LEGISLATIVE INQUIRIES
executive privilege; Senior national security officials who in the judgment of
Sabio v. Gordon
On February 20, 2006, Senator Miriam Defensor-Santiago introduced
Senate Res. No. 455 directing an inquiry in aid of legislation on the
anomalous losses incurred by the Philippines Overseas Telecommunications
Corporation (POTC), Philippine Communications Satellite Corporation
(PHILCOMSAT), and PHILCOMSAT Holdings Corporation (PHC) due to
the alleged improprieties in their operations by their respective Board of
Directors. Pursuant to this, on May 8, 2006, Senator Richard Gordon,
wrote Chairman Camilo Sabio of the PCGG inviting him to be one of the
resource persons in the public meeting jointly conducted by the Committee
on Government Corporations and Public Enterprises and Committee on
Public Services. Chairman Sabio declined the invitation because of prior
commitment. At the same time, he invoked Section 4(b) of E.O. No. 1 No
member or staff of the Commission shall be required to testify or produce
evidence in any judicial, legislative or administrative proceeding concerning
matters within its official cognizance. Apparently, the purpose is to ensure
PCGGs unhampered performance of its task. Gordons Subpoenae Ad
Testificandum was repeatedly ignored by Sabio hence he threatened Sabio to
be cited with contempt.
ISSUE: Whether or not Section 4 of EO No. 1 is constitutional.
HELD: No. It can be said that the Congress power of inquiry has gained
more solid existence and expansive construal. The Courts high regard to
such power is rendered more evident in Senate v. Ermita, where it
categorically ruled that the power of inquiry is broad enough to cover
officials of the executive branch. Verily, the Court reinforced the doctrine
in Arnault that the operation of government, being a legitimate subject for
legislation, is a proper subject for investigation and that the power of
inquiry is co-extensive with the power to legislate. 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, Section 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.
These twin provisions of the Constitution seek to promote transparency in
policy-making and in the operations of the government, as well as provide
the people sufficient information to enable them to exercise effectively their
constitutional rights. Armed with the right information, citizens can
participate in public discussions leading to the formulation of government
policies and their effective implementation.
Senate of the Philippines v. Ermita
In 2005, scandals involving anomalous transactions about the North Rail
Project as well as the Garci tapes surfaced. This prompted the Senate to
conduct a public hearing to investigate the said anomalies particularly the
alleged overpricing in the NRP. The investigating Senate committee issued
invitations to certain department heads and military officials to speak
before the committee as resource persons. Ermita submitted that he and
some of the department heads cannot attend the said hearing due to pressing
matters that need immediate attention. AFP Chief of Staff Senga likewise
sent a similar letter. Drilon, the senate president, excepted the said requests
for they were sent belatedly and arrangements were already made and
scheduled. Subsequently, GMA issued EO 464 which took effect
immediately.
EO 464 basically prohibited Department heads, 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
the National Security Adviser are covered by the executive privilege; and
Such other officers as may be determined by the President, from appearing
in such hearings conducted by Congress without first securing the
presidents approval.
The department heads and the military officers who were invited by the
Senate committee then invoked EO 464 to except themselves. Despite EO
464, the scheduled hearing proceeded with only 2 military personnel
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. EO 464s constitutionality was
assailed for it is alleged that it infringes on the rights and duties of Congress
to conduct investigation in aid of legislation and conduct oversight
functions in the implementation of laws.
ISSUE: Whether or not EO 464 is constitutional.
HELD: The SC ruled that EO 464 is constitutional in part. To determine
the validity of the provisions of EO 464, the SC sought to distinguish
Section 21 from Section 22 of Art 6 of the 1987 Constitution. The Congress
power of inquiry is expressly recognized in Section 21 of Article VI of the
Constitution. 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.
Section 22 on the other hand provides for the Question Hour. 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.
Section 22 refers only to 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. 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. 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. 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 co-equal 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 co-equal branch of government which is sanctioned by
a long-standing custom. 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.
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 .
NOTES: The SC ruled that Section 1 and Section 2a are valid. The rest
invalid.
