Compilation 6.03 - Art. XII

Poli
Law Review | Dean Candelaria Compilation 6.03 Article XII Page 1 of 29

Art. XII allowing foreign contractors to manage or operate all the aspects of the mining operation,
the above-cited provisions of R.A. No. 7942 have in effect conveyed beneficial ownership
Sec. 2: La Bugal Blaan v Ramos (NO) over the nations mineral resources to these contractors, leaving the State with nothing but
La Bulgaal Tribal Association v. DENR bare title thereto.
G.R. No. 127882||January 27, 2004|| J. Carpio-Morales
MR (Ganda nito, hirap lang I digest see full text for exhaustive discussion)
Petitioners: LA BUGAL-BLAAN TRIBAL ASSOCIATION, INC., represented by its Chairman FLONG MIGUEL M.
LUMAYONG, WIGBERTO E. TAADA, PONCIANO BENNAGEN, JAIME TADEO, RENATO R. CONSTANTINO, JR. (Dami dude)
Respondents: VICTOR O. RAMOS, SECRETARY, DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES (DENR), All mineral resources are owned by the State. Their exploration, development and
HORACIO RAMOS, DIRECTOR, MINES AND GEOSCIENCES BUREAU (MGB-DENR), RUBEN TORRES, EXECUTIVE utilization (EDU) must always be subject to the full control and supervision of the
SECRETARY, and WMC (PHILIPPINES), INC.
State. More specifically, given the inadequacy of Filipino capital and technology in large-
scale EDU activities, the State may secure the help of foreign companies in all relevant
PUCHA TAYLO GRABE KA MAKA BAWI HA?! (Sorry guys, favorite nya to so its a bit long)
matters -- especially financial and technical assistance -- provided that, at all times, the State
Eh gusto mo naman ng long bro eh :)) - JT
maintains its right of full control. The foreign assistor or contractor assumes all financial,
Summary: technical and entrepreneurial risks in the EDU activities; hence, it may be given reasonable
On 1995, President Ramos approved R.A. No. 7942 which defines the modes of mineral management, operational, marketing, audit and other prerogatives to protect its
agreements for mining operations, outlines the procedure for their filing and approval, investments and to enable the business to succeed.
assignment/transfer and withdrawal, and fixes their terms. Similar provisions govern
financial or technical assistance agreements. DENR issued the IRR for the implementation of Full control is not anathematic to day-to-day management by the contractor, provided that
the law. Petitioners filed this case alleging that at the time of the filing of the petition, 100 the State retains the power to direct overall strategy; and to set aside, reverse or modify
FTAA applications had already been filed, covering an area of 8.4 million hectares, 64 of plans and actions of the contractor. The idea of full control is similar to that which is
which applications are by fully foreign-owned corporations covering a total of 5.8 million exercised by the board of directors of a private corporation: the performance of managerial,
hectares, and at least one by a fully foreign-owned mining company over offshore areas. The operational, financial, marketing and other functions may be delegated to subordinate
issue is w/n this violates Sec. 2, Art. XII of the Constitution. Yes. officers or given to contractual entities, but the board retains full residual control of the
business.
The Court painstakingly discussed the history of the ownership of minerals and its utilization.
The court then clarified that based on the intent of the 1987 ConCom they wanted to do J. Panganiban explained here that there is no basis for the restrictive interpretation of the
away with the practice of allowing foreign corporations manage the usage of our natural provision. Moreover, the state still remains in control since the foreign company is still
resources. For legal precision, Comm. Villegas said,: Actually, the second provision about subject to the law and its requirements. The decision still invalidated 7.8 and 7.9 which were
the President does not permit foreign investors to participate. It is only technical or financial disadvantageous to the Philippine government.
assistance they do not own anything but on conditions that have to be determined by
law with the concurrence of Congress. So, it is very restrictive. If the Commissioner will Facts:
remember, this removes the possibility for service contracts which we said yesterday were President Cory Aquino issued E.O. 759, which authorized the DENR Secretary to
avenues used in the previous regime to go around the 60-40 requirement. UP law evaluate proposals from foreign-owned corporations or foreign investors for
professors explained the reason, for crafting the provision this way, of Sec. 2, they said, contracts or agreements involving either technical or financial assistance for large-
these are contract forms which recognize and assert our sovereignty and ownership over scale exploration, development, and utilization of minerals, which, upon
natural resources since the foreign entity is just a pure contractor and not a beneficial owner appropriate recommendation of the Secretary, the President may execute with the
of our economic resources. The proposal recognizes the need for capital and technology to foreign proponent. (Since there was no law yet, large scale mining was defined to
develop our natural resources without sacrificing our sovereignty and control over such be a utilization, development and involves a capital investment of $50M per
resources by the safeguard of a special law which requ\ires two-thirds vote of all the mining unit)
members of the Legislature. On 1995, President Ramos approved R.A. No. 7942 to govern the exploration,

