RepublicofthePhilippines

SupremeCourt
BaguioCity
EN BANC
ATTY. SYLVIA BANDA, CONSORICIA O. PENSON, RADITO V.
PADRIGANO, JEAN R. DE MESA, LEAH P. DELA CRUZ, ANDY V.
MACASAQUIT, SENEN B. CORDOBA, ALBERT BRILLANTES,
GLORIA BISDA, JOVITA V. CONCEPCION, TERESITA G.
CARVAJAL, ROSANNA T. MALIWANAG, RICHARD ODERON,
CECILIA ESTERNON, BENEDICTO CABRAL, MA. VICTORIA E.
LAROCO, CESAR ANDRA, FELICISIMO GALACIO, ELSA R.
CALMA, FILOMENA A. GALANG, JEAN PAUL MELEGRITO,
CLARO G. SANTIAGO, JR., EDUARDO FRIAS, REYNALDO O.
ANDAL, NEPHTALIE IMPERIO, RUEL BALAGTAS, VICTOR R.
ORTIZ, FRANCISCO P. REYES, JR., ELISEO M. BALAGOT, JR.,
JOSE C. MONSALVE, JR., ARTURO ADSUARA, F.C. LADRERO,
JR., NELSON PADUA, MARCELA C. SAYAO, ANGELITO
MALAKAS, GLORIA RAMENTO, JULIANA SUPLEO, MANUEL
MENDRIQUE, E. TAYLAN, CARMELA BOBIS, DANILO VARGAS,
ROY-LEO C. PABLO, ALLAN VILLANUEVA, VICENTE R.
VELASCO, JR., IMELDA ERENO, FLORIZA M. CATIIS, RANIEL
R. BASCO, E. JALIJALI, MARIO C. CARAAN, DOLORES M.
AVIADO, MICHAEL P. LAPLANA, GUILLERMO G. SORIANO,
ALICE E. SOJO, ARTHUR G. NARNE, LETICIA SORIANO,
FEDERICO RAMOS, JR., PETERSON CAAMPUED, RODELIO L.
GOMEZ, ANTONIO D. GARCIA, JR., ANTONIO GALO, A.
SANCHEZ, SOL E. TAMAYO, JOSEPHINE A.M. COCJIN, DAMIAN
QUINTO, JR., EDLYN MARIANO, M.A. MALANUM, ALFREDO S.
ESTRELLA, and JESUS MEL SAYO,
Petitioners,

G.R. No. 166620

- versus EDUARDO R. ERMITA, in his capacity as Executive Secretary, THE

DIRECTOR GENERAL OF THE PHILIPPINE INFORMATION
AGENCY and THE NATIONAL TREASURER,
Respondents.

Present:
PUNO, C.J.,
CARPIO,
CORONA,
CARPIO MORALES,
VELASCO, JR.,
NACHURA,
LEONARDO-DE CASTRO,
BRION,
PERALTA,
BERSAMIN,
DEL CASTILLO,

ABAD,*
VILLARAMA, JR.,
PEREZ, and
MENDOZA, JJ.

Promulgated:

April 20, 2010

x--------------------------------------------------x
DECISION
LEONARDO-DE CASTRO, J.:
The present controversy arose from a Petition for Certiorari and prohibition challenging the
constitutionality of Executive Order No. 378 dated October 25, 2004, issued by President Gloria
Macapagal Arroyo (President Arroyo). Petitioners characterize their action as a class suit filed on their own
behalf and on behalf of all their co-employees at the National Printing Office (NPO).
The NPO was formed on July 25, 1987, during the term of former President Corazon C.
Aquino (President Aquino), by virtue of Executive Order No. 285[1] which provided, among others, the
creation of the NPO from the merger of the Government Printing Office and the relevant printing units of
the Philippine Information Agency (PIA). Section 6 of Executive Order No. 285 reads:
SECTION 6. Creation of the National Printing Office. There is
hereby created a National Printing Office out of the merger of the Government
Printing Office and the relevant printing units of the Philippine Information
Agency. The Office shall have exclusive printing jurisdiction over the following:
a. Printing, binding and distribution of all standard and accountable
forms of national, provincial, city and municipal governments, including
government corporations;
b.

Printing of officials ballots;

c.
Printing of public documents such as the Official
Gazette, General Appropriations Act, Philippine Reports, and development
information materials of the Philippine Information Agency.
The Office may also accept other government printing jobs, including
government publications, aside from those enumerated above, but not in an
exclusive basis.

The details of the organization, powers, functions, authorities, and

related management aspects of the Office shall be provided in the implementing
details which shall be prepared and promulgated in accordance with Section II of
this Executive Order.
The Office shall be attached to the Philippine Information Agency.
On October 25, 2004, President Arroyo issued the herein assailed Executive Order No. 378,
amending Section 6 of Executive Order No. 285 by, inter alia, removing the exclusive jurisdiction of the
NPO over the printing services requirements of government agencies and instrumentalities. The pertinent
portions of Executive Order No. 378, in turn, provide:
SECTION 1. The NPO shall continue to provide printing services
to government agencies and instrumentalities as mandated by law. However,
it shall no longer enjoy exclusive jurisdiction over the printing services
requirements of the government over standard and accountable forms. It
shall have to compete with the private sector, except in the printing of election
paraphernalia which could be shared with the Bangko Sentral ng Pilipinas, upon
the discretion of the Commission on Elections consistent with the provisions of
the Election Code of 1987.
SECTION 2. Government agencies/instrumentalities may source
printing services outside NPO provided that:
2.1 The printing services to be provided by the private sector is
superior in quality and at a lower cost than what is offered by the NPO; and
2.2 The private printing provider is flexible in terms of meeting the
target completion time of the government agency.
SECTION 3. In the exercise of its functions, the amount to be
appropriated for the programs, projects and activities of the NPO in the
General Appropriations Act (GAA) shall be limited to its income without
additional financial support from the government. (Emphases and
underscoring supplied.)
Pursuant to Executive Order No. 378, government agencies and instrumentalities are allowed
to source their printing services from the private sector through competitive bidding, subject to the
condition that the services offered by the private supplier be of superior quality and lower in cost compared
to what was offered by the NPO. Executive Order No. 378 also limited NPOs appropriation in the General
Appropriations Act to its income.
Perceiving Executive Order No. 378 as a threat to their security of tenure as employees of the
NPO, petitioners now challenge its constitutionality, contending that: (1) it is beyond the executive powers
of President Arroyo to amend or repeal Executive Order No. 285 issued by former President Aquino when
the latter still exercised legislative powers; and (2) Executive Order No. 378 violates petitioners security of
tenure, because it paves the way for the gradual abolition of the NPO.
We dismiss the petition.
Before proceeding to resolve the substantive issues, the Court must first delve into a
procedural matter. Since petitioners instituted this case as a class suit, the Court, thus, must first determine
if the petition indeed qualifies as one. In Board of Optometry v. Colet,[2] we held that [c]ourts must
exercise utmost caution before allowing a class suit, which is the exception to the requirement of joinder of

all indispensable parties. For while no difficulty may arise if the decision secured is favorable to the
plaintiffs, a quandary would result if the decision were otherwise as those who were deemed impleaded by
their self-appointed representatives would certainly claim denial of due process.
Section 12, Rule 3 of the Rules of Court defines a class suit, as follows:
Sec. 12. Class suit. When the subject matter of the controversy is one
of common or general interest to many persons so numerous that it is
impracticable to join all as parties, a number of them which the court finds to be
sufficiently numerous and representative as to fully protect the interests of all
concerned may sue or defend for the benefit of all. Any party in interest shall have
the right to intervene to protect his individual interest.
From the foregoing definition, the requisites of a class suit are: 1) the subject matter of
controversy is one of common or general interest to many persons; 2) the parties affected are so numerous
that it is impracticable to bring them all to court; and 3) the parties bringing the class suit are sufficiently
numerous or representative of the class and can fully protect the interests of all concerned.
In Mathay v. The Consolidated Bank and Trust Company,[3] the Court held that:
An action does not become a class suit merely because it is designated as such in
the pleadings. Whether the suit is or is not a class suit depends upon the attending
facts, and the complaint, or other pleading initiating the class action should
allege the existence of the necessary facts, to wit, the existence of a subject matter
of common interest, and the existence of a class and the number of persons in the
alleged class, in order that the court might be enabled to determine whether
the members of the class are so numerous as to make it impracticable to bring
them all before the court, to contrast the number appearing on the record with
the number in the class and to determine whether claimants on record
adequately represent the class and the subject matter of general or common
interest. (Emphases ours.)
Here, the petition failed to state the number of NPO employees who would be affected by the
assailed Executive Order and who were allegedly represented by petitioners. It was the Solicitor General,
as counsel for respondents, who pointed out that there were about 549 employees in the NPO.[4] The 67
petitioners undeniably comprised a small fraction of the NPO employees whom they claimed to represent.
Subsequently, 32 of the original petitioners executed an Affidavit of Desistance, while one signed a letter
denying ever signing the petition,[5] ostensibly reducing the number of petitioners to 34. We note that
counsel for the petitioners challenged the validity of the desistance or withdrawal of some of the
petitioners and insinuated that such desistance was due to pressure from people close to the seat of power.
[6] Still, even if we were to disregard the affidavit of desistance filed by some of the petitioners, it is
highly doubtful that a sufficient, representative number of NPO employees have instituted this purported
class suit. A perusal of the petition itself would show that of the 67 petitioners who signed the
Verification/Certification of Non-Forum Shopping, only 20 petitioners were in fact mentioned in the jurat
as having duly subscribed the petition before the notary public. In other words, only 20 petitioners
effectively instituted the present case.
Indeed, in MVRS Publications, Inc. v. Islamic Dawah Council of the Philippines, Inc.,[7] we
observed that an element of a class suit or representative suit is the adequacy of representation. In
determining the question of fair and adequate representation of members of a class, the court must consider
(a) whether the interest of the named party is coextensive with the interest of the other members of the
class; (b) the proportion of those made a party, as it so bears, to the total membership of the class; and (c)
any other factor bearing on the ability of the named party to speak for the rest of the class.
Previously, we held in Ibaes v. Roman Catholic Church[8] that where the interests of the

plaintiffs and the other members of the class they seek to represent are diametrically opposed, the class suit
will not prosper.
It is worth mentioning that a Manifestation of Desistance,[9] to which the previously
mentioned Affidavit of Desistance[10] was attached, was filed by the President of the National Printing
Office Workers Association (NAPOWA). The said manifestation expressed NAPOWAs opposition to the
filing of the instant petition in any court. Even if we take into account the contention of petitioners counsel
that the NAPOWA President had no legal standing to file such manifestation, the said pleading is a clear
indication that there is a divergence of opinions and views among the members of the class sought to be
represented, and not all are in favor of filing the present suit. There is here an apparent conflict between
petitioners interests and those of the persons whom they claim to represent. Since it cannot be said that
petitioners sufficiently represent the interests of the entire class, the instant case cannot be properly treated
as a class suit.
As to the merits of the case, the petition raises two main grounds to assail the constitutionality
of Executive Order No. 378:
First, it is contended that President Arroyo cannot amend or repeal Executive Order No. 285
by the mere issuance of another executive order (Executive Order No. 378). Petitioners maintain that
former President Aquinos Executive Order No. 285 is a legislative enactment, as the same was issued
while President Aquino still had legislative powers under the Freedom Constitution;[11] thus, only
Congress through legislation can validly amend Executive Order No. 285.
Second, petitioners maintain that the issuance of Executive Order No. 378 would lead to the
eventual abolition of the NPO and would violate the security of tenure of NPO employees.
Anent the first ground raised in the petition, we find the same patently without merit.
It is a well-settled principle in jurisprudence that the President has the power to reorganize the
offices and agencies in the executive department in line with the Presidents constitutionally granted power
of control over executive offices and by virtue of previous delegation of the legislative power to reorganize
executive offices under existing statutes.
In Buklod ng Kawaning EIIB v. Zamora,[12] the Court pointed out that Executive Order No.
292 or the Administrative Code of 1987 gives the President continuing authority to reorganize and redefine
the functions of the Office of the President. Section 31, Chapter 10, Title III, Book III of the said Code, is
explicit:
Sec. 31. Continuing Authority of the President to Reorganize his
Office. The President, subject to the policy in the Executive Office and in order
to achieve simplicity, economy and efficiency, shall have continuing authority
to reorganize the administrative structure of the Office of the President. For
this purpose, he may take any of the following actions:
(1) Restructure the internal organization of
the Office of the President Proper, including the
immediate
Offices,
the
President
Special
Assistants/Advisers System and the Common Staff
Support System, by abolishing, consolidating or
merging units thereof or transferring functions from
one unit to another;
(2) Transfer any function under the Office
of the President to any other Department or Agency as
well as transfer functions to the Office of the President
from other Departments and Agencies; and