On March 6, 2008, President Arroyo issued Memorandum Circular No. 151,
revoking Executive Order No. 464 and Memorandum Circular No. 108. She
advised executive officials and employees to follow and abide by the
Constitution, existing laws and jurisprudence, including, among others, the
case of Senate v. Ermita when they are invited to legislative inquiries in aid
of legislation.
NOTA BENE:
Please remember this, this is case of Arnault used in the cases.
Jean Arnault v. Nazareno
This case arose from the legislative inquiry into the acquisition by the
Philippine Government of the Buenavista and Tambobong estates sometime
in 1949. Among the witnesses called to be examined by the special
committee created by a Senate resolution was Jean L. Arnault, a lawyer
who delivered a partial of the purchase price to a representative of the
vendor. During the Senate investigation, Arnault refused to reveal the
identity of said representative, at the same time invoking his constitutional
right against self-incrimination. The Senate adopted a resolution
committing Arnault to the custody of the Sergeant-at-Arms and imprisoned
until he shall have purged the contempt by revealing to the Senate . . . the
name of the person to whom he gave the P440,000, as well as answer other
pertinent questions in connection therewith. Arnault petitioned for a writ
of Habeas Corpus
ISSUE: Can the senate impose penalty against those who refuse to answer
its questions in a congressional hearing in aid of legislation.
HELD: It is the inherent right of the Senate to impose penalty in carrying
out their duty to conduct inquiry in aid of legislation. But it must be herein
established that a witness who refuses to answer a query by the Committee
may be detained during the term of the members imposing said penalty but
the detention should not be too long as to violate the witness right to due
process of law.
Gudani v. Senga
Facts: Senator Rodolfo Biazon invited several senior officers of the AFP,
including Gen. Gudani and Col. Balutan, to appear at a public hearing
before the Senate Committee on National Defense and Security to shed light
on the Hello Garci controversy. Gudani and Balutan were directed by
AFP Chief of Staff Gen. Senga, per instruction of Pres. Arroyo, not testify
before said Committee. On the very day of the hearing, President Gloria-
Macapagal-Arroyo issued Executive Order No. 464 enjoining officials of
the executive department including the military establishment from
appearing in any legislative inquiry without her approval. However, the
two testified before the Senate, prompting Gen. Senga to issue an order
directing Gudani and Balutan to appear before the Office of the Provost
Marshal General (OPMG) on 3 October 2005 for investigation. The
following day, Gen. Gudani was compulsorily retired from military service.
After investigation, the OPMG recommended that the two be charged with
violation of Article of War 65, on willfully disobeying a superior officer.
Thus, Gudani and Balutan filed a petition for certiorari and prohibition
seeking that (1) the order of President Arroyo be declared unconstitutional;
(2) the charges against them be quashed; and (3) Gen. Senga and their
successors-in-interest or persons acting for and on their behalf or orders, be
permanently enjoined from proceeding against them, as a consequence of
their having testified before the Senate.
Issue:
1. May the President prevent a member of the armed forces from testifying
before a legislative inquiry?
2. How may the members of the military be compelled to attend legislative
inquiries even if the President desires otherwise?
3. Does the court-martial have jurisdiction over Gudani considering his
retirement last 4 October 2005?
Held:
1. Yes. The President has constitutional authority to do so, by virtue of her
power as commander-in-chief, and that as a consequence a military officer
who defies such injunction is liable under military justice. Our ruling that
the President could, as a general rule, require military officers to seek
presidential approval before appearing before Congress is based foremost on
the notion that a contrary rule unduly diminishes the prerogatives of the
President as commander-in-chief. Congress holds significant control over the
armed forces in matters such as budget appropriations and the approval of
higher-rank promotions, yet it is on the President that the Constitution
vests the title as commander-in-chief and all the prerogatives and functions
appertaining to the position. Again, the exigencies of military discipline and
the chain of command mandate that the Presidents ability to control the
individual members of the armed forces be accorded the utmost respect.
Where a military officer is torn between obeying the President and obeying
the Senate, the Court will without hesitation affirm that the officer has to
choose the President. After all, the Constitution prescribes that it is the
President, and not the Senate, who is the commander-in-chief of the armed
forces.