development, utilization and processing of all mineral resources. The law defines
Several provisions in the law evince the participation of foreign corporations which is a
the modes of mineral agreements for mining operations, outlines the procedure
violation of Sec. 2, Article XII. Sec. 33 states, Any qualified person with technical and financial
for their filing and approval, assignment/transfer and withdrawal, and fixes their
capability to undertake large-scale exploration, development, and utilization of mineral
resources. Mining operation, as the law defines it, means mining terms. Similar provisions govern financial or technical assistance agreements.
activities involving exploration, feasibility, development, utilization, and processing. By

Bautista Caguioa Chavez Cupin David Dulay Enguio Feble Galon Gammad Gan Gerona Giltendez Gonzales Lambino Lukban Macabulos Magbanua Nitura Oducado Pabilane Quintos Ramos Remollo Rivera Santos Tan Taylo Uy

Poli Law Review | Dean Candelaria Compilation 6.03 Article XII Page 2 of 29

The law governs the qualifications of contractors, their rights, and it also includes During the American Period, we were governed by organic acts. One of which is
the rights of surface owners as well as a mechanism for settling dispute. the Bill of 1902, Sec. 20 of which reserved the disposition of mineral lands of the
Shortly before the effectivity of R.A. No. 7942, however, or on March 30, 1995, the public domain from sale. Section 21 thereof allowed the free and open
President entered into an FTAA with WMCP covering 99,387 hectares of land in exploration, occupation and purchase of mineral deposits not only to citizens of
South Cotabato, Sultan Kudarat, Davao del Sur and North Cotabato. Sec. Ramos the Philippine Islands but to those of the United States as well.
then issued the IRR which was later on repealed by DAO No. 96-40. A person who acquired ownership over a parcel of private mineral land pursuant
On January 10, 1997, counsels for petitioners sent a letter to the DENR Secretary to the laws then prevailing could exclude other persons, even the State, from
demanding that the DENR stop the implementation of R.A. No. 7942 and DAO No. exploiting minerals within his property.
96-40. Since the DENR did not respond to the letter, they filed the present petition The Regalian doctrine and the American system, therefore, differ in one essential
for prohibition and mandamus, with a prayer for a temporary restraining order. respect. Under the Regalian theory, mineral rights are not included in a grant of
Also impleaded is private respondent WMCP, which entered into the assailed FTAA land by the state; under the American doctrine, mineral rights are included in a
with the Philippine Government. WMCP is owned by WMC Resources grant of land by the government.
International Pty., Ltd. (WMC), a wholly owned subsidiary of Western Mining 1935 Constitution
Corporation Holdings Limited, a publicly listed major Australian mining and The 1935 Constitution adopted the Regalian doctrine, declaring all natural
exploration company. By WMCPs information, it is a 100% owned subsidiary of resources of the Philippines, including mineral lands and minerals, to be property
WMC LIMITED. belonging to the State. This was embodied in Art. XIII Sec. 1 which is similar to the
Issue: provision found in Sec. 2 of Art. XII.
Whether or not the WMC FTAA, which was entered into pursuant to E.O. No. 279, violates State ownership of natural resources was seen as a necessary starting point to
Section 2, Article XII of the Constitution. secure recognition of the states power to control their disposition, exploitation,
Held: development, or utilization. The delegates of the Constitutional Convention very
WHEREFORE, the petition is GRANTED. The Court hereby declares unconstitutional and void: well knew that the concept of State ownership of land and natural resources was
(1) The following provisions of Republic Act No. 7942: (a) The proviso in Section 3 (aq); introduced by the Spaniards, however, they were not certain whether it was
(b) Section 23;(c) Section 33 to 41; (d) Section 56; (e) The second and third paragraphs of
continued and applied by the Americans. To remove all doubts, the Convention
Section 81, and (f) Section 90.
approved the provision in the Constitution affirming the Regalian doctrine.
(2) All provisions of Department of Environment and Natural Resources Administrative Order
96-40, s. 1996 which are not in conformity with this Decision, and The nationalization of the natural resources was intended (1) to insure their
(3) The Financial and Technical Assistance Agreement between the Government of the conservation for Filipino posterity; (2) to serve as an instrument of national
Republic of the Philippines and WMC Philippines, Inc. defense, helping prevent the extension to the country of foreign control through
peaceful economic penetration; and (3) to avoid making the Philippines a source of
Ratio: international conflicts with the consequent danger to its internal security and
Regalian Doctrine independence.
The first sentence of Section 2 embodies the Regalian doctrine or jura This provision was diluted because of the Parity agreement, which allowed US
regalia. Introduced by Spain into these Islands, this feudal concept is based on the citizens to utilize our natural resources, was approved through a plebiscite. The
States power of dominium, which is the capacity of the State to own or acquire Parity Amendment was subsequently modified by the 1954 Revised Trade
property Agreement, also known as the Laurel-Langley Agreement, embodied in Republic
jura regalia refers to royal rights, or those rights which the King has by virtue of Act No. 1355 (skipped the 1973 constitution)
his prerogatives. In Spanish law, it refers to a right which the sovereign has over 1987 Constitution
anything in which a subject has a right of property or propriedad. These were Like the 1935 and 1973 Constitutions before it, the 1987 Constitution, in the
rights enjoyed during feudal times by the king as the sovereign. (Basically the king second sentence of the same provision, prohibits the alienation of natural
owns all the titles, in theory, parang usufruct lang yung sa commoners) This was resources, except agricultural lands.
adopted because the Philippines was a colony of Spain, and all lands belongs to the The third sentence of the same paragraph is new: The exploration, development
crown. and utilization of natural resources shall be under the full control and supervision
The Regalian doctrine extends not only to land but also to all natural wealth that of the State. The constitutional policy of the States full control and supervision
may be found in the bowels ( ) of the earth. over natural resources proceeds from the concept of jura regalia, as well as the