(3) Transfer any agency under the Office of

the President to any other department or agency as
well as transfer agencies to the Office of the President
from other Departments or agencies. (Emphases ours.)
Interpreting the foregoing provision, we held in Buklod ng Kawaning EIIB, thus:
But of course, the list of legal basis authorizing the President to
reorganize any department or agency in the executive branch does not have to end
here. We must not lose sight of the very source of the power that which constitutes
an express grant of power. Under Section 31, Book III of Executive Order No. 292
(otherwise known as the Administrative Code of 1987), the President, subject to
the policy in the Executive Office and in order to achieve simplicity, economy and
efficiency, shall have the continuing authority to reorganize the administrative
structure of the Office of the President. For this purpose, he may transfer the
functions of other Departments or Agencies to the Office of the President. In
Canonizado v. Aguirre [323 SCRA 312 (2000)], we ruled that reorganization
involves the reduction of personnel, consolidation of offices, or abolition thereof
by reason of economy or redundancy of functions. It takes place when there is
an alteration of the existing structure of government offices or units therein,
including the lines of control, authority and responsibility between them. The
EIIB is a bureau attached to the Department of Finance. It falls under the Office of
the President. Hence, it is subject to the Presidents continuing authority to
reorganize.[13] (Emphasis ours.)
It is undisputed that the NPO, as an agency that is part of the Office of the Press Secretary
(which in various times has been an agency directly attached to the Office of the Press Secretary or as an
agency under the Philippine Information Agency), is part of the Office of the President.[14]
Pertinent to the case at bar, Section 31 of the Administrative Code of 1987 quoted above
authorizes the President (a) to restructure the internal organization of the Office of the President Proper,
including the immediate Offices, the President Special Assistants/Advisers System and the Common Staff
Support System, by abolishing, consolidating or merging units thereof or transferring functions from one
unit to another, and (b) to transfer functions or offices from the Office of the President to any other
Department or Agency in the Executive Branch, and vice versa.
Concomitant to such power to abolish, merge or consolidate offices in the Office of the
President Proper and to transfer functions/offices not only among the offices in the Office of President
Proper but also the rest of the Office of the President and the Executive Branch, the President implicitly has
the power to effect less radical or less substantive changes to the functional and internal structure of the
Office of the President, including the modification of functions of such executive agencies as the exigencies
of the service may require.
In the case at bar, there was neither an abolition of the NPO nor a removal of any of its
functions to be transferred to another agency. Under the assailed Executive Order No. 378, the NPO
remains the main printing arm of the government for all kinds of government forms and publications but in
the interest of greater economy and encouraging efficiency and profitability, it must now compete with the
private sector for certain government printing jobs, with the exception of election paraphernalia which
remains the exclusive responsibility of the NPO, together with the Bangko Sentral ng Pilipinas, as the
Commission on Elections may determine. At most, there was a mere alteration of the main function of the
NPO by limiting the exclusivity of its printing responsibility to election forms.[15]
There is a view that the reorganization actions that the President may take with respect to

agencies in the Office of the President are strictly limited to transfer of functions and offices as seemingly
provided in Section 31 of the Administrative Code of 1987.
However, Section 20, Chapter 7, Title I, Book III of the same Code significantly provides:
Sec. 20. Residual Powers. Unless Congress provides otherwise, the
President shall exercise such other powers and functions vested in the President
which are provided for under the laws and which are not specifically enumerated
above, or which are not delegated by the President in accordance with law.
(Emphasis ours.)
Pursuant to Section 20, the power of the President to reorganize the Executive Branch under
Section 31 includes such powers and functions that may be provided for under other laws. To be sure, an
inclusive and broad interpretation of the Presidents power to reorganize executive offices has been
consistently supported by specific provisions in general appropriations laws.
In the oft-cited Larin v. Executive Secretary,[16] the Court likewise adverted to certain
provisions of Republic Act No. 7645, the general appropriations law for 1993, as among the statutory
bases for the Presidents power to reorganize executive agencies, to wit:
Section 48 of R.A. 7645 provides that:
Sec. 48. Scaling Down and Phase Out of
Activities of Agencies Within the Executive Branch. The
heads of departments, bureaus and offices and agencies are
hereby directed to identify their respective activities which
are no longer essential in the delivery of public services and
which may be scaled down, phased out or abolished,
subject to civil [service] rules and regulations. x x x. Actual
scaling down, phasing out or abolition of the activities shall
be effected pursuant to Circulars or Orders issued for the
purpose by the Office of the President.
Said provision clearly mentions the acts of "scaling down, phasing out and
abolition" of offices only and does not cover the creation of offices or transfer
of functions. Nevertheless, the act of creating and decentralizing is included in
the subsequent provision of Section 62, which provides that:
Sec. 62. Unauthorized organizational changes.
Unless otherwise created by law or directed by the
President of the Philippines, no organizational unit or
changes in key positions in any department or agency shall
be authorized in their respective organization structures and
be funded from appropriations by this Act.
The foregoing provision evidently shows that the President is authorized to
effect organizational changes including the creation of offices in the department
or agency concerned.
The contention of petitioner that the two provisions are riders deserves scant
consideration. Well settled is the rule that every law has in its favor the presumption
of constitutionality. Unless and until a specific provision of the law is declared
invalid and unconstitutional, the same is valid and binding for all intents and
purposes.[17] (Emphases ours)
Buklod ng Kawaning EIIB v. Zamora,[18] where the Court upheld as valid then President
Joseph Estradas Executive Order No. 191 deactivating the Economic Intelligence and Investigation Bureau
(EIIB) of the Department of Finance, hewed closely to the reasoning in Larin. The Court, among others,
also traced from the General Appropriations Act[19] the Presidents authority to effect organizational

changes in the department or agency under the executive structure, thus:

We adhere to the precedent or ruling in Larin that this provision recognizes the
authority of the President to effect organizational changes in the department or
agency under the executive structure. Such a ruling further finds support in Section
78 of Republic Act No. 8760. Under this law, the heads of departments, bureaus,
offices and agencies and other entities in the Executive Branch are directed (a) to
conduct a comprehensive review of their respective mandates, missions, objectives,
functions, programs, projects, activities and systems and procedures; (b) identify
activities which are no longer essential in the delivery of public services and which
may be scaled down, phased-out or abolished; and (c) adopt measures that will
result in the streamlined organization and improved overall performance of
their respective agencies. Section 78 ends up with the mandate that the actual
streamlining and productivity improvement in agency organization and operation
shall be effected pursuant to Circulars or Orders issued for the purpose by the Office
of the President. x x x.[20] (Emphasis ours)
Notably, in the present case, the 2003 General Appropriations Act, which was reenacted in
2004 (the year of the issuance of Executive Order No. 378), likewise gave the President the authority to
effect a wide variety of organizational changes in any department or agency in the Executive Branch.
Sections 77 and 78 of said Act provides:
Section 77. Organized Changes. Unless otherwise provided by law
or directed by the President of the Philippines, no changes in key positions or
organizational units in any department or agency shall be authorized in their
respective organizational structures and funded from appropriations provided by
this Act.
Section 78.
Institutional Strengthening and Productivity
Improvement in Agency Organization and Operations and Implementation of
Organization/Reorganization Mandated by Law. The Government shall adopt
institutional strengthening and productivity improvement measures to
improve service delivery and enhance productivity in the government, as directed
by the President of the Philippines. The heads of departments, bureaus, offices,
agencies, and other entities of the Executive Branch shall accordingly conduct a
comprehensive review of their respective mandates, missions, objectives,
functions, programs, projects, activities and systems and procedures; identify
areas where improvements are necessary; and implement corresponding
structural, functional and operational adjustments that will result in
streamlined organization and operations and improved performance and
productivity: PROVIDED, That actual streamlining and productivity
improvements in agency organization and operations, as authorized by the
President of the Philippines for the purpose, including the utilization of savings
generated from such activities, shall be in accordance with the rules and
regulations to be issued by the DBM, upon consultation with the Presidential
Committee on Effective Governance: PROVIDED, FURTHER, That in the
implementation of organizations/reorganizations, or specific changes in
agency structure, functions and operations as a result of institutional
strengthening or as mandated by law, the appropriation, including the
functions, projects, purposes and activities of agencies concerned may be
realigned as may be necessary: PROVIDED, FINALLY, That any unexpended
balances or savings in appropriations may be made available for payment of
retirement gratuities and separation benefits to affected personnel, as authorized
under existing laws. (Emphases and underscoring ours.)

Implicitly, the aforequoted provisions in the appropriations law recognize the power of the
President to reorganize even executive offices already funded by the said appropriations act, including the
power to implement structural, functional, and operational adjustments in the executive bureaucracy
and, in so doing, modify or realign appropriations of funds as may be necessary under such reorganization.
Thus, insofar as petitioners protest the limitation of the NPOs appropriations to its own income under
Executive Order No. 378, the same is statutorily authorized by the above provisions.
In the 2003 case of Bagaoisan v. National Tobacco Administration,[21] we upheld the
streamlining of the National Tobacco Administration through a reduction of its personnel and deemed the
same as included in the power of the President to reorganize executive offices granted under the laws,
notwithstanding that such streamlining neither involved an abolition nor a transfer of functions of an office.
To quote the relevant portion of that decision:
In the recent case of Rosa Ligaya C. Domingo, et al. vs. Hon. Ronaldo D. Zamora,
in his capacity as the Executive Secretary, et al., this Court has had occasion to also
delve on the Presidents power to reorganize the Office of the President under
Section 31(2) and (3) of Executive Order No. 292 and the power to reorganize the
Office of the President Proper. x x x
xxxx
The first sentence of the law is an express grant to the President of a continuing
authority to reorganize the administrative structure of the Office of the President.
The succeeding numbered paragraphs are not in the nature of provisos that
unduly limit the aim and scope of the grant to the President of the power to
reorganize but are to be viewed in consonance therewith. Section 31(1) of
Executive Order No. 292 specifically refers to the Presidents power to restructure
the internal organization of the Office of the President Proper, by abolishing,
consolidating or merging units hereof or transferring functions from one unit to
another, while Section 31(2) and (3) concern executive offices outside the Office of
the President Proper allowing the President to transfer any function under the
Office of the President to any other Department or Agency and vice-versa, and the
transfer of any agency under the Office of the President to any other department or
agency and vice-versa.
In the present instance, involving neither an abolition nor transfer
of offices, the assailed action is a mere reorganization under the general
provisions of the law consisting mainly of streamlining the NTA in the interest
of simplicity, economy and efficiency. It is an act well within the authority of
the President motivated and carried out, according to the findings of the appellate
court, in good faith, a factual assessment that this Court could only but accept.[22]
(Emphases and underscoring supplied.)
In the more recent case of Tondo Medical Center Employees Association v. Court of Appeals,
[23] which involved a structural and functional reorganization of the Department of Health under an
executive order, we reiterated the principle that the power of the President to reorganize agencies under
the executive department by executive or administrative order is constitutionally and statutorily
recognized. We held in that case:
This Court has already ruled in a number of cases that the
President may, by executive or administrative order, direct the reorganization
of government entities under the Executive Department. This is also sanctioned
under the Constitution, as well as other statutes.
Section 17, Article VII of the 1987 Constitution, clearly states: [T]he
president shall have control of all executive departments, bureaus and offices.

Section 31, Book III, Chapter 10 of Executive Order No. 292, also known as the
Administrative Code of 1987 reads:
SEC. 31. Continuing Authority of the President
to Reorganize his Office - The President, subject to the
policy in the Executive Office and in order to achieve
simplicity, economy and efficiency, shall have continuing
authority to reorganize the administrative structure of the
Office of the President. For this purpose, he may take any
of the following actions:
xxxx
In Domingo v. Zamora [445 Phil. 7 (2003)], this Court explained the
rationale behind the Presidents continuing authority under the Administrative Code
to reorganize the administrative structure of the Office of the President. The law
grants the President the power to reorganize the Office of the President in
recognition of the recurring need of every President to reorganize his or her
office to achieve simplicity, economy and efficiency. To remain effective and
efficient, it must be capable of being shaped and reshaped by the President in the
manner the Chief Executive deems fit to carry out presidential directives and
policies.
The Administrative Code provides that the Office of the President consists of the
Office of the President Proper and the agencies under it. The agencies under the
Office of the President are identified in Section 23, Chapter 8, Title II of the
Administrative Code:
Sec. 23. The Agencies under the Office of the
President.The agencies under the Office of the President
refer to those offices placed under the chairmanship of the
President, those under the supervision and control of the
President, those under the administrative supervision of
the Office of the President, those attached to it for policy
and program coordination, and those that are not placed by
law or order creating them under any specific department.
xxxx
The power of the President to reorganize the executive department is likewise
recognized in general appropriations laws. x x x.
xxxx
Clearly, Executive Order No. 102 is well within the constitutional power of the
President to issue. The President did not usurp any legislative prerogative in
issuing Executive Order No. 102. It is an exercise of the Presidents
constitutional power of control over the executive department, supported by
the provisions of the Administrative Code, recognized by other statutes, and
consistently affirmed by this Court.[24] (Emphases supplied.)
Subsequently, we ruled in Anak Mindanao Party-List Group v. Executive Secretary[25] that:
The Constitutions express grant of the power of control in the President justifies an
executive action to carry out reorganization measures under a broad authority of

law.
In enacting a statute, the legislature is presumed to have deliberated with full
knowledge of all existing laws and jurisprudence on the subject. It is thus
reasonable to conclude that in passing a statute which places an agency under the
Office of the President, it was in accordance with existing laws and jurisprudence
on the Presidents power to reorganize.
In establishing an executive department, bureau or office, the
legislature necessarily ordains an executive agencys position in the scheme of
administrative structure. Such determination is primary, but subject to the
Presidents continuing authority to reorganize the administrative structure. As far as
bureaus, agencies or offices in the executive department are concerned, the power
of control may justify the President to deactivate the functions of a particular
office. Or a law may expressly grant the President the broad authority to carry out
reorganization measures. The Administrative Code of 1987 is one such law.[26]
The issuance of Executive Order No. 378 by President Arroyo is an exercise of a delegated
legislative power granted by the aforementioned Section 31, Chapter 10, Title III, Book III of the
Administrative Code of 1987, which provides for the continuing authority of the President to reorganize
the Office of the President, in order to achieve simplicity, economy and efficiency. This is a matter already
well-entrenched in jurisprudence. The reorganization of such an office through executive or administrative
order is also recognized in the Administrative Code of 1987. Sections 2 and 3, Chapter 2, Title I, Book III
of the said Code provide:
Sec. 2. Executive Orders. - Acts of the President providing for rules of a general
or permanent character in implementation or execution of constitutional or
statutory powers shall be promulgated in executive orders.
Sec. 3. Administrative Orders. - Acts of the President which relate to particular
aspects of governmental operations in pursuance of his duties as administrative
head shall be promulgated in administrative orders. (Emphases supplied.)
To reiterate, we find nothing objectionable in the provision in Executive Order No. 378
limiting the appropriation of the NPO to its own income. Beginning with Larin and in subsequent cases,
the Court has noted certain provisions in the general appropriations laws as likewise reflecting the power
of the President to reorganize executive offices or agencies even to the extent of modifying and realigning
appropriations for that purpose.
Petitioners contention that the issuance of Executive Order No. 378 is an invalid exercise of
legislative power on the part of the President has no legal leg to stand on.
In all, Executive Order No. 378, which purports to institute necessary reforms in government
in order to improve and upgrade efficiency in the delivery of public services by redefining the functions of
the NPO and limiting its funding to its own income and to transform it into a self-reliant agency able to
compete with the private sector, is well within the prerogative of President Arroyo under her continuing
delegated legislative power to reorganize her own office. As pointed out in the separate concurring opinion
of our learned colleague, Associate Justice Antonio T. Carpio, the objective behind Executive Order No.
378 is wholly consistent with the state policy contained in Republic Act No. 9184 or the Government
Procurement Reform Act to encourage competitiveness by extending equal opportunity to private
contracting parties who are eligible and qualified.[27]
To be very clear, this delegated legislative power to reorganize pertains only to the Office of
the President and the departments, offices and agencies of the executive branch and does not include the

