books, since the possibility of its recovery is

The illusion that blinds the majority to this state of affairs is

the claim that the pre-paid input VAT may anyway be
carried over into the succeeding quarter, a chimera
enhanced by the grossly misleading presentation of the
Office of the Solicitor General. What this deception fosters,
and what the majority fails to realize, is that since the
taxpayer is perpetually obliged to remit the 30% input VAT
every quarter, there would be a continuous accumulation of
excess input VAT. It is not true then that the input VAT
prepaid for the first quarter can be recovered in the second,
third or fourth quarter of that year, or at any time in the
next year for that matter since the amount of prepaid input
VAT accumulates with every succeeding prepayment of
input VAT. Moreover, the accumulation of the prepaid input
VAT diminishes the actual value of the refundable amounts,
considering the established principle of "time-value of
money", as explained in my Dissenting Opinion.

Thus, the pre-paid input VAT, for which the petitioners and
other similarly situated taxpayers are not even ultimately
liable in the first place, represents in tangible terms an
actual loss. To put it more succinctly, when the taxpayer
prepays the 30% input VAT, there is no chance for its
recovery except until after the taxpayer ceases to be such.
This point is crucial, as it goes in the heart of the
constitutional challenge raised by the petitioners. A
recognition that the input VAT is a property asset places it
squarely in the ambit of the due process clause.
The majority now stresses that prior to Executive Order No.
273 sales taxes paid by the retailer or dealers were not
recoverable. The nature of a sales tax precisely is that it is
shouldered by the seller, not the consumer. In that case,
the clear legislative intent is to encumber the retailer with
the end tax. Under the VAT system, as enshrined under
Rep. Act No. 9337, the new E-VAT Law, there is precisely a
legislative recognition that it is the end user, not the seller,
who shoulders the E-VAT. The problem with the new E-VAT
law is that it correspondingly imposes a defeatist
mechanism that obviates this entitlement of the seller by
forcibly withholding in perpetua this pre-paid input VAT.
The majority cites with approval Justice Chico-Nazarios
argument, as expressed in her concurring opinion, that prior
to the new E-VAT Law, the petroleum dealers in particular
had no input VAT credits to speak of, and therefore, could
not assert any property rights to the input VAT credits
under the new law. Of course the petroleum dealers had no
input VAT credits prior to the E-VAT Law because precisely
they were not covered by the VAT system in the first place.
What would now be classified as "input VAT credits" was, in
real terms, profit obtainable by the petroleum dealers prior
to the new E-VAT Law. The E-VAT Law stands to diminish
such profit, not by outright taking perhaps, but by ad
infinitum confiscation with the illusory promise of eventual
return. Obviously, there is a deprivation of property in such

case; yet is it seriously contended that such deprivation

isipso facto sheltered if it is not classified as a taking, but
instead reclassified as a "credit"?
It is highly distressful that the Court, in its haste to decree
petitioners as bereft of any vested property rights, rejects
the notion that a person has a vested right to the earnings
and profits incurred in business. Before, no legal basis could
be found to prop up such a palpably outlandish claim; but
the Decision, as affirmed by the majoritys Resolution, now
enshrines a temerarious proposition with doctrinal status.
In the Decision, and also in Justice Panganibans Separate
Opinion therein, the case of United Paracale Mining Co. v.
De la Rosa4 was cited in support of the proposition that
there is no vested right to the input VAT credit. Justice
Panganiban went as far as to cite that case to support the
contention that "[t]here is no vested right in a deferred
input tax account; it is a mere statutory privilege." Reliance
on the case is quite misplaced. First, as pointed out in
my Dissenting Opinion, it does not even pertain to tax
credits involving as it does, questions on the jurisdiction of
the Bureau of Mines.5 Second, the putative vested rights
therein pertained to mining claims, yet all mineral resources
indisputably belong to the State. Herein, the rights pertain
to profit incurred by private enterprise, and certainly the
majority cannot contend that such profits actually belong to
the State.
As stated in my Dissenting Opinion, the Constitution itself
recognizes a right to income and profit when it recognizes
"the right of enterprises to reasonable returns on
investments, and to expansion and growth."6 Section 20,
Article II of the Constitution further mandates that the State
recognize the indispensable role of the private sector, the
encouragement of private enterprise, and the provision of
incentives to needed investments.7 Indeed, there is a
fundamental recognition in any form of democratic

government that recognizes a capitalist economy that the

enterprise has a right to its profits. Today, the Court instead
affirms that there is no such right. Should capital flight
ensue, the phenomenom should not be blamed on investors
in view of our judicial systems rejection of capitalisms
fundamental precept.
Mainstream Denunciation of 70% Cap
The fact that petitioners are dealers of petroleum products
may have left the impression that the 70% cap singularly
affects the petroleum industry; or that other classes of
dealers or retailers do not pose the same objections to
these "innovations" in the E-VAT law. This is far from the
truth.
In fact, the clamor against the 70% cap has been
widespread among the players and components in the
financial mainstream. Denunciations have been registered
by the Philippine Chamber of Commerce and Industry8, the
Joint Foreign Chambers of the Philippines (comprising of the
American Chamber of Commerce in the Philippines, the
Australian-New Zealand Chamber Commerce of the
Philippines, Inc., the Canadian Chamber of Commerce of the
Philippines, Inc., the European Chamber of Commerce of
the Philippines, Inc., the Japanese Chamber of Commerce of
the Philippines, Inc., the Korean Chamber of Commerce and
Industry of the Philippines, and the Philippine Association of
Multinational Companies Regional Headquarters, Inc.),9 the
Filipino-Chinese Chamber of Commerce and Industry,10 the
Federation of Philippine Industries,11 the Consumer and Oil
Price Watch,12 the Association of Certified Public
Accountants in Public Practice,13 the Philippine Tobacco
Institute,14 and the auditing firm of
PricewaterhouseCooper.15

Even newly installed Finance Secretary Margarito Teves has

expressed concern that the 70% input VAT "may not work
across all industries because of varying profit
margins".16 Other experts who have voiced concerns on the
70% input VAT are former NEDA Directors Cielito
Habito17 and Solita Monsod,18 Peter Wallace of the Wallace
Business Forum,19 and Paul R. Cooper, director of
PricewaterhouseCooper.
In fact, Mr. Cooper published in the Philippine Daily Inquirer
a lengthy disquisition on the problems surrounding the 70%
cap, portions of which I replicate below:
Policy concerns on the cap
When the idea of putting a cap was originally introduced on
the floor of the Senate. The idea was to address to some
extent the under-reporting of output VAT by non-complaint
taxpayers. The original suggestion was a 90 percent cap, or
effectively a 1-percent minimum VAT. At that level, the rule
should not impact adversely on complaint taxpayers, but
would result in non-complaint taxpayers having to account
for closer to their true tax liability.
As a general policy consideration, one should question why
our legislators are penalizing complaint taxpayers when the
fundamental issue is at the apparent inability of the Bureau
of Internal Revenue (BIR) to implement tax law effectively.
At a 90-percent cap, the measure might still have been
defensible as a rough proxy for VAT. However, somewhere
in the bicameral process, the rule has become even more
punitive with a 70-percent cap. As with most amendments
introduced at the bicameral stage, there is no public
indication about what lawmakers were thinking when they
put the travesty in place.

xxx
One of the arguments in Senate debates for taxing the
power and petroleum sectors was that if it was good enough
for mom-and-pop stores to have to account for the VAT, it
was good enough for the biggest companies in the country
to do the same. A similar argument here is that if small
businesses have to pay a minimum 3-percent tax, why
should larger VAT-registered persons get away with paying
less?
The problem with this thinking is threefold:
The percentage tax applies to small businesses in the
hard-to-tax sector and a few believe the BIR collects close
to what it should from this. Nor should we be overly
concerned if this is the casethe revenues are small, and
the BIRs efforts would be a lot better focused on larger
taxpayers where more significant revenues will be at issue.
VAT-registered persons incur compliance costs. The 3percent tax might be better conceived as a slightly more
expensive option to allow taxpayers to opt out of the VAT,
rather than a punitive rule for small businesses. (If the
percentage tax is considered unduly punitive, why is it not
just repealed?)
Ironically, one of the new measures in the Senate bill was
to allow taxpayers with turnovers below, the registration
threshold to register voluntarily for VAT if they believe the
3-percent tax imposition to be excessive. Without the
minimum VAT, smaller taxpayers might have been
encouraged to enter the more formalized VAT sector.
Potential consequences of the cap

The minimum VAT will distort the way taxpayers conduct

business. A 3-percent minimum VAT is more likely to impact
on sellers of goods than on sellers of services, as their
proportion of taxable inputs are lower (there is no VAT paid
when using labor, but there is VAT on the purchase of
goods). Consequently, there will be a bias toward
consuming services over goods. Businesses may have an
incentive to obtain goods from the informal (and potentially
tax-evading) sector as there will be no input tax paid for the
purchasein other words, the bill may actively encourage
less tax complaint behavior. Business structures may
change; expect buy-sell distributors to convent into
commission agents, as this reduces the risk that they will
need to pay more than should be paid under a VAT system
to cover the 3-percent minimum VAT.20
These objections are voiced by members of the sensible
center, and not those reflexively against VAT or any tax
imposition of the current administration. These objections
are raised by the people who stand to be directly affected
on a daily punitive basis by the imposition of the 70% cap,
the 60-month amortization period and the 5% withholding
VAT. Indeed, Justice Chico-Nazario has expressed her
disbelief over, or at least has asserted as unproven, the
claimed impact of the input VAT on the petroleum
dealers.21 Of course there can be no tangible gauge as of
yet on the impact of these changes in the VAT law, since
they have yet to be implemented. However, the prevalent
adverse reaction within the business sector should be
sufficiently expressive of the actual fears of the people who
should know better. It is sad that the majority, by
maintaining a blithely nave view of the input VAT,
perpetuates the disconnect between the Court and the
business sector, unnecessarily considering that in this
instance, the concerns of the financial community can be
translated into a viable constitutional challenge.
Reliance on Legislative Amendments

An Abdication of the Courts Constitutional Duty

Justice Panganiban has already expressed the view that the
remedy to the inequities caused by the new input VAT
system would be amending the law, and not an outright
declaration of unconstitutionality. I can only hazard a guess
on how many members of the Court or the legal community
are similarly reliant on that remedy as a means of
assuaging their fears on the impact of the input VAT
innovations.
As I stated in my Dissenting Opinion, it is this Court, and
not the legislature, which has the duty to strike down
unconstitutional laws. Congress may amend
unconstitutional laws to remedy such legal infirmities, but it
is under no constitutional or legal obligation to do so. The
same does not hold true with this Court. The essence of
judicial review mandates that the Court strike down
unconstitutional laws.
Another corollary prospect has also arisen, that the
Executive Department itself will mitigate the implementation
of the 70% cap by not fully implementing the law.
This prospect of course is speculative, the sort of
speculation that is wholly dependent on the whim of the
officials of the executive branch and one that cannot be
quantified by mathematical formula. This cannot be the
basis for any judicial action or vote. Moreover, such resort
may actually be illegal.
For one, Article 239 of the Revised Penal Code imposes the
penalty of prision correccional on public officers "who shall
encroach upon the powers of the legislative branch of the
Government, either by making general rules or regulations
beyond the scope of his authority, or by attempting to
repeal a law or suspending the execution thereof."

Certainly, the remedy to the inequities of the E-VAT Law

cannot be left to administrative pussy-footing, considering
that these officials may be jailed for refusing to implement
the law, or obfuscating the legislative will.
Second, it is a cardinal rule that an administrative agency
such as the Bureau of Internal Revenue or even the
Department of Finance cannot amend an act of Congress.
Whatever administrative regulations they may adopt under
legislative authority must be in harmony with the provisions
of the law they are intended to carry into effect. They
cannot widen or diminish its scope.22
Finally, it must be remembered that one of the central
doctrines enforced in the disposition of the joint petitions is
that the power to tax belongs solely to the legislative
branch of government. If the legislative will were to be
frustrated by haphazard implementation by the executive
branch, all our disquisitions on this matter, as well as the
key constitutional principle on the inherent, non-delegable
nature of the legislative power of taxation, will be for
naught.
Indeed, I truly fear the scenario when, after the deluge, the
executive branch of government suspends the
implementation of the 70% cap, or increases the cap to a
higher amount such as 90%. Any taxpayer will have
standing to attack such remedial measure, considering that
the net effect would be to diminish the governments
collection of cash at hand. Following the law, the proper
judicial action would be to uphold the clear legislative intent
over the reengineering of the taxing provisions by the
executive branch of government. Yet if the courts instead
uphold the power of the executive branch of government to
reinvent the tax statute, then the end concession would be
that the power to enact tax laws ultimately belongs to the
executive branch of government.

I hesitate to say this, but there will be confusion, instability,

and multiple fatalities within the business sector with the
enforcement of the amendments of Section 8 and 12 of the
E-VAT Law. It could have been stopped through the
allowance of the petition in G.R. No. 168461, but
regrettably the Court did not act.

See Manila Bulletin, 7 July 2005, pp. B-1 and B-2.

See Philippine Star, 23 June 2005, pp. B-1 and B-5.

10

See BusinessWorld, 28 July 2005, p. 2/S1.

11

I respectfully dissent.

See Philippine Star, 28 June 2005.

12

DANTE O. TINGA

See Malaya, 21 September 2005, p. B-10.

13

Associate Justice

See Manila Standard Today, 7 October 2005, p. B3.

14

Ibid.

15

Ibid.

Footnotes
1

I similarly maintain my earlier vote, explained in my

previous Dissenting Opinion, that Section 21 of the
E-VAT law, assailed by the petitioners in G.R. No.
168463, is likewise unconstitutional.
2

G.R. No. 159139.

See J. Tinga, dissenting, Information Technology

Foundation of the Phils. V. COMELEC, G.R. No.
159139, 13 January 2004.
4

G.R. Nos. 63786-87, 7 April 1993, 221 SCRA 108.

Id. at 115.

See Section 3, Article XII, Constitution.

See Section 20, Article II, Constitution.

16

See BusinessWorld, 14 July 2005, p. S1/9.

17

See Philippine Daily Inquirer, 11 July 2005, p. B6.

18

See Philippine Daily Inquirer, 16 July 2005.

19

Supra note 8.

20

See Philippine Daily Inquirer, 7 June 2005.

21

Indeed, it is rather curious that while Justice ChicoNazario would belittle the factual presentation of the
petroleum dealers as "unsubstantiated", she would
seem to accept the counter-presentation made by
the Solicitor-General which is outright misleading, as
pointed out in my Dissenting Opinion.
22

See Boie-Takeda Chemicals Inc. v. De la Serna,

G.R. No. 92174. December 10, 1993.

Supreme Court of the Philippines contesting the Constitutionality of the

Veto by the President of Special and General Provisions, particularly
Section 55, of the General Appropriation Bill of 1989 (H.B. No. 19186)
and For Other Purposes."
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Petitioners are thus before us as members and ex-officio members of

the Committee on Finance of the Senate and as "substantial taxpayers
whose vital interests may be affected by this case."

EN BANC

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[G.R. No. 87636. November 19, 1990.]

NEPTALI A. GONZALES, ERNESTO M. MACEDA, ALBERTO G.
ROMULO, HEHERSON T. ALVAREZ, EDGARDO J. ANGARA,
AGAPITO A. AQUINO, TEOFISTO T. GUINGONA, JR., ERNESTO F.
HERRERA, JOSE D. LINA, JR., JOHN OSMEA, VICENTE T.
PATERNO, RENE A. SAGUISAG, LETICIA RAMOS-SHAHANI,
MAMINTAL ABDUL J. TAMANO, WIGBERTO E. TAADA, JOVITO
R. SALONGA, ORLANDO S. MERCADO, JUAN PONCE ENRILE,
JOSEPH ESTRADA, SOTERO LAUREL, AQUILINO PIMENTEL, JR.,
SANTANINA RASUL, VICTOR ZIGA, Petitioners, v. HON.
CATALINO MACARAIG, JR., HON. VICENTE JAYME, HON.
CARLOS DOMINGUEZ, HON. FULGENCIO FACTORAN, HON.
FIORELLO ESTUAR, HON. LOURDES QUISUMBING, HON. RAUL
MANGLAPUS, HON. ALFREDO BENGSON, HON. JOSE
CONCEPCION, HON. LUIS SANTOS, HON. MITA PARDO DE
TAVERA, HON. RAINERIO REYES, HON. GUILLERMO CARAGUE,
HON. ROSALINA CAJUCOM and HON. EUFEMIO C.
DOMINGO, Respondents.
Gonzales, Batiller, Bilog & Associates for petitioners.

Respondents are members of the Cabinet tasked with the

implementation of the General Appropriations Act of 1989 and 1990,
some of them incumbents, while others have already been replaced,
and include the National Treasurer and the Commission on Audit
Chairman, all of whom are being sued in their official capacities.
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The Background Facts

On 16 December 1988, Congress passed House Bill No. 19186, or the
General Appropriations Bill for the Fiscal Year 1989. As passed, it
eliminated or decreased certain items included in the proposed budget
submitted by the President.
Pursuant to the constitutional provision on the passage of bills,
Congress presented the said Bill to the President for consideration and
approval.
On 29 December 1988, the President signed the Bill into law, and
declared the same to have become Rep. Act No. 6688. In the process,
seven (7) Special Provisions and Section 55, a "General Provision,"
were vetoed.
On 2 February 1989, the Senate, in the same Resolution No. 381
mentioned at the outset, further expressed:

DECISION

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MELENCIO-HERRERA, J.:

This constitutional controversy between the legislative and executive

departments of government stemmed from Senate Resolution No. 381,
adopted on 2 February 1989,
"Authorizing and Directing the Committee on Finance to Bring in the
Name of the Senate of the Philippines the Proper Suit with the

"WHEREAS, Be it Resolved, as it is hereby Resolved, That the Senate

express its sense that the veto by the President of Section 55 of the
GENERAL PROVISIONS of the General Appropriation Bill of 1989 (H.B.
No. 19186) is unconstitutional and, therefore, void and without any
force and effect; hence, the aforesaid Section 55 remains;
"x

x"

Thus it is that, on 11 April 1989, this Petition for Prohibition/

Mandamus was filed, with a prayer for the issuance of a Writ of
Preliminary Injunction and Restraining Order, assailing mainly the

constitutionality or legality of the Presidential veto of Section 55, and

seeking to enjoin respondents from implementing Rep. Act No. 6688.
No Restraining Order was issued by the Court.
The Comment, submitted by the Solicitor General on 25 August 1989
(after several extensions granted), was considered as the Answer to
the Petition and, on 7 September 1989, the Court Resolved to give due
course to the Petition and to require the parties to submit their
respective Memoranda. Petitioners filed their Memorandum on 12
December 1989. But, on 19 January 1990, they filed a Motion for
Leave to File and to Admit Supplemental Petition, which was granted,
basically raising the same issue as in the original Petition, this time
questioning the Presidents veto of certain provisions, particularly
Section 16, of House Bill 26934, or the General Appropriations Bill for
Fiscal Year 1990, which the President declared to have become Rep.
Act No. 6831.
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The Solicitor Generals Comment on the Supplemental Petition, on

behalf of respondent public officials, was submitted on 24 April 1990.
On 15 May 1990, the Court required the parties to file simultaneously
their consolidated memoranda, to include the Supplemental Petition,
within an inextendible period of thirty (30) days from notice. However,
because the original Resolution of 15 May 1990 merely required the
filing of a memorandum on the Supplemental Petition, a revised
Resolution requiring consolidated memoranda, within thirty (30) days
from notice, was released on 28 June 1990.
The Consolidated Memoranda were respectively filed on 26 June 1990
by petitioners, and on 1 August 1990 by respondents. On 14 August
1990, both Memoranda were Noted and the case was deemed
submitted for deliberation.
On 11 September 1990, the Court heard the case on oral argument
and required the submittal of supplemental Memoranda, the last of
which was filed on 26 September 1990.
The Vetoed Provisions and Reasons Therefor
Section 55 of the Appropriations Act of 1989 (Section 55 [FY 89]
hereinafter), which was vetoed by the President, reads:
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"SEC. 55. Prohibition Against the Restoration or Increase of

Recommended Appropriations Disapproved and/or Reduced by
Congress: No item of appropriation recommended by the President in
the Budget submitted to Congress pursuant to Article VII, Section 22

of the Constitution which has been disapproved or reduced in this Act

shall be restored or increased by the use of appropriations authorized
for other purposes by augmentation. An item of appropriation for any
purpose recommended by the President in the Budget shall be deemed
to have been disapproved by Congress if no corresponding
appropriation for the specific purpose is provided in this Act."
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We quote below the reason for the Presidential veto:

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"The provision violates Section 25 (5) of Article VI of the Constitution.

If allowed, this Section would nullify not only the constitutional and
statutory authority of the President, but also that of the President of
the Senate, the Speaker of the House of Representatives, the Chief
Justice of the Supreme Court, and Heads of Constitutional
Commissions, to augment any item in the general appropriations law
for their respective offices from savings in other items of their
respective appropriations. A careful review of the legislative action on
the budget as submitted shows that in almost all cases, the budgets of
agencies as recommended by the President, as well as those of the
Senate, the House of Representatives, and the Constitutional
Commissions, have been reduced. An unwanted consequence of this
provision is the inability of the President, the President of the Senate,
Speaker of the House of Representatives, the Chief Justice of the
Supreme Court, and the heads of Constitutional Commissions to
augment any item of appropriation of their respective offices from
savings in other items of their respective appropriations even in cases
of calamity or in the event of urgent need to accelerate the
implementation of essential public services and infrastructure projects.
"Furthermore, this provision is inconsistent with Section 12 and other
similar provisions of this General Appropriations Act."
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A substantially similar provision as the vetoed Section 55 appears in

the Appropriations Act of 1990, this time crafted as follows:
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"B. GENERAL PROVISIONS

"Sec. 16. Use of Savings. The President of the Philippines, the
President of the Senate, the Speaker of the House of Representatives,
the Chief Justice of the Supreme Court, the Heads of Constitutional
Commissions under Article IX of the Constitution and the Ombudsman
are hereby authorized to augment any item in this Act for their
respective offices from savings in other items of their appropriations:
PROVIDED, THAT NO ITEM OF APPROPRIATION RECOMMENDED BY
THE PRESIDENT IN THE BUDGET SUBMITTED TO CONGRESS

PURSUANT TO ARTICLE VII, SECTION 22 OF THE CONSTITUTION

WHICH HAS BEEN DISAPPROVED OR REDUCED BY CONGRESS SHALL
BE RESTORED OR INCREASED BY THE USE OF APPROPRIATIONS
AUTHORIZED FOR OTHER PURPOSES IN THIS ACT BY
AUGMENTATION. AN ITEM OF APPROPRIATION FOR ANY PURPOSE
RECOMMENDED BY THE PRESIDENT IN THE BUDGET SHALL BE
DEEMED TO HAVE BEEN DISAPPROVED BY CONGRESS IF NO
CORRESPONDING APPROPRIATION FOR THE SPECIFIC PURPOSE IS
PROVIDED IN THIS ACT."

services and infrastructure projects."

It should be noted that in the 1989 Appropriations Act, the "Use of

Savings" appears in Section 12, separate and apart from Section 55;
whereas in the 1990 Appropriations Act, the "Use of Savings" and the
vetoed provision have been commingled in Section 16 only, with the
vetoed provision made to appear as a condition or restriction.

In essence, petitioners cause is anchored on the following grounds:

(1) the Presidents line-veto power as regards appropriation bills is
limited to item/s and does not cover provision/s; therefore, she
exceeded her authority when she vetoed Section 55 (FY 89) and
Section 16 (FY 90) which are provisions; (2) when the President
objects to a provision of an appropriation bill, she cannot exercise the
item-veto power but should veto the entire bill; (3) the item-veto
power does not carry with it the power to strike out conditions or
restrictions for that would be legislation, in violation of the doctrine of
separation of powers; and (4) the power of augmentation in Article VI,
Section 25 [5] of the 1987 Constitution, has to be provided for by law
and, therefore, Congress is also vested with the prerogative to impose
restrictions on the exercise of that power.

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Essentially the same reason was given for the veto of Section 16 (FY
90), thus:
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"I am vetoing this provision for the reason that it violates Section 25
(5) of Article VI of the Constitution in relation to Sections 44 and 45 of
P.D. No. 1177 as amended by R.A. No. 6670 which authorizes the
President to use savings to augment any item of appropriations in the
Executive Branch of the Government.
"Parenthetically, there is a case pending in the Supreme Court relative
to the validity of the Presidents veto on Section 55 of the General
Provisions of Republic Act No. 6688 upon which the amendment on
this Section was based. Inclusion, therefore, of the proviso in the last
sentence of this section might prejudice the Executive Branchs
position in the case.
"Moreover, if allowed, this Section would nullify not only the
constitutional and statutory authority of the President, but also that of
the officials enumerated under Section 25 (5) of Article VI of the
Constitution, to augment any item in the general appropriations law
for their respective appropriations.
"An unwanted consequence of this provision would be the inability of
the President, the President of the Senate, Speaker of the House of
Representatives, the Chief Justice of the Supreme Court, and heads of
Constitutional Commissions to augment any item of appropriation of
their respective offices from savings in other items of their respective
appropriations even in cases of national emergency or in the event of
urgent need to accelerate the implementation of essential public

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The fundamental issue raised is whether or not the veto by the

President of Section 55 of the 1989 Appropriations Bill (Section 55 FY
89), and subsequently of its counterpart Section 16 of the 1990
Appropriations Bill (Section 16 FY 90), is unconstitutional and without
effect.
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The Contending Views

The Solicitor General, as counsel for public respondents, counters that

the issue at bar is a political question beyond the power of this Court
to determine; that petitioners had a political remedy, which was to
override the veto; that Section 55 is a "rider" because it is extraneous
to the Appropriations Act and, therefore, merits the Presidents veto;
that the power of the President to augment items in the appropriations
for the executive branches had already been provided for in the
Budget Law, specifically Sections 44 and 45 of Pres. Decree No. 1177,
as amended by Rep. Act No. 6670 (4 August 1988); and that the
President is empowered by the Constitution to veto provisions or other
"distinct and severable parts" of an Appropriations Bill.
Judicial Determination
With the Senate maintaining that the Presidents veto is
unconstitutional, and that charge being controverted, there is an
actual case or justiciable controversy between the Upper House of
Congress and the executive department that may be taken cognizance
of by this Court.
"Indeed, where the legislature or the executive branch is acting within

the limits of its authority, the judiciary cannot and ought not to
interfere with the former. But where the legislature or the executive
acts beyond the scope of its constitutional powers, it becomes the duty
of the judiciary to declare what the other branches of the government
had assumed to do as void. This is the essence of judicial power
conferred by the Constitution in one Supreme Court and in such lower
courts as may be established by law [Art. VIII, Section 1 of the 1935
Constitution; Art. X, Section 1 of the 1973 Constitution and which was
adopted as part of the Freedom Constitution, and Art. VIII, Section 1
of the 1987 Constitution] and which power this Court has exercised in
many instances" (Demetria v. Alba, G.R. No. 71977, 27 February
1987, 148 SCRA 209).
We take note as well of what petitioners stress as the "imperative
need for a definitive ruling by this Court as to the exact parameters of
the exercise of the item-veto power of the President as regards
appropriation bills . . . in order to obviate the recurrence of a similar
problem whenever a general appropriations bill is passed by
Congress." Indeed, the contextual reiteration of Section 55 (FY 89) in
Section 16 (FY 90) and again, its veto by the President, underscore
the need for judicial arbitrament. The Court does not thereby assert its
superiority over or exhibit lack of respect due the other co-ordinate
departments but discharges a solemn and sacred duty to determine
essentially the scope of intersecting powers in regard which the
Executive and the Senate are in dispute.
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controversies involving rights which are legally demandable and

enforceable, and to determine whether or not there has been a grave
abuse of discretion amounting to lack or excess of jurisdiction on the
part of any branch or instrumentality of the Government."
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Nor is this the first time that the constitutionality of a Presidential veto
is raised to the Court. The two oft-cited cases are Bengson v.
Secretary of Justice (62 Phil. 912 [1936]), penned by Justice George
A. Malcolm, which upheld the veto questioned before it, but which
decision was reversed by the U.S. Supreme Court in the same entitled
case in 292 U.S. 410, infra, essentially on the ground that an
Appropriations Bill was not involved. The second case is Bolinao
Electronics v. Valencia (G.R. No. L-20740, 30 June 1964, 11 SCRA
486), infra, which rejected the Presidents veto of a condition or
restriction in an Appropriations Bill.
The Extent of the Presidents Item-veto Power
The focal issue for resolution is whether or not the President exceeded
the item-veto power accorded by the Constitution. Or differently put,
has the President the power to veto "provisions" of an Appropriations
Bill?
Petitioners contend that Section 55 (FY 89) and Section 16 (FY 90)
are provisions and not items and are, therefore, outside the scope of
the item-veto power of the President.
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Petitioners have also brought this suit as taxpayers. As ruled in

Sanidad v. COMELEC (No. L-44640, 12 October 1976, 73 SCRA 333),
this Court enjoys the open discretion to entertain taxpayers suits or
not. In Tolentino v. COMELEC (No. L-34150, 16 October 1961, 41
SCRA 702), it was also held that a member of the Senate has the
requisite personality to bring a suit where a constitutional issue is
raised.
cralawnad

The political question doctrine neither interposes an obstacle to judicial

determination of the rival claims. The jurisdiction to delimit
constitutional boundaries has been given to this Court. It cannot
abdicate that obligation mandated by the 1987 Constitution, although
said provision by no means does away with the applicability of the
principle in appropriate cases.
"SECTION 1. The judicial power shall be vested in one Supreme Court
and in such lower courts as may be established by law.
Judicial power includes the duty of the courts of justice to settle actual

The veto power of the President is expressed in Article VI, Section 27

of the 1987 Constitution reading, in full, as follows:
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"Sec. 27. (1) Every bill passed by the Congress shall, before it
becomes a law, be presented to the President. If he approves the
same, he shall sign it; otherwise, he shall veto it and return the same
with his objections to the House where it originated, which shall enter
the objections at large in its Journal and proceed to reconsider it. If,
after such reconsideration, two-thirds of all the Members of such
House shall agree to pass the bill, it shall be sent, together with the
objections, to the other House by which it shall likewise be
reconsidered, and if approved by two-thirds of all the Members of that
House, it shall become a law. In all such cases, the votes of each
House shall be determined by yeas or nays, and the names of the
Members voting for or against shall be entered in its Journal. The
President shall communicate his veto of any bill to the House where it
originated within thirty days after the date of receipt thereof;
otherwise, it shall become a law as if he had signed it.

"(2) The President shall have the power to veto any particular item or
items in an appropriation, revenue, or tariff bill, but the veto shall not
affect the item or items to which he does not object."
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Paragraph (1) refers to the general veto power of the President and if
exercised would result in the veto of the entire bill, as a general rule.
Paragraph (2) is what is referred to as the item-veto power or the lineveto power. It allows the exercise of the veto over a particular item or
items in an appropriation, revenue, or tariff bill. As specified, the
President may not veto less than all of an item of an Appropriations
Bill. In other words, the power given the executive to disapprove any
item or items in an Appropriations Bill does not grant the authority to
veto a part of an item and to approve the remaining portion of the
same item.
Originally, item veto exclusively referred to veto of items of
appropriation bills and first came into being in the former Organic Act,
the Act of Congress of 29 August 1916. This was followed by the 1935
Constitution, which contained a similar provision in its Section 11(2),
Article VI, except that the veto power was made more expansive by
the inclusion of this sentence:
jgc:chanrobles.com.ph

". . . When a provision of an appropriation bill affects one or more

items of the same, the President can not veto the provision without at
the same time vetoing the particular item or items to which it relates .
. ."
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The 1935 Constitution further broadened the Presidents veto power to

include the veto of item or items of revenue and tariff bills.
With the advent of the 1973 Constitution, the section took a more
simple and compact form, thus:
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"Section 20 (2). The Prime Minister shall have the power to veto any
particular item or items in an appropriation, revenue, or tariff bill, but
the veto shall not affect the item or items to which he does not
object."
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It is to be noted that the counterpart provision in the 1987

Constitution (Article VI, Section 27 [2], supra), is a verbatim
reproduction except for the public official concerned. In other words,
also eliminated has been any reference to the veto of a provision. The
vital question is: should this exclusion be interpreted to mean as a
disallowance of the power to veto a provision, as petitioners urge?

The terms item and provision in budgetary legislation and practice are
concededly different. An item in a bill refers to the particulars, the
details, the distinct and severable parts . . . of the bill (Bengzon,
supra, at 916). It is an indivisible sum of money dedicated to a stated
purpose (Commonwealth v. Dodson, 11 S.E., 2d 120, 124, 125, etc.,
176 Va. 281). The United States Supreme Court, in the case of
Bengzon v. Secretary of Justice (299 U.S. 410, 414, 57 S.Ct 252, 81 L.
Ed., 312) declared "that an item of an appropriation bill obviously
means an item which in itself is a specific appropriation of money, not
some general provision of law, which happens to be put into an
appropriation bill."
cralaw virtua1aw library

It is our considered opinion that, notwithstanding the elimination in

Article VI, Section 27 (2) of the 1987 Constitution of any reference to
the veto of a provision, the extent of the Presidents veto power as
previously defined by the 1935 Constitution has not changed. This is
because the eliminated proviso merely pronounces the basic principle
that a distinct and severable part of a bill may be the subject of a
separate veto (Bengzon v. Secretary of Justice, 62 Phil., 912, 916
(1926); 2 BERNAS, Joaquin, S.J., The Constitution of the Republic of
the Philippines, 1st ed., 154-155, [1988]).
The restrictive interpretation urged by petitioners that the President
may not veto a provision without vetoing the entire bill not only
disregards the basic principle that a distinct and severable part of a bill
may be the subject of a separate veto but also overlooks the
Constitutional mandate that any provision in the general
appropriations bill shall relate specifically to some particular
appropriation therein and that any such provision shall be limited in its
operation to the appropriation to which it relates (1987 Constitution,
Article VI, Section 25 [2]). In other words, in the true sense of the
term, a provision in an Appropriations Bill is limited in its operation to
some particular appropriation to which it relates, and does not relate
to the entire bill.
chanrobles law library

Petitioners further submission that, since the exercise of the veto

power by the President partakes of the nature of legislative powers it
should be strictly construed, is negative by the following dictum in
Bengzon, supra, reading:
jgc:chanrobles.com.ph

"The Constitution is a limitation upon the power of the legislative

department of the government, but in this respect it is a grant of
power to the executive department. The Legislature has the
affirmative power to enact laws; the Chief Executive has the negative

power by the constitutional exercise of which he may defeat the will of

the Legislature. It follows that the Chief Executive must find his
authority in the Constitution. But in exercising that authority he may
not be confined to rules of strict construction or hampered by the
unwise interference of the judiciary. The courts will indulge every
intendment in favor of the constitutionality of a veto the same as they
will presume the constitutionality of an act as originally passed by the
Legislature" (Commonwealth v. Barnett [1901], 199 Pa., 161; 55
L.R.A., 882; People v. Board of Councilmen [1892], 20 N.Y.S., 52;
Fulmore v. Lane [1911], 104 Tex., 499; Texas Co. v. State [1927], 53
A.L.R., 258 [at 917]).
Inappropriateness of the so-called "Provisions"
But even assuming arguendo that provisions are beyond the executive
power to veto, we are of the opinion that Section 55 (FY 89) and
Section 16 (FY 90) are not provisions in the budgetary sense of the
term. Article VI, Section 25 (2) of the 1987 Constitution provides:
jgc:chanrobles.com.ph

"Sec. 25 (2) No provision or enactment shall be embraced in the

general appropriations bill unless it relates specifically to some
particular appropriation therein. Any such provision or enactment shall
be limited in its operation to the appropriation to which it relates."

on him as chief executive officer of the state by including in a general

appropriation bill matters more properly enacted in separate
legislation. The Governors constitutional power to veto bills of general
legislation . . . cannot be abridged by the careful placement of such
measures in a general appropriation bill, thereby forcing the Governor
to choose between approving unacceptable substantive legislation or
vetoing items of expenditure essential to the operation of
government. The legislature cannot by location of a bill give it
immunity from executive veto. Nor can it circumvent the Governors
veto power over substantive legislation by artfully drafting general law
measures so that they appear to be true conditions or limitations on
an item of appropriation. Otherwise, the legislature would be permitted
to impair the constitutional responsibilities and functions of a co-equal
branch of government in contravention of the separation of powers
doctrine . . . We are no more willing to allow the legislature to use its
appropriation power to infringe on the Governors constitutional right
to veto matters of substantive legislation than we are to allow the
Governor to encroach on the constitutional powers of the legislature.
In order to avoid this result, we hold that, when the legislature inserts
inappropriate provisions in a general appropriation bill, such provisions
must be treated as items for purposes of the Governors item veto
power over general appropriation bills.

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Explicit is the requirement that a provision in the Appropriations Bill

should relate specifically to some" particular appropriation" therein.
The challenged "provisions" fall short of this requirement. Firstly, the
vetoed "provisions" do not relate to any particular or distinctive
appropriation. They apply generally to all items disapproved or
reduced by Congress in the Appropriations Bill. Secondly, the
disapproved or reduced items are nowhere to be found on the face of
the Bill. To discover them, resort will have to be made to the original
recommendations made by the President and to the source indicated
by petitioners themselves, i.e., the "Legislative Budget Research and
Monitoring Office" (Annex B-1 and B-2, Petition). Thirdly, the vetoed
Sections are more of an expression of Congressional policy in respect
of augmentation from savings rather than a budgetary appropriation.
Consequently, Section 55 (FY 89) and Section 16 (FY 90) although
labelled as "provisions," are actually inappropriate provisions that
should be treated as items for the purpose of the Presidents veto
power. (Henry v. Edwards [1977] 346 S Rep. 2d, 157-158)
"Just as the President may not use his item-veto to usurp
constitutional powers conferred on the legislature, neither can the
legislature deprive the Governor of the constitutional powers conferred

". . . Legislative control cannot be exercised in such a manner as to

encumber the general appropriation bill with veto-proof logrolling
measure, special interest provisions which could not succeed if
separately enacted, or riders, substantive pieces of legislation
incorporated in a bill to insure passage without veto. . . ." (Emphasis
supplied)
Inappropriateness of the so-called "Conditions/Restrictions"
Petitioners maintain, however, that Congress is free to impose
conditions in an Appropriations Bill and where conditions are attached,
the veto power does not carry with it the power to strike them out,
citing Commonwealth v. Dodson (11 SE, 2d 130, supra) and Bolinao
Electronics Corporation v. Valencia (No. L-20740, June 30, 1964, 11
SCRA 486). In other words, their theory is that Section 55 (FY 89) and
Section 16 (FY 90) are such conditions/restrictions and thus beyond
the veto power.
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There can be no denying that inherent in the power of appropriation is

the power to specify how money shall be spent; and that in addition to
distinct "items" of appropriation, the Legislature may include in
Appropriation Bills qualifications, conditions, limitations or restrictions
on expenditure of funds. Settled also is the rule that the Executive is
not allowed to veto a condition or proviso of an appropriation while
allowing the appropriation itself to stand (Fairfield v. Foster, supra, at
320). That was also the ruling in Bolinao, supra, which held that the
veto of a condition in an Appropriations Bill which did not include a
veto of the items to which the condition related was deemed invalid
and without effect whatsoever.
However, for the rule to apply, restrictions should be such in the real
sense of the term, not some matters which are more properly dealt
with in a separate legislation (Henry v. Edwards, La, 346, So 2d 153).
Restrictions or conditions in an Appropriations Bill must exhibit a
connection with money items in a budgetary sense in the schedule of
expenditures. Again, the test is appropriateness.
"It is not enough that a provision be related to the institution or
agency to which funds are appropriated. Conditions and limitations
properly included in an appropriation bill must exhibit such a connexity
with money items of appropriation that they logically belong in a
schedule of expenditures . . . the ultimate test is one of
appropriateness" (Henry v. Edwards, supra, at 158).
Tested by these criteria, Section 55 (FY 89) and Section 16 (FY 90)
must also be held to be inappropriate "conditions." While they,
particularly, Section 16 (FY 90), have been "artfully drafted" to appear
as true conditions or limitations, they are actually general law
measures more appropriate for substantive and, therefore, separate
legislation.
Further, neither of them shows the necessary connection with a
schedule of expenditures. The reason, as explained earlier, is that
items reduced or disapproved by Congress would not appear on the
face of the enrolled bill or Appropriations Act itself. They can only be
detected when compared with the original budgetary submittals of the
President. In fact, Sections 55 (FY 89) and 16 (FY 90) themselves
provide that an item "shall be deemed to have been disapproved by
Congress if no corresponding appropriation for the specific purpose is
provided in this Act."
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Considering that the vetoed provisions are not, in the budgetary sense
of the term, conditions or restrictions, the case of Bolinao Electronics
Corporation v. Valencia (supra), invoked by petitioners, becomes

inapplicable. In that case, a public works bill contained an item

appropriating a certain sum for assistance to television stations,
subject to the condition that the amount would not be available to
places where there were commercial television stations. Then
President Macapagal approved the appropriation but vetoed the
condition. When challenged before this Court, it was held that the veto
was ineffectual and that the approval of the item carried with it the
approval of the condition attached to it. In contrast with the case at
bar, there is no condition, in the budgetary sense of the term,
attached to an appropriation or item in the appropriation bill which was
struck out. For obviously, Sections 55 (FY 89) and 16 (FY 90) partake
more of a curtailment on the power to augment from savings; in other
words, "a general provision of law, which happens to be put in an
appropriation bill" (Bengzon v. Secretary of Justice, supra).
The Power of Augmentation and The Validity of the Veto
The President promptly vetoed Section 55 (FY 89) and Section 16 (FY
90) because they nullify the authority of the Chief Executive and
heads of different branches of government to augment any item in the
General Appropriations Law for their respective offices from savings in
other items of their respective appropriations, as guaranteed by Article
VI, Section 25 (5) of the Constitution. Said provision reads:
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"Sec. 25. (5) No law shall be passed authorizing any transfer of

appropriations; however, the President, the President of the Senate,
the Speaker of the House of Representatives, the Chief Justice of the
Supreme Court, and the heads of Constitutional Commissions may, by
law, be authorized to augment any item in the general appropriations
law for their respective offices from savings in other items of their
respective appropriations" (Emphasis ours).
Noteworthy is the fact that the power to augment from savings lies
dormant until authorized by law.
This Court upheld the validity of the power of augmentation from
savings in Demetria v. Alba, which ruled:
jgc:chanrobles.com.ph

". . . to afford the heads of the different branches of the government

and those of the constitutional commissions considerable flexibility in
the use of public funds and resources, the constitution allowed the
enactment of a law authorizing the transfer of funds for the purpose of
augmenting an item from savings in another item in the appropriation
of the government branch or constitutional body concerned. The
leeway granted was thus limited. The purpose and conditions for which

funds may be transferred were specified, i.e., transfer may be allowed

for the purpose of augmenting an item and such transfer may be made
only if there are savings from another item in the appropriation of the
government branch or constitutional body" (G.R. No. 71977, 27
February 1987, 148 SCRA 214).
The 1973 Constitution contained an identical authority to augment
from savings in its Article VIII, Section 16 (5), except for mention of
the Prime Minister among the officials vested with that power. 1
In 1977, the statutory authority of the President to augment any
appropriation of the executive department in the General
Appropriations Act from savings was specifically provided for in Section
44 of Presidential Decree No. 1177, as amended (RA 6670, 4 August
1988), otherwise known as the "Budget Reform Decree of 1977." It
reads:
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"Sec. 44. . . .
"The President shall, likewise, have the authority to augment any
appropriation of the Executive Department in the General
Appropriations Act, from savings in the appropriations of another
department, bureau, office or agency within the Executive Branch,
pursuant to the provisions of Art. VIII, Sec. 16 (5) of the Constitution
(now Sec. 25 (5), Art. VI)" (Emphasis ours), (N.B.: The first paragraph
declared void in Demetria v. Alba, supra, has been deleted).
Similarly, the use by the President of savings to cover deficits is
specifically authorized in the same Decree. Thus:
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"Sec. 45. Authority to Use Savings in Appropriations to Cover Deficits.

Except as otherwise provided in the General Appropriations Act, any
savings in the regular appropriations authorized in the General
Appropriations Act for programs and projects of any department, office
or agency, may, with the approval of the President be used to cover a
deficit in any other item of the regular appropriations: ". . .
A more recent grant is found in Section 12 of the General
Appropriations Act of 1989, the text of which is repeated in the first
paragraph of Section 16 (FY 90). Section 12 reads:
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"Sec. 12. Use of Savings. The President, the President of the

Senate, the Speaker of the House of Representatives, the Chief Justice
of the Supreme Court, the heads of the Constitutional Commissions,
and the Ombudsman are hereby authorized to augment any item in

this Act for their respective offices from savings in other items of their
respective appropriations."
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There should be no question, therefore, that statutory authority has, in

fact, been granted. And once given, the heads of the different
branches of the Government and those of the Constitutional
Commissions are afforded considerable flexibility in the use of public
funds and resources (Demetria v. Alba, supra). The doctrine of
separation of powers is in no way endangered because the transfer is
made within a department (or branch of government) and not from
one department (branch) to another (CRUZ, Isagani A., Philippine
Political Law [1989] p. 155).
When Sections 55 (FY 89) and 16 (FY 90), therefore, prohibit the
restoration or increase by augmentation of appropriations disapproved
or reduced by Congress, they impair the constitutional and statutory
authority of the President and other key officials to augment any item
or any appropriation from savings in the interest of expediency and
efficiency. The exercise of such authority in respect of disapproved or
reduced items by no means vests in the Executive the power to rewrite
the entire budget, as petitioners contend, the leeway granted being
delimited to transfers within the department or branch concerned, the
sourcing to come only from savings.
More importantly, it strikes us, too, that for such a special power as
that of augmentation from savings, the same is merely incorporated in
the General Appropriations Bill. An Appropriations Bill is "one the
primary and specific aim of which is to make appropriation of money
from the public treasury" (Bengzon v. Secretary of Justice, 292 U.S.,
410, 57 S.Ct. 252). It is a legislative authorization of receipts and
expenditures. The power of augmentation from savings, on the other
hand, can by no means be considered a specific appropriation of
money. It is a non-appropriation item inserted in an appropriation
measure.
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The same thing must be said of Section 55 (FY 89), taken in

conjunction with Section 12, and Section 16 (FY 90), which prohibit
the restoration or increase by augmentation of appropriations
disapproved and/or reduced by Congress. They are non-appropriation
items, an appropriation being a setting apart by law of a certain sum
from the public revenue for a specific purpose (Bengzon v. Secretary
of Justice, 62 Phil. 912, 916 [1936]). It bears repeating that they are
more of a substantive expression of a legislative objective to restrict
the power of augmentation granted to the President and other key
officials. They are actually matters of general law and more properly

the subject of a separate legislation that will embody, define and

delimit the scope of the special power of augmentation from savings
instead of being inappropriately incorporated annually in the
Appropriation Act. To sanction this practice would be to give the
Legislature the freedom to grant or withhold the power from the
Executive and other officials, and thus put in yearly jeopardy the
exercise of that power.
If, indeed, by the later enactments of Section 55 (FY 89) and Section
16 (FY 90), Congress, as petitioners argue, intended to amend or
repeal Pres. Decree No. 1177, with all the more reason should it have
so provided in a separate enactment, it being basic that implied
repeals are not favored. For the same reason, we cannot subscribe to
petitioners allegation that Pres. Decree No. 1177 has been revoked by
the 1987 Constitution. The 1987 Constitution itself provides for the
continuance of laws, decrees, executive orders, proclamations, letters
of instructions, and other executive issuances not inconsistent with the
Constitution until amended, repealed, or revoked (1987 Constitution,
Article XVIII, Section 3).
If, indeed, the legislature believed that the exercise of the veto powers
by the executive were unconstitutional, the remedy laid down by the
Constitution is crystal clear. A Presidential veto may be overriden by
the votes of two-thirds of members of Congress (1987 Constitution,
Article VI, Section 27[1], supra). But Congress made no attempt to
override the Presidential veto. Petitioners argument that the veto is
ineffectual so that there is "nothing to override" (citing Bolinao) has
lost force and effect with the executive veto having been herein
upheld.
As we see it, there need be no future conflict if the legislative and
executive branches of government adhere to the spirit of the
Constitution, each exercising its respective powers with due deference
to the constitutional responsibilities and functions of the other.
Thereby, the delicate equilibrium of governmental powers remains on
even keel.
WHEREFORE, the constitutionality of the assailed Presidential veto is
UPHELD and this Petition is hereby DISMISSED.
No costs.
SO ORDERED.
Narvasa, Gancayco, Bidin, Sarmiento, Grio-Aquino, Medialdea and

Regalado, JJ., concur.

Fernan, C.J., took no part.
Feliciano, J., is on leave.
Separate Opinions
GUTIERREZ, JR., J., dissenting:

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I regretfully dissent from the Courts opinion in this case because

fundamental principles underlying the doctrine of separation of powers
were violated when the President vetoed certain provisions of the 1989
and 1990 Appropriation Bills.
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I am disturbed by the consequences of the Courts act of legitimation,

among them the following:
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(1) The traditional power of Congress over the public purse is negated
if functions or offices it has abolished or reduced are restored through
the grant of carte blanche authority to shift savings from one
department or agency to another. What the Court is sustaining is no
longer augmentation within the purview of the Constitution. It is
already fund juggling against the express command of the body in
whom fiscal power is vested.
(2) The Court is, in effect, allowing a modified lump sum appropriation
for the entire Executive Branch. The Executive is annually given
appropriations ranging from Two Hundred Billion Pesos to Two
Hundred Fifty Billion Pesos. Whenever the President calls on all
Departments to effect ten percent (10%) savings, compliance
immediately follows. There is thus a built in excess of Two Billion
Pesos. This tremendous amount can now be used to finance projects
which Congress declares improvident or of low priority. Secretaries of
executive departments can thumb their noses at the legislature and,
by asking for the Presidents largesse, implement even that which has
been interdicted.
(3) The Constitution does not grant fiscal autonomy to the Executive
Branch. There is no comparison between the appropriations for the
Judiciary and other constitutional offices on one hand and for the
Executive Branch on the other. There is reason to give flexibility in the
use of funds for the Judiciary and other constitutional creatures.
However, tight congressional control over the way executive programs

of government are funded is part of a responsible presidential system

of government.
(4) The power to augment is intended for functions, projects, and
offices where both Congress and the President expressly or impliedly
concur, not where one specifically exercises its constitutional power to
regulate or modify the expenditures of the other. In the same way that
Congress cannot increase the budgetary proposals of the Executive,
neither should the Executive restore that which Congress has
expressly abolished or reduced.
(5) The Constitution grants the President power to veto any particular
item or items of an appropriation bill. The Constitution withholds the
power to veto provisions from the President. We are rewriting the
Constitution to restore what the framers have eliminated when we
ignore the difference between an item and a provision.
The Court is interpreting the power to augment under Section 25 (5),
Article VI of the Constitution as a grant of near untrammelled authority
to shift savings from appropriated funds for functions and projects
never intended by the lawmakers to be funded and worse, for
functions and projects which Congress has expressly stated should not
be beneficiaries of public funds for a specific year.
chanrobles law library

With a budget of over Two Hundred Billion Pesos

(P200,000,000,000.00) annually given to the Executive Department,
the implications of the Courts ruling are extremely serious, to say the
least. The Courts interpretation of the power of augmentation
effectively corrodes the power of Congress over a function which by its
nature is inherently legislative. I dont believe the Constitution ever
intended to give carte blanche authority to the President to suppress
certain activities in the Executive Department already agreed upon
with Congress and from the funds thus saved, transfer various
amounts to projects and offices which Congress declares must be
abolished or reduced. Why not simply give the President a lump sum
allocation of P250 Billion and let it be spent as the Executive wills?
The raising of funds for the expenses of Government is a legislative
prerogative. The legislative power also determines through
Appropriation Acts how the revenues collected shall be spent and for
what purpose. Congress alone has the power to give the President the
necessary funds to implement Government programs. This vested
power of Congress over the financial affairs of Government underlies
and colors all interpretations of budgetary provisions and appropriation
laws.

Because of the high profile of Malacaang in the disbursement of funds

for public needs, people tend to forget that it is only implementing the
law as passed by Congress. The President has no power to enact or
amend statutes, most specifically appropriation statutes. The
Executive merely proposes and submits recommendations. It is
Congress which decides.
In the same way that Congress creates public offices, it can also
abolish them whenever, in its opinion, bona fide simplicity, economy,
and efficiency would be achieved. By allowing the President through
augmentation to re-create public offices abolished or reduced by
Congress, the Court is treading upon time-tested doctrines, the effects
of which may, in the future, be regretted.
It is misleading for the respondents to tie up the Presidents
augmentation authority with the same authority given to the Chief
Justice and the heads of Constitutional Commissions. The Judiciary and
these Commissions enjoy fiscal autonomy. Their roles in the
constitutional scheme call for independence and flexibility in the use of
appropriated funds. Most of their expenditures are fixed and recurring.
The Department of Budget and Management (DBM) prunes their
requests for funds to the bone such that when the budget is presented
to Congress, there is nothing more to abolish or reduce. The Judiciary
and Commissions are usually neglected if not forgotten when the
financial pie is sliced. Thus the Judiciary with around 23,000 Justices,
Judges, Clerks of Court, lawyers, and other supporting personnel is
generally allocated a miniscule one (1%) percent of the national
budget by DBM proposals. In the aborted 1991 proposals, the
percentage was lowered to 00.67 percent or a little over one-half
percent. Any savings are quite modest and usually result from nonfilling of judicial positions. The Constitutional Commissions have the
same problems. The Court now validates the free use of savings by the
Executive against the express will of Congress. Since these could
easily amount not to one percent but to ten percent or more of the
gargantuan budget for the Executive Branch, the implications are
extremely disturbing.
As for the power given to the Senate President and Speaker, it is
Congress which enacts the law and the need for augmentation is not
really significant.
The same is not true for the President where the amount from which
savings are generated is always beyond P200 Billion. The argument
that the leeway granted is delimited to transfers within the department

or branch overlooks the fact that almost the entire budget of the
Government is eaten up by the Executive Branch. It is relatively easy
for the Office of the President, for example, to get P100 Million from
funds allocated as assistance to local governments or construction of
major public works and augment another item anywhere in the entire
Executive Branch. This is indeed the power to rewrite the entire
budget. It is not the legislative power over the public purse which
alone is denigrated. The power to fiscalize government expenses is
equally diminished.
The constitutional history of the Presidents item veto power shows
that it should not be interpreted to include the vetoing of provisions. It
must be limited to items.
The 1935 Constitution granted the power to veto "provisions" provided
the particular item or items to which the provision relates are also
vetoed.
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The 1973 Constitution removed the power to veto "provisions." The

Chief Executive was given the power to veto only "any particular item
or items" in an appropriation, revenue, or tariff bill.
The 1987 Constitution follows the 1973 formula. The President may
veto any particular item or items in an appropriation, revenue, or tariff
bill but the veto shall not affect the item or items to which he does not
object.
The majority opinion correctly concedes that the terms item and
provision in budgetary legislation and practice are different.
If that is so, I fail to see how we can rule that the power of the
President under the 1935 Constitution to veto "provisions" remains
even if it was expressly eliminated from both the 1973 and 1987
Constitutions. Where the Constitution says "items," the veto power
must be limited to "items." It cannot include "provisions" which was
expressly stricken out.
As a general rule, laws passed by Congress can be vetoed by the
President only in their entirety or none at all. She cannot select
provisions and sections she does not like and veto them while
approving the rest of the statute. The Constitution allows a limited
power of veto only when it comes to appropriation, revenue or tariff
bills. The power is limited to items. It should not be interpreted by this
Court to mean the expanded power to also veto "provisions."
cralaw virtua1aw library

To state it in another way, the President may veto a distinct and

severable part of a bill only (1) if that severable part is an item and
not a provision, and (2) if that severable part belongs to an
appropriation, revenue or tariff bill. All other bills must be vetoed in
their entirety.
Regarding the citation from Bengzon v. Secretary of Justice (299 U.S.
410, 414 [1936]) for a liberal construction, the veto power is
interpreted in favor of validity only when it is limited to the items it
covers. No amount of liberal interpretation, for instance, can allow the
President to veto any item, part, or section of a bill which has nothing
to do with appropriations, revenues, or tariffs.
I must emphasize that the provisions vetoed by the President are not
inappropriate and definitely are not riders.
There can be no dispute that Congress has the power to reduce the
budgetary proposals prepared by the Executive.
If Congress abolishes, removes, or reduces a project, function, or
activity by cutting the funds proposed for it, a provision enforcing that
abolition, removal, or reduction is appropriate and germane to the part
thus stricken out. It would be absurd to require that it should appear
in separate legislation.
A rider is a provision which is alien to the bill to which it is attached.
An example is the Spooner Amendment which transferred government
powers over the Philippines in 1901 from the military to the civil
government, from the Executive to Congress. This section had nothing
to do with the Army Appropriation Bill in which it was included. On the
other hand, the vetoed provisions in the instant case specifically refer
to appropriations which were disapproved or reduced in those very
same bills.
In fact, the vetoed provisions of the 1989 and 1990 Appropriation Acts
are not only germane to these Acts but are precisely authorized under
Section 25 (5) of Article VI of the Constitution. Under Section 25 (5),
the President, Senate President, Speaker, Chief Justice and heads of
Constitutional Commissions are by law authorized to augment items in
the general appropriations law for their respective offices from savings
in other items. As stated by the majority opinion, the power to
augment from savings lies dormant until authorized by law. When
Congress exercises that dormant power and by law authorizes these
officials to augment items, certainly it has the power to also state what
items may not be augmented. I fail to see how the exercise of this

power can be termed an inappropriate rider.