2. At the same time, the refusal of the President to allow members of the
military to appear before Congress is still subject to judicial relief. The
Constitution itself recognizes as one of the legislatures functions is the
conduct of inquiries in aid of legislation. Inasmuch as it is ill-advised for
Congress to interfere with the Presidents power as commander-in-chief, it is
similarly detrimental for the President to unduly interfere with Congresss
right to conduct legislative inquiries. The impasse did not come to pass in
this petition, since petitioners testified anyway despite the presidential
prohibition. Yet the Court is aware that with its pronouncement today that
the President has the right to require prior consent from members of the
armed forces, the clash may soon loom or actualize.
We believe and hold that our constitutional and legal order sanctions a
modality by which members of the military may be compelled to attend
legislative inquiries even if the President desires otherwise, a modality
which does not offend the Chief Executives prerogatives as commander-in-
chief. The remedy lies with the courts.
The fact that the executive branch is an equal, coordinate branch of
government to the legislative creates a wrinkle to any basic rule that
persons summoned to testify before Congress must do so. There is
considerable interplay between the legislative and executive branches,
informed by due deference and respect as to their various constitutional
functions. Reciprocal courtesy idealizes this relationship; hence, it is only as
a last resort that one branch seeks to compel the other to a particular mode
of behavior. The judiciary, the third coordinate branch of government, does
not enjoy a similar dynamic with either the legislative or executive branches.
Whatever weakness inheres on judicial power due to its inability to
originate national policies and legislation, such is balanced by the fact that
it is the branch empowered by the Constitution to compel obeisance to its
rulings by the other branches of government.
3. An officer whose name was dropped from the roll of officers cannot be
considered to be outside the jurisdiction of military authorities when
military justice proceedings were initiated against him before the
termination of his service. Once jurisdiction has been acquired over the
officer, it continues until his case is terminated. Military jurisdiction has
fully attached to Gen. Gudani inasmuch as both the acts complained of and
the initiation of the proceedings against him occurred before he compulsorily
retired on 4 October 2005. (Gudani vs. Senga, GR No. 170165, August 15,
2006)
Neri v. Senate Committee on Accountability
In April April 2007, DOTC entered into a contract with Zhong Xing
Telecommunications Equipment (ZTE) for the supply of equipment and
services for the National Broadband Network (NBN) Project in the amount
of $329,481,290.00 (approximately P16 Billion Pesos). The Project was to
be financed by the Peoples Republic of China. The Senate passed various
resolutions relative to the NBN deal. On the other hand, Joe De Venecia
issued a statement that several high executive officials and power brokers
were using their influence to push the approval of the NBN Project by the
NEDA.
Neri, the head of NEDA, was then invited to testify before the Senate Blue
Ribbon. He appeared in one hearing wherein he was interrogated for 11 hrs
and during which he admitted that Abalos of COMELEC tried to bribe him
with P200M in exchange for his approval of the NBN project. He further
narrated that he informed President Arroyo about the bribery attempt and
that she instructed him not to accept the bribe. However, when probed
further on what they discussed about the NBN Project, Neri refused to
answer, invoking executive privilege. In particular, he refused to answer
the questions on (a) whether or not President Arroyo followed up the NBN
Project, (b) whether or not she directed him to prioritize it, and (c) whether
or not she directed him to approve. He later refused to attend the other
hearings and Ermita sent a letter to the SBRC averring that the
communications between GMA and Neri is privileged and that the
jurisprudence laid down in Senate vs Ermita be applied. The SBRC cited
Neri for contempt.
ISSUE: Whether or not the three questions sought by the SBRC to be
answered falls under executive privilege.
HELD: The oversight function of Congress may be facilitated by
compulsory process only to the extent that it is performed in pursuit of
legislation.
The communications elicited by the three (3) questions are covered by the
presidential communications privilege.
1st, the communications relate to a quintessential and non-delegable
power of the President, i.e. the power to enter into an executive agreement
with other countries. This authority of the President to enter into executive
agreements without the concurrence of the Legislature has traditionally
been recognized in Philippine jurisprudence.