Judiciary, the Legislature or the constitutionally-created or mandated bodies. Moreover, it must be stressed
that the exercise by the President of the power to reorganize the executive department must be in
accordance with the Constitution, relevant laws and prevailing jurisprudence.
In this regard, we are mindful of the previous pronouncement of this Court in Dario v.
Mison[28] that:
Reorganizations in this jurisdiction have been regarded as valid
provided they are pursued in good faith. As a general rule, a reorganization is
carried out in good faith if it is for the purpose of economy or to make bureaucracy
more efficient. In that event, no dismissal (in case of a dismissal) or separation
actually occurs because the position itself ceases to exist. And in that case, security
of tenure would not be a Chinese wall. Be that as it may, if the abolition, which is
nothing else but a separation or removal, is done for political reasons or purposely
to defeat security of tenure, or otherwise not in good faith, no valid abolition takes
place and whatever abolition is done, is void ab initio. There is an invalid abolition
as where there is merely a change of nomenclature of positions, or where claims of
economy are belied by the existence of ample funds. (Emphasis ours.)
Stated alternatively, the presidential power to reorganize agencies and offices in the executive
branch of government is subject to the condition that such reorganization is carried out in good faith.
If the reorganization is done in good faith, the abolition of positions, which results in loss of
security of tenure of affected government employees, would be valid. In Buklod ng Kawaning EIIB v.
Zamora,[29] we even observed that there was no such thing as an absolute right to hold office. Except
those who hold constitutional offices, which provide for special immunity as regards salary and tenure, no
one can be said to have any vested right to an office or salary.[30]
This brings us to the second ground raised in the petition that Executive Order No. 378, in
allowing government agencies to secure their printing requirements from the private sector and in limiting
the budget of the NPO to its income, will purportedly lead to the gradual abolition of the NPO and the loss
of security of tenure of its present employees. In other words, petitioners avow that the reorganization of
the NPO under Executive Order No. 378 is tainted with bad faith. The basic evidentiary rule is that he who
asserts a fact or the affirmative of an issue has the burden of proving it.[31]
A careful review of the records will show that petitioners utterly failed to substantiate their
claim. They failed to allege, much less prove, sufficient facts to show that the limitation of the NPOs
budget to its own income would indeed lead to the abolition of the position, or removal from office, of any
employee. Neither did petitioners present any shred of proof of their assertion that the changes in the
functions of the NPO were for political considerations that had nothing to do with improving the efficiency
of, or encouraging operational economy in, the said agency.
In sum, the Court finds that the petition failed to show any constitutional infirmity or grave
abuse of discretion amounting to lack or excess of jurisdiction in President Arroyos issuance of Executive
Order No. 378.
WHEREFORE, the petition is hereby DISMISSED and the prayer for a Temporary
Restraining Order and/or a Writ of Preliminary Injunction is hereby DENIED. No costs.
SO ORDERED.

TERESITA J. LEONARDO-DE CASTRO

Associate Justice

WE CONCUR:

REYNATO S. PUNO
Chief Justice

ANTONIO T. CARPIO
Associate Justice

CONCHITA CARPIO MORALES

Associate Justice

RENATO C. C
Associate J

PRESBITERO J. V
Associate J

ANTONIO EDUARDO B. NACHURA

Associate Justice

ARTURO D.
Associate J

DIOSDADO M. PERALTA
Associate Justice

LUCAS P. BE
Associate J

MARIANO C. DEL CASTILLO

Associate Justice

On official
ROBERTO A
Associate J

MARTIN S. VILLARAMA, JR.

Associate Justice

JOSE P. PE
Associate J

JOSE C. MENDOZA
Associate Justice

C E R T I F I C AT I O N
Pursuant to Section 13, Article VIII of the Constitution, I 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.

REYNATO S. PUNO
Chief Justice

EN BANC
WILLIAM C. DAGAN, CARLOS G.R. No. 175220
H. REYES, NARCISO MORALES,
BONIFACIO MANTILLA, Present:
CESAR AZURIN, WEITONG LIM,
MA. TERESA TRINIDAD, MA. PUNO, C.J.,
CARMELITA FLORENTINO, QUISUMBING,
Petitioners, YNARES-SANTIAGO,
CARPIO,
AUSTRIA-MARTINEZ,
CORONA,
- versus - CARPIO MORALES,
AZCUNA,
TINGA,
CHICO-NAZARIO,
VELASCO, JR.,
PHILIPPINE RACING COMMISSION, NACHURA,
MANILA JOCKEY CLUB, INC., and LEONARDO DE CASTRO,
PHILIPPINE RACING CLUB, INC., BRION, and
Respondents PERALTA, JJ.
Promulgated:
February 12, 2009
x ----------------------------------------------------------------------------------- x

DECISION
TINGA, J.:
The subject of this petition for certiorari is the decision[1] of the Court of Appeals in CA-G.R.
SP No. 95212, affirming in toto the judgment[2] of the Regional Trial Court of Makati in Civil Case No.
04-1228.
The controversy stemmed from the 11 August 2004 directive[3] issued by the Philippine
Racing Commission (Philracom) directing the Manila Jockey Club, Inc. (MJCI) and Philippine Racing
Club, Inc. (PRCI) to immediately come up with their respective Clubs House Rule to address Equine
Infectious Anemia (EIA)[4] problem and to rid their facilities of horses infected with EIA. Said directive
was issued pursuant to Administrative Order No. 5[5] dated 28 March 1994 by the Department of
Agriculture declaring it unlawful for any person, firm or corporation to ship, drive, or transport horses from
any locality or place except when accompanied by a certificate issued by the authority of the Director of the
Bureau of Animal Industry (BAI).[6]
In compliance with the directive, MJCI and PRCI ordered the owners of racehorses stable in
their establishments to submit the horses to blood sampling and administration of the Coggins Test to
determine whether they are afflicted with the EIA virus. Subsequently, on 17 September 2004, Philracom
issued copies of the guidelines for the monitoring and eradication of EIA.[7]

Petitioners and racehorse owners William Dagan (Dagan), Carlos Reyes, Narciso Morales,
Bonifacio Montilla, Cezar Azurin, Weitong Lim, Ma. Teresa Trinidad and Ma. Carmelita Florentino refused
to comply with the directive. First, they alleged that there had been no prior consultation with horse
owners. Second, they claimed that neither official guidelines nor regulations had been issued relative to the
taking of blood samples. And third, they asserted that no documented case of EIA had been presented to
justify the undertaking.[8]
Despite resistance from petitioners, the blood testing proceeded. The horses, whose owners
refused to comply were banned from the races, were removed from the actual day of race, prohibited from
renewing their licenses or evicted from their stables.
When their complaint went unheeded, the racehorse owners lodged a complaint before the Office of the
President (OP) which in turn issued a directive instructing Philracom to investigate the matter.
For failure of Philracom to act upon the directive of the OP, petitioners filed a petition for injunction with
application for the issuance of a temporary restraining order (TRO). In an order[9] dated 11 November
2004, the trial court issued a TRO.

Dagan refused to comply with the directives because, according to him, the same are unfair as there are no
implementing rules on the banning of sick horses from races. Consequently, his horses were evicted from
the stables and transferred to an isolation area. He also admitted that three of his horses had been found
positive for EIA.[10]
Confronted with two issues, namely: whether there were valid grounds for the issuance of a writ of
injunction and whether respondents had acted with whim and caprice in the implementation of the
contested guideline, the trial court resolved both queries in the negative.

The trial court found that most racehorse owners, except for Dagan, had already subjected their racehorses
to EIA testing. Their act constituted demonstrated compliance with the contested guidelines, according to
the trial court. Hence, the acts sought to be enjoined had been rendered moot and academic.
With respect to the subject guidelines, the trial court upheld their validity as an exercise of police power,
thus:
The Petitioners submission that the subject guidelines are oppressive
and hence confiscatory of proprietary rights is likewise viewed by this Court to be
barren of factual and legal support. The horseracing industry, needless to state, is
imbued with public interest deserving of utmost concern if not constant vigilance.
The Petitioners do not dispute this. It is because of this basic fact that respondents
are expected to police the concerned individuals and adopt measures that will
promote and protect the interests of all the stakeholders starting from the moneyed
horse-owners, gawking bettors down to the lowly maintainers of the stables. This is
a clear and valid exercise of police power with the respondents acting for the State.
Participation in the business of horseracing is but a privilege; it is not a right. And
no clear acquiescence to this postulation can there be than the Petitioners' own
undertaking to abide by the rules and conditions issued and imposed by the
respondents as specifically shown by their contracts of lease with MCJI.[11]
Petitioners appealed to the Court of Appeals. In its Decision dated 27 October 2006, the
appellate court affirmed in toto the decision of the trial court.
The appellate court upheld the authority of Philracom to formulate guidelines since it is vested
with exclusive jurisdiction over and control of the horse-racing industry per Section 8 of Presidential
Decree (P.D.) No. 8. The appellate court further pointed out that P.D. No. 420 also endows Philracom with
the power to prescribe additional rules and regulations not otherwise inconsistent with the said presidential
decree[12] and to perform such duties and exercise all powers incidental or necessary to the
accomplishment of its aims and objectives.[13] It similarly concluded that the petition for prohibition
should be dismissed on the ground of mootness in light of evidence indicating that petitioners had already
reconsidered their refusal to have their horses tested and had, in fact, subsequently requested the
administration of the test to the horses.[14]

Aggrieved by the appellate courts decision, petitioners filed the instant certiorari petition[15]
imputing grave abuse of discretion on the part of respondents in compelling petitioners to subject their
racehorses to blood testing.
In their amended petition,[16] petitioners allege that Philracoms unsigned and undated
implementing guidelines suffer from several infirmities. They maintain that the assailed guidelines do not
comply with due process requirements. Petitioners insist that racehorses already in the MJCI stables were
allowed to be so quartered because the individual horse owners had already complied with the Philracom
regulation that horses should not bear any disease. There was neither a directive nor a rule that racehorses
already lodged in the stables of the racing clubs should again be subjected to the collection of blood
samples preparatory to the conduct of the EIA tests,[17] petitioners note. Thus, it came as a surprise to
horse owners when told about the administration of a new Coggins Tests on old horses since the matter had
not been taken up with them.[18] No investigation or at least a summary proceeding was conducted
affording petitioners an opportunity to be heard.[19] Petitioners also aver that the assailed guidelines are
ultra vires in that the sanctions imposed for refusing to submit to medical examination are summary
eviction from the stables or arbitrary banning of participation in the races, notwithstanding the penalties
prescribed in the contract of lease.[20]

In its Comment,[21] the PRCI emphasizes that it merely obeyed the terms of its franchise and
abided by the rules enacted by Philracom.[22] For its part, Philracom, through the Office of the SolicitorGeneral (OSG), stresses that the case has become moot and academic since most of petitioners had
complied with the guidelines by subjecting their race horses to EIA testing. The horses found unafflicted
with the disease were eventually allowed to join the races.[23] Philracom also justified its right under the
law to regulate horse racing.[24] MJCI adds that Philracom need
not delegate its rule-making power to the former since MJCIs right to formulate its internal rules is
subsumed under the franchise granted to it by Congress.[25]
In their Reply,[26] petitioners raise for the first time the issue that Philracom had unconstitutionally
delegated its rule-making power to PRCI and MJCI in issuing the directive for them to come up with club
rules. In response to the claim that respondents had merely complied with their duties under their
franchises, petitioners counter that the power granted to PRCI and MJCI under their respective franchises is
limited to: (1) the construction, operation and maintenance of racetracks; (2) the establishment of branches
for booking purposes; and (3) the conduct of horse races.
It appears on record that only Dagan had refused to comply with the orders of respondents.
Therefore, the case subsists as regards Dagan.
Petitioners essentially assail two issuances of Philracom; namely: the Philracom directive[27]
and the subsequent guidelines addressed to MJCI and PRCI.
The validity of an administrative issuance, such as the assailed guidelines, hinges on
compliance with the following requisites:
1.
2.
3.
4.
All the prescribed requisites are met as regards the questioned issuances. Philracoms authority
is drawn from P.D. No. 420. The delegation made in the presidential decree is valid. Philracom did not
exceed its authority. And the issuances are fair and reasonable.

The rule is that what has been delegated cannot be delegated, or as expressed in the Latin
maxim: potestas delegate non delegare potest. This rule is based upon the ethical principle that such
delegated power constitutes not only a right but a duty to be performed by the delegate by the
instrumentality of his own judgment acting immediately upon the matter of legislation and not through the
intervening mind of another.[29] This rule however admits of recognized exceptions[30] such as the grant
of rule-making power to administrative agencies. They have been granted by Congress with the authority to
issue rules to regulate the implementation of a law entrusted to them. Delegated rule-making has become a
practical necessity in modern governance due to the increasing complexity and variety of public functions.
[31]
However, 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; and (b) fixes a standardthe limits of which are
sufficiently determinate and determinableto which the delegate must conform in the performance of his
functions. 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.[32]
P.D. No. 420 hurdles the tests of completeness and standards sufficiency.