The grant of the power to augment includes the authority to specify
what matters are not part of the granted power. I cannot agree that
the 1977 authority to augment appropriations from savings can prevail
over 1989 and 1990 provisions to the contrary. The 1989 grant of the
power to augment in Section 12 of the 1989 Appropriations Acts is
necessarily circumscribed by the withholding of that power in the
provisions illegally vetoed. One part cannot remain if a related part is
vetoed.
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In closing, I repeat that the Courts opinion allows the President to

denigrate and render ineffective a clear and positive expression of
legislative policy on how the funds of Government shall be spent.
Where Congress expressly states that our limited funds should not be
spent on a particular function or office, we should not give the
President the power to appropriate through transfers of funds the
money to maintain the abolished or greatly reduced function or office.
The power of augmentation is intended to save programs or projects
agreed upon by both the President and Congress where the funds
allocated turn out to be inadequate. It was never conceived to render
inutile the legislative power over the purse. The power to determine
how public funds should be spent should remain lodged where it
rightfully belongs.
Paras, J., dissents.
CRUZ, J., dissenting:

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Mme. Justice Herrera has written another opinion that commends itself
for its logic and lucidity. Regrettably, there are certain conclusions in
the ponencia that I cannot share.
In justifying her veto, the President says that "the provision violates
section 25(5) of Article VI of the Constitution," as if to suggest that
she derives her power of augmentation directly from this section. She
does not, of course. This is not a self-executing provision. The said
section states that she and the other officials mentioned therein "may,
by law, be authorized to augment any item in the general
appropriations law for their respective offices . . ." This means she
needs statutory authority before she can augment.
The President says nevertheless that she has that authority and points
to Section 440 of PD No. 1177, otherwise known as the Budget Reform
Decree of 1977, as amended. Significantly, the provision she invokes

is precisely the section modified by Congress in the General

Appropriations Act of 1989 (and also of 1990). In vetoing Section 55 of
that law, the President is in effect saying that the authorization earlier
given her cannot be revoked.
The authority to augment is not such an extraordinary endowment
that, once given, becomes sacrosanct and irrevocable. What the
Legislature has conferred in its discretion, it can also recall in the
exercise of that same discretion. The only exception I know to the
principle that Congress cannot pass irrepealable laws is the
impairment clause, and even that is fast losing ground.
I am not persuaded that Section 55 of the General Appropriations Law
of 1989 is a rider as contended by the respondents. A rider is a
provision not germane to the subject or purpose of the bill where it is
included, Section 55 is not irrelevant to the General Appropriations Act
of 1989 as it deals, quite obviously, with appropriations. Its purpose is
in fact to limit the powers of the President in the disposition of the
funds appropriated in that measure.
I suggest it is Section 44 of the Budget Reform Decree and not Section
55 of the General Appropriations Act of 1989 that is the rider. Section
44 is extraneous to the subject and purpose of PD No. 1177, which
deals only with "the form, content and manner of preparation of the
budget" that are required to "be prescribed by law" under Article VI,
Sec. 25(1) of the Constitution. The budget is only a recommendation
of appropriations, not the appropriation itself. The authority to
augment given by Section 44 of PD No. 1177 belongs in the General
Appropriations Act and has no place in the Budget Reform Decree.
The ponencia says that to sanction the inclusion of Section 55 in the
General Appropriations Act "would be to give the Legislature the
freedom to grant or withhold the power from the Executive and other
officials and thus put in yearly jeopardy the exercise of that power" to
augment. I respectfully submit that the freedom is not ours to give. It
was vested in Congress by the Constitution itself, and we ourselves
have no authority to grant or withhold it.
It is needless to debate whatever distinction there may be between the
item and the provision. The important consideration is that, whatever
its nature, Section 55 of the General Appropriations Act cannot be
vetoed in any case because it seeks to withdraw a delegated power.
The power of the purse belongs to Congress and has been traditionally
recognized in the constitutional provision that "no money shall be paid

out of the Treasury except in pursuance of an appropriation made by

law." The transfer of funds from one item to another in the General
Appropriations Act is part of that power, except that the Constitution
allows Congress to delegate it by law to the President, the Senate
President, the Speaker of the House of Representatives, the Chief
Justice and the heads of the Constitutional Commissions. When
exercising this authority, the aforementioned officials act not by virtue
of their own competence but only as agents of Congress.
There should be no question that the agency conferred on these
officials can be revoked by Congress at any time and for any reason it
sees fit. The delegates cannot challenge this withdrawal and insist on
holding on to the authorization that the legislature had the discretion
to withhold from them in the first place. The authority to augment
involves the element of confidence. Should Congress choose to
withdraw it, a becoming respect for the doctrine of separation of
powers, if not anything else, should persuade the delegates to yield to
the wish of the principal.
The challenge to the validity of Section 55 is to me plain quibbling. To
argue that no recall has been made is to ignore the obvious. What
matters is the intention of Congress, which should be clear enough if
only the respondents would not muddy the waters. The plain and
unmistakable intention of Congress is to withdraw from the President,
for its own reasons, the delegated power to augment.

PADILLA, J., dissenting:

chanrob1es virtual 1aw library

I dissent mainly for two (2) reasons:

chanrob1es virtual 1aw library

First: the questioned veto has no constitutional basis.

Article VI, Section 27 of the 1987 Constitution provides:

jgc:chanrobles.com.ph

"Sec. 27. (1) Every bill passed by the Congress shall, before it
becomes a law, be presented to the President. If he approves the
same, he shall sign it; otherwise, he shall veto it and return the same
with his objections to the House where it originated, which shall enter
the objections at large in its Journal and proceed to reconsider it. If,
after such reconsideration, two-thirds of all the Members of such
House shall agree to pass the bill, it shall be sent, together with the
objections, to the other House by which it shall likewise be
reconsidered, and if approved by two-thirds of all the Members of that
House, it shall become a law. In all such cases, the votes of each
House shall be determined by yeas or nays, and the names of the
Members voting for or against shall be entered in its Journals. The
President shall communicate his veto of any bill to the House where it
originated within thirty days after the date of receipt thereof;
otherwise, it shall become a law as if he had signed it.

chanroblesvirtualawlibra ry

The following observations in the Emergency Power Cases, 92 Phil.

603, are appropriate:
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Although House Bill No. 727 had been vetoed by the President and did
not thereby become a regular statute, it may at least be considered as
a concurrent resolution of the Congress formally declaring the
termination of the emergency powers. To contend that the Bill needed
presidential acquiescence to produce effect would lead to the
anomalous, if not absurd, situation that, while Congress might
delegate its powers by a simple majority, it might not be able to recall
them except by two-thirds vote. In other words, it would be easier for
Congress to delegate its powers than to take them back. This is not
right and is not, and ought not, to be the law.

(2) The President shall have the power to veto any particular item or
items in an appropriation, revenue, or tariff bill, but the veto shall not
affect the item or items to which he does not object."
cralaw virtua1aw library

Section 27 (1) refers to a general veto, where the President objects to

an entire bill approved by Congress and returns it to Congress for its
reconsideration. The situation at bar is admittedly not a general veto
of the appropriation acts for 1989 and 1990, Section 27 (1) does not,
therefore, apply.

I think it would have been more characteristic of the President if she

had graciously respected the will of the Legislature and so again
recognized her role in the constitutional scheme of the Republic.

The majority opinion positions the veto questioned in this case within
the scope of Section 27 (2) above-quoted. I do not see how this can
be done without doing violence to the constitutional design. The
distinction between an item-veto and a provision-veto has been
traditionally recognized in constitutional litigation and budgetary
practice. As stated by Mr. Justice Sutherland, speaking for the U.S.
Supreme Court in Bengzon v. Secretary of Justice, 299 U.S. 410416:

Paras, J., dissents.

". . . An item of an appropriation bill obviously means an item which in

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itself is a specific appropriation of money, not some general provisions

of law which happens to be put into an appropriation bill. . . ."
cralaw virtua1aw libra ry

When the Constitution in Section 27 (2) empowers the President to

veto any particular item or items in the appropriation act, it does not
confer in fact, it excludes the power to veto any particular
provision or provisions in said act.
In an earlier case, Sarmiento v. Mison, Et Al., 156 SCRA 549, this
Court referred to its duty to construe the Constitution, not in
accordance with how the executive or the legislative would want it
construed, but in accordance with what it says and provides. When the
Constitution states that the President has the power to veto any
particular item or items in the appropriation act, this must be taken as
a component of that delicate balance of power between the executive
and the legislative, so that, for this Court to construe Sec. 27 (2) of
the Constitution as also empowering the President to veto any
particular provision or provisions in the appropriation act, is to load the
scale in favor of the executive, at the expense of that delicate balance
of power.
Stated differently, to stretch the power of the President to veto any
item in the appropriation act so as to include the power to veto any
particular provision in the same act, without any conclusive indication
that the same was the intent of the constitutional framers and the
people who adopted the 1987 Constitution, is for the Court to indulge
in spatial constitutional aerobics simply to justify what, to my mind, is
an indefensible presidential veto.
Second: Section 55 (FY 1989) and Section 16 (FY 1990) are founded
on principles of sound reason and public policy; the attempt to "veto"
them is a grave abuse of discretion amounting to lack or excess of
jurisdiction.
To begin with, Article VI, Section 25, par. 5 of the 1987 Constitution
provides:
chanrobles virtualawlibra ry chanrobles.c om:chanrobles.com.ph

"(5) No law shall be passed authorizing any transfer of appropriations;

however, the President, the President of the Senate, the Speaker of
the House of Representatives, the Chief Justice of the Supreme Court,
and the heads of Constitutional Commissions may, by law, be
authorized to augment any item in the general appropriations law for
their respective offices from savings in other items of their respective
appropriations."
cralaw virtua1aw library

It will be at once noted that the fundamental policy of the Constitution

is against transfer of appropriations even by law, since this "juggling
of funds is often a rich source of unbridled patronage, abuse and
interminable corruption.
However, the same provision allows the enactment of a law that would
authorize the President of the Philippines, the President of the Senate,
the Speaker of the House, the Chief Justice of the Supreme Court, and
the heads of Constitutional Commissions to augment from savings
realized from any appropriations for their respective offices, any other
item of appropriation also for their offices. In accordance with this
Constitutional leave, Section 12 of the appropriation act of 1989 (also
Section 16 (1st part) of the appropriation act of 1990) provides:
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"Sec. 12. Use of Savings. The President, the President of the

Senate, the Speaker of the House of Representatives, the Chief Justice
of the Supreme Court, the Heads of the Constitutional Commissions,
and the Ombudsman are hereby authorized to augment any item in
this Act for their respective offices from savings in other items of their
respective appropriations."
cralaw virtua1aw libra ry

Thus, a transfer from savings is allowed to augment any appropriation

pertaining to the office which effects the savings.
And yet, Congress as the appropriating and funding department of the
Government has seen fit to place a condition or a qualification in the
authority to augment, from savings, any appropriation in the offices
concerned. It requires that no such savings can be used to augment
an appropriation previously disapproved by Congress or to restore an
appropriation previously reduced by Congress.
I can see no valid reason, in logic or in sound management, why such
a condition can not be accepted. It only makes certain that
congressional action disapproving an appropriation or reducing the
amount of an appropriation, is not rendered inutile or meaningless by
a transfer of savings in an appropriation to such other items already
disapproved or reduced by Congress.
It can hardly be disputed that the condition, restriction or qualification
embodied in Sections 55 and 16, here discussed, was enacted by
Congress in the exercise of its legislative power to appropriate funds
for government operations. The exercise of that legislative power, in
the first instance, should be accorded due respect and, as I see it, the
veto of the said condition is an undue encroachment by the executive
on a properly exercised legislative power. This Court, in delineating

power boundaries between the different departments of government,

sadly expands, in this case, the bounds of an already too-powerful
executive, at the expense of legislative prerogative. The majority
appear to have overlooked that the power to appropriate and set
reasonable conditions incidental thereto is a function entrusted by the
Constitution in the legislature and only in the legislature.
In Bolinao v. Valencia, G.R. No. L-20740, 30 June 1964, 11 SCRA 486,
this Court already had occasion to uphold a condition laid down by the
legislative in an appropriation measure, to the extent of declaring a
presidential veto of such condition as illegal if made separately from
the appropriation itself. This Court held:
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"It may be observed from the wordings of the Appropriations Act that
the amount appropriated for the operation of the Philippine
Broadcasting Service was made subject to the condition that the same
shall not be used or expended for operation of television stations in
Luzon, where there are already existing commercial television stations.
This gives rise to the question of whether the President may legally
veto a condition attached to an appropriation or item in the
appropriation bill. But this is not a novel question. A little effort to
research on the subject would have yielded enough authority to guide
action on the matter. For, in the leading case of State v. Holder, it was
already declared that such action by the Chief Executive was illegal.
This ruling, that the executives veto power does not carry with it the
power to strike out conditions or restrictions, has been adhered to in
subsequent cases. If the veto is unconstitutional, it follows that the
same produced no effect whatsoever, and the restriction imposed by
the appropriation bill, therefore, remains. Any expenditure made by
the intervenor PBS, for the purpose of installing or operating a
television station in Manila, where there are already television stations
in operation, would be in violation of the express condition for the
release of the appropriation and, consequently, null and void. . . ."
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By clear analogy, the President could not veto Sections 55 (FY 1989)
and 16 (FY 1990) as conditions, without vetoing the items or
appropriations which are affected by said conditions, meaning the
entire appropriation bills.
ACCORDINGLY, I vote to GRANT the petition and to declare the
presidential veto of Section 55 (FY 1989) and Section 16 (FY 1990) as
null and void and of no effect whatsoever, for being clearly
unconstitutional. It follows that Sections 55 (FY 1989) and 16 (FY
1990) remain as binding conditions in the disposition of savings in
appropriations covered by the appropriation acts for 1989 and 1990.

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Paras, J., dissents.

Endnotes:

1. Sec. 16 (5) No law shall be passed authorizing any transfer of

appropriations; however, the President, the Prime Minister, the
Speaker, the Chief Justice of the Supreme Court, and the heads of
Constitutional Commissions may by law be authorized to augment any
item in the general appropriations law for their respective offices from
savings in other items of their respective appropriations.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC

G.R. No. 103524 April 15, 1992

CESAR BENGZON, QUERUBE MAKALINTAL, LINO M.
PATAJO, JOSE LEUTERIO, ET AL., petitioners,
vs.
HON. FRANKLIN N. DRILON, in his capacity as
Executive Secretary, HON. GUILLERMO CARAGUE, in
his capacity as Secretary of Department of Budget
and Management, and HON. ROSALINA CAJUCOM, in
her capacity as National Treasurer, respondents.
A.M. No. 91-8-225-CA April 15, 1992
REQUEST OF RETIRED JUSTICES MANUEL P.
BARCELONA, JUAN P. ENRIQUEZ, JUAN O. REYES, JR.
and GUARDSON R. LOOD FOR READJUSTMENT OF
THEIR MONTHLY PENSION.

GUTIERREZ, JR., J.:

The issue in this petition is the constitutionality of the veto
by the President of certain provisions in the General
Appropriations Act for the Fiscal Year 1992 relating to the
payment of the adjusted pensions of retired Justices of the
Supreme Court and the Court of Appeals.

The petitioners are retired Justices of the Supreme Court

and Court of Appeals who are currently receiving monthly
pensions under Republic Act No. 910 as amended by
Republic Act No. 1797. They filed the instant petition on
their own behalf and in representation of all other retired
Justices of the Supreme Court and the Court of Appeals
similarly situated.
Named respondents are Hon. Franklin Drilon the Executive
Secretary, Hon. Guillermo Carague as Secretary of the
Department of Budget and Management, and Hon.
Rosalinda Cajucom, the Treasurer of the Philippines. The
respondents are sued in their official capacities, being
officials of the Executive Department involved in the
implementation of the release of funds appropriated in the
Annual Appropriations Law.
We treat the Comments of the Office of the Solicitor General
(OSG) as an Answer and decide the petition on its merits.
The factual backdrop of this case is as follows:
On June 20, 1953, Republic Act No, 910 was enacted to
provide the retirement pensions of Justices of the Supreme
Court and of the Court of Appeals who have rendered at
least twenty (20) years service either in the Judiciary or in
any other branch of the Government or in both, having
attained the age of seventy (70) years or who resign by
reason of incapacity to discharge the duties of the office.
The retired Justice shall receive during the residue of his
natural life the salary which he was receiving at the time of
his retirement or resignation.
Republic Act No. 910 was amended by Republic Act No.
1797 (approved on June 21, 1957) which provided that:

Sec. 3-A. In case the salary of Justices of the

Supreme Court or of the Court of Appeals is
increased or decreased, such increased or
decreased salary shall, for purposes of this
Act, be deemed to be the salary or the
retirement pension which a Justice who as of
June twelve, nineteen hundred fifty-four had
ceased to be such to accept another position
in the Government or who retired was
receiving at the time of his cessation in office.
Provided, that any benefits that have already
accrued prior to such increase or decrease
shall not be affected thereby.
Identical retirement benefits were also given to the
members of the Constitutional Commissions under Republic
Act No. 1568, as amended by Republic Act No. 3595. On
November 12, 1974, on the occasion of the Armed Forces
Loyalty Day, President Marcos signed Presidential Decree
578 which extended similar retirement benefits to the
members of the Armed Forces giving them also the
automatic readjustment features of Republic Act No. 1797
and Republic Act No. 3595.
Two months later, however, President Marcos issued
Presidential Decree 644 on January 25, 1975 repealing
Section 3-A of Republic Act No. 1797 and Republic Act No.
3595 (amending Republic Act No. 1568 and Presidential
Decree No. 578) which authorized the adjustment of the
pension of the retired Justices of the Supreme Court, Court
of Appeals, Chairman and members of the Constitutional
Commissions and the officers and enlisted members of the
Armed Forces to the prevailing rates of salaries.
Significantly, under Presidential Decree 1638 the automatic
readjustment of the retirement pension of officers and
enlisted men was subsequently restored by President
Marcos. A later decree Presidential Decree 1909 was also

issued providing for the automatic readjustment of the

pensions of members of the Armed Forces who have retired
prior to September 10, 1979.
While the adjustment of the retirement pensions for
members of the Armed Forces who number in the tens of
thousands was restored, that of the retired Justices of the
Supreme Court and Court of Appeals who are only a handful
and fairly advanced in years, was not.
Realizing the unfairness of the discrimination against the
members of the Judiciary and the Constitutional
Commissions, Congress approved in 1990 a bill for the
reenactment of the repealed provisions of Republic Act No.
1797 and Republic Act No. 3595. Congress was under the
impression that Presidential Decree 644 became law after it
was published in the Official Gazette on April 7, 1977. In the
explanatory note of House Bill No. 16297 and Senate Bill
No. 740, the legislature saw the need to reenact Republic
Act Nos. 1797 and 3595 to restore said retirement pensions
and privileges of the retired Justices and members of the
Constitutional Commissions, in order to assure those
serving in the Supreme Court, Court of Appeals and
Constitutional Commissions adequate old age pensions even
during the time when the purchasing power of the peso has
been diminished substantially by worldwide recession or
inflation. This is underscored by the fact that the petitioner
retired Chief Justice, a retired Associate Justice of the
Supreme Court and the retired Presiding Justice are
presently receiving monthly pensions of P3,333.33,
P2,666.66 and P2,333.33 respectively.
President Aquino, however vetoed House Bill No. 16297 on
July 11, 1990 on the ground that according to her "it would
erode the very foundation of the Government's collective
effort to adhere faithfully to and enforce strictly the policy
on standardization of compensation as articulated in
Republic Act No. 6758 known as Compensation and Position

Classification Act of 1989." She further said that "the

Government should not grant distinct privileges to select
group of officials whose retirement benefits under existing
laws already enjoy preferential treatment over those of the
vast majority of our civil service servants."

Pursuant to the above resolution, Congress included in the

General Appropriations Bill for Fiscal Year 1992 certain
appropriations for the Judiciary intended for the payment of
the adjusted pension rates due the retired Justices of the
Supreme Court and Court of Appeals.

Prior to the instant petition, however, Retired Court of

Appeals Justices Manuel P. Barcelona, Juan P. Enriquez,
Juan O. Reyes, Jr. and Guardson R. Lood filed a
letter/petition dated April 22, 1991 which we treated as
Administrative Matter No. 91-8-225-CA. The petitioners
asked this Court far a readjustment of their monthly
pensions in accordance with Republic Act No. 1797. They
reasoned out that Presidential Decree 644 repealing
Republic Act No. 1797 did not become law as there was no
valid publication pursuant to Taada v. Tuvera, (136 SCRA
27 [1985]) and 146 SCRA 446 [1986]). Presidential Decree
644 promulgated on January 24, 1975 appeared for the first
time only in the supplemental issue of the Official Gazette,
(Vol. 74, No. 14) purportedly dated April 4, 1977 but
published only on September 5, 1983. Since Presidential
Decree 644 has no binding force and effect of law, it
therefore did not repeal Republic Act No. 1797.

The pertinent provisions in House Bill No. 34925 are as

follows:

In a Resolution dated November 28, 1991 the Court acted

favorably on the request. The dispositive portion reads as
follows:
WHEREFORE, the requests of retired Justices
Manuel P. Barcelona, Juan P. Enriquez, Juan
O. Reyes and Guardson Lood are GRANTED.
It is hereby AUTHORIZED that their monthly
pensions be adjusted and paid on the basis of
RA 1797 effective January 1, 1991 without
prejudice to the payment on their pension
differentials corresponding to the previous
years upon the availability of funds for the
purpose.

XXVIII. THE JUDICIARY

A. Supreme Court of the Philippines and the
Lower Courts.
For general administration, administration of
personnel benefits, supervision of courts,
adjudication of constitutional questions
appealed and other cases, operation and
maintenance of the Judicial and Bar Council in
the Supreme Court, and the adjudication of
regional court cases, metropolitan court
cases, municipal trial court cases in Cities,
municipal circuit court cases, municipal, court
cases, Shari'a district court cases and Shari'a
circuit court cases as indicated hereunder
P2,095,651,000
xxx xxx xxx
Special Provisions.
1. Augmentation of any Item in the Court's
Appropriations. Any savings in the
appropriation for the Supreme Court and the
Lower Courts may be utilized by the Chief
Justice of the Supreme Court to augment any
item of the Court's appropriations for: (a)

printing of decisions and publications of

Philippine Reports; b) commutable terminal
leaves of Justices and other personnel of the
Supreme Court and any payment of adjusted
pension rates to retired Justices entitled
thereto pursuant to Administrative Matter No.
91-8-225-CA; (c) repair, maintenance,
improvement, and other operating expenses
of the courts' books and periodicals; (d)
purchase, maintenance and improvement of
printing equipment; e) necessary expenses
for the employment of temporary employees,
contractual and casual employees, for judicial
administration; f) maintenance and
improvement of the Court's Electronic Data
Processing; (g) extraordinary expenses of the
Chief Justice, attendance in international
conferences and conduct of training
programs; (h) commutable transportation and
representation allowances and fringe benefits
for Justices, Clerks of Court, Court
Administrator, Chief of Offices and other
Court personnel in accordance with the rates
prescribed by law; and (i) compensation of
attorneys-de-oficio; PROVIDED, that as
mandated by LOI No. 489 any increases in
salary and allowances shall be subject to the
usual procedures and policies as provided for
under P.D. No. 985 and other pertinent laws.
(page 1071, General Appropriations Act, FY
1992; Emphasis supplied)
xxx xxx xxx
4. Payment of Adjusted Pension Rates to
Retired Justices. The amount herein
appropriated for payment of pensions to
retired judges and justices shall include the

payment of pensions at the adjusted rates to

retired justices of the Supreme Court entitled
thereto pursuant to the ruling of the Court in
Administrative Matter No. 91-8-225-C.A.
(page 1071, General Appropriations Act, FY
1992).
xxx xxx xxx
Activities and Purposes
1. General Administration and Support
Services.
a. General administrative
Services P 43,515,000
b. Payment of retirement
gratuity
of national goverment officials
and employees P 206,717,000
c. Payment of terminal leave
benefits to
officials and employees antitled
thereto P 55,316,000
d. Payment of pension totired
jude
and justice entitled thereto P
22,500,000
(page 1071, General Appropriations Act, FY 1992)
C. COURT OF APPEALS
For general administration,
administration
of personnel benefit, benefits
and the

adjudication of appealed and

other cases
as indicated hereunder
P114,615,000

For general fund adjustment for

operational and special
requirements
as indicated hereunder
P500,000,000

Special Provisions.
xxx xxx xxx
1. Authority to Use Savings. Subject to the
approval of the Chief Justice of the Supreme
Court in accordance with Section 25(5),
Article VI of the Constitution of the Republic
of the Philippines, the Presiding Justice may
be authorized to use any savings in any item
of the appropriation for the Court of Appeals
for purposes of: (1) improving its compound
and facilities; and (2) for augmenting any
deficiency in any item of its appropriation
including its extraordinary expenses and
payment of adjusted pension rates to retired
justices entitled thereto pursuant to
Administrative Matter No. 91-8-225C.A. (page 1079, General Appropriations Act,
FY 1992; Emphasis supplied)
2. Payment of adjustment Pension Rates to
Retired Justices. The amount herein
appropriated for payment of pensions to
retired judges and justices shall include the
payment of pensions at the adjusted rates to
retired justices of the Court of Appeals
entitled thereto pursuant to the Ruling of the
Supreme Court in Administrative Matter No.
91-6-225-C.A. (page 1079 General
Appropriations Act, FY 1992).
XL. GENERAL FUND ADJUSTMENT

Special Provisions
1. Use of the Fund. This fund shall be used for:
xxx xxx xxx
1.3. Authorized overdrafts
and/or valid unbooked
obligations, including the
payment of back salaries and
related personnel benefits
arising from decision of
competent authorityincluding
the Supreme Court decision in
Administrative Matter No. 91-8225-C.A. and COA decision in
No. 1704." (page 11649 Gen.
Appropriations Act, FY 1992;
Emphasis supplied)
On January 15, 1992, the President vetoed the underlined
portions of Section 1 and the entire Section 4 the Special
Provisions for the Supreme Court of the Philippines and the
Lower Courts (General Appropriations Act, FY 1992, page
1071) and the underlined portions of Section 1 and the
entire Section 2, of the Special Provisions for the Court of
Appeals (page 1079) and the underlined portions of Section
1.3 of Article XLV of the Special Provisions of the General

Fund Adjustments (page 1164, General Appropriations Act,

FY 1992).
The reason given for the veto of said provisions is that "the
resolution of this Honorable Court in Administrative Matter
No. 91-8-225-CA pursuant to which the foregoing
appropriations for the payment of the retired Justices of the
Supreme Court and the Court of Appeals have been enacted
effectively nullified the veto of the President on House Bill
No. 16297, the bill which provided for the automatic
increase in the retirement pensions of the Justices of the
Supreme Court and the Court of Appeals and chairmen of
the Constitutional Commissions by re-enacting Republic Act
No. 1797 and Republic Act No. 3595. The President's veto of
the aforesaid provisions was further justified by reiterating
the earlier reasons for vetoing House Bill No. 16297: "they
would erode the very foundation of our collective effort to
adhere faithfully to and enforce strictly the policy and
standardization of compensation. We should not permit the
grant of distinct privileges to select group of officials whose
retirement pensions under existing laws already enjoy
preferential treatment over those of the vast majority of our
civil servants."
Hence, the instant petition filed by the petitioners with the
assertions that:
1) The subject veto is not an item veto;
2) The veto by the Executive is violative of
the doctrine of separation of powers;
3) The veto deprives the retired Justices of
their rights to the pensions due them;
4) The questioned veto impairs the Fiscal
Autonomy guaranteed by the Constitution.

Raising similar grounds, the petitioners in AM-91-8-225-CA,

brought to the attention of this Court that the veto
constitutes no legal obstacle to the continued payment of
the adjusted pensions pursuant to the Court's resolution.
On February 14, 1992, the Court resolved to consolidate
Administrative Matter No. 91-8-225-CA with G.R. No.
103524.
The petitioners' contentions are well-taken.
I
It cannot be overstressed that in a constitutional
government such as ours, the rule of law must prevail. The
Constitution is the basic and paramount law to which all
other laws must conform and to which all persons including
the highest official of this land must defer. From this
cardinal postulate, it follows that the three branches of
government must discharge their respective functions within
the limits of authority conferred by the Constitution. Under
the principle of separation of powers, neither Congress, the
President nor the Judiciary may encroach on fields allocated
to the other branches of government. The legislature is
generally limited to the enactment of laws, the executive to
the enforcement of laws and the judiciary to their
interpretation and application to cases and controversies.
The Constitution expressly confers or the judiciary the
power to maintain inviolate what it decrees. As the guardian
of the Constitution we cannot shirk the duty of seeing to it
that the officers in each branch of government do not go
beyond their constitutionally allocated boundaries and that
the entire Government itself or any of its branches does not
violate the basic liberties of the people. The essence of this
judicial duty was emphatically explained by Justice Laurel in

the leading case of Angara v. Electoral Commission, (63

Phil. 139 [1936]) to wit:
The Constitution is a definition of the powers
of government. Who is to determine the
nature, scope and extent of such powers? The
Constitution itself has provided for the
instrumentality of the judiciary as the rational
way. And when the judiciary mediates to
allocate constitutional boundaries it does not
assert any superiority over the other
department, it does not in reality nullify or
invalidate an act of the legislature, but only
asserts the solemn and sacred obligation
assigned to it by the Constitution to
determine conflicting claims of authority
under the Constitution and to establish for the
parties in an actual controversy the rights
which that instrument secures and
guarantees to them. (Emphasis supplied)
The act of the Executive in vetoing the particular provisions
is an exercise of a constitutionally vested power. But even
as the Constitution grants the power, it also provides
limitations to its exercise. The veto power is not absolute.
The pertinent provision of the Constitution reads:
The President shall have the power to veto
any particular item or items in an
appropriation, revenue or tariff bill but the
veto shall not affect the item or items to
which he does not object. (Section 27(2),
Article VI, Constitution)
The OSG is correct when it states that the Executive must
veto a bill in its entirety or not at all. He or she cannot act

like an editor crossing out specific lines, provisions, or

paragraphs in a bill that he or she dislikes. In the exercise
of the veto power, it is generally all or nothing. However,
when it comes to appropriation, revenue or tariff bills, the
Administration needs the money to run the machinery of
government and it can not veto the entire bill even if it may
contain objectionable features. The President is, therefore,
compelled to approve into law the entire bill, including its
undesirable parts. It is for this reason that the Constitution
has wisely provided the "item veto power" to avoid
inexpedient riders being attached to an indispensable
appropriation or revenue measure.
The Constitution provides that only a particular item or
items may be vetoed. The power to disapprove any item or
items in an appropriate bill does not grant the authority to
veto a part of an item and to approve the remaining portion
of the same item. (Gonzales v. Macaraig, Jr., 191 SCRA
452, 464 [1990])
We distinguish an item from a provision in the following
manner:
The terms item and provision in budgetary
legislation and practice are concededly
different. An itemin a bill refers to the
particulars, the details, the distinct and
severable parts . . . of the bill
(Bengzon,supra, at 916.) It is an indivisible
sum of money dedicated to a stated purpose
(Commonwealth v. Dodson, 11 S.E. 2d 120,
124, 125, etc., 176 Va. 281) The United
States Supreme Court, in the case of Bengzon
v. Secretary of Justice (299 U.S. 410, 414, 57
Ct. 252, 81 L. Ed, 312) declared "that
an"tem" of an appropriation bill obviously
means an item which in itself is a specific
appropriation of money, not some general

provision of law, which happens to be put into

an appropriation bill." (id. at page 465)
We regret having to state that misimpressions or
unfortunately wrong advice must have been the basis of the
disputed veto.
The general fund adjustment is an item which appropriates
P500,000,000.00 to enable the Government to meet certain
unavoidable obligations which may have been inadequately
funded by the specific items for the different branches,
departments, bureaus, agencies, and offices of the
government.
The President did not veto this item. What were vetoed
were methods or systems placed by Congress to insure that
permanent and continuing obligations to certain officials
would be paid when they fell due.
An examination of the entire sections and the underlined
portions of the law which were vetoed will readily show that
portions of the item have been chopped up into vetoed and
unvetoed parts. Less than all of an item has been vetoed.
Moreover, the vetoed portions are not items. They
are provisions.
Thus, the augmentation of specific appropriations found
inadequate to pay retirement payments, by transferring
savings from other items of appropriation is a provision and
not an item. It gives power to the Chief Justice to transfer
funds from one item to another. There is no specific
appropriation of money involved.
In the same manner, the provision which states that in
compliance with decisions of the Supreme Court and the
Commission on Audit, funds still undetermined in amount
may be drawn from the general fund adjustment is not an

item. It is the "general fund adjustment" itself which is the

item. This was not touched. It was not vetoed.
More ironic is the fact that misinformation led the Executive
to believe that the items in the 1992 Appropriations Act
were being vetoed when, in fact, the veto struck something
else.
What were really vetoed are:
(1) Republic Act No. 1797 enacted as early as June 21,
1957; and
(2) The Resolution of the Supreme Court dated November
28, 1991 in Administrative Matter No. 91-8-225-CA.
We need no lengthy justifications or citations of authorities
to declare that no President may veto the provisions of a
law enacted thirty-five (35) years before his or her term of
office. Neither may the President set aside or reverse a final
and executory judgment of this Court through the exercise
of the veto power.
A few background facts may be reiterated to fully explain
the unhappy situation.
Republic Act No. 1797 provided for the adjustment of
pensions of retired Justices which privilege was extended to
retired members of Constitutional Commissions by Republic
Act No. 3595.
On January 25, 1975, President Marcos issued Presidential
Decree No. 644 which repealed Republic Acts 1797 and
3595. Subsequently, automatic readjustment of pensions
for retired Armed Forces officers and men was
surreptitiously restored through Presidential Decree Nos.
1638 and 1909.

It was the impression that Presidential Decree No. 644 had

reduced the pensions of Justices and Constitutional
Commissioners which led Congress to restore the repealed
provisions through House Bill No. 16297 in 1990. When her
finance and budget advisers gave the wrong information
that the questioned provisions in the 1992 General
Appropriations Act were simply an attempt to overcome her
earlier 1990 veto, she issued the veto now challenged in
this petition.
It turns out, however, that P.D. No. 644 never became valid
law. If P.D. No. 644 was not law, it follows that Rep. Act No.
1797 was not repealed and continues to be effective up to
the present. In the same way that it was enforced from
1951 to 1975, so should it be enforced today.
House Bill No. 16297 was superfluous as it tried to restore
benefits which were never taken away validly. The veto of
House Bill No. 16297 in 1991 did not also produce any
effect. Both were based on erroneous and non-existent
premises.
From the foregoing discussion, it can be seen that when the
President vetoed certain provisions of the 1992 General
Appropriations Act, she was actually vetoing Republic Act
No. 1797 which, of course, is beyond her power to
accomplish.
Presidential Decree No. 644 which purportedly repealed
Republic Act No. 1717 never achieved that purpose because
it was not properly published. It never became a law.
The case of Tada v. Tuvera (134 SCRA 27 [1985]and 146
SCRA 446 [1986]) specifically requires that "all laws shall
immediately upon their approval or as soon thereafter as
possible, be published in full in the Official Gazette, to
become effective only after fifteen days from their

publication, or on another date specified by the legislature,

in accordance with Article 2 of the Civil Code." This was the
Court's answer to the petition of Senator Lorenzo Taada
and other opposition leaders who challenged the validity of
Marcos' decrees which, while never published, were being
enforced. Secret decrees are anathema in a free society.
In support of their request, the petitioners in Administrative
Matter No. 91-9-225-CA secured certification from Director
Lucita C. Sanchez of the National Printing Office that the
April 4, 1977 Supplement to the Official Gazette was
published only on September 5, 1983 and officially released
on September 29, 1983.
On the issue of whether or not Presidential Decree 644
became law, the Court has already categorically spoken in a
definitive ruling on the matter, to wit:
xxx xxx xxx
PD 644 was promulgated by President Marcos
on January 24, 1975, but was not
immediately or soon thereafter published
although preceding and subsequent decrees
were duly published in the Official Gazette. It
now appears that it was intended as a secret
decree "NOT FOR PUBLICATION" as the
notation on the face of the original copy
thereof plainly indicates (Annex B). It is also
clear that the decree was published in the
back-dated Supplement only after it was
challenged in the Taada case as among the
presidential decrees that had not become
effective for lack of the required publication.
The petition was filed on May 7, 1983, four
months before the actual publication of the
decree.

It took more than eight years to publish the

decree after its promulgation in 1975.
Moreover, the publication was made in bad
faith insofar as it purported to show that it
was done in 1977 when the now
demonstrated fact is that the April 4, 1977
supplement was actually published and
released only in September 1983. The belated
publication was obviously intended to refute
the petitioner's claim in the Taada case and
to support the Solicitor General's submission
that the petition had become moot and
academic.
xxx xxx xxx
We agree that PD 644 never became a law
because it was not validly published and that,
consequently, it did not have the effect of
repealing RA 1797. The requesting Justices
(including Justice Lood, whose request for the
upgrading of his pension was denied on
January 15, 1991) are therefore entitled to be
paid their monthly pensions on the basis of
the latter measure, which remains unchanged
to date.
The Supreme Court has spoken and it has done so with
finality, logically and rightly so as to assure stability in legal
relations, and avoid confusion. (see Ver v. Quetullo, 163
SCRA 80 [1988]) Like other decisions of this Court, the
ruling and principles set out in the Court resolution
constitute binding precedent. (Bulig-Bulig Kita Kamaganak
Association, et al. v. Sulpicio Lines, Inc., Regional Trial
Court, etc., G.R. 847500 16 May 1989, En Banc, Minute
Resolution)

The challenged veto has far-reaching implications which the

Court can not countenance as they undermine the principle
of separation of powers. The Executive has no authority to
set aside and overrule a decision of the Supreme Court.
We must emphasize that the Supreme Court did not enact
Rep. Act No. 1797. It is not within its powers to pass laws in
the first place. Its duty is confined to interpreting or
defining what the law is and whether or not it violates a
provision of the Constitution.
As early as 1953, Congress passed a law providing for
retirement pensions to retired Justices of the Supreme
Court and the Court of Appeals. This law was amended by
Republic Act 1797 in 1957. Funds necessary to pay the
retirement pensions under these statutes are deemed
automatically appropriated every year.
Thus, Congress included in the General Appropriations Act
of 1992, provisions identifying funds and savings which may
be used to pay the adjusted pensions pursuant to the
Supreme Court Resolution. As long as retirement laws
remain in the statute book, there is an existing obligation
on the part of the government to pay the adjusted pension
rate pursuant to RA 1797 and AM-91-8-225-CA.
Neither may the veto power of the President be exercised as
a means of repealing RA 1797. This is arrogating unto the
Presidency legislative powers which are beyond its
authority. The President has no power to enact or amend
statutes promulgated by her predecessors much less to
repeal existing laws. The President's power is merely to
execute the laws as passed by Congress.
II

There is a matter of greater consequence arising from this

petition. The attempt to use the veto power to set aside a
Resolution of this Court and to deprive retirees of benefits
given them by Rep. Act No. 1797 trenches upon the
constitutional grant of fiscal autonomy to the Judiciary.
Sec. 3, Art. VIII mandates that:
Sec. 3 The Judiciary shall enjoy fiscal
autonomy. Appropriations for the Judiciary
may not be reduced by the legislature below
the amount appropriated for the previous
year and, after approval, shall be
automatically and regularly released.
We can not overstress the importance of and the need for
an independent judiciary. The Court has on various past
occasions explained the significance of judicial
independence. In the case of De la Llana v. Alba (112 SCRA
294 [1982]), it ruled:
It is a cardinal rule of faith of our
constitutional regime that it is the people who
are endowed with rights, to secure which a
government is instituted. Acting as it does
through public officials, it has to grant them
either expressly or implicitly certain powers.
These they exercise not for their own benefit
but for the body politic. . . .
A public office is a public trust. That is more
than a moral adjuration. It is a legal
imperative. The law may vest in a public
official certain rights. It does so to enable
them to perform his functions and fulfill his
responsibilities more efficiently. . . . It is an
added guarantee that justices and judges can

administer justice undeterred by any fear of

reprisal or untoward consequence. Their
judgments then are even more likely to be
inspired solely by their knowledge of the law
and the dictates of their conscience, free from
the corrupting influence of base or unworthy
motives. The independence of which they are
assured is impressed with a significance
transcending that of a purely personal right.
(At pp. 338-339)
The exercise of the veto power in this case may be traced
back to the efforts of the Department of Budget and
Management (DBM) to ignore or overlook the plain mandate
of the Constitution on fiscal autonomy. The OSG Comment
reflects the same truncated view of the provision.
We have repeatedly in the past few years called the
attention of DBM that not only does it allocate less than one
percent (1%) of the national budget annually for the 22,769
Justices, Judges, and court personnel all over the country
but it also examines with a fine-toothed come how we
spend the funds appropriated by Congress based on DBM
recommendations.
The gist of our position papers and arguments before
Congress is as follows:
The DBM requires the Supreme Court, with
Constitutional Commissions, and the
Ombudsman to submit budget proposals in
accordance with parameters it establishes.
DBM evaluates the proposals, asks each
agency to defend its proposals during DBM
budget hearings, submits its own version of
the proposals to Congress without informing
the agency of major alterations and

mutilations inflicted on their proposals, and

expects each agency to defend in Congress
proposals not of the agency's making.
After the general appropriations bill is passed
by Congress and signed into law by the
President, the tight and officious control by
DBM continues. For the release of
appropriated funds, the Judiciary,
Constitutional Commissions, and Ombudsman
are instructed through "guidelines", how to
prepare Work and Financial Plans and
requests for monthly allotments. The DBM
evaluates and approves these plans and
requests and on the basis of its approval
authorizes the release of allotments with
corresponding notices of cash allocation.
These notices specify the maximum
withdrawals each month which the Supreme
Court, the Commissions and the Ombudsman
may make from the servicing government
bank. The above agencies are also required to
submit to DBM monthly, quarterly and yearend budget accountability reports to indicate
their performance, physical and financial
operations and income,
The DBM reserves to itself the power to
review the accountability reports and when
importuned for needed funds, to release
additional allotments to the agency. Since
DBM always prunes the budget proposals to
below subsistence levels and since emergency
situations usually occur during the fiscal year,
the Chief Justices, Chairmen of the
Commissions, and Ombudsman are compelled
to make pilgrimages to DBM for additional

funds to tide their respective agencies over

the emergency.
What is fiscal autonomy?
As envisioned in the Constitution, the fiscal autonomy
enjoyed by the Judiciary, the Civil Service Commission, the
Commission on Audit, the Commission on Elections, and the
Office of the Ombudsman contemplates a guarantee on full
flexibility to allocate and utilize their resources with the
wisdom and dispatch that their needs require. It recognizes
the power and authority to levy, assess and collect fees, fix
rates of compensation not exceeding the highest rates
authorized by law for compensation and pay plans of the
government and allocate and disburse such sums as may be
provided by law or prescribed by them in the course of the
discharge of their functions.
Fiscal autonomy means freedom from outside control. If the
Supreme Court says it needs 100 typewriters but DBM rules
we need only 10 typewriters and sends its
recommendations to Congress without even informing us,
the autonomy given by the Constitution becomes an empty
and illusory platitude.
The Judiciary, the Constitutional Commissions, and the
Ombudsman must have the independence end flexibility
needed in the discharge of their constitutional duties. The
imposition of restrictions and constraints on the manner the
independent constitutional offices allocate and utilize the
funds appropriated for their operations is anathema to fiscal
autonomy and violative not only of the express mandate of
the Constitution but especially as regards the Supreme
Court, of the independence and separation of powers upon
which the entire fabric of our constitutional system is based.
In the interest of comity and cooperation, the Supreme
Court, Constitutional Commissions, and the Ombudsman

have so far limited their objections to constant reminders.

We now agree with the petitioners that this grant of
autonomy should cease to be a meaningless provision.
In the case at bar, the veto of these specific provisions in
the General Appropriations Act is tantamount to dictating to
the Judiciary how its funds should be utilized, which is
clearly repugnant to fiscal autonomy. The freedom of the
Chief Justice to make adjustments in the utilization of the
funds appropriated for the expenditures of the judiciary,
including the use of any savings from any particular item to
cover deficits or shortages in other items of the Judiciary is
withheld. Pursuant to the Constitutional mandate, the
Judiciary must enjoy freedom in the disposition of the funds
allocated to it in the appropriations law. It knows its
priorities just as it is aware of the fiscal restraints. The Chief
Justice must be given a free hand on how to augment
appropriations where augmentation is needed.
Furthermore, in the case of Gonzales v. Macaraig (191
SCRA 452 [1990]), the Court upheld the authority of the
President and other key officials to augment any item or
any appropriation from savings in the interest of expediency
and efficiency. The Court stated that:

The Constitution, particularly Article VI, Section 25(5) also

provides:
Sec. 25. (5) No law shall be passed
authorizing any transfer of appropriations;
however, the President, the President of the
Senate, the Speaker of the House of
Representatives, the Chief Justice of the
Supreme Court, and the heads of
Constitutional Commissions may, by law, be
authorized to augment any item in the
general appropriations law for their respective
offices from savings in other items of their
respective appropriations.
In the instant case, the vetoed provisions which relate to
the use of savings for augmenting items for the payment of
the pension differentials, among others, are clearly in
consonance with the abovestated pronouncements of the
Court. The veto impairs the power of the Chief Justice to
augment other items in the Judiciary's appropriation, in
contravention of the constitutional provision on "fiscal
autonomy."
III

There should be no question, therefore, that

statutory authority has, in fact, been granted.
And once given, the heads of the different
branches of the Government and those of the
Constitutional Commissions are afforded
considerable flexibility in the use of public
funds and resources (Demetria v.
Alba, supra). The doctrine of separation of
powers is in no way endangered because the
transfer is made within a department (or
branch of government) and not from one
department (branch) to another.

Finally, it can not be denied that the retired Justices have a

vested right to the accrued pensions due them pursuant to
RA 1797.
The right to a public pension is of statutory origin and
statutes dealing with pensions have been enacted by
practically all the states in the United States (State ex rel.
Murray v, Riley, 44 Del 505, 62 A2d 236), and presumably
in most countries of the world. Statutory provisions for the
support of Judges or Justices on retirement are founded on
services rendered to the state. Where a judge has complied

with the statutory prerequisite for retirement with pay, his

right to retire and draw salary becomes vested and may
not, thereafter, be revoked or impaired. (Gay v. Whitehurst,
44 So ad 430)
Thus, in the Philippines, a number of retirement laws have
been enacted, the purpose of which is to entice competent
men and women to enter the government service and to
permit them to retire therefrom with relative security, not
only those who have retained their vigor but, more so,
those who have been incapacitated by illness or accident.
(In re: Amount of the Monthly Pension of Judges and
Justices Starting From the Sixth Year of their Retirement
and After the Expiration of the Initial Five-year Period of
Retirement, (190 SCRA 315 [1990]).
As early as 1953, Rep. Act No. 910 was enacted to grant
pensions to retired Justices of the Supreme Court and Court
of Appeals.
This was amended by RA 1797 which provided for an
automatic adjustment of the pension rates. Through the
years, laws were enacted and jurisprudence expounded to
afford retirees better benefits.
P.D. No. 1438, for one, was promulgated on June 10, 1978
amending RA 910 providing that the lump sum of 5 years
gratuity to which the retired Justices of the Supreme Court
and Court of Appeals were entitled was to be computed on
the basis of the highest monthly aggregate of
transportation, living and representation allowances each
Justice was receiving on the date of his resignation. The
Supreme Court in a resolution dated October 4, 1990,
stated that this law on gratuities covers the monthly
pensions of retired Judges and Justices which should include
the highest monthly aggregate of transportation, living and
representation allowances the retiree was receiving on the

date of retirement. (In Re: Amount of the Monthly Pension

of Judges and Justices, supra)
The rationale behind the veto which implies that Justices
and Constitutional officers are unduly favored is, again, a
misimpression.
Immediately, we can state that retired Armed Forces
officers and enlisted men number in the tens of thousands
while retired Justices are so few they can be immediately
identified. Justices retire at age 70 while military men retire
at a much younger age some retired Generals left the
military at age 50 or earlier. Yet the benefits in Rep. Act No.
1797 are made to apply equally to both groups. Any ideas
arising from an alleged violation of the equal protection
clause should first be directed to retirees in the military or
civil service where the reason for the retirement provision is
not based on indubitable and constitutionally sanctioned
grounds, not to a handful of retired Justices whose
retirement pensions are founded on constitutional reasons.
The provisions regarding retirement pensions of justices
arise from the package of protections given by the
Constitution to guarantee and preserve the independence of
the Judiciary.
The Constitution expressly vests the power of judicial review
in this Court. Any institution given the power to declare, in
proper cases, that act of both the President and Congress
are unconstitutional needs a high degree of independence in
the exercise of its functions. Our jurisdiction may not be
reduced by Congress. Neither may it be increased without
our advice and concurrence. Justices may not be removed
until they reach age 70 except through impeachment. All
courts and court personnel are under the administrative
supervision of the Supreme Court. The President may not
appoint any Judge or Justice unless he or she has been

nominated by the Judicial and Bar Council which, in turn, is

under the Supreme Court's supervision. Our salaries may
not be decreased during our continuance in office. We
cannot be designated to any agency performing
administrative or quasi-judicial functions. We are specifically
given fiscal autonomy. The Judiciary is not only independent
of, but also co-equal and coordinate with the Executive and
Legislative Departments. (Article VIII and section 30, Article
VI, Constitution)
Any argument which seeks to remove special privileges
given by law to former Justices of this Court and the ground
that there should be no "grant of distinct privileges" or
"preferential treatment" to retired Justices ignores these
provisions of the Constitution and, in effect, asks that these
Constitutional provisions on special protections for the
Judiciary be repealed. The integrity of our entire
constitutional system is premised to a large extent on the
independence of the Judiciary. All these provisions are
intended to preserve that independence. So are the laws on
retirement benefits of Justices.
One last point.

robbery because it is done under the forms of

law . . ." (Law Association V. Topeka, 20 Wall.
655) (Comment, p. 16)
The above arguments are not only specious, impolite and
offensive; they certainly are unbecoming of an office whose
top officials are supposed to be, under their charter, learned
in the law.
Chief Justice Cesar Bengzon and Chief Justice Querube
Makalintal, Justices J.B.L. Reyes, Cecilia Muoz Palma, Efren
Plana, Vicente Abad Santos, and, in fact, all retired Justices
of the Supreme Court and the Court of Appeals may no
longer be in the active service. Still, the Solicitor General
and all lawyers under him who represent the government
before the two courts and whose predecessors themselves
appeared before these retirees, should show some
continuing esteem and good manners toward these Justices
who are now in the evening of their years.
All that the retirees ask is to be given the benefits granted
by law. To characterize them as engaging in "robbery" is
intemperate, abrasive, and disrespectful more so because
the argument is unfounded.

The Office of the Solicitor General argues that:

. . . Moreover, by granting these benefits to
retired Justices implies that public funds,
raised from taxes on other citizens, will be
paid off to select individuals who are already
leading private lives and have ceased
performing public service. Said the United
States Supreme Court, speaking through Mr.
Justice Miller: "To lay with one hand the
power of the government on the property of
the citizen, and with the other to bestow upon
favored individuals . . . is nonetheless a

If the Comment is characteristic of OSG pleadings today,

then we are sorry to state that the then quality of research
in that institution has severely deteriorated.
In the first place, the citation of the case is, wrong. The title
is not LAW Association v. Topeka but Citizen's Savings and
Loan Association of Cleveland, Ohio v. Topeka City (20 Wall.
655; 87 U.S. 729; 22 Law. Ed. 455 [1874]. Second, the
case involved the validity of a statute authorizing cities and
counties to issue bonds for the purpose of building bridges,
waterpower, and other public works to aid private railroads
improve their services. The law was declared void on the

ground that the right of a municipality to impose a tax

cannot be used for private interests.
The case was decided in 1874. The world has turned over
more than 40,000 times since that ancient period. Public
use is now equated with public interest. Public money may
now be used for slum clearance, low-cost housing, squatter
resettlement, urban and agrarian reform where only private
persons are the immediate beneficiaries. What was
"robbery" in 1874 is now called "social justice." There is
nothing about retirement benefits in the cited case.
Obviously, the OSG lawyers cited from an old textbook or
encyclopedia which could not even spell "loan" correctly.
Good lawyers are expected to go to primary sources and to
use only relevant citations.
The Court has been deluged with letters and petitions by
former colleagues in the Judiciary requesting adjustments in
their pensions just so they would be able to cope with the
everyday living expenses not to mention the high cost of
medical bills that old age entails. As Justice Cruz aptly
stated in Teodoro J. Santiago v. COA, (G.R. No. 92284, July
12, 1991);
Retirement laws should be interpreted
liberally in favor of the retiree because their
intention is to provide for his sustenance, and
hopefully even comfort, when he no longer
has the stamina to continue earning his
livelihood. After devoting the best years of his
life to the public service, he deserves the
appreciation of a grateful government as best
concretely expressed in a generous
retirement gratuity commensurate with the
value and length of his services. That
generosity is the least he should expect now
that his work is done and his youth is gone.
Even as he feels the weariness in his bones

and glimpses the approach of the lengthening

shadows, he should be able to luxuriate in the
thought that he did his task well, and was
rewarded for it.
For as long as these retired Justices are entitled under laws
which continue to be effective, the government can not
deprive them of their vested right to the payment of their
pensions.
WHEREFORE, the petition is hereby GRANTED. The
questioned veto is SET ASIDE as illegal and
unconstitutional. The vetoed provisions of the 1992
Appropriations Act are declared valid and subsisting. The
respondents are ordered to automatically and regularly
release pursuant to the grant of fiscal autonomy the funds
appropriated for the subject pensions as well as the other
appropriations for the Judiciary. The resolution in
Administrative Matter No. 91-8-225-CA dated November 28,
1991 is likewise ordered to be implemented as
promulgated.
SO ORDERED.
Narvasa, C.J., Melencio-Herrera, Cruz, Paras, Feliciano,
Padilla, Bidin, Grio-Aquino, Medialdea, Regalado, Davide,
Jr., Romero and Nocon, JJ., concur.
Bellosillo, J., is on leave.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC

G.R. No. 113105 August 19, 1994

PHILIPPINE CONSTITUTION ASSOCIATION,
EXEQUIEL B. GARCIA and A. GONZALES, petitioners,
vs.
HON. SALVADOR ENRIQUEZ, as Secretary of Budget
and Management; HON. VICENTE T. TAN, as National
Treasurer and COMMISSION ON AUDIT, respondents.
G.R. No. 113174 August 19, 1994
RAUL S. ROCO, as Member of the Philippine Senate,
NEPTALI A. GONZALES, Chairman of the Committee
on Finance of the Philippine Senate, and EDGARDO J.
ANGARA, as President and Chief Executive of the
Philippine Senate, all of whom also sue as taxpayers,
in their own behalf and in representation of Senators
HEHERSON ALVAREZ, AGAPITO A. AQUINO, RODOLFO
G. BIAZON, JOSE D. LINA, JR., ERNESTO F. HERRERA,
BLAS F. OPLE, JOHN H. OSMENA, GLORIA
MACAPAGAL- ARROYO, VICENTE C. SOTTO III,
ARTURO M. TOLENTINO, FRANCISCO S. TATAD,
WIGBERTO E. TAADA and FREDDIE N.
WEBB, petitioners,
vs.
THE EXECUTIVE SECRETARY, THE DEPARTMENT OF
BUDGET AND MANAGEMENT, and THE NATIONAL
TREASURER, THE COMMISSION ON AUDIT, impleaded

herein as an unwilling
co-petitioner, respondents.
G.R. No. 113766 August 19, 1994
WIGBERTO E. TAADA and ALBERTO G. ROMULO, as
Members of the Senate and as taxpayers, and
FREEDOM FROM DEBT COALITION, petitioners,
vs.
HON. TEOFISTO T. GUINGONA, JR. in his capacity as
Executive Secretary, HON. SALVADOR ENRIQUEZ, JR.,
in his capacity as Secretary of the Department of
Budget and Management, HON. CARIDAD
VALDEHUESA, in her capacity as National Treasurer,
and THE COMMISSION ON AUDIT, respondents.
G.R. No. 113888 August 19, 1994
WIGBERTO E. TAADA and ALBERTO G. ROMULO, as
Members of the Senate and as taxpayers,petitioners,
vs.
HON. TEOFISTO T. GUINGONA, JR., in his capacity as
Executive Secretary, HON. SALVADOR ENRIQUEZ, JR.,
in his capacity as Secretary of the Department of
Budget and Management, HON. CARIDAD
VALDEHUESA, in her capacity as National Treasurer,
and THE COMMISSION ON AUDIT, respondents.
Ramon R. Gonzales for petitioners in G.R. No. 113105.
Eddie Tamondong for petitioners in G.R. Nos. 113766 &
113888.
Roco, Buag, Kapunan, Migallos & Jardeleza for petitioners
Raul S. Roco, Neptali A. Gonzales and Edgardo Angara.

Ceferino Padua Law Office fro intervenor Lawyers Against

Monopoly and Poverty (Lamp).