2nd, the communications are received by a close advisor of the President.
Under the operational proximity test, petitioner can be considered a close
advisor, being a member of President Arroyos cabinet. And
3rd, there is no adequate showing of a compelling need that would justify
the limitation of the privilege and of the unavailability of the information
elsewhere by an appropriate investigating authority.
Alternative answer:
The communications are covered by executive privilege
The revocation of EO 464 (advised executive officials and employees to
follow and abide by the Constitution, existing laws and jurisprudence,
including, among others, the case of Senate v. Ermita when they are invited
to legislative inquiries in aid of legislation.), does not in any way diminish
the concept of executive privilege. This is because this concept has
Constitutional underpinnings.
The claim of executive privilege is highly recognized in cases where the
subject of inquiry relates to a power textually committed by the
Constitution to the President, such as the area of military and foreign
relations. Under our Constitution, the President is the repository of the
commander-in-chief, appointing, pardoning, and diplomatic powers.
Consistent with the doctrine of separation of powers, the information
relating to these powers may enjoy greater confidentiality than others.
Several jurisprudence cited provide the elements of presidential
communications privilege:
1) The protected communication must relate to a quintessential and non-
delegable presidential power.
2) The communication must be authored or solicited and received by a
close advisor of the President or the President himself. The judicial test is
that an advisor must be in operational proximity with the President.
3) The presidential communications privilege remains a qualified privilege
that may be overcome by a showing of adequate need, such that the
information sought likely contains important evidence and by the
unavailability of the information elsewhere by an appropriate investigating
authority.
In the case at bar, Executive Secretary Ermita premised his claim of
executive privilege on the ground that the communications elicited by the
three (3) questions fall under conversation and correspondence between the
President and public officials necessary in her executive and policy
decision-making process and, that the information sought to be disclosed
might impair our diplomatic as well as economic relations with the Peoples
Republic of China. Simply put, the bases are presidential communications
privilege and executive privilege on matters relating to diplomacy or foreign
relations.
Using the above elements, we are convinced that, indeed, the
communications elicited by the three (3) questions are covered by the
presidential communications privilege. First, the communications relate to a
quintessential and non-delegable power of the President, i.e. the power to
enter into an executive agreement with other countries. This authority of
the President to enter into executive agreements without the concurrence of
the Legislature has traditionally been recognized in Philippine
jurisprudence. Second, the communications are received by a close advisor
of the President. Under the operational proximity test, petitioner can be
considered a close advisor, being a member of President Arroyos cabinet.
And third, there is no adequate showing of a compelling need that would
justify the limitation of the privilege and of the unavailability of the
information elsewhere by an appropriate investigating authority.
Respondent Committees further contend that the grant of petitioners claim
of executive privilege violates the constitutional provisions on the right of
the people to information on matters of public concern.50 We might have
agreed with such contention if petitioner did not appear before them at all.
But petitioner made himself available to them during the September 26
hearing, where he was questioned for eleven (11) hours. Not only that, he
expressly manifested his willingness to answer more questions from the
Senators, with the exception only of those covered by his claim of executive
privilege.
The right to public information, like any other right, is subject to limitation.
Section 7 of Article III provides:
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 POWER OF APPROPRIATION
Belgica v. Executive Secretary
This case is consolidated with G.R. No. 208493 and G.R. No. 209251.
The so-called pork barrel system has been around in the Philippines since
about 1922. Pork Barrel is commonly known as the lump-sum, discretionary
funds of the members of the Congress. It underwent several legal
designations from Congressional Pork Barrel to the latest Priority
Development Assistance Fund or PDAF. The allocation for the pork barrel
is integrated in the annual General Appropriations Act (GAA).
Since 2011, the allocation of the PDAF has been done in the following
manner:
a. P70 million: for each member of the lower house; broken down to P40
million for hard projects (infrastructure projects like roads, buildings,
schools, etc.), and P30 million for soft projects (scholarship grants, medical
assistance, livelihood programs, IT development, etc.);
b. P200 million: for each senator; broken down to P100 million for hard
projects, P100 million for soft projects;
c. P200 million: for the Vice-President; broken down to P100 million for
hard projects, P100 million for soft projects.