Philracom was created for the purpose of carrying out the declared policy in Section 1 which is
to promote and direct the accelerated development and continued growth of horse racing not only in
pursuance of the sports development program but also in order to insure the full exploitation of the sport as
a source of revenue and employment. Furthermore, Philracom was granted exclusive jurisdiction and
control over every aspect of the conduct of horse racing, including the framing and scheduling of races, the
construction and safety of race tracks, and the security of racing. P.D. No. 420 is already complete in
itself.
Section 9 of the law fixes the standards and limitations to which Philracom must conform in the
performance of its functions, to wit:
Section 9. Specific Powers. Specifically, the Commission shall have the
power:
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
Clearly, there is a proper legislative delegation of rule-making power to Philracom. Clearly too,
for its part Philracom has exercised its rule-making power in a proper and reasonable manner. More
specifically, its discretion to rid the facilities of MJCI and PRCI of horses afflicted with EIA is aimed at
preserving the security and integrity of horse races.
Petitioners also question the supposed delegation by Philracom of its rule-making powers to
MJCI and PRCI.
There is no delegation of power to speak of between Philracom, as the delegator and MJCI and
PRCI as delegates. The Philracom directive is merely instructive in character. Philracom had instructed
PRCI and MJCI to immediately come up with Clubs House Rule to address the problem and rid their
facilities of horses infected with EIA. PRCI and MJCI followed-up when they ordered the racehorse
owners to submit blood samples and subject their race horses to blood testing. Compliance with the
Philracoms directive is part of the mandate of PRCI and MJCI under Sections 1[33] of R.A. No. 7953[34]
and Sections 1[35] and 2[36] of 8407.[37]

As correctly proferred by MJCI, its duty is not derived from the delegated authority of
Philracom but arises from the franchise granted to them by Congress allowing MJCI to do and carry out all
such acts, deeds and things as may be necessary to give effect to the foregoing.[38] As justified by PRCI,
obeying the terms of the franchise and abiding by whatever rules enacted by Philracom is its duty.[39]
More on the second, third and fourth requisites.
As to the second requisite, petitioners raise some infirmities relating to Philracoms guidelines.
They question the supposed belated issuance of the guidelines, that is, only after the collection of blood
samples for the Coggins Test was ordered. While it is conceded that the guidelines were issued a month
after Philracoms directive, this circumstance does not render the directive nor the guidelines void. The

directives validity and effectivity are not dependent on any supplemental guidelines. Philracom has every
right to issue directives to MJCI and PRCI with respect to the conduct of horse racing, with or without
implementing guidelines.
Petitioners also argue that Philracoms guidelines have no force and effect for lack of
publication and failure to file copies with the University of the Philippines (UP) Law Center as required by
law.
As a rule, the issuance of rules and regulations in the exercise of an administrative agency of its
quasi-legislative power does not require notice 7and hearing.[40] In Abella, Jr. v. Civil Service Commission,
[41] this Court had the occasion to rule that prior notice and hearing are not essential to the validity of rules
or regulations issued in the exercise of quasi-legislative powers since there is no determination of past
events or facts that have to be established or ascertained.[42]
The third requisite for the validity of an administrative issuance is that it must be within the
limits of the powers granted to it. The administrative body may not make rules and regulations which are
inconsistent with the provisions of the Constitution or a statute, particularly the statute it is administering or
which created it, or which are in derogation of, or defeat, the purpose of a statute.[43]
The assailed guidelines prescribe the procedure for monitoring and eradicating EIA. These
guidelines are in accord with Philracoms mandate under the law to regulate the conduct of horse racing in
the country.
Anent the fourth requisite, the assailed guidelines do not appear to be unreasonable or
discriminatory. In fact, all horses stabled at the MJCI and PRCIs premises underwent the same procedure.
The guidelines implemented were undoubtedly reasonable as they bear a reasonable relation to the purpose
sought to be accomplished, i.e., the complete riddance of horses infected with EIA.
It also appears from the records that MJCI properly notified the racehorse owners before the
test was conducted.[44] Those who failed to comply were repeatedly warned of certain consequences and
sanctions.
Furthermore, extant from the records are circumstances which allow respondents to determine
from time to time the eligibility of horses as race entries. The lease contract executed between petitioner
and MJC contains a proviso reserving the right of the lessor, MJCI in this case, the right to determine
whether a particular horse is a qualified horse. In addition, Philracoms rules and regulations on horse racing
provide that horses must be free from any contagious disease or illness in order to be eligible as race
entries.
All told, we find no grave abuse of discretion on the part of Philracom in issuing the contested
guidelines and on the part MJCI and PRCI in complying with Philracoms directive.
WHEREFORE, the petition is DISMISSED. Costs against petitioner William Dagan.
SO ORDERED.

DANTE O. TINGA
Associate Justice

WE CONCUR:

REYNATO S. PUNO
Chief Justice

LEONARDO A. QUISUMBING
Associate Justice

CONSU

ANTONIO T. CARPIO
Associate Justice

MA. AL

RENATO C. CORONA
Associate Justice

ADOLFO S. AZCUNA
Associate Justice

PRESBITERO J. VELASCO, JR.

CONCHITA CARPIO MORALES

Associate Justice

MIN

ANTONI
Associate Justice

TERESITA LEONARDO DE CASTRO

Associate Justice

DIOSDADO M. PERALTA
Associate Justice

C E R T I F I C AT I O N
Pursuant to Article VIII, Section 13 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.
REYNATO S. PUNO
Chief Justice
Republic of the PhilippinesSUPREME COURTManila
SECOND DIVISION
G.R. No. 130230

April 15, 2005

METROPOLITAN MANILA DEVELOPMENT AUTHORITY, Petitioner, vs.DANTE O. GARIN,

respondent.
DECISION
CHICO-NAZARIO, J.:
At issue in this case is the validity of Section 5(f) of Republic Act No. 7924 creating the
Metropolitan Manila Development Authority (MMDA), which authorizes it to confiscate and
suspend or revoke driver's licenses in the enforcement of traffic laws and regulations.
The issue arose from an incident involving the respondent Dante O. Garin, a lawyer, who was
issued a traffic violation receipt (TVR) and his driver's license confiscated for parking illegally
along Gandara Street, Binondo, Manila, on 05 August 1995. The following statements were
printed on the TVR:
You are hereby directed to report to the MMDA Traffic Operations Center Port Area Manila after
48 hours from date of apprehension for disposition/appropriate action thereon. Criminal case
shall be filed for failure to redeem license after 30 days.
Valid as temporary DRIVER'S license for seven days from date of apprehension. 1
Shortly before the expiration of the TVR's validity, the respondent addressed a letter 2 to then
MMDA Chairman Prospero Oreta requesting the return of his driver's license, and expressing his
preference for his case to be filed in court.
Receiving no immediate reply, Garin filed the original complaint 3 with application for preliminary
injunction in Branch 260 of the Regional Trial Court (RTC) of Paraaque, on 12 September 1995,
contending that, in the absence of any implementing rules and regulations, Sec. 5(f) of Rep. Act

No. 7924 grants the MMDA unbridled discretion to deprive erring motorists of their licenses, preempting a judicial determination of the validity of the deprivation, thereby violating the due
process clause of the Constitution. The respondent further contended that the provision violates
the constitutional prohibition against undue delegation of legislative authority, allowing as it does
the MMDA to fix and impose unspecified and therefore unlimited - fines and other penalties on
erring motorists.
In support of his application for a writ of preliminary injunction, Garin alleged that he suffered and
continues to suffer great and irreparable damage because of the deprivation of his license and
that, absent any implementing rules from the Metro Manila Council, the TVR and the confiscation
of his license have no legal basis.
For its part, the MMDA, represented by the Office of the Solicitor General, pointed out that the
powers granted to it by Sec. 5(f) of Rep. Act No. 7924 are limited to the fixing, collection and
imposition of fines and penalties for traffic violations, which powers are legislative and executive
in nature; the judiciary retains the right to determine the validity of the penalty imposed. It further
argued that the doctrine of separation of powers does not preclude "admixture" of the three
powers of government in administrative agencies.4
The MMDA also refuted Garin's allegation that the Metro Manila Council, the governing board and
policy making body of the petitioner, has as yet to formulate the implementing rules for Sec. 5(f)
of Rep. Act No. 7924 and directed the court's attention to MMDA Memorandum Circular No. TT95-001 dated 15 April 1995. Respondent Garin, however, questioned the validity of MMDA
Memorandum Circular No. TT-95-001, as he claims that it was passed by the Metro Manila
Council in the absence of a quorum.
Judge Helen Bautista-Ricafort issued a temporary restraining order on 26 September 1995,
extending the validity of the TVR as a temporary driver's license for twenty more days. A
preliminary mandatory injunction was granted on 23 October 1995, and the MMDA was directed
to return the respondent's driver's license.
On 14 August 1997, the trial court rendered the assailed decision 5 in favor of the herein
respondent and held that:
a.
There was indeed no quorum in that First Regular Meeting of the MMDA Council held on
March 23, 1995, hence MMDA Memorandum Circular No. TT-95-001, authorizing confiscation of
driver's licenses upon issuance of a TVR, is void ab initio.
b.
The summary confiscation of a driver's license without first giving the driver an opportunity
to be heard; depriving him of a property right (driver's license) without DUE PROCESS; not filling
(sic) in Court the complaint of supposed traffic infraction, cannot be justified by any legislation
(and is) hence unconstitutional.
WHEREFORE, the temporary writ of preliminary injunction is hereby made permanent; th(e)
MMDA is directed to return to plaintiff his driver's license; th(e) MMDA is likewise ordered to desist
from confiscating driver's license without first giving the driver the opportunity to be heard in an
appropriate proceeding.
In filing this petition,6 the MMDA reiterates and reinforces its argument in the court below and
contends that a license to operate a motor vehicle is neither a contract nor a property right, but is
a privilege subject to reasonable regulation under the police power in the interest of the public
safety and welfare. The petitioner further argues that revocation or suspension of this privilege
does not constitute a taking without due process as long as the licensee is given the right to
appeal the revocation.

To buttress its argument that a licensee may indeed appeal the taking and the judiciary retains
the power to determine the validity of the confiscation, suspension or revocation of the license,
the petitioner points out that under the terms of the confiscation, the licensee has three options:
1. To voluntarily pay the imposable fine,
2. To protest the apprehension by filing a protest with the MMDA Adjudication Committee, or
3. To request the referral of the TVR to the Public Prosecutor's Office.
The MMDA likewise argues that Memorandum Circular No. TT-95-001 was validly passed in the
presence of a quorum, and that the lower court's finding that it had not was based on a
"misapprehension of facts," which the petitioner would have us review. Moreover, it asserts that
though the circular is the basis for the issuance of TVRs, the basis for the summary confiscation
of licenses is Sec. 5(f) of Rep. Act No. 7924 itself, and that such power is self-executory and does
not require the issuance of any implementing regulation or circular.
Meanwhile, on 12 August 2004, the MMDA, through its Chairman Bayani Fernando, implemented
Memorandum Circular No. 04, Series of 2004, outlining the procedures for the use of the
Metropolitan Traffic Ticket (MTT) scheme. Under the circular, erring motorists are issued an MTT,
which can be paid at any Metrobank branch. Traffic enforcers may no longer confiscate drivers'
licenses as a matter of course in cases of traffic violations. All motorists with unredeemed TVRs
were given seven days from the date of implementation of the new system to pay their fines and
redeem their license or vehicle plates.7
It would seem, therefore, that insofar as the absence of a prima facie case to enjoin the petitioner
from confiscating drivers' licenses is concerned, recent events have overtaken the Court's need
to decide this case, which has been rendered moot and academic by the implementation of
Memorandum Circular No. 04, Series of 2004.
The petitioner, however, is not precluded from re-implementing Memorandum Circular No. TT-95001, or any other scheme, for that matter, that would entail confiscating drivers' licenses. For the
proper implementation, therefore, of the petitioner's future programs, this Court deems it
appropriate to make the following observations:
1.
A license to operate a motor vehicle is a privilege that the state may withhold in the exercise
of its police power.
The petitioner correctly points out that a license to operate a motor vehicle is not a property right,
but a privilege granted by the state, which may be suspended or revoked by the state in the
exercise of its police power, in the interest of the public safety and welfare, subject to the
procedural due process requirements. This is consistent with our rulings in Pedro v. Provincial
Board of Rizal8 on the license to operate a cockpit, Tan v. Director of Forestry9 and Oposa v.
Factoran10 on timber licensing agreements, and Surigao Electric Co., Inc. v. Municipality of
Surigao11 on a legislative franchise to operate an electric plant.
Petitioner cites a long list of American cases to prove this point, such as State ex. Rel. Sullivan,12
which states in part that, "the legislative power to regulate travel over the highways and
thoroughfares of the state for the general welfare is extensive. It may be exercised in any
reasonable manner to conserve the safety of travelers and pedestrians. Since motor vehicles are
instruments of potential danger, their registration and the licensing of their operators have been
required almost from their first appearance. The right to operate them in public places is not a
natural and unrestrained right, but a privilege subject to reasonable regulation, under the police
power, in the interest of the public safety and welfare. The power to license imports further power

to withhold or to revoke such license upon noncompliance with prescribed conditions."

Likewise, the petitioner quotes the Pennsylvania Supreme Court in Commonwealth v. Funk,13 to
the effect that: "Automobiles are vehicles of great speed and power. The use of them constitutes
an element of danger to persons and property upon the highways. Carefully operated, an
automobile is still a dangerous instrumentality, but, when operated by careless or incompetent
persons, it becomes an engine of destruction. The Legislature, in the exercise of the police
power of the commonwealth, not only may, but must, prescribe how and by whom motor vehicles
shall be operated on the highways. One of the primary purposes of a system of general
regulation of the subject matter, as here by the Vehicle Code, is to insure the competency of the
operator of motor vehicles. Such a general law is manifestly directed to the promotion of public
safety and is well within the police power."
The common thread running through the cited cases is that it is the legislature, in the exercise of
police power, which has the power and responsibility to regulate how and by whom motor
vehicles may be operated on the state highways.
2.

The MMDA is not vested with police power.