QUIASON, J.:
Once again this Court is called upon to rule on the
conflicting claims of authority between the Legislative and
the Executive in the clash of the powers of the purse and
the sword. Providing the focus for the contest between the
President and the Congress over control of the national
budget are the four cases at bench. Judicial intervention is
being sought by a group of concerned taxpayers on the
claim that Congress and the President have impermissibly
exceeded their respective authorities, and by several
Senators on the claim that the President has committed
grave abuse of discretion or acted without jurisdiction in the
exercise of his veto power.
I
House Bill No. 10900, the General Appropriation Bill of 1994
(GAB of 1994), was passed and approved by both houses of
Congress on December 17, 1993. As passed, it imposed
conditions and limitations on certain items of appropriations
in the proposed budget previously submitted by the
President. It also authorized members of Congress to
propose and identify projects in the "pork barrels" allotted
to them and to realign their respective operating budgets.
Pursuant to the procedure on the passage and enactment of
bills as prescribed by the Constitution, Congress presented
the said bill to the President for consideration and approval.
On December 30, 1993, the President signed the bill into
law, and declared the same to have become Republic Act

No. 7663, entitled "AN ACT APPROPRIATING FUNDS FOR

THE OPERATION OF THE GOVERNMENT OF THE
PHILIPPINES FROM JANUARY ONE TO DECEMBER THIRTY
ONE, NINETEEN HUNDRED AND NINETY-FOUR, AND FOR
OTHER PURPOSES" (GAA of 1994). On the same day, the
President delivered his Presidential Veto Message, specifying
the provisions of the bill he vetoed and on which he
imposed certain conditions.
No step was taken in either House of Congress to override
the vetoes.
In G.R. No. 113105, the Philippine Constitution Association,
Exequiel B. Garcia and Ramon A. Gonzales as taxpayers,
prayed for a writ of prohibition to declare as
unconstitutional and void: (a) Article XLI on the
Countrywide Development Fund, the special provision in
Article I entitled Realignment of Allocation for Operational
Expenses, and Article XLVIII on the Appropriation for Debt
Service or the amount appropriated under said Article
XLVIII in excess of the P37.9 Billion allocated for the
Department of Education, Culture and Sports; and (b) the
veto of the President of the Special Provision of
Article XLVIII of the GAA of 1994 (Rollo, pp. 88-90, 104105)
In G.R. No. 113174, sixteen members of the Senate led by
Senate President Edgardo J. Angara, Senator Neptali A.
Gonzales, the Chairman of the Committee on Finance, and
Senator Raul S. Roco, sought the issuance of the writs of
certiorari, prohibition and mandamus against the Executive
Secretary, the Secretary of the Department of Budget and
Management, and the National Treasurer.
Suing as members of the Senate and taxpayers, petitioners
question: (1) the constitutionality of the conditions imposed
by the President in the items of the GAA of 1994: (a) for the

Supreme Court, (b) Commission on Audit (COA), (c)

Ombudsman, (d) Commission on Human Rights (CHR), (e)
Citizen Armed Forces Geographical Units (CAFGU'S) and (f)
State Universities and Colleges (SUC's); and (2) the
constitutionality of the veto of the special provision in the
appropriation for debt service.
In G.R. No. 113766, Senators Alberto G. Romulo and
Wigberto Taada (a co-petitioner in G.R. No. 113174),
together with the Freedom from Debt Coalition, a non-stock
domestic corporation, sought the issuance of the writs of
prohibition and mandamus against the Executive Secretary,
the Secretary of the Department of Budget and
Management, the National Treasurer, and the COA.
Petitioners Taada and Romulo sued as members of the
Philippine Senate and taxpayers, while petitioner Freedom
from Debt Coalition sued as a taxpayer. They challenge the
constitutionality of the Presidential veto of the special
provision in the appropriations for debt service and the
automatic appropriation of funds therefor.
In G.R. No. 11388, Senators Taada and Romulo sought the
issuance of the writs of prohibition and mandamus against
the same respondents in G.R. No. 113766. In this petition,
petitioners contest the constitutionality of: (1) the veto on
four special provision added to items in the GAA of 1994 for
the Armed Forces of the Philippines (AFP) and the
Department of Public Works and Highways (DPWH); and (2)
the conditions imposed by the President in the
implementation of certain appropriations for the CAFGU's,
the DPWH, and the National Housing Authority (NHA).
Petitioners also sought the issuance of temporary
restraining orders to enjoin respondents Secretary of
Budget and Management, National Treasurer and COA from
enforcing the questioned provisions of the GAA of 1994, but

the Court declined to grant said provisional reliefs on the

time- honored principle of according the presumption of
validity to statutes and the presumption of regularity to
official acts.
In view of the importance and novelty of most of the issues
raised in the four petitions, the Court invited former Chief
Justice Enrique M. Fernando and former Associate Justice
Irene Cortes to submit their respective memoranda
as Amicus curiae, which they graciously did.
II
Locus Standi
When issues of constitutionality are raised, the Court can
exercise its power of judicial review only if the following
requisites are compresent: (1) the existence of an actual
and appropriate case; (2) a personal and substantial
interest of the party raising the constitutional question; (3)
the exercise of judicial review is pleaded at the earliest
opportunity; and (4) the constitutional question is the lis
mota of the case (Luz Farms v. Secretary of the Department
of Agrarian Reform, 192 SCRA 51 [1990]; Dumlao v.
Commission on Elections, 95 SCRA 392 [1980]; People v.
Vera, 65 Phil. 56 [1937]).
While the Solicitor General did not question the locus
standi of petitioners in G.R. No. 113105, he claimed that the
remedy of the Senators in the other petitions is political
(i.e., to override the vetoes) in effect saying that they do
not have the requisite legal standing to bring the suits.
The legal standing of the Senate, as an institution, was
recognized in Gonzales v. Macaraig, Jr., 191 SCRA 452
(1990). In said case, 23 Senators, comprising the entire
membership of the Upper House of Congress, filed a petition

to nullify the presidential veto of Section 55 of the GAA of

1989. The filing of the suit was authorized by Senate
Resolution No. 381, adopted on February 2, 1989, and
which reads as follows:
Authorizing and Directing the Committee on
Finance to Bring in the Name of the Senate of
the Philippines the Proper Suit with the
Supreme Court of the Philippines contesting
the Constitutionality of the Veto by the
President of Special and General Provisions,
particularly Section 55, of the General
Appropriation Bill of 1989 (H.B. No. 19186)
and For Other Purposes.
In the United States, the legal standing of a House of
Congress to sue has been recognized (United States v.
American Tel. & Tel. Co., 551 F. 2d 384, 391 [1976];
Notes: Congressional Access To The Federal Courts, 90
Harvard Law Review 1632 [1977]).
While the petition in G.R. No. 113174 was filed by 16
Senators, including the Senate President and the Chairman
of the Committee on Finance, the suit was not authorized by
the Senate itself. Likewise, the petitions in
G.R. Nos. 113766 and 113888 were filed without an
enabling resolution for the purpose.
Therefore, the question of the legal standing of petitioners
in the three cases becomes a preliminary issue before this
Court can inquire into the validity of the presidential veto
and the conditions for the implementation of some items in
the GAA of 1994.
We rule that a member of the Senate, and of the House of
Representatives for that matter, has the legal standing to

question the validity of a presidential veto or a condition

imposed on an item in an appropriation bill.
Where the veto is claimed to have been made without or in
excess of the authority vested on the President by the
Constitution, the issue of an impermissible intrusion of the
Executive into the domain of the Legislature arises
(Notes: Congressional Standing To Challenge Executive
Action, 122 University of Pennsylvania Law Review 1366
[1974]).
To the extent the power of Congress are impaired, so is the
power of each member thereof, since his office confers a
right to participate in the exercise of the powers of that
institution (Coleman v. Miller, 307 U.S. 433 [1939];
Holtzman v. Schlesinger, 484 F. 2d 1307 [1973]).
An act of the Executive which injures the institution of
Congress causes a derivative but nonetheless substantial
injury, which can be questioned by a member of Congress
(Kennedy v. Jones, 412 F. Supp. 353 [1976]). In such a
case, any member of Congress can have a resort to the
courts.
Former Chief Justice Enrique M. Fernando, as Amicus
Curiae, noted:
This is, then, the clearest case of the Senate
as a whole or individual Senators as such
having a substantial interest in the question
at issue. It could likewise be said that there
was the requisite injury to their rights as
Senators. It would then be futile to raise
any locus standi issue. Any intrusion into the
domain appertaining to the Senate is to be
resisted. Similarly, if the situation were
reversed, and it is the Executive Branch that

could allege a transgression, its officials could

likewise file the corresponding action. What
cannot be denied is that a Senator has
standing to maintain inviolate the
prerogatives, powers and privileges vested by
the Constitution in his office (Memorandum,
p. 14).
It is true that the Constitution provides a mechanism for
overriding a veto (Art. VI, Sec. 27 [1]). Said remedy,
however, is available only when the presidential veto is
based on policy or political considerations but not when the
veto is claimed to be ultra vires. In the latter case, it
becomes the duty of the Court to draw the dividing line
where the exercise of executive power ends and the bounds
of legislative jurisdiction begin.
III
G.R. No. 113105
1. Countrywide Development Fund
Article XLI of the GAA of 1994 sets up a Countrywide
Development Fund of P2,977,000,000.00 to "be used for
infrastructure, purchase of ambulances and computers and
other priority projects and activities and credit facilities to
qualified beneficiaries." Said Article provides:
COUNTRYWIDE DEVELOPMENT FUND
For Fund requirements of countrywide
development projects P 2,977,000,000

New Appropriations, by Purpose

Current Operating Expenditures

A. PURPOSE
Personal Maintenance Capital Total
Services and Other Outlays
Operating
Expenses
1. For Countrywide
Developments Projects P250,000,000
P2,727,000,000 P2,977,000,000
TOTAL NEW
APPROPRIATIONS P250,000,000
P2,727,000,000 P2,977,000,000
Special Provisions
1. Use and Release of Funds. The amount
herein appropriated shall be used for
infrastructure, purchase of ambulances and
computers and other priority projects and
activities, and credit facilities to qualified
beneficiaries as proposed and identified by
officials concerned according to the following
allocations: Representatives, P12,500,000
each; Senators, P18,000,000 each; VicePresident, P20,000,000; PROVIDED, That, the
said credit facilities shall be constituted as a
revolving fund to be administered by a
government financial institution (GFI) as a
trust fund for lending operations. Prior years
releases to local government units and
national government agencies for this
purpose shall be turned over to the
government financial institution which shall
be the sole administrator of credit facilities
released from this fund.

The fund shall be automatically released

quarterly by way of Advice of Allotments and
Notice of Cash Allocation directly to the
assigned implementing agency not later than
five (5) days after the beginning of each
quarter upon submission of the list of projects
and activities by the officials concerned.
2. Submission of Quarterly Reports. The
Department of Budget and Management shall
submit within thirty (30) days after the end of
each quarter a report to the Senate
Committee on Finance and the House
Committee on Appropriations on the releases
made from this Fund. The report shall include
the listing of the projects, locations,
implementing agencies and the endorsing
officials (GAA of 1994, p. 1245).
Petitioners claim that the power given to the members of
Congress to propose and identify the projects and activities
to be funded by the Countrywide Development Fund is an
encroachment by the legislature on executive power, since
said power in an appropriation act in implementation of a
law. They argue that the proposal and identification of the
projects do not involve the making of laws or the repeal and
amendment thereof, the only function given to the Congress
by the Constitution (Rollo, pp. 78- 86).
Under the Constitution, the spending power called by James
Madison as "the power of the purse," belongs to Congress,
subject only to the veto power of the President. The
President may propose the budget, but still the final say on
the matter of appropriations is lodged in the Congress.
The power of appropriation carries with it the power to
specify the project or activity to be funded under the

appropriation law. It can be as detailed and as broad as

Congress wants it to be.
The Countrywide Development Fund is explicit that it shall
be used "for infrastructure, purchase of ambulances and
computers and other priority projects and activities and
credit facilities to qualified beneficiaries . . ." It was
Congress itself that determined the purposes for the
appropriation.
Executive function under the Countrywide Development
Fund involves implementation of the priority projects
specified in the law.
The authority given to the members of Congress is only to
propose and identify projects to be implemented by the
President. Under Article XLI of the GAA of 1994, the
President must perforce examine whether the proposals
submitted by the members of Congress fall within the
specific items of expenditures for which the Fund was set
up, and if qualified, he next determines whether they are in
line with other projects planned for the locality. Thereafter,
if the proposed projects qualify for funding under the Funds,
it is the President who shall implement them. In short, the
proposals and identifications made by the members of
Congress are merely recommendatory.
The procedure of proposing and identifying by members of
Congress of particular projects or activities under Article XLI
of the GAA of 1994 is imaginative as it is innovative.
The Constitution is a framework of a workable government
and its interpretation must take into account the
complexities, realities and politics attendant to the
operation of the political branches of government. Prior to
the GAA of 1991, there was an uneven allocation of
appropriations for the constituents of the members of

Congress, with the members close to the Congressional

leadership or who hold cards for "horse-trading," getting
more than their less favored colleagues. The members of
Congress also had to reckon with an unsympathetic
President, who could exercise his veto power to cancel from
the appropriation bill a pet project of a Representative or
Senator.
The Countrywide Development Fund attempts to make
equal the unequal. It is also a recognition that individual
members of Congress, far more than the President and their
congressional colleagues are likely to be knowledgeable
about the needs of their respective constituents and the
priority to be given each project.
2. Realignment of Operating Expenses
Under the GAA of 1994, the appropriation for the Senate is
P472,000,000.00 of which P464,447,000.00 is appropriated
for current operating expenditures, while the appropriation
for the House of Representatives is P1,171,924,000.00 of
which P1,165,297,000.00 is appropriated for current
operating expenditures (GAA of 1994, pp. 2, 4, 9, 12).
The 1994 operating expenditures for the Senate are as
follows:
Personal Services
Salaries, Permanent 153,347
Salaries/Wage, Contractual/Emergency 6,870

Total Salaries and Wages 160,217

=======
Other Compensation

Step Increments 1,073

Honoraria and Commutable Allowances 3,731
Compensation Insurance Premiums 1,579
Pag-I.B.I.G. Contributions 1,184
Medicare Premiums 888
Bonus and Cash Gift 14,791
Terminal Leave Benefits 2,000
Personnel Economic Relief Allowance 10,266
Additional Compensation of P500 under A.O.
53 11,130
Others 57,173

Total Other Compensation 103,815

01 Total Personal Services 264,032

=======
Maintenance and Other Operating Expenses
02 Traveling Expenses 32,841
03 Communication Services 7,666
04 Repair and Maintenance of Government
Facilities 1,220
05 Repair and Maintenance of Government
Vehicles 318
06 Transportation Services 128
07 Supplies and Materials 20,189
08 Rents 24,584
14 Water/Illumination and Power 6,561
15 Social Security Benefits and Other Claims
3,270
17 Training and Seminars Expenses 2,225
18 Extraordinary and Miscellaneous Expenses
9,360
23 Advertising and Publication
24 Fidelity Bonds and Insurance Premiums

1,325
29 Other Services 89,778

Total Maintenance and Other Operating

Expenditures 200,415

Total Current Operating Expenditures 464,447

=======
(GAA of 1994, pp. 3-4)
The 1994 operating expenditures for the House of
Representatives are as follows:
Personal Services
Salaries, Permanent 261,557
Salaries/Wages, Contractual/Emergency
143,643

Total Salaries and Wages 405,200

=======
Other Compensation
Step Increments 4,312
Honoraria and Commutable
Allowances 4,764
Compensation Insurance
Premiums 1,159
Pag-I.B.I.G. Contributions 5,231
Medicare Premiums 2,281
Bonus and Cash Gift 35,669
Terminal Leave Benefits 29
Personnel Economic Relief
Allowance 21,150

Additional Compensation of P500 under A.O.

53
Others 106,140

Total Other Compensation 202,863

01 Total Personal Services 608,063

=======
Maintenance and Other Operating Expenses
02 Traveling Expenses 139,611
03 Communication Services 22,514
04 Repair and Maintenance of Government
Facilities 5,116
05 Repair and Maintenance of Government
Vehicles 1,863
06 Transportation Services 178
07 Supplies and Materials 55,248
10 Grants/Subsidies/Contributions 940
14 Water/Illumination and Power 14,458
15 Social Security Benefits and Other Claims
325
17 Training and Seminars Expenses 7,236
18 Extraordinary and Miscellaneous Expenses
14,474
20 Anti-Insurgency/Contingency Emergency
Expenses 9,400
23 Advertising and Publication 242
24 Fidelity Bonds and Insurance Premiums
1,420
29 Other Services 284,209

Total Maintenance and Other Operating

Expenditures 557,234

Total Current Operating Expenditures

1,165,297
=======
(GAA of 1994, pp. 11-12)
The Special Provision Applicable to the Congress of the
Philippines provides:
4. Realignment of Allocation for Operational
Expenses. A member of Congress may realign
his allocation for operational expenses to any
other expenses category provide the total of
said allocation is not exceeded. (GAA of 1994,
p. 14).
The appropriation for operating expenditures for each House
is further divided into expenditures for salaries, personal
services, other compensation benefits, maintenance
expenses and other operating expenses. In turn, each
member of Congress is allotted for his own operating
expenditure a proportionate share of the appropriation for
the House to which he belongs. If he does not spend for one
items of expense, the provision in question allows him to
transfer his allocation in said item to another item of
expense.
Petitioners assail the special provision allowing a member of
Congress to realign his allocation for operational expenses
to any other expense category (Rollo, pp. 82-92), claiming
that this practice is prohibited by Section 25(5), Article VI of
the Constitution. Said section provides:
No law shall be passed authorizing any
transfer of appropriations: however, the
President, the President of the Senate, the
Speaker of the House of Representatives, the
Chief Justice of the Supreme Court, and the

heads of Constitutional Commissions may, by

law, be authorized to augment any item in
the general appropriations law for their
respective offices from savings in other items
of their respective appropriations.
The proviso of said Article of the Constitution grants the
President of the Senate and the Speaker of the House of
Representatives the power to augment items in an
appropriation act for their respective offices from savings in
other items of their appropriations, whenever there is a law
authorizing such augmentation.
The special provision on realignment of the operating
expenses of members of Congress is authorized by Section
16 of the General Provisions of the GAA of 1994, which
provides:
Expenditure Components. Except by act of
the Congress of the Philippines, no change or
modification shall be made in the expenditure
items authorized in this Act and other
appropriation laws unless in cases
of augmentations from savings in
appropriations as authorized under Section
25(5) of Article VI of the Constitution (GAA of
1994, p. 1273).
Petitioners argue that the Senate President and the Speaker
of the House of Representatives, but not the individual
members of Congress are the ones authorized to realign the
savings as appropriated.
Under the Special Provisions applicable to the Congress of
the Philippines, the members of Congress only determine
the necessity of the realignment of the savings in the
allotments for their operating expenses. They are in the

best position to do so because they are the ones who know

whether there are savings available in some items and
whether there are deficiencies in other items of their
operating expenses that need augmentation. However, it is
the Senate President and the Speaker of the House of
Representatives, as the case may be, who shall approve the
realignment. Before giving their stamp of approval, these
two officials will have to see to it that:
(1) The funds to be realigned or transferred are actually
savings in the items of expenditures from which the same
are to be taken; and
(2) The transfer or realignment is for the purposes of
augmenting the items of expenditure to which said transfer
or realignment is to be made.
3. Highest Priority for Debt Service
While Congress appropriated P86,323,438,000.00 for debt
service (Article XLVII of the GAA of 1994), it appropriated
only P37,780,450,000.00 for the Department of Education
Culture and Sports. Petitioners urged that Congress cannot
give debt service the highest priority in the GAA of 1994
(Rollo, pp. 93-94) because under the Constitution it should
be education that is entitled to the highest funding. They
invoke Section 5(5), Article XIV thereof, which provides:
(5) The State shall assign the highest
budgetary priority to education and ensure
that teaching will attract and retain its rightful
share of the best available talents through
adequate remuneration and other means of
job satisfaction and fulfillment.

This issue was raised in Guingona, Jr. v. Carague, 196 SCRA

221 (1991), where this Court held that Section 5(5), Article
XIV of the Constitution, is merely directory, thus:
While it is true that under Section 5(5),
Article XIV of the Constitution, Congress is
mandated to "assign the highest budgetary
priority to education" in order to "insure that
teaching will attract and retain its rightful
share of the best available talents through
adequate remuneration and other means of
job satisfaction and fulfillment," it does not
thereby follow that the hands of Congress are
so hamstrung as to deprive it the power to
respond to the imperatives of the national
interest and for the attainment of other state
policies or objectives.
As aptly observed by respondents, since
1985, the budget for education has tripled to
upgrade and improve the facility of the public
school system. The compensation of teachers
has been doubled. The amount of
P29,740,611,000.00 set aside for the
Department of Education, Culture and Sports
under the General Appropriations Act (R.A.
No. 6381), is the highest budgetary allocation
among all department budgets. This is a clear
compliance with the aforesaid constitutional
mandate according highest priority to
education.
Having faithfully complied therewith,
Congress is certainly not without any power,
guided only by its good judgment, to provide
an appropriation, that can reasonably service
our enormous debt, the greater portion of
which was inherited from the previous

administration. It is not only a matter of

honor and to protect the credit standing of
the country. More especially, the very survival
of our economy is at stake. Thus, if in the
process Congress appropriated an amount for
debt service bigger than the share allocated
to education, the Court finds and so holds
that said appropriation cannot be thereby
assailed as unconstitutional.
G.R. No. 113105
G.R. No. 113174
Veto of Provision on Debt Ceiling
The Congress added a Special Provision to Article XLVIII
(Appropriations for Debt Service) of the GAA of 1994 which
provides:
Special Provisions
1. Use of the Fund. The appropriation
authorized herein shall be used for payment
of principal and interest of foreign and
domestic indebtedness; PROVIDED, That any
payment in excess of the amount herein
appropriated shall be subject to the approval
of the President of the Philippines with the
concurrence of the Congress of the
Philippines; PROVIDED, FURTHER, That in no
case shall this fund be used to pay for the
liabilities of the Central Bank Board of
Liquidators.
2. Reporting Requirement. The Bangko
Sentral ng Pilipinas and the Department of
Finance shall submit a quarterly report of

actual foreign and domestic debt service

payments to the House Committee on
Appropriations and Senate Finance
Committee within one (1) month after each
quarter (GAA of 1944, pp. 1266).
The President vetoed the first Special Provision, without
vetoing the P86,323,438,000.00 appropriation for debt
service in said Article. According to the President's Veto
Message:
IV. APPROPRIATIONS FOR DEBT SERVICE
I would like to emphasize that I concur fully
with the desire of Congress to reduce the
debt burden by decreasing the appropriation
for debt service as well as the inclusion of the
Special Provision quoted below. Nevertheless,
I believe that this debt reduction scheme
cannot be validly done through the 1994 GAA.
This must be addressed by revising our debt
policy by way of innovative and
comprehensive debt reduction programs
conceptualized within the ambit of the
Medium-Term Philippine Development Plan.
Appropriations for payment of public debt,
whether foreign or domestic, are
automatically appropriated pursuant to the
Foreign Borrowing Act and Section 31 of P.D.
No. 1177 as reiterated under Section 26,
Chapter 4, Book VI of E.O. No. 292, the
Administrative Code of 1987. I wish to
emphasize that the constitutionality of such
automatic provisions on debt servicing has
been upheld by the Supreme Court in the
case of "Teofisto T. Guingona, Jr., and

Aquilino Q. Pimentel, Jr. v. Hon. Guillermo N.

Carague, in his capacity as Secretary of
Budget and Management, et al.," G.R. No.
94571, dated April 22, 1991.
I am, therefore vetoing the following special
provision for the reason that the GAA is not
the appropriate legislative measure to amend
the provisions of the Foreign Borrowing Act,
P.D. No. 1177 and E.O. No. 292:
Use of the Fund. The
appropriation authorized herein
shall be used for payment of
principal and interest of foreign
and domestic
indebtedness: PROVIDED, That
any payment in excess of the
amount herein appropriated
shall be subject to the approval
of the President of the
Philippines with the
concurrence of the Congress of
the
Philippines:PROVIDED, FURTHE
R, That in no case shall this
fund be used to pay for the
liabilities of the Central Bank
Board of Liquidators (GAA of
1994, p. 1290).
Petitioners claim that the President cannot veto the Special
Provision on the appropriation for debt service without
vetoing the entire amount of P86,323,438.00 for said
purpose (Rollo, G.R. No. 113105, pp. 93-98; Rollo, G.R. No.
113174, pp. 16-18). The Solicitor General counterposed
that the Special Provision did not relate to the item of
appropriation for debt service and could therefore be the

subject of an item veto (Rollo, G.R. No. 113105, pp. 5460; Rollo, G.R. No. 113174, pp. 72-82).
This issue is a mere rehash of the one put to rest
in Gonzales v. Macaraig, Jr., 191 SCRA 452 (1990). In that
case, the issue was stated by the Court, thus:
The fundamental issue raised is whether or
not the veto by the President of Section 55 of
the 1989 Appropriations Bill (Section 55
FY '89), and subsequently of its counterpart
Section 16 of the 1990 Appropriations Bill
(Section 16 FY '90), is unconstitutional and
without effect.
The Court re-stated the issue, just so there would not be
any misunderstanding about it, thus:
The focal issue for resolution is whether or
not the President exceeded the item-veto
power accorded by the Constitution. Or
differently put, has the President the power to
veto "provisions" of an Appropriations Bill?
The bases of the petition in Gonzales, which are similar to
those invoked in the present case, are stated as follows:
In essence, petitioners' cause is anchored on
the following grounds: (1) the President's
line-veto power as regards appropriation bills
is limited to item/s and does not cover
provision/s; therefore, she exceeded her
authority when she vetoed Section 55 (FY
'89) and Section 16 (FY '90) which are
provisions; (2) when the President objects to
a provision of an appropriation bill, she
cannot exercise the item-veto power but

should veto the entire bill; (3) the item-veto

power does not carry with it the power to
strike out conditions or restrictions for that
would be legislation, in violation of the
doctrine of separation of powers; and (4) the
power of augmentation in Article VI, Section
25 [5] of the 1987 Constitution, has to be
provided for by law and, therefore, Congress
is also vested with the prerogative to impose
restrictions on the exercise of that power.
The restrictive interpretation urged by
petitioners that the President may not veto a
provision without vetoing the entire bill not
only disregards the basic principle that a
distinct and severable part of a bill may be
the subject of a separate veto but also
overlooks the Constitutional mandate that
any provision in the general appropriations
bill shall relate specifically to some particular
appropriation therein and that any such
provision shall be limited in its operation to
the appropriation to which it relates (1987
Constitution, Article VI, Section 25 [2]). In
other words, in the true sense of the term, a
provision in an Appropriations Bill is limited in
its operation to some particular appropriation
to which it relates, and does not relate to the
entire bill.
The Court went one step further and ruled that even
assuming arguendo that "provisions" are beyond the
executive power to veto, and Section 55
(FY '89) and Section 16 (FY '90) were not "provisions" in the
budgetary sense of the term, they are "inappropriate
provisions" that should be treated as "items" for the
purpose of the President's veto power.

The Court, citing Henry v. Edwards, La., 346 So. 2d 153

(1977), said that Congress cannot include in a general
appropriations bill matters that should be more properly
enacted in separate legislation, and if it does that, the
inappropriate provisions inserted by it must be treated as
"item", which can be vetoed by the President in the exercise
of his item-veto power.
It is readily apparent that the Special Provision applicable to
the appropriation for debt service insofar as it refers to
funds in excess of the amount appropriated in the bill, is an
"inappropriate" provision referring to funds other than the
P86,323,438,000.00 appropriated in the General
Appropriations Act of 1991.
Likewise the vetoed provision is clearly an attempt to repeal
Section 31 of P.D. No. 1177 (Foreign Borrowing Act) and
E.O. No. 292, and to reverse the debt payment policy. As
held by the Court in Gonzales, the repeal of these laws
should be done in a separate law, not in the appropriations
law.
The Court will indulge every intendment in favor of the
constitutionality of a veto, the same as it will presume the
constitutionality of an act of Congress (Texas Co. v. State,
254 P. 1060; 31 Ariz, 485, 53 A.L.R. 258 [1927]).
The veto power, while exercisable by the President, is
actually a part of the legislative process (Memorandum of
Justice Irene Cortes as Amicus Curiae, pp. 3-7). That is why
it is found in Article VI on the Legislative Department rather
than in Article VII on the Executive Department in the
Constitution. There is, therefore, sound basis to indulge in
the presumption of validity of a veto. The burden shifts on
those questioning the validity thereof to show that its use is
a violation of the Constitution.

Under his general veto power, the President has to veto the
entire bill, not merely parts thereof (1987 Constitution, Art.
VI, Sec. 27[1]). The exception to the general veto power is
the power given to the President to veto any particular item
or items in a general appropriations bill (1987 Constitution,
Art. VI,
Sec. 27[2]). In so doing, the President must veto the entire
item.
A general appropriations bill is a special type of legislation,
whose content is limited to specified sums of money
dedicated to a specific purpose or a separate fiscal unit
(Beckman, The Item Veto Power of the Executive,
31 Temple Law Quarterly 27 [1957]).
The item veto was first introduced by the Organic Act of the
Philippines passed by the U.S. Congress on August 29,
1916. The concept was adopted from some State
Constitutions.
Cognizant of the legislative practice of inserting provisions,
including conditions, restrictions and limitations, to items in
appropriations bills, the Constitutional Convention added the
following sentence to Section 20(2), Article VI of the 1935
Constitution:
. . . When a provision of an appropriation bill
affect one or more items of the same, the
President cannot veto the provision without at
the same time vetoing the particular item or
items to which it relates . . . .
In short, under the 1935 Constitution, the President was
empowered to veto separately not only items in an
appropriations bill but also "provisions".

While the 1987 Constitution did not retain the

aforementioned sentence added to Section 11(2) of Article
VI of the 1935 Constitution, it included the following
provision:
No provision or enactment shall be embraced
in the general appropriations bill unless it
relates specifically to some particular
appropriation therein. Any such provision or
enactment shall be limited in its operation to
the appropriation to which it relates (Art. VI,
Sec. 25[2]).
In Gonzales, we made it clear that the omission of that
sentence of Section 16(2) of the 1935 Constitution in the
1987 Constitution should not be interpreted to mean the
disallowance of the power of the President to veto a
"provision".
As the Constitution is explicit that the provision which
Congress can include in an appropriations bill must "relate
specifically to some particular appropriation therein" and
"be limited in its operation to the appropriation to which it
relates," it follows that any provision which does not relate
to any particular item, or which extends in its operation
beyond an item of appropriation, is considered "an
inappropriate provision" which can be vetoed separately
from an item. Also to be included in the category of
"inappropriate provisions" are unconstitutional provisions
and provisions which are intended to amend other laws,
because clearly these kind of laws have no place in an
appropriations bill. These are matters of general legislation
more appropriately dealt with in separate enactments.
Former Justice Irene Cortes, as Amicus Curiae, commented
that Congress cannot by law establish conditions for and
regulate the exercise of powers of the President given by
the Constitution for that would be an unconstitutional
intrusion into executive prerogative.

The doctrine of "inappropriate provision" was well elucidated

in Henry v. Edwards, supra., thus:
Just as the President may not use his itemveto to usurp constitutional powers conferred
on the legislature, neither can the legislature
deprive the Governor of the constitutional
powers conferred on him as chief executive
officer of the state by including in a general
appropriation bill matters more properly
enacted in separate legislation. The
Governor's constitutional power to veto bills
of general legislation . . . cannot be abridged
by the careful placement of such measures in
a general appropriation bill, thereby forcing
the Governor to choose between approving
unacceptable substantive legislation or
vetoing "items" of expenditures essential to
the operation of government.The legislature
cannot by location of a bill give it immunity
from executive veto. Nor can it circumvent
the Governor's veto power over substantive
legislation by artfully drafting general law
measures so that they appear to be true
conditions or limitations on an item of
appropriation. Otherwise, the legislature
would be permitted to impair the
constitutional responsibilities and functions of
a co-equal branch of government in
contravention of the separation of powers
doctrine . . . We are no more willing to allow
the legislature to use its appropriation power
to infringe on the Governor's constitutional
right to veto matters of substantive legislation
than we are to allow the Governor to
encroach on the Constitutional powers of the
legislature. In order to avoid this result, we
hold that,when the legislature inserts

inappropriate provisions in a general

appropriation bill, such provisions must be
treated as "items" for purposes of the
Governor's item veto power over general
appropriation bills.
xxx xxx xxx
. . . Legislative control cannot be exercised in
such a manner as to encumber the general
appropriation bill with veto-proof "logrolling
measures", special interest provisions which
could not succeed if separately enacted, or
"riders", substantive pieces of legislation
incorporated in a bill to insure passage
without veto . . . (Emphasis supplied).
Petitioners contend that granting arguendo that the veto of
the Special Provision on the ceiling for debt payment is
valid, the President cannot automatically appropriate funds
for debt payment without complying with the conditions for
automatic appropriation under the provisions of R.A. No.
4860 as amended by P.D. No. 81 and the provisions of P.D.
No. 1177 as amended by the Administrative Code of 1987
and P.D. No. 1967 (Rollo, G.R. No. 113766, pp. 9-15).
Petitioners cannot anticipate that the President will not
faithfully execute the laws. The writ of prohibition will not
issue on the fear that official actions will be done in
contravention of the laws.
The President vetoed the entire paragraph one of the
Special Provision of the item on debt service, including the
provisions that the appropriation authorized in said item
"shall be used for payment of the principal and interest of
foreign and domestic indebtedness" and that "in no case
shall this fund be used to pay for the liabilities of the Central

Bank Board of Liquidators." These provisions are germane

to and have a direct connection with the item on debt
service. Inherent in the power of appropriation is the power
to specify how the money shall be spent (Henry v. Edwards,
LA, 346 So., 2d., 153). The said provisos, being appropriate
provisions, cannot be vetoed separately. Hence the item
veto of said provisions is void.
We reiterate, in order to obviate any misunderstanding, that
we are sustaining the veto of the Special Provision of the
item on debt service only with respect to the proviso therein
requiring that "any payment in excess of the amount herein,
appropriated shall be subject to the approval of the
President of the Philippines with the concurrence of the
Congress of the Philippines . . ."
G.R. NO. 113174
G.R. NO. 113766
G.R. NO. 11388
1. Veto of provisions for revolving funds of SUC's.
In the appropriation for State Universities and Colleges
(SUC's), the President vetoed special provisions which
authorize the use of income and the creation, operation and
maintenance of revolving funds. The Special Provisions
vetoed are the following:
(H. 7) West Visayas State University
Equal Sharing of Income. Income earned by
the University subject to Section 13 of the
special provisions applicable to all State
Universities and Colleges shall be equally
shared by the University and the University
Hospital (GAA of 1994, p. 395).

xxx xxx xxx

(J. 3) Leyte State College
Revolving Fund for the Operation of LSC
House and Human Resources Development
Center (HRDC). The income of Leyte State
College derived from the operation of its LSC
House and HRDC shall be constituted into a
Revolving Fund to be deposited in an
authorized government depository bank for
the operational expenses of these
projects/services. The net income of the
Revolving Fund at the end of the year shall be
remitted to the National Treasury and shall
accrue to the General Fund. The
implementing guidelines shall be issued by
the Department of Budget and Management
(GAA of 1994, p. 415).
The vetoed Special Provisions applicable to all SUC's are the
following:
12. Use of Income from Extension Services.
State Universities and Colleges are authorized
to use their income from their extension
services. Subject to the approval of the Board
of Regents and the approval of a special
budget pursuant to Sec. 35, Chapter 5, Book
VI of E.O.
No. 292, such income shall be utilized solely
for faculty development, instructional
materials and work study program (GAA of
1994, p. 490).
xxx xxx xxx

13. Income of State Universities and Colleges.

The income of State Universities and Colleges
derived from tuition fees and other sources as
may be imposed by governing boards other
than those accruing to revolving funds
created under LOI Nos. 872 and 1026 and
those authorized to be recorded as trust
receipts pursuant to Section 40, Chapter 5,
Book VI of E.O. No. 292 shall be deposited
with the National Treasury and recorded as a
Special Account in the General Fund pursuant
to P.D. No. 1234 and P.D. No. 1437 for the
use of the institution, subject to Section 35,
Chapter 5, Book VI of E.O. No.
292L PROVIDED, That disbursements from
the Special Account shall not exceed the
amount actually earned and
deposited: PROVIDED, FURTHER, That a cash
advance on such income may be allowed
State half of income actually realized during
the preceding year and this cash advance
shall be charged against income actually
earned during the budget year: AND
PROVIDED, FINALLY, That in no case shall
such funds be used to create positions, nor
for payment of salaries, wages or allowances,
except as may be specifically approved by the
Department of Budge and Management for
income-producing activities, or to purchase
equipment or books, without the prior
approval of the President of the Philippines
pursuant to Letter of Implementation No. 29.
All collections of the State Universities and
Colleges for fees, charges and receipts
intended for private recipient units, including
private foundations affiliated with these
institutions shall be duly acknowledged with

official receipts and deposited as a trust

receipt before said income shall be subject to
Section 35, Chapter 5, Book VI of E.O. No.
292
(GAA of 1994, p. 490).
The President gave his reason for the veto thus:
Pursuant to Section 65 of the Government
Auditing Code of the Philippines, Section 44,
Chapter 5, Book VI of E.O. No. 292, s. 1987
and Section 22, Article VII of the Constitution,
all income earned by all Government offices
and agencies shall accrue to the General Fund
of the Government in line with the One Fund
Policy enunciated by Section 29 (1), Article VI
and Section 22, Article VII of the Constitution.
Likewise, the creation and establishment of
revolving funds shall be authorized by
substantive law pursuant to Section 66 of the
Government Auditing Code of the Philippines
and Section 45, Chapter 5, Book VI of E.O.
No. 292.
Notwithstanding the aforementioned
provisions of the Constitution and existing
law, I have noted the proliferation of special
provisions authorizing the use of agency
income as well as the creation, operation and
maintenance of revolving funds.
I would like to underscore the facts that such
income were already considered as integral
part of the revenue and financing sources of
the National Expenditure Program which I
previously submitted to Congress. Hence, the
grant of new special provisions authorizing

the use of agency income and the

establishment of revolving funds over and
above the agency appropriations authorized
in this Act shall effectively reduce the
financing sources of the 1994 GAA and, at the
same time, increase the level of expenditures
of some agencies beyond the wellcoordinated, rationalized levels for such
agencies. This corresponding increases the
overall deficit of the National Government
(Veto Message, p. 3).
Petitioners claim that the President acted with grave abuse
of discretion when he disallowed by his veto the "use of
income" and the creation of "revolving fund" by the Western
Visayas State University and Leyte State Colleges when he
allowed other government offices, like the National Stud
Farm, to use their income for their operating expenses
(Rollo, G.R. No. 113174, pp. 15-16).
There was no undue discrimination when the President
vetoed said special provisions while allowing similar
provisions in other government agencies. If some
government agencies were allowed to use their income and
maintain a revolving fund for that purpose, it is because
these agencies have been enjoying such privilege before by
virtue of the special laws authorizing such practices as
exceptions to the "one-fund policy" (e.g., R.A. No. 4618 for
the National Stud Farm, P.D. No. 902-A for the Securities
and Exchange Commission; E.O. No. 359 for the
Department of Budget and Management's Procurement
Service).
2. Veto of provision on 70% (administrative)/30%
(contract) ratio for road maintenance.

In the appropriation for the Department of Public Works and

Highways, the President vetoed the second paragraph of
Special Provision No. 2, specifying the 30% maximum ration
of works to be contracted for the maintenance of national
roads and bridges. The said paragraph reads as follows:
2. Release and Use of Road Maintenance
Funds. Funds allotted for the maintenance
and repair of roads which are provided in this
Act for the Department of Public Works and
Highways shall be released to the respective
Engineering District, subject to such rules and
regulations as may be prescribed by the
Department of Budget and Management.
Maintenance funds for roads and bridges shall
be exempt from budgetary reserve.
Of the amount herein appropriated for the
maintenance of national roads and bridges, a
maximum of thirty percent (30%) shall be
contracted out in accordance with guidelines
to be issued by the Department of Public
Works and Highways. The balance shall be
used for maintenance by force account.
Five percent (5%) of the total road
maintenance fund appropriated herein to be
applied across the board to the allocation of
each region shall be set aside for the
maintenance of roads which may be
converted to or taken over as national roads
during the current year and the same shall be
released to the central office of the said
department for eventual
sub-allotment to the concerned region and
district: PROVIDED, That any balance of the
said five percent (5%) shall be restored to the

regions on a pro-rata basis for the

maintenance of existing national roads.
No retention or deduction as reserves or
overhead expenses shall be made, except as
authorized by law or upon direction of the
President
(GAA of 1994, pp. 785-786; Emphasis
supplied).
The President gave the following reason for the veto:
While I am cognizant of the well-intended
desire of Congress to impose certain
restrictions contained in some special
provisions, I am equally aware that many
programs, projects and activities of agencies
would require some degree of flexibility to
ensure their successful implementation and
therefore risk their completion. Furthermore,
not only could these restrictions and
limitations derail and impede program
implementation but they may also result in a
breach of contractual obligations.
D.1.a. A study conducted by the
Infrastructure Agencies show that for
practical intent and purposes, maintenance by
contract could be undertaken to an optimum
of seventy percent (70%) and the remaining
thirty percent (30%) by force account.
Moreover, the policy of maximizing
implementation through contract maintenance
is a covenant of the Road and Road Transport
Program Loan from the Asian Development
Bank (ADB Loan No. 1047-PHI-1990) and
Overseas Economic Cooperation Fund (OECF

Loan No. PH-C17-199). The same is a

covenant under the World Bank (IBRD) Loan
for the Highway Management Project (IBRD
Loan
No. PH-3430) obtained in 1992.
In the light of the foregoing and considering
the policy of the government to encourage
and maximize private sector participation in
the regular repair and maintenance of
infrastructure facilities, I am directly vetoing
the underlined second paragraph of Special
Provision No. 2 of the Department of Public
Works and Highways (Veto Message, p. 11).
The second paragraph of Special Provision No. 2 brings to
fore the divergence in policy of Congress and the President.
While Congress expressly laid down the condition that only
30% of the total appropriation for road maintenance should
be contracted out, the President, on the basis of a
comprehensive study, believed that contracting out road
maintenance projects at an option of 70% would be more
efficient, economical and practical.
The Special Provision in question is not an inappropriate
provision which can be the subject of a veto. It is not alien
to the appropriation for road maintenance, and on the other
hand, it specified how the said item shall be expended
70% by administrative and 30% by contract.
The 1987 Constitution allows the addition by Congress of
special provisions, conditions to items in an expenditure bill,
which cannot be vetoed separately from the items to which
they relate so long as they are "appropriate" in the
budgetary sense (Art. VII, Sec. 25[2]).

The Solicitor General was hard put in justifying the veto of

this special provision. He merely argued that the provision
is a complete turnabout from an entrenched practice of the
government to maximize contract maintenance (Rollo, G.R.
No. 113888, pp. 85-86). That is not a ground to veto a
provision separate from the item to which it refers.
The veto of the second paragraph of Special Provision No. 2
of the item for the DPWH is therefore unconstitutional.
3. Veto of provision on purchase of medicines by
AFP.
In the appropriation for the Armed Forces of the Philippines
(AFP), the President vetoed the special provision on the
purchase by the AFP of medicines in compliance with the
Generics Drugs Law (R.A. No. 6675). The vetoed provision
reads:
12. Purchase of Medicines. The purchase of
medicines by all Armed Forces of the
Philippines units, hospitals and clinics shall
strictly comply with the formulary embodied
in the National Drug Policy of the Department
of Health (GAA of 1994, p. 748).
According to the President, while it is desirable to subject
the purchase of medicines to a standard formulary, "it is
believed more prudent to provide for a transition period for
its adoption and smooth implementation in the Armed
Forces of the Philippines" (Veto Message, p. 12).
The Special Provision which requires that all purchases of
medicines by the AFP should strictly comply with the
formulary embodied in the National Drug Policy of the
Department of Health is an "appropriate" provision. it is a
mere advertence by Congress to the fact that there is an

existing law, the Generics Act of 1988, that requires "the

extensive use of drugs with generic names through a
rational system of procurement and distribution." The
President believes that it is more prudent to provide for a
transition period for the smooth implementation of the law
in the case of purchases by the Armed Forces of the
Philippines, as implied by Section 11 (Education Drive) of
the law itself. This belief, however, cannot justify his veto of
the provision on the purchase of medicines by the AFP.
Being directly related to and inseparable from the
appropriation item on purchases of medicines by the AFP,
the special provision cannot be vetoed by the President
without also vetoing the said item (Bolinao Electronics
Corporation v. Valencia, 11 SCRA 486 [1964]).
4. Veto of provision on prior approval of Congress for
purchase of military equipment.
In the appropriation for the modernization of the AFP, the
President vetoed the underlined proviso of Special Provision
No. 2 on the "Use of Fund," which requires the prior
approval of Congress for the release of the corresponding
modernization funds, as well as the entire Special
Provisions
No. 3 on the "Specific Prohibition":
2. Use of the Fund. Of the amount herein
appropriated, priority shall be given for the
acquisition of AFP assets necessary for
protecting marine, mineral, forest and other
resources within Philippine territorial borders
and its economic zone, detection, prevention
or deterrence of air or surface intrusions and
to support diplomatic moves aimed at
preserving national dignity, sovereignty and
patrimony: PROVIDED, That the said

modernization fund shall not be released until

a Table of Organization and Equipment for FY
1994-2000 is submitted to and approved by
Congress.
3. Specific Prohibition. The said Modernization
Fund shall not be used for payment of six (6)
additional S-211 Trainer planes, 18 SF-260
Trainer planes and 150 armored personnel
carriers (GAA of 1994, p. 747).
As reason for the veto, the President stated that the said
condition and prohibition violate the Constitutional mandate
of non-impairment of contractual obligations, and if allowed,
"shall effectively alter the original intent of the AFP
Modernization Fund to cover all military equipment deemed
necessary to modernize the Armed Forces of the
Philippines" (Veto Message, p. 12).
Petitioners claim that Special Provision No. 2 on the "Use of
Fund" and Special Provision No. 3 are conditions or
limitations related to the item on the AFP modernization
plan.
The requirement in Special Provision No. 2 on the "Use of
Fund" for the AFP modernization program that the President
must submit all purchases of military equipment to
Congress for its approval, is an exercise of the
"congressional or legislative veto." By way of definition, a
congressional veto is a means whereby the legislature can
block or modify administrative action taken under a statute.
It is a form of legislative control in the implementation of
particular executive actions. The form may be either
negative, that is requiring disapproval of the executive
action, or affirmative, requiring approval of the executive
action. This device represents a significant attempt by
Congress to move from oversight of the executive to shared

administration (Dixon, The Congressional Veto and

Separation of Powers: The Executive on a Leash,
56 North Carolina Law Review, 423 [1978]).
A congressional veto is subject to serious questions
involving the principle of separation of powers.
However the case at bench is not the proper occasion to
resolve the issues of the validity of the legislative veto as
provided in Special Provisions Nos. 2 and 3 because the
issues at hand can be disposed of on other grounds. Any
provision blocking an administrative action in implementing
a law or requiring legislative approval of executive acts
must be incorporated in a separate and substantive bill.
Therefore, being "inappropriate" provisions, Special
Provisions Nos. 2 and 3 were properly vetoed.
As commented by Justice Irene Cortes in her memorandum
as Amicus Curiae: "What Congress cannot do directly by law
it cannot do indirectly by attaching conditions to the
exercise of that power (of the President as Commander-inChief) through provisions in the appropriation law."
Furthermore, Special Provision No. 3, prohibiting the use of
the Modernization Funds for payment of the trainer planes
and armored personnel carriers, which have been
contracted for by the AFP, is violative of the Constitutional
prohibition on the passage of laws that impair the obligation
of contracts (Art. III, Sec. 10), more so, contracts entered
into by the Government itself.
The veto of said special provision is therefore valid.
5. Veto of provision on use of savings to augment
AFP pension funds.

In the appropriation for the AFP Pension and Gratuity Fund,

the President vetoed the new provision authorizing the Chief
of Staff to use savings in the AFP to augment pension and
gratuity funds. The vetoed provision reads:
2. Use of Savings. The Chief of Staff, AFP, is
authorized, subject to the approval of the
Secretary of National Defense, to use savings
in the appropriations provided herein to
augment the pension fund being managed by
the AFP Retirement and Separation Benefits
System as provided under Sections 2(a) and
3 of P.D. No. 361 (GAA of 1994,
p. 746).
According to the President, the grant of retirement and
separation benefits should be covered by direct
appropriations specifically approved for the purpose
pursuant to Section 29(1) of Article VI of the Constitution.
Moreover, he stated that the authority to use savings is
lodged in the officials enumerated in Section 25(5) of Article
VI of the Constitution (Veto Message, pp. 7-8).
Petitioners claim that the Special Provision on AFP Pension
and Gratuity Fund is a condition or limitation which is so
intertwined with the item of appropriation that it could not
be separated therefrom.
The Special Provision, which allows the Chief of Staff to use
savings to augment the pension fund for the AFP being
managed by the AFP Retirement and Separation Benefits
System is violative of Sections 25(5) and 29(1) of the
Article VI of the Constitution.
Under Section 25(5), no law shall be passed authorizing any
transfer of appropriations, and under Section 29(1), no
money shall be paid out of

the Treasury except in pursuance of an appropriation made

by law. While Section 25(5) allows as an exception the
realignment of savings to augment items in the general
appropriations law for the executive branch, such right must
and can be exercised only by the President pursuant to a
specific law.
6. Condition on the deactivation of the CAFGU's.
Congress appropriated compensation for the CAFGU's,
including the payment of separation benefits but it added
the following Special Provision:
1. CAFGU Compensation and Separation
Benefit. The appropriation authorized herein
shall be used for the compensation of
CAFGU's including the payment of their
separation benefit not exceeding one (1) year
subsistence allowance for the 11,000
members who will be deactivated in 1994.
The Chief of Staff, AFP, shall, subject to the
approval of the Secretary of National Defense,
promulgate policies and procedures for the
payment of separation benefit (GAA of 1994,
p. 740).
The President declared in his Veto Message that the
implementation of this Special Provision to the item on the
CAFGU's shall be subject to prior Presidential approval
pursuant to P.D. No. 1597 and R.A.. No. 6758. He gave the
following reasons for imposing the condition:
I am well cognizant of the laudable intention
of Congress in proposing the amendment of
Special Provision No. 1 of the CAFGU.
However, it is premature at this point in time
of our peace process to earmark and declare

through special provision the actual number

of CAFGU members to be deactivated in CY
1994. I understand that the number to be
deactivated would largely depend on the
result or degree of success of the on-going
peace initiatives which are not yet precisely
determinable today. I have desisted,
therefore, to directly veto said provisions
because this would mean the loss of the
entire special provision to the prejudice of its
beneficient provisions. I therefore declare that
the actual implementation of this special
provision shall be subject to prior Presidential
approval pursuant to the provisions of P.D.
No. 1597 and
R.A. No. 6758 (Veto Message, p. 13).
Petitioners claim that the Congress has required the
deactivation of the CAFGU's when it appropriated the money
for payment of the separation pay of the members of
thereof. The President, however, directed that the
deactivation should be done in accordance to his timetable,
taking into consideration the peace and order situation in
the affected localities.
Petitioners complain that the directive of the President was
tantamount to an administrative embargo of the
congressional will to implement the Constitution's command
to dissolve the CAFGU's (Rollo, G.R. No. 113174,
p. 14; G.R. No. 113888, pp. 9, 14-16). They argue that the
President cannot impair or withhold expenditures authorized
and appropriated by Congress when neither the
Appropriations Act nor other legislation authorize such
impounding (Rollo, G.R. No. 113888, pp. 15-16).
The Solicitor General contends that it is the President, as
Commander-in-Chief of the Armed Forces of the Philippines,
who should determine when the services of the CAFGU's are

no longer needed (Rollo, G.R. No. 113888,

pp. 92-95.).
This is the first case before this Court where the power of
the President to impound is put in issue. Impoundment
refers to a refusal by the President, for whatever reason, to
spend funds made available by Congress. It is the failure to
spend or obligate budget authority of any type
(Notes: Impoundment of Funds, 86 Harvard Law Review
1505 [1973]).
Those who deny to the President the power to impound
argue that once Congress has set aside the fund for a
specific purpose in an appropriations act, it becomes
mandatory on the part of the President to implement the
project and to spend the money appropriated therefor. The
President has no discretion on the matter, for the
Constitution imposes on him the duty to faithfully execute
the laws.
In refusing or deferring the implementation of an
appropriation item, the President in effect exercises a veto
power that is not expressly granted by the Constitution. As
a matter of fact, the Constitution does not say anything
about impounding. The source of the Executive authority
must be found elsewhere.
Proponents of impoundment have invoked at least three
principal sources of the authority of the President. Foremost
is the authority to impound given to him either expressly or
impliedly by Congress. Second is the executive power drawn
from the President's role as Commander-in-Chief. Third is
the Faithful Execution Clause which ironically is the same
provision invoked by petitioners herein.
The proponents insist that a faithful execution of the laws
requires that the President desist from implementing the

law if doing so would prejudice public interest. An example

given is when through efficient and prudent management of
a project, substantial savings are made. In such a case, it is
sheer folly to expect the President to spend the entire
amount budgeted in the law (Notes: Presidential
Impoundment: Constitutional Theories and Political
Realities, 61 Georgetown Law Journal 1295 [1973];
Notes; Protecting the Fisc: Executive Impoundment and
Congressional Power, 82 Yale Law Journal 1686 [1973).
We do not find anything in the language used in the
challenged Special Provision that would imply that Congress
intended to deny to the President the right to defer or
reduce the spending, much less to deactivate 11,000 CAFGU
members all at once in 1994. But even if such is the
intention, the appropriation law is not the proper vehicle for
such purpose. Such intention must be embodied and
manifested in another law considering that it abrades the
powers of the Commander-in-Chief and there are existing
laws on the creation of the CAFGU's to be amended. Again
we state: a provision in an appropriations act cannot
be used to repeal or amend other laws, in this case, P.D.
No. 1597 and R.A. No. 6758.
7. Condition on the appropriation for the Supreme
Court, etc.
(a) In the appropriations for the Supreme Court,
Ombudsman, COA, and CHR, the Congress added the
following provisions:
The Judiciary
xxx xxx xxx
Special Provisions

1. Augmentation of any Item in the Court's

Appropriations. Any savings in the
appropriations for the Supreme Court and the
Lower Courts may be utilized by the Chief
Justice of the Supreme Court to augment any
item of the Court's appropriations for (a)
printing of decisions and publication of
"Philippine Reports"; (b) Commutable
terminal leaves of Justices and other
personnel of the Supreme Court and payment
of adjusted pension rates to retired Justices
entitled thereto pursuant to Administrative
Matter No. 91-8-225-C.A.; (c) repair,
maintenance, improvement and other
operating expenses of the courts' libraries,
including purchase of books and periodicals;
(d) purchase, maintenance and improvement
of printing equipment; (e) necessary
expenses for the employment of temporary
employees, contractual and casual
employees, for judicial administration; (f)
maintenance and improvement of the Court's
Electronic Data
Processing System; (g) extraordinary
expenses of the Chief Justice, attendance in
international conferences and conduct of
training programs; (h) commutable
transportation and representation allowances
and fringe benefits for Justices, Clerks of
Court, Court Administrator, Chiefs of Offices
and other Court personnel in accordance with
the rates prescribed by law; and (i)
compensation of attorney-deofficio: PROVIDED, That as mandated by LOI
No. 489 any increase in salary and allowances
shall be subject to the usual procedures and
policies as provided for under

P.D. No. 985 and other pertinent laws (GAA of

1994, p. 1128; Emphasis supplied).
xxx xxx xxx
Commission on Audit
xxx xxx xxx
5. Use of Savings. The Chairman of the
Commission on Audit is hereby authorized,
subject to appropriate accounting and
auditing rules and regulations, to use savings
for the payment of fringe benefits as may be
authorized by law for officials and personnel
of the Commission (GAA of 1994, p. 1161;
Emphasis supplied).
xxx xxx xxx
Office of the Ombudsman
xxx xxx xxx
6. Augmentation of Items in the appropriation
of the Office of the Ombudsman. The
Ombudsman is hereby authorized, subject to
appropriate accounting and auditing rules and
regulations to augment items of appropriation
in the Office of the Ombudsman from savings
in other items of appropriation actually
released, for: (a) printing and/or publication
of decisions, resolutions, training and
information materials; (b) repair,
maintenance and improvement of OMB
Central and Area/Sectoral facilities; (c)
purchase of books, journals, periodicals and

equipment;
(d) payment of commutable representation
and transportation allowances of officials and
employees who by reason of their positions
are entitled thereto and fringe benefits as
may be authorized specifically by law for
officials and personnel of OMB pursuant to
Section 8 of Article IX-B of the Constitution;
and (e) for other official purposes subject to
accounting and auditing rules and regulations
(GAA of 1994, p. 1174; Emphasis supplied).
xxx xxx xxx
Commission on Human Rights
xxx xxx xxx
1. Use of Savings. The Chairman of the
Commission on Human Rights (CHR) is
hereby authorized, subject to appropriate
accounting and auditing rules and regulations,
to augment any item of appropriation in the
office of the CHR from savings in other items
of appropriations actually released, for: (a)
printing and/or publication of decisions,
resolutions, training materials and educational
publications; (b) repair, maintenance and
improvement of Commission's central and
regional facilities; (c) purchase of books,
journals, periodicals and equipment, (d)
payment of commutable representation and
transportation allowances of officials and
employees who by reason of their positions
are entitled thereto and fringe benefits, as
may be authorized by law for officials and
personnel of CHR, subject to accounting and

auditing rules and regulations (GAA of 1994,

p. 1178; Emphasis supplied).
In his Veto Message, the President expressed his approval
of the conditions included in the GAA of 1994. He noted
that:
The said condition is consistent with the
Constitutional injunction prescribed under
Section 8, Article IX-B of the Constitution
which states that "no elective or appointive
public officer or employee shall receive
additional, double, or indirect compensation
unless specifically authorized by law." I am,
therefore, confident that the heads of the said
offices shall maintain fidelity to the law and
faithfully adhere to the well-established
principle on compensation standardization
(Veto Message, p. 10).
Petitioners claim that the conditions imposed by the
President violated the independence and fiscal autonomy of
the Supreme Court, the Ombudsman, the COA and the CHR.
In the first place, the conditions questioned by petitioners
were placed in the GAB by Congress itself, not by the
President. The Veto Message merely highlighted the
Constitutional mandate that additional or indirect
compensation can only be given pursuant to law.
In the second place, such statements are mere reminders
that the disbursements of appropriations must be made in
accordance with law. Such statements may, at worse, be
treated as superfluities.
(b) In the appropriation for the COA, the President imposed
the condition that the implementation of the budget of the

COA be subject to "the guidelines to be issued by the

President."
The provisions subject to said condition reads:
xxx xxx xxx
3. Revolving Fund. The income of the
Commission on Audit derived from sources
authorized by the Government Auditing Code
of the Philippines (P.D. No. 1445) not
exceeding Ten Million Pesos (P10,000,000)
shall be constituted into a revolving fund
which shall be used for maintenance,
operating and other incidental expenses to
enhance audit services and audit-related
activities. The fund shall be deposited in an
authorized government depository ban, and
withdrawals therefrom shall be made in
accordance with the procedure prescribed by
law and implementing rules and
regulations:PROVIDED, That any interests
earned on such deposit shall be remitted at
the end of each quarter to the national
Treasury and shall accrue to the General
Fund: PROVIDED FURTHER, That the
Commission on Audit shall submit to the
Department of Budget and Management a
quarterly report of income and expenditures
of said revolving fund (GAA of 1994, pp.
1160-1161).
The President cited the "imperative need to rationalize" the
implementation, applicability and operation of use of income
and revolving funds. The Veto Message stated:

. . . I have observed that there are old and

long existing special provisions authorizing
the use of income and the creation of
revolving funds. As a rule, such authorizations
should be discouraged. However, I take it
that these authorizations have legal/statutory
basis aside from being already a vested right
to the agencies concerned which should not
be jeopardized through the Veto Message.
There is, however, imperative need to
rationalize their implementation, applicability
and operation. Thus, in order to substantiate
the purpose and intention of said provisions, I
hereby declare that the operationalization of
the following provisions during budget
implementation shall be subject to
theguidelines to be issued by the
President pursuant to Section 35, Chapter 5,
Book VI of E.O. No. 292 and Sections 65 and
66 of P.D. No. 1445 in relation to Sections 2
and 3 of the General Provisions of this Act
(Veto Message, p. 6; Emphasis Supplied.)
(c) In the appropriation for the DPWH, the President
imposed the condition that in the implementation of DPWH
projects, the administrative and engineering overhead of
5% and 3% "shall be subject to the necessary
administrative guidelines to be formulated by the Executive
pursuant to existing laws." The condition was imposed
because the provision "needs further study" according to
the President.
The following provision was made subject to said condition:
9. Engineering and Administrative Overhead.
Not more than five percent (5%) of the
amount for infrastructure project released by
the Department of Budget and Management

shall be deducted by DPWH for administrative

overhead, detailed engineering and
construction supervision, testing and quality
control, and the like, thus insuring that at
least ninety-five percent (95%) of the
released fund is available for direct
implementation of the
project. PROVIDED, HOWEVER, That for
school buildings, health centers, day-care
centers and barangay halls, the deductible
amount shall not exceed three percent (3%).
Violation of, or non-compliance with, this
provision shall subject the government official
or employee concerned to administrative, civil
and/or criminal sanction under Sections 43
and 80, Book VI of E.O.
No. 292 (GAA of 1994, p. 786).
(d) In the appropriation for the National Housing Authority
(NHA), the President imposed the condition that allocations
for specific projects shall be released and disbursed "in
accordance with the housing program of the government,
subject to prior Executive approval."
The provision subject to the said condition reads:
3. Allocations for Specified Projects. The
following allocations for the specified projects
shall be set aside for corollary works and used
exclusively for the repair, rehabilitation and
construction of buildings, roads, pathwalks,
drainage, waterworks systems, facilities and
amenities in the area:PROVIDED, That any
road to be constructed or rehabilitated shall
conform with the specifications and standards
set by the Department of Public Works and

Highways for such kind of

road: PROVIDED,FURTHER, That savings that
may be available in the future shall be used
for road repair, rehabilitation and
construction:
(1) Maharlika
Village Road
Not less than
P5,000,000
(2) Tenement
Housing Project
(Taguig) Not
less than
P3,000,000
(3) Bagong
Lipunan
Condominium
Project (Taguig)
Not less than
P2,000,000
4. Allocation of Funds. Out of the amount
appropriated for the implementation of
various projects in resettlement areas, Seven
Million Five Hundred Thousand Pesos
(P7,500,000) shall be allocated to the
Dasmarias Bagong Bayan resettlement area,
Eighteen Million Pesos (P18,000,000) to the
Carmona Relocation Center Area (Gen.
Mariano Alvarez) and Three Million Pesos
(P3,000,000) to the Bulihan Sites and
Services, all of which will be for the
cementing of roads in accordance with DPWH
standards.