The PDAF articles in the GAA do provide for realignment of funds
whereby certain cabinet members may request for the realignment of funds
into their department provided that the request for realignment is approved
or concurred by the legislator concerned.
Presidential Pork Barrel
The president does have his own source of fund albeit not included in the
GAA. The so-called presidential pork barrel comes from two sources: (a) the
Malampaya Funds, from the Malampaya Gas Project this has been
around since 1976, and (b) the Presidential Social Fund which is derived
from the earnings of PAGCOR this has been around since about 1983.
Pork Barrel Scam Controversy
Ever since, the pork barrel system has been besieged by allegations of
corruption. In July 2013, six whistle blowers, headed by Benhur Luy,
exposed that for the last decade, the corruption in the pork barrel system
had been facilitated by Janet Lim Napoles. Napoles had been helping
lawmakers in funneling their pork barrel funds into about 20 bogus NGOs
(non-government organizations) which would make it appear that
government funds are being used in legit existing projects but are in fact
going to ghost projects. An audit was then conducted by the Commission
on Audit and the results thereof concurred with the exposes of Luy et al.
Motivated by the foregoing, Greco Belgica and several others, filed various
petitions before the Supreme Court questioning the constitutionality of the
pork barrel system.
ISSUES:
I. Whether or not the congressional pork barrel system is constitutional.
II. Whether or not presidential pork barrel system is constitutional.
HELD:
I. No, the congressional pork barrel system is unconstitutional. It is
unconstitutional because it violates the following principles:
a. Separation of Powers
As a rule, the budgeting power lies in Congress. It regulates the release of
funds (power of the purse). The executive, on the other hand, implements the
laws this includes the GAA to which the PDAF is a part of. Only the
executive may implement the law but under the pork barrel system, whats
happening was that, after the GAA, itself a law, was enacted, the
legislators themselves dictate as to which projects their PDAF funds should
be allocated to a clear act of implementing the law they enacted a
violation of the principle of separation of powers. (Note in the older case of
PHILCONSA vs Enriquez, it was ruled that pork barrel, then called as
CDF or the Countrywide Development Fund, was constitutional insofar as
the legislators only recommend where their pork barrel funds go).
This is also highlighted by the fact that in realigning the PDAF, the
executive will still have to get the concurrence of the legislator concerned.
b. Non-delegability of Legislative Power
As a rule, the Constitution vests legislative power in Congress alone. (The
Constitution does grant the people legislative power but only insofar as the
processes of referendum and initiative are concerned). That being, legislative
power cannot be delegated by Congress for it cannot delegate further that
which was delegated to it by the Constitution.
Exceptions to the rule are:
(i) delegated legislative power to local government units but this shall
involve purely local matters;
(ii) 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, 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.
In this case, the PDAF articles which allow the individual legislator to
identify the projects to which his PDAF money should go to is a violation
of the rule on non-delegability of legislative power. The power to
appropriate funds is solely lodged in Congress (in the two houses comprising
it) collectively and not lodged in the individual members. Further, nowhere
in the exceptions does it state that the Congress can delegate the power to
the individual member of Congress.
c. Principle of Checks and Balances
One feature in the principle of checks and balances is the power of the
president to veto items in the GAA which he may deem to be inappropriate.
But this power is already being undermined because of the fact that once
the GAA is approved, the legislator can now identify the project to which
he will appropriate his PDAF. Under such system, how can the president
veto the appropriation made by the legislator if the appropriation is made
after the approval of the GAA again, Congress cannot choose a mode of
budgeting which effectively renders the constitutionally-given power of the
President useless.
d. Local Autonomy
As a rule, the local governments have the power to manage their local
affairs. Through their Local Development Councils (LDCs), the LGUs can
develop their own programs and policies concerning their localities. But
with the PDAF, particularly on the part of the members of the house of
representatives, whats happening is that a congressman can either bypass
or duplicate a project by the LDC and later on claim it as his own. This is
an instance where the national government (note, a congressman is a
national officer) meddles with the affairs of the local government and this
is contrary to the State policy embodied in the Constitution on local
autonomy. Its good if thats all that is happening under the pork barrel
system but worse, the PDAF becomes more of a personal fund on the part
of legislators.