In Metro Manila Development Authority v. Bel-Air Village Association, Inc.,14 we categorically

stated that Rep. Act No. 7924 does not grant the MMDA with police power, let alone legislative
power, and that all its functions are administrative in nature.
The said case also involved the herein petitioner MMDA which claimed that it had the authority to
open a subdivision street owned by the Bel-Air Village Association, Inc. to public traffic because it
is an agent of the state endowed with police power in the delivery of basic services in Metro
Manila. From this premise, the MMDA argued that there was no need for the City of Makati to
enact an ordinance opening Neptune Street to the public.
Tracing the legislative history of Rep. Act No. 7924 creating the MMDA, we concluded that the
MMDA is not a local government unit or a public corporation endowed with legislative power, and,
unlike its predecessor, the Metro Manila Commission, it has no power to enact ordinances for the
welfare of the community. Thus, in the absence of an ordinance from the City of Makati, its own
order to open the street was invalid.
We restate here the doctrine in the said decision as it applies to the case at bar: police power, as
an inherent attribute of sovereignty, is the power vested by the Constitution in the legislature to
make, ordain, and establish all manner of wholesome and reasonable laws, statutes and
ordinances, either with penalties or without, not repugnant to the Constitution, as they shall judge
to be for the good and welfare of the commonwealth, and for the subjects of the same.
Having been lodged primarily in the National Legislature, it cannot be exercised by any group or
body of individuals not possessing legislative power. The National Legislature, however, may
delegate this power to the president and administrative boards as well as the lawmaking bodies
of municipal corporations or local government units (LGUs). Once delegated, the agents can
exercise only such legislative powers as are conferred on them by the national lawmaking body.
Our Congress delegated police power to the LGUs in the Local Government Code of 1991. 15 A
local government is a "political subdivision of a nation or state which is constituted by law and has
substantial control of local affairs."16 Local government units are the provinces, cities,
municipalities and barangays, which exercise police power through their respective legislative
bodies.
Metropolitan or Metro Manila is a body composed of several local government units. With the

passage of Rep. Act No. 7924 in 1995, Metropolitan Manila was declared as a "special
development and administrative region" and the administration of "metro-wide" basic services
affecting the region placed under "a development authority" referred to as the MMDA. Thus:
. . . [T]he powers of the MMDA are limited to the following acts: formulation, coordination,
regulation, implementation, preparation, management, monitoring, setting of policies, installation
of a system and administration. There is no syllable in R. A. No. 7924 that grants the MMDA
police power, let alone legislative power. Even the Metro Manila Council has not been
delegated any legislative power. Unlike the legislative bodies of the local government units,
there is no provision in R. A. No. 7924 that empowers the MMDA or its Council to "enact
ordinances, approve resolutions and appropriate funds for the general welfare" of the
inhabitants of Metro Manila. The MMDA is, as termed in the charter itself, a "development
authority." It is an agency created for the purpose of laying down policies and coordinating
with the various national government agencies, people's organizations, non-governmental
organizations and the private sector for the efficient and expeditious delivery of basic
services in the vast metropolitan area. All its functions are administrative in nature and
these are actually summed up in the charter itself, viz:
"Sec. 2. Creation of the Metropolitan Manila Development Authority. -- -x x x.
The MMDA shall perform planning, monitoring and coordinative functions, and in the process
exercise regulatory and supervisory authority over the delivery of metro-wide services within
Metro Manila, without diminution of the autonomy of the local government units concerning purely
local matters."
.
Clearly, the MMDA is not a political unit of government. The power delegated to the MMDA is that
given to the Metro Manila Council to promulgate administrative rules and regulations in the
implementation of the MMDA's functions. There is no grant of authority to enact ordinances
and regulations for the general welfare of the inhabitants of the metropolis. 17 (footnotes
omitted, emphasis supplied)
Therefore, insofar as Sec. 5(f) of Rep. Act No. 7924 is understood by the lower court and by the
petitioner to grant the MMDA the power to confiscate and suspend or revoke drivers' licenses
without need of any other legislative enactment, such is an unauthorized exercise of police power.
3.

Sec. 5(f) grants the MMDA with the duty to enforce existing traffic rules and regulations.

Section 5 of Rep. Act No. 7924 enumerates the "Functions and Powers of the Metro Manila
Development Authority." The contested clause in Sec. 5(f) states that the petitioner shall "install
and administer a single ticketing system, fix, impose and collect fines and penalties for all kinds of
violations of traffic rules and regulations, whether moving or nonmoving in nature, and confiscate
and suspend or revoke drivers' licenses in the enforcement of such traffic laws and regulations,
the provisions of Rep. Act No. 4136 18 and P.D. No. 160519 to the contrary notwithstanding," and
that "(f)or this purpose, the Authority shall enforce all traffic laws and regulations in Metro Manila,
through its traffic operation center, and may deputize members of the PNP, traffic enforcers of
local government units, duly licensed security guards, or members of non-governmental
organizations to whom may be delegated certain authority, subject to such conditions and
requirements as the Authority may impose."
Thus, where there is a traffic law or regulation validly enacted by the legislature or those agencies
to whom legislative powers have been delegated (the City of Manila in this case), the petitioner is
not precluded and in fact is duty-bound to confiscate and suspend or revoke drivers' licenses

in the exercise of its mandate of transport and traffic management, as well as the administration
and implementation of all traffic enforcement operations, traffic engineering services and traffic
education programs.20
This is consistent with our ruling in Bel-Air that the MMDA is a development authority created for
the purpose of laying down policies and coordinating with the various national government
agencies, people's organizations, non-governmental organizations and the private sector, which
may enforce, but not enact, ordinances.
This is also consistent with the fundamental rule of statutory construction that a statute is to be
read in a manner that would breathe life into it, rather than defeat it, 21 and is supported by the
criteria in cases of this nature that all reasonable doubts should be resolved in favor of the
constitutionality of a statute.22
A last word. The MMDA was intended to coordinate services with metro-wide impact that
transcend local political boundaries or would entail huge expenditures if provided by the individual
LGUs, especially with regard to transport and traffic management, 23 and we are aware of the
valiant efforts of the petitioner to untangle the increasingly traffic-snarled roads of Metro Manila.
But these laudable intentions are limited by the MMDA's enabling law, which we can but interpret,
and petitioner must be reminded that its efforts in this respect must be authorized by a valid law,
or ordinance, or regulation arising from a legitimate source.
WHEREFORE, the petition is dismissed.
SO ORDERED.
Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Tinga, JJ., concur.

Footnotes
SECOND DIVISION
PACIFIC STEAM LAUNDRY, INC.,
Petitioner,

G.R. No. 165299

Present:
CARPIO, J., Chairperson,
LEONARDO-DE CASTRO,*
BRION,
DEL CASTILLO, and
ABAD, JJ.

- versus -

LAGUNA LAKE DEVELOPMENT

AUTHORITY,
Respondent.
x--------------------------------------------------x
DECISION
CARPIO, J.:

Promulgated:
December 18, 2009

The Case
This is a petition for review[1] of the Decision[2] dated 30 June 2004 and the Resolution dated 8
September 2004 of the Court of Appeals in CA-G.R. SP No. 75238.

The Facts
Petitioner Pacific Steam Laundry, Inc. (petitioner) is a company engaged in the business of laundry
services. On 6 June 2001, the Environmental Management Bureau of the Department of Environment and
Natural Resources (DENR) endorsed to respondent Laguna Lake Development Authority (LLDA) the
inspection report on the complaint of black smoke emission from petitioners plant located at 114 Roosevelt
Avenue, Quezon City.[3] On 22 June 2001, LLDA conducted an investigation and found that untreated
wastewater generated from petitioners laundry washing activities was discharged directly to the San
Francisco Del Monte River. Furthermore, the Investigation Report[4] stated that petitioners plant was
operating without LLDA clearance, AC/PO-ESI, and Discharge Permit from LLDA. On 5 September 2001,
the Environmental Quality Management Division of LLDA conducted wastewater sampling of petitioners
effluent.[5] The result of the laboratory analysis showed non-compliance with effluent standards
particularly Total Suspended Solids (TSS), Biochemical Oxygen Demand (BOD), Oil/Grease
Concentration and Color Units.[6] Consequently, LLDA issued to petitioner a Notice of Violation[7] dated
30 October 2001 which states:
THE GENERAL MANAGER
PACIFIC STEAM LAUNDRY, INC.
114 Roosevelt Avenue, Brgy. Paraiso
Quezon City
Subject: Notice of Violation
PH-01-10-303
Gentlemen:
This refers to the findings of the inspection and result of laboratory analysis of the wastewater collected
from your firm last 5 September 2001. Evaluation of the results of laboratory analysis showed that your
plants effluent failed to conform with the 1990 Revised Effluent Standard for Inland Water Class C
specifically in terms of TSS, BOD, Oil/Grease and Color. (Please see attached laboratory analysis)
In view thereof, you are hereby directed to submit corrective measures to abate/control the water pollution
caused by your firm, within fifteen (15) days from receipt of this letter.
Furthermore, pursuant to Section 9 of Presidential Decree No. 984, PACIFIC STEAM LAUNDRY, INC. is
hereby ordered to pay a penalty of One Thousand Pesos (P1,000.00) per day of discharging pollutive
wastewater to be computed from 5 September 2001, the date of inspection until full cessation of
discharging pollutive wastewater and a fine of Five Thousand Pesos (P5,000.00) per year for operating
without the necessary clearance/permits from the Authority.
Very truly yours,
(signed)
CALIXTO R. CATAQUIZ
General Manager

Petitioner submitted its application for LLDA Clearance and Discharge Permit and informed LLDA that it

would undertake the necessary measures to abate the water pollution.[8] On 1 March 2002, a compliance
monitoring was conducted and the result of the laboratory analysis[9] still showed non-compliance with
effluent standards in terms of TSS, BOD, Chemical Oxygen Demand (COD), and Oil/Grease
Concentration. It was reported that petitioners wastewater treatment facility was under construction.
Subsequently, another wastewater sampling was conducted on 25 April 2002 but the results[10] still failed
to conform with the effluent standards in terms of Oil/Grease Concentration.
Meanwhile, on 15 April 2002, a Pollution Control and Abatement case was filed against petitioner before
the LLDA. During the public hearing on 30 April 2002, LLDA informed petitioner of its continuous noncompliance with the effluent standards. Petitioner requested for another wastewater sampling which was
conducted on 5 June 2002. The laboratory results[11] of the wastewater sampling finally showed
compliance with the effluent standard in all parameters. On 9 August 2002, another public hearing was held
to discuss the dismissal of the water pollution case and the payment of the accumulated daily penalty.
According to LLDA, the penalty should be reckoned from 5 September 2001, the date of initial sampling,
to 17 May 2002, the date LLDA received the request for re-sampling. Petitioner manifested that its
wastewater discharge was not on a daily basis. In its position paper[12] dated 25 August 2002, petitioner
prayed that the Notice of Violation dated 30 October 2001 be set aside and the penalty and fine imposed be
reckoned from the date of actual hearing on 15 April 2002.
On 16 September 2002, LLDA issued an Order to Pay,[13] the pertinent portion of which reads:
Respondent prayed that the Notice of Violation issued on 30 October 2001 and its
corresponding daily penalty be set aside and that the imposable penalty be
reckoned from the date of actual hearing and not on 5 September 2001. It is
respondents position that the Notice of Violation and the imposition of the penalty
had no legal and factual basis because it had already installed the necessary
wastewater treatment to abate the water pollution.
This Public Hearing Committee finds respondents arguments devoid of merit. Presidential Decree No. 984
prohibits the discharge of pollutive wastewater and any person found in violation thereof shall pay a fine
not exceeding five thousand pesos (PhP5,000.00) [sic] for every day during which such violation continues.
The mere discharge of wastewater not conforming with the effluent standard is the violation referred to in
PD No. 984. Sample of respondents effluent was collected on 5 September 2001 and the results of
laboratory analysis confirmed the quality thereof. Thus, a notice of violation was issued against the
respondent after it was established that its discharge was pollutive. The fact that the subsequent re-sampling
reported compliance with the effluent standard does not negate the 5 September 2001 initial sampling.
Respondent passed the standard because it already implemented remedial measures to abate the water
pollution. It is therefore but just and proper that the penalty should be imposed from the date of initial
sampling, 5 September 2001, to 17 May 2002, the date the request for re-sampling was received by the
Authority. The 5 June 2002 sampling confirmed that respondents effluent already complied with the
standard showing that its water pollution has ceased. Respondent did not submit any proof of its actual
operation hence, the penalty shall be computed for five (5) working days per week, excluding Saturdays
and Sundays as well as legal holidays from 5 September 2001 to 17 May 2002, for a total of one hundred
seventy-two (172) days.
WHEREFORE, premises considered, respondent Pacific steam Laundry, Inc. is hereby ordered to pay the
accumulated daily penalty amounting to ONE HUNDRED SEVENTY-TWO THOUSAND
(PhP172,000.00) PESOS within fifteen(15) days from receipt hereof as a condition sine qua non for the
dismissal of the above-captioned case.
SO ORDERED.[14]
Petitioner filed a motion for reconsideration, which the LLDA denied in its Order[15] dated 27 November
2002.
Petitioner then filed with the Court of Appeals a petition for review under Rule 43 of the Rules of Court.

The Court of Appeals denied the petition, as well as the motion for reconsideration filed by petitioner.
Hence, this petition.

The Court of Appeals Ruling

The Court of Appeals held that LLDA has the power to impose fines, thus:
Concededly, the power to impose administrative fines in pollution abatement cases
was expressly granted under Section 9 of P.D. 984 to the now defunct National
Pollution Control Commission (NPCC), thus:
Section 9. Penalties. - (a) Any person found violating or
failing to comply with any order, decision or regulation of
the Commission for the control or abatement of pollution
shall pay a fine not exceeding five thousand pesos per day
for every day during which such violation or default
continues; and the Commission is hereby authorized and
empowered to impose the fine after due notice and
hearing.
Nonetheless, it may be well to recall that the LLDA was created under R.A. 4850
with the end view of promoting and accelerating the development and balanced
growth of the Laguna Lake area and the surrounding provinces, and carrying out
the development of the Laguna Lake Region with due regard and adequate
provisions for environmental management and control, preservation of the quality
of human life and ecological systems, and the preservation of undue ecological
disturbances, deterioration and pollution. To correct deficiencies and clarify
ambiguities that impede the accomplishment of the Authorities goal, Former
President Ferdinand E. Marcos promulgated P.D. 813. Finally, to enable the LLDA
to effectively perform its role, Former President Marcos further issued E.O. 927,
which granted the LLDA additional powers and functions, viz:
Section 4. Additional Powers and Functions. - The authority
shall have the following powers and functions:
xxx
(d)

Make, alter or modify orders

requiring the discontinuance
of pollution specifying the
conditions and time within
which such continuance must
be accomplished.

xxx
(i)

Exercise such powers and perform such

other functions as may be necessary to
carry out its duties and responsibilities
under this Executive order.

Indeed, the express grant of power to impose administrative fines as couched in the
language of P.D. 984 was not reproduced in E.O. 927, however, it can be logically

implied from LLDAs authority to exercise the power to make, alter or modify
orders requiring the discontinuance of pollution. In addition, the clear intendment
of E.O. 927 to clothe LLDA not only with the express powers granted to it, but also
those implied, incidental and necessary for the exercise of its express powers can
be easily discerned from the grant of the general power to exercise (such) powers
and perform such other functions as may be necessary to carry out its duties and
responsibilities.
This finds support in the wealth of authorities in American Jurisprudence, citing
adherence of other courts to the principle that the authority given to an agency
should be liberally construed in order to permit the agency to carry out its statutory
responsibilities. This is especially true where the agency is concerned with
protecting the public health and welfare, the delegation of authority to the
agency is liberally construed.
The LLDA, as an agency implementing pollution laws, rules and regulations,
should be given some measures of flexibility in its operations in order not to
hamper it unduly in the fulfillment of its objectives. How could it effectively
perform its role if in every act of violation, it must resort to other venue for the
appropriate remedy, because it is impotent by itself to punish or deal with it?[16]
(Emphasis in the original)
The Issues
Petitioner raises two issues:
1.