recognition of the importance of the countrys natural resources, not only for Effectivity of E.O. 279
national economic development, but also for its security and national defense Section 8 of the E.O. states that the same shall take effect immediately. This
Conspicuously absent in Section 2 is the provision in the 1935 and 1973 provision, according to petitioners, runs counter to Section 1 of E.O. No. 200,
Constitutions authorizing the State to grant licenses, concessions, or leases for the which states, Laws shall take effect after fifteen days following the completion of
exploration, exploitation, development, or utilization of natural resources. By such their publication.
omission, the utilization of inalienable lands of public domain through license, It bears noting that there is nothing in E.O. No. 200 that prevents a law from taking
concession or lease is no longer allowed under the 1987 Constitution. effect on a date other than even before the 15-day period after its
It introduced an unfamiliar language, The State may directly undertake such publication. Where a law provides for its own date of effectivity, such date
activities or it may enter into co-production, joint venture, or production-sharing prevails over that prescribed by E.O. No. 200.
agreements with Filipino citizens, or corporations or associations at least sixty per From a reading then of Section 8 of E.O. No. 279, Section 1 of E.O. No. 200,
centum of whose capital is owned by such citizens. and Taada v. Tuvera, this Court holds that E.O. No. 279 became
Section 2 provides 2 options: One, the State may directly undertake these activities effective immediately upon its publication in the Official Gazette on August 3,
itself; or two, it may enter into co-production, joint venture, or production-sharing 1987.
agreements with Filipino citizens, or entities at least 60% of whose capital is That such effectivity took place after the convening of the first Congress is
owned by such citizens. Third option is by law which allows small scale utilization. irrelevant. At the time President Aquino issued E.O. No. 279 on July 25, 1987, she
While the second and third options are limited only to Filipino citizens or, in the was still validly exercising legislative powers under the Provisional Constitution.
case of the former, to corporations or associations at least 60% of the capital of
which is owned by Filipinos, a fourth allows the participation of foreign-owned Certain provisions of the FTAA is unconstitutional
corporations. Petitioners submit that, in accordance with the text of Section 2, Article XII, FTAAs
The fourth and fifth paragraphs of Section 2 provide: The President may enter into should be limited to technical or financial assistance only. They observe that the
agreements with foreign-owned corporations involving either technical or financial WMCP FTAA allows WMCP, a fully foreign-owned mining corporation, to extend
assistance for large-scale exploration, development, and utilization of minerals, more than mere financial or technical assistance to the State, for it permits WMCP
petroleum, and other mineral oils according to the general terms and conditions to manage and operate every aspect of the mining activity.
provided by law, based on real contributions to the economic growth and general Following the literal text of the Constitution, assistance accorded by foreign-
welfare of the country. In such agreements, the State shall promote the owned corporations in the large-scale exploration, development, and utilization of
development and use of local scientific and technical resources.
1 petroleum, minerals and mineral oils should be limited to technical or financial
assistance only.