II. Yes, the presidential pork barrel is valid.
The main issue raised by Belgica et al against the presidential pork barrel is
that it is unconstitutional because it violates Section 29 (1), Article VI of
the Constitution which provides:
No money shall be paid out of the Treasury except in pursuance of an
appropriation made by law.
Belgica et al emphasized that the presidential pork comes from the earnings
of the Malampaya and PAGCOR and not from any appropriation from a
particular legislation.
The Supreme Court disagrees as it ruled that PD 910, which created the
Malampaya Fund, as well as PD 1869 (as amended by PD 1993), which
amended PAGCORs charter, provided for the appropriation, to wit:
(i) PD 910: Section 8 thereof provides that all fees, among others, collected
from certain energy-related ventures shall form part of a special fund (the
Malampaya Fund) which shall be used to further finance energy resource
development and for other purposes which the President may direct;
(ii) PD 1869, as amended: Section 12 thereof provides that a part of
PAGCORs earnings shall be allocated to a General Fund (the Presidential
Social Fund) which shall be used in government infrastructure projects.
These are sufficient laws which met the requirement of Section 29, Article
VI of the Constitution. The appropriation contemplated therein does not
have to be a particular appropriation as it can be a general appropriation as
in the case of PD 910 and PD 1869.
Araullo v. Aquino III
When President Benigno Aquino III took office, his administration noticed
the sluggish growth of the economy. The World Bank advised that the
economy needed a stimulus plan. Budget Secretary Florencio Butch Abad
then came up with a program called the Disbursement Acceleration Program
(DAP).
The DAP was seen as a remedy to speed up the funding of government
projects. DAP enables the Executive to realign funds from slow moving
projects to priority projects instead of waiting for next years appropriation.
So what happens under the DAP was that if a certain government project is
being undertaken slowly by a certain executive agency, the funds allotted
therefor will be withdrawn by the Executive. Once withdrawn, these funds
are declared as savings by the Executive and said funds will then be
reallotted to other priority projects. The DAP program did work to
stimulate the economy as economic growth was in fact reported and portion
of such growth was attributed to the DAP (as noted by the Supreme Court).
Other sources of the DAP include the unprogrammed funds from the
General Appropriations Act (GAA). Unprogrammed funds are standby
appropriations made by Congress in the GAA.
Meanwhile, in September 2013, Senator Jinggoy Estrada made an expos
claiming that he, and other Senators, received Php50M from the President
as an incentive for voting in favor of the impeachment of then Chief Justice
Renato Corona. Secretary Abad claimed that the money was taken from the
DAP but was disbursed upon the request of the Senators.
This apparently opened a can of worms as it turns out that the DAP does
not only realign funds within the Executive. It turns out that some non-
Executive projects were also funded; to name a few: Php1.5B for the CPLA
(Cordillera Peoples Liberation Army), Php1.8B for the MNLF (Moro
National Liberation Front), P700M for the Quezon Province, P50-P100M
for certain Senators each, P10B for Relocation Projects, etc.
This prompted Maria Carolina Araullo, Chairperson of the Bagong
Alyansang Makabayan, and several other concerned citizens to file various
petitions with the Supreme Court questioning the validity of the DAP.
Among their contentions was:
DAP is unconstitutional because it violates the constitutional rule which
provides that no money shall be paid out of the Treasury except in
pursuance of an appropriation made by law.
Secretary Abad argued that the DAP is based on certain laws particularly
the GAA (savings and augmentation provisions thereof), Sec. 25(5), Art. VI
of the Constitution (power of the President to augment), Secs. 38 and 49 of
Executive Order 292 (power of the President to suspend expenditures and
authority to use savings, respectively).
Issues:
I. Whether or not the DAP violates the principle no money shall be paid
out of the Treasury except in pursuance of an appropriation made by law
(Sec. 29(1), Art. VI, Constitution).