Does the respondent LLDA have the implied power to impose fines as set
forth in PD 984?

2.

Does the grant of implied power to LLDA to impose penalties violate the
rule on non-delegation of legislative powers?[17]
The Ruling of the Court

We find the petition without merit.

Power of LLDA to Impose Fines
Petitioner asserts that LLDA has no power to impose fines since such power to impose penal sanctions,
which was once lodged with the National Pollution Control Commission (NPCC), is now assumed by the
Pollution Adjudication Board pursuant to Executive Order No. 192 (EO 192).[18]
We disagree with petitioner.
Presidential Decree No. 984 (PD 984)[19] created and established the NPCC under the Office of the
President. EO 192, which reorganized the DENR, created the Pollution Adjudication Board under the
Office of the DENR Secretary which assumed the powers and functions of the NPCC with respect to
adjudication of pollution cases.
Section 19 of EO 192 provides:
SEC. 19. Pollution Adjudication Board. There is hereby created a Pollution
Adjudication Board under the Office of the Secretary. The Board shall be
composed of the Secretary as Chairman, two (2) Undersecretaries as may be
designated by the Secretary, the Director of Environmental Management, and three

(3) others to be designated by the Secretary as members. The Board shall assume
the powers and functions of the Commission/Commissioners of the National
Pollution Control Commission with respect to the adjudication of pollution
cases under Republic Act 3931 and Presidential Decree 984, particularly with
respect to Section 6 letters e, f, g, j, k, and p of P.D. 984. The Environmental
Management Bureau shall serve as the Secretariat of the Board. These powers and
functions may be delegated to the regional officers of the Department in
accordance with rules and regulations to be promulgated by the Board. (Emphasis
supplied)
Section 6, paragraphs (e), (f), (g), (j), (k), and (p) of PD 984 referred to above states:
SEC. 6. Powers and Functions. The Commission shall have the following powers
and functions:
xxx
(e) Issue orders or decisions to compel compliance with the provisions of this Decree and its implementing
rules and regulations only after proper notice and hearing.
(f) Make, alter or modify orders requiring the discontinuance of pollution specifying the conditions and the
time within which such discontinuance must be accomplished.
(g) Issue, renew, or deny permits, under such conditions as it may determine to be
reasonable, for the prevention and abatement of pollution, for the discharge of
sewage, industrial waste, or for the installation or operation of sewage works and
industrial disposal system or parts thereof: Provided, however, the Commission, by
rules and regulations, may require subdivisions, condominium, hospitals, public
buildings and other similar human settlements to put up appropriate central
sewerage system and sewage treatment works, except that no permits shall be
required of any new sewage works or changes to or extensions of existing works
that discharge only domestic or sanitary wastes from a single residential building
provided with septic tanks or their equivalent. The Commission may impose
reasonable fees and charges for the issuance or renewal of all permits herein
required.
xxx
(j) Serve as arbitrator for the determination of reparations, or restitution of the damages and losses resulting
from pollution.
(k) Deputize in writing or request assistance of appropriate government agencies or instrumentalities for the
purpose of enforcing this Decree and its implementing rules and regulations and the orders and decisions of
the Commission.
xxx
(p) Exercise such powers and perform such other functions as may be necessary to carry out its duties and
responsibilities under this Decree.
On the other hand, LLDA is a special agency created under Republic Act No. 4850 (RA 4850)[20] to
manage and develop the Laguna Lake region, comprising of the provinces of Rizal and Laguna and the
cities of San Pablo, Manila, Pasay, Quezon and Caloocan. RA 4850, as amended by Presidential Decree
No. 813 (PD 813),[21] mandates LLDA to carry out the development of the Laguna Lake region, with due
regard and adequate provisions for environmental management and control, preservation of the quality of
human life and ecological systems, and the prevention of undue ecological disturbances, deterioration and
pollution.[22]
Under Executive Order No. 927 (EO 927),[23] LLDA is granted additional powers and functions to
effectively perform its role and to enlarge its prerogatives of monitoring, licensing and enforcement, thus:
SECTION 4. Additional Powers and Functions. The Authority [LLDA] shall have
the following powers and functions:

a) Issue standards, rules and regulations to govern the approval of plans and
specifications for sewage works and industrial waste disposal systems and the
issuance of permits in accordance with the provisions of this Executive Order;
inspect the construction and maintenance of sewage works and industrial waste
disposal systems for compliance to plans.
b) Adopt, prescribe, and promulgate rules and regulations governing the Procedures of the Authority with
respect to hearings, plans, specifications, designs, and other data for sewage works and industrial waste
disposal system, the filing of reports, the issuance of permits, and other rules and regulations for the proper
implementation and enforcement of this Executive Order.
c) Issue orders or decisions to compel compliance with the provisions of this
Executive Order and its implementing rules and regulations only after proper
notice and hearing.
d) Make, alter or modify orders requiring the discontinuance of pollution specifying the conditions
and the time within which such discontinuance must be accomplished.
e) Issue, renew or deny permits, under such conditions as it may determine to be reasonable, for the
prevention and abatement of pollution, for the discharge of sewage, industrial waste, or for the installation
or operation of sewage works and industrial disposal system or parts thereof: Provided, however, that the
Authority, by rules and regulations, may require subdivisions, condominiums, hospitals, public buildings
and other similar human settlements to put up appropriate central sewerage system and sewage treatment
works, except that no permits shall be required of any new sewage works or changes to or extensions of
existing works that discharge only domestic or sanitary wastes from a single residential building provided
with septic tanks or their equivalent. The Authority may impose reasonable fees and charges for the
issuance or renewal of all permits herein required.
f) After due notice and hearing, the Authority may also revoke, suspend or modify
any permit issued under this Order whenever the same is necessary to prevent or
abate pollution.
g) Deputize in writing or request assistance of appropriate government agencies or instrumentalities for the
purpose of enforcing this executive Order and its implementing rules and regulations and the orders and
decision of the Authority.
(h) Authorize its representative to enter at all reasonable times any property of the public dominion and
private property devoted to industrial, manufacturing processing or commercial use without doing damage,
for the purpose of inspecting and investigating conditions relating to pollution or possible or imminent
pollution.
(i) Exercise such powers and perform such other functions as may be necessary
to carry out its duties and responsibilities under this Executive Order.
(Emphasis supplied)
A comparison of the powers and functions of the Pollution Adjudication Board and the LLDA reveals
substantial similarity. Both the Pollution Adjudication Board and the LLDA are empowered, among others,
to: (1) make, alter or modify orders requiring the discontinuance of pollution; (2) issue, renew, or deny
permits for the prevention and abatement of pollution, for the discharge of sewage, industrial waste, or for
the installation or operation of sewage works and industrial disposal system; and (3) exercise such powers
and perform such other functions necessary to carry out their duties and responsibilities. The difference is
that while Section 19 of EO 192 vested the Pollution Adjudication Board with the specific power to
adjudicate pollution cases in general,[24] the scope of authority of LLDA to adjudicate pollution cases is
limited to the Laguna Lake region as defined by RA 4850, as amended.
Thus, in Laguna Lake Development Authority v. Court of Appeals,[25] the Court held that the adjudication
of pollution cases generally pertains to the Pollution Adjudication Board, except where a special law, such
as the LLDA Charter, provides for another forum. Indeed, even PD 984 authorizes the LLDA to undertake
pollution control activities within LLDAs development area. Section 10 of PD 984 provides:
SEC. 10. Jurisdiction. The Commission [NPCC] shall have no jurisdiction over
waterworks or sewage system operated by the Metropolitan Waterworks Sewerage

System, but the rules and regulations issued by the Commission for the protection
and prevention of pollution under the authority herein granted shall supersede and
prevail over any rules or regulations as may heretofore have been issued by other
government agencies or instrumentalities on the same subject.
In case of development projects involving specific human settlement sites or
integrated regional or subregional projects, such as the Tondo Foreshore
Development Authority and the Laguna Lake Development Authority, the
Commission shall consult with the authorities charged with the planning and
execution of such projects to ensure that their pollution control standards
comply with those of the Commission. Once minimum pollution standards are
established and agreed upon, the development authorities concerned may, by
mutual agreement and prior consultation with the Commission, undertake the
pollution control activities themselves. (Boldfacing and underscoring supplied)
In this case, the DENRs Environmental Management Bureau endorsed to LLDA the pollution complaint
against petitioner. Under Section 16 of EO 192, the Environmental Management Bureau assumed the
powers and functions of the NPCC except with respect to adjudication of pollution cases, thus:
SEC. 16. Environmental Management Bureau. There is hereby created an
Environmental Management Bureau. The National Environmental Protection
Council (NEPC), the National Pollution Control Commission (NPCC) and the
Environmental Center of the Philippines (ECP), are hereby abolished and their
powers and functions are hereby integrated into the Environmental
Management Bureau in accordance with Section 24(c) hereof, subject to Section
19 hereof. x x x (Emphasis supplied)
The Environmental Management Bureau also serves as the Secretariat of the Pollution Adjudication Board,
and its Director is one of the members of the Pollution Adjudication Board. Clearly, by endorsing to LLDA
the pollution complaint against petitioner, the Environmental Management Bureau deferred to LLDAs
jurisdiction over the pollution complaint against petitioner.
Although the Pollution Adjudication Board assumed the powers and functions of the NPCC with respect to
adjudication of pollution cases, this does not preclude LLDA from assuming jurisdiction of pollution cases
within its area of responsibility and to impose fines as penalty.
Thus, in the recent case of The Alexandra Condominium Corporation v. Laguna Lake Development
Authority,[26] the Court affirmed the ruling of the Court of Appeals which sustained LLDAs Order,
requiring petitioner therein to pay a fine of P1,062,000 representing penalty for pollutive wastewater
discharge. Although petitioner in that case did not challenge LLDAs authority to impose fine, the Court
acknowledged the power of LLDA to impose fines, holding that under Section 4-A of RA 4850, as
amended, LLDA is entitled to compensation for damages resulting from failure to meet established water
and effluent standards. Section 4-A of RA 4850, as amended, reads:
SEC. 4-A. Compensation for damages to the water and aquatic resources of Laguna
de Bay and its tributaries resulting from failure to meet established water and
effluent quality standards or from such other wrongful act or omission of a person,
private or public, juridical or otherwise, punishable under the law shall be awarded
to the Authority to be earmarked for water quality control and management.
Under Section 4(h) of EO 927, LLDA may exercise such powers and perform such other functions as may
be necessary to carry out its duties and responsibilities. In Laguna Lake Development Authority v. Court of
Appeals,[27] the Court upheld the power of LLDA to issue an ex-parte cease and desist order even if such
power is not expressly conferred by law, holding that an administrative agency has also such powers as are
necessarily implied in the exercise of its express powers. The Court ruled that LLDA, in the exercise of its
express powers under its charter, as a regulatory and quasi-judicial body with respect to pollution cases in
the Laguna Lake region, has the implied authority to issue a cease and desist order. In the same manner, we

hold that the LLDA has the power to impose fines in the exercise of its function as a regulatory and quasijudicial body with respect to pollution cases in the Laguna Lake region.
No Undue Delegation of Legislative Power
Petitioner contends that if LLDA is deemed to have implied power to impose penalties, then LLDA will
have unfettered discretion to determine for itself the penalties it may impose, which will amount to undue
delegation of legislative power.
We do not agree. Contrary to petitioners contention, LLDAs power to impose fines is not unrestricted. In
this case, LLDA investigated the pollution complaint against petitioner and conducted wastewater sampling
of petitioners effluent. It was only after the investigation result showing petitioners failure to meet the
established water and effluent quality standards that LLDA imposed a fine against petitioner. LLDA then
imposed upon petitioner a penalty of P1,000 per day of discharging pollutive wastewater. The P1,000
penalty per day is in accordance with the amount of penalty prescribed under PD 984:
SEC. 8. Prohibitions. No person shall throw, run, drain, or otherwise dispose
into any of the water, air and/or land resources of the Philippines, or cause,
permit, suffer to be thrown, run, drain, allow to seep or otherwise dispose
thereto any organic or inorganic matter or any substance in gaseous or liquid
form that shall cause pollution thereof.
xxx
SEC 9. Penalties. x x x
(b) Any person who shall violate any of the previous provisions of Section Eight of this Decree or its
implementing rules and regulations, or any Order or Decision of the Commission, shall be liable to a
penalty of not to exceed one thousand pesos each day during which the violation continues, or by
imprisonment of from two years to six years, or by both fine and imprisonment, and in addition such person
may be required or enjoined from continuing such violation as hereinafter provided.
x x x (Emphasis supplied)
Clearly, there are adequate statutory limitations on LLDAs power to impose fines which obviates unbridled
discretion in the exercise of such power.
WHEREFORE, we DENY the petition. We AFFIRM the Decision dated 30 June 2004 and the Resolution
dated 8 September 2004 of the Court of Appeals in CA-G.R. SP No. 75238.
SO ORDERED.

ANTONIO
T. CARPIO
Associate Justice

WE CONCUR:

TERESITA J. LEONARDO-DE CASTRO

ASSOCIATE JUSTICE

ARTURO D. BRION MARIANO C. DEL CASTILLO

ASSOCIATE JUSTICE ASSOCIATE JUSTICE

ROBERTO A. ABAD
ASSOCIATE JUSTICE
ATTESTATION
I ATTEST 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 COURTS DIVISION.

ANTONIO T. CARPIO
Associate Justice
Chairperson
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons Attestation, I
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 Courts Division.

REYNATO S. PUNO
Chief Justice
Alfeo Vivas, on his behalf and on behalf of the Shareholders of the
Eurocredit Community Bank, Petitioner, vs. The Monetary Board of the BSP
and the PDIC, Respondents.
GR No. 191424; August 7, 2013
Facts: The Monetary Board placed the Eurocredit Community Bank under Prompt
Corrective Action framework on account of the findings of serious findings and
supervisory concerns. Vivas moved for the reconsideration of such action. ECBI also
unjustly refused to allow the BSP examiners from inspecting its books and records.
The MB issued Resolution No. 276 placing ECBI under receivership, because of its
inability to pay its liabilities, insufficient realizable assets and violation of cease and
desist order of the MB for acts constituting unsound banking practices. Vivas argued
that the MB committed grave abuse of discretion for placing ECBI under receivership
without prior notice and hearing, pursuant to RA 7353, Sec. 11.
Issue: Whether or not the MB committed grave abuse of discretion in placing ECBI
under receivership without notice and hearing.