5. Allocation for Sapang Palay. An allocation

of Eight Million Pesos (P8,000,000) shall be
set aside for the asphalting of seven (7)
kilometer main road of Sapang Palay, San
Jose Del Monte, Bulacan
(GAA of 1994, p. 1216).
The President imposed the conditions: (a) that the
"operationalization" of the special provision on revolving
funds of the COA "shall be subject to guidelines to be issued
by the President pursuant to Section 35, Chapter 5,
Book VI of E.O. 292 and Sections 65 and 66 of P.D. No.
1445 in relation to Sections 2 and 3 of the General
Provisions of this Act" (Rollo, G.R.
No. 113174, pp. 5,7-8); (b) that the implementation of
Special Provision No. 9 of the DPWH on the mandatory
retention of 5% and 3% of the amounts released by said
Department "be subject to the necessary administrative
guidelines to be formulated by the Executive pursuant to
existing law" (Rollo, G.R. No. 113888; pp. 10, 14-16); and
(c) that the appropriations authorized for the NHA can be
released only "in accordance with the housing program of
the government subject to prior Executive approval" (Rollo,
G.R. No. 113888, pp. 10-11;
14-16).
The conditions objected to by petitioners are mere
reminders that the implementation of the items on which
the said conditions were imposed, should be done in
accordance with existing laws, regulations or policies. They
did not add anything to what was already in place at the
time of the approval of the GAA of 1994.
There is less basis to complain when the President said that
the expenditures shall be subject to guidelines he will issue.
Until the guidelines are issued, it cannot be determined
whether they are proper or inappropriate. The issuance of
administrative guidelines on the use of public funds

authorized by Congress is simply an exercise by the

President of his constitutional duty to see that the laws are
faithfully executed (1987 Constitution, Art. VII, Sec. 17;
Planas v. Gil 67 Phil. 62 [1939]). Under the Faithful
Execution Clause, the President has the power to take
"necessary and proper steps" to carry into execution the law
(Schwartz, On Constitutional Law, p. 147 [1977]). These
steps are the ones to be embodied in the guidelines.
IV
Petitioners chose to avail of the special civil actions but
those remedies can be used only when respondents have
acted "without or in excess" of jurisdiction, or "with grave
abuse of discretion," (Revised Rules of Court,
Rule 65, Section 2). How can we begrudge the President for
vetoing the Special Provision on the appropriation for debt
payment when he merely followed our decision in Gonzales?
How can we say that Congress has abused its discretion
when it appropriated a bigger sum for debt payment than
the amount appropriated for education, when it merely
followed our dictum in Guingona?
Article 8 of the Civil Code of Philippines, provides:
Judicial decisions applying or interpreting the
laws or the constitution shall from a part of
the legal system of the Philippines.
The Court's interpretation of the law is part of that law as of
the date of its enactment since the court's interpretation
merely establishes the contemporary legislative intent that
the construed law purports to carry into effect (People v.
Licera, 65 SCRA 270 [1975]). Decisions of the Supreme
Court assume the same authority as statutes (Floresca v.
Philex Mining Corporation, 136 SCRA 141 [1985]).

Even if Guingona and Gonzales are considered hard cases

that make bad laws and should be reversed, such reversal
cannot nullify prior acts done in reliance thereof.
WHEREFORE, the petitions are DISMISSED, except with
respect to
(1) G.R. Nos. 113105 and 113766 only insofar as they pray
for the annulment of the veto of the special provision on
debt service specifying that the fund therein appropriated
"shall be used for payment of the principal and interest of
foreign and domestic indebtedness" prohibiting the use of
the said funds "to pay for the liabilities of the Central Bank
Board of Liquidators", and (2) G.R. No. 113888 only insofar
as it prays for the annulment of the veto of: (a) the second
paragraph of Special Provision No. 2 of the item of
appropriation for the Department of Public Works and
Highways (GAA of 1994, pp. 785-786); and (b) Special
Provision No. 12 on the purchase of medicines by the Armed
Forces of the Philippines (GAA of 1994, p. 748), which is
GRANTED.
SO ORDERED.
Narvasa, C.J., Feliciano, Bidin, Regalado, Davide, Jr.,
Romero, Bellosillo, Melo, Puno, Kapunan and
Mendoza, JJ., concur.

Separate Opinions

PADILLA, J., concurring and dissenting:

I concur with the ponencia of Mr. Justice Camilo D. Quiason

except in so far as it re-affirms the Court's decision
inGonzalez v. Macaraig (191 SCRA 452).
Sec. 27(2), Art. VI of the Constitution states:
The President shall have the power to veto
any particular item or items in an
appropriation, revenue, or tariff bill, but the
veto shall not effect the item or items to
which he does not object.
In my dissenting opinion in Gonzalez, I stated that:
The majority opinion positions the veto
questioned in this case within the scope of
Section 27(2) [Article VI of the Constitution].
I do not see how this can be done without
doing violence to the constitutional design.
The distinction between an item-veto and
a provision veto has been traditionally
recognized in constitutional litigation and
budgetary practice. As stated by Mr. Justice
Sutherland, speaking for the U.S. Supreme
Court in Bengzon v. Secretary of Justice, 299
U.S. 410-416:
. . . An item of an appropriation
bill obviously means an item
which in itself is a specific
appropriation of money, not
some general provisions of law
which happens to be put into
an appropriation bill . . .
When the Constitution in Section 27(2)
empowers the President to veto any particular

item or items in the appropriation act, it does

not
confer in fact, it excludes the power to
veto any particular provision or provisions in
said act.
In an earlier case, Sarmiento v. Mison, et
al., 156 SCRA 549, this court referred to its
duty to construe the Constitution, not in
accordance with how the executive or the
legislative would want it construed, but in
accordance with what it says and provides.
When the Constitution states that the
President has the power to veto any particular
item or items in the appropriation act, this
must be taken as a component of that
delicate balance of power between the
executive and legislative, so that, for this
Court to construe Sec. 27(2) of the
Constitution as also empowering the
President to veto any particular provision or
provisions in the appropriations act, is to load
the scale in favor of the executive, at the
expense of that delicate balance of power.
I therefore disagree with the majority's pronouncements
which would validate the veto by the President of specific
provisions in the appropriations act based on the contention
that such are "inappropriate provisions." Even assuming, for
the sake of argument, that a provision in the appropriations
act is "inappropriate" from the Presidential standpoint, it is
still a provision, not an item, in an appropriations act and,
therefore, outside the veto power of the Executive.
VITUG, J., concurring:

I concur on the points so well expounded by a most

respected colleague, Mr. Justice Camilo D. Quiason. I should
like to highlight a bit, however, that part of
the ponencia dealing on the Countrywide Development Fund
or, so commonly referred to as, the infamous "pork barrel".
I agree that it lies with Congress to determine in an
appropriation act the activities and the projects that are
desirable and may thus be funded. Once, however, such
identification and the corresponding appropriation therefore
is done, the legislative act is completed and it ends there.
Thereafter, the Executive is behooved, with exclusive
responsibility and authority, to see to it that the legislative
will is properly carried out. I cannot subscribe to another
theory invoked by some quarters that, in so implementing
the law, the Executive does so only by way of delegation.
Congress neither may delegate what it does not have nor
may encroach on the powers of a co-equal, independent
and coordinate branch.
Within its own sphere, Congress acts as a body, not as the
individuals that comprise it, in any action or decision that
can bind it, or be said to have been done by it, under its
constitutional authority. Even assuming that overseeing the
laws it enacts continues to be a legislative process, one that
I find difficult to accept, it is Congress itself, not any of its
members, that must exercise that function.
I cannot debate the fact that the members of Congress,
more than the President and his colleagues, would have the
best feel on the needs of their own respective cosntituents.
I see no legal obstacle, however, in their making, just like
anyone else, the proper recommendations to albeit not
necessarily conclusive on, the President for the purpose.
Neother would it be objectionable for Congrss, by law, to
appropriate funds for specific projects as it may be minded;
to give that authoriy, however, to the individual members of

Congress in whatever guise, I am afraid, would be

constitutionality impermissible.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 81311 June 30, 1988
KAPATIRAN NG MGA NAGLILINGKOD SA
PAMAHALAAN NG PILIPINAS, INC., HERMINIGILDO C.
DUMLAO, GERONIMO Q. QUADRA, and MARIO C.
VILLANUEVA, petitioners,
vs.
HON. BIENVENIDO TAN, as Commissioner of Internal
Revenue, respondent.
G.R. No. 81820 June 30, 1988
KILUSANG MAYO UNO LABOR CENTER (KMU), its
officers and affiliated labor federations and
alliances,petitioners,
vs.
THE EXECUTIVE SECRETARY, SECRETARY OF
FINANCE, THE COMMISSIONER OF INTERNAL
REVENUE, and SECRETARY OF BUDGET, respondents.
G.R. No. 81921 June 30, 1988
INTEGRATED CUSTOMS BROKERS ASSOCIATION OF
THE PHILIPPINES and JESUS B. BANAL, petitioners,
vs.
The HON. COMMISSIONER, BUREAU OF INTERNAL
REVENUE, respondent.
G.R. No. 82152 June 30, 1988

RICARDO C. VALMONTE, petitioner,

vs.
THE EXECUTIVE SECRETARY, SECRETARY OF
FINANCE, COMMISSIONER OF INTERNAL REVENUE
and SECRETARY OF BUDGET, respondent.
Franklin S. Farolan for petitioner Kapatiran in G.R. No.
81311.
Jaime C. Opinion for individual petitioners in G.R. No.
81311.
Banzuela, Flores, Miralles, Raeses, Sy, Taquio and
Associates for petitioners in G.R. No 81820.
Union of Lawyers and Advocates for Peoples Right
collaborating counsel for petitioners in G.R. No 81820.
Jose C. Leabres and Joselito R. Enriquez for petitioners in
G.R. No. 81921.

PADILLA, J.:
These four (4) petitions, which have been consolidated
because of the similarity of the main issues involved
therein, seek to nullify Executive Order No. 273 (EO 273,
for short), issued by the President of the Philippines on 25
July 1987, to take effect on 1 January 1988, and which
amended certain sections of the National Internal Revenue
Code and adopted the value-added tax (VAT, for short), for
being unconstitutional in that its enactment is not alledgedly
within the powers of the President; that the VAT is
oppressive, discriminatory, regressive, and violates the due
process and equal protection clauses and other provisions of
the 1987 Constitution.

The Solicitor General prays for the dismissal of the petitions

on the ground that the petitioners have failed to show
justification for the exercise of its judicial powers, viz. (1)
the existence of an appropriate case; (2) an interest,
personal and substantial, of the party raising the
constitutional questions; (3) the constitutional question
should be raised at the earliest opportunity; and (4) the
question of constitutionality is directly and necessarily
involved in a justiciable controversy and its resolution is
essential to the protection of the rights of the parties.
According to the Solicitor General, only the third requisite
that the constitutional question should be raised at the
earliest opportunity has been complied with. He also
questions the legal standing of the petitioners who, he
contends, are merely asking for an advisory opinion from
the Court, there being no justiciable controversy for
resolution.
Objections to taxpayers' suit for lack of sufficient personality
standing, or interest are, however, in the main procedural
matters. Considering the importance to the public of the
cases at bar, and in keeping with the Court's duty, under
the 1987 Constitution, to determine wether or not the other
branches of government have kept themselves within the
limits of the Constitution and the laws and that they have
not abused the discretion given to them, the Court has
brushed aside technicalities of procedure and has taken
cognizance of these petitions.
But, before resolving the issues raised, a brief look into the
tax law in question is in order.
The VAT is a tax levied on a wide range of goods and
services. It is a tax on the value, added by every seller,
with aggregate gross annual sales of articles and/or
services, exceeding P200,00.00, to his purchase of goods
and services, unless exempt. VAT is computed at the rate of

0% or 10% of the gross selling price of goods or gross

receipts realized from the sale of services.
The VAT is said to have eliminated privilege taxes, multiple
rated sales tax on manufacturers and producers, advance
sales tax, and compensating tax on importations. The
framers of EO 273 that it is principally aimed to rationalize
the system of taxing goods and services; simplify tax
administration; and make the tax system more equitable, to
enable the country to attain economic recovery.
The VAT is not entirely new. It was already in force, in a
modified form, before EO 273 was issued. As pointed out by
the Solicitor General, the Philippine sales tax system, prior
to the issuance of EO 273, was essentially a single stage
value added tax system computed under the "cost
subtraction method" or "cost deduction method" and was
imposed only on original sale, barter or exchange of articles
by manufacturers, producers, or importers. Subsequent
sales of such articles were not subject to sales tax.
However, with the issuance of PD 1991 on 31 October 1985,
a 3% tax was imposed on a second sale, which was reduced
to 1.5% upon the issuance of PD 2006 on 31 December
1985, to take effect 1 January 1986. Reduced sales taxes
were imposed not only on the second sale, but
on every subsequent sale, as well. EO 273 merely increased
the VAT on every sale to 10%, unless zero-rated or exempt.
Petitioners first contend that EO 273 is unconstitutional on
the Ground that the President had no authority to issue EO
273 on 25 July 1987.
The contention is without merit.
It should be recalled that under Proclamation No. 3, which
decreed a Provisional Constitution, sole legislative authority

was vested upon the President. Art. II, sec. 1 of the

Provisional Constitution states:
Sec. 1. Until a legislature is elected and
convened under a new Constitution, the
President shall continue to exercise legislative
powers.
On 15 October 1986, the Constitutional Commission of 1986
adopted a new Constitution for the Republic of the
Philippines which was ratified in a plebiscite conducted on 2
February 1987. Article XVIII, sec. 6 of said Constitution,
hereafter referred to as the 1987 Constitution, provides:
Sec. 6. The incumbent President shall
continue to exercise legislative powers until
the first Congress is convened.
It should be noted that, under both the Provisional and the
1987 Constitutions, the President is vested with legislative
powers until a legislature under a new Constitution
is convened. The first Congress, created and elected under
the 1987 Constitution, was convened on 27 July 1987.
Hence, the enactment of EO 273 on 25 July 1987, two (2)
days before Congress convened on 27 July 1987, was within
the President's constitutional power and authority to
legislate.
Petitioner Valmonte claims, additionally, that Congress was
really convened on 30 June 1987 (not 27 July 1987). He
contends that the word "convene" is synonymous with "the
date when the elected members of Congress assumed
office."
The contention is without merit. The word "convene" which
has been interpreted to mean "to call together, cause to
assemble, or convoke," 1 is clearly different from

assumption of office by the individual members of Congress

or their taking the oath of office. As an example, we call to
mind the interim National Assembly created under the 1973
Constitution, which had not been "convened" but some
members of the body, more particularly the delegates to the
1971 Constitutional Convention who had opted to serve
therein by voting affirmatively for the approval of said
Constitution, had taken their oath of office.
To uphold the submission of petitioner Valmonte would
stretch the definition of the word "convene" a bit too far. It
would also defeat the purpose of the framers of the 1987
Constitutional and render meaningless some other
provisions of said Constitution. For example, the provisions
of Art. VI, sec. 15, requiring Congress to convene once
every year on the fourth Monday of July for its regular
session would be a contrariety, since Congress would
already be deemed to be in session after the individual
members have taken their oath of office. A portion of the
provisions of Art. VII, sec. 10, requiring Congress
to convene for the purpose of enacting a law calling for a
special election to elect a President and Vice-President in
case a vacancy occurs in said offices, would also be a
surplusage. The portion of Art. VII, sec. 11, third
paragraph, requiring Congress to convene, if not in session,
to decide a conflict between the President and the Cabinet
as to whether or not the President and the Cabinet as to
whether or not the President can re-assume the powers and
duties of his office, would also be redundant. The same is
true with the portion of Art. VII, sec. 18, which requires
Congress to convene within twenty-four (24) hours
following the declaration of martial law or the suspension of
the privilage of the writ of habeas corpus.
The 1987 Constitution mentions a specific date when the
President loses her power to legislate. If the framers of said
Constitution had intended to terminate the exercise of
legislative powers by the President at the beginning of the

term of office of the members of Congress, they should

have so stated (but did not) in clear and unequivocal terms.
The Court has not power to re-write the Constitution and
give it a meaning different from that intended.
The Court also finds no merit in the petitioners' claim that
EO 273 was issued by the President in grave abuse of
discretion amounting to lack or excess of jurisdiction.
"Grave abuse of discretion" has been defined, as follows:
Grave abuse of discretion" implies such
capricious and whimsical exercise of
judgment as is equivalent to lack of
jurisdiction (Abad Santos vs. Province of
Tarlac, 38 Off. Gaz. 834), or, in other words,
where the power is exercised in an arbitrary
or despotic manner by reason of passion or
personal hostility, and it must be so patent
and gross as to amount to an evasion of
positive duty or to a virtual refusal to perform
the duty enjoined or to act at all in
contemplation of law. (Tavera-Luna, Inc. vs.
Nable, 38 Off. Gaz. 62). 2
Petitioners have failed to show that EO 273 was issued
capriciously and whimsically or in an arbitrary or despotic
manner by reason of passion or personal hostility. It
appears that a comprehensive study of the VAT had been
extensively discussed by this framers and other government
agencies involved in its implementation, even under the
past administration. As the Solicitor General correctly sated.
"The signing of E.O. 273 was merely the last stage in the
exercise of her legislative powers. The legislative process
started long before the signing when the data were
gathered, proposals were weighed and the final wordings of
the measure were drafted, revised and finalized. Certainly,
it cannot be said that the President made a jump, so to
speak, on the Congress, two days before it convened." 3

Next, the petitioners claim that EO 273 is oppressive,

discriminatory, unjust and regressive, in violation of the
provisions of Art. VI, sec. 28(1) of the 1987 Constitution,
which states:
Sec. 28 (1) The rule of taxation shall be
uniform and equitable. The Congress shall
evolve a progressive system of taxation.
The petitioners" assertions in this regard are not supported
by facts and circumstances to warrant their conclusions.
They have failed to adequately show that the VAT is
oppressive, discriminatory or unjust. Petitioners merely rely
upon newspaper articles which are actually hearsay and
have evidentiary value. To justify the nullification of a law.
there must be a clear and unequivocal breach of the
Constitution, not a doubtful and argumentative
implication. 4
As the Court sees it, EO 273 satisfies all the requirements of
a valid tax. It is uniform. The court, in City of Baguio vs. De
Leon, 5 said:
... In Philippine Trust Company v. Yatco (69
Phil. 420), Justice Laurel, speaking for the
Court, stated: "A tax is considered uniform
when it operates with the same force and
effect in every place where the subject may
be found."
There was no occasion in that case to
consider the possible effect on such a
constitutional requirement where there is a
classification. The opportunity came in
Eastern Theatrical Co. v. Alfonso (83 Phil.
852, 862). Thus: "Equality and uniformity in
taxation means that all taxable articles or

kinds of property of the same class shall be

taxed at the same rate. The taxing power has
the authority to make reasonable and natural
classifications for purposes of taxation; . . ."
About two years later, Justice Tuason,
speaking for this Court in Manila Race Horses
Trainers Assn. v. de la Fuente (88 Phil. 60,
65) incorporated the above excerpt in his
opinion and continued; "Taking everything
into account, the differentiation against which
the plaintiffs complain conforms to the
practical dictates of justice and equity and is
not discriminatory within the meaning of the
Constitution."
To satisfy this requirement then, all that is
needed as held in another case decided two
years later, (Uy Matias v. City of Cebu, 93
Phil. 300) is that the statute or ordinance in
question "applies equally to all persons, firms
and corporations placed in similar situation."
This Court is on record as accepting the view
in a leading American case (Carmichael v.
Southern Coal and Coke Co., 301 US 495)
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).
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 engage 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, spared as they are
from the incidence of the VAT, are expected to be relatively
lower and within the reach of the general public. 6
The Court likewise finds no merit in the contention of the
petitioner Integrated Customs Brokers Association of the
Philippines that EO 273, more particularly the new Sec. 103
(r) of the National Internal Revenue Code, unduly
discriminates against customs brokers. The contested
provision states:
Sec. 103. Exempt transactions. The
following shall be exempt from the valueadded tax:
xxx xxx xxx
(r) Service performed in the exercise of
profession or calling (except customs brokers)
subject to the occupation tax under the Local
Tax Code, and professional services
performed by registered general professional
partnerships;
The phrase "except customs brokers" is not meant to
discriminate against customs brokers. It was inserted in
Sec. 103(r) to complement the provisions of Sec. 102 of the
Code, which makes the services of customs brokers subject
to the payment of the VAT and to distinguish customs
brokers from other professionals who are subject to the
payment of an occupation tax under the Local Tax Code.
Pertinent provisions of Sec. 102 read:
Sec. 102. Value-added tax on sale of services.
There shall be levied, assessed and
collected, a value-added tax equivalent to

10% percent of gross receipts derived by any

person engaged in the sale of services. The
phrase sale of services" means the
performance of all kinds of services for others
for a fee, remuneration or consideration,
including those performed or rendered by
construction and service contractors; stock,
real estate, commercial, customs and
immigration brokers; lessors of personal
property; lessors or distributors of
cinematographic films; persons engaged in
milling, processing, manufacturing or
repacking goods for others; and similar
services regardless of whether or not the
performance thereof call for the exercise or
use of the physical or mental faculties: ...
With the insertion of the clarificatory phrase "except
customs brokers" in Sec. 103(r), a potential conflict
between the two sections, (Secs. 102 and 103), insofar as
customs brokers are concerned, is averted.
At any rate, the distinction of the customs brokers from the
other professionals who are subject to occupation tax under
the Local Tax Code is based upon material differences, in
that the activities of customs brokers (like those of stock,
real estate and immigration brokers) partake more of a
business, rather than a profession and were thus subjected
to the percentage tax under Sec. 174 of the National
Internal Revenue Code prior to its amendment by EO 273.
EO 273 abolished the percentage tax and replaced it with
the VAT. If the petitioner Association did not protest the
classification of customs brokers then, the Court sees no
reason why it should protest now.
The Court takes note that EO 273 has been in effect for
more than five (5) months now, so that the fears expressed
by the petitioners that the adoption of the VAT will trigger

skyrocketing of prices of basic commodities and services, as

well as mass actions and demonstrations against the VAT
should by now be evident. The fact that nothing of the sort
has happened shows that the fears and apprehensions of
the petitioners appear to be more imagined than real. It
would seem that the VAT is not as bad as we are made to
believe.
In any event, if petitioners seriously believe that the
adoption and continued application of the VAT are
prejudicial to the general welfare or the interests of the
majority of the people, they should seek recourse and relief
from the political branches of the government. The Court,
following the time-honored doctrine of separation of powers,
cannot substitute its judgment for that of the President as
to the wisdom, justice and advisability of the adoption of
the VAT. The Court can only look into and determine
whether or not EO 273 was enacted and made effective as
law, in the manner required by, and consistent with, the
Constitution, and to make sure that it was not issued in
grave abuse of discretion amounting to lack or excess of
jurisdiction; and, in this regard, the Court finds no reason to
impede its application or continued implementation.
WHEREFORE, the petitions are DISMISSED. Without
pronouncement as to costs.
SO ORDERED.
Yap, C.J., Fernan, Narvasa, Melencio-Herrera, Cruz, Paras,
Feliciano, Gancayco, Bidin, Sarmiento, Cortes and GrioAquino, JJ., concur.
Gutierrez, Jr. and Medialdea, JJ., are on leave.

Footnotes
1 Application of Lamb, 169 A2d 822, 830, 67
N.J. Super. 29, affd. 170 A2d 34, 34 n.J. 448,
citing 18 C.J.S. Convene p. 37.
2 Alafriz vs. Nable, 72 Phil. 278, 280.
3 Comment on petition, G.R. No. 82152, p.
18.
4 Peralta vs. Comelec, L-47771 and others,
March 11, 1978, 82 SCRA 30, 55.
5 134 Phil. 912, 919-920.
6 EO 273 enumerates in its sec. 102 zerorated sales and in its sec. 103 transactions
exempt from the VAT.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 144104

June 29, 2004

LUNG CENTER OF THE PHILIPPINES, petitioner,

vs.
QUEZON CITY and CONSTANTINO P. ROSAS, in his
capacity as City Assessor of Quezon City,respondents.
DECISION
CALLEJO, SR., J.:
This is a petition for review on certiorari under Rule 45 of
the Rules of Court, as amended, of the Decision1 dated July
17, 2000 of the Court of Appeals in CA-G.R. SP No. 57014
which affirmed the decision of the Central Board of
Assessment Appeals holding that the lot owned by the
petitioner and its hospital building constructed thereon are
subject to assessment for purposes of real property tax.
The Antecedents
The petitioner Lung Center of the Philippines is a non-stock
and non-profit entity established on January 16, 1981 by
virtue of Presidential Decree No. 1823.2 It is the registered
owner of a parcel of land, particularly described as Lot No.
RP-3-B-3A-1-B-1, SWO-04-000495, located at Quezon
Avenue corner Elliptical Road, Central District, Quezon City.
The lot has an area of 121,463 square meters and is
covered by Transfer Certificate of Title (TCT) No. 261320 of
the Registry of Deeds of Quezon City. Erected in the middle
of the aforesaid lot is a hospital known as the Lung Center

of the Philippines. A big space at the ground floor is being

leased to private parties, for canteen and small store
spaces, and to medical or professional practitioners who use
the same as their private clinics for their patients whom
they charge for their professional services. Almost one-half
of the entire area on the left side of the building along
Quezon Avenue is vacant and idle, while a big portion on
the right side, at the corner of Quezon Avenue and Elliptical
Road, is being leased for commercial purposes to a private
enterprise known as the Elliptical Orchids and Garden
Center.
The petitioner accepts paying and non-paying patients. It
also renders medical services to out-patients, both paying
and non-paying. Aside from its income from paying
patients, the petitioner receives annual subsidies from the
government.
On June 7, 1993, both the land and the hospital building of
the petitioner were assessed for real property taxes in the
amount of P4,554,860 by the City Assessor of Quezon
City.3 Accordingly, Tax Declaration Nos. C-021-01226 (162518) and C-021-01231 (15-2518-A) were issued for the
land and the hospital building, respectively.4 On August 25,
1993, the petitioner filed a Claim for Exemption 5 from real
property taxes with the City Assessor, predicated on its
claim that it is a charitable institution. The petitioners
request was denied, and a petition was, thereafter, filed
before the Local Board of Assessment Appeals of Quezon
City (QC-LBAA, for brevity) for the reversal of the resolution
of the City Assessor. The petitioner alleged that under
Section 28, paragraph 3 of the 1987 Constitution, the
property is exempt from real property taxes. It averred that
a minimum of 60% of its hospital beds are exclusively used
for charity patients and that the major thrust of its hospital
operation is to serve charity patients. The petitioner
contends that it is a charitable institution and, as such, is
exempt from real property taxes. The QC-LBAA rendered

judgment dismissing the petition and holding the petitioner

liable for real property taxes.6
The QC-LBAAs decision was, likewise, affirmed on appeal
by the Central Board of Assessment Appeals of Quezon City
(CBAA, for brevity)7 which ruled that the petitioner was not
a charitable institution and that its real properties were not
actually, directly and exclusively used for charitable
purposes; hence, it was not entitled to real property tax
exemption under the constitution and the law. The
petitioner sought relief from the Court of Appeals, which
rendered judgment affirming the decision of the CBAA.8
Undaunted, the petitioner filed its petition in this Court
contending that:
A. THE COURT A QUO ERRED IN DECLARING
PETITIONER AS NOT ENTITLED TO REALTY TAX
EXEMPTIONS ON THE GROUND THAT ITS LAND,
BUILDING AND IMPROVEMENTS, SUBJECT OF
ASSESSMENT, ARE NOT ACTUALLY, DIRECTLY AND
EXCLUSIVELY DEVOTED FOR CHARITABLE
PURPOSES.
B. WHILE PETITIONER IS NOT DECLARED AS REAL
PROPERTY TAX EXEMPT UNDER ITS CHARTER, PD
1823, SAID EXEMPTION MAY NEVERTHELESS BE
EXTENDED UPON PROPER APPLICATION.
The petitioner avers that it is a charitable institution within
the context of Section 28(3), Article VI of the 1987
Constitution. It asserts that its character as a charitable
institution is not altered by the fact that it admits paying
patients and renders medical services to them, leases
portions of the land to private parties, and rents out
portions of the hospital to private medical practitioners from
which it derives income to be used for operational expenses.

The petitioner points out that for the years 1995 to 1999,
100% of its out-patients were charity patients and of the
hospitals 282-bed capacity, 60% thereof, or 170 beds, is
allotted to charity patients. It asserts that the fact that it
receives subsidies from the government attests to its
character as a charitable institution. It contends that the
"exclusivity" required in the Constitution does not
necessarily mean "solely." Hence, even if a portion of its
real estate is leased out to private individuals from whom it
derives income, it does not lose its character as a charitable
institution, and its exemption from the payment of real
estate taxes on its real property. The petitioner cited our
ruling in Herrera v. QC-BAA9 to bolster its pose. The
petitioner further contends that even if P.D. No. 1823 does
not exempt it from the payment of real estate taxes, it is
not precluded from seeking tax exemption under the 1987
Constitution.
In their comment on the petition, the respondents aver that
the petitioner is not a charitable entity. The petitioners real
property is not exempt from the payment of real estate
taxes under P.D. No. 1823 and even under the 1987
Constitution because it failed to prove that it is a charitable
institution and that the said property is actually, directly
and exclusively used for charitable purposes. The
respondents noted that in a newspaper report, it appears
that graft charges were filed with the Sandiganbayan
against the director of the petitioner, its administrative
officer, and Zenaida Rivera, the proprietress of the Elliptical
Orchids and Garden Center, for entering into a lease
contract over 7,663.13 square meters of the property in
1990 for only P20,000 a month, when the monthly rental
should beP357,000 a month as determined by the
Commission on Audit; and that instead of complying with
the directive of the COA for the cancellation of the contract
for being grossly prejudicial to the government, the
petitioner renewed the same on March 13, 1995 for a
monthly rental of only P24,000. They assert that the

petitioner uses the subsidies granted by the government for

charity patients and uses the rest of its income from the
property for the benefit of paying patients, among other
purposes. They aver that the petitioner failed to adduce
substantial evidence that 100% of its out-patients and 170
beds in the hospital are reserved for indigent patients. The
respondents further assert, thus:
13. That the claims/allegations of the Petitioner LCP
do not speak well of its record of service. That before
a patient is admitted for treatment in the Center,
first impression is that it is pay-patient and required
to pay a certain amount as deposit. That even if a
patient is living below the poverty line, he is charged
with high hospital bills. And, without these bills being
first settled, the poor patient cannot be allowed to
leave the hospital or be discharged without first
paying the hospital bills or issue a promissory note
guaranteed and indorsed by an influential agency or
person known only to the Center; that even the
remains of deceased poor patients suffered the same
fate. Moreover, before a patient is admitted for
treatment as free or charity patient, one must
undergo a series of interviews and must submit all
the requirements needed by the Center, usually
accompanied by endorsement by an influential
agency or person known only to the Center. These
facts were heard and admitted by the Petitioner LCP
during the hearings before the Honorable QC-BAA
and Honorable CBAA. These are the reasons of
indigent patients, instead of seeking treatment with
the Center, they prefer to be treated at the Quezon
Institute. Can such practice by the Center be called
charitable?10
The Issues

The issues for resolution are the following: (a) whether the
petitioner is a charitable institution within the context of
Presidential Decree No. 1823 and the 1973 and 1987
Constitutions and Section 234(b) of Republic Act No. 7160;
and (b) whether the real properties of the petitioner are
exempt from real property taxes.
The Courts Ruling
The petition is partially granted.
On the first issue, we hold that the petitioner is a charitable
institution within the context of the 1973 and 1987
Constitutions. To determine whether an enterprise is a
charitable institution/entity or not, the elements which
should be considered include the statute creating the
enterprise, its corporate purposes, its constitution and bylaws, the methods of administration, the nature of the
actual work performed, the character of the services
rendered, the indefiniteness of the beneficiaries, and the
use and occupation of the properties.11
In the legal sense, a charity may be fully defined as a gift,
to be applied consistently with existing laws, for the benefit
of an indefinite number of persons, either by bringing their
minds and hearts under the influence of education or
religion, by assisting them to establish themselves in life or
otherwise lessening the burden of government.12 It may be
applied to almost anything that tend to promote the welldoing and well-being of social man. It embraces the
improvement and promotion of the happiness of man.13 The
word "charitable" is not restricted to relief of the poor or
sick.14 The test of a charity and a charitable organization are
in law the same. The test whether an enterprise is
charitable or not is whether it exists to carry out a purpose
reorganized in law as charitable or whether it is maintained
for gain, profit, or private advantage.

Under P.D. No. 1823, the petitioner is a non-profit and nonstock corporation which, subject to the provisions of the
decree, is to be administered by the Office of the President
of the Philippines with the Ministry of Health and the
Ministry of Human Settlements. It was organized for the
welfare and benefit of the Filipino people principally to help
combat the high incidence of lung and pulmonary diseases
in the Philippines. The raison detre for the creation of the
petitioner is stated in the decree, viz:
Whereas, for decades, respiratory diseases have
been a priority concern, having been the leading
cause of illness and death in the Philippines,
comprising more than 45% of the total annual
deaths from all causes, thus, exacting a tremendous
toll on human resources, which ailments are likely to
increase and degenerate into serious lung diseases
on account of unabated pollution, industrialization
and unchecked cigarette smoking in the
country;lavvph!l.net
Whereas, the more common lung diseases are, to a
great extent, preventable, and curable with early and
adequate medical care, immunization and through
prompt and intensive prevention and health
education programs;
Whereas, there is an urgent need to consolidate and
reinforce existing programs, strategies and efforts at
preventing, treating and rehabilitating people
affected by lung diseases, and to undertake research
and training on the cure and prevention of lung
diseases, through a Lung Center which will house
and nurture the above and related activities and
provide tertiary-level care for more difficult and
problematical cases;

Whereas, to achieve this purpose, the Government

intends to provide material and financial support
towards the establishment and maintenance of a
Lung Center for the welfare and benefit of the
Filipino people.15
The purposes for which the petitioner was created are
spelled out in its Articles of Incorporation, thus:
SECOND: That the purposes for which such
corporation is formed are as follows:
1. To construct, establish, equip, maintain,
administer and conduct an integrated medical
institution which shall specialize in the
treatment, care, rehabilitation and/or relief of
lung and allied diseases in line with the
concern of the government to assist and
provide material and financial support in the
establishment and maintenance of a lung
center primarily to benefit the people of the
Philippines and in pursuance of the policy of
the State to secure the well-being of the
people by providing them specialized health
and medical services and by minimizing the
incidence of lung diseases in the country and
elsewhere.
2. To promote the noble undertaking of
scientific research related to the prevention of
lung or pulmonary ailments and the care of
lung patients, including the holding of a series
of relevant congresses, conventions, seminars
and conferences;
3. To stimulate and, whenever possible,
underwrite scientific researches on the

biological, demographic, social, economic,

eugenic and physiological aspects of lung or
pulmonary diseases and their control; and to
collect and publish the findings of such
research for public consumption;

8. To seek and obtain assistance in any form

from both international and local foundations
and organizations; and to administer grants
and funds that may be given to the
organization;

4. To facilitate the dissemination of ideas and

public acceptance of information on lung
consciousness or awareness, and the
development of fact-finding, information and
reporting facilities for and in aid of the
general purposes or objects aforesaid,
especially in human lung requirements,
general health and physical fitness, and other
relevant or related fields;

9. To extend, whenever possible and

expedient, medical services to the public and,
in general, to promote and protect the health
of the masses of our people, which has long
been recognized as an economic asset and a
social blessing;

5. To encourage the training of physicians,

nurses, health officers, social workers and
medical and technical personnel in the
practical and scientific implementation of
services to lung patients;
6. To assist universities and research
institutions in their studies about lung
diseases, to encourage advanced training in
matters of the lung and related fields and to
support educational programs of value to
general health;
7. To encourage the formation of other
organizations on the national, provincial
and/or city and local levels; and to coordinate
their various efforts and activities for the
purpose of achieving a more effective
programmatic approach on the common
problems relative to the objectives
enumerated herein;

10. To help prevent, relieve and alleviate the

lung or pulmonary afflictions and maladies of
the people in any and all walks of life,
including those who are poor and needy, all
without regard to or discrimination, because
of race, creed, color or political belief of the
persons helped; and to enable them to obtain
treatment when such disorders occur;
11. To participate, as circumstances may
warrant, in any activity designed and carried
on to promote the general health of the
community;
12. To acquire and/or borrow funds and to
own all funds or equipment, educational
materials and supplies by purchase, donation,
or otherwise and to dispose of and distribute
the same in such manner, and, on such basis
as the Center shall, from time to time, deem
proper and best, under the particular
circumstances, to serve its general and nonprofit purposes and objectives;lavvphil.net

13. To buy, purchase, acquire, own, lease,

hold, sell, exchange, transfer and dispose of
properties, whether real or personal, for
purposes herein mentioned; and
14. To do everything necessary, proper,
advisable or convenient for the
accomplishment of any of the powers herein
set forth and to do every other act and thing
incidental thereto or connected therewith.16
Hence, the medical services of the petitioner are to be
rendered to the public in general in any and all walks of life
including those who are poor and the needy without
discrimination. After all, any person, the rich as well as the
poor, may fall sick or be injured or wounded and become a
subject of charity.17
As a general principle, a charitable institution does not lose
its character as such and its exemption from taxes simply
because it derives income from paying patients, whether
out-patient, or confined in the hospital, or receives
subsidies from the government, so long as the money
received is devoted or used altogether to the charitable
object which it is intended to achieve; and no money inures
to the private benefit of the persons managing or operating
the institution.18 In Congregational Sunday School, etc. v.
Board of Review,19 the State Supreme Court of Illinois held,
thus:
[A]n institution does not lose its charitable
character, and consequent exemption from taxation,
by reason of the fact that those recipients of its
benefits who are able to pay are required to do so,
where no profit is made by the institution and the
amounts so received are applied in furthering its
charitable purposes, and those benefits are refused

to none on account of inability to pay therefor. The

fundamental ground upon which all exemptions in
favor of charitable institutions are based is the
benefit conferred upon the public by them, and a
consequent relief, to some extent, of the burden
upon the state to care for and advance the interests
of its citizens.20
As aptly stated by the State Supreme Court of South
Dakota in Lutheran Hospital Association of South Dakota v.
Baker:21
[T]he fact that paying patients are taken, the
profits derived from attendance upon these patients
being exclusively devoted to the maintenance of the
charity, seems rather to enhance the usefulness of
the institution to the poor; for it is a matter of
common observation amongst those who have gone
about at all amongst the suffering classes, that the
deserving poor can with difficulty be persuaded to
enter an asylum of any kind confined to the
reception of objects of charity; and that their honest
pride is much less wounded by being placed in an
institution in which paying patients are also received.
The fact of receiving money from some of the
patients does not, we think, at all impair the
character of the charity, so long as the money thus
received is devoted altogether to the charitable
object which the institution is intended to further.22
The money received by the petitioner becomes a part of the
trust fund and must be devoted to public trust purposes and
cannot be diverted to private profit or benefit.23
Under P.D. No. 1823, the petitioner is entitled to receive
donations. The petitioner does not lose its character as a
charitable institution simply because the gift or donation is

in the form of subsidies granted by the government. As held

by the State Supreme Court of Utah in Yorgason v. County
Board of Equalization of Salt Lake County:24
Second, the government subsidy payments are
provided to the project. Thus, those payments are
like a gift or donation of any other kind except they
come from the government. In both Intermountain
Health Careand the present case, the crux is the
presence or absence of material reciprocity. It is
entirely irrelevant to this analysis that the
government, rather than a private benefactor, chose
to make up the deficit resulting from the exchange
between St. Marks Tower and the tenants by making
a contribution to the landlord, just as it would have
been irrelevant in Intermountain Health Care if the
patients income supplements had come from private
individuals rather than the government.
Therefore, the fact that subsidization of part of the
cost of furnishing such housing is by the government
rather than private charitable contributions does not
dictate the denial of a charitable exemption if the
facts otherwise support such an exemption, as they
do here.25
In this case, the petitioner adduced substantial evidence
that it spent its income, including the subsidies from the
government for 1991 and 1992 for its patients and for the
operation of the hospital. It even incurred a net loss in 1991
and 1992 from its operations.
Even as we find that the petitioner is a charitable institution,
we hold, anent the second issue, that those portions of its
real property that are leased to private entities are not
exempt from real property taxes as these are not actually,
directly and exclusively used for charitable purposes.

The settled rule in this jurisdiction is that laws granting

exemption from tax are construed strictissimi juris against
the taxpayer and liberally in favor of the taxing power.
Taxation is the rule and exemption is the exception. The
effect of an exemption is equivalent to an appropriation.
Hence, a claim for exemption from tax payments must be
clearly shown and based on language in the law too plain to
be mistaken.26 As held in Salvation Army v. Hoehn:27
An intention on the part of the legislature to grant an
exemption from the taxing power of the state will
never be implied from language which will admit of
any other reasonable construction. Such an intention
must be expressed in clear and unmistakable terms,
or must appear by necessary implication from the
language used, for it is a well settled principle that,
when a special privilege or exemption is claimed
under a statute, charter or act of incorporation, it is
to be construed strictly against the property owner
and in favor of the public. This principle applies with
peculiar force to a claim of exemption from taxation .
28
Section 2 of Presidential Decree No. 1823, relied upon by
the petitioner, specifically provides that the petitioner shall
enjoy the tax exemptions and privileges:
SEC. 2. TAX EXEMPTIONS AND PRIVILEGES. Being a
non-profit, non-stock corporation organized primarily
to help combat the high incidence of lung and
pulmonary diseases in the Philippines, all donations,
contributions, endowments and equipment and
supplies to be imported by authorized entities or
persons and by the Board of Trustees of the Lung
Center of the Philippines, Inc., for the actual use and
benefit of the Lung Center, shall be exempt from
income and gift taxes, the same further deductible in
full for the purpose of determining the maximum

deductible amount under Section 30, paragraph (h),

of the National Internal Revenue Code, as amended.
The Lung Center of the Philippines shall be exempt
from the payment of taxes, charges and fees
imposed by the Government or any political
subdivision or instrumentality thereof with respect to
equipment purchases made by, or for the Lung
Center.29
It is plain as day that under the decree, the petitioner does
not enjoy any property tax exemption privileges for its real
properties as well as the building constructed thereon. If the
intentions were otherwise, the same should have been
among the enumeration of tax exempt privileges under
Section 2:
It is a settled rule of statutory construction that the
express mention of one person, thing, or
consequence implies the exclusion of all others. The
rule is expressed in the familiar maxim, expressio
unius est exclusio alterius.
The rule of expressio unius est exclusio alterius is
formulated in a number of ways. One variation of the
rule is the principle that what is expressed puts an
end to that which is implied. Expressium facit
cessare tacitum. Thus, where a statute, by its terms,
is expressly limited to certain matters, it may not, by
interpretation or construction, be extended to other
matters.
...
The rule of expressio unius est exclusio alterius and
its variations are canons of restrictive interpretation.
They are based on the rules of logic and the natural

workings of the human mind. They are predicated

upon ones own voluntary act and not upon that of
others. They proceed from the premise that the
legislature would not have made specified
enumeration in a statute had the intention been not
to restrict its meaning and confine its terms to those
expressly mentioned.30
The exemption must not be so enlarged by construction
since the reasonable presumption is that the State has
granted in express terms all it intended to grant at all, and
that unless the privilege is limited to the very terms of the
statute the favor would be intended beyond what was
meant.31
Section 28(3), Article VI of the 1987 Philippine Constitution
provides, thus:
(3) Charitable institutions, churches and parsonages
or convents appurtenant thereto, mosques, nonprofit cemeteries, and all lands, buildings, and
improvements, actually, directly and exclusively used
for religious, charitable or educational purposes shall
be exempt from taxation.32
The tax exemption under this constitutional provision
covers property taxes only.33 As Chief Justice Hilario G.
Davide, Jr., then a member of the 1986 Constitutional
Commission, explained: ". . . what is exempted is not the
institution itself . . .; those exempted from real estate taxes
are lands, buildings and improvements actually, directly and
exclusively used for religious, charitable or educational
purposes."34
Consequently, the constitutional provision is implemented
by Section 234(b) of Republic Act No. 7160 (otherwise
known as the Local Government Code of 1991) as follows:

SECTION 234. Exemptions from Real Property Tax.

The following are exempted from payment of the real
property tax:
...
(b) Charitable institutions, churches,
parsonages or convents appurtenant thereto,
mosques, non-profit or religious cemeteries
and all lands, buildings, and
improvements actually, directly,
andexclusively used for religious, charitable
or educational purposes.35
We note that under the 1935 Constitution, "... all lands,
buildings, and improvements used exclusively for
charitable purposes shall be exempt from
taxation."36 However, under the 1973 and the present
Constitutions, for "lands, buildings, and improvements" of
the charitable institution to be considered exempt, the same
should not only be "exclusively" used for charitable
purposes; it is required that such property be used
"actually" and "directly" for such purposes.37
In light of the foregoing substantial changes in the
Constitution, the petitioner cannot rely on our ruling
in Herrera v. Quezon City Board of Assessment
Appeals which was promulgated on September 30, 1961
before the 1973 and 1987 Constitutions took effect. 38 As
this Court held in Province of Abra v. Hernando:39
Under the 1935 Constitution: "Cemeteries,
churches, and parsonages or convents appurtenant
thereto, and all lands, buildings, and improvements
used exclusively for religious, charitable, or
educational purposes shall be exempt from taxation."
The present Constitution added "charitable

institutions, mosques, and non-profit cemeteries"

and required that for the exemption of "lands,
buildings, and improvements," they should not only
be "exclusively" but also "actually" and "directly"
used for religious or charitable purposes. The
Constitution is worded differently. The change should
not be ignored. It must be duly taken into
consideration. Reliance on past decisions would have
sufficed were the words "actually" as well as
"directly" not added. There must be proof therefore
of the actual and direct use of the lands, buildings,
and improvements for religious or charitable
purposes to be exempt from taxation.
Under the 1973 and 1987 Constitutions and Rep. Act No.
7160 in order to be entitled to the exemption, the petitioner
is burdened to prove, by clear and unequivocal proof, that
(a) it is a charitable institution; and (b) its real properties
are ACTUALLY, DIRECTLY and EXCLUSIVELY used for
charitable purposes. "Exclusive" is defined as possessed and
enjoyed to the exclusion of others; debarred from
participation or enjoyment; and "exclusively" is defined, "in
a manner to exclude; as enjoying a privilege
exclusively."40 If real property is used for one or more
commercial purposes, it is not exclusively used for the
exempted purposes but is subject to taxation.41 The words
"dominant use" or "principal use" cannot be substituted for
the words "used exclusively" without doing violence to the
Constitutions and the law.42 Solely is synonymous with
exclusively.43
What is meant by actual, direct and exclusive use of the
property for charitable purposes is the direct and immediate
and actual application of the property itself to the purposes
for which the charitable institution is organized. It is not the
use of the income from the real property that is
determinative of whether the property is used for taxexempt purposes.44

The petitioner failed to discharge its burden to prove that

the entirety of its real property is actually, directly and
exclusively used for charitable purposes. While portions of
the hospital are used for the treatment of patients and the
dispensation of medical services to them, whether paying or
non-paying, other portions thereof are being leased to
private individuals for their clinics and a canteen. Further, a
portion of the land is being leased to a private individual for
her business enterprise under the business name "Elliptical
Orchids and Garden Center." Indeed, the petitioners
evidence shows that it collected P1,136,483.45 as rentals in
1991 and P1,679,999.28 for 1992 from the said lessees.
Accordingly, we hold that the portions of the land leased to
private entities as well as those parts of the hospital leased
to private individuals are not exempt from such taxes.45 On
the other hand, the portions of the land occupied by the
hospital and portions of the hospital used for its patients,
whether paying or non-paying, are exempt from real
property taxes.
IN LIGHT OF ALL THE FOREGOING, the petition
is PARTIALLY GRANTED. The respondent Quezon City
Assessor is hereby DIRECTED to determine, after due
hearing, the precise portions of the land and the area
thereof which are leased to private persons, and to compute
the real property taxes due thereon as provided for by law.
SO ORDERED.
Davide, Jr., Puno, Vitug, Panganiban, Quisumbing, YnaresSantiago, Sandoval-Gutierrez, Carpio, Austria-Martinez,
Corona, Carpio Morales, Azcuna, and Tinga, JJ., concur.

Footnotes
*

On official leave.

**

On leave.

Penned by Associate Justice Remedios A. SalazarFernando, with Associate Justices Fermin A. Martin,
Jr. and Salvador J. Valdez, Jr. concurring.
2

SECTION 1. CREATION OF THE LUNG CENTER OF

THE PHILIPPINES. There is hereby created a trust,
under the name and style of Lung Center of the
Philippines, which, subject to the provisions of this
Decree, shall be administered, according to the
Articles of Incorporation, By-Laws and Objectives of
the Lung Center of the Philippines, Inc., duly
registered (reg. No. 85886) with the Securities and
Exchange Commission of the Republic of the
Philippines, by the Office of the President, in
coordination with the Ministry of Human Settlements
and the Ministry of Health.
3

Annex "C," Rollo, p. 49.

Annexes "2" & "2-A," id. at 93-94.

Annex "D," id. at 50-52.

Annex "E," id. at 53-55.

Annexes "4" & "5," id. at 100-109.

Annex "A," id. at 33-41.

3 SCRA 187 (1961).

10

Rollo, pp. 83-84.

23

See Obrien v. Physicians Hospital Association,

116 N.E. 975 (1917).

11

See Workmens Circle Educational Center of

Springfield v. Board of Assessors of City of
Springfield, 51 N.E.2d 313 (1943).

24

714 P.2d 653 (1986).

25

Id. at 660-661.

12

Congregational Sunday School & Publishing

Society v. Board of Review, 125 N.E. 7 (1919),
citingJackson v. Philipps, 14 Allen (Mass.) 539.

26

13

27

188 S.W.2d. 826 (1945).

28

Id. at 829.

29

Rollo, p. 120. (Underscoring supplied.)

Malinias v. COMELEC, 390 SCRA 480 (2002).

Bader Realty & Investment Co. v. St. Louis

Housing Authority, 217 S.W.2d 489 (1949).

Commissioner of Internal Revenue v. Court of

Appeals, 298 SCRA 83 (1998).

14

Board of Assessors of Boston v. Garland School of

Homemaking, 6 N.E.2d 379.
15

Rollo, pp. 119-120.

30

16

Id. at 123-125.

31

17

Scripps Memorial Hospital v. California

Employment Commission, 24 Cal.2d 669, 151 P.2d
109 (1944).

St. Louis Young Mens Christian Association v.

Gehner, 47 S.W.2d 776 (1932).
32

Underscoring supplied.

33
18

Sisters of Third Order of St. Frances v. Board of

Review of Peoria County, 83 N.E. 272.

Commissioner of Internal Revenue v. Court of

Appeals, supra.
34

19

See note 12.

Ibid. Citing II RECORDS OF THE CONSTITUTIONAL

COMMISSION 90.

20

Id. at 10.

35

21

167 N.W. 148 (1918), citing State v. Powers, 10

Mo. App. 263, 74 Mo. 476.
22

Id. at 149.

36

Underscoring supplied.

Article VI, Section 22, par. (3) of the 1935

Constitution provides that, "Cemeteries, churches
and parsonages or convents appurtenant thereto,
and all lands, buildings, and improvements used

exclusively for religious, charitable, or educational

purposes shall be exempt from taxation."
37

Article VIII, Section 17, par. (3) of the 1973

Constitution provides that, "Charitable institutions,
churches, parsonages or convents appurtenant
thereto, mosques, and non-profit cemeteries, and all
lands, buildings, and improvements actually, directly,
and exclusively used for religious or charitable
purposes shall be exempt from taxation."
38

3 SCRA 186 (1961).

39

107 SCRA 105 (1981).

40

Young Mens Christian Association of Omaha v.

Douglas County, 83 N.W. 924 (1900).
41

St. Louis Young Mens Christian Association v.

Gehner, supra.
42

See State ex rel Koeln v. St. Louis Y.M.C.A., 168

S.W. 589 (1914).
43

Lodge v. Nashville, 154 S.W. 141.

44

Christian Business College v. Kalamanzoo, 131

N.W. 553.
45

See Young Mens Christian Association of Omaha

v. Douglas County, supra; Martin v. City of New
Orleans, 58 Am. 194 (1886).

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-49336 August 31, 1981
THE PROVINCE OF ABRA, represented by LADISLAO
ANCHETA, Provincial Assessor, petitioner,
vs.
HONORABLE HAROLD M. HERNANDO, in his capacity
as Presiding Judge of Branch I, Court of First Instance
Abra; THE ROMAN CATHOLIC BISHOP OF BANGUED,
INC., represented by Bishop Odilo etspueler and
Reverend Felipe Flores, respondents.

FERNANDO, C.J.:
On the face of this certiorari and mandamus petition filed by
the Province of Abra, 1 it clearly appears that the actuation
of respondent Judge Harold M. Hernando of the Court of
First Instance of Abra left much to be desired. First, there
was a denial of a motion to dismiss 2 an action for
declaratory relief by private respondent Roman Catholic
Bishop of Bangued desirous of being exempted from a real
estate tax followed by a summary judgment 3 granting such
exemption, without even hearing the side of petitioner. In
the rather vigorous language of the Acting Provincial Fiscal,
as counsel for petitioner, respondent Judge "virtually
ignored the pertinent provisions of the Rules of Court; ...
wantonly violated the rights of petitioner to due process, by
giving due course to the petition of private respondent for
declaratory relief, and thereafter without allowing petitioner
to answer and without any hearing, adjudged the case; all

in total disregard of basic laws of procedure and basic

provisions of due process in the constitution, thereby
indicating a failure to grasp and understand the law, which
goes into the competence of the Honorable Presiding
Judge." 4
It was the submission of counsel that an action for
declaratory relief would be proper only before a breach or
violation of any statute, executive order or
regulation. 5 Moreover, there being a tax assessment made
by the Provincial Assessor on the properties of respondent
Roman Catholic Bishop, petitioner failed to exhaust the
administrative remedies available under Presidential Decree
No. 464 before filing such court action. Further, it was
pointed out to respondent Judge that he failed to abide by
the pertinent provision of such Presidential Decree which
provides as follows: "No court shall entertain any suit
assailing the validity of a tax assessed under this Code until
the taxpayer, shall have paid, under protest, the tax
assessed against him nor shall any court declare any tax
invalid by reason of irregularities or informalities in the
proceedings of the officers charged with the assessment or
collection of taxes, or of failure to perform their duties
within this time herein specified for their performance
unless such irregularities, informalities or failure shall have
impaired the substantial rights of the taxpayer; nor shall
any court declare any portion of the tax assessed under the
provisions of this Code invalid except upon condition that
the taxpayer shall pay the just amount of the tax, as
determined by the court in the pending proceeding." 6
When asked to comment, respondent Judge began with the
allegation that there "is no question that the real properties
sought to be taxed by the Province of Abra are properties of
the respondent Roman Catholic Bishop of Bangued,
Inc." 7 The very next sentence assumed the very point it
asked when he categorically stated: "Likewise, there is no
dispute that the properties including their procedure

are actually, directly and exclusively used by the Roman

Catholic Bishop of Bangued, Inc. for religious or charitable
purposes." 8 For him then: "The proper remedy of the
petitioner is appeal and not this special civil action." 9 A
more exhaustive comment was submitted by private
respondent Roman Catholic Bishop of Bangued, Inc. It was,
however, unable to lessen the force of the objection raised
by petitioner Province of Abra, especially the due process
aspect. it is to be admitted that his opposition to the
petition, pressed with vigor, ostensibly finds a semblance of
support from the authorities cited. It is thus impressed with
a scholarly aspect. It suffers, however, from the grave
infirmity of stating that only a pure question of law is
presented when a claim for exemption is made.

to Commissioner of Internal Revenue v. Guerrero: 12 "From

1906, in Catholic Church v. Hastings to 1966, in Esso
Standard Eastern, Inc. v. Acting Commissioner of Customs,
it has been the constant and uniform holding that
exemption from taxation is not favored and is never
presumed, so that if granted it must be strictly construed
against the taxpayer. Affirmatively put, the law frowns on
exemption from taxation, hence, an exempting provision
should be construedstrictissimi juris." 13 In Manila Electric
Company v. Vera, 14 a 1975 decision, such principle was
reiterated, reference being made to Republic Flour Mills,
Inc. v. Commissioner of Internal Revenue; 15 Commissioner
of Customs v. Philippine Acetylene Co. & CTA; 16 and Davao
Light and Power Co., Inc. v. Commissioner of Customs. 17

The petition must be granted.