1
WMCP nevertheless submits that the word technical in the fourth paragraph of
Summary of the Changes: Section 2 of E.O. No. 279 encompasses a broad number of possible services,
First, the parties to FTAAs. Only the President, in behalf of the State, may enter into these agreements, and only
with corporations. By contrast, under the 1973 Constitution, a Filipino citizen, corporation or association may enter perhaps, scientific and/or technological in basis. It thus posits that it may also
into a service contract with a foreign person or entity. well include the area of management or operations . . . so long as such
Second, the size of the activities: only large-scale exploration, development, and utilization is allowed. The term large- assistance requires specialized knowledge or skills, and are related to the
scale usually refers to very capital-intensive activities.
Third, the natural resources subject of the activities is restricted to minerals, petroleum and other mineral oils, the exploration, development and utilization of mineral resources.
intent being to limit service contracts to those areas where Filipino capital may not be sufficient. This Court is not persuaded. As priorly pointed out, the phrase management or
Fourth, consistency with the provisions of statute. The agreements must be in accordance with the terms and
conditions provided by law. other forms of assistance in the 1973 Constitution was deleted in the 1987
Fifth, Section 2 prescribes certain standards for entering into such agreements. The agreements must be based on real Constitution, which allows only technical or financial assistance. Casus omisus
contributions to economic growth and general welfare of the country. pro omisso habendus est. A person, object or thing omitted from an enumeration
Sixth, the agreements must contain rudimentary stipulations for the promotion of the development and use of local
scientific and technical resources. must be held to have been omitted intentionally.
Seventh, the notification requirement. The President shall notify Congress of every financial or technical assistance The intention of the 1987 ConCom was to eliminate evils brought due to the management
agreement entered into within thirty days from its execution.
or operation of mining activities by foreign contractors.
Finally, the scope of the agreements. While the 1973 Constitution referred to service contracts for financial, technical,
management, or other forms of assistance the 1987 Constitution provides for agreements. . . involving either As earlier noted, the phrase service contracts has been deleted in the 1987
financial or technical assistance. It bears noting that the phrases service contracts and management or other forms Constitutions Article on National Economy and Patrimony. If the CONCOM
of assistance in the earlier constitution have been omitted.

intended to retain the concept of service contracts under the 1973 Constitution, it



could have simply adopted the old terminology (service contracts) instead of recognize and assert our sovereignty and ownership over natural resources since
employing new and unfamiliar terms. the foreign entity is just a pure contractor and not a beneficial owner of our
Such a difference between the language of a provision in a revised constitution economic resources. The proposal recognizes the need for capital and technology
and that of a similar provision in the preceding constitution is viewed as indicative to develop our natural resources without sacrificing our sovereignty and control
of a difference in purpose. over such resources by the safeguard of a special law which requires two-thirds
The SC then cited the concom deliberations wherein the exchanges of Comm. vote of all the members of the Legislature.
Quesada and Comm. Villegas were featured. Specifically, Comm. Villegas R.A. 7942, while using Technical or Financial assistance, actually allows service contracts
said: deletion of the phrase service contracts was our first attempt to avoid With the foregoing discussion in mind, this Court finds that R.A. No. 7942 is invalid
some of the abuses in the past regime in the use of service contracts to go insofar as said Act authorizes service contracts. Although the statute employs the
around the 60-40 arrangement. phrase financial and technical agreements in accordance with the 1987
In a subsequent discussion, Comm. Villegas clarified that: Actually, the second Constitution, it actually treats these agreements as service contracts that grant
provision about the President does not permit foreign investors to participate. It beneficial ownership to foreign contractors contrary to the fundamental law.
is only technical or financial assistance they do not own anything but on Sec. 33 states, Any qualified person with technical and financial capability to
conditions that have to be determined by law with the concurrence of undertake large-scale (parang tiyan ni JT) exploration, development, and
Congress. So, it is very restrictive. If the Commissioner will remember, this utilization of mineral resources in the Philippines may enter into a financial or
removes the possibility for service contracts which we said yesterday were technical assistance agreement directly with the Government through the
avenues used in the previous regime to go around the 60-40 requirement. Department
Comm. Davide, the proponent of the proposal, explained the purpose of the Exploration under the questioned law means the searching or prospecting for
provision. He said, In the Preamble we clearly stated that the Filipino people are mineral resources by geological, geochemical or geophysical surveys, remote
sovereign and that one of the objectives for the creation or establishment of a sensing, test pitting, trending, drilling, shaft sinking, tunneling or any other means
government is to conserve and develop the national patrimony. The implication for the purpose of determining the existence, extent, quantity and quality thereof
is that the national patrimony or our natural resources are exclusively reserved and the feasibility of mining them for profit.
for the Filipino