Ruling:
No, the MB did not gravely abuse its discretion. The ECBI was given every
chance to be heard and improve its financial standing. Moreover, the MB has the
power to forbid a bank from doing business and place it under receivership without
prior notice and hearing, when the circumstances warrant it. Under RA 7653, the MB
was given with more power of closure and placement of a bank in receivership for
insolvency or if the continuance in the business would result in the loss of depositors
or creditors. The close now, hear later doctrine was justified on practical and legal
considerations to preclude unwarranted dissipation of the banks assets and as valid
exercise of police power to protect creditors, depositors, stockholders and the general
public.
EN BANC
ROMEO P. GEROCHI, KATULONG NG BAYAN (KB) and
ENVIRONMENTALIST CONSUMERS NETWORK, INC. (ECN),
Petitioners,
-versusDEPARTMENT OF ENERGY (DOE), ENERGY REGULATORY
COMMISSION (ERC), NATIONAL POWER CORPORATION
(NPC), POWER SECTOR ASSETS AND LIABILITIES
MANAGEMENT GROUP (PSALM Corp.), STRATEGIC POWER
UTILITIES GROUP (SPUG), and PANAY ELECTRIC COMPANY
INC. (PECO),
Respondents.

G.R. No. 159796

Present:
PUNO, C.J.,
QUISUMBING,
YNARES-SANTIAGO,
SANDOVAL-GUTIERREZ,
CARPIO,
AUSTRIA-MARTINEZ,
CORONA,
CARPIO MORALES,
AZCUNA,
TINGA,
CHICO-NAZARIO,
GARCIA,
VELASCO, JR. and
NACHURA, JJ.
Promulgated:
July 17, 2007

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
DECISION
NACHURA, J.:
Petitioners Romeo P. Gerochi, Katulong Ng Bayan (KB), and Environmentalist Consumers Network, Inc.
(ECN) (petitioners), come before this Court in this original action praying that Section 34 of Republic Act
(RA) 9136, otherwise known as the Electric Power Industry Reform Act of 2001 (EPIRA), imposing the
Universal Charge,[1] and Rule 18 of the Rules and Regulations (IRR)[2] which seeks to implement the said
imposition, be declared unconstitutional. Petitioners also pray that the Universal Charge imposed upon the
consumers be refunded and that a preliminary injunction and/or temporary restraining order (TRO) be
issued directing the respondents to refrain from implementing, charging, and collecting the said charge. [3]
The assailed provision of law reads:
SECTION 34. Universal Charge. Within one (1) year from the
effectivity of this Act, a universal charge to be determined, fixed and approved by
the ERC, shall be imposed on all electricity end-users for the following purposes:

(a) Payment for the stranded debts[4] in excess of the amount assumed by the
National Government and stranded contract costs of NPC[5] and as well as
qualified stranded contract costs of distribution utilities resulting from the
restructuring of the industry;
(b) Missionary electrification;[6]
(c) The equalization of the taxes and royalties applied to indigenous or renewable
sources of energy vis--vis imported energy fuels;
(d) An environmental charge equivalent to one-fourth of one centavo per kilowatthour (P0.0025/kWh), which shall accrue to an environmental fund to be
used solely for watershed rehabilitation and management. Said fund shall be
managed by NPC under existing arrangements; and
(e) A charge to account for all forms of cross-subsidies for a period not exceeding
three (3) years.
The universal charge shall be a non-bypassable charge which shall be passed on
and collected from all end-users on a monthly basis by the distribution utilities.
Collections by the distribution utilities and the TRANSCO in any given month shall
be remitted to the PSALM Corp. on or before the fifteenth (15th) of the succeeding
month, net of any amount due to the distribution utility. Any end-user or selfgenerating entity not connected to a distribution utility shall remit its corresponding
universal charge directly to the TRANSCO. The PSALM Corp., as administrator of
the fund, shall create a Special Trust Fund which shall be disbursed only for the
purposes specified herein in an open and transparent manner. All amount collected
for the universal charge shall be distributed to the respective beneficiaries within a
reasonable period to be provided by the ERC.
The Facts
Congress enacted the EPIRA on June 8, 2001; on June 26, 2001, it took effect.[7]
On April 5, 2002, respondent National Power Corporation-Strategic Power Utilities Group[8] (NPC-SPUG)
filed with respondent Energy Regulatory Commission (ERC) a petition for the availment from the
Universal Charge of its share for Missionary Electrification, docketed as ERC Case No. 2002-165.[9]
On May 7, 2002, NPC filed another petition with ERC, docketed as ERC Case No. 2002-194, praying that
the proposed share from the Universal Charge for the Environmental charge of P0.0025 per kilowatt-hour
(/kWh), or a total of P119,488,847.59, be approved for withdrawal from the Special Trust Fund (STF)
managed by respondent Power Sector Assets and
Liabilities Management Group (PSALM)[10] for the rehabilitation and management of watershed areas.
[11]
On December 20, 2002, the ERC issued an Order[12] in ERC Case No. 2002-165 provisionally approving
the computed amount of P0.0168/kWh as the share of the NPC-SPUG from the Universal Charge for
Missionary Electrification and authorizing the National Transmission Corporation (TRANSCO) and
Distribution Utilities to collect the same from its end-users on a monthly basis.
On June 26, 2003, the ERC rendered its Decision[13] (for ERC Case No. 2002-165) modifying its Order of
December 20, 2002, thus:

WHEREFORE, the foregoing premises considered, the provisional

authority granted to petitioner National Power Corporation-Strategic Power
Utilities Group (NPC-SPUG) in the Order dated December 20, 2002 is hereby
modified to the effect that an additional amount of P0.0205 per kilowatt-hour
should be added to the P0.0168 per kilowatt-hour provisionally authorized by the
Commission in the said Order. Accordingly, a total amount of P0.0373 per kilowatthour is hereby APPROVED for withdrawal from the Special Trust Fund managed
by PSALM as its share from the Universal Charge for Missionary Electrification
(UC-ME) effective on the following billing cycles:
(a) June 26-July 25, 2003 for National Transmission Corporation
(TRANSCO); and
(b) July 2003 for Distribution Utilities (Dus).
Relative thereto, TRANSCO and Dus are directed to collect the UCME in the amount of P0.0373 per kilowatt-hour and remit the same to PSALM on
or before the 15th day of the succeeding month.
In the meantime, NPC-SPUG is directed to submit, not later than April
30, 2004, a detailed report to include Audited Financial Statements and physical
status (percentage of completion) of the projects using the prescribed format.
Let copies of this Order be furnished petitioner NPC-SPUG and all
distribution utilities (Dus).
SO ORDERED.
On August 13, 2003, NPC-SPUG filed a Motion for Reconsideration asking the ERC, among others, [14] to
set aside the above-mentioned Decision, which the ERC granted in its Order dated October 7, 2003,
disposing:
WHEREFORE, the foregoing premises considered, the Motion for Reconsideration
filed by petitioner National Power Corporation-Small Power Utilities Group (NPCSPUG) is hereby GRANTED. Accordingly, the Decision dated June 26, 2003 is
hereby modified accordingly.
Relative thereto, NPC-SPUG is directed to submit a quarterly report on the
following:
1.
2.
3.
4.
5.
6.

Projects for CY 2002 undertaken;

Location
Actual amount utilized to complete the project;
Period of completion;
Start of Operation; and
Explanation of the reallocation of UC-ME funds, if

any.
SO ORDERED.[15]
Meanwhile, on April 2, 2003, ERC decided ERC Case No. 2002-194, authorizing the NPC to draw up to
P70,000,000.00 from PSALM for its 2003 Watershed Rehabilitation Budget subject to the availability of
funds for the Environmental Fund component of the Universal Charge.[16]
On the basis of the said ERC decisions, respondent Panay Electric Company, Inc. (PECO) charged

petitioner Romeo P. Gerochi and all other

end-users with the Universal Charge as reflected in their respective electric bills starting from the month of
July 2003.[17]
Hence, this original action.
Petitioners submit that the assailed provision of law and its IRR which sought to implement the same are
unconstitutional on the following grounds:
1)

The universal charge provided for under Sec. 34 of the EPIRA and sought to
be implemented under Sec. 2, Rule 18 of the IRR of the said law is a tax
which is to be collected from all electric end-users and self-generating
entities. The power to tax is strictly a legislative function and as suc.

lh, the delegation of said power to any executive or administrative agency like the
ERC is unconstitutional, giving the same unlimited authority. The assailed
provision clearly provides that the Universal Charge is to be determined,
fixed and approved by the ERC, hence leaving to the latter complete
discretionary legislative authority.
2)

The ERC is also empowered to approve and determine where the funds
collected should be used.

3)

The imposition of the Universal Charge on all end-users is oppressive and

confiscatory and amounts to taxation without representation as the consumers
were not given a chance to be heard and represented.[18]

Petitioners contend that the Universal Charge has the characteristics of a tax and is collected to
fund the operations of the NPC. They argue that the cases[19] invoked by the respondents clearly show the
regulatory purpose of the charges imposed therein, which is not so in the case at bench. In said cases, the
respective funds[20] were created in order to balance and stabilize the prices of oil and sugar, and to act as
buffer to counteract the changes and adjustments in prices, peso devaluation, and other variables which
cannot be adequately and timely monitored by the legislature. Thus, there was a need to delegate powers to
administrative bodies.[21] Petitioners posit that the Universal Charge is imposed not for a similar purpose.
On the other hand, respondent PSALM through the Office of the Government Corporate Counsel (OGCC)
contends that unlike a tax which is imposed to provide income for public purposes, such as support of the
government, administration of the law, or payment of public expenses, the assailed Universal Charge is
levied for a specific regulatory purpose, which is to ensure the viability of the country's electric power
industry. Thus, it is exacted by the State in the exercise of its inherent police power. On this premise,
PSALM submits that there is no undue delegation of legislative power to the ERC since the latter merely
exercises a limited authority or discretion as to the execution and implementation of the provisions of the
EPIRA.[22]
Respondents Department of Energy (DOE), ERC, and NPC, through the Office of the Solicitor General
(OSG), share the same view that the Universal Charge is not a tax because it is levied for a specific
regulatory purpose, which is to ensure the viability of the country's electric power industry, and is,
therefore, an exaction in the exercise of the State's police power. Respondents further contend that said
Universal Charge does not possess the essential characteristics of a tax, that its imposition would redound
to the benefit of the electric power industry and not to the public, and that its rate is uniformly levied on
electricity end-users, unlike a tax which is imposed based on the individual taxpayer's ability to pay.
Moreover, respondents deny that there is undue delegation of legislative power to the ERC since the EPIRA
sets forth sufficient determinable standards which would guide the ERC in the exercise of the powers
granted to it. Lastly, respondents argue that the imposition of the Universal Charge is not oppressive and

confiscatory since it is an exercise of the police power of the State and it complies with the requirements of
due process.[23]
On its part, respondent PECO argues that it is duty-bound to collect and remit the amount pertaining to the
Missionary Electrification and Environmental Fund components of the Universal Charge, pursuant to Sec.
34 of the EPIRA and the Decisions in ERC Case Nos. 2002-194 and 2002-165. Otherwise, PECO could be
held liable under Sec. 46[24] of the EPIRA, which imposes fines and penalties for any violation of its
provisions or its IRR.[25]
The Issues
The ultimate issues in the case at bar are:
1)

Whether or not, the Universal Charge imposed under Sec. 34 of the EPIRA is
a tax; and

2)

Whether or not there is undue delegation of legislative power to tax on the

part of the ERC.[26]

Before we discuss the issues, the Court shall first deal with an obvious procedural lapse.
Petitioners filed before us an original action particularly denominated as a Complaint assailing
the constitutionality of Sec. 34 of the EPIRA imposing the Universal Charge and Rule 18 of the EPIRA's
IRR. No doubt, petitioners have locus standi. They impugn the constitutionality of Sec. 34 of the EPIRA
because they sustained a direct injury as a result of the imposition of the Universal Charge as reflected in
their electric bills.
However, petitioners violated the doctrine of hierarchy of courts when they filed this Complaint
directly with us. Furthermore, the Complaint is bereft of any allegation of grave abuse of discretion on the
part of the ERC or any of the public respondents, in order for the Court to consider it as a petition for
certiorari or prohibition.
Article VIII, Section 5(1) and (2) of the 1987 Constitution[27] categorically provides that:
SECTION 5. The Supreme Court shall have the following powers:
1.
2.

Exercise original jurisdiction over cases affecting ambassadors, other public

ministers and consuls, and over petitions for certiorari, prohibition,
mandamus, quo warranto, and habeas corpus.
Review, revise, reverse, modify, or affirm on appeal or certiorari, as the law
or the rules of court may provide, final judgments and orders of lower courts
in:
(a) All cases in which the constitutionality or validity of
any treaty, international or executive agreement, law,
presidential decree, proclamation, order, instruction,
ordinance, or regulation is in question.