II. Whether or not the DAP realignments can be considered as
impoundments by the executive.
III. Whether or not the DAP realignments/transfers are constitutional.
IV. Whether or not the sourcing of unprogrammed funds to the DAP is
constitutional.
V. Whether or not the Doctrine of Operative Fact is applicable.
HELD:
I. No, the DAP did not violate Section 29(1), Art. VI of the Constitution.
DAP was merely a program by the Executive and is not a fund nor is it an
appropriation. It is a program for prioritizing government spending. As
such, it did not violate the Constitutional provision cited in Section 29(1),
Art. VI of the Constitution. In DAP no additional funds were withdrawn
from the Treasury otherwise, an appropriation made by law would have
been required. Funds, which were already appropriated for by the GAA,
were merely being realigned via the DAP.
II. No, there is no executive impoundment in the DAP. Impoundment of
funds refers to the Presidents power to refuse to spend appropriations or to
retain or deduct appropriations for whatever reason. Impoundment is
actually prohibited by the GAA unless there will be an unmanageable
national government budget deficit (which did not happen). Nevertheless,
theres no impoundment in the case at bar because whats involved in the
DAP was the transfer of funds.
III. No, the transfers made through the DAP were unconstitutional. It is
true that the President (and even the heads of the other branches of the
government) are allowed by the Constitution to make realignment of funds,
however, such transfer or realignment should only be made within their
respective offices. Thus, no cross-border transfers/augmentations may be
allowed. But under the DAP, this was violated because funds appropriated
by the GAA for the Executive were being transferred to the Legislative and
other non-Executive agencies.
Further, transfers within their respective offices also contemplate
realignment of funds to an existing project in the GAA. Under the DAP,
even though some projects were within the Executive, these projects are
non-existent insofar as the GAA is concerned because no funds were
appropriated to them in the GAA. Although some of these projects may be
legitimate, they are still non-existent under the GAA because they were not
provided for by the GAA. As such, transfer to such projects is
unconstitutional and is without legal basis.
On the issue of what are savings
These DAP transfers are not savings contrary to what was being declared
by the Executive. Under the definition of savings in the GAA, savings
only occur, among other instances, when there is an excess in the funding of
a certain project once it is completed, finally discontinued, or finally
abandoned. The GAA does not refer to savings as funds withdrawn from
a slow moving project. Thus, since the statutory definition of savings was
not complied with under the DAP, there is no basis at all for the transfers.
Further, savings should only be declared at the end of the fiscal year. But
under the DAP, funds are already being withdrawn from certain projects in
the middle of the year and then being declared as savings by the Executive
particularly by the DBM.
IV. No. Unprogrammed funds from the GAA cannot be used as money
source for the DAP because under the law, such funds may only be used if
there is a certification from the National Treasurer to the effect that the
revenue collections have exceeded the revenue targets. In this case, no such
certification was secured before unprogrammed funds were used.
V. Yes. The Doctrine of Operative Fact, which recognizes the legal effects
of an act prior to it being declared as unconstitutional by the Supreme
Court, is applicable. The DAP has definitely helped stimulate the economy.
It has funded numerous projects. If the Executive is ordered to reverse all
actions under the DAP, then it may cause more harm than good. The DAP
effects can no longer be undone. The beneficiaries of the DAP cannot be
asked to return what they received especially so that they relied on the
validity of the DAP. However, the Doctrine of Operative Fact may not be
applicable to the authors, implementers, and proponents of the DAP if it is
so found in the appropriate tribunals (civil, criminal, or administrative) that
they have not acted in good faith.
THE POWER OF TAXATION
Tan v. Del Rosario
Facts:
1. Two consolidated cases assail the validity of RA 7496 or the Simplified
Net Income Taxation Scheme ("SNIT"), which amended certain provisions of
the NIRC, as well as the Rules and Regulations promulgated by public
respondents pursuant to said law.
2. Petitioners posit that RA 7496 is unconstitutional as it allegedly
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.