2. Petitioner Province of Abra is therefore fully justified in

invoking the protection of procedural due process. If there
is any case where proof is necessary to demonstrate that
there is compliance with the constitutional provision that
allows an exemption, this is it. Instead, respondent Judge
accepted at its face the allegation of private respondent. All
that was alleged in the petition for declaratory relief filed by
private respondents, after mentioning certain parcels of
land owned by it, are that they are used "actually, directly
and exclusively" as sources of support of the parish priest
and his helpers and also of private respondent Bishop. 18 In
the motion to dismiss filed on behalf of petitioner Province
of Abra, the objection was based primarily on the lack of
jurisdiction, as the validity of a tax assessment may be
questioned before the Local Board of Assessment Appeals
and not with a court. There was also mention of a lack of a
cause of action, but only because, in its view, declaratory
relief is not proper, as there had been breach or violation of
the right of government to assess and collect taxes on such
property. It clearly appears, therefore, that in failing to
accord a hearing to petitioner Province of Abra and deciding
the case immediately in favor of private respondent,

1. Respondent Judge would not have erred so grievously

had he merely compared the provisions of the present
Constitution with that appearing in the 1935 Charter on the
tax exemption of "lands, buildings, and improvements."
There is a marked difference. Under the 1935 Constitution:
"Cemeteries, churches, and parsonages or convents
appurtenant thereto, and all lands, buildings, and
improvements used exclusively for religious, charitable, or
educational purposes shall be exempt from taxation." 10 The
present Constitution added "charitable institutions,
mosques, and non-profit cemeteries" and required that for
the exemption of ":lands, buildings, and improvements,"
they should not only be "exclusively" but also "actually and
"directly" used for religious or charitable purposes. 11 The
Constitution is worded differently. The change should not be
ignored. It must be duly taken into consideration. Reliance
on past decisions would have sufficed were the words
"actually" as well as "directly" not added. There must be
proof therefore of the actual and direct use of the lands,
buildings, and improvements for religious or charitable
purposes to be exempt from taxation. According

respondent Judge failed to abide by the constitutional

command of procedural due process.

under the instrument or statute and for a

declaration of his rights or duties thereunder."

WHEREFORE, the petition is granted and the resolution of

June 19, 1978 is set aside. Respondent Judge, or who ever
is acting on his behalf, is ordered to hear the case on the
merit. No costs.

6 Section 64, Presidential Decree No. 464

(1974).

Barredo, Concepcion, Jr., and De Castro, JJ., concur.

7 Comment, par. 1. He made mention of the

fact that it was represented by Bishop Odilo
Etspueler and Reverend Felipe Flores, private
respondents.

Aquino, J., concur in the result.

Abad Santos, J., is on leave.

8 Ibid, par. 2. (underlining by respondent

Judge)
9 Ibid, 3.
10 Article VI, Section 22, par. (3) of the 1935
Constitution.

Footnotes
1 In the suit it was represented by the
Provincial Assessor, Ladislao Ancheta.
2 Petition, par. 7, Annex F.
3 Ibid, par. 10, Annex J.
4 Ibid, par. 13.
5 According to Rule 64, Section 1 of the Rules
of Court: "Any person interested under a
deed, will, contract or other written
instrument, or whose rights are affected by a
statute, executive order or regulation, or
ordinance, may, before breach or violation
thereof, bring an action to determine any
question of construction or validity arising

11 According to Article VIII, Section 17, par.

(3) of the present Constitution: "Charitable
institutions, churches, parsonages or
convents appurtenant thereto, mosques, and
non-profit cemeteries, and all lands,
buildings, and improvements actually,
directly, and exclusively used for religious or
charitable purposes shall be exempt from
taxation."
12 L-20812, September 22, 1967, 21 SCRA
180.
13 Ibid. 183. Catholic Church v. Hastings is
reported in 5 Phil. 701 and Esso Standard
Eastern, Inc. v. Acting Commissioner of
Customs, L-21841, October 28, 1966, in 18

SCRA 488. The footnote mentioned 8

additional cases.
14 L-29987, October 22, 1975, 67 SCRA 351.
15 L-25602, February 18, 1970, 31 SCRA
520.
16 L-22443, May 29, 1971, 39 SCRA 71.
17 L-28902, March 29, 1972, 44 SCRA 122.
18 Petition, Annex A, par. 7.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-39086 June 15, 1988
ABRA VALLEY COLLEGE, INC., represented by PEDRO
V. BORGONIA, petitioner,
vs.
HON. JUAN P. AQUINO, Judge, Court of First Instance,
Abra; ARMIN M. CARIAGA, Provincial Treasurer, Abra;
GASPAR V. BOSQUE, Municipal Treasurer, Bangued,
Abra; HEIRS OF PATERNO MILLARE,respondents.

PARAS, J.:
This is a petition for review on certiorari of the decision * of
the defunct Court of First Instance of Abra, Branch I, dated
June 14, 1974, rendered in Civil Case No. 656, entitled
"Abra Valley Junior College, Inc., represented by Pedro V.
Borgonia, plaintiff vs. Armin M. Cariaga as Provincial
Treasurer of Abra, Gaspar V. Bosque as Municipal Treasurer
of Bangued, Abra and Paterno Millare, defendants," the
decretal portion of which reads:
IN VIEW OF ALL THE FOREGOING, the Court
hereby declares:
That the distraint seizure and sale by the
Municipal Treasurer of Bangued, Abra, the
Provincial Treasurer of said province against
the lot and building of the Abra Valley Junior

College, Inc., represented by Director Pedro

Borgonia located at Bangued, Abra, is valid;
That since the school is not exempt from
paying taxes, it should therefore pay all back
taxes in the amount of P5,140.31 and back
taxes and penalties from the promulgation of
this decision;
That the amount deposited by the plaintaff
him the sum of P60,000.00 before the trial,
be confiscated to apply for the payment of the
back taxes and for the redemption of the
property in question, if the amount is less
than P6,000.00, the remainder must be
returned to the Director of Pedro Borgonia,
who represents the plaintiff herein;
That the deposit of the Municipal Treasurer in
the amount of P6,000.00 also before the trial
must be returned to said Municipal Treasurer
of Bangued, Abra;
And finally the case is hereby ordered
dismissed with costs against the plaintiff.
SO ORDERED. (Rollo, pp. 22-23)
Petitioner, an educational corporation and institution of
higher learning duly incorporated with the Securities and
Exchange Commission in 1948, filed a complaint (Annex "1"
of Answer by the respondents Heirs of Paterno Millare;
Rollo, pp. 95-97) on July 10, 1972 in the court a quo to
annul and declare void the "Notice of Seizure' and the
"Notice of Sale" of its lot and building located at Bangued,
Abra, for non-payment of real estate taxes and penalties
amounting to P5,140.31. Said "Notice of Seizure" of the

college lot and building covered by Original Certificate of

Title No. Q-83 duly registered in the name of petitioner,
plaintiff below, on July 6, 1972, by respondents Municipal
Treasurer and Provincial Treasurer, defendants below, was
issued for the satisfaction of the said taxes thereon. The
"Notice of Sale" was caused to be served upon the
petitioner by the respondent treasurers on July 8, 1972 for
the sale at public auction of said college lot and building,
which sale was held on the same date. Dr. Paterno Millare,
then Municipal Mayor of Bangued, Abra, offered the highest
bid of P6,000.00 which was duly accepted. The certificate of
sale was correspondingly issued to him.
On August 10, 1972, the respondent Paterno Millare (now
deceased) filed through counstel a motion to dismiss the
complaint.
On August 23, 1972, the respondent Provincial Treasurer
and Municipal Treasurer, through then Provincial Fiscal
Loreto C. Roldan, filed their answer (Annex "2" of Answer by
the respondents Heirs of Patemo Millare; Rollo, pp. 98-100)
to the complaint. This was followed by an amended answer
(Annex "3," ibid, Rollo, pp. 101-103) on August 31, 1972.
On September 1, 1972 the respondent Paterno Millare filed
his answer (Annex "5," ibid; Rollo, pp. 106-108).
On October 12, 1972, with the aforesaid sale of the school
premises at public auction, the respondent Judge, Hon. Juan
P. Aquino of the Court of First Instance of Abra, Branch I,
ordered (Annex "6," ibid; Rollo, pp. 109-110) the
respondents provincial and municipal treasurers to deliver
to the Clerk of Court the proceeds of the auction sale.
Hence, on December 14, 1972, petitioner, through Director
Borgonia, deposited with the trial court the sum of
P6,000.00 evidenced by PNB Check No. 904369.

On April 12, 1973, the parties entered into a stipulation of

facts adopted and embodied by the trial court in its
questioned decision. Said Stipulations reads:
STIPULATION OF FACTS
COME NOW the parties, assisted by counsels,
and to this Honorable Court respectfully enter
into the following agreed stipulation of facts:
1. That the personal circumstances of the
parties as stated in paragraph 1 of the
complaint is admitted; but the particular
person of Mr. Armin M. Cariaga is to be
substituted, however, by anyone who is
actually holding the position of Provincial
Treasurer of the Province of Abra;
2. That the plaintiff Abra Valley Junior
College, Inc. is the owner of the lot and
buildings thereon located in Bangued, Abra
under Original Certificate of Title No. 0-83;
3. That the defendant Gaspar V. Bosque, as
Municipal treasurer of Bangued, Abra caused
to be served upon the Abra Valley Junior
College, Inc. a Notice of Seizure on the
property of said school under Original
Certificate of Title No. 0-83 for the
satisfaction of real property taxes thereon,
amounting to P5,140.31; the Notice of
Seizure being the one attached to the
complaint as Exhibit A;
4. That on June 8, 1972 the above properties
of the Abra Valley Junior College, Inc. was
sold at public auction for the satisfaction of

the unpaid real property taxes thereon and

the same was sold to defendant Paterno
Millare who offered the highest bid of
P6,000.00 and a Certificate of Sale in his
favor was issued by the defendant Municipal
Treasurer.
5. That all other matters not particularly and
specially covered by this stipulation of facts
will be the subject of evidence by the parties.

The succeeding Provincial Fiscal, Hon. Jose A. Solomon and

his Assistant, Hon. Eustaquio Z. Montero, filed a
Memorandum for the Government on March 25, 1974, and a
Supplemental Memorandum on May 7, 1974, wherein they
opined "that based on the evidence, the laws applicable,
court decisions and jurisprudence, the school building and
school lot used for educational purposes of the Abra Valley
College, Inc., are exempted from the payment of taxes."
(Annexes "B," "B-1" of Petition; Rollo, pp. 24-49; 44 and
49).

WHEREFORE, it is respectfully prayed of the

Honorable Court to consider and admit this
stipulation of facts on the point agreed upon
by the parties.

Nonetheless, the trial court disagreed because of the use of

the second floor by the Director of petitioner school for
residential purposes. He thus ruled for the government and
rendered the assailed decision.

Bangued, Abra, April 12, 1973.

After having been granted by the trial court ten (10) days
from August 6, 1974 within which to perfect its appeal (Per
Order dated August 6, 1974; Annex "G" of Petition; Rollo, p.
57) petitioner instead availed of the instant petition for
review on certiorari with prayer for preliminary injunction
before this Court, which petition was filed on August 17,
1974 (Rollo, p.2).

Aside from the Stipulation of Facts, the trial court among

others, found the following: (a) that the school is
recognized by the government and is offering Primary, High
School and College Courses, and has a school population of
more than one thousand students all in all; (b) that it is
located right in the heart of the town of Bangued, a few
meters from the plaza and about 120 meters from the Court
of First Instance building; (c) that the elementary pupils are
housed in a two-storey building across the street; (d) that
the high school and college students are housed in the main
building; (e) that the Director with his family is in the
second floor of the main building; and (f) that the annual
gross income of the school reaches more than one hundred
thousand pesos.
From all the foregoing, the only issue left for the Court to
determine and as agreed by the parties, is whether or not
the lot and building in question are used exclusively for
educational purposes. (Rollo, p. 20)

In the resolution dated August 16, 1974, this Court resolved

to give DUE COURSE to the petition (Rollo, p. 58).
Respondents were required to answer said petition (Rollo, p.
74).
Petitioner raised the following assignments of error:
I
THE COURT A QUO ERRED IN SUSTAINING AS VALID THE
SEIZURE AND SALE OF THE COLLEGE LOT AND BUILDING
USED FOR EDUCATIONAL PURPOSES OF THE PETITIONER.

II
THE COURT A QUO ERRED IN DECLARING THAT THE
COLLEGE LOT AND BUILDING OF THE PETITIONER ARE NOT
USED EXCLUSIVELY FOR EDUCATIONAL PURPOSES MERELY
BECAUSE THE COLLEGE PRESIDENT RESIDES IN ONE
ROOM OF THE COLLEGE BUILDING.
III
THE COURT A QUO ERRED IN DECLARING THAT THE
COLLEGE LOT AND BUILDING OF THE PETITIONER ARE NOT
EXEMPT FROM PROPERTY TAXES AND IN ORDERING
PETITIONER TO PAY P5,140.31 AS REALTY TAXES.
IV
THE COURT A QUO ERRED IN ORDERING THE
CONFISCATION OF THE P6,000.00 DEPOSIT MADE IN THE
COURT BY PETITIONER AS PAYMENT OF THE P5,140.31
REALTY TAXES. (See Brief for the Petitioner, pp. 1-2)
The main issue in this case is the proper interpretation of
the phrase "used exclusively for educational purposes."
Petitioner contends that the primary use of the lot and
building for educational purposes, and not the incidental use
thereof, determines and exemption from property taxes
under Section 22 (3), Article VI of the 1935 Constitution.
Hence, the seizure and sale of subject college lot and
building, which are contrary thereto as well as to the
provision of Commonwealth Act No. 470, otherwise known
as the Assessment Law, are without legal basis and
therefore void.
On the other hand, private respondents maintain that the
college lot and building in question which were subjected to

seizure and sale to answer for the unpaid tax are used: (1)
for the educational purposes of the college; (2) as the
permanent residence of the President and Director thereof,
Mr. Pedro V. Borgonia, and his family including the in-laws
and grandchildren; and (3) for commercial purposes
because the ground floor of the college building is being
used and rented by a commercial establishment, the
Northern Marketing Corporation (See photograph attached
as Annex "8" (Comment; Rollo, p. 90]).
Due to its time frame, the constitutional provision which
finds application in the case at bar is Section 22, paragraph
3, Article VI, of the then 1935 Philippine Constitution, which
expressly grants exemption from realty taxes for
"Cemeteries, churches and parsonages or convents
appurtenant thereto, and all lands, buildings, and
improvements used exclusively for religious, charitable or
educational purposes ...
Relative thereto, Section 54, paragraph c, Commonwealth
Act No. 470 as amended by Republic Act No. 409, otherwise
known as the Assessment Law, provides:
The following are exempted from real
property tax under the Assessment Law:
xxx xxx xxx
(c) churches and parsonages or convents
appurtenant thereto, and all lands, buildings,
and improvements used exclusively for
religious, charitable, scientific or educational
purposes.
xxx xxx xxx

In this regard petitioner argues that the primary use of the

school lot and building is the basic and controlling guide,
norm and standard to determine tax exemption, and not the
mere incidental use thereof.
As early as 1916 in YMCA of Manila vs. Collector of lnternal
Revenue, 33 Phil. 217 [1916], this Court ruled that while it
may be true that the YMCA keeps a lodging and a boarding
house and maintains a restaurant for its members, still
these do not constitute business in the ordinary acceptance
of the word, but an institution used exclusively for religious,
charitable and educational purposes, and as such, it is
entitled to be exempted from taxation.
In the case of Bishop of Nueva Segovia v. Provincial Board
of Ilocos Norte, 51 Phil. 352 [1972], this Court included in
the exemption a vegetable garden in an adjacent lot and
another lot formerly used as a cemetery. It was clarified
that the term "used exclusively" considers incidental use
also. Thus, the exemption from payment of land tax in favor
of the convent includes, not only the land actually occupied
by the building but also the adjacent garden devoted to the
incidental use of the parish priest. The lot which is not used
for commercial purposes but serves solely as a sort of
lodging place, also qualifies for exemption because this
constitutes incidental use in religious functions.
The phrase "exclusively used for educational purposes" was
further clarified by this Court in the cases of Herrera vs.
Quezon City Board of assessment Appeals, 3 SCRA 186
[1961] and Commissioner of Internal Revenue vs. Bishop of
the Missionary District, 14 SCRA 991 [1965], thus
Moreover, the exemption in favor of property
used exclusively for charitable or educational
purposes is 'not limited to property actually
indispensable' therefor (Cooley on Taxation,

Vol. 2, p. 1430), but extends to facilities

which are incidental to and reasonably
necessary for the accomplishment of said
purposes, such as in the case of hospitals, "a
school for training nurses, a nurses' home,
property use to provide housing facilities for
interns, resident doctors, superintendents,
and other members of the hospital staff, and
recreational facilities for student nurses,
interns, and residents' (84 CJS 6621), such as
"Athletic fields" including "a firm used for the
inmates of the institution. (Cooley on
Taxation, Vol. 2, p. 1430).
The test of exemption from taxation is the use of the
property for purposes mentioned in the Constitution
(Apostolic Prefect v. City Treasurer of Baguio, 71 Phil, 547
[1941]).
It must be stressed however, that while this Court allows a
more liberal and non-restrictive interpretation of the phrase
"exclusively used for educational purposes" as provided for
in Article VI, Section 22, paragraph 3 of the 1935 Philippine
Constitution, reasonable emphasis has always been made
that exemption extends to facilities which are incidental to
and reasonably necessary for the accomplishment of the
main purposes. Otherwise stated, the use of the school
building or lot for commercial purposes is neither
contemplated by law, nor by jurisprudence. Thus, while the
use of the second floor of the main building in the case at
bar for residential purposes of the Director and his family,
may find justification under the concept of incidental use,
which is complimentary to the main or primary purpose
educational, the lease of the first floor thereof to the
Northern Marketing Corporation cannot by any stretch of
the imagination be considered incidental to the purpose of
education.

It will be noted however that the aforementioned lease

appears to have been raised for the first time in this Court.
That the matter was not taken up in the to court is really
apparent in the decision of respondent Judge. No mention
thereof was made in the stipulation of facts, not even in the
description of the school building by the trial judge, both
embodied in the decision nor as one of the issues to resolve
in order to determine whether or not said properly may be
exempted from payment of real estate taxes (Rollo, pp. 1723). On the other hand, it is noteworthy that such fact was
not disputed even after it was raised in this Court.
Indeed, it is axiomatic that facts not raised in the lower
court cannot be taken up for the first time on appeal.
Nonetheless, as an exception to the rule, this Court has held
that although a factual issue is not squarely raised below,
still in the interest of substantial justice, this Court is not
prevented from considering a pivotal factual matter. "The
Supreme Court is clothed with ample authority to review
palpable errors not assigned as such if it finds that their
consideration is necessary in arriving at a just decision."
(Perez vs. Court of Appeals, 127 SCRA 645 [1984]).
Under the 1935 Constitution, the trial court correctly arrived
at the conclusion that the school building as well as the lot
where it is built, should be taxed, not because the second
floor of the same is being used by the Director and his
family for residential purposes, but because the first floor
thereof is being used for commercial purposes. However,
since only a portion is used for purposes of commerce, it is
only fair that half of the assessed tax be returned to the
school involved.
PREMISES CONSIDERED, the decision of the Court of First
Instance of Abra, Branch I, is hereby AFFIRMED subject to
the modification that half of the assessed tax be returned to
the petitioner.

SO ORDERED.
Yap, C.J., Melencio-Herrera, Padilla and Sarmiento, JJ.,
concur.

Footnotes
* Penned by the respondent Judge, Hon.
Judge P. Aquino.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-45459

March 13, 1937

GREGORIO AGLIPAY, petitioner,

vs.
JUAN RUIZ, respondent.
Vicente Sotto for petitioner.
Office of the Solicitor-General Tuason for respondent.
LAUREL, J.:
The petitioner, Mons. Gregorio Aglipay, Supreme Head of
the Philippine Independent Church, seeks the issuance from
this court of a writ of prohibition to prevent the respondent
Director of Posts from issuing and selling postage stamps
commemorative of the Thirty-third International Eucharistic
Congress.
In May, 1936, the Director of Posts announced in the dailies
of Manila that he would order the issues of postage stamps
commemorating the celebration in the City of Manila of the
Thirty-third international Eucharistic Congress, organized by
the Roman Catholic Church. The petitioner, in the fulfillment
of what he considers to be a civic duty, requested Vicente
Sotto, Esq., member of the Philippine Bar, to denounce the
matter to the President of the Philippines. In spite of the
protest of the petitioner's attorney, the respondent publicly
announced having sent to the United States the designs of
the postage stamps for printing as follows:

"In the center is chalice, with grape vine and stalks of wheat
as border design. The stamps are blue, green, brown,
cardinal red, violet and orange, 1 inch by 1,094 inches. The
denominations are for 2, 6, 16, 20, 36 and 50 centavos."
The said stamps were actually issued and sold though the
greater part thereof, to this day, remains unsold. The
further sale of the stamps is sought to be prevented by the
petitioner herein.
The Solicitor-General contends that the writ of prohibition is
not the proper legal remedy in the instant case, although he
admits that the writ may properly restrain ministerial
functions. While, generally, prohibition as an extraordinary
legal writ will not issue to restrain or control the
performance of other than judicial or quasi-judicial functions
(50 C. J., 6580, its issuance and enforcement are regulated
by statute and in this jurisdiction may issue to . . . inferior
tribunals, corporations, boards, or persons, whether
excercising functions judicial or ministerial, which are
without or in excess of the jurisdiction of such tribunal,
corporation, board, or person, . . . ." (Secs. 516 and 226,
Code of Civil Procedure.) The terms "judicial" and
"ministerial" used with reference to "functions" in the
statute are undoubtedly comprehensive and include the
challenged act of the respondent Director of Posts in the
present case, which act because alleged to be violative of
the Constitution is a fortiorari "without or in excess of . . .
jurisdiction." The statutory rule, therefore, in the jurisdiction
is that the writ of prohibition is not confined exclusively to
courts or tribunals to keep them within the limits of their
own jurisdiction and to prevent them from encroaching
upon the jurisdiction of other tribunals, but will issue, in
appropriate cases, to an officer or person whose acts are
without or in excess of his authority. Not infrequently, "the
writ is granted, where it is necessary for the orderly
administration of justice, or to prevent the use of the strong
arm of the law in an oppressive or vindictive manner, or a

multiplicity of actions." (Dimayuga and Fajardo vs.

Fernandez [1923], 43 Phil., 304, 307.)
The more important question raised refers to the alleged
violation of the Constitution by the respondent in issuing
and selling postage stamps commemorative of the Thirtythird International Eucharistic Congress. It is alleged that
this action of the respondent is violative of the provisions of
section 23, subsection 3, Article VI, of the Constitution of
the Philippines, which provides as follows:
No public money or property shall ever be
appropriated, applied, or used, directly or indirectly,
for the use, benefit, or support of any sect, church,
denomination, secretarian, institution, or system of
religion, or for the use, benefit, or support of any
priest, preacher, minister, or other religious teacher
or dignitary as such, except when such priest,
preacher, minister, or dignitary is assigned to the
armed forces or to any penal institution, orphanage,
or leprosarium.
The prohibition herein expressed is a direct corollary of the
principle of separation of church and state. Without the
necessity of adverting to the historical background of this
principle in our country, it is sufficient to say that our
history, not to speak of the history of mankind, has taught
us that the union of church and state is prejudicial to both,
for ocassions might arise when the estate will use the
church, and the church the state, as a weapon in the
furtherance of their recognized this principle of separation of
church and state in the early stages of our constitutional
development; it was inserted in the Treaty of Paris between
the United States and Spain of December 10, 1898,
reiterated in President McKinley's Instructions of the
Philippine Commission, reaffirmed in the Philippine Bill of
1902 and in the autonomy Act of August 29, 1916, and
finally embodied in the constitution of the Philippines as the

supreme expression of the Filipino people. It is almost trite

to say now that in this country we enjoy both religious and
civil freedom. All the officers of the Government, from the
highest to the lowest, in taking their oath to support and
defend the constitution, bind themselves to recognize and
respect the constitutional guarantee of religious freedom,
with its inherent limitations and recognized implications. It
should be stated that what is guaranteed by our
Constitution is religious liberty, not mere religious
toleration.
Religious freedom, however, as a constitutional mandate is
not inhibition of profound reverence for religion and is not
denial of its influence in human affairs. Religion as a
profession of faith to an active power that binds and
elevates man to his Creator is recognized. And, in so far as
it instills into the minds the purest principles of morality, its
influence is deeply felt and highly appreciated. When the
Filipino people, in the preamble of their Constitution,
implored "the aid of Divine Providence, in order to establish
a government that shall embody their ideals, conserve and
develop the patrimony of the nation, promote the general
welfare, and secure to themselves and their posterity the
blessings of independence under a regime of justice, liberty
and democracy," they thereby manifested reliance upon
Him who guides the destinies of men and nations. The
elevating influence of religion in human society is
recognized here as elsewhere. In fact, certain general
concessions are indiscriminately accorded to religious sects
and denominations. Our Constitution and laws exempt from
taxation properties devoted exclusively to religious purposes
(sec. 14, subsec. 3, Art. VI, Constitution of the Philippines
and sec. 1, subsec. 4, Ordinance appended thereto;
Assessment Law, sec. 344, par. [c]. Adm. Code). Sectarian
aid is not prohibited when a priest, preacher, minister or
other religious teacher or dignitary as such is assigned to
the armed forces or to any penal institution, orphanage or
leprosarium 9 sec. 13, subsec. 3, Art. VI, Constitution of the

Philippines). Optional religious instruction in the public

schools is by constitutional mandate allowed (sec. 5, Art.
XIII, Constitution of the Philippines, in relation to sec. 928,
Adm. Code). Thursday and Friday of Holy Week,
Thanksgiving Day, Christmas Day, and Sundays and made
legal holidays (sec. 29, Adm. Code) because of the secular
idea that their observance is conclusive to beneficial moral
results. The law allows divorce but punishes polygamy and
bigamy; and certain crimes against religious worship are
considered crimes against the fundamental laws of the state
(see arts. 132 and 133, Revised Penal Code).
In the case at bar, it appears that the respondent Director
of Posts issued the postage stamps in question under the
provisions of Act No. 4052 of the Philippine Legislature. This
Act is as follows:
No. 4052. AN ACT APPROPRIATING THE SUM OF
SIXTY THOUSAND PESOS AND MAKING THE SAME
AVAILABLE OUT OF ANY FUNDS IN THE INSULAR
TREASURY NOT OTHERWISE APPROPRIATED FOR
THE COST OF PLATES AND PRINTING OF POSTAGE
STAMPS WITH NEW DESIGNS, AND FOR OTHER
PURPOSES.
Be it enacted by the Senate and House of
Representatives of the Philippines in Legislature
assembled and by the authority of the same:
SECTION 1. The sum of sixty thousand pesos is hereby
appropriated and made immediately available out of any
funds in the Insular Treasury not otherwise appropriated,
for the costs of plates and printing of postage stamps with
new designs, and other expenses incident thereto.
SEC. 2. The Director of Posts, with the approval of the
Secretary of Public Works and Communications, is hereby

authorized to dispose of the whole or any portion of the

amount herein appropriated in the manner indicated and as
often as may be deemed advantageous to the Government.
SEC. 3. This amount or any portion thereof not otherwise
expended shall not revert to the Treasury.
SEC. 4. This act shall take effect on its approval.
Approved, February 21, 1933.
It will be seen that the Act appropriates the sum of sixty
thousand pesos for the costs of plates and printing of
postage stamps with new designs and other expenses
incident thereto, and authorizes the Director of Posts, with
the approval of the Secretary of Public Works and
Communications, to dispose of the amount appropriated in
the manner indicated and "as often as may be deemed
advantageous to the Government". The printing and
issuance of the postage stamps in question appears to have
been approved by authority of the President of the
Philippines in a letter dated September 1, 1936, made part
of the respondent's memorandum as Exhibit A. The
respondent alleges that the Government of the Philippines
would suffer losses if the writ prayed for is granted. He
estimates the revenue to be derived from the sale of the
postage stamps in question at P1,618,17.10 and states that
there still remain to be sold stamps worth P1,402,279.02.
Act No. 4052 contemplates no religious purpose in view.
What it gives the Director of Posts is the discretionary
power to determine when the issuance of special postage
stamps would be "advantageous to the Government." Of
course, the phrase "advantageous to the Government" does
not authorize the violation of the Constitution. It does not
authorize the appropriation, use or application of public
money or property for the use, benefit or support of a

particular sect or church. In the present case, however, the

issuance of the postage stamps in question by the Director
of Posts and the Secretary of Public Works and
Communications was not inspired by any sectarian
denomination. The stamps were not issue and sold for the
benefit of the Roman Catholic Church. Nor were money
derived from the sale of the stamps given to that church.
On the contrary, it appears from the latter of the Director of
Posts of June 5, 1936, incorporated on page 2 of the
petitioner's complaint, that the only purpose in issuing and
selling the stamps was "to advertise the Philippines and
attract more tourist to this country." The officials concerned
merely, took advantage of an event considered of
international importance "to give publicity to the Philippines
and its people" (Letter of the Undersecretary of Public
Works and Communications to the President of the
Philippines, June 9, 1936; p. 3, petitioner's complaint). It is
significant to note that the stamps as actually designed and
printed (Exhibit 2), instead of showing a Catholic Church
chalice as originally planned, contains a map of the
Philippines and the location of the City of Manila, and an
inscription as follows: "Seat XXXIII International Eucharistic
Congress, Feb. 3-7,1937." What is emphasized is not the
Eucharistic Congress itself but Manila, the capital of the
Philippines, as the seat of that congress. It is obvious that
while the issuance and sale of the stamps in question may
be said to be inseparably linked with an event of a religious
character, the resulting propaganda, if any, received by the
Roman Catholic Church, was not the aim and purpose of the
Government. We are of the opinion that the Government
should not be embarassed in its activities simply because of
incidental results, more or less religious in character, if the
purpose had in view is one which could legitimately be
undertaken by appropriate legislation. The main purpose
should not be frustrated by its subordinate to mere
incidental results not contemplated. (Vide Bradfield vs.
Roberts, 175 U. S., 295; 20 Sup. Ct. Rep., 121; 44 Law.
ed., 168.)

We are much impressed with the vehement appeal of

counsel for the petitioner to maintain inviolate the complete
separation of church and state and curb any attempt to
infringe by indirection a constitutional inhibition. Indeed, in
the Philippines, once the scene of religious intolerance and
prescription, care should be taken that at this stage of our
political development nothing is done by the Government or
its officials that may lead to the belief that the Government
is taking sides or favoring a particular religious sect or
institution. But, upon very serious reflection, examination of
Act No. 4052, and scrutiny of the attending circumstances,
we have come to the conclusion that there has been no
constitutional infraction in the case at bar, Act No. 4052
grants the Director of Posts, with the approval of the
Secretary of Public Works and Communications, discretion
to misuse postage stamps with new designs "as often as
may be deemed advantageous to the Government." Even if
we were to assume that these officials made use of a poor
judgment in issuing and selling the postage stamps in
question still, the case of the petitioner would fail to take in
weight. Between the exercise of a poor judgment and the
unconstitutionality of the step taken, a gap exists which is
yet to be filled to justify the court in setting aside the official
act assailed as coming within a constitutional inhibition.
The petition for a writ of prohibition is hereby denied,
without pronouncement as to costs. So ordered.
Avancea, C.J., Villa-Real, Abad Santos, Imperial, Diaz and
Concepcion, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC

G.R. No. 94571 April 22, 1991

TEOFISTO T. GUINGONA, JR. and AQUILINO Q.
PIMENTEL, JR., petitioners,
vs.
HON. GUILLERMO CARAGUE, in his capacity as
Secretary, Budget & Management, HON. ROZALINA S.
CAJUCOM in her capacity as National Treasurer and
COMMISSION ON AUDIT, respondents.
Ramon A. Gonzales for petitioners.

GANCAYCO, J.:p
This is a case of first impression whereby petitioners
question the constitutionality of the automatic appropriation
for debt service in the 1990 budget.
As alleged in the petition, the facts are as follows:
The 1990 budget consists of P98.4 Billion in automatic
appropriation (with P86.8 Billion for debt service) and
P155.3 Billion appropriated under Republic Act No. 6831,
otherwise known as the General Appropriations Act, or a
total of P233.5 Billion, 1 while the appropriations for the

Department of Education, Culture and Sports amount to

P27,017,813,000.00. 2
The said automatic appropriation for debt service is
authorized by P.D. No. 81, entitled "Amending Certain
Provisions of Republic Act Numbered Four Thousand Eight
Hundred Sixty, as Amended (Re: Foreign Borrowing Act),"
by P.D. No. 1177, entitled "Revising the Budget Process in
Order to Institutionalize the Budgetary Innovations of the
New Society," and by P.D. No. 1967, entitled "An Act
Strenghthening the Guarantee and Payment Positions of the
Republic of the Philippines on Its Contingent Liabilities
Arising out of Relent and Guaranteed Loan by Appropriating
Funds For The Purpose.
There can be no question that petitioners as Senators of the
Republic of the Philippines may bring this suit where a
constitutional issue is raised. 3 Indeed, even a taxpayer has
personality to restrain unlawful expenditure of public funds.
The petitioner seek the declaration of the unconstitutionality
of P.D. No. 81, Sections 31 of P.D. 1177, and P.D. No.
1967. The petition also seeks to restrain the disbursement
for debt service under the 1990 budget pursuant to said
decrees.
Respondents contend that the petition involves a pure
political question which is the repeal or amendment of said
laws addressed to the judgment, wisdom and patriotism of
the legislative body and not this Court.
In Gonzales, 5 the main issue was the unconstitutionality of
the presidential veto of certain provision particularly Section
16 of the General Appropriations Act of 1990, R.A. No.
6831. This Court, in disposing of the issue, stated

The political question doctrine neither

interposes an obstacle to judicial
determination of the rival claims. The
jurisdiction to delimit constitutional
boundaries has been given to this Court. It
cannot abdicate that obligation mandated by
the 1987 Constitution, although said provision
by no means does away with the applicability
of the principle in appropriate cases.
Sec. 1. The judicial power shad
be vested in one Supreme
Court and in such lower courts
as may be established by law.
Judicial power includes the duty
of the courts of justice to settle
actual controversies involving
rights which are legally
demandable and enforceable,
and to determine whether or
not there has been a grave
abuse of discretion amounting
to lack or excess of jurisdiction
on the part of any branch or
instrumentality of the
Government.
With the Senate maintaining that the
President's veto is unconstitutional and that
charge being controverted, there is an actual
case or justiciable controversy between the
Upper House of Congress and the executive
department that may be taken cognizance of
by this Court.
The questions raised in the instant petition are

I. IS THE APPROPRIATION OF P86 BILLION IN

THE P233 BILLION 1990 BUDGET VIOLATIVE
OF SECTION 5, ARTICLE XIV OF THE
CONSTITUTION?
II. ARE PD No. 81, PD No. 1177 AND PD No.
1967 STILL OPERATIVE UNDER THE
CONSTITUTION?
III. ARE THEY VIOLATIVE OF SECTION 29(l),
ARTICLE VI OF THE CONSTITUTION? 6
There is thus a justiciable controversy raised in the petition
which this Court may properly take cognizance of On the
first issue, the petitioners aver
According to Sec. 5, Art. XIV of the
Constitution:
(5) The State shall assign
the highest budgetary priority
to education and ensure that
teaching will attract and retain
its rightful share of the best
available talents through
adequate remuneration and
other means of job satisfaction
and fulfillment.
The reason behind the said provision is
stated, thus:
In explaining his proposed
amendment, Mr. Ople stated
that all the great and sincere
piety professed by every
President and every Congress

of the Philippines since the end

of World War II for the
economic welfare of the public
schoolteachers always ended
up in failure and this failure, he
stated, had caused mass
defection of the best and
brightest teachers to other
careers, including menial jobs
in overseas employment and
concerted actions by them to
project their grievances, mainly
over low pay and abject
working conditions.
He pointed to the high
expectations generated by the
February Revolution, especially
keen among public
schoolteachers, which at
present exacerbate these long
frustrated hopes.
Mr. Ople stated that despite the
sincerity of all administrations
that tried vainly to respond to
the needs of the teachers, the
central problem that always
defeated their pious intentions
was really the one budgetary
priority in the sense that any
proposed increase for public
schoolteachers had to be
multiplied many times by the
number of government
employees in general and their
equitable claims to any pay
standardization such that the

pay rate of teachers is

hopelessly pegged to the rate
of government workers in
general. This, he stated,
foredoomed the prospect of a
significant pay increase for
teachers.
Mr. Ople pointed out that
the recognition by the
Constitution of the highest
priority for public
schoolteachers, and by
implication, for all teachers,
would ensure that the President
and Congress would be strongly
urged by a constitutional
mandate to grant to them such
a level of remuneration and
other incentives that would
make teaching competitive
again and attractive to the best
available talents in the nation.
Finally, Mr. Ople recalled that
before World War II, teaching
competed most successfully
against all other career choices
for the best and the brightest of
the younger generation. It is
for this reason, he stated, that
his proposed amendment if
approved, would ensure that
teaching would be restored to
its lost glory as the career of
choice for the most talented
and most public-spirited of the
younger generation in the

sense that it would become the

countervailing measure against
the continued decline of
teaching and the wholesale
desertion of this noble
profession presently taking
place. He further stated that
this would ensure that the
future and the quality of the
population would be asserted
as a top priority against many
clamorous and importunate but
less important claims of the
present. (Journal of the
Constitutional Commission, Vol.
II, p. 1172)
However, as against this constitutional
intention, P86 Billion is appropriated for debt
service while only P27 Billion is appropriated
for the Department of Education in the 1990
budget. It plain, therefore, that the said
appropriation for debt services is inconsistent
with the Constitution, hence, viod (Art. 7,
New Civil Code). 7
While it is true that under Section 5(5), Article XIV of the
Constitution Congress is mandated to "assign the highest
budgetary priority to education" in order to "insure that
teaching will attract and retain its rightful share of the best
available talents through adequate remuneration and other
means of job satisfaction and fulfillment," it does not
thereby follow that the hands of Congress are so hamstrung
as to deprive it the power to respond to the imperatives of
the national interest and for the attainment of other state
policies or objectives.

As aptly observed by respondents, since 1985, the budget

for education has tripled to upgrade and improve the facility
of the public school system. The compensation of teachers
has been doubled. The amount of
P29,740,611,000.00 8 set aside for the Department of
Education, Culture and Sports under the General
Appropriations Act (R.A. No. 6831), is the highest budgetary
allocation among all department budgets. This is a clear
compliance with the aforesaid constitutional mandate
according highest priority to education.
Having faithfully complied therewith, Congress is certainly
not without any power, guided only by its good judgment,
to provide an appropriation, that can reasonably service our
enormous debt, the greater portion of which was inherited
from the previous administration. It is not only a matter of
honor and to protect the credit standing of the country.
More especially, the very survival of our economy is at
stake. Thus, if in the process Congress appropriated an
amount for debt service bigger than the share allocated to
education, the Court finds and so holds that said
appropriation cannot be thereby assailed as
unconstitutional.
Now to the second issue. The petitioners made the following
observations:
To begin with, Rep. Act 4860 entitled "AN
ACT AUTHORIZING THE PRESIDENT OF THE
PHILIPPINES TO OBTAIN SUCH
FOREIGN LOANS AND CREDITS, OR TO
INCUR SUCH FOREIGN INDEBTEDNESS, AS
MAY BE NECESSARY TO FINANCE APPROVED
ECONOMIC DEVELOPMENT PURPOSES OR
PROJECTS, AND TO GUARANTEE, IN BEHALF
OF THE REPUBLIC OF THE PHILIPPINES,
FOREIGN LOANS OBTAINED OR BONDS
ISSUED BY CORPORATIONS OWNED OR

CONTROLLED BY THE GOVERNMENT OF THE

PHILIPPINES FOR ECONOMIC DEVELOPMENT
PURPOSES INCLUDING THOSE INCURRED
FOR PURPOSES OF RELENDING TO THE
PRIVATE SECTOR, APPROPRIATING THE
NECESSARY FUNDS THEREFOR, AND FOR
OTHER PURPOSES, provides:
Sec. 2. The total amount of
loans, credits and
indebtedness, excluding
interests, which the President
of the Philippines is authorized
to incur under this Act shall not
exceed one billion United States
dollars or its equivalent in other
foreign currencies at the
exchange rate prevailing at the
time the loans, credits and
indebtedness are
incurred: Provided, however,
That the total loans, credits and
indebtedness incurred under
this Act shall not exceed two
hundred fifty million in the
fiscal year of the approval of
this Act, and two hundred fifty
million every fiscal year
thereafter, all in United States
dollars or its equivalent in other
currencies.
Sec. 5. It shall be the duty of
the President, within thirty days
after the opening of every
regular session, to report to the
Congress the amount of loans,
credits and indebtedness

contracted, as well as
the guarantees extended, and
the purposes and projects for
which the loans, credits and
indebtedness were incurred,
and the guarantees extended,
as well as such loans which
may be reloaned to Filipino
owned or controlled
corporations and similar
purposes.
Sec. 6. The Congress shall
appropriate the necessary
amount out of any funds in the
National Treasury not otherwise
appropriated, to cover the
payment of the principal and
interest on such loans, credits
or indebtedness as and when
they shall become due.
However, after the declaration of martial law,
President Marcos issued PD 81 amending
Section 6, thus:
Sec. 7. Section six of the same
Act is hereby further amended
to read as follows:
Sec. 6. Any
provision of law
to the contrary
notwithstanding,
and in order to
enable the
Republic of the

Philippines to pay
the principal,
interest, taxes
and other normal
banking charges
on the loans,
credits or
indebtedness, or
on the bonds,
debentures,
securities or
other evidences
of indebtedness
sold in
international
markets incurred
under the
authority of this
Act, the proceeds
of which are
deemed
appropriated for
the projects, all
the revenue
realized from the
projects financed
by such loans,
credits or
indebtedness, or
on the bonds,
debentures,
securities or
other evidences
of indebtedness,
shall be turned
over in full, after
deducting actual
and necessary

expenses for the

operation and
maintenance of
said projects, to
the National
Treasury by the
government
office, agency or
instrumentality,
or governmentowned or
controlled
corporation
concerned, which
is hereby
appropriated for
the purpose as
and when they
shall become
due. In case the
revenue realized
is insufficient to
cover the
principal, interest
and other
charges, such
portion of the
budgetary
savings as may
be necessary to
cover the balance
or deficiency
shall be set aside
exclusively for
the purpose by
the government
office, agency or
instrumentality,

or governmentowned or
controlled
corporation
concerned: Provi
ded, That, if
there still
remains a
deficiency, such
amount
necessary to
cover the
payment of the
principal and
interest on such
loans, credit or
indebtedness as
and when they
shall become due
is hereby
appropriated out
of any funds in
the national
treasury not
otherwise
appropriated: . .
.
President Marcos also issued PD 1177, which
provides:
Sec. 31. Automatic
appropriations. All
expenditures for (a) personnel
retirement premiums,
government service insurance,
and other similar fixed
expenditures, (b)principal and

interest on public debt, (c)

national government
guarantees of obligations which
are drawn upon, are
automatically
appropriated; Provided, that no
obligations shall be incurred or
payments made from funds
thus automatically
appropriated except as issued
in the form of regular
budgetary allotments.
and PD 1967, which provides:
Sec. 1. There is hereby appropriated, out of
any funds in the National Treasury not
otherwise appropriated, such amounts as may
be necessary to effect payments on foreign or
domestic loans, or foreign or domestic loans
whereon creditors make a call on the direct
and indirect guarantee of the Republic of the
Philippines, obtained by:
a. The Republic of the
Philippines the proceeds of
which were relent to
government-owned or
controlled corporations and/or
government financial
institutions;
b. government-owned or
controlled corporations and/or
government financial
institutions the proceeds of

which were relent to public or

private institutions;
c. government-owned or
controlled corporations and/or
financial institutions and
guaranteed by the Republic of
the Philippines;
d. other public or private
institutions and guaranteed by
government-owned or
controlled corporations and/or
government financial
institutions.
Sec. 2. All repayments made by borrower
institutions on the loans for whose account
advances were made by the National
Treasury will revert to the General Fund.
Sec. 3. In the event that any borrower
institution is unable to settle the advances
made out of the appropriation provided
therein, the Treasurer of the Philippines shall
make the proper recommendation to the
Minister of Finance on whether such advances
shall be treated as equity or subsidy of the
National Government to the institution
concerned, which shall be considered in the
budgetary program of the Government.
In the "Budget of Expenditures and Sources
of Financing Fiscal Year 1990," which
accompanied her budget message to
Congress, the President of the Philippines,
Corazon C. Aquino, stated:

Sources Appropriation
The P233.5 billion budget
proposed for fiscal year 1990
will require P132.1 billion of
new programmed
appropriations out of a total
P155.3 billion in new legislative
authorization from Congress.
The rest of the budget, totalling
P101.4 billion, will be sourced
from existing
appropriations: P98.4 billion
from Automatic Appropriations
and P3.0 billion from
Continuing Appropriations
(Fig. 4).
And according to Figure 4, . . ., P86.8 billion
out of the P98.4 Billion are programmed for
debt service. In other words, the President
had, on her own, determined and set aside
the said amount of P98.4 Billion with the rest
of the appropriations of P155.3 Billion to be
determined and fixed by Congress, which is
now Rep. Act 6831. 9
Petitioners argue that the said automatic appropriations
under the aforesaid decrees of then President Marcos
became functus oficio when he was ousted in February,
1986; that upon the expiration of the one-man legislature in
the person of President Marcos, the legislative power was
restored to Congress on February 2, 1987 when the
Constitution was ratified by the people; that there is a need
for a new legislation by Congress providing for automatic
appropriation, but Congress, up to the present, has not
approved any such law; and thus the said P86.8 Billion
automatic appropriation in the 1990 budget is an

administrative act that rests on no law, and thus, it cannot

be enforced.
Moreover, petitioners contend that assuming arguendo that
P.D. No. 81, P.D. No. 1177 and P.D. No. 1967 did not expire
with the ouster of President Marcos, after the adoption of
the 1987 Constitution, the said decrees are inoperative
under Section 3, Article XVIII which provides
Sec. 3. All existing laws, decrees, executive
orders, proclamations, letters of instructions,
and other executive issuances not
inconsistent with this Constitution shall
remain operative until amended, repealed, or
revoked." (Emphasis supplied.)
They then point out that since the said decrees are
inconsistent with Section 24, Article VI of the
Constitution, i.e.,
Sec. 24. 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.
(Emphasis supplied.)
whereby bills have to be approved by the
President, 10 then a law must be passed by Congress
to authorize said automatic appropriation. Further,
petitioners state said decrees violate Section 29(l) of
Article VI of the Constitution which provides as
follows

Sec. 29(l). No money shall be paid out of the

Treasury except in pursuance of
an appropriation made by law.
They assert that there must be definiteness, certainty and
exactness in an appropriation, 11 otherwise it is an undue
delegation of legislative power to the President who
determines in advance the amount appropriated for the
debt service. 12
The Court is not persuaded.
Section 3, Article XVIII of the Constitution recognizes that
"All existing laws, decrees, executive orders, proclamations,
letters of instructions and other executive issuances not
inconsistent with the Constitution shall remain operative
until amended, repealed or revoked."
This transitory provision of the Constitution has precisely
been adopted by its framers to preserve the social order so
that legislation by the then President Marcos may be
recognized. Such laws are to remain in force and effect
unless they are inconsistent with the Constitution or, are
otherwise amended, repealed or revoked.
An examination of the aforecited presidential decrees show
the clear intent that the amounts needed to cover the
payment of the principal and interest on all foreign loans,
including those guaranteed by the national government,
should be made available when they shall become due
precisely without the necessity of periodic enactments of
separate laws appropriating funds therefor, since both the
periods and necessities are incapable of determination in
advance.
The automatic appropriation provides the flexibility for the
effective execution of debt management policies. Its

political wisdom has been convincingly discussed by the

Solicitor General as he argues
. . . First, for example, it enables the
Government to take advantage of a favorable
turn of market conditions by redeeming highinterest securities and borrowing at lower
rates, or to shift from short-term to long-term
instruments, or to enter into arrangements
that could lighten our outstanding debt
burden debt-to-equity, debt to asset, debt-todebt or other such schemes. Second, the
automatic appropriation obviates the serious
difficulties in debt servicing arising from any
deviation from what has been previously
programmed. The annual debt service
estimates, which are usually made one year
in advance, are based on a mathematical set
or matrix or, in layman's parlance, "basket" of
foreign exchange and interest
rate assumptions which may significantly
differ from actual rates not even in proportion
to changes on the basis of the assumptions.
Absent an automatic appropriation clause, the
Philippine Government has to await and
depend upon Congressional action, which by
the time this comes, may no longer be
responsive to the intended conditions which in
the meantime may have already drastically
changed. In the meantime, also, delayed
payments and arrearages may have
supervened, only to worsen our debt serviceto-total expenditure ratio in the budget due to
penalties and/or demand for immediate
payment even before due dates.
Clearly, the claim that payment of the loans
and indebtedness is conditioned upon the

continuance of the person of President Marcos

and his legislative power goes against the
intent and purpose of the law. The purpose is
foreseen to subsist with or without the person
of Marcos. 13
The argument of petitioners that the said presidential
decrees did not meet the requirement and are therefore
inconsistent with Sections 24 and 27 of Article VI of the
Constitution which requires, among others, that "all
appropriations, . . . bills authorizing increase of public debt"
must be passed by Congress and approved by the President
is untenable. Certainly, the framers of the Constitution did
not contemplate that existing laws in the statute books
including existing presidential decrees appropriating public
money are reduced to mere "bills" that must again go
through the legislative million The only reasonable
interpretation of said provisions of the Constitution which
refer to "bills" is that they mean appropriation measures still
to be passed by Congress. If the intention of the framers
thereof were otherwise they should have expressed their
decision in a more direct or express manner.
Well-known is the rule that repeal or amendment by
implication is frowned upon. Equally fundamental is the
principle that construction of the Constitution and law is
generally applied prospectively and not retrospectively
unless it is so clearly stated.
On the third issue that there is undue delegation of
legislative power, in Edu vs. Ericta, 14 this Court had this to
say
What cannot be delegated is the authority
under the Constitution to make laws and to
alter and repeal them; the test is the
completeness of the statute in all its terms

and provisions when it leaves the hands of

the legislature. To determine whether or not
there is an undue delegation of legislative
power, the inequity must be directed to the
scope and definiteness of the measure
enacted. The legislature does not abdicate its
function when it describes what job must be
done, who is to do it, and what is the scope of
his authority. For a complex economy, that
may indeed be the only way in which
legislative process can go forward . . .
To avoid the taint of unlawful delegation there
must be a standard, which implies at the very
least that the legislature itself determines
matters of principle and lays down
fundamental policy . . .
The standard may be either express or
implied . . . from the policy and purpose of
the act considered as whole . . .
In People vs. Vera, 15 this Court said "the true distinction is
between the delegation of power to make the law, which
necessarily involves discretion as to what the law shall be,
and conferring authority or discretion as to its execution, to
be exercised under and in pursuance of the law. The first
cannot be done; to the latter no valid objection can be
made."
Ideally, the law must be complete in all its essential terms
and conditions when it leaves the legislature so that there
will be nothing left for the delegate to do when it reaches
him except enforce it. If there are gaps in the law that will
prevent its enforcement unless they are first filled, the
delegate will then have been given the opportunity to step
in the shoes of the legislature and exercise a discretion

essentially legislative in order to repair the omissions. This

is invalid delegation. 16
The Court finds that in this case the questioned laws are
complete in all their essential terms and conditions and
sufficient standards are indicated therein.
The legislative intention in R.A. No. 4860, as amended,
Section 31 of P.D. No. 1177 and P.D. No. 1967 is that the
amount needed should be automatically set aside in order
to enable the Republic of the Philippines to pay the
principal, interest, taxes and other normal banking charges
on the loans, credits or indebtedness incurred as
guaranteed by it when they shall become due without the
need to enact a separate law appropriating funds therefor
as the need arises. The purpose of these laws is to enable
the government to make prompt payment and/or advances
for all loans to protect and maintain the credit standing of
the country.
Although the subject presidential decrees do not state
specific amounts to be paid, necessitated by the very nature
of the problem being addressed, the amounts nevertheless
are made certain by the legislative parameters provided in
the decrees. The Executive is not of unlimited discretion as
to the amounts to be disbursed for debt servicing. The
mandate is to pay only the principal, interest, taxes and
other normal banking charges on the loans, credits or
indebtedness, or on the bonds, debentures or security or
other evidences of indebtedness sold in international
markets incurred by virtue of the law, as and when they
shall become due. No uncertainty arises in executive
implementation as the limit will be the exact amounts as
shown by the books of the Treasury.

The Government budgetary process has been graphically

described to consist of four major phases as aptly discussed
by the Solicitor General:
The Government budgeting process consists
of four major phases:
1. Budget preparation. The first step is
essentially tasked upon the Executive Branch
and covers the estimation of government
revenues, the determination of budgetary
priorities and activities within the constraints
imposed by available revenues and
by borrowing limits, and the translation of
desired priorities and activities into
expenditure levels.
Budget preparation starts with the budget call
issued by the Department of Budget and
Management. Each agency is required to
submit agency budget estimates in line with
the requirements consistent with the general
ceilings set by the Development Budget
Coordinating Council (DBCC).
With regard to debt servicing, the DBCC staff,
based on the macro-economic projections of
interest rates (e.g. LIBOR rate) and estimated
sources of domestic and foreign financing,
estimates debt service levels. Upon issuance
of budget call, the Bureau of Treasury
computes for the interest and principal
payments for the year for all direct national
government borrowings and other liabilities
assumed by the same.

2. Legislative authorization. At this stage,

Congress enters the picture and deliberates
or acts on the budget proposals of the
President, and Congress in the exercise of its
own judgment and wisdomformulates an
appropriation act precisely following the
process established by the Constitution, which
specifies that no money may be paid from the
Treasury except in accordance with an
appropriation made by law.
Debt service is not included in the General
Appropriation Act, since authorization therefor
already exists under RA No. 4860 and 245, as
amended and PD 1967. Precisely in the fight
of this subsisting authorization as embodied
in said Republic Acts and PD for debt service,
Congress does not concern itself with details
for implementation by the Executive, but
largely with annual levels and approval
thereof upon due deliberations as part of the
whole obligation program for the year. Upon
such approval, Congress has spoken and
cannot be said to have delegated its wisdom
to the Executive, on whose part lies
the implementation or execution of the
legislative wisdom.
3. Budget Execution. Tasked on the
Executive, the third phase of the budget
process covers the
various operational aspects of budgeting. The
establishment of obligation authority ceilings,
the evaluation of work and financial plans for
individual activities, the continuing review of
government fiscal position, the regulation of
funds releases, the implementation of cash
payment schedules, and other related

activities comprise this phase of the budget

cycle.
Release from the debt service fired is
triggered by a request of the Bureau of the
Treasury for allotments from the Department
of Budget and Management, one quarter in
advance of payment schedule, to ensure
prompt payments. The Bureau of Treasury,
upon receiving official billings from the
creditors, remits payments to creditors
through the Central Bank or to the Sinking
Fund established for government security
issues (Annex F).
4. Budget accountability. The fourth phase
refers to the evaluation of actual performance
and initially approved work targets,
obligations incurred, personnel hired and
work accomplished are compared with the
targets set at the time the agency budgets
were approved.
There being no undue delegation of legislative
power as clearly above shown, petitioners
insist nevertheless that subject presidential
decrees constitute undue delegation of
legislative power to the executive on the
alleged ground that the appropriations therein
are not exact, certain or definite,invoking in
support therefor the Constitution of Nebraska,
the constitution under which the case of State
v. Moore, 69 NW 974, cited by petitioners,
was decided. Unlike the Constitution of
Nebraska, however, our Constitution does not
require a definite, certain, exact
or "specific appropriation made by law."

Section 29, Article VI of our 1987 Constitution

omits any of these words and simply states:
Section 29(l). No money shall
be paid out of the treasury
except in pursuance of an
appropriation made by law.
More significantly, there is no provision in our
Constitution that provides or prescribes any
particular form of words or religious recitals in
which an authorization or appropriation by
Congress shall be made, except that it be
"made by law," such as precisely the
authorization or appropriation under the
questioned presidential decrees. In other
words, in terms of time horizons, an
appropriation may be made impliedly (as by
past but subsisting legislations) as well as
expressly for the current fiscal year (as by
enactment of laws by the present Congress),
just as said appropriation may be made in
general as well as in specific terms. The
Congressional authorization may be embodied
in annual laws, such as a general
appropriations act or in special provisions of
laws of general or special application which
appropriate public funds for specific public
purposes, such as the questioned decrees. An
appropriation measure is sufficient if the
legislative intention clearly and certainly
appears from the language employed (In re
Continuing Appropriations, 32 P. 272),
whether in the past or in the present. 17
Thus, in accordance with Section 22, Article VII of the 1987
Constitution, President Corazon C. Aquino submitted to
Congress the Budget of Expenditures and Sources of

Financing for the Fiscal Year 1990. The proposed 1990

expenditure program covering the estimated obligation that
will be incurred by the national government during the fiscal
year amounts to P233.5 Billion. Of the proposed budget,
P86.8 is set aside for debt servicing as follows:
National Government Debt
Service Expenditures, 1990
(in million pesos)
Domestic Foreign Total
RA 245, as RA 4860

they are repealed or otherwise amended by Congress. The

Executive was thus merely complying with the duty to
implement the same.
There can be no question as to the patriotism and good
motive of petitioners in filing this petition. Unfortunately,
the petition must fail on the constitutional and legal issues
raised. As to whether or not the country should honor its
international debt, more especially the enormous amount
that had been incurred by the past administration, which
appears to be the ultimate objective of the petition, is not
an issue that is presented or proposed to be addressed by
the Court. Indeed, it is more of a political decision for
Congress and the Executive to determine in the exercise of
their wisdom and sound discretion.

amended as amended,

WHEREFORE, the petition is DISMISSED, without

pronouncement as to costs.

PD 1967

SO ORDERED.

Interest

Fernan, C.J., Narvasa, Melencio-Herrera, Feliciano, Bidin,

Grio-Aquino, Medialdea, Regalado and Davide, Jr., JJ.,
concur.

Payments P36,861 P18,570 P55,431

Principal

Separate Opinions

Amortization 16,310 15,077 31,387

Total P53,171 P33,647 P86,818

18

as authorized under P.D. 1967 and R.A. 4860 and 245, as

amended.
The Court, therefor, finds that R.A. No. 4860, as amended
by P.D. No. 81, Section 31 of P.D. 1177 and P.D. No. 1967
constitute lawful authorizations or appropriations, unless

PARAS, J., dissenting:

I dissent. Any law that undermines our economy and
therefore our security is per se unconstitutional.

CRUZ, J., dissenting:

The presidential decrees on which the respondents rely do

not satisfy this requirement.

I regret I must dissent.

One of the essential requirements of a valid appropriation is
that the amount appropriated must be certain, which means
that the sum authorized to be released should either be
determinate or at least determinable. As has been uniformly
held:
It is essential to the validity of an
appropriation law that it should state the
exact amount appropriated or the maximum
sum from which the authorized expenses shall
be paid, otherwise it would be void for
uncertainty, since the legislative power over
appropriation in effect could have been
delegated in such case to the recipient of the
funds appropriated or to the official
authorized to spend them. (State v. Eggers,
16 L.R.A., N.S. 630; State v. La Grave, 41
Pac. 1075).
Thus, a law which provided that there should
be paid out of the State Treasury to any
person, firm or corporation engaged in the
manufacture of sugar in that State the sum of
five-eights of one per cent per pound upon
each pound manufactured under the
conditions and restrictions of the Act was held
as invalid appropriation for lack of certainty in
the amount to be paid out of the Treasury,
the legislature having failed to fix the amount
to be appropriated. (State of Nebraska v.
Moore, 50 Neb. 88, cited in Gonzales, Phil.
Political Law, p. 213).

Section 7 of P.D. 81 provides that "all the revenue realized

from the projects financed by such loans," after deducting
the actual and necessary operating and maintenance
expenses, is appropriated for servicing the foreign debts.
The same sections says that in case of deficiency, "such
amount necessary to cover the payment of the principal and
interest on such loans, credit or indebteedness as and when
they shall become due is hereby appropriated."
Section 31 of P.D. 1717 provides that "all expenditures for
the payment of the principal and interest on public debt" are
automatically appropriated.
Section 1 of P.D. 1967 appropriates "such amounts as may
be necessary to effect payments on foreign or domestic
loans."
It is easy to see that in none of these decrees is the amount
appropriated fixed, either by an exact figure or by an
indication at least of its maximum.
The ponencia says that "the amounts are made certain by
the legislative parameters provided in the degree." I am
afraid I do not see those parameters. I see only the
appropriation of "all the revenue derived from the projects
financed by such loans" and "such amounts as may be
necessary to effect payment on foreign or domestic loans"
or "the principal and interest on public debt, as and when
they shall become due." All these are uncertain.
Even President Marcos as a legislator, did not know how
much he was appropriating.

The ponencia assures us that "no uncertainty arises in

executive implementation as the limit will be the exact
amounts as shown by the books of the Treasury." That is
cold comfort, indeed, if we consider that it is the Treasury
itself that is sought to be limited by the requirement for
certainty. The intention precisely is to prevent the
disbursement of public funds by the Treasury itself from
"running riot."
We surely cannot defend an appropriation, say, of "such
amounts as may be necessary for the construction of a
bridge across the Pasig River" even if the exact cost may be
shown later by the books of the Treasury. This would be no
different from the uncertain appropriations the Court is here
sustaining.
I think it is a mistake for this government to justify its acts
on the basis of the decrees of President Marcos. These are
on the whole tainted with authoritarianism and enfeebled by
lack of proper study and draftmanship, let alone suspect
motives. I suggest that these decrees must be reviewed
carefully and whenever proper, set aright by necessary
modification or outright revocation. Instead, the
respondents are invoking them blindly.
Sarmiento, J., concurs.

Sec. 29(l). No money shall be paid out of the

Treasury except in pursuance of an
appropriation made by law.
It is quite obvious from this provision that there must first
be a law enacted by Congress (and approved by the
President) appropriating a particular sum or sums before
payment thereof from the Treasury can be made.
If the above constitutional provision is to be meaningful and
effective at all, I believe that the law appropriating
aparticular sum or sums for debt service, whether involving
domestic or foreign loans of the Government, should be
enacted by the Congress, composed of the most recently
elected representatives of the people. To construe the term
"lay" in the above provision to mean the decrees issued by
then President Marcos would, in effect, be supporting
a continuing governance of a large segment of the
Philippine economy by a past regime which, as every one
knows, centralized for a good number of years legislative
and executive powers in only one person.
Besides, these decrees issued by President Marcos relative
to debt service were tailored for the periods covered by said
decrees. Today it is Congress that should determine and
approve the proper appropriations for debt servicing, as this
is a matter of policy that, in my opinion, pertains to the
legislative department, as the policy determining body of
the Government.

PADILLA, J., dissenting

I join Mr. Justice Cruz in his dissent. I only wish to add the
following:
Section 29(l), Article VI of the 1987 Constitution provides:

Footnotes
1 Annexes A and B to Petition consisting of
excerpts from the "Budget Expenditure and
Services of Financing Fiscal Year 1990"

attached to the budget message of the

President to Congress.

13 Pages 66 to 67, Rollo.

14 1435 SCRA 481 (1970).

2 Annex C to Petition.
3 Gonzales vs. Macaraig, Jr., G.R. No. 87656,
November 19, 1990.
4 Municipality of Malabang vs. Benito, 27
SCRA 533 (1969) and Philippine Constitution
Association, Inc. vs. Mathay, 18 SCRA 300
(1966).
5 Supra.
6 Page 5, Rollo.
7 Pages 6 to 7, Rollo.
8 Annex G to Petition.
9 Pages 7 to 11, Rollo; Emphasis supplied.
10 Section 27, Article VI, Constitution.
11 Citing State vs. Eggers, 16 L.R.A. N.S.
630; State vs. La Grave, 41 Pac. 1075; 1
Taada and Carreon, Political Law, 1961 ed.,
p. 253; State vs. Moore, 69 N.W. 3735, pages
15 to 20, Rollo.
12 Citing People vs. Vera, 65 Phil. 56 (1937)
and Araneta vs. Dinglasan, 84 Phil. 368
(1949), 1 Taada and Carreon, supra, pages
421 to 422; Sinco, Philippine Political Law,
10th ed., page 220.

15 Supra.
16 Isagani Cruz, Philippine Political Law,
pages 97 to 99, 1987 Edition.
17 Pages 73 to 78, Rollo.
18 Annex B to Petition.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC

G.R. No. 99886 March 31, 1993

JOHN H. OSMEA, petitioner,
vs.
OSCAR ORBOS, in his capacity as Executive Secretary;
JESUS ESTANISLAO, in his capacity as Secretary of
Finance; WENCESLAO DELA PAZ, in his capacity as
Head of the Office of Energy Affairs; REX V.
TANTIONGCO, and the ENERGY REGULATORY
BOARD, respondents.
Nachura & Sarmiento for petitioner.
The Solicitor General for public respondents.

NARVASA, C.J.:
The petitioner seeks the corrective, 1 prohibitive and
coercive remedies provided by Rule 65 of the Rules of
Court, 2 upon the following posited grounds, viz.: 3
1) the invalidity of the "TRUST ACCOUNT" in the books of
account of the Ministry of Energy (now, the Office of Energy
Affairs), created pursuant to 8, paragraph 1, of P.D. No.
1956, as amended, "said creation of a trust fund being

contrary to Section 29 (3), Article VI of the . .

Constitution; 4
2) the unconstitutionality of 8, paragraph 1 (c) of P.D. No.
1956, as amended by Executive Order No. 137, for "being
an undue and invalid delegation of legislative power . . to
the Energy Regulatory Board;" 5
3) the illegality of the reimbursements to oil companies,
paid out of the Oil Price Stabilization Fund, 6 because it
contravenes 8, paragraph 2 (2) of
P. D. 1956, as amended; and
4) the consequent nullity of the Order dated December 10,
1990 and the necessity of a rollback of the pump prices and
petroleum products to the levels prevailing prior to the said
Order.
It will be recalled that on October 10, 1984, President
Ferdinand Marcos issued P.D. 1956 creating a Special
Account in the General Fund, designated as the Oil Price
Stabilization Fund (OPSF). The OPSF was designed to
reimburse oil companies for cost increases in crude oil and
imported petroleum products resulting from exchange rate
adjustments and from increases in the world market prices
of crude oil.
Subsequently, the OPSF was reclassified into a "trust
liability account," in virtue of E.O. 1024, 7 and ordered
released from the National Treasury to the Ministry of
Energy. The same Executive Order also authorized the
investment of the fund in government securities, with the
earnings from such placements accruing to the fund.
President Corazon C. Aquino, amended P.D. 1956. She
promulgated Executive Order No. 137 on February 27,
1987, expanding the grounds for reimbursement to oil

companies for possible cost underrecovery incurred as a

result of the reduction of domestic prices of petroleum
products, the amount of the underrecovery being left for
determination by the Ministry of Finance.
Now, the petition alleges that the status of the OPSF as of
March 31, 1991 showed a "Terminal Fund Balance deficit" of
some P12.877 billion; 8 that to abate the worsening deficit,
"the Energy Regulatory Board . . issued an Order on
December 10, 1990, approving the increase in pump prices
of petroleum products," and at the rate of recoupment, the
OPSF deficit should have been fully covered in a span of six
(6) months, but this notwithstanding, the respondents
Oscar Orbos, in his capacity as Executive Secretary; Jesus
Estanislao, in his capacity as Secretary of Finance;
Wenceslao de la Paz, in his capacity as Head of the Office of
Energy Affairs; Chairman Rex V. Tantiongco and the Energy
Regulatory Board "are poised to accept, process and pay
claims not authorized under P.D. 1956." 9
The petition further avers that the creation of the trust fund
violates
29(3), Article VI of the Constitution, reading as follows:
(3) All money collected on any tax levied for a
special purpose shall be treated as a special
fund and paid out for such purposes only. If
the purpose for which a special fund was
created has been fulfilled or abandoned, the
balance, if any, shall be transferred to the
general funds of the Government.
The petitioner argues that "the monies collected pursuant to
. . P.D. 1956, as amended, must be treated as a 'SPECIAL
FUND,' not as a 'trust account' or a 'trust fund,' and that "if
a special tax is collected for a specific purpose, the revenue
generated therefrom shall 'be treated as a special fund' to

be used only for the purpose indicated, and not channeled

to another government objective." 10 Petitioner further
points out that since "a 'special fund' consists of monies
collected through the taxing power of a State, such amounts
belong to the State, although the use thereof is limited to
the special purpose/objective for which it was created." 11
He also contends that the "delegation of legislative
authority" to the ERB violates 28 (2). Article VI of the
Constitution, viz.:
(2) The Congress may, by law, authorize the
President to fix, within specified limits, and
subject to such limitations and restrictions as
it may impose, tariff rates, import and export
quotas, tonnage and wharfage dues, and
other duties or imposts within the framework
of the national development program of the
Government;
and, inasmuch as the delegation relates to the
exercise of the power of taxation, "the limits,
limitations and restrictions must be quantitative, that
is, the law must not only specify how to tax, who
(shall) be taxed (and) what the tax is for, but also
impose a specific limit on how much to tax." 12
The petitioner does not suggest that a "trust account" is
illegal per se, but maintains that the monies collected,
which form part of the OPSF, should be maintained in
a special account of the general fund for the reason that the
Constitution so provides, and because they are,
supposedly, taxes levied for a special purpose. He assumes
that the Fund is formed from a tax undoubtedly because a
portion thereof is taken from collections of ad valorem taxes
and the increases thereon.

It thus appears that the challenge posed by the petitioner is

premised primarily on the view that the powers granted to
the ERB under P.D. 1956, as amended, partake of the
nature of the taxation power of the State. The Solicitor
General observes that the "argument rests on the
assumption that the OPSF is a form of revenue measure
drawing from a special tax to be expended for a special
purpose." 13 The petitioner's perceptions are, in the Court's
view, not quite correct.
To address this critical misgiving in the position of the
petitioner on these issues, the Court recalls its holding
inValmonte v. Energy Regulatory Board, et al. 14
The foregoing arguments suggest the
presence of misconceptions about the nature
and functions of the OPSF. The OPSF is a
"Trust Account" which was established "for
the purpose of minimizing the frequent price
changes brought about by exchange rate
adjustment and/or changes in world market
prices of crude oil and imported petroleum
products." 15 Under P.D. No. 1956, as
amended by Executive Order No. 137 dated
27 February 1987, this Trust Account may be
funded from any of the following sources:
a) Any increase in the tax
collection from ad valorem tax
or customs duty imposed on
petroleum products subject to
tax under this Decree arising
from exchange rate
adjustment, as may be
determined by the Minister of
Finance in consultation with the
Board of Energy;

b) Any increase in the tax

collection as a result of the
lifting of tax exemptions of
government corporations, as
may be determined by the
Minister of Finance in
consultation with the Board of
Energy:
c) Any additional amount to be
imposed on petroleum
products to augment the
resources of the Fund through
an appropriate Order that may
be issued by the Board of
Energy requiring payment of
persons or companies engaged
in the business of importing,
manufacturing and/or
marketing petroleum products;
d) Any resulting peso cost
differentials in case the actual
peso costs paid by oil
companies in the importation of
crude oil and petroleum
products is less than the peso
costs computed using the
reference foreign exchange rate
as fixed by the Board of
Energy.
xxx xxx xxx
The fact that the world market prices of oil,
measured by the spot market in Rotterdam,
vary from day to day is of judicial notice.

Freight rates for hauling crude oil and

petroleum products from sources of supply to
the Philippines may also vary from time to
time. The exchange rate of the peso vis-avis the U.S. dollar and other convertible
foreign currencies also changes from day to
day. These fluctuations in world market prices
and in tanker rates and foreign exchange
rates would in a completely free market
translate into corresponding adjustments in
domestic prices of oil and petroleum products
with sympathetic frequency. But domestic
prices which vary from day to day or even
only from week to week would result in a
chaotic market with unpredictable effects
upon the country's economy in general. The
OPSF was established precisely to protect
local consumers from the adverse
consequences that such frequent oil price
adjustments may have upon the
economy. Thus, the OPSF serves as a pocket,
as it were, into which a portion of the
purchase price of oil and petroleum products
paid by consumers as well as some tax
revenues are inputted and from which
amounts are drawn from time to time to
reimburse oil companies, when appropriate
situations arise, for increases in, as well as
underrecovery of, costs of crude
importation. The OPSF is thus a buffer
mechanism through which the domestic
consumer prices of oil and petroleum
products are stabilized, instead of fluctuating
every so often, and oil companies are allowed
to recover those portions of their costs which
they would not otherwise recover given the
level of domestic prices existing at any given
time.To the extent that some tax revenues

are also put into it, the OPSF is in effect a

device through which the domestic prices of
petroleum products are subsidized in part. It
appears to the Court that the establishment
and maintenance of the OPSF is well within
that pervasive and non-waivable power and
responsibility of the government to secure the
physical and economic survival and well-being
of the community, that comprehensive
sovereign authority we designate as the
police power of the State. The stabilization,
and subsidy of domestic prices of petroleum
products and fuel oil clearly critical in
importance considering, among other things,
the continuing high level of dependence of the
country on imported crude oil are
appropriately regarded as public purposes.
Also of relevance is this Court's ruling in relation to the
sugar stabilization fund the nature of which is not far
different from the OPSF. In Gaston v. Republic Planters
Bank, 16 this Court upheld the legality of the sugar
stabilization fees and explained their nature and
character, viz.:
The stabilization fees collected are in the
nature of a tax, which is within the power of
the State to impose for the promotion of the
sugar industry (Lutz v. Araneta, 98 Phil. 148).
. . . The tax collected is not in a pure exercise
of the taxing power. It is levied with a
regulatory purpose, to provide a means for
the stabilization of the sugar industry. The
levy is primarily in the exercise of the police
power of the State (Lutz v. Araneta, supra).
xxx xxx xxx

The stabilization fees in question are levied by

the State upon sugar millers, planters and
producers for a special purpose that of
"financing the growth and development of the
sugar industry and all its components,
stabilization of the domestic market including
the foreign market." The fact that the State
has taken possession of moneys pursuant to
law is sufficient to constitute them state
funds, even though they are held for a special
purpose (Lawrence v. American Surety Co.
263 Mich. 586, 249 ALR 535, cited in 42 Am
Jur Sec. 2, p. 718). Having been levied for a
special purpose, the revenues collected are to
be treated as a special fund, to be, in the
language of the statute, "administered in
trust" for the purpose intended. Once the
purpose has been fulfilled or abandoned, the
balance if any, is to be transferred to the
general funds of the Government. That is the
essence of the trust intended (SEE 1987
Constitution, Article VI, Sec. 29(3), lifted from
the 1935 Constitution, Article VI, Sec.
23(1). 17
The character of the Stabilization Fund as a
special kind of fund is emphasized by the fact
that the funds are deposited in the Philippine
National Bank and not in the Philippine
Treasury, moneys from which may be paid
out only in pursuance of an appropriation
made by law (1987) Constitution, Article VI,
Sec. 29 (3), lifted from the 1935 Constitution,
Article VI, Sec. 23(1). (Emphasis supplied).
Hence, it seems clear that while the funds collected may be
referred to as taxes, they are exacted in the exercise of the
police power of the State. Moreover, that the OPSF is a

special fund is plain from the special treatment given it by

E.O. 137. It is segregated from the general fund; and while
it is placed in what the law refers to as a "trust liability
account," the fund nonetheless remains subject to the
scrutiny and review of the COA. The Court is satisfied that
these measures comply with the constitutional description
of a "special fund." Indeed, the practice is not without
precedent.
With regard to the alleged undue delegation of legislative
power, the Court finds that the provision conferring the
authority upon the ERB to impose additional amounts on
petroleum products provides a sufficient standard by which
the authority must be exercised. In addition to the general
policy of the law to protect the local consumer by stabilizing
and subsidizing domestic pump rates, 8(c) of P.D.
1956 18 expressly authorizes the ERB to impose additional
amounts to augment the resources of the Fund.
What petitioner would wish is the fixing of some definite,
quantitative restriction, or "a specific limit on how much to
tax." 19 The Court is cited to this requirement by the
petitioner on the premise that what is involved here is the
power of taxation; but as already discussed, this is not the
case. What is here involved is not so much the power of
taxation as police power. Although the provision authorizing
the ERB to impose additional amounts could be construed to
refer to the power of taxation, it cannot be overlooked that
the overriding consideration is to enable the delegate to act
with expediency in carrying out the objectives of the law
which are embraced by the police power of the State.
The interplay and constant fluctuation of the various factors
involved in the determination of the price of oil and
petroleum products, and the frequently shifting need to
either augment or exhaust the Fund, do not conveniently
permit the setting of fixed or rigid parameters in the law as
proposed by the petitioner. To do so would render the ERB

unable to respond effectively so as to mitigate or avoid the

undesirable consequences of such fluidity. As such, the
standard as it is expressed, suffices to guide the delegate in
the exercise of the delegated power, taking account of the
circumstances under which it is to be exercised.
For a valid delegation of power, it is essential that the law
delegating the power must be (1) complete in itself, that is
it must set forth the policy to be executed by the delegate
and (2) it must fix a standard limits of which
are sufficiently determinate or determinable to which the
delegate must conform. 20
. . . As pointed out in Edu v. Ericta: "To avoid
the taint of unlawful delegation, there must
be a standard, which implies at the very least
that the legislature itself determines matters
of principle and lays down fundamental
policy. Otherwise, the charge of complete
abdication may be hard to repel. A standard
thus defines legislative policy, marks its
limits, maps out its boundaries and specifies
the public agency to apply it. It indicates the
circumstances under which the legislative
command is to be effected. It is the criterion
by which the legislative purpose may be
carried out. Thereafter, the executive or
administrative office designated may in
pursuance of the above guidelines promulgate
supplemental rules and regulations. The
standard may either be express or implied. If
the former, the non-delegation objection is
easily met. The standard though does not
have to be spelled out specifically. It could be
implied from the policy and purpose of the act
considered as a whole. 21

It would seem that from the above-quoted ruling, the

petition for prohibition should fail.
The standard, as the Court has already stated, may even be
implied. In that light, there can be no ground upon which to
sustain the petition, inasmuch as the challenged law sets
forth a determinable standard which guides the exercise of
the power granted to the ERB. By the same token, the
proper exercise of the delegated power may be tested with
ease. It seems obvious that what the law intended was to
permit the additional imposts for as long as there exists a
need to protect the general public and the petroleum
industry from the adverse consequences of pump rate
fluctuations. "Where the standards set up for the guidance
of an administrative officer and the action taken are in fact
recorded in the orders of such officer, so that Congress, the
courts and the public are assured that the orders in the
judgment of such officer conform to the legislative standard,
there is no failure in the performance of the legislative
functions." 22
This Court thus finds no serious impediment to sustaining
the validity of the legislation; the express purpose for which
the imposts are permitted and the general objectives and
purposes of the fund are readily discernible, and they
constitute a sufficient standard upon which the delegation of
power may be justified.
In relation to the third question respecting the illegality of
the reimbursements to oil companies, paid out of the Oil
Price Stabilization Fund, because allegedly in contravention
of 8, paragraph 2 (2) of P.D. 1956, amended 23 the
Court finds for the petitioner.
The petition assails the payment of certain items or
accounts in favor of the petroleum companies (i.e.,
inventory losses, financing charges, fuel oil sales to the

National Power Corporation, etc.) because not authorized by

law. Petitioner contends that "these claims are not
embraced in the enumeration in 8 of P.D. 1956 . . since
none of them was incurred 'as a result of the reduction of
domestic prices of petroleum products,'" 24 and since these
items are reimbursements for which the OPSF should not
have responded, the amount of the P12.877 billion deficit
"should be reduced by P5,277.2 million." 25 It is argued
"that under the principle of ejusdem generis . . . the term
'other factors' (as used in 8 of P.D. 1956) . . can only
include such 'other factors' which necessarily result in the
reduction of domestic prices of petroleum products." 26
The Solicitor General, for his part, contends that "(t)o place
said (term) within the restrictive confines of the rule
ofejusdem generis would reduce (E.O. 137) to a
meaningless provision."
This Court, in Caltex Philippines, Inc. v. The Honorable
Commissioner on Audit, et al., 27 passed upon the
application of ejusdem generis to paragraph 2 of 8 of P.D.
1956, viz.:
The rule of ejusdem generis states that
"[w]here words follow an enumeration of
persons or things, by words of a particular
and specific meaning, such general words are
not to be construed in their widest extent, but
are held to be as applying only to persons or
things of the same kind or class as those
specifically mentioned." 28 A reading of
subparagraphs (i) and (ii) easily discloses that
they do not have a common characteristic.
The first relates to price reduction as directed
by the Board of Energy while the second
refers to reduction in internal ad
valorem taxes. Therefore, subparagraph (iii)
cannot be limited by the enumeration in these

subparagraphs. What should be considered

for purposes of determining the "other
factors" in subparagraph (iii) is the first
sentence of paragraph (2) of the Section
which explicitly allows the cost underrecovery
only if such were incurred as a result of the
reduction of domestic prices of petroleum
products.
The Court thus holds, that the reimbursement of financing
charges is not authorized by paragraph 2 of 8 of P.D.
1956, for the reason that they were not incurred as a result
of the reduction of domestic prices of petroleum products.
Under the same provision, however, the payment of
inventory losses is upheld as valid, being clearly a result of
domestic price reduction, when oil companies incur a cost
underrecovery for yet unsold stocks of oil in inventory
acquired at a higher price.
Reimbursement for cost underrecovery from the sales of oil
to the National Power Corporation is equally permissible,
not as coming within the provisions of P.D. 1956, but in
virtue of other laws and regulations as held inCaltex 29 and
which have been pointed to by the Solicitor General. At any
rate, doubts about the propriety of such reimbursements
have been dispelled by the enactment of R.A. 6952,
establishing the Petroleum Price Standby Fund, 2 of which
specifically authorizes the reimbursement of "cost
underrecovery incurred as a result of fuel oil sales to the
National Power Corporation."
Anent the overpayment refunds mentioned by the
petitioner, no substantive discussion has been presented to
show how this is prohibited by P.D. 1956. Nor has the
Solicitor General taken any effort to defend the propriety of
this refund. In fine, neither of the parties, beyond the mere
mention of overpayment refunds, has at all bothered to
discuss the arguments for or against the legality of the so-

called overpayment refunds. To be sure, the absence of any

argument for or against the validity of the refund cannot
result in its disallowance by the Court. Unless the
impropriety or illegality of the overpayment refund has been
clearly and specifically shown, there can be no basis upon
which to nullify the same.
Finally, the Court finds no necessity to rule on the
remaining issue, the same having been rendered moot and
academic. As of date hereof, the pump rates of gasoline
have been reduced to levels below even those prayed for in
the petition.
WHEREFORE, the petition is GRANTED insofar as it prays for
the nullification of the reimbursement of financing charges,
paid pursuant to E.O. 137, and DISMISSED in all other
respects.

3 Rollo, pp. 1 to 4.
4 Rollo, p. 2.
5 Id.
6 When this petition was filed, the amount
involved was P5,277.4 million.
7 Issued on 9 May 1985.
8 Rollo, pp. 8-9.
9 Rollo, p. 11; emphasis supplied.
10 Id., pp. 13-4.

SO ORDERED.

11 Id., p. 15.

Cruz, Feliciano, Padilla, Bidin, Grio-Aquino, Regalado,

Davide, Jr., Romero, Nocon, Bellosillo, Melo, Campos, Jr.,
and Quiason, JJ., concur.

12 Rollo, p. 17.

Gutierrez, Jr., J., is on leave.

# Footnotes
1 The writ of certiorari is, of course, available
only as against tribunals, boards or officers
exercisingjudicial or quasi-judicial functions.
2 The petition alleges separate causes or
grounds for each extraordinary writ sought.

13 Comment of the Respondents; Rollo, p.

63.
14 G.R. Nos. L-79501-03 [23 June 1988] 162
SCRA 521; Decided jointly with Citizen's
Alliance for Consumer Protection v. Energy
Regulatory Board et al., G.R. Nos. L-7888890, and Kilusang Mayo Uno Labor Center v.
Energy Regulatory Board, et al., G.R. Nos. L79590-92; emphasis supplied.
15 Citing E.O. No. 137, Sec. 1 (amending 8
of P.D. 1956).
16 158 SCRA 626, emphasis supplied.

17 "(3) All money collected on any tax levied

for a special purpose shall be treated as a
special fund and paid out for such purpose
only. If the purpose for which a special fund
was created has been fulfilled or abandoned,
the balance, if any, shall be transferred to the
general funds of the government." (1987
Constitution, Art. VI, Sec. 28[3]).
18 Supra; see footnote 14 and related text.
19 Rollo, p. 17.
20 SEE Vigan Electric Light Co., Inc. v. Public
Service Commission, G.R. No.
L-19850, 30 January 1964 and Pelaez v.
Auditor General, G.R. No. L-23825, 24
December 1965; see also Gonzales, N.
Administrative Law A Text, (1979) at 29.
21 De La Llana v. Alba, 112 SCRA
294, citing Edu v. Ericta, 35 SCRA
481: Cf. Agustin v. Edu, 88 SCRA 195.
22 Hirabayashi v. U.S., 390 U.S. 99.
23 When this petition was filed, the amount
involved was P5,277.4 million.
24 Rollo, p. 20.
25 Id., p. 21.
26 Id., p. 20.

27 Caltex Philippines, Inc. v. The Honorable

Commissioner on Audit, et al., G.R. No.
92585, 8 May 1992, En Banc. N.B. The
Solicitor General seems to have taken a
different position in this case, with respect to
the application of ejusdem generis.
28 Smith Bell and Co., Ltd. v. Register of
Deeds of Davao, 96 Phil. 53
[1954], citing BLACK on Interpretation of
Law, 2nd ed. at 203: see also Republic v.
Migrio 189 SCRA 289 [1990].
29 Supra at note 25; SEE also Maceda v. Hon.
Catalino Macaraig, Jr., et al., G.R. No. 88291,
197 SCRA 771 (1991).

Republic of the Philippines

SUPREME COURT
Manila
EN BANC

G.R. No. 113105 August 19, 1994

PHILIPPINE CONSTITUTION ASSOCIATION,
EXEQUIEL B. GARCIA and A. GONZALES, petitioners,
vs.
HON. SALVADOR ENRIQUEZ, as Secretary of Budget
and Management; HON. VICENTE T. TAN, as National
Treasurer and COMMISSION ON AUDIT, respondents.
G.R. No. 113174 August 19, 1994
RAUL S. ROCO, as Member of the Philippine Senate,
NEPTALI A. GONZALES, Chairman of the Committee
on Finance of the Philippine Senate, and EDGARDO J.
ANGARA, as President and Chief Executive of the
Philippine Senate, all of whom also sue as taxpayers,
in their own behalf and in representation of Senators
HEHERSON ALVAREZ, AGAPITO A. AQUINO, RODOLFO
G. BIAZON, JOSE D. LINA, JR., ERNESTO F. HERRERA,
BLAS F. OPLE, JOHN H. OSMENA, GLORIA
MACAPAGAL- ARROYO, VICENTE C. SOTTO III,
ARTURO M. TOLENTINO, FRANCISCO S. TATAD,
WIGBERTO E. TAADA and FREDDIE N.
WEBB, petitioners,
vs.
THE EXECUTIVE SECRETARY, THE DEPARTMENT OF
BUDGET AND MANAGEMENT, and THE NATIONAL
TREASURER, THE COMMISSION ON AUDIT, impleaded

herein as an unwilling
co-petitioner, respondents.
G.R. No. 113766 August 19, 1994
WIGBERTO E. TAADA and ALBERTO G. ROMULO, as
Members of the Senate and as taxpayers, and
FREEDOM FROM DEBT COALITION, petitioners,
vs.
HON. TEOFISTO T. GUINGONA, JR. in his capacity as
Executive Secretary, HON. SALVADOR ENRIQUEZ, JR.,
in his capacity as Secretary of the Department of
Budget and Management, HON. CARIDAD
VALDEHUESA, in her capacity as National Treasurer,
and THE COMMISSION ON AUDIT, respondents.
G.R. No. 113888 August 19, 1994
WIGBERTO E. TAADA and ALBERTO G. ROMULO, as
Members of the Senate and as taxpayers,petitioners,
vs.
HON. TEOFISTO T. GUINGONA, JR., in his capacity as
Executive Secretary, HON. SALVADOR ENRIQUEZ, JR.,
in his capacity as Secretary of the Department of
Budget and Management, HON. CARIDAD
VALDEHUESA, in her capacity as National Treasurer,
and THE COMMISSION ON AUDIT, respondents.
Ramon R. Gonzales for petitioners in G.R. No. 113105.
Eddie Tamondong for petitioners in G.R. Nos. 113766 &
113888.
Roco, Buag, Kapunan, Migallos & Jardeleza for petitioners
Raul S. Roco, Neptali A. Gonzales and Edgardo Angara.

Ceferino Padua Law Office fro intervenor Lawyers Against

Monopoly and Poverty (Lamp).

QUIASON, J.:
Once again this Court is called upon to rule on the
conflicting claims of authority between the Legislative and
the Executive in the clash of the powers of the purse and
the sword. Providing the focus for the contest between the
President and the Congress over control of the national
budget are the four cases at bench. Judicial intervention is
being sought by a group of concerned taxpayers on the
claim that Congress and the President have impermissibly
exceeded their respective authorities, and by several
Senators on the claim that the President has committed
grave abuse of discretion or acted without jurisdiction in the
exercise of his veto power.
I
House Bill No. 10900, the General Appropriation Bill of 1994
(GAB of 1994), was passed and approved by both houses of
Congress on December 17, 1993. As passed, it imposed
conditions and limitations on certain items of appropriations
in the proposed budget previously submitted by the
President. It also authorized members of Congress to
propose and identify projects in the "pork barrels" allotted
to them and to realign their respective operating budgets.
Pursuant to the procedure on the passage and enactment of
bills as prescribed by the Constitution, Congress presented
the said bill to the President for consideration and approval.
On December 30, 1993, the President signed the bill into
law, and declared the same to have become Republic Act

No. 7663, entitled "AN ACT APPROPRIATING FUNDS FOR

THE OPERATION OF THE GOVERNMENT OF THE
PHILIPPINES FROM JANUARY ONE TO DECEMBER THIRTY
ONE, NINETEEN HUNDRED AND NINETY-FOUR, AND FOR
OTHER PURPOSES" (GAA of 1994). On the same day, the
President delivered his Presidential Veto Message, specifying
the provisions of the bill he vetoed and on which he
imposed certain conditions.
No step was taken in either House of Congress to override
the vetoes.
In G.R. No. 113105, the Philippine Constitution Association,
Exequiel B. Garcia and Ramon A. Gonzales as taxpayers,
prayed for a writ of prohibition to declare as
unconstitutional and void: (a) Article XLI on the
Countrywide Development Fund, the special provision in
Article I entitled Realignment of Allocation for Operational
Expenses, and Article XLVIII on the Appropriation for Debt
Service or the amount appropriated under said Article
XLVIII in excess of the P37.9 Billion allocated for the
Department of Education, Culture and Sports; and (b) the
veto of the President of the Special Provision of
Article XLVIII of the GAA of 1994 (Rollo, pp. 88-90, 104105)
In G.R. No. 113174, sixteen members of the Senate led by
Senate President Edgardo J. Angara, Senator Neptali A.
Gonzales, the Chairman of the Committee on Finance, and
Senator Raul S. Roco, sought the issuance of the writs of
certiorari, prohibition and mandamus against the Executive
Secretary, the Secretary of the Department of Budget and
Management, and the National Treasurer.
Suing as members of the Senate and taxpayers, petitioners
question: (1) the constitutionality of the conditions imposed
by the President in the items of the GAA of 1994: (a) for the

Supreme Court, (b) Commission on Audit (COA), (c)

Ombudsman, (d) Commission on Human Rights (CHR), (e)
Citizen Armed Forces Geographical Units (CAFGU'S) and (f)
State Universities and Colleges (SUC's); and (2) the
constitutionality of the veto of the special provision in the
appropriation for debt service.
In G.R. No. 113766, Senators Alberto G. Romulo and
Wigberto Taada (a co-petitioner in G.R. No. 113174),
together with the Freedom from Debt Coalition, a non-stock
domestic corporation, sought the issuance of the writs of
prohibition and mandamus against the Executive Secretary,
the Secretary of the Department of Budget and
Management, the National Treasurer, and the COA.
Petitioners Taada and Romulo sued as members of the
Philippine Senate and taxpayers, while petitioner Freedom
from Debt Coalition sued as a taxpayer. They challenge the
constitutionality of the Presidential veto of the special
provision in the appropriations for debt service and the
automatic appropriation of funds therefor.
In G.R. No. 11388, Senators Taada and Romulo sought the
issuance of the writs of prohibition and mandamus against
the same respondents in G.R. No. 113766. In this petition,
petitioners contest the constitutionality of: (1) the veto on
four special provision added to items in the GAA of 1994 for
the Armed Forces of the Philippines (AFP) and the
Department of Public Works and Highways (DPWH); and (2)
the conditions imposed by the President in the
implementation of certain appropriations for the CAFGU's,
the DPWH, and the National Housing Authority (NHA).
Petitioners also sought the issuance of temporary
restraining orders to enjoin respondents Secretary of
Budget and Management, National Treasurer and COA from
enforcing the questioned provisions of the GAA of 1994, but

the Court declined to grant said provisional reliefs on the

time- honored principle of according the presumption of
validity to statutes and the presumption of regularity to
official acts.
In view of the importance and novelty of most of the issues
raised in the four petitions, the Court invited former Chief
Justice Enrique M. Fernando and former Associate Justice
Irene Cortes to submit their respective memoranda
as Amicus curiae, which they graciously did.
II
Locus Standi
When issues of constitutionality are raised, the Court can
exercise its power of judicial review only if the following
requisites are compresent: (1) the existence of an actual
and appropriate case; (2) a personal and substantial
interest of the party raising the constitutional question; (3)
the exercise of judicial review is pleaded at the earliest
opportunity; and (4) the constitutional question is the lis
mota of the case (Luz Farms v. Secretary of the Department
of Agrarian Reform, 192 SCRA 51 [1990]; Dumlao v.
Commission on Elections, 95 SCRA 392 [1980]; People v.
Vera, 65 Phil. 56 [1937]).
While the Solicitor General did not question the locus
standi of petitioners in G.R. No. 113105, he claimed that the
remedy of the Senators in the other petitions is political
(i.e., to override the vetoes) in effect saying that they do
not have the requisite legal standing to bring the suits.
The legal standing of the Senate, as an institution, was
recognized in Gonzales v. Macaraig, Jr., 191 SCRA 452
(1990). In said case, 23 Senators, comprising the entire
membership of the Upper House of Congress, filed a petition

to nullify the presidential veto of Section 55 of the GAA of

1989. The filing of the suit was authorized by Senate
Resolution No. 381, adopted on February 2, 1989, and
which reads as follows:
Authorizing and Directing the Committee on
Finance to Bring in the Name of the Senate of
the Philippines the Proper Suit with the
Supreme Court of the Philippines contesting
the Constitutionality of the Veto by the
President of Special and General Provisions,
particularly Section 55, of the General
Appropriation Bill of 1989 (H.B. No. 19186)
and For Other Purposes.
In the United States, the legal standing of a House of
Congress to sue has been recognized (United States v.
American Tel. & Tel. Co., 551 F. 2d 384, 391 [1976];
Notes: Congressional Access To The Federal Courts, 90
Harvard Law Review 1632 [1977]).
While the petition in G.R. No. 113174 was filed by 16
Senators, including the Senate President and the Chairman
of the Committee on Finance, the suit was not authorized by
the Senate itself. Likewise, the petitions in
G.R. Nos. 113766 and 113888 were filed without an
enabling resolution for the purpose.
Therefore, the question of the legal standing of petitioners
in the three cases becomes a preliminary issue before this
Court can inquire into the validity of the presidential veto
and the conditions for the implementation of some items in
the GAA of 1994.
We rule that a member of the Senate, and of the House of
Representatives for that matter, has the legal standing to

question the validity of a presidential veto or a condition

imposed on an item in an appropriation bill.
Where the veto is claimed to have been made without or in
excess of the authority vested on the President by the
Constitution, the issue of an impermissible intrusion of the
Executive into the domain of the Legislature arises
(Notes: Congressional Standing To Challenge Executive
Action, 122 University of Pennsylvania Law Review 1366
[1974]).
To the extent the power of Congress are impaired, so is the
power of each member thereof, since his office confers a
right to participate in the exercise of the powers of that
institution (Coleman v. Miller, 307 U.S. 433 [1939];
Holtzman v. Schlesinger, 484 F. 2d 1307 [1973]).
An act of the Executive which injures the institution of
Congress causes a derivative but nonetheless substantial
injury, which can be questioned by a member of Congress
(Kennedy v. Jones, 412 F. Supp. 353 [1976]). In such a
case, any member of Congress can have a resort to the
courts.
Former Chief Justice Enrique M. Fernando, as Amicus
Curiae, noted:
This is, then, the clearest case of the Senate
as a whole or individual Senators as such
having a substantial interest in the question
at issue. It could likewise be said that there
was the requisite injury to their rights as
Senators. It would then be futile to raise
any locus standi issue. Any intrusion into the
domain appertaining to the Senate is to be
resisted. Similarly, if the situation were
reversed, and it is the Executive Branch that

could allege a transgression, its officials could

likewise file the corresponding action. What
cannot be denied is that a Senator has
standing to maintain inviolate the
prerogatives, powers and privileges vested by
the Constitution in his office (Memorandum,
p. 14).
It is true that the Constitution provides a mechanism for
overriding a veto (Art. VI, Sec. 27 [1]). Said remedy,
however, is available only when the presidential veto is
based on policy or political considerations but not when the
veto is claimed to be ultra vires. In the latter case, it
becomes the duty of the Court to draw the dividing line
where the exercise of executive power ends and the bounds
of legislative jurisdiction begin.
III
G.R. No. 113105
1. Countrywide Development Fund
Article XLI of the GAA of 1994 sets up a Countrywide
Development Fund of P2,977,000,000.00 to "be used for
infrastructure, purchase of ambulances and computers and
other priority projects and activities and credit facilities to
qualified beneficiaries." Said Article provides:
COUNTRYWIDE DEVELOPMENT FUND
For Fund requirements of countrywide
development projects P 2,977,000,000

New Appropriations, by Purpose

Current Operating Expenditures

A. PURPOSE
Personal Maintenance Capital Total
Services and Other Outlays
Operating
Expenses
1. For Countrywide
Developments Projects P250,000,000
P2,727,000,000 P2,977,000,000
TOTAL NEW
APPROPRIATIONS P250,000,000
P2,727,000,000 P2,977,000,000
Special Provisions
1. Use and Release of Funds. The amount
herein appropriated shall be used for
infrastructure, purchase of ambulances and
computers and other priority projects and
activities, and credit facilities to qualified
beneficiaries as proposed and identified by
officials concerned according to the following
allocations: Representatives, P12,500,000
each; Senators, P18,000,000 each; VicePresident, P20,000,000; PROVIDED, That, the
said credit facilities shall be constituted as a
revolving fund to be administered by a
government financial institution (GFI) as a
trust fund for lending operations. Prior years
releases to local government units and
national government agencies for this
purpose shall be turned over to the
government financial institution which shall
be the sole administrator of credit facilities
released from this fund.

The fund shall be automatically released

quarterly by way of Advice of Allotments and
Notice of Cash Allocation directly to the
assigned implementing agency not later than
five (5) days after the beginning of each
quarter upon submission of the list of projects
and activities by the officials concerned.
2. Submission of Quarterly Reports. The
Department of Budget and Management shall
submit within thirty (30) days after the end of
each quarter a report to the Senate
Committee on Finance and the House
Committee on Appropriations on the releases
made from this Fund. The report shall include
the listing of the projects, locations,
implementing agencies and the endorsing
officials (GAA of 1994, p. 1245).
Petitioners claim that the power given to the members of
Congress to propose and identify the projects and activities
to be funded by the Countrywide Development Fund is an
encroachment by the legislature on executive power, since
said power in an appropriation act in implementation of a
law. They argue that the proposal and identification of the
projects do not involve the making of laws or the repeal and
amendment thereof, the only function given to the Congress
by the Constitution (Rollo, pp. 78- 86).
Under the Constitution, the spending power called by James
Madison as "the power of the purse," belongs to Congress,
subject only to the veto power of the President. The
President may propose the budget, but still the final say on
the matter of appropriations is lodged in the Congress.
The power of appropriation carries with it the power to
specify the project or activity to be funded under the

appropriation law. It can be as detailed and as broad as

Congress wants it to be.
The Countrywide Development Fund is explicit that it shall
be used "for infrastructure, purchase of ambulances and
computers and other priority projects and activities and
credit facilities to qualified beneficiaries . . ." It was
Congress itself that determined the purposes for the
appropriation.
Executive function under the Countrywide Development
Fund involves implementation of the priority projects
specified in the law.
The authority given to the members of Congress is only to
propose and identify projects to be implemented by the
President. Under Article XLI of the GAA of 1994, the
President must perforce examine whether the proposals
submitted by the members of Congress fall within the
specific items of expenditures for which the Fund was set
up, and if qualified, he next determines whether they are in
line with other projects planned for the locality. Thereafter,
if the proposed projects qualify for funding under the Funds,
it is the President who shall implement them. In short, the
proposals and identifications made by the members of
Congress are merely recommendatory.
The procedure of proposing and identifying by members of
Congress of particular projects or activities under Article XLI
of the GAA of 1994 is imaginative as it is innovative.
The Constitution is a framework of a workable government
and its interpretation must take into account the
complexities, realities and politics attendant to the
operation of the political branches of government. Prior to
the GAA of 1991, there was an uneven allocation of
appropriations for the constituents of the members of

Congress, with the members close to the Congressional

leadership or who hold cards for "horse-trading," getting
more than their less favored colleagues. The members of
Congress also had to reckon with an unsympathetic
President, who could exercise his veto power to cancel from
the appropriation bill a pet project of a Representative or
Senator.
The Countrywide Development Fund attempts to make
equal the unequal. It is also a recognition that individual
members of Congress, far more than the President and their
congressional colleagues are likely to be knowledgeable
about the needs of their respective constituents and the
priority to be given each project.
2. Realignment of Operating Expenses
Under the GAA of 1994, the appropriation for the Senate is
P472,000,000.00 of which P464,447,000.00 is appropriated
for current operating expenditures, while the appropriation
for the House of Representatives is P1,171,924,000.00 of
which P1,165,297,000.00 is appropriated for current
operating expenditures (GAA of 1994, pp. 2, 4, 9, 12).
The 1994 operating expenditures for the Senate are as
follows:
Personal Services
Salaries, Permanent 153,347
Salaries/Wage, Contractual/Emergency 6,870

Total Salaries and Wages 160,217

=======
Other Compensation

Step Increments 1,073

Honoraria and Commutable Allowances 3,731
Compensation Insurance Premiums 1,579
Pag-I.B.I.G. Contributions 1,184
Medicare Premiums 888
Bonus and Cash Gift 14,791
Terminal Leave Benefits 2,000
Personnel Economic Relief Allowance 10,266
Additional Compensation of P500 under A.O.
53 11,130
Others 57,173

Total Other Compensation 103,815

01 Total Personal Services 264,032

=======
Maintenance and Other Operating Expenses
02 Traveling Expenses 32,841
03 Communication Services 7,666
04 Repair and Maintenance of Government
Facilities 1,220
05 Repair and Maintenance of Government
Vehicles 318
06 Transportation Services 128
07 Supplies and Materials 20,189
08 Rents 24,584
14 Water/Illumination and Power 6,561
15 Social Security Benefits and Other Claims
3,270
17 Training and Seminars Expenses 2,225
18 Extraordinary and Miscellaneous Expenses
9,360
23 Advertising and Publication
24 Fidelity Bonds and Insurance Premiums

1,325
29 Other Services 89,778

Total Maintenance and Other Operating

Expenditures 200,415

Total Current Operating Expenditures 464,447

=======
(GAA of 1994, pp. 3-4)
The 1994 operating expenditures for the House of
Representatives are as follows:
Personal Services
Salaries, Permanent 261,557
Salaries/Wages, Contractual/Emergency
143,643

Total Salaries and Wages 405,200

=======
Other Compensation
Step Increments 4,312
Honoraria and Commutable
Allowances 4,764
Compensation Insurance
Premiums 1,159
Pag-I.B.I.G. Contributions 5,231
Medicare Premiums 2,281
Bonus and Cash Gift 35,669
Terminal Leave Benefits 29
Personnel Economic Relief
Allowance 21,150

Additional Compensation of P500 under A.O.

53
Others 106,140

Total Other Compensation 202,863

01 Total Personal Services 608,063

=======
Maintenance and Other Operating Expenses
02 Traveling Expenses 139,611
03 Communication Services 22,514
04 Repair and Maintenance of Government
Facilities 5,116
05 Repair and Maintenance of Government
Vehicles 1,863
06 Transportation Services 178
07 Supplies and Materials 55,248
10 Grants/Subsidies/Contributions 940
14 Water/Illumination and Power 14,458
15 Social Security Benefits and Other Claims
325
17 Training and Seminars Expenses 7,236
18 Extraordinary and Miscellaneous Expenses
14,474
20 Anti-Insurgency/Contingency Emergency
Expenses 9,400
23 Advertising and Publication 242
24 Fidelity Bonds and Insurance Premiums
1,420
29 Other Services 284,209

Total Maintenance and Other Operating

Expenditures 557,234

Total Current Operating Expenditures

1,165,297
=======
(GAA of 1994, pp. 11-12)
The Special Provision Applicable to the Congress of the
Philippines provides:
4. Realignment of Allocation for Operational
Expenses. A member of Congress may realign
his allocation for operational expenses to any
other expenses category provide the total of
said allocation is not exceeded. (GAA of 1994,
p. 14).
The appropriation for operating expenditures for each House
is further divided into expenditures for salaries, personal
services, other compensation benefits, maintenance
expenses and other operating expenses. In turn, each
member of Congress is allotted for his own operating
expenditure a proportionate share of the appropriation for
the House to which he belongs. If he does not spend for one
items of expense, the provision in question allows him to
transfer his allocation in said item to another item of
expense.
Petitioners assail the special provision allowing a member of
Congress to realign his allocation for operational expenses
to any other expense category (Rollo, pp. 82-92), claiming
that this practice is prohibited by Section 25(5), Article VI of
the Constitution. Said section provides:
No law shall be passed authorizing any
transfer of appropriations: however, the
President, the President of the Senate, the
Speaker of the House of Representatives, the
Chief Justice of the Supreme Court, and the

heads of Constitutional Commissions may, by

law, be authorized to augment any item in
the general appropriations law for their
respective offices from savings in other items
of their respective appropriations.
The proviso of said Article of the Constitution grants the
President of the Senate and the Speaker of the House of
Representatives the power to augment items in an
appropriation act for their respective offices from savings in
other items of their appropriations, whenever there is a law
authorizing such augmentation.
The special provision on realignment of the operating
expenses of members of Congress is authorized by Section
16 of the General Provisions of the GAA of 1994, which
provides:
Expenditure Components. Except by act of
the Congress of the Philippines, no change or
modification shall be made in the expenditure
items authorized in this Act and other
appropriation laws unless in cases
of augmentations from savings in
appropriations as authorized under Section
25(5) of Article VI of the Constitution (GAA of
1994, p. 1273).
Petitioners argue that the Senate President and the Speaker
of the House of Representatives, but not the individual
members of Congress are the ones authorized to realign the
savings as appropriated.
Under the Special Provisions applicable to the Congress of
the Philippines, the members of Congress only determine
the necessity of the realignment of the savings in the
allotments for their operating expenses. They are in the

best position to do so because they are the ones who know

whether there are savings available in some items and
whether there are deficiencies in other items of their
operating expenses that need augmentation. However, it is
the Senate President and the Speaker of the House of
Representatives, as the case may be, who shall approve the
realignment. Before giving their stamp of approval, these
two officials will have to see to it that:
(1) The funds to be realigned or transferred are actually
savings in the items of expenditures from which the same
are to be taken; and
(2) The transfer or realignment is for the purposes of
augmenting the items of expenditure to which said transfer
or realignment is to be made.
3. Highest Priority for Debt Service
While Congress appropriated P86,323,438,000.00 for debt
service (Article XLVII of the GAA of 1994), it appropriated
only P37,780,450,000.00 for the Department of Education
Culture and Sports. Petitioners urged that Congress cannot
give debt service the highest priority in the GAA of 1994
(Rollo, pp. 93-94) because under the Constitution it should
be education that is entitled to the highest funding. They
invoke Section 5(5), Article XIV thereof, which provides:
(5) The State shall assign the highest
budgetary priority to education and ensure
that teaching will attract and retain its rightful
share of the best available talents through
adequate remuneration and other means of
job satisfaction and fulfillment.

This issue was raised in Guingona, Jr. v. Carague, 196 SCRA

221 (1991), where this Court held that Section 5(5), Article
XIV of the Constitution, is merely directory, thus:
While it is true that under Section 5(5),
Article XIV of the Constitution, Congress is
mandated to "assign the highest budgetary
priority to education" in order to "insure that
teaching will attract and retain its rightful
share of the best available talents through
adequate remuneration and other means of
job satisfaction and fulfillment," it does not
thereby follow that the hands of Congress are
so hamstrung as to deprive it the power to
respond to the imperatives of the national
interest and for the attainment of other state
policies or objectives.
As aptly observed by respondents, since
1985, the budget for education has tripled to
upgrade and improve the facility of the public
school system. The compensation of teachers
has been doubled. The amount of
P29,740,611,000.00 set aside for the
Department of Education, Culture and Sports
under the General Appropriations Act (R.A.
No. 6381), is the highest budgetary allocation
among all department budgets. This is a clear
compliance with the aforesaid constitutional
mandate according highest priority to
education.
Having faithfully complied therewith,
Congress is certainly not without any power,
guided only by its good judgment, to provide
an appropriation, that can reasonably service
our enormous debt, the greater portion of
which was inherited from the previous

administration. It is not only a matter of

honor and to protect the credit standing of
the country. More especially, the very survival
of our economy is at stake. Thus, if in the
process Congress appropriated an amount for
debt service bigger than the share allocated
to education, the Court finds and so holds
that said appropriation cannot be thereby
assailed as unconstitutional.
G.R. No. 113105
G.R. No. 113174
Veto of Provision on Debt Ceiling
The Congress added a Special Provision to Article XLVIII
(Appropriations for Debt Service) of the GAA of 1994 which
provides:
Special Provisions
1. Use of the Fund. The appropriation
authorized herein shall be used for payment
of principal and interest of foreign and
domestic indebtedness; PROVIDED, That any
payment in excess of the amount herein
appropriated shall be subject to the approval
of the President of the Philippines with the
concurrence of the Congress of the
Philippines; PROVIDED, FURTHER, That in no
case shall this fund be used to pay for the
liabilities of the Central Bank Board of
Liquidators.
2. Reporting Requirement. The Bangko
Sentral ng Pilipinas and the Department of
Finance shall submit a quarterly report of

actual foreign and domestic debt service

payments to the House Committee on
Appropriations and Senate Finance
Committee within one (1) month after each
quarter (GAA of 1944, pp. 1266).
The President vetoed the first Special Provision, without
vetoing the P86,323,438,000.00 appropriation for debt
service in said Article. According to the President's Veto
Message:
IV. APPROPRIATIONS FOR DEBT SERVICE
I would like to emphasize that I concur fully
with the desire of Congress to reduce the
debt burden by decreasing the appropriation
for debt service as well as the inclusion of the
Special Provision quoted below. Nevertheless,
I believe that this debt reduction scheme
cannot be validly done through the 1994 GAA.
This must be addressed by revising our debt
policy by way of innovative and
comprehensive debt reduction programs
conceptualized within the ambit of the
Medium-Term Philippine Development Plan.
Appropriations for payment of public debt,
whether foreign or domestic, are
automatically appropriated pursuant to the
Foreign Borrowing Act and Section 31 of P.D.
No. 1177 as reiterated under Section 26,
Chapter 4, Book VI of E.O. No. 292, the
Administrative Code of 1987. I wish to
emphasize that the constitutionality of such
automatic provisions on debt servicing has
been upheld by the Supreme Court in the
case of "Teofisto T. Guingona, Jr., and

Aquilino Q. Pimentel, Jr. v. Hon. Guillermo N.

Carague, in his capacity as Secretary of
Budget and Management, et al.," G.R. No.
94571, dated April 22, 1991.
I am, therefore vetoing the following special
provision for the reason that the GAA is not
the appropriate legislative measure to amend
the provisions of the Foreign Borrowing Act,
P.D. No. 1177 and E.O. No. 292:
Use of the Fund. The
appropriation authorized herein
shall be used for payment of
principal and interest of foreign
and domestic
indebtedness: PROVIDED, That
any payment in excess of the
amount herein appropriated
shall be subject to the approval
of the President of the
Philippines with the
concurrence of the Congress of
the
Philippines:PROVIDED, FURTHE
R, That in no case shall this
fund be used to pay for the
liabilities of the Central Bank
Board of Liquidators (GAA of
1994, p. 1290).
Petitioners claim that the President cannot veto the Special
Provision on the appropriation for debt service without
vetoing the entire amount of P86,323,438.00 for said
purpose (Rollo, G.R. No. 113105, pp. 93-98; Rollo, G.R. No.
113174, pp. 16-18). The Solicitor General counterposed
that the Special Provision did not relate to the item of
appropriation for debt service and could therefore be the

subject of an item veto (Rollo, G.R. No. 113105, pp. 5460; Rollo, G.R. No. 113174, pp. 72-82).
This issue is a mere rehash of the one put to rest
in Gonzales v. Macaraig, Jr., 191 SCRA 452 (1990). In that
case, the issue was stated by the Court, thus:
The fundamental issue raised is whether or
not the veto by the President of Section 55 of
the 1989 Appropriations Bill (Section 55
FY '89), and subsequently of its counterpart
Section 16 of the 1990 Appropriations Bill
(Section 16 FY '90), is unconstitutional and
without effect.
The Court re-stated the issue, just so there would not be
any misunderstanding about it, thus:
The focal issue for resolution is whether or
not the President exceeded the item-veto
power accorded by the Constitution. Or
differently put, has the President the power to
veto "provisions" of an Appropriations Bill?
The bases of the petition in Gonzales, which are similar to
those invoked in the present case, are stated as follows:
In essence, petitioners' cause is anchored on
the following grounds: (1) the President's
line-veto power as regards appropriation bills
is limited to item/s and does not cover
provision/s; therefore, she exceeded her
authority when she vetoed Section 55 (FY
'89) and Section 16 (FY '90) which are
provisions; (2) when the President objects to
a provision of an appropriation bill, she
cannot exercise the item-veto power but

should veto the entire bill; (3) the item-veto

power does not carry with it the power to
strike out conditions or restrictions for that
would be legislation, in violation of the
doctrine of separation of powers; and (4) the
power of augmentation in Article VI, Section
25 [5] of the 1987 Constitution, has to be
provided for by law and, therefore, Congress
is also vested with the prerogative to impose
restrictions on the exercise of that power.
The restrictive interpretation urged by
petitioners that the President may not veto a
provision without vetoing the entire bill not
only disregards the basic principle that a
distinct and severable part of a bill may be
the subject of a separate veto but also
overlooks the Constitutional mandate that
any provision in the general appropriations
bill shall relate specifically to some particular
appropriation therein and that any such
provision shall be limited in its operation to
the appropriation to which it relates (1987
Constitution, Article VI, Section 25 [2]). In
other words, in the true sense of the term, a
provision in an Appropriations Bill is limited in
its operation to some particular appropriation
to which it relates, and does not relate to the
entire bill.
The Court went one step further and ruled that even
assuming arguendo that "provisions" are beyond the
executive power to veto, and Section 55
(FY '89) and Section 16 (FY '90) were not "provisions" in the
budgetary sense of the term, they are "inappropriate
provisions" that should be treated as "items" for the
purpose of the President's veto power.

The Court, citing Henry v. Edwards, La., 346 So. 2d 153

(1977), said that Congress cannot include in a general
appropriations bill matters that should be more properly
enacted in separate legislation, and if it does that, the
inappropriate provisions inserted by it must be treated as
"item", which can be vetoed by the President in the exercise
of his item-veto power.
It is readily apparent that the Special Provision applicable to
the appropriation for debt service insofar as it refers to
funds in excess of the amount appropriated in the bill, is an
"inappropriate" provision referring to funds other than the
P86,323,438,000.00 appropriated in the General
Appropriations Act of 1991.
Likewise the vetoed provision is clearly an attempt to repeal
Section 31 of P.D. No. 1177 (Foreign Borrowing Act) and
E.O. No. 292, and to reverse the debt payment policy. As
held by the Court in Gonzales, the repeal of these laws
should be done in a separate law, not in the appropriations
law.
The Court will indulge every intendment in favor of the
constitutionality of a veto, the same as it will presume the
constitutionality of an act of Congress (Texas Co. v. State,
254 P. 1060; 31 Ariz, 485, 53 A.L.R. 258 [1927]).
The veto power, while exercisable by the President, is
actually a part of the legislative process (Memorandum of
Justice Irene Cortes as Amicus Curiae, pp. 3-7). That is why
it is found in Article VI on the Legislative Department rather
than in Article VII on the Executive Department in the
Constitution. There is, therefore, sound basis to indulge in
the presumption of validity of a veto. The burden shifts on
those questioning the validity thereof to show that its use is
a violation of the Constitution.

Under his general veto power, the President has to veto the
entire bill, not merely parts thereof (1987 Constitution, Art.
VI, Sec. 27[1]). The exception to the general veto power is
the power given to the President to veto any particular item
or items in a general appropriations bill (1987 Constitution,
Art. VI,
Sec. 27[2]). In so doing, the President must veto the entire
item.
A general appropriations bill is a special type of legislation,
whose content is limited to specified sums of money
dedicated to a specific purpose or a separate fiscal unit
(Beckman, The Item Veto Power of the Executive,
31 Temple Law Quarterly 27 [1957]).
The item veto was first introduced by the Organic Act of the
Philippines passed by the U.S. Congress on August 29,
1916. The concept was adopted from some State
Constitutions.
Cognizant of the legislative practice of inserting provisions,
including conditions, restrictions and limitations, to items in
appropriations bills, the Constitutional Convention added the
following sentence to Section 20(2), Article VI of the 1935
Constitution:
. . . When a provision of an appropriation bill
affect one or more items of the same, the
President cannot veto the provision without at
the same time vetoing the particular item or
items to which it relates . . . .
In short, under the 1935 Constitution, the President was
empowered to veto separately not only items in an
appropriations bill but also "provisions".

While the 1987 Constitution did not retain the

aforementioned sentence added to Section 11(2) of Article
VI of the 1935 Constitution, it included the following
provision:
No provision or enactment shall be embraced
in the general appropriations bill unless it
relates specifically to some particular
appropriation therein. Any such provision or
enactment shall be limited in its operation to
the appropriation to which it relates (Art. VI,
Sec. 25[2]).
In Gonzales, we made it clear that the omission of that
sentence of Section 16(2) of the 1935 Constitution in the
1987 Constitution should not be interpreted to mean the
disallowance of the power of the President to veto a
"provision".
As the Constitution is explicit that the provision which
Congress can include in an appropriations bill must "relate
specifically to some particular appropriation therein" and
"be limited in its operation to the appropriation to which it
relates," it follows that any provision which does not relate
to any particular item, or which extends in its operation
beyond an item of appropriation, is considered "an
inappropriate provision" which can be vetoed separately
from an item. Also to be included in the category of
"inappropriate provisions" are unconstitutional provisions
and provisions which are intended to amend other laws,
because clearly these kind of laws have no place in an
appropriations bill. These are matters of general legislation
more appropriately dealt with in separate enactments.
Former Justice Irene Cortes, as Amicus Curiae, commented
that Congress cannot by law establish conditions for and
regulate the exercise of powers of the President given by
the Constitution for that would be an unconstitutional
intrusion into executive prerogative.

The doctrine of "inappropriate provision" was well elucidated

in Henry v. Edwards, supra., thus:
Just as the President may not use his itemveto to usurp constitutional powers conferred
on the legislature, neither can the legislature
deprive the Governor of the constitutional
powers conferred on him as chief executive
officer of the state by including in a general
appropriation bill matters more properly
enacted in separate legislation. The
Governor's constitutional power to veto bills
of general legislation . . . cannot be abridged
by the careful placement of such measures in
a general appropriation bill, thereby forcing
the Governor to choose between approving
unacceptable substantive legislation or
vetoing "items" of expenditures essential to
the operation of government.The legislature
cannot by location of a bill give it immunity
from executive veto. Nor can it circumvent
the Governor's veto power over substantive
legislation by artfully drafting general law
measures so that they appear to be true
conditions or limitations on an item of
appropriation. Otherwise, the legislature
would be permitted to impair the
constitutional responsibilities and functions of
a co-equal branch of government in
contravention of the separation of powers
doctrine . . . We are no more willing to allow
the legislature to use its appropriation power
to infringe on the Governor's constitutional
right to veto matters of substantive legislation
than we are to allow the Governor to
encroach on the Constitutional powers of the
legislature. In order to avoid this result, we
hold that,when the legislature inserts

inappropriate provisions in a general

appropriation bill, such provisions must be
treated as "items" for purposes of the
Governor's item veto power over general
appropriation bills.
xxx xxx xxx
. . . Legislative control cannot be exercised in
such a manner as to encumber the general
appropriation bill with veto-proof "logrolling
measures", special interest provisions which
could not succeed if separately enacted, or
"riders", substantive pieces of legislation
incorporated in a bill to insure passage
without veto . . . (Emphasis supplied).
Petitioners contend that granting arguendo that the veto of
the Special Provision on the ceiling for debt payment is
valid, the President cannot automatically appropriate funds
for debt payment without complying with the conditions for
automatic appropriation under the provisions of R.A. No.
4860 as amended by P.D. No. 81 and the provisions of P.D.
No. 1177 as amended by the Administrative Code of 1987
and P.D. No. 1967 (Rollo, G.R. No. 113766, pp. 9-15).
Petitioners cannot anticipate that the President will not
faithfully execute the laws. The writ of prohibition will not
issue on the fear that official actions will be done in
contravention of the laws.
The President vetoed the entire paragraph one of the
Special Provision of the item on debt service, including the
provisions that the appropriation authorized in said item
"shall be used for payment of the principal and interest of
foreign and domestic indebtedness" and that "in no case
shall this fund be used to pay for the liabilities of the Central

Bank Board of Liquidators." These provisions are germane

to and have a direct connection with the item on debt
service. Inherent in the power of appropriation is the power
to specify how the money shall be spent (Henry v. Edwards,
LA, 346 So., 2d., 153). The said provisos, being appropriate
provisions, cannot be vetoed separately. Hence the item
veto of said provisions is void.
We reiterate, in order to obviate any misunderstanding, that
we are sustaining the veto of the Special Provision of the
item on debt service only with respect to the proviso therein
requiring that "any payment in excess of the amount herein,
appropriated shall be subject to the approval of the
President of the Philippines with the concurrence of the
Congress of the Philippines . . ."
G.R. NO. 113174
G.R. NO. 113766
G.R. NO. 11388
1. Veto of provisions for revolving funds of SUC's.
In the appropriation for State Universities and Colleges
(SUC's), the President vetoed special provisions which
authorize the use of income and the creation, operation and
maintenance of revolving funds. The Special Provisions
vetoed are the following:
(H. 7) West Visayas State University
Equal Sharing of Income. Income earned by
the University subject to Section 13 of the
special provisions applicable to all State
Universities and Colleges shall be equally
shared by the University and the University
Hospital (GAA of 1994, p. 395).

xxx xxx xxx

(J. 3) Leyte State College
Revolving Fund for the Operation of LSC
House and Human Resources Development
Center (HRDC). The income of Leyte State
College derived from the operation of its LSC
House and HRDC shall be constituted into a
Revolving Fund to be deposited in an
authorized government depository bank for
the operational expenses of these
projects/services. The net income of the
Revolving Fund at the end of the year shall be
remitted to the National Treasury and shall
accrue to the General Fund. The
implementing guidelines shall be issued by
the Department of Budget and Management
(GAA of 1994, p. 415).
The vetoed Special Provisions applicable to all SUC's are the
following:
12. Use of Income from Extension Services.
State Universities and Colleges are authorized
to use their income from their extension
services. Subject to the approval of the Board
of Regents and the approval of a special
budget pursuant to Sec. 35, Chapter 5, Book
VI of E.O.
No. 292, such income shall be utilized solely
for faculty development, instructional
materials and work study program (GAA of
1994, p. 490).
xxx xxx xxx

13. Income of State Universities and Colleges.

The income of State Universities and Colleges
derived from tuition fees and other sources as
may be imposed by governing boards other
than those accruing to revolving funds
created under LOI Nos. 872 and 1026 and
those authorized to be recorded as trust
receipts pursuant to Section 40, Chapter 5,
Book VI of E.O. No. 292 shall be deposited
with the National Treasury and recorded as a
Special Account in the General Fund pursuant
to P.D. No. 1234 and P.D. No. 1437 for the
use of the institution, subject to Section 35,
Chapter 5, Book VI of E.O. No.
292L PROVIDED, That disbursements from
the Special Account shall not exceed the
amount actually earned and
deposited: PROVIDED, FURTHER, That a cash
advance on such income may be allowed
State half of income actually realized during
the preceding year and this cash advance
shall be charged against income actually
earned during the budget year: AND
PROVIDED, FINALLY, That in no case shall
such funds be used to create positions, nor
for payment of salaries, wages or allowances,
except as may be specifically approved by the
Department of Budge and Management for
income-producing activities, or to purchase
equipment or books, without the prior
approval of the President of the Philippines
pursuant to Letter of Implementation No. 29.
All collections of the State Universities and
Colleges for fees, charges and receipts
intended for private recipient units, including
private foundations affiliated with these
institutions shall be duly acknowledged with

official receipts and deposited as a trust

receipt before said income shall be subject to
Section 35, Chapter 5, Book VI of E.O. No.
292
(GAA of 1994, p. 490).
The President gave his reason for the veto thus:
Pursuant to Section 65 of the Government
Auditing Code of the Philippines, Section 44,
Chapter 5, Book VI of E.O. No. 292, s. 1987
and Section 22, Article VII of the Constitution,
all income earned by all Government offices
and agencies shall accrue to the General Fund
of the Government in line with the One Fund
Policy enunciated by Section 29 (1), Article VI
and Section 22, Article VII of the Constitution.
Likewise, the creation and establishment of
revolving funds shall be authorized by
substantive law pursuant to Section 66 of the
Government Auditing Code of the Philippines
and Section 45, Chapter 5, Book VI of E.O.
No. 292.
Notwithstanding the aforementioned
provisions of the Constitution and existing
law, I have noted the proliferation of special
provisions authorizing the use of agency
income as well as the creation, operation and
maintenance of revolving funds.
I would like to underscore the facts that such
income were already considered as integral
part of the revenue and financing sources of
the National Expenditure Program which I
previously submitted to Congress. Hence, the
grant of new special provisions authorizing

the use of agency income and the

establishment of revolving funds over and
above the agency appropriations authorized
in this Act shall effectively reduce the
financing sources of the 1994 GAA and, at the
same time, increase the level of expenditures
of some agencies beyond the wellcoordinated, rationalized levels for such
agencies. This corresponding increases the
overall deficit of the National Government
(Veto Message, p. 3).
Petitioners claim that the President acted with grave abuse
of discretion when he disallowed by his veto the "use of
income" and the creation of "revolving fund" by the Western
Visayas State University and Leyte State Colleges when he
allowed other government offices, like the National Stud
Farm, to use their income for their operating expenses
(Rollo, G.R. No. 113174, pp. 15-16).
There was no undue discrimination when the President
vetoed said special provisions while allowing similar
provisions in other government agencies. If some
government agencies were allowed to use their income and
maintain a revolving fund for that purpose, it is because
these agencies have been enjoying such privilege before by
virtue of the special laws authorizing such practices as
exceptions to the "one-fund policy" (e.g., R.A. No. 4618 for
the National Stud Farm, P.D. No. 902-A for the Securities
and Exchange Commission; E.O. No. 359 for the
Department of Budget and Management's Procurement
Service).
2. Veto of provision on 70% (administrative)/30%
(contract) ratio for road maintenance.

In the appropriation for the Department of Public Works and

Highways, the President vetoed the second paragraph of
Special Provision No. 2, specifying the 30% maximum ration
of works to be contracted for the maintenance of national
roads and bridges. The said paragraph reads as follows:
2. Release and Use of Road Maintenance
Funds. Funds allotted for the maintenance
and repair of roads which are provided in this
Act for the Department of Public Works and
Highways shall be released to the respective
Engineering District, subject to such rules and
regulations as may be prescribed by the
Department of Budget and Management.
Maintenance funds for roads and bridges shall
be exempt from budgetary reserve.
Of the amount herein appropriated for the
maintenance of national roads and bridges, a
maximum of thirty percent (30%) shall be
contracted out in accordance with guidelines
to be issued by the Department of Public
Works and Highways. The balance shall be
used for maintenance by force account.
Five percent (5%) of the total road
maintenance fund appropriated herein to be
applied across the board to the allocation of
each region shall be set aside for the
maintenance of roads which may be
converted to or taken over as national roads
during the current year and the same shall be
released to the central office of the said
department for eventual
sub-allotment to the concerned region and
district: PROVIDED, That any balance of the
said five percent (5%) shall be restored to the

regions on a pro-rata basis for the

maintenance of existing national roads.
No retention or deduction as reserves or
overhead expenses shall be made, except as
authorized by law or upon direction of the
President
(GAA of 1994, pp. 785-786; Emphasis
supplied).
The President gave the following reason for the veto:
While I am cognizant of the well-intended
desire of Congress to impose certain
restrictions contained in some special
provisions, I am equally aware that many
programs, projects and activities of agencies
would require some degree of flexibility to
ensure their successful implementation and
therefore risk their completion. Furthermore,
not only could these restrictions and
limitations derail and impede program
implementation but they may also result in a
breach of contractual obligations.
D.1.a. A study conducted by the
Infrastructure Agencies show that for
practical intent and purposes, maintenance by
contract could be undertaken to an optimum
of seventy percent (70%) and the remaining
thirty percent (30%) by force account.
Moreover, the policy of maximizing
implementation through contract maintenance
is a covenant of the Road and Road Transport
Program Loan from the Asian Development
Bank (ADB Loan No. 1047-PHI-1990) and
Overseas Economic Cooperation Fund (OECF

Loan No. PH-C17-199). The same is a

covenant under the World Bank (IBRD) Loan
for the Highway Management Project (IBRD
Loan
No. PH-3430) obtained in 1992.
In the light of the foregoing and considering
the policy of the government to encourage
and maximize private sector participation in
the regular repair and maintenance of
infrastructure facilities, I am directly vetoing
the underlined second paragraph of Special
Provision No. 2 of the Department of Public
Works and Highways (Veto Message, p. 11).
The second paragraph of Special Provision No. 2 brings to
fore the divergence in policy of Congress and the President.
While Congress expressly laid down the condition that only
30% of the total appropriation for road maintenance should
be contracted out, the President, on the basis of a
comprehensive study, believed that contracting out road
maintenance projects at an option of 70% would be more
efficient, economical and practical.
The Special Provision in question is not an inappropriate
provision which can be the subject of a veto. It is not alien
to the appropriation for road maintenance, and on the other
hand, it specified how the said item shall be expended
70% by administrative and 30% by contract.
The 1987 Constitution allows the addition by Congress of
special provisions, conditions to items in an expenditure bill,
which cannot be vetoed separately from the items to which
they relate so long as they are "appropriate" in the
budgetary sense (Art. VII, Sec. 25[2]).

The Solicitor General was hard put in justifying the veto of

this special provision. He merely argued that the provision
is a complete turnabout from an entrenched practice of the
government to maximize contract maintenance (Rollo, G.R.
No. 113888, pp. 85-86). That is not a ground to veto a
provision separate from the item to which it refers.
The veto of the second paragraph of Special Provision No. 2
of the item for the DPWH is therefore unconstitutional.
3. Veto of provision on purchase of medicines by
AFP.
In the appropriation for the Armed Forces of the Philippines
(AFP), the President vetoed the special provision on the
purchase by the AFP of medicines in compliance with the
Generics Drugs Law (R.A. No. 6675). The vetoed provision
reads:
12. Purchase of Medicines. The purchase of
medicines by all Armed Forces of the
Philippines units, hospitals and clinics shall
strictly comply with the formulary embodied
in the National Drug Policy of the Department
of Health (GAA of 1994, p. 748).
According to the President, while it is desirable to subject
the purchase of medicines to a standard formulary, "it is
believed more prudent to provide for a transition period for
its adoption and smooth implementation in the Armed
Forces of the Philippines" (Veto Message, p. 12).
The Special Provision which requires that all purchases of
medicines by the AFP should strictly comply with the
formulary embodied in the National Drug Policy of the
Department of Health is an "appropriate" provision. it is a
mere advertence by Congress to the fact that there is an

existing law, the Generics Act of 1988, that requires "the

extensive use of drugs with generic names through a
rational system of procurement and distribution." The
President believes that it is more prudent to provide for a
transition period for the smooth implementation of the law
in the case of purchases by the Armed Forces of the
Philippines, as implied by Section 11 (Education Drive) of
the law itself. This belief, however, cannot justify his veto of
the provision on the purchase of medicines by the AFP.
Being directly related to and inseparable from the
appropriation item on purchases of medicines by the AFP,
the special provision cannot be vetoed by the President
without also vetoing the said item (Bolinao Electronics
Corporation v. Valencia, 11 SCRA 486 [1964]).
4. Veto of provision on prior approval of Congress for
purchase of military equipment.
In the appropriation for the modernization of the AFP, the
President vetoed the underlined proviso of Special Provision
No. 2 on the "Use of Fund," which requires the prior
approval of Congress for the release of the corresponding
modernization funds, as well as the entire Special
Provisions
No. 3 on the "Specific Prohibition":
2. Use of the Fund. Of the amount herein
appropriated, priority shall be given for the
acquisition of AFP assets necessary for
protecting marine, mineral, forest and other
resources within Philippine territorial borders
and its economic zone, detection, prevention
or deterrence of air or surface intrusions and
to support diplomatic moves aimed at
preserving national dignity, sovereignty and
patrimony: PROVIDED, That the said

modernization fund shall not be released until

a Table of Organization and Equipment for FY
1994-2000 is submitted to and approved by
Congress.
3. Specific Prohibition. The said Modernization
Fund shall not be used for payment of six (6)
additional S-211 Trainer planes, 18 SF-260
Trainer planes and 150 armored personnel
carriers (GAA of 1994, p. 747).
As reason for the veto, the President stated that the said
condition and prohibition violate the Constitutional mandate
of non-impairment of contractual obligations, and if allowed,
"shall effectively alter the original intent of the AFP
Modernization Fund to cover all military equipment deemed
necessary to modernize the Armed Forces of the
Philippines" (Veto Message, p. 12).
Petitioners claim that Special Provision No. 2 on the "Use of
Fund" and Special Provision No. 3 are conditions or
limitations related to the item on the AFP modernization
plan.
The requirement in Special Provision No. 2 on the "Use of
Fund" for the AFP modernization program that the President
must submit all purchases of military equipment to
Congress for its approval, is an exercise of the
"congressional or legislative veto." By way of definition, a
congressional veto is a means whereby the legislature can
block or modify administrative action taken under a statute.
It is a form of legislative control in the implementation of
particular executive actions. The form may be either
negative, that is requiring disapproval of the executive
action, or affirmative, requiring approval of the executive
action. This device represents a significant attempt by
Congress to move from oversight of the executive to shared

administration (Dixon, The Congressional Veto and

Separation of Powers: The Executive on a Leash,
56 North Carolina Law Review, 423 [1978]).
A congressional veto is subject to serious questions
involving the principle of separation of powers.
However the case at bench is not the proper occasion to
resolve the issues of the validity of the legislative veto as
provided in Special Provisions Nos. 2 and 3 because the
issues at hand can be disposed of on other grounds. Any
provision blocking an administrative action in implementing
a law or requiring legislative approval of executive acts
must be incorporated in a separate and substantive bill.
Therefore, being "inappropriate" provisions, Special
Provisions Nos. 2 and 3 were properly vetoed.
As commented by Justice Irene Cortes in her memorandum
as Amicus Curiae: "What Congress cannot do directly by law
it cannot do indirectly by attaching conditions to the
exercise of that power (of the President as Commander-inChief) through provisions in the appropriation law."
Furthermore, Special Provision No. 3, prohibiting the use of
the Modernization Funds for payment of the trainer planes
and armored personnel carriers, which have been
contracted for by the AFP, is violative of the Constitutional
prohibition on the passage of laws that impair the obligation
of contracts (Art. III, Sec. 10), more so, contracts entered
into by the Government itself.
The veto of said special provision is therefore valid.
5. Veto of provision on use of savings to augment
AFP pension funds.

In the appropriation for the AFP Pension and Gratuity Fund,

the President vetoed the new provision authorizing the Chief
of Staff to use savings in the AFP to augment pension and
gratuity funds. The vetoed provision reads:
2. Use of Savings. The Chief of Staff, AFP, is
authorized, subject to the approval of the
Secretary of National Defense, to use savings
in the appropriations provided herein to
augment the pension fund being managed by
the AFP Retirement and Separation Benefits
System as provided under Sections 2(a) and
3 of P.D. No. 361 (GAA of 1994,
p. 746).
According to the President, the grant of retirement and
separation benefits should be covered by direct
appropriations specifically approved for the purpose
pursuant to Section 29(1) of Article VI of the Constitution.
Moreover, he stated that the authority to use savings is
lodged in the officials enumerated in Section 25(5) of Article
VI of the Constitution (Veto Message, pp. 7-8).
Petitioners claim that the Special Provision on AFP Pension
and Gratuity Fund is a condition or limitation which is so
intertwined with the item of appropriation that it could not
be separated therefrom.
The Special Provision, which allows the Chief of Staff to use
savings to augment the pension fund for the AFP being
managed by the AFP Retirement and Separation Benefits
System is violative of Sections 25(5) and 29(1) of the
Article VI of the Constitution.
Under Section 25(5), no law shall be passed authorizing any
transfer of appropriations, and under Section 29(1), no
money shall be paid out of

the Treasury except in pursuance of an appropriation made

by law. While Section 25(5) allows as an exception the
realignment of savings to augment items in the general
appropriations law for the executive branch, such right must
and can be exercised only by the President pursuant to a
specific law.
6. Condition on the deactivation of the CAFGU's.
Congress appropriated compensation for the CAFGU's,
including the payment of separation benefits but it added
the following Special Provision:
1. CAFGU Compensation and Separation
Benefit. The appropriation authorized herein
shall be used for the compensation of
CAFGU's including the payment of their
separation benefit not exceeding one (1) year
subsistence allowance for the 11,000
members who will be deactivated in 1994.
The Chief of Staff, AFP, shall, subject to the
approval of the Secretary of National Defense,
promulgate policies and procedures for the
payment of separation benefit (GAA of 1994,
p. 740).
The President declared in his Veto Message that the
implementation of this Special Provision to the item on the
CAFGU's shall be subject to prior Presidential approval
pursuant to P.D. No. 1597 and R.A.. No. 6758. He gave the
following reasons for imposing the condition:
I am well cognizant of the laudable intention
of Congress in proposing the amendment of
Special Provision No. 1 of the CAFGU.
However, it is premature at this point in time
of our peace process to earmark and declare

through special provision the actual number

of CAFGU members to be deactivated in CY
1994. I understand that the number to be
deactivated would largely depend on the
result or degree of success of the on-going
peace initiatives which are not yet precisely
determinable today. I have desisted,
therefore, to directly veto said provisions
because this would mean the loss of the
entire special provision to the prejudice of its
beneficient provisions. I therefore declare that
the actual implementation of this special
provision shall be subject to prior Presidential
approval pursuant to the provisions of P.D.
No. 1597 and
R.A. No. 6758 (Veto Message, p. 13).
Petitioners claim that the Congress has required the
deactivation of the CAFGU's when it appropriated the money
for payment of the separation pay of the members of
thereof. The President, however, directed that the
deactivation should be done in accordance to his timetable,
taking into consideration the peace and order situation in
the affected localities.
Petitioners complain that the directive of the President was
tantamount to an administrative embargo of the
congressional will to implement the Constitution's command
to dissolve the CAFGU's (Rollo, G.R. No. 113174,
p. 14; G.R. No. 113888, pp. 9, 14-16). They argue that the
President cannot impair or withhold expenditures authorized
and appropriated by Congress when neither the
Appropriations Act nor other legislation authorize such
impounding (Rollo, G.R. No. 113888, pp. 15-16).
The Solicitor General contends that it is the President, as
Commander-in-Chief of the Armed Forces of the Philippines,
who should determine when the services of the CAFGU's are

no longer needed (Rollo, G.R. No. 113888,

pp. 92-95.).
This is the first case before this Court where the power of
the President to impound is put in issue. Impoundment
refers to a refusal by the President, for whatever reason, to
spend funds made available by Congress. It is the failure to
spend or obligate budget authority of any type
(Notes: Impoundment of Funds, 86 Harvard Law Review
1505 [1973]).
Those who deny to the President the power to impound
argue that once Congress has set aside the fund for a
specific purpose in an appropriations act, it becomes
mandatory on the part of the President to implement the
project and to spend the money appropriated therefor. The
President has no discretion on the matter, for the
Constitution imposes on him the duty to faithfully execute
the laws.
In refusing or deferring the implementation of an
appropriation item, the President in effect exercises a veto
power that is not expressly granted by the Constitution. As
a matter of fact, the Constitution does not say anything
about impounding. The source of the Executive authority
must be found elsewhere.
Proponents of impoundment have invoked at least three
principal sources of the authority of the President. Foremost
is the authority to impound given to him either expressly or
impliedly by Congress. Second is the executive power drawn
from the President's role as Commander-in-Chief. Third is
the Faithful Execution Clause which ironically is the same
provision invoked by petitioners herein.
The proponents insist that a faithful execution of the laws
requires that the President desist from implementing the

law if doing so would prejudice public interest. An example

given is when through efficient and prudent management of
a project, substantial savings are made. In such a case, it is
sheer folly to expect the President to spend the entire
amount budgeted in the law (Notes: Presidential
Impoundment: Constitutional Theories and Political
Realities, 61 Georgetown Law Journal 1295 [1973];
Notes; Protecting the Fisc: Executive Impoundment and
Congressional Power, 82 Yale Law Journal 1686 [1973).
We do not find anything in the language used in the
challenged Special Provision that would imply that Congress
intended to deny to the President the right to defer or
reduce the spending, much less to deactivate 11,000 CAFGU
members all at once in 1994. But even if such is the
intention, the appropriation law is not the proper vehicle for
such purpose. Such intention must be embodied and
manifested in another law considering that it abrades the
powers of the Commander-in-Chief and there are existing
laws on the creation of the CAFGU's to be amended. Again
we state: a provision in an appropriations act cannot
be used to repeal or amend other laws, in this case, P.D.
No. 1597 and R.A. No. 6758.
7. Condition on the appropriation for the Supreme
Court, etc.
(a) In the appropriations for the Supreme Court,
Ombudsman, COA, and CHR, the Congress added the
following provisions:
The Judiciary
xxx xxx xxx
Special Provisions

1. Augmentation of any Item in the Court's

Appropriations. Any savings in the
appropriations for the Supreme Court and the
Lower Courts may be utilized by the Chief
Justice of the Supreme Court to augment any
item of the Court's appropriations for (a)
printing of decisions and publication of
"Philippine Reports"; (b) Commutable
terminal leaves of Justices and other
personnel of the Supreme Court and payment
of adjusted pension rates to retired Justices
entitled thereto pursuant to Administrative
Matter No. 91-8-225-C.A.; (c) repair,
maintenance, improvement and other
operating expenses of the courts' libraries,
including purchase of books and periodicals;
(d) purchase, maintenance and improvement
of printing equipment; (e) necessary
expenses for the employment of temporary
employees, contractual and casual
employees, for judicial administration; (f)
maintenance and improvement of the Court's
Electronic Data
Processing System; (g) extraordinary
expenses of the Chief Justice, attendance in
international conferences and conduct of
training programs; (h) commutable
transportation and representation allowances
and fringe benefits for Justices, Clerks of
Court, Court Administrator, Chiefs of Offices
and other Court personnel in accordance with
the rates prescribed by law; and (i)
compensation of attorney-deofficio: PROVIDED, That as mandated by LOI
No. 489 any increase in salary and allowances
shall be subject to the usual procedures and
policies as provided for under

P.D. No. 985 and other pertinent laws (GAA of

1994, p. 1128; Emphasis supplied).
xxx xxx xxx
Commission on Audit
xxx xxx xxx
5. Use of Savings. The Chairman of the
Commission on Audit is hereby authorized,
subject to appropriate accounting and
auditing rules and regulations, to use savings
for the payment of fringe benefits as may be
authorized by law for officials and personnel
of the Commission (GAA of 1994, p. 1161;
Emphasis supplied).
xxx xxx xxx
Office of the Ombudsman
xxx xxx xxx
6. Augmentation of Items in the appropriation
of the Office of the Ombudsman. The
Ombudsman is hereby authorized, subject to
appropriate accounting and auditing rules and
regulations to augment items of appropriation
in the Office of the Ombudsman from savings
in other items of appropriation actually
released, for: (a) printing and/or publication
of decisions, resolutions, training and
information materials; (b) repair,
maintenance and improvement of OMB
Central and Area/Sectoral facilities; (c)
purchase of books, journals, periodicals and

equipment;
(d) payment of commutable representation
and transportation allowances of officials and
employees who by reason of their positions
are entitled thereto and fringe benefits as
may be authorized specifically by law for
officials and personnel of OMB pursuant to
Section 8 of Article IX-B of the Constitution;
and (e) for other official purposes subject to
accounting and auditing rules and regulations
(GAA of 1994, p. 1174; Emphasis supplied).
xxx xxx xxx
Commission on Human Rights
xxx xxx xxx
1. Use of Savings. The Chairman of the
Commission on Human Rights (CHR) is
hereby authorized, subject to appropriate
accounting and auditing rules and regulations,
to augment any item of appropriation in the
office of the CHR from savings in other items
of appropriations actually released, for: (a)
printing and/or publication of decisions,
resolutions, training materials and educational
publications; (b) repair, maintenance and
improvement of Commission's central and
regional facilities; (c) purchase of books,
journals, periodicals and equipment, (d)
payment of commutable representation and
transportation allowances of officials and
employees who by reason of their positions
are entitled thereto and fringe benefits, as
may be authorized by law for officials and
personnel of CHR, subject to accounting and

auditing rules and regulations (GAA of 1994,

p. 1178; Emphasis supplied).
In his Veto Message, the President expressed his approval
of the conditions included in the GAA of 1994. He noted
that:
The said condition is consistent with the
Constitutional injunction prescribed under
Section 8, Article IX-B of the Constitution
which states that "no elective or appointive
public officer or employee shall receive
additional, double, or indirect compensation
unless specifically authorized by law." I am,
therefore, confident that the heads of the said
offices shall maintain fidelity to the law and
faithfully adhere to the well-established
principle on compensation standardization
(Veto Message, p. 10).
Petitioners claim that the conditions imposed by the
President violated the independence and fiscal autonomy of
the Supreme Court, the Ombudsman, the COA and the CHR.
In the first place, the conditions questioned by petitioners
were placed in the GAB by Congress itself, not by the
President. The Veto Message merely highlighted the
Constitutional mandate that additional or indirect
compensation can only be given pursuant to law.
In the second place, such statements are mere reminders
that the disbursements of appropriations must be made in
accordance with law. Such statements may, at worse, be
treated as superfluities.
(b) In the appropriation for the COA, the President imposed
the condition that the implementation of the budget of the

COA be subject to "the guidelines to be issued by the

President."
The provisions subject to said condition reads:
xxx xxx xxx
3. Revolving Fund. The income of the
Commission on Audit derived from sources
authorized by the Government Auditing Code
of the Philippines (P.D. No. 1445) not
exceeding Ten Million Pesos (P10,000,000)
shall be constituted into a revolving fund
which shall be used for maintenance,
operating and other incidental expenses to
enhance audit services and audit-related
activities. The fund shall be deposited in an
authorized government depository ban, and
withdrawals therefrom shall be made in
accordance with the procedure prescribed by
law and implementing rules and
regulations:PROVIDED, That any interests
earned on such deposit shall be remitted at
the end of each quarter to the national
Treasury and shall accrue to the General
Fund: PROVIDED FURTHER, That the
Commission on Audit shall submit to the
Department of Budget and Management a
quarterly report of income and expenditures
of said revolving fund (GAA of 1994, pp.
1160-1161).
The President cited the "imperative need to rationalize" the
implementation, applicability and operation of use of income
and revolving funds. The Veto Message stated:

. . . I have observed that there are old and

long existing special provisions authorizing
the use of income and the creation of
revolving funds. As a rule, such authorizations
should be discouraged. However, I take it
that these authorizations have legal/statutory
basis aside from being already a vested right
to the agencies concerned which should not
be jeopardized through the Veto Message.
There is, however, imperative need to
rationalize their implementation, applicability
and operation. Thus, in order to substantiate
the purpose and intention of said provisions, I
hereby declare that the operationalization of
the following provisions during budget
implementation shall be subject to
theguidelines to be issued by the
President pursuant to Section 35, Chapter 5,
Book VI of E.O. No. 292 and Sections 65 and
66 of P.D. No. 1445 in relation to Sections 2
and 3 of the General Provisions of this Act
(Veto Message, p. 6; Emphasis Supplied.)
(c) In the appropriation for the DPWH, the President
imposed the condition that in the implementation of DPWH
projects, the administrative and engineering overhead of
5% and 3% "shall be subject to the necessary
administrative guidelines to be formulated by the Executive
pursuant to existing laws." The condition was imposed
because the provision "needs further study" according to
the President.
The following provision was made subject to said condition:
9. Engineering and Administrative Overhead.
Not more than five percent (5%) of the
amount for infrastructure project released by
the Department of Budget and Management

shall be deducted by DPWH for administrative

overhead, detailed engineering and
construction supervision, testing and quality
control, and the like, thus insuring that at
least ninety-five percent (95%) of the
released fund is available for direct
implementation of the
project. PROVIDED, HOWEVER, That for
school buildings, health centers, day-care
centers and barangay halls, the deductible
amount shall not exceed three percent (3%).
Violation of, or non-compliance with, this
provision shall subject the government official
or employee concerned to administrative, civil
and/or criminal sanction under Sections 43
and 80, Book VI of E.O.
No. 292 (GAA of 1994, p. 786).
(d) In the appropriation for the National Housing Authority
(NHA), the President imposed the condition that allocations
for specific projects shall be released and disbursed "in
accordance with the housing program of the government,
subject to prior Executive approval."
The provision subject to the said condition reads:
3. Allocations for Specified Projects. The
following allocations for the specified projects
shall be set aside for corollary works and used
exclusively for the repair, rehabilitation and
construction of buildings, roads, pathwalks,
drainage, waterworks systems, facilities and
amenities in the area:PROVIDED, That any
road to be constructed or rehabilitated shall
conform with the specifications and standards
set by the Department of Public Works and

Highways for such kind of

road: PROVIDED,FURTHER, That savings that
may be available in the future shall be used
for road repair, rehabilitation and
construction:
(1) Maharlika
Village Road
Not less than
P5,000,000
(2) Tenement
Housing Project
(Taguig) Not
less than
P3,000,000
(3) Bagong
Lipunan
Condominium
Project (Taguig)
Not less than
P2,000,000
4. Allocation of Funds. Out of the amount
appropriated for the implementation of
various projects in resettlement areas, Seven
Million Five Hundred Thousand Pesos
(P7,500,000) shall be allocated to the
Dasmarias Bagong Bayan resettlement area,
Eighteen Million Pesos (P18,000,000) to the
Carmona Relocation Center Area (Gen.
Mariano Alvarez) and Three Million Pesos
(P3,000,000) to the Bulihan Sites and
Services, all of which will be for the
cementing of roads in accordance with DPWH
standards.

5. Allocation for Sapang Palay. An allocation

of Eight Million Pesos (P8,000,000) shall be
set aside for the asphalting of seven (7)
kilometer main road of Sapang Palay, San
Jose Del Monte, Bulacan
(GAA of 1994, p. 1216).
The President imposed the conditions: (a) that the
"operationalization" of the special provision on revolving
funds of the COA "shall be subject to guidelines to be issued
by the President pursuant to Section 35, Chapter 5,
Book VI of E.O. 292 and Sections 65 and 66 of P.D. No.
1445 in relation to Sections 2 and 3 of the General
Provisions of this Act" (Rollo, G.R.
No. 113174, pp. 5,7-8); (b) that the implementation of
Special Provision No. 9 of the DPWH on the mandatory
retention of 5% and 3% of the amounts released by said
Department "be subject to the necessary administrative
guidelines to be formulated by the Executive pursuant to
existing law" (Rollo, G.R. No. 113888; pp. 10, 14-16); and
(c) that the appropriations authorized for the NHA can be
released only "in accordance with the housing program of
the government subject to prior Executive approval" (Rollo,
G.R. No. 113888, pp. 10-11;
14-16).
The conditions objected to by petitioners are mere
reminders that the implementation of the items on which
the said conditions were imposed, should be done in
accordance with existing laws, regulations or policies. They
did not add anything to what was already in place at the
time of the approval of the GAA of 1994.
There is less basis to complain when the President said that
the expenditures shall be subject to guidelines he will issue.
Until the guidelines are issued, it cannot be determined
whether they are proper or inappropriate. The issuance of
administrative guidelines on the use of public funds

authorized by Congress is simply an exercise by the

President of his constitutional duty to see that the laws are
faithfully executed (1987 Constitution, Art. VII, Sec. 17;
Planas v. Gil 67 Phil. 62 [1939]). Under the Faithful
Execution Clause, the President has the power to take
"necessary and proper steps" to carry into execution the law
(Schwartz, On Constitutional Law, p. 147 [1977]). These
steps are the ones to be embodied in the guidelines.
IV
Petitioners chose to avail of the special civil actions but
those remedies can be used only when respondents have
acted "without or in excess" of jurisdiction, or "with grave
abuse of discretion," (Revised Rules of Court,
Rule 65, Section 2). How can we begrudge the President for
vetoing the Special Provision on the appropriation for debt
payment when he merely followed our decision in Gonzales?
How can we say that Congress has abused its discretion
when it appropriated a bigger sum for debt payment than
the amount appropriated for education, when it merely
followed our dictum in Guingona?
Article 8 of the Civil Code of Philippines, provides:
Judicial decisions applying or interpreting the
laws or the constitution shall from a part of
the legal system of the Philippines.
The Court's interpretation of the law is part of that law as of
the date of its enactment since the court's interpretation
merely establishes the contemporary legislative intent that
the construed law purports to carry into effect (People v.
Licera, 65 SCRA 270 [1975]). Decisions of the Supreme
Court assume the same authority as statutes (Floresca v.
Philex Mining Corporation, 136 SCRA 141 [1985]).

Even if Guingona and Gonzales are considered hard cases

that make bad laws and should be reversed, such reversal
cannot nullify prior acts done in reliance thereof.
WHEREFORE, the petitions are DISMISSED, except with
respect to
(1) G.R. Nos. 113105 and 113766 only insofar as they pray
for the annulment of the veto of the special provision on
debt service specifying that the fund therein appropriated
"shall be used for payment of the principal and interest of
foreign and domestic indebtedness" prohibiting the use of
the said funds "to pay for the liabilities of the Central Bank
Board of Liquidators", and (2) G.R. No. 113888 only insofar
as it prays for the annulment of the veto of: (a) the second
paragraph of Special Provision No. 2 of the item of
appropriation for the Department of Public Works and
Highways (GAA of 1994, pp. 785-786); and (b) Special
Provision No. 12 on the purchase of medicines by the Armed
Forces of the Philippines (GAA of 1994, p. 748), which is
GRANTED.
SO ORDERED.
Narvasa, C.J., Feliciano, Bidin, Regalado, Davide, Jr.,
Romero, Bellosillo, Melo, Puno, Kapunan and
Mendoza, JJ., concur.

Separate Opinions

PADILLA, J., concurring and dissenting:

I concur with the ponencia of Mr. Justice Camilo D. Quiason

except in so far as it re-affirms the Court's decision
inGonzalez v. Macaraig (191 SCRA 452).
Sec. 27(2), Art. VI of the Constitution states:
The President shall have the power to veto
any particular item or items in an
appropriation, revenue, or tariff bill, but the
veto shall not effect the item or items to
which he does not object.
In my dissenting opinion in Gonzalez, I stated that:
The majority opinion positions the veto
questioned in this case within the scope of
Section 27(2) [Article VI of the Constitution].
I do not see how this can be done without
doing violence to the constitutional design.
The distinction between an item-veto and
a provision veto has been traditionally
recognized in constitutional litigation and
budgetary practice. As stated by Mr. Justice
Sutherland, speaking for the U.S. Supreme
Court in Bengzon v. Secretary of Justice, 299
U.S. 410-416:
. . . An item of an appropriation
bill obviously means an item
which in itself is a specific
appropriation of money, not
some general provisions of law
which happens to be put into
an appropriation bill . . .
When the Constitution in Section 27(2)
empowers the President to veto any particular

item or items in the appropriation act, it does

not
confer in fact, it excludes the power to
veto any particular provision or provisions in
said act.
In an earlier case, Sarmiento v. Mison, et
al., 156 SCRA 549, this court referred to its
duty to construe the Constitution, not in
accordance with how the executive or the
legislative would want it construed, but in
accordance with what it says and provides.
When the Constitution states that the
President has the power to veto any particular
item or items in the appropriation act, this
must be taken as a component of that
delicate balance of power between the
executive and legislative, so that, for this
Court to construe Sec. 27(2) of the
Constitution as also empowering the
President to veto any particular provision or
provisions in the appropriations act, is to load
the scale in favor of the executive, at the
expense of that delicate balance of power.
I therefore disagree with the majority's pronouncements
which would validate the veto by the President of specific
provisions in the appropriations act based on the contention
that such are "inappropriate provisions." Even assuming, for
the sake of argument, that a provision in the appropriations
act is "inappropriate" from the Presidential standpoint, it is
still a provision, not an item, in an appropriations act and,
therefore, outside the veto power of the Executive.
VITUG, J., concurring:

I concur on the points so well expounded by a most

respected colleague, Mr. Justice Camilo D. Quiason. I should
like to highlight a bit, however, that part of
the ponencia dealing on the Countrywide Development Fund
or, so commonly referred to as, the infamous "pork barrel".

Congress in whatever guise, I am afraid, would be

constitutionality impermissible.

# Separate Opinions

I agree that it lies with Congress to determine in an

appropriation act the activities and the projects that are
desirable and may thus be funded. Once, however, such
identification and the corresponding appropriation therefore
is done, the legislative act is completed and it ends there.
Thereafter, the Executive is behooved, with exclusive
responsibility and authority, to see to it that the legislative
will is properly carried out. I cannot subscribe to another
theory invoked by some quarters that, in so implementing
the law, the Executive does so only by way of delegation.
Congress neither may delegate what it does not have nor
may encroach on the powers of a co-equal, independent
and coordinate branch.
Within its own sphere, Congress acts as a body, not as the
individuals that comprise it, in any action or decision that
can bind it, or be said to have been done by it, under its
constitutional authority. Even assuming that overseeing the
laws it enacts continues to be a legislative process, one that
I find difficult to accept, it is Congress itself, not any of its
members, that must exercise that function.
I cannot debate the fact that the members of Congress,
more than the President and his colleagues, would have the
best feel on the needs of their own respective cosntituents.
I see no legal obstacle, however, in their making, just like
anyone else, the proper recommendations to albeit not
necessarily conclusive on, the President for the purpose.
Neother would it be objectionable for Congrss, by law, to
appropriate funds for specific projects as it may be minded;
to give that authoriy, however, to the individual members of

PADILLA, J., concurring and dissenting:

I concur with the ponencia of Mr. Justice Camilo D. Quiason
except in so far as it re-affirms the Court's decision
inGonzalez v. Macaraig (191 SCRA 452).
Sec. 27(2), Art. VI of the Constitution states:
The President shall have the power to veto
any particular item or items in an
appropriation, revenue, or tariff bill, but the
veto shall not effect the item or items to
which he does not object.
In my dissenting opinion in Gonzalez, I stated that:
The majority opinion positions the veto
questioned in this case within the scope of
Section 27(2) [Article VI of the Constitution].
I do not see how this can be done without
doing violence to the constitutional design.
The distinction between an item-veto and
a provision veto has been traditionally
recognized in constitutional litigation and
budgetary practice. As stated by Mr. Justice
Sutherland, speaking for the U.S. Supreme
Court in Bengzon v. Secretary of Justice, 299
U.S. 410-416:

. . . An item of an appropriation
bill obviously means an item
which in itself is a specific
appropriation of money, not
some general provisions of law
which happens to be put into
an appropriation bill . . .

that such are "inappropriate provisions." Even assuming, for

the sake of argument, that a provision in the appropriations
act is "inappropriate" from the Presidential standpoint, it is
still a provision, not an item, in an appropriations act and,
therefore, outside the veto power of the Executive.

When the Constitution in Section 27(2)

empowers the President to veto any particular
item or items in the appropriation act, it does
not
confer in fact, it excludes the power to
veto any particular provision or provisions in
said act.

I concur on the points so well expounded by a most

respected colleague, Mr. Justice Camilo D. Quiason. I should
like to highlight a bit, however, that part of
the ponencia dealing on the Countrywide Development Fund
or, so commonly referred to as, the infamous "pork barrel".

In an earlier case, Sarmiento v. Mison, et

al., 156 SCRA 549, this court referred to its
duty to construe the Constitution, not in
accordance with how the executive or the
legislative would want it construed, but in
accordance with what it says and provides.
When the Constitution states that the
President has the power to veto any particular
item or items in the appropriation act, this
must be taken as a component of that
delicate balance of power between the
executive and legislative, so that, for this
Court to construe Sec. 27(2) of the
Constitution as also empowering the
President to veto any particular provision or
provisions in the appropriations act, is to load
the scale in favor of the executive, at the
expense of that delicate balance of power.
I therefore disagree with the majority's pronouncements
which would validate the veto by the President of specific
provisions in the appropriations act based on the contention

VITUG, J., concurring:

I agree that it lies with Congress to determine in an

appropriation act the activities and the projects that are
desirable and may thus be funded. Once, however, such
identification and the corresponding appropriation therefore
is done, the legislative act is completed and it ends there.
Thereafter, the Executive is behooved, with exclusive
responsibility and authority, to see to it that the legislative
will is properly carried out. I cannot subscribe to another
theory invoked by some quarters that, in so implementing
the law, the Executive does so only by way of delegation.
Congress neither may delegate what it does not have nor
may encroach on the powers of a co-equal, independent
and coordinate branch.
Within its own sphere, Congress acts as a body, not as the
individuals that comprise it, in any action or decision that
can bind it, or be said to have been done by it, under its
constitutional authority. Even assuming that overseeing the
laws it enacts continues to be a legislative process, one that
I find difficult to accept, it is Congress itself, not any of its
members, that must exercise that function.

I cannot debate the fact that the members of Congress,

more than the President and his colleagues, would have the
best feel on the needs of their own respective constituents.
I see no legal obstacle, however, in their making, just like
anyone else, the proper recommendations to, albeit not
necessarily conclusive on, the President for the purpose.
Neither would it be objectionable for Congress, by law, to
appropriate funds for such specific projects as it may be
minded; to give that authority, however, to the individual
members of Congress in whatever guise, I am afraid, would
be constitutionally impermissible.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 110571 March 10, 1994

FIRST LEPANTO CERAMICS, INC., petitioner,
vs.
THE COURT OF APPEALS and MARIWASA
MANUFACTURING, INC., respondents.
Castillo, Laman, Tan & Pantaleon for petitioner.
De Borja, Medialdea, Ata, Bello, Guevarra & Serapio for
private respondent.

NOCON, J.:
Brought to fore in this petition for certiorari and prohibition
with application for preliminary injunction is the novel
question of where and in what manner appeals from
decisions of the Board of Investments (BOI) should be filed.
A thorough scrutiny of the conflicting provisions of Batas
Pambansa Bilang 129, otherwise known as the "Judiciary
Reorganization Act of 1980," Executive Order No. 226, also
known as the Omnibus Investments Code of 1987 and
Supreme Court Circular No. 1-91 is, thus, called for.
Briefly, this question of law arose when BOI, in its decision
dated December 10, 1992 in BOI Case No. 92-005 granted

petitioner First Lepanto Ceramics, Inc.'s application to

amend its BOI certificate of registration by changing the
scope of its registered product from "glazed floor tiles" to
"ceramic tiles." Eventually, oppositor Mariwasa filed a
motion for reconsideration of the said BOI decision while
oppositor Fil-Hispano Ceramics, Inc. did not move to
reconsider the same nor appeal therefrom. Soon rebuffed in
its bid for reconsideration, Mariwasa filed a petition for
review with respondent Court of Appeals pursuant to
Circular 1-91.
Acting on the petition, respondent court required the BOI
and petitioner to comment on Mariwasa's petition and to
show cause why no injunction should issue. On February 17,
1993, respondent court temporarily restrained the BOI from
implementing its decision. This temporary restraining order
lapsed by its own terms on March 9, 1993, twenty (20) days
after its issuance, without respondent court issuing any
preliminary injunction.
On February 24, 1993, petitioner filed a "Motion to Dismiss
Petition and to Lift Restraining Order" on the ground that
respondent court has no appellate jurisdiction over BOI
Case No. 92-005, the same being exclusively vested with
the Supreme Court pursuant to Article 82 of the Omnibus
Investments Code of 1987.
On May 25, 1993, respondent court denied petitioner's
motion to dismiss, the dispositive portion of which reads as
follows:
WHEREFORE, private respondent's motion to
dismiss the petition is hereby DENIED, for
lack of merit.
Private respondent is hereby given an
inextendible period of ten (10) days from

receipt hereof within which to file its comment

to the petition. 1
Upon receipt of a copy of the above resolution on June 4,
1993, petitioner decided not to file any motion for
reconsideration as the question involved is essentially legal
in nature and immediately filed a petition for certiorariand
prohibition before this Court.
Petitioner posits the view that respondent court acted
without or in excess of its jurisdiction in issuing the
questioned resolution of May 25, 1993, for the following
reasons:
I. Respondent court has no jurisdiction to
entertain Mariwasa's appeal from the BOI's
decision in BOI Case No. 92-005, which has
become final.
II. The appellate jurisdiction conferred by
statute upon this Honorable Court cannot be
amended or superseded by Circular No. 191. 2
Petitioner then concludes that:
III. Mariwasa has lost it right to appeal . . . in
this case. 3
Petitioner argues that the Judiciary Reorganization Act of
1980 or Batas Pambansa Bilang 129 and Circular 1-91,
"Prescribing the Rules Governing Appeals to the Court of
Appeals from a Final Order or Decision of the Court of Tax
Appeals and Quasi-Judicial Agencies" cannot be the basis of
Mariwasa's appeal to respondent court because the
procedure for appeal laid down therein runs contrary to
Article 82 of E.O. 226, which provides that appeals from

decisions or orders of the BOI shall be filed directly with this

Court, to wit:
Judicial relief. All orders or decisions of the
Board
(of Investments) in cases involving the
provisions of this Code shall immediately be
executory. No appeal from the order or
decision of the Board by the party adversely
affected shall stay such an order or
decision; Provided, that all appeals shall be
filed directly with the Supreme Court within
thirty (30) days from receipt of the order or
decision.
On the other hand, Mariwasa maintains that whatever
"obvious inconsistency" or "irreconcilable repugnancy" there
may have been between B.P. 129 and Article 82 of E.O. 226
on the question of venue for appeal has already been
resolved by Circular 1-91 of the Supreme Court, which was
promulgated on February 27, 1991 or four (4) years after
E.O. 226 was enacted.
Sections 1, 2 and 3 of Circular 1-91, is herein quoted below:
1. Scope. These rules shall apply to
appeals from final orders or decisions of the
Court of Tax Appeals. They shall also apply to
appeals from final orders or decisions of any
quasi-judicial agency from which an appeal is
now allowed by statute to the Court of
Appeals or the Supreme Court. Among these
agencies are the Securities and Exchange
Commission, Land Registration Authority,
Social Security Commission, Civil Aeronautics
Board, Bureau of Patents, Trademarks and
Technology Transfer, National Electrification

Administration, Energy Regulatory Board,

National Telecommunications Commission,
Secretary of Agrarian Reform and Special
Agrarian Courts under RA 6657, Government
Service Insurance System, Employees
Compensation Commission, Agricultural
Inventions Board, Insurance Commission and
Philippine Atomic Energy Commission.
2. Cases not covered. These rules shall not
apply to decisions and interlocutory orders of
the National Labor Relations Commission or
the Secretary of Labor and Employment
under the Labor Code of the Philippines, the
Central Board of Assessment Appeals, and
other quasi-judicial agencies from which no
appeal to the courts is prescribed or allowed
by statute.
3. Who may appeal and where to appeal.
The appeal of a party affected by a final
order, decision, or judgment of the Court of
Tax Appeals or of a quasi-judicial agency shall
be taken to the Court of Appeals within the
period and in the manner herein provided,
whether the appeal involves questions of fact
or of law or mixed questions of fact and law.
From final judgments or decisions of the
Court of Appeals, the aggrieved party may
appeal by certiorari to the Supreme Court as
provided in Rule 45 of the Rules of Court.
It may be called that Section 9(3) of B.P. 129 vests
appellate jurisdiction over all final judgments, decisions,
resolutions, orders or awards of quasi-judicial agencies on
the Court of Appeals, to wit:

(3) Exclusive appellate jurisdiction over all

final judgments, decisions, resolutions,
orders, awards of Regional Trial Courts and
quasi-judicial agencies, instrumentalities,
boards or commissions, except those falling
within the appellate jurisdiction of the
Supreme Court in accordance with the
Constitution, the provisions of this Act, and of
subparagraph (1) of the third paragraph and
subparagraph (4) of the fourth paragraph of
Section 17 of the Judiciary Act of 1948.
The Intermediate Appellate Court shall have
the power to try cases and conduct hearings,
receive evidence and perform any and all acts
necessary to resolve factual issues raised in
cases falling within its original and appellate
jurisdiction, including the power to grant and
conduct new trials or further proceedings.
These provisions shall not apply to decisions
and interlocutory orders issued under the
Labor Code of the Philippines and by the
Central Board of Assessment Appeals.
Clearly evident in the aforequoted provision of B.P. 129 is
the laudable objective of providing a uniform procedure of
appeal from decisions of all quasi-judicial agencies for the
benefit of the bench and the bar. Equally laudable is the
twin objective of B.P. 129 of unclogging the docket of this
Court to enable it to attend to more important tasks, which
in the words of Dean Vicente G. Sinco, as quoted in our
decision in Conde v. Intermediate Appellate Court 4is "less
concerned with the decisions of cases that begin and end
with the transient rights and obligations of particular
individuals but is more intertwined with the direction of
national policies, momentous economic and social problems,

the delimitation of governmental authority and its impact

upon fundamental rights.
In Development Bank of the Philippines vs. Court of
Appeals, 5 this Court noted that B.P. 129 did not deal only
with "changes in the rules on procedures" and that not only
was the Court of Appeals reorganized, but its jurisdiction
and powers were also broadened by Section 9 thereof.
Explaining the changes, this Court said:
. . . Its original jurisdiction to issue writs
of mandamus,
prohibition, certiorari and habeas corpus,
which theretofore could be exercised only in
aid of its appellate jurisdiction, was expanded
by (1) extending it so as to include the writ
of quo warranto, and also (2) empowering it
to issue all said extraordinary writs "whether
or not in aid of its appellate jurisdiction." Its
appellate jurisdiction was also extended to
cover not only final judgments of Regional
Trial Courts, but also "all final judgments,
decisions, resolutions, orders or awards of . .
. quasi-judicial agencies, instrumentalities,
boards or commissions, except those falling
within the appellate jurisdiction of the
Supreme Court in accordance with the
Constitution, the provisions of this Act, and of
sub-paragraph (1) of the third paragraph and
subparagraph (4) of the fourth paragraph of
Section 17 of the Judiciary Act of 1948," it
being noteworthy in this connection that the
text of the law is broad and comprehensive,
and the explicitly stated exceptions have no
reference whatever to the Court of Tax
Appeals. Indeed, the intention to expand the
original and appellate jurisdiction of the Court
of Appeals over quasi-judicial agencies,

instrumentalities, boards, or commissions, is

further stressed by the last paragraph of
Section 9 which excludes from its provisions,
only the "decisions and interlocutory orders
issued under the Labor Code of the
Philippines and by the Central Board of
Assessment Appeals." 6
However, it cannot be denied that the lawmaking system of
the country is far from perfect. During the transitional
period after the country emerged from the Marcos regime,
the lawmaking power was lodged on the Executive
Department. The obvious lack of deliberation in the drafting
of our laws could perhaps explain the deviation of some of
our laws from the goal of uniform procedure which B.P. 129
sought to promote.
In exempli gratia, Executive Order No. 226 or the Omnibus
Investments Code of 1987 provides that all appeals shall be
filed directly with the Supreme Court within thirty (30) days
from receipt of the order or decision.
Noteworthy is the fact that presently, the Supreme Court
entertains ordinary appeals only from decisions of the
Regional Trial Courts in criminal cases where the penalty
imposed is reclusion perpetua or higher. Judgments of
regional trial courts may be appealed to the Supreme Court
only by petition for review on certiorari within fifteen (15)
days from notice of judgment in accordance with Rule 45 of
the Rules of Court in relation to Section 17 of the Judiciary
Act of 1948, as amended, this being the clear intendment of
the provision of the Interim Rules that "(a)ppeals to the
Supreme Court shall be taken by petition
for certiorari which shall be governed by Rule 45 of the
Rules of Court." Thus, the right of appeal provided in E.O.
226 within thirty (30) days from receipt of the order or
decision is clearly not in consonance with the present
procedure before this Court. Only decisions, orders or

rulings of a Constitutional Commission (Civil Service

Commission, Commission on Elections or Commission on
Audit), may be brought to the Supreme Court on original
petitions for certiorari under Rule 65 by the aggrieved party
within thirty (30) days form receipt of a copy thereof. 7
Under this contextual backdrop, this Court, pursuant to its
Constitutional power under Section 5(5), Article VIII of the
1987 Constitution to promulgate rules concerning pleading,
practice and procedure in all courts, and by way of
implementation of B.P. 129, issued Circular 1-91 prescribing
the rules governing appeals to the Court of Appeals from
final orders or decisions of the Court of Tax Appeals and
quasi-judicial agencies to eliminate unnecessary
contradictions and confusing rules of procedure.
Contrary to petitioner's contention, although a circular is not
strictly a statute or law, it has, however, the force and
effect of law according to settled jurisprudence. 8 In Inciong
v. de Guia, 9 a circular of this Court was treated as law. In
adopting the recommendation of the Investigating Judge to
impose a sanction on a judge who violated Circular No. 7 of
this Court dated
September 23, 1974, as amended by Circular No. 3 dated
April 24, 1975 and Circular No. 20 dated October 4, 1979,
requiring raffling of cases, this Court quoted the
ratiocination of the Investigating Judge, brushing aside the
contention of respondent judge that assigning cases instead
of raffling is a common practice and holding that respondent
could not go against the circular of this Court until it is
repealed or otherwise modified, as "(L)aws are repealed
only by subsequent ones, and their violation or nonobservance shall not be excused by disuse, or customs or
practice to the contrary." 10
The argument that Article 82 of E.O. 226 cannot be validly
repealed by Circular 1-91 because the former grants a
substantive right which, under the Constitution cannot be

modified, diminished or increased by this Court in the

exercise of its rule-making powers is not entirely defensible
as it seems. Respondent correctly argued that Article 82 of
E.O. 226 grants the right of appeal from decisions or final
orders of the BOI and in granting such right, it also provided
where and in what manner such appeal can be brought.
These latter portions simply deal with procedural aspects
which this Court has the power to regulate by virtue of its
constitutional rule-making powers.
The case of Bustos v. Lucero 11 distinguished between rights
created by a substantive law and those arising from
procedural law:
Substantive law creates substantive rights . .
. . Substantive rights is a term which includes
those rights which one enjoys under the legal
system prior to the disturbance of normal
relations (60 C.J., 980). Substantive law is
that part of the law which creates, defines
and regulates rights, or which regulates rights
and duties which give rise to a cause of
action, as oppossed to adjective or remedial
law, which prescribes the method of enforcing
rights or obtains a redress for their
invasion. 12
Indeed, the question of where and in what manner appeals
from decisions of the BOI should be brought pertains only to
procedure or the method of enforcing the substantive right
to appeal granted by E.O. 226. In other words, the right to
appeal from decisions or final orders of the BOI under E.O.
226 remains and continues to be respected. Circular 1-91
simply transferred the venue of appeals from decisions of
this agency to respondent Court of Appeals and provided a
different period of appeal, i.e., fifteen (15) days from
notice. It did not make an incursion into the substantive
right to appeal.

The fact that BOI is not expressly included in the list of

quasi-judicial agencies found in the third sentence of
Section 1 of Circular 1-91 does not mean that said circular
does not apply to appeals from final orders or decision of
the BOI. The second sentence of Section 1 thereof expressly
states that "(T)hey shall also apply to appeals from final
orders or decisions of any quasi-judicial agency from which
an appeal is now allowed by statute to the Court of Appeals
or the Supreme Court." E.O. 266 is one such statute.
Besides, the enumeration is preceded by the words
"(A)mong these agencies are . . . ," strongly implying that
there are other quasi-judicial agencies which are covered by
the Circular but which have not been expressly listed
therein. More importantly, BOI does not fall within the
purview of the exclusions listed in Section 2 of the circular.
Only the following final decisions and interlocutory orders
are expressly excluded from the circular, namely, those of:
(1) the National Labor Relations Commission; (2) the
Secretary of Labor and Employment; (3) the Central Board
of Assessment Appeals and (4) other quasi-judicial agencies
from which no appeal to the courts is prescribed or allowed
by statute. Since in DBP v. CA 13 we upheld the appellate
jurisdiction of the Court of Appeals over the Court of Tax
Appeals despite the fact that the same is not among the
agencies reorganized by B.P. 129, on the ground that B.P.
129 is broad and comprehensive, there is no reason why
BOI should be excluded from
Circular 1-91, which is but implementary of said law.
Clearly, Circular 1-91 effectively repealed or superseded
Article 82 of E.O. 226 insofar as the manner and method of
enforcing the right to appeal from decisions of the BOI are
concerned. Appeals from decisions of the BOI, which by
statute was previously allowed to be filed directly with the
Supreme Court, should now be brought to the Court of
Appeals.

WHEREFORE, in view of the foregoing reasons, the instant

petition for certiorari and prohibition with application for
temporary restraining order and preliminary injunction is
hereby DISMISSED for lack of merit. The Temporary
Restraining Order issued on July 19, 1993 is hereby LIFTED.
SO ORDERED.
Narvasa, C.J., Padilla, Regalado and Puno, JJ. concur.

# Footnotes
1 Rollo, p. 71.
2 Rollo, p. 180.
3 Ibid.
4 G.R. No. 70443, 144 SCRA 144 (1986).
5 G.R. No. 86625, 180 SCRA 609 (1989).
6 Ibid.
7 Sec. 7, Art. IX, 1987 Constitution.
8 Sare v. Aseron, G.R. No. L-22380, 20 SCRA
1027 (1967); Pascual vs. Commission of
Customs, G.R. No. L-12219, 4 SCRA 1020
(1962).
9 A.M. R-249-RTJ, 154 SCRA 93 (1987).
10 Article 7, New Civil Code.

11 81 Phil. 640.
12 36 C.J. 27; 52 C.J.S., 1026.
13 Supra.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC

G.R. No. 110571 October 7, 1994

FIRST LEPANTO CERAMICS, INC., petitioner,
vs.
THE COURT OF APPEALS and MARIWASA
MANUFACTURING, INC., respondents.
Castillo, Laman. Tan & Pantaleon for petitioner.
De Borja, Medi, Aldea, Ata, Bello, Guevarra & Serapio for
private respondent.
RESOLUTION
MENDOZA, J.:
This is a motion for the reconsideration of the decision of
the Second Division 1 sustaining the jurisdiction of the Court
of Appeals over appeals from the decisions of the Board of
Investments and, consequently, dismissing the petition
forcertiorari and prohibition filed by petitioner First Lepanto
Ceramics, Inc. Because of the importance of the question
raised, the Court en banc agreed to accept the matter for
consideration.
Petitioner's contention is that Circular No. 1-91 cannot be
deemed to have superseded art. 82 of the Omnibus
Investments Code of 1987 (E.O.

No. 226) because the Code, which President Aquino

promulgated in the exercise of legislative authority, is in the
nature of a substantive act of Congress defining the
jurisdiction of courts pursuant to Art. VIII, 2 of the
Constitution, while the circular is a rule of procedure which
this Court promulgated pursuant to its rule-making power
under Art. VIII 5(5). Petitioner questions the holding of
the Second Division that although the right to appeal
granted by art. 82 of the Code is a substantive right which
cannot be modified by a rule of procedure, nonetheless,
questions concerning where and in what manner the appeal
can be brought are only matters of procedure which this
Court has the power to regulate.
Even assuming that there is merit in petitioner's contention,
however, the result reached in the main decision is
nonetheless, correct from another point of view.
Judicial review of the decisions and final orders of the BOI
was originally provided for in the Omnibus Investments
Code of 1981 (P.D. No. 1789), 2
Art. 78 of which stated:
Art. 78. Judicial Relief . All orders or
decisions of the Board in cases involving the
provisions of this Code shall immediately be
executory. No appeal from the order or
decision of the Board by the party adversely
affected shall stay such order or
decision: Provided, That all appeals shall be
filed directly with the Supreme Court within
thirty (30) days from receipt of the order or
decision.
Art. 78 was thereafter amended by B.P. Blg. 129, 3 by
granting in 9 thereof exclusive appellate jurisdiction to the
then Intermediate Appellate Court (now the Court of

Appeals) over the decisions and final orders of quasi-judicial

agencies. When the Omnibus Investments Code of 1987
(E.O. No. 226) was promulgated on July 17, 1987, the right
to appeal from the decisions and final orders of the BOI to
the Supreme Court was again granted. Thus, the present
Code provides:
Art. 82. Judicial Relief . All orders or decisions of the
Board in cases involving the provisions of this Code shall
immediately be executory. No appeal from the order or
decision of the Board by the party adversely affected shall
stay such order or decision: Provided, That all appeals shall
be filed directly with the Supreme Court within thirty (30)
days from receipt of the order or decision.
By then, however, the present Constitution had taken
effect. 4 The Constitution now provides in Art. VI, 30 that
"No law shall be passed increasing the appellate jurisdiction
of the Supreme Court as provided in this Constitution
without its advice and concurrence." This provision is
intended to give the Supreme Court a measure of control
over cases placed under its appellate jurisdiction. For the
indiscriminate enactment of legislation enlarging its
appellate jurisdiction can unnecessarily burden the Court
and thereby undermine its essential function of expounding
the law in its most profound national aspects.
Now, art. 82 of the 1987 Omnibus Investments Code, by
providing for direct appeals to the Supreme Court from the
decisions and final orders of the BOI, increases the
appellate jurisdiction of this Court. Since it was enacted
without the advice and concurrence of this Court, this
provision never became effective, with the result that it can
never be deemed to have amended BP
Blg. 129, 9. Consequently, the authority of the Court of
Appeals to decide cases appealed to it from the BOI must
be deemed to have been conferred by B.P. Blg. 129, 9, to

be exercised by it in accordance with the procedure

prescribed by Circular No. 1-91.
Indeed, there is no reason why decisions and final orders of
the BOI must be directly appealed to this Court. As already
noted in the main decision in this case, the purpose of 9
of B.P. Blg. 129 is to provide uniform appeals to the Court
of Appeals from the decisions and final orders of all quasijudicial agencies, with the exception only of those issued
under the Labor Code and those rendered by the Central
Board of Assessment Appeals. It is, therefore, regrettable
that in the adoption of the Omnibus Investments Code of
1987 the advice and concurrence of the Supreme Court, as
required by the Constitution, had not been obtained in
providing for the appeal of the decisions and final orders of
the BOI directly to the Supreme Court.
WHEREFORE, the motion for reconsideration is DENIED.
SO ORDERED.
Narvasa, C.J., Cruz, Padilla, Bidin, Regalado, Davide, Jr.,
Romero, Bellosillo, Melo, Quiason, Puno, Vitug and
Kapunan, JJ., concur.
Feliciano, J., is on leave.
#Footnotes
1 Per Nocon, J. (now retired) and concurred
in by Narvasa, C. J., Padilla, Regalado, and
Puno, JJ.
2 Effective Jan. 16, 1981.
3 Effective Aug. 14, 1987.

4 Effective Feb. 2, 1987.

Republic of the Philippines

SUPREME COURT
Manila

On 6 July 1992, petitioners filed a petition for review

on certiorari before this Court assailing the decision of ERB
on the ground of lack of jurisdiction and/or grave abuse of
discretion amounting to lack of jurisdiction.

FIRST DIVISION

G.R. No. L-109698 December 5, 1994

ANTONIO DIAZ AND KOSUMO DABAW, petitioners,
vs.
COURT OF APPEALS, ENERGY REGULATORY BOARD
AND DAVAO LIGHT AND POWER CO., INC.,respondents.
RESOLUTION

BELLOSILLO, J.:
On 23 January 1991, Davao Light and Power Company, Inc.
(DLPC) filed with the Energy Regulatory Board (ERB) an
application for the approval of the sound value appraisal of
its property in service.
The Asian Appraisal Company valued the property and
equipment of DLPC as of 12 March 1990 at One Billion One
Hundred Forty One Million Seven Hundred Seventy Four
Thousand Pesos (P1,141,774,000.00).
On 6 December 1992, ERB approved the application of DLPC
after deducting Fourteen Million Eight Hundred Thousand
Pesos (P14,800,000.00) worth of property and equipment
which were not used by DLPC in its operation.

In our resolution of 8 September 1992, we referred the case

for proper disposition to the Court of Appeals which
subsequently dismissed the petition on the ground that (1)
the filing of the petition for review with the Supreme Court
was a wrong mode of appeal, and (2) the petition did not
comply with the provisions of Supreme Court Circular 1-88
in that (a) it did not state the date when the petitioners
received notice of the ERB decision, (b) it did not state the
date when the petitioners filed a motion for reconsideration,
and (c) it inconsistently alleged different dates when
petitioners supposedly received the denial of their motion by
ERB.
On 18 December 1992, petitioners filed a motion for
reconsideration contending that our resolution of 8
September 1992 was a directive for the Court of Appeals to
disregard the above circular.
In its resolution of 24 March 1993, the Court of Appeals
denied the motion for reconsideration for lack of merit.
Hence, the instant recourse.
We deny the petition. The predecessor of the Energy
Regulatory Board was the Board of Energy created under
P.D. No. 1206. Thereunder, appeals from the decisions of
the Board of Energy were appealable to the Office of the
President. However, under the Interim Rules Implementing
the Judiciary Reorganization Act of 1980, final decisions,
orders, awards or resolutions of the Board of Energy were
made appealable to the Intermediate Appellate Court (Sec.
9).

On 2 February 1987, the New Constitution took effect. Sec.

30, Art. VI, thereof provides: "No law shall be passed
increasing the appellate jurisdiction of the Supreme Court
as provided in this Constitution without its advice and
concurrence."

Prior to Circular No. 1-91, the Supreme Court promulgated

Circular No. 2-90 dated 9 March 1990, Item No. 4 of which
states that "[a]n appeal taken to either the Supreme Court
or the Court of Appeals by the wrong or inappropriate mode
shall be dismissed".

On 8 May 1987, the President promulgated E.O. No. 172

creating the Energy Regulatory Board to replace the Board
of Energy. Under Sec. 10 thereof, "[a] party adversely
affected by a decision, order or ruling of the Board . . . may
file a petition to be known as petition for review with the
Supreme Court."

Paragraph (d) of said Circular No. 2-90 also provides that

"[n]o transfer of appeals erroneously taken to the Supreme
Court or to the Court of Appeals to whichever of these
Tribunals has appropriate appellate jurisdiction will be
allowed; continued ignorance or willful disregard of the law
on appeals will not be tolerated."

On 27 February 1991, the Supreme Court promulgated

Circular No.
1-91, par. (1) of which specifically provides that the proper
mode of appeal from any quasi-judicial agency, including
ERB, is by way of a petition for review with the Court of
Appeals.

Consequently, the Court of Appeals was correct when it held

It is very patent that since Sec. 10 of E.O. No. 172 was

enacted without the advice and concurrence of this Court,
this provision never became effective, with the result that it
cannot be deemed to have amended the Judiciary
Reorganization Act of 1980. Consequently, the authority of
the Court of Appeals to decide cases from the Board of
Energy, now ERB, remains (Cf. First Lepanto Ceramics, Inc.
v. Court of Appeals, G.R. No. 110571, 7 October 1994).
If the appeal is brought to either Court (Supreme Court or
Court of Appeals) by the wrong procedure, the only course
of action open to it is to dismiss the appeal. There is no
longer any justification for allowing transfers of erroneous
appeals from one court to another (Quesada v. Court of
Appeals, G.R. No. 93869, 12 November 1990).

Contrary to petitioners' stand, the Supreme

Court's Resolution dated September 8, 1992,
referring "this case to the Court of Appeals for
further disposition" was not a directive for
this court to disregard the above circulars and
precedents. Rather the said SC resolution
could mean only that this court should
dispose of the subject petition in conformity
with, and not in violation of, those circulars
and precedents (Rollo, p. 26).
Both Circulars Nos. 1-88 and 2-90 were duly published in
newspapers of general circulation in the Philippines. Hence,
lawyers are expected to keep themselves abreast with the
decisions of this Court and with its Circulars and other
issuances relating to procedure or affecting their duties and
responsibilities as officers of the court (Teehankee, Jr. v.
Hon. Madayag, G.R. No. 102717, 12 December 1992).
SC Circular No. 1-88, which took effect on 1 January 1989,
was not adopted and approved by this Court for childish,

flimsy or petty reasons, nor for pure love of technicalities,

but to compel the strict observance of the Revised Rules of
Court in order that proceedings before this Court may not
be needlessly delayed (Gallardo v. Quintus, A.M. No. RTJ90-577, 18 April 1991).
WHEREFORE, the instant petition is DISMISSED.
Padilla, Davide, Jr., Quiason and Kapunan, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC

G.R. No. 125416 September 26, 1996

SUBIC BAY METROPOLITAN AUTHORITY, petitioner,
vs.
COMMISSION ON ELECTIONS, ENRIQUE T. GARCIA
and CATALINO A. CALIMBAS, respondents.

PANGANIBAN, J.:
The 1987 Constitution is unique in many ways. For
one thing, it institutionalized people power in lawmaking. Learning from the bitter lesson of
completely surrending to Congress the sole authority
to make, amend or repeal laws, the present
Constitution concurrently vested such prerogatives in
the electorate by expressly recognizing their residual
and sovereign authority to ordain legislation directly
through the concepts and processes of initiative and
of referendum.
In this Decision, this Court distinguishes referendum
from initiative and discusses the practical and legal
implications of such differences. It also sets down
some guidelines in the conduct and implementation
of these two novel and vital features of popular
democracy, as well as settles some relevant
questions on jurisdiction all with the purpose of

nurturing, protecting and promoting the people's

exercise of direct democracy.
In this action for certiorari and prohibition, petitioner
seeks to nullify the respondent Commission on
Elections' Ruling dated April 17, 1996 and Resolution
No. 2848 promulgated on June 27, 1996 1 denying
petitioner's plea to stop the holding of a local
initiative and referendum on the proposition to recall
Pambayang Kapasyahan Blg. 10, Serye 1993, of the
Sangguniang Bayan of Morong, Bataan.
The Facts
On March 13, 1992, Congress enacted Republic Act
No. 7227 (The Bases Conversion and Development
Act of 1992), which among others, provided for the
creation of the Subic Economic Zone, thus:
Sec. 12. Subic Special Economic Zone.
Subject to the concurrence by resolution of
the Sangguniang Panlugnsod of the City of
Olongapo and the Sangguniang Bayan of the
Municipalities of Subic. Morong and Hermosa,
there is hereby created a Special Economic
and Free-port Zone consisting of the City of
Olongapo and the Municipality of Subic,
Province of Zambales, the lands occupied by
the Subic Naval Base and its contiguous
extensions as embraced, covered and defined
by the 1947 Military Bases Agreement
between the Philippines and the United States
of America as amended, and within the
territorial jurisdiction of the Municipalities of
Morong and Hermosa, Province of Bataan,
hereinafter referred to as the Subic Special
Economic Zone whose metes and bounds

shall be delineated in a proclamation to be

issued by the President of the Philippines.
Within thirty (30) days after the approval of
this Act, each local government unit shall
submit its resolution of concurrence to join
the Subic Special Economic Zone to the Office
of the President. Thereafter, the President of
the Philippines shall issue a proclamation
defining the metes and bounds of the zone as
provided herein." (Emphasis supplied)
RA 7227 likewise created petitioner to implement the
declared national policy of converting the Subic
military reservation into alternative productive
uses. 2 Petitioner was organized with an authorized
capital stock of P20 billion which was fully subscribed
and fully paid up by the Republic of the Philippines
with, among other assets, "(a)ll lands embraced,
covered and defined in Section 12 hereof, as well as
permanent improvements and fixtures upon proper
inventory not otherwise alienated, conveyed, or
transferred to another government agency". 3
On November 24, 1992, the American navy turned
over the Subic military reservation to the Philippines
government. Immediately, petitioner commenced
the implementation of its task, particularly the
preservation of the sea-ports, airport, buildings,
houses and other installations left by the American
navy.
In April 1993, the Sangguniang Bayan of Morong,
Bataan passed Pambayang Kapasyahan Bilang 10,
Serye 1993, expressing therein its absolute
concurrence, as required by said Sec. 12 of RA 7227,
to join the Subic Special Economic Zone. On
September 5, 1993, the Sangguniang Bayan of

Morong submitted Pambayang Kapasyahan Bilang

10, Serye 1993 to the Office of the President.
On May 24, 1993, respondents Garcia, Calimbas and
their companions filed a petition with the
Sangguniang Bayan of Morong to annul Pambayang
Kapasyahan Blg. 10, Serye 1993. The petition
prayed for the following:
I. Bawiin, nulipikahin at pawalang-bisa and
Pambayang Kapasyahang Blg. 10, Serye 1993
ng Sangguniang Bayan para sa pag-anib ng
Morong sa SSEFZ na walang kundisyon.
II. Palitan ito ng isang Pambayang
kapasyahan na aanib lamang ang Morong sa
SSEFZ kung ang mga sumusunod na
kondisyones ay ipagkakaloob, ipatutupad at
isasagawa para sa kapakanan at interest ng
Morong at Bataan:
(A) Ibalik sa Bataan ang "Virgin
Forests" isang bundok na
hindi nagagalaw at punongpuno ng malalaking punongkahoy at iba't-ibang halaman.
(B) Ihiwalay ang Grande Island
sa SSEFZ at ibalik ito sa
Bataan.
(K) Isama ang mga lupain ng
Bataan na nakapaloob sa SBMA
sa pagkukuenta ng salaping
ipinagkaloob ng pamahalaang
national o "Internal Revenue

Allotment" (IRA) sa Morong,

Hermosa at sa Lalawigan.
(D) Payagang magtatag rin ng
sariling "special economic
zones" and bawat bayan ng
Morong, Hermosa at
Dinalupihan.
(E) Ibase sa laki ng kanyakanyang lupa ang pamamahagi
ng kikitain ng SBMA.
(G) Ibase rin ang alokasyon ng
pagbibigay ng trabaho sa laki
ng nasabing mga lupa.
(H) Pabayaang bukas ang pinto
ng SBMA na nasa Morong ng 24
na oras at bukod dito sa
magbukas pa ng pinto sa
hangganan naman ng Morong
at Hermosa upang magkaroon
ng pagkakataong umunlad rin
ang mga nasabing bayan, pati
na rin ng iba pang bayan ng
Bataan.

(J) Magkakaroon ng sapat na

representasyon sa pamunuan
ng SBMA ang Morong, Hermosa
at Bataan.
The Sangguniang Bayan ng Morong acted upon the
petition of respondents Garcia, Calimbas, et al. by
promulgating Pambayang Kapasyahan Blg. 18, Serye
1993, requesting Congress of the Philippines so
amend certain provisions of RA 7227, particularly
those concerning the matters cited in items (A), (B),
(K), (E), and (G) of private respondent's petition.
The Sangguniang Bayan of Morong also informed
respondents that items (D) and (H) had already been
referred to and favorably acted upon by the
government agencies concerned, such as the Bases
Conversion Development Authority and the Office of
the President.
Not satisfied, and within 30 days from submission of
their petition, herein respondents resorted to their
power initiative under the Local Government Code of
1991, 4 Sec. 122 paragraph (b) of which provides as
follows:
Sec. 122. Procedure in Local Initiative.
xxx xxx xxx

(I) Tapusin ang pagkokonkreto

ng mga daang Morong-TalaOrani at Morong-TasigDinalupihan para sa kabutihan
ng mga taga-Bataan at tuloy
makatulong sa pangangalaga
ng mga kabundukan.

(b) If no favorable action thereon is taken by

the sanggunian concerned, the proponents,
through their duly authorized and registered
representatives, may invoke their power of
initiative, giving notice thereof to the
sangguniang concerned.
xxx xxx xxx

On July 6, 1993, respondent Commission En Banc in

Comelec Resolution No. 93-1623 denied the petition
for local initiative by herein private respondents on
the ground that the subject thereof was merely a
resolution (pambayang kapasyahan) and not an
ordinance. On July 13, 1993, public respondent
ComelecEn Banc (thru Comelec Resolution no. 931676) further directed its Provincial Election
Supervisor to hold action on the authentication of
signatures being solicited by private respondents.
On August 15, 1993, private respondents instituted a
petition for certiorari and mandamus 5 before this
Court against the Commission on Elections and the
Sangguniang Bayan of Morong, Bataan, to set aside
Comelec Resolution No. 93-1623 insofar as it
disallowed the conduct of a local initiative to annul
Pambayang Kapasyahan Bilang 10, Serye 1993, and
Comelec Resolution No. 93-1676 insofar as it
prevented the Provincial Election Supervisor of
Bataan from proceeding with the authentication of
the required number of signatures in support of the
initiative and the gathering of signatures.
On February 1, 1995, pursuant to Sec. 12 of RA
7227, the President of the Philippines issued
Proclamation No. 532 defining the metes and bounds
of the SSEZ. Said proclamation included in the SSEZ
all the lands within the former Subic Naval Base,
including Grande Island and that portion of the
former naval base within the territorial jurisdiction of
the Municipality of Morong.
On June 18, 19956, respondent Comelec issued
Resolution No. 2845, adopting therein a "Calendar of
Activities for local referendum on certain municipal
ordinance passed by the Sangguniang Bayan of
Morong, Bataan", and which indicated, among

others, the scheduled Referendum Day (July 27,

1996, Saturday). On June 27, 1996, the Comelec
promulgated the assailed Resolution No. 2848
providing for "the rules and guidelines to govern the
conduct of the referendum proposing to annul or
repeal Kapasyahan Blg. 10, Serye 1993 of
the Sangguniang Bayan of Morong, Bataan".
On July 10, 1996, petitioner instituted the present
petition for certiorari and prohibition contesting the
validity of Resolution No. 2848 and alleging, inter
alia, that public respondent "is intent on proceeding
with a local initiative that proposes an amendment of
a national law. . . .
The Issues
The petition 6 presents the following "argument":
Respondent Commission on Elections
committed a grave abuse of discretion
amounting to lack of jurisdiction in scheduling
a local initiative which seeks the amendment
of a national law.
In his Comment, private respondent Garcia claims
that (1) petitioner has failed to show the existence of
an actual case of controversy: (2) . . . petitioner
seeks to overturn a decision/judgment which has
long become final and executory; (3) . . . public
respondent has not abused its discretion and has in
fact acted within its jurisdiction; (and) (4) . . . the
concurrence of local government units is required for
the establishment of the Subic Special Economic
Zone."

Private respondent Calimbas, now the incumbent

Mayor of Morong, in his Reply (should be Comment)
joined petitioner's cause because "(a)fter several
meetings with petitioner's Chairman and staff and
after consultation with legal counsel, respondent
Calimbas discovered that the demands in the petition
for a local initiative/referendum were not legally
feasible." 7

petition, filed by: (b-1) the Solicitor General

for respondent Commission on Elections
dated July 19, 1996 and (b-2) counsel for
private respondent Enrique T. Garcia, dated
July 22, 1996, all filed in compliance with the
resolution of July 16, 1996 and (c)
Manifestation filed by counsel for petitioner,
dated July 22, 1996.

The Solicitor General, as counsel for public

respondent, identified two issues, as follows:

At the hearing of this case this morning, Atty.

Rodolfo O. Reyes appeared and argued for
petitioner Subic Bay Metropolitan Authority
(SBMA) while Atty. Sixto Brillantes for private
respondent Enrique T. Garcia, and Atty. Oscar
L. Karaan for respondent Catalino Calimbas.
Solicitor General Raul Goco, Assistant
Solicitor General Cecilio O. Estoesta and
Solicitor Zenaida Hernandez-Perez appeared
for respondent Commission on Elections with
Solicitor General Goco arguing.

1. Whether or not the Comelec can be

enjoined from scheduling/conducting the local
initiative proposing to annul Pambayang
Kapasyahan Blg. 10, Serye 1993 of the
Sangguniang Bayan of Morong, Bataan.
2. Whether or not the Comelec committed
grave abuse of discretion in denying the
request of petitioner SBMA to stop the local
initiative.
On July 23, 1996, the Court heard oral argument by
the parties, after which, it issued the following
Resolution:
The Court Resolved to: (1) GRANT the Motion
to Admit the Attachment Comment filed by
counsel for private respondent Enrique T.
Garcia, dated July 22, 1996 and (2) NOTE
the: (a) Reply (should be comment) to the
petition for certiorari and prohibition with
prayer for temporary restraining order and/or
writ of preliminary injunction, filed by counsel
for respondent Catalino Calimbas, date July
22, 1996; (b) Separate Comments on the

Before the Court adjourned, the Court

directed the counsel for both parties to
INFORM this Court by Friday, July 26, 1996,
whether or not Commission on Elections
would push through with the
initiative/referendum this Saturday, July 27,
1996.
Thereafter, the case shall be considered
SUBMITTED for resolution.
At 2:50 p.m., July 23, 1996, the Court
received by facsimile transmission an Order
dated also on July 23, 1996 from the
respondent Commission on Elections En
Banc inter alia "to hold in abeyance the

scheduled referendum (initiative) on July 27,

1996 pending resolution of G.R. No. 125416."
In view of this Order, the petitioner's
application for a temporary restraining order
and/or writ of preliminary injunction has
become moot and academic and will thus not
be passed upon by this Court at this time.
Puno, J., no part due to relationship.
Bellosillo, J., is on leave.
After careful study of and judicious deliberation on
the submissions and arguments of the parties, the
Court believes that the issues may be restated as
follows:
(1) Whether this petition "seeks to overturn a
decision/judgment which has long become
final and executory"; namely, G.R. No.
111230, Enrique Garcia, et al. vs.
Commission on Elections, et al.;
(2) Whether the respondent Comelec
committed grave abuse of discretion in
promulgating and implementing its Resolution
No. 2848 which "govern(s) the conduct of the
referendum proposing to annul or
repeal Pambayang Kapasyahan Blg. 10, Serye
1993 of the Sangguniang Bayan of Morong,
Bataan;" and
(3) Whether the questioned local initiative
covers a subject within the powers of the
people of Morong to enact; i.e., whether such
initiative "seeks the amendment of a national
law."
First Issue: Bar by Final Judgment

Respondent Garcia contends that this Court had

already ruled with finality in Enrique T. Garcia, et
al. vs.Commission on Elections, et al. 8 on "the very
issue raised in (the) petition: whether or not there
can be an initiative by the people of Morong, Bataan
on the subject proposition the very same
proposition, it bears emphasizing, the submission of
which to the people of Morong, Bataan is now sought
to be enjoined by petitioner . . .".
We disagree. The only issue resolved in the
earlier Garcia case is whether a municipal resolution
as contra-distinguished from an ordinance may be
the proper subject of an initiative and/or
referendum. We quote from our said Decision: 9
In light of this legal backdrop, the essential
issue to be resolved in the case at bench is
whether Pambayang Kapasyahan Blg. 10,
serye 1993 of the Sangguniang Bayan of
Morong, Bataan is the proper subject of an
initiative. Respondents take the negative
stance as they contend that under the Local
Government Code of 1991 only an ordinance
can be the subject of initiative. They rely on
Section 120, Chapter 2, Title XI, Book I of the
Local Government Code of 1991 which
provides: "Local Initiative
Defined. Local initiative is the legal process
whereby the registered voters of a local
government until may directly propose, enact,
or amend any ordinance."
We reject respondents' narrow and literal
reading of the above provision for it will
collide with the Constitution and will subvert
the intent of the lawmakers in enacting the

provisions of the Local Government of 1991

on initiative and referendum.

a Sangguniang Bayan Resolution can be the subject

of a valid initiative or referendum". 10

The Constitution clearly includes not only

ordinance but resolutions as appropriate
subjects of a local initiative. Section 32 of
Article VI provides in luminous language:
"The Congress shall, as early as possible,
provide for a system of initiative and
referendum, and the exceptions therefrom,
whereby the people can directly propose and
enact laws or approve or reject any act or law
or part thereof passed by the Congress, or
local legislative body . . .". An act includes a
resolution. Black defines an act as "an
expression of will or purpose . . . it may
denote something done . . . as a legislature,
including not merely physical acts, but also
decrees, edicts, laws, judgments, resolves,
awards, and determinations . . .". It is basic
that a law should be construed in harmony
with and not in violation of the Constitution.
In line with this postulate, we held in In Re
Guarina that "if there is doubt or uncertainty
as to the meaning of the legislative, if the
words or provisions are obscure, or if the
enactment is fairly susceptible of two or more
constructions, that interpretation will be
adopted which will avoid the effect of
unconstitutionality, even though it may be
necessary, for this purpose, to disregard the
more usual or apparent import of the
language used."

In the present case, petitioner is not contesting the

propriety of a municipal resolution as the form by
which these two new constitutional prerogatives of
the people may be validly exercised. What is at issue
here is whether Pambayang Kapasyahan Blg. 10,
Serye 1993, as worded, is sufficient in form and
substance for submission to the people for their
approval; in fine, whether the Comelec acted
properly and juridically in promulgating and
implementing Resolution No. 2848.

Moreover, we reviewed our rollo in said G.R. No.

111230 and we found that the sole issue presented
by the pleadings was the question of "whether or not

Second Issue: Sufficiency of Comelec Resolution No.

2848
The main issue in this case may be re-stated thus:
Did respondent Comelec commit grave abuse of
discretion in promulgating and implementing
Resolution No. 2848?
We answer the question in the affirmative.
To begin with, the process started by private
respondents was an INITIATIVE but respondent
Comelec made preparations for a REFERENDUM only.
In fact, in the body of the Resolution 11 as
reproduced in the footnote below, the word
"referendum" is repeated at least 27 times, but
"initiative" is not mentioned at all. The Comelec
labeled the exercise as a "Referendum"; the counting
of votes was entrusted to a "Referendum
Committee"; the documents were called "referendum
returns"; the canvassers, "Referendum Board of
Canvassers" and the ballots themselves bore the
description "referendum". To repeat, not once was

the word "initiative" used in said body of Resolution

No. 2848. And yet, this exercise is unquestionably an
INITIATIVE.
There are statutory and conceptual demarcations
between a referendum and an initiative. In enacting
the "Initiative and Referendum Act, 12 Congress
differentiated one term from the other, thus:
(a) "Initiative" is the power of the people to
propose amendments to the Constitution or to
propose and enact legislations through an
election called for the purpose.
There are three (3) systems of initiative,
namely:
a.1. Initiative on
the Constitution
which refers to a
petition
proposing
amendments to
the Constitution;
a.2. Initiative on
statutes which
refers to a
petition
proposing to
enact a national
legislation; and
a.3. Initiative on
local legislation
which refers to a
petition

proposing to
enact a regional,
provincial, city,
municipal, or
barangay law,
resolution or
ordinance.
(b) "Indirect initiative" is exercise of initiative
by the people through a proposition sent to
Congress or the local legislative body for
action.
(c) "Referendum" is the power of the
electorate to approve or reject a legislation
through an election called for the purpose. It
may be of two classes, namely:
c.1. Referendum
on statutes which
refers to a
petition to
approve or reject
an act or law, or
part thereof,
passed by
Congress; and
c.2 Referendum
on local law
which refers to a
petition to
approve or reject
a law, resolution
or ordinance
enacted by
regional

assemblies and
local legislative
bodies.
Along these statutory definitions, Justice Isagani A.
Cruz 13 defines initiative as the "power of the people
to propose bills and laws, and to enact or reject
them at the polls independent of the legislative
assembly." On the other hand, he explains that
referendum "is the right reserved to the people to
adopt or reject any act or measure which has been
passed by a legislative body and which in most cases
would without action on the part of electors become
a law." The foregoing definitions, which are based on
Black's 14 and other leading American authorities, are
echoed in the Local Government Code (RA 7160)
substantially as follows:
Sec. 120. Local Initiative Defined. Local
initiative is the legal process whereby the
registered voters of local government unit
may directly propose, enact, or amend any
ordinance.
Sec. 126. Local Referendum Defined. Local
referendum is the legal process whereby the
registered voters of the local government
units may approve, amend or reject any
ordinance enacted by the sanggunian.
The local referendum shall be held under the
control and direction of the Comelec within
sixty (60) days in case of provinces and cities,
forty-five (45) days in case of municipalities
and thirty (30) days in case of baranggays.

The Comelec shall certify and proclaim the

results of the said referendum.
Prescinding from these definitions, we gather that
initiative is resorted to (or initiated) by the people
directly either because the law-making body fails or
refuses to enact the law, ordinance, resolution or act
that they desire or because they want to amend or
modify one already existing. Under Sec. 13 of R.A.
6735, the local legislative body is given the
opportunity to enact the proposal. If it
refuses/neglects to do so within thirty (30) days
from its presentation, the proponents through their
duly-authorized and registered representatives may
invoke their power of initiative, giving notice thereof
to the local legislative body concerned. Should the
proponents be able to collect the number of signed
conformities within the period granted by said
statute, the Commission on Elections "shall then set
a date for the initiative (not referendum) at which
the proposition shall be submitted to the registered
voters in the local government unit concerned . . .".
On the other hand, in a local referendum, the lawmaking body submits to the registered voters of its
territorial jurisdiction, for approval or rejection, any
ordinance or resolution which is duly enacted or
approved by such law-making authority. Said
referendum shall be conducted also under the control
and direction of the Commission on Elections. 15
In other words, while initiative is entirely the work of
the electorate, referendum is begun and consented
to by the law-making body. Initiative is a process of
law-making by the people themselves without the
participation and against the wishes of their elected
representatives, while referendum consists merely of
the electorate approving or rejecting what has been

drawn up or enacted by a legislative body. Hence,

the process and the voting in an initiative are
understandably more complex than in a referendum
where expectedly the voters will simply write either
"Yes" of "No" in the ballot.
[Note: While the above quoted laws variously refer
to initiative and referendum as "powers" or "legal
processes", these can be also be "rights", as Justice
Cruz terms them, or "concepts", or "the proposal"
itself (in the case of initiative) being referred to in
this Decision.]
From the above differentiation, it follows that there
is need for the Comelec to supervise an initiative
more closely, its authority thereon extending not
only to the counting and canvassing of votes but also
to seeing to it that the matter or act submitted to
the people is in the proper form and language so it
may be easily understood and voted upon by the
electorate. This is especially true where the proposed
legislation is lengthy and complicated, and should
thus be broken down into several autonomous parts,
each such part to be voted upon separately. Care
must also be exercised that "(n)o petition embracing
more than one subject shall be submitted to the
electorate," 16 although "two or more propositions
may be submitted in an initiative". 17
It should be noted that under Sec. 13 (c) of RA
6735, the "Secretary of Local Government or his
designated representative shall extend assistance in
the formulation of the proposition."
In initiative and referendum, the Comelec exercises
administration and supervision of the process itself,
akin to its powers over the conduct of elections.

These law-making powers belong to the people,

hence the respondent Commission cannot control or
change the substance or the content of legislation. In
the exercise of its authority, it may (in fact it should
have done so already) issue relevant and adequate
guidelines and rules for the orderly exercise of these
"people-power" features of our Constitution.
Third Issue: Withdrawal of Adherence and
Imposition of Conditionalities Ultra Vires?
Petitioner maintains that the proposition sought to
be submitted in the plebiscite, namely, Pambayang
Kapasyahan Blg. 10, Serye 1993, is ultra vires or
beyond the powers of the Sangguniang Bayan to
enact,18 stressing that under Sec. 124 (b) of RA
7160 (the Local Government Code), "local initiative
shall cover only such subjects or matters as are
within the legal powers of the sangguniang to enact."
Elsewise stated, a local initiative may enact only
such ordinances or resolutions as the municipal
council itself could, if it decided to so enact. 19 After
the Sangguniang Bayan of Morong and the other
municipalities concerned (Olongapo, Subic and
Hermosa) gave their resolutions of concurrence, and
by reason of which the SSEZ had been created,
whose metes and bounds had already been
delineated by Proclamation No. 532 issued on
February 1, 1995 in accordance with Section 12 of
R.A. No. 7227, the power to withdraw such
concurrence and/or to substitute therefor a
conditional concurrence is no longer within the
authority and competence of the Municipal Council of
Morong to legislate. Furthermore, petitioner adds,
the specific conditionalities included in the
questioned municipal resolution are beyond the
powers of the Council to impose. Hence, such
withdrawal can no longer be enacted or

conditionalities imposed by initiative. In other words,

petitioner insists, the creation of SSEZ is now a faith
accompli for the benefit of the entire nation. Thus,
Morong cannot unilaterally withdraw its concurrence
or impose new conditions for such concurrence as
this would effectively render nugatory the creation
by (national) law of the SSEZ and would deprive the
entire nation of the benefits to be derived therefrom.
Once created. SSEZ has ceased to be a local
concern. It has become a national project.
On the other hand, private respondent Garcia
counters that such argument is premature and
conjectural because at this point, the resolution is
just a proposal. If the people should reject it during
the referendum, then there is nothing to declare as
illegal.
Deliberating on this issue, the Court agrees with
private respondent Garcia that indeed, the municipal
resolution is still in the proposal stage. It is not yet
an approved law. Should the people reject it, then
there would be nothing to contest and to adjudicate.
It is only when the people have voted for it and it
has become an approved ordinance or resolution that
rights and obligations can be enforced or
implemented thereunder. At this point, it is merely a
proposal and the writ or prohibition cannot issue
upon a mere conjecture or possibility.
Constitutionally speaking, courts may decide only
actual controversies, not hypothetical questions or
cases. 20
We also note that the Initiative and Referendum Act
itself provides 21 that "(n)othing in this Act shall
prevent or preclude the proper courts from declaring
null and void any proposition approved pursuant to
this Act . . . ."

So too, the Supreme Court is basically a review

court. 22 It passes upon errors of law (and
sometimes of fact, as in the case of mandatory
appeals of capital offenses) of lower courts as well as
determines whether there had been grave abuse of
discretion amounting to lack or excess of jurisdiction
on the part of any "branch or instrumentality" of
government. In the present case, it is quite clear
that the Court has authority to review Comelec
Resolution No. 2848 to determine the commission of
grave abuse of discretion. However, it does not have
the same authority in regard to the proposed
initiative since it has not been promulgated or
approved, or passed upon by any "branch or
instrumentality" or lower court, for that matter. The
Commission on Elections itself has made no
reviewable pronouncements about the issues
brought by the pleadings. The Comelec simply
included verbatim the proposal in its questioned
Resolution No. 2848. Hence, there is really no
decision or action made by a branch, instrumentality
or court which this Court could take cognizance of
and acquire jurisdiction over, in the exercise of its
review powers.
Having said that, we are in no wise suggesting that
the Commelec itself has no power to pass
uponproposed resolutions in an initiative. Quite the
contrary, we are ruling that these matters are in fact
within the initiatory jurisdiction of the Commission
to which then the herein basic questions ought to
have been addressed, and by which the same should
have been decided in the first instance. In other
words, while regular courts may take jurisdiction
over "approved propositions" per said Sec. 18 of R.A.
6735, the Comelec in the exercise of its quasijudicial and administrative powers may adjudicate
and pass upon such proposals insofar as their form

and language are concerned, as discussed earlier;

and it may be added, even as to content, where the
proposals or parts thereof are patently and clearly
outside the "capacity of the local legislative body to
enact." 23 Accordingly, the question of whether the
subject of this initiative is within the capacity of the
Municipal Council of Morong to enact may be ruled
upon by the Comelec upon remand and after hearing
the parties thereon.
While on the subject of capacity of the local
lawmaking body, it would be fruitful for the parties
and the Comelec to plead and adjudicate,
respectively, the question of whether Grande Island
and the "virgin forest" mentioned in the proposed
initiative belong to the national government and thus
cannot be segregated from the Zone and "returned
to Bataan" by the simple expedient of passing a
municipal resolution. We note that Sec. 13 (e) of
R.A. 7227 speaks of the full subscription
and payment of the P20 billion authorized capital
stock of the Subic Authority by the Republic, with,
aside from cash and other assets, the ". . . lands
embraced, covered and defined in Section 12 hereof,
. . ." which includes said island and forests. The
ownership of said lands is question of fact that may
be taken up in the proper forum the Commission
on Elections.
Another question which the parties may wish to
submit to the Comelec upon remand of the initiative
is whether the proposal, assuming it is within the
capacity of the Municipal Council to enact, may be
divided into several parts for purposes of voting.
Item "I" is a proposal to recall, nullify and render
without effect (bawiin, nulipikahin at pawalangbisa)
Municipal Resolution No. 10, Series of 1993. On the
other hand, Item "II" proposes to change or replace

(palitan) said resolution with another municipal

resolution of concurrenceprovided certain conditions
enumerated thereunder would be granted, obeyed
and implemented (ipagkakaloob, ipatutupad at
isasagawa) for the benefit and interest of Morong
and Bataan. A voter may favor Item I i.e., he may
want a total dismemberment of Morong from the
Authority but may not agree with any of the
conditions set forth in Item II. Should the proposal
then be divided and be voted upon separately and
independently?
All told, we shall not pass upon the third issue
of ultra vires on the ground of prematurity.
Epilogue
In sum, we hold that (i) our decision in the
earlier Garcia case is not a bar to the present
controversy as the issue raised and decided therein
is different from the questions involved here; (iii) the
respondent Commission should be given an
opportunity to review and correct its errors in
promulgating its Resolution No. 2848 and in
preparing if necessary for the plebiscite; and
(iii) that the said Commission has administrative and
initiatory quasi-judicial jurisdiction to pass upon the
question of whether the proposal is sufficient in form
and language and whether such proposal or part or
parts thereof are clearly and patently outside the
powers of the municipal council of Morong to enact,
and therefore violative of law.
In deciding this case, the Court realizes that initiative
and referendum, as concepts and processes, are new
in our country. We are remanding the matter to the
Comelec so that proper corrective measures, as

above discussed, may be undertaken, with a view to

helping fulfill our people's aspirations for the
actualization of effective direct sovereignty. Indeed
we recognize that "(p)rovisions for initiative and
referendum are liberally construed to effectuate their
purposes, to facilitate and not to hamper the
exercise by the voters of the rights granted
thereby." 24 In his authoritative treatise on the
Constitution, Fr. Joaquin G. Bernas, S. J. treasures
these "instruments which can be used should the
legislature show itself indifferent to the needs of the
people." 25Impelled by a sense or urgency, Congress
enacted Republic Act No. 6735 to give life and form
to the constitutional mandate. Congress also
interphased initiative and referendum into the
workings of local governments by including a chapter
on this subject in the Local Government Code of
1991. 26 And the Commission on Elections can do no
less by seasonably and judiciously promulgating
guidelines and rules, for both national and local use,
in implementation of these laws. For its part, this
Court early on expressly recognized the
revolutionary import of reserving people power in the
process of law-making. 27
Like elections, initiative and referendum are powerful
and valuable modes of expressing popular
sovereignty. And this Court as a matter of policy and
doctrine will exert every effort to nurture, protect
and promote their legitimate exercise. For it is but
sound public policy to enable the electorate to
express their free and untrammeled will, not only in
the election of their anointed lawmakers and
executives, but also in the formulation of the very
rules and laws by which our society shall be
governed and managed.

WHEREFORE the petition is GRANTED. Resolution No.

2848 is ANNULLED and SET ASIDE. The initiative on
Pambayang Kapasyahan Blg. 10, Serye 1993 is
REMANDED to the Commission on Elections for
further proceeding consistent with the foregoing
discussion. No costs.
IT IS SO ORDERED.
Narvasa, C.J., Padilla, Regalado, Davide, Jr., Bellosillo,
Melo, Vitug, Kapunan, Francisco, Hermosisima, Jr. and
Torres, Jr., JJ., concur.
Puno, J., took no part.
Romero and Mendoza, JJ., are on leave.
Footnotes
1 Rollo, pp. 38-46; signed by Chairman Bernardo P.
Pardo and Comms. Regalado E. Maambong,
Remedios A. Salazar-Fernando, Manolo B. Gorospe,
Julio F. Desamito, Teresita Dy-Liaco Flores and Japal
M. Guiani.
2 Sec. 13 (a), RA 7227.
3 Sec. 13 (e) (1), RA 7227.
4 Republic Act No. 7160.
5 Enrique T. Garcia, et al. vs. Commission on
Elections, et al., 237 SCRA 279, September 30,
1994.
6 p. 10; rollo, p. 12.

7 Reply, p. 3.
8 See footnote no. 5, supra.
9 Supra, at pp. 290-291.
10 Rollo, G.R. No. 111230, p. 82 (Solocitor General's
Comment). See also petitioner Garcia's
Memorandum,rollo, pp. 134-147.
11 For easy references, quoted verbatim hereunder,
minus the preamble or "whereas" clauses, is the next
of Resolution 2848:
NOW, THEREFORE, the Commission on Elections, by
virtue of the powers vested upon it by the
Constitution, Republic Act No. 6735, Republic Act No.
7160, the Omnibus Election Code and other related
election laws, RESOLVED AS IT HEREBY RESOLVES
to promulgate the following rules and guidelines to
govern the conduct of the referendum proposing to
annul or repeal Kapasyahan Blg. 10, Serye 1993, of
the Sangguniang Bayan of Morong, Bataan.
Sec. 1. Supervision and control. The Commission
on Elections shall have direct control and supervision
over the conduct of the referendum.
Sec. 2. Expenses, forms and paraphernalia. The
expenses in the holding of the referendum, which
shall include the printing of official ballots,
referendum returns, and other forms and the
procurement of supplies and paraphernalia, as well
as the per diems of the members of the Referendum
committees and overtime compensation of the
members of the Board of Canvassers, shall be
chargeable against the available funds of the

Commission. In case of deficiency, the Executive

Director and the Director of the Finance Services
Department are directed to submit the budget
thereon and to request the Department of Budget
and Management to immediately release the
necessary amount.
Sec. 3. Date of referendum and voting hours. The
referendum shall be held on July 27, 1996. The
voting shall start at seven o'clock in the morning and
shall end at three o'clock in the afternoon.
Sec. 4. Area of coverage. The referendum shall be
held in the entire municipality of Morong, Bataan.
Sec. 5. Who may vote. The qualified voters of
Morong, Bataan, duly registered as such in the May
8, 1995 Congressional and Local Elections, and those
who are registered in the special registration of
voters scheduled on June 29, 1996, shall be entitled
to vote in the referendum. For this purpose, the
Election Officer, said municipality, shall prepare the
lists of voters for the entire municipality.
Sec. 6. Precincts and polling places. The same
precincts and polling places that functioned in the
municipality of Morong, Bataan during the May 8,
1995 Congressional and Local Elections shall function
and be used in the referendum, subject to such
changes under the law as the Commission may find
necessary.
Sec. 7. Officials ballots. The official ballots to be
used in the referendum shall bear the heading:
"OFFICIAL BALLOT"; "REFERENDUM"; "JULY 27,
1996", "MORONG, BATAAN"; and underneath, the
following instructions: "Fill out this ballot secretly

inside the voting booth. Do not put any distinctive

mark on any part of this ballot." The following
question shall be provided in the official ballots:
DO YOU APPROVE OF THE PROPOSITIONS
CONTAINED IN THE SIGNED PETITION TO ANNUL OR
REPEAL PAMBAYANG KAPASYAHAN BLG.
10, SERYE 1993, OF THE SANGGUNIANG BAYAN OF
MORONG, BATAAN, WHICH READ AS FOLLOWS:
I. Bawiin, nulipikahin at pawalang-bisa and
Pambayang Kapasyahan Blg. 10, Serye 1993 ng
Sangguniang Bayan para sa pag-anib ng Morong sa
SSEZ na walang kondisyon.
II. Palitan ito ng isang Pambayang Kapasiyahan na
aanib lamang ang Morong sa SSEZ kung and mga
sumusunod na kondisyones ay ipagkakaloob,
ipatutupad at isasagawa para sa kapakanan at
interes ng Morong at Bataan:
(A) Ibalik sa Bataan ang "Virgin Forests" isang
bundok na hindi nagagalaw at punong-puno ng
malalaking punong-kahoy at iba't-ibang halaman.
(B) Ihiwalay ang Grande Island sa SSEZ at ibalik ito
sa Bataan.
(K) Isama ang mga lupain ng Bataan na nakapaloob
sa SBMA sa pagkukuenta ng salaping ipinagkaloob
ng pamahalaang national o "Internal Revenue
Allotment" (IRA) sa Morong, Hermosa at sa
Lalawigan.
(D) Payagang magtatag rin ng sariling "special
economic zones" ang bawal bayan ng Morong,
Hermosa at Dinalupihan.

(E) Ibase sa laki ng kanya-kanya lupa ang

pamamahagi ng kikitain ng SBMA.
(G) Ibase rin ang alokasyon ng pagbibigay ng
trabaho sa laki ng nasabing mga lupa.
(H) Pabayaang bukas ang pinto ng SBMA na nasa
Morong ng 24 na oras at bukod dito sa magbukas pa
ng pinto sa hangganan naman ng Morong at
Hermosa upang magkaroon ng pagkakataong
umunlad rin ang mga nasabing bayan, pati na rin ng
iba pang bayan ng Bataan.
(I) Tapusin ang pagkokonkre-to ng mga daang
Morong-Tala-Orani at Morong-Tasig-Dinalupihan para
sa kabutihan ng mga taga-Bataan at tuloy
makatulong sa pangangalaga ng mga kabundukan.
(J) Magkaroon ng sapat na representation sa
pamunuan ng SBMA ng Morong, Hermosa at
Bataan.?
Sec. 8. Referendum Committee. The voting and
counting of votes shall be conducted in each polling
place by a Referendum Committee composed of a
Chairman, a Poll Clerk, and a Third Member who
shall all be public schools teachers, to be appointed
by the Commission through the Election Officer of
Morong, Bataan. Each member of the Referendum
Committee shall be entitled to a per diem of Two
Hundred Pesos (P200.00) for services rendered on
the day of the referendum.
Sec. 9. Referendum returns and distribution of
copies thereof. The referendum returns shall be
prepared by the Referendum Committee in three (3)
copies, to distributed as follows:

(1) The first copy shall be delivered to the

Referendum Board of Canvassers;
(2) The second copy shall be forwarded to the
Election Records and Statistics Department of the
Commission; and
(3) The third copy shall be deposited inside ballot
box.
Sec. 10. Referendum Board of Canvassers. There
is hereby created a Referendum Board of Canvassers
which shall be composed of the Provincial Election
Supervisor of Bataan as Chairman; and as Members
thereof, the Municipal Treasurer and the most senior
District School Supervisor or, in the latter's absence,
a principal of the school district or the elementary
school.
At least five (5) days before the day of the
referendum, the Chairman shall issue a written
notice to the Members of the Board that it shall
convene at four o'clock in the afternoon of
Referendum Day to canvass the referendum returns.
Notice of said meeting shall be posted in conspicuous
places in the Municipal Hall and other public places
within the municipality.
The Board shall meet at the session hall of the
Sangguniang Bayan of Morong, Bataan not later than
four o'clock in the afternoon of Referendum Day, and
shall immediately canvass the referendum returns
and shall not adjourn until the canvass is completed.
Sec. 11. Preparation and distribution of copies of the
referendum results. As soon as all the returns
have been canvassed, the Board shall prepare and

accomplish the Certificate of Canvass of Votes and

Proclamation in five (5) copies, supported by a
Statement of Votes per Precinct, and, or on the basis
thereof, shall certify and proclaim the final results.
Said copies shall be distributed as follows:
(1) The original shall, within three (3) days from
proclamation; be sent to the Election Records and
Statistics Department of the Commission;
(2) The second copy shall be filed in the Office of the
Provincial Election Supervisor of Bataan;
(3) The third copy shall be submitted to the
Provincial Governor of Bataan;
(4) The fourth copy shall be kept in the Office of the
Election Officer of Morong, Bataan;
(5) The fifth copy shall be submitted to the Municipal
Mayor of Morong, Bataan.
Sec. 12. Information campaign. There shall be a
period of information campaign which shall
commence immediately, but shall not include the day
before and the day of the referendum. During this
period, the Election Officer of Morong, Bataan shall
convoke barangay assemblies or "pulong-pulongs"
within the municipality. Civic, professional, religious,
business, youth and any other similar organizations
may also hold public rallies or meetings to enlighten
the residents therein of the issues involved.
Constructive discussions and debates shall be
encouraged and the voters assured of the freedom to
voice their opinion regarding the issue.

Sec. 13. Applicability of election laws. The

pertinent provisions of the Omnibus Election Code
(Batas Pambansa Blg. 881), the Electoral Reforms
Law of 1987 (Republic Act NO. 6646) and other
related election laws which are not inconsistent with
this Resolution shall apply to this referendum.

SO ORDERED.

Sec. 14. Implementation. The Executive Director,

assisted by the Deputy Executive Director for
Operations and the Directors of the Finance Services
Department, Administrative Services Department
and Election and Barangay Affairs Department, shall
implement this Resolution to ensure the holding of a
free, orderly, honest, peaceful and credible
referendum.

14 Black's Law Dictionary, 1979 edition, pp. 705 and

1152. See also Words and Phrases, Vol. 36A, 179 et
seq. and Vol. 21-A, pp. 56 et seq.; 42 Am.
Jur 647 et seq.; Bouvier's Law Dictionary, Vol. I, 3rd
edition, 1569.

Sec. 15. Effectivity. This Resolution shall take

effect on the seventh day after its publication in two
(2) daily newspapers of general circulation in the
Philippines.
Sec. 16. Dissemination. The Education and
Information Department shall cause the immediate
publication of this Resolution in two (2) daily
newspapers of general circulation in the Philippines
and give this Resolution the widest publicity and
dissemination possible. The Executive Director shall
furnish the Secretary of the Department of Budget
and Management; the Secretary of the Department
of Education, Culture and Sports; the Provincial
Governor of Bataan; the Provincial Election
Supervisor of Bataan; and the Municipal Mayor, the
Municipal Treasurer, the District School Supervisor,
and the Election Officer, all of Morong, Bataan, each
of a copy of this Resolution the widest publicity
possible within the municipality.

12 Sec. 3, Republic Act 6735; approved on August 4,

1989.
13 Philippine Political Law, 1991 edition, p. 169.

15 Sec. 17, RA 6735.

16 Sec. 10 (a), RA 6735.
17 Sec. 13 (d), RA 6735.
18 Rollo, pp. 10, 14.
19 "Thus, local initiatives cannot propose the
enactment of the death penalty for any crime
because the imposition of (such) penalty is not
within the competence of the local sanggunian to
enact." Pimentel, The Local Government Code of
1991, 1993 edition, p. 237.
20 Judicial power has been defined in jurisprudence
as "the right to determine actual controversies
arising between adverse litigants, duly instituted in
courts of proper jurisdiction" (citing Muskrat v.
United States, 219 U.S. 346 [1911]). It is "the
authority to settle justiciable controversies or
disputes involving rights that are enforceable and
demandable before the courts of justice or the
redress of wrongs for violation of such rights"

(citing Lopez v. Roxas, 17 SCRA 756, 761 [1966]).

Thus, there can be no occasion for the exercise of
judicial power unless real parties come to court for
the settlement of an actual controversy and unless
the controversy is such that it can be settled in a
manner that binds the parties by the application of
existing laws.
The 1987 Constitution now adds: "Judicial power
includes the duty of the courts of justice to settle
actual controversies involving rights which are legally
demandable and enforceable, and to determine
whether or not there has been a grave abuse of
discretion amounting to lack or excess of jurisdiction
on the part of any branch or instrumentality of the
Government." . . .
Fr. Joaquin G. Bernas, S.J., The Constitution of
the Republic of the Philippines A Commentary,
Vol. II, 1988 edition, p. 255.
21 Sec. 18, RA 6735.
22 Andres R. Narvasa C.J., Handbook on the Courts
and the Criminal Justice System, 1996 Ed., p. 5.
23 Cf. Sec. 12, RA 6735.
24 42 Am. Jr. 2d, p. 653.
25 Bernas, op. cit., Vol II, at p. 68.
26 R.A. 7160. See Book I, Title Nine, Chapter 2.
27 Garcia vs. Commission on Elections, et al., supra,
at p. 288.