But this Court's jurisdiction to issue writs of certiorari, prohibition, mandamus, quo warranto, and habeas
corpus, while concurrent with that of the regional trial courts and the Court of Appeals, does not give
litigants unrestrained freedom of choice of forum from which to seek such relief.[28] It has long been
established that this Court will not entertain direct resort to it unless the redress desired cannot be obtained
in the appropriate courts, or where exceptional and compelling circumstances justify availment of a remedy

within and call for the exercise of our primary jurisdiction.[29] This circumstance alone warrants the
outright dismissal of the present action.
This procedural infirmity notwithstanding, we opt to resolve the constitutional issue raised
herein. We are aware that if the constitutionality of Sec. 34 of the EPIRA is not resolved now, the issue will
certainly resurface in the near future, resulting in a repeat of this litigation, and probably involving the same
parties. In the public interest and to avoid unnecessary delay, this Court renders its ruling now.
The instant complaint is bereft of merit.
The First Issue
To resolve the first issue, it is necessary to distinguish the States power of taxation from the
police power.
The power to tax is an incident of sovereignty and is unlimited in its range, acknowledging in its very
nature no limits, so that security against its abuse is to be found only in the responsibility of the legislature
which imposes the tax on the constituency that is to pay it.[30] It is based on the principle that taxes are the
lifeblood of the government, and their prompt and certain availability is an imperious need.[31] Thus, the
theory behind the exercise of the power to tax emanates from necessity; without taxes, government cannot
fulfill its mandate of promoting the general welfare and well-being of the people.[32]
On the other hand, police power is the power of the state to promote public welfare by restraining and
regulating the use of liberty and property.[33] It is the most pervasive, the least limitable, and the most
demanding of the three fundamental powers of the State. The justification is found in the Latin maxims
salus populi est suprema lex (the welfare of the people is the supreme law) and sic utere tuo ut alienum non
laedas (so use your property as not to injure the property of others). As an inherent attribute of sovereignty
which virtually extends to all public needs, police power grants a wide panoply of instruments through
which the State, as parens patriae, gives effect to a host of its regulatory powers.[34] We have held that the
power to "regulate" means the power to protect, foster, promote, preserve, and control, with due regard for
the interests, first and foremost, of the public, then of the utility and of its patrons.[35]
The conservative and pivotal distinction between these two powers rests in the purpose for
which the charge is made. If generation of revenue is the primary purpose and regulation is merely
incidental, the imposition is a tax; but if regulation is the primary purpose, the fact that revenue is
incidentally raised does not make the imposition a tax.[36]
In exacting the assailed Universal Charge through Sec. 34 of the EPIRA, the State's police power,
particularly its regulatory dimension, is invoked. Such can be deduced from Sec. 34 which enumerates the
purposes for which the Universal Charge is imposed[37] and which can be amply discerned as regulatory in
character. The EPIRA resonates such regulatory purposes, thus:
SECTION 2. Declaration of Policy. It is hereby declared the policy of the State:
(a) To ensure and accelerate the total electrification of the country;
(b) To ensure the quality, reliability, security and affordability of the supply of
electric power;
(c) To ensure transparent and reasonable prices of electricity in a regime of free and
fair competition and full public accountability to achieve greater operational
and economic efficiency and enhance the competitiveness of Philippine
products in the global market;
(d) To enhance the inflow of private capital and broaden the ownership base of the
power generation, transmission and distribution sectors;
(e) To ensure fair and non-discriminatory treatment of public and private sector
entities in the process of restructuring the electric power industry;
(f) To protect the public interest as it is affected by the rates and services of electric

utilities and other providers of electric power;

(g) To assure socially and environmentally compatible energy sources and
infrastructure;
(h) To promote the utilization of indigenous and new and renewable energy
resources in power generation in order to reduce dependence on imported
energy;
(i) To provide for an orderly and transparent privatization of the assets and
liabilities of the National Power Corporation (NPC);
(j) To establish a strong and purely independent regulatory body and system to
ensure consumer protection and enhance the competitive operation of the
electricity market; and
(k) To encourage the efficient use of energy and other modalities of demand side
management.
From the aforementioned purposes, it can be gleaned that the assailed Universal Charge is not a tax, but an
exaction in the exercise of the State's police power. Public welfare is surely promoted.
Moreover, it is a well-established doctrine that the taxing power may be used as an implement of police
power.[38] In Valmonte v. Energy Regulatory Board, et al.[39] and in Gaston v. Republic Planters Bank,
[40] this Court held that the Oil Price Stabilization Fund (OPSF) and the Sugar Stabilization Fund (SSF)
were exactions made in the exercise of the police power. The doctrine was reiterated in Osmea v. Orbos[41]
with respect to the OPSF. Thus, we disagree with petitioners that the instant case is different from the
aforementioned cases. With the Universal Charge, a Special Trust Fund (STF) is also created under the
administration of PSALM.[42] The STF has some notable characteristics similar to the OPSF and the SSF,
viz.:
1)

In the implementation of stranded cost recovery, the ERC shall conduct a

review to determine whether there is under-recovery or over recovery and
adjust (true-up) the level of the stranded cost recovery charge. In case of an
over-recovery, the ERC shall ensure that any excess amount shall be remitted
to the STF. A separate account shall be created for these amounts which shall
be held in trust for any future claims of distribution utilities for stranded cost
recovery. At the end of the stranded cost recovery period, any remaining
amount in this account shall be used to reduce the electricity rates to the endusers.[43]

2)

With respect to the assailed Universal Charge, if the total amount collected
for the same is greater than the actual availments against it, the PSALM shall
retain the balance within the STF to pay for periods where a shortfall occurs.
[44]

3)

Upon expiration of the term of PSALM, the administration of the STF shall
be transferred to the DOF or any of the DOF attached agencies as designated
by the DOF Secretary.[45]

The OSG is in point when it asseverates:

Evidently, the establishment and maintenance of the Special Trust Fund, under the
last paragraph of Section 34, R.A. No. 9136, is well within the pervasive and nonwaivable 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.[46]

This feature of the Universal Charge further boosts the position that the same is an exaction imposed
primarily in pursuit of the State's police objectives. The STF reasonably serves and assures the attainment
and perpetuity of the purposes for which the Universal Charge is imposed, i.e., to ensure the viability of the
country's electric power industry.
The Second Issue
The principle of separation of powers ordains that each of the three branches of government has
exclusive cognizance of and is supreme in matters falling within its own constitutionally allocated sphere.
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 (what has been delegated cannot be
delegated). This is based on the ethical principle that such 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. [47]
In the face of the increasing complexity of modern life, delegation of legislative power to various
specialized administrative agencies is allowed as an exception to this principle.[48] Given the volume and
variety of interactions in today's society, it is doubtful if the legislature can promulgate laws that will deal
adequately with and respond promptly to the minutiae of everyday life. Hence, the need to delegate to
administrative bodies - the principal agencies tasked to execute laws in their specialized fields - the
authority to promulgate rules and regulations to implement a given statute and effectuate its policies. All
that is required for the valid exercise of this power of subordinate legislation is that the regulation be
germane to the objects and purposes of the law and that the regulation be not in contradiction to, but in
conformity with, the standards prescribed by the law. These requirements are denominated as the
completeness test and the sufficient standard test.
Under the first test, the law must be complete in all its terms and conditions when it leaves the legislature
such that when it reaches the delegate, the only thing he will have to do is to enforce it. The second test
mandates adequate guidelines or limitations in the law to determine the boundaries of the delegate's
authority and prevent the delegation from running riot.[49]
The Court finds that the EPIRA, read and appreciated in its entirety, in relation to Sec. 34 thereof, is
complete in all its essential terms and conditions, and that it contains sufficient standards.
Although Sec. 34 of the EPIRA merely provides that within one (1) year from the effectivity thereof, a
Universal Charge to be determined, fixed and approved by the ERC, shall be imposed on all electricity endusers, and therefore, does not state the specific amount to be paid as Universal Charge, the amount
nevertheless is made certain by the legislative parameters provided in the law itself. For one, Sec. 43(b)(ii)
of the EPIRA provides:
SECTION 43. Functions of the ERC. The ERC shall promote competition,
encourage market development, ensure customer choice and penalize abuse of
market power in the restructured electricity industry. In appropriate cases, the ERC
is authorized to issue cease and desist order after due notice and hearing. Towards
this end, it shall be responsible for the following key functions in the restructured
industry:
xxxx
(b) Within six (6) months from the effectivity of this Act, promulgate and enforce,
in accordance with law, a National Grid Code and a Distribution Code which shall
include, but not limited to the following:
xxxx

(ii) Financial capability standards for the generating companies, the TRANSCO,
distribution utilities and suppliers: Provided, That in the formulation of the
financial capability standards, the nature and function of the entity shall be
considered: Provided, further, That such standards are set to ensure that the electric
power industry participants meet the minimum financial standards to protect the
public interest. Determine, fix, and approve, after due notice and public hearings
the universal charge, to be imposed on all electricity end-users pursuant to Section
34 hereof;

Moreover, contrary to the petitioners contention, the ERC does not enjoy a wide latitude of discretion in the
determination of the Universal Charge. Sec. 51(d) and (e) of the EPIRA[50] clearly provides:
SECTION 51. Powers. The PSALM Corp. shall, in the performance of its functions
and for the attainment of its objective, have the following powers:
xxxx
(d) To calculate the amount of the stranded debts and stranded contract costs of
NPC which shall form the basis for ERC in the determination of the
universal charge;
(e) To liquidate the NPC stranded contract costs, utilizing the proceeds from sales
and other property contributed to it, including the proceeds from the
universal charge.

Thus, the law is complete and passes the first test for valid delegation of legislative power.
As to the second test, this Court had, in the past, accepted as sufficient standards the following: "interest of
law and order;"[51] "adequate and efficient instruction;"[52] "public interest;"[53] "justice and equity;"[54]
"public convenience and welfare;"[55] "simplicity, economy and efficiency;"[56] "standardization and
regulation of medical education;"[57] and "fair and equitable employment practices."[58] Provisions of the
EPIRA such as, among others, to ensure the total electrification of the country and the quality, reliability,
security and affordability of the supply of electric power[59] and watershed rehabilitation and
management[60] meet the requirements for valid delegation, as they provide the limitations on the ERCs
power to formulate the IRR. These are sufficient standards.
It may be noted that this is not the first time that the ERC's conferred powers were challenged. In Freedom
from Debt Coalition v. Energy Regulatory Commission,[61] the Court had occasion to say:
In determining the extent of powers possessed by the ERC, the provisions of the
EPIRA must not be read in separate parts. Rather, the law must be read in its
entirety, because a statute is passed as a whole, and is animated by one general
purpose and intent. Its meaning cannot to be extracted from any single part thereof
but from a general consideration of the statute as a whole. Considering the intent of
Congress in enacting the EPIRA and reading the statute in its entirety, it is plain to
see that the law has expanded the jurisdiction of the regulatory body, the ERC in
this case, to enable the latter to implement the reforms sought to be accomplished
by the EPIRA. When the legislators decided to broaden the jurisdiction of the ERC,
they did not intend to abolish or reduce the powers already conferred upon ERC's

predecessors. To sustain the view that the ERC possesses only the powers and
functions listed under Section 43 of the EPIRA is to frustrate the objectives of the
law.
In his Concurring and Dissenting Opinion[62] in the same case, then Associate Justice, now Chief Justice,
Reynato S. Puno described the immensity of police power in relation to the delegation of powers to the
ERC and its regulatory functions over electric power as a vital public utility, to wit:
Over the years, however, the range of police power was no longer
limited to the preservation of public health, safety and morals, which used to be the
primary social interests in earlier times. Police power now requires the State to
"assume an affirmative duty to eliminate the excesses and injustices that are the
concomitants of an unrestrained industrial economy." Police power is now exerted
"to further the public welfare a concept as vast as the good of society itself."
Hence, "police power is but another name for the governmental authority to further
the welfare of society that is the basic end of all government." When police power
is delegated to administrative bodies with regulatory functions, its exercise should
be given a wide latitude. Police power takes on an even broader dimension in
developing countries such as ours, where the State must take a more active role in
balancing the many conflicting interests in society. The Questioned Order was
issued by the ERC, acting as an agent of the State in the exercise of police power.
We should have exceptionally good grounds to curtail its exercise. This approach is
more compelling in the field of rate-regulation of electric power rates. Electric
power generation and distribution is a traditional instrument of economic growth
that affects not only a few but the entire nation. It is an important factor in
encouraging investment and promoting business. The engines of progress may
come to a screeching halt if the delivery of electric power is impaired. Billions of
pesos would be lost as a result of power outages or unreliable electric power
services. The State thru the ERC should be able to exercise its police power with
great flexibility, when the need arises.

This was reiterated in National Association of Electricity Consumers for Reforms v. Energy Regulatory
Commission[63] where the Court held that the ERC, as regulator, should have sufficient power to respond
in real time to changes wrought by multifarious factors affecting public utilities.
From the foregoing disquisitions, we therefore hold that there is no undue delegation of legislative power to
the ERC.
Petitioners failed to pursue in their Memorandum the contention in the Complaint that the
imposition of the Universal Charge on all end-users is oppressive and confiscatory, and amounts to taxation
without representation. Hence, such contention is deemed waived or abandoned per Resolution[64] of
August 3, 2004.[65] Moreover, the determination of whether or not a tax is excessive, oppressive or
confiscatory is an issue which essentially involves questions of fact, and thus, this Court is precluded from
reviewing the same.[66]
As a penultimate statement, it may be well to recall what this Court said of EPIRA:
One of the landmark pieces of legislation enacted by Congress in recent years is the
EPIRA. It established a new policy, legal structure and regulatory framework for
the electric power industry. The new thrust is to tap private capital for the

expansion and improvement of the industry as the large government debt and the
highly capital-intensive character of the industry itself have long been
acknowledged as the critical constraints to the program. To attract private
investment, largely foreign, the jaded structure of the industry had to be addressed.
While the generation and transmission sectors were centralized and monopolistic,
the distribution side was fragmented with over 130 utilities, mostly small and
uneconomic. The pervasive flaws have caused a low utilization of existing
generation capacity; extremely high and uncompetitive power rates; poor quality of
service to consumers; dismal to forgettable performance of the government power
sector; high system losses; and an inability to develop a clear strategy for
overcoming these shortcomings.
Thus, the EPIRA provides a framework for the restructuring of the industry,
including the privatization of the assets of the National Power Corporation (NPC),
the transition to a competitive structure, and the delineation of the roles of various
government agencies and the private entities. The law ordains the division of the
industry into four (4) distinct sectors, namely: generation, transmission, distribution
and supply.
Corollarily, the NPC generating plants have to privatized and its transmission
business spun off and privatized thereafter.[67]
Finally, every law has in its favor the presumption of constitutionality, and to justify its nullification, there
must be a clear and unequivocal breach of the Constitution and not one that is doubtful, speculative, or
argumentative.[68] Indubitably, petitioners failed to overcome this presumption in favor of the EPIRA. We
find no clear violation of the Constitution which would warrant a pronouncement that Sec. 34 of the EPIRA
and Rule 18 of its IRR are unconstitutional and void.
WHEREFORE, the instant case is hereby DISMISSED for lack of merit.
SO ORDERED.
ANTONIO EDUARDO B. NACHURA
Associate Justice

WE CONCUR:

REYNATO S. PUNO
Chief Justice

LEONARDO A. QUISUMBING CONSUELO YNARES-SANTIAGO

Associate Justice Associate Justice

ANGELINA SANDOVAL-GUTIERREZ ANTONIO T. CARPIO

Associate Justice Associate Justice

MA. ALICIA AUSTRIA-MARTINEZ RENATO C. CORONA

Associate Justice Associate Justice

CONCHITA CARPIO MORALES ADOLFO S. AZCUNA

Associate Justice Associate Justice

DANTE O. TINGA MINITA V. CHICO-NAZARIO

Associate Justice Associate Justice

CANCIO C. GARCIA PRESBITERO J. VELASCO, JR.

Associate Justice Associate Justice

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

REYNATO S. PUNO
Chief Justice