3. Petitioners contended that public respondents exceeded their rule-making
authority in applying SNIT to general professional partnerships. Petitioner
contends that the title of HB 34314, progenitor of RA 7496, is 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) when 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. Petitioners also contend it violated due process.
5. The Solicitor General espouses the position taken by public respondents.
6. The Court has given due course to both petitions.
ISSUE: Whether or not the tax law is unconstitutional for violating due
process
NO. 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 in herein case.
1. Uniformity of taxation, like the 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. Uniformity does not violate
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.
2. What is apparent from the amendatory law is the legislative intent to
increasingly shift the income tax system towards the schedular approach in
the income taxation of individual taxpayers and to maintain, by and large,
the present global treatment on taxable corporations. The Court does not
view this classification to be arbitrary and inappropriate.
ISSUE 2: Whether or not public respondents exceeded their authority in
promulgating the RR
No. 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.
Planters Products v. Fertiphil
Lessons Applicable: Bet. private and public suit, easier to file public suit,
Apply real party in interest test for private suit and direct injury test for
public suit, Validity test varies depending on which inherent power
Laws Applicable:
FACTS:
President Ferdinand Marcos, exercising his legislative powers, issued LOI
No. 1465 which provided, among others, for the imposition of a capital
recovery component (CRC) on the domestic sale of all grades of fertilizers
which resulted in having Fertiphil paying P 10/bag sold to the Fertilizer
and Perticide Authority (FPA).
FPA remits its collection to Far East Bank and Trust Company who
applies to the payment of corporate debts of Planters Products Inc. (PPI)
After the Edsa Revolution, FPA voluntarily stopped the imposition of the
P10 levy. Upon return of democracy, Fertiphil demanded a refund but PPI
refused. Fertiphil filed a complaint for collection and damages against FPA
and PPI with the RTC on the ground that LOI No. 1465 is unjust,
unreaonable oppressive, invalid and unlawful resulting to denial of due
process of law.
FPA answered that it is a valid exercise of the police power of the state in
ensuring the stability of the fertilizing industry in the country and that
Fertiphil did NOT sustain damages since the burden imposed fell on the
ultimate consumers.
RTC and CA favored Fertiphil holding that it is an exercise of the power of
taxation ad is as such because it is NOT for public purpose as PPI is a
private corporation.
ISSUE:
1. W/N Fertiphil has locus standi
2. W/N LOI No. 1465 is an invalid exercise of the power of taxation rather
the police power
Held:
1. Yes. In private suits, locus standi requires a litigant to be a "real party in
interest" or party who stands to be benefited or injured by the judgment in
the suit. In public suits, there is the right of the ordinary citizen to petition
the courts to be freed from unlawful government intrusion and illegal
official action subject to the direct injury test or where there must be
personal and substantial interest in the case such that he has sustained or
will sustain direct injury as a result. Being a mere procedural technicality,
it has also been held that locus standi may be waived in the public interest
such as cases of transcendental importance or with far-reaching implications
whether private or public suit, Fertiphil has locus standi.

2. As a seller, it bore the ultimate burden of paying the levy which made its
products more expensive and harm its business. It is also of paramount
public importance since it involves the constitutionality of a tax law and
use of taxes for public purpose.

3. Yes. Police power and the power of taxation are inherent powers of the
state but distinct and have different tests for validity. Police power is the
power of the state to enact the legislation that may interfere with personal
liberty on property in order to promote general welfare. While, the power of
taxation is the power to levy taxes as to be used for public purpose. The
main purpose of police power is the regulation of a behavior or conduct,
while taxation is revenue generation. The lawful subjects and lawful means
tests are used to determine the validity of a law enacted under the police
power. The power of taxation, on the other hand, is circumscribed by
inherent and constitutional limitations.

In this case, it is for purpose of revenue. But it is a robbery for the State to
tax the citizen and use the funds generation for a private purpose. Public
purpose does NOT only pertain to those purpose which are traditionally
viewed as essentially governmental function such as building roads and
delivery of basic services, but also includes those purposes designed to
promote social justice. Thus, public money may now be used for the
relocation of illegal settlers, low-cost housing and urban or agrarian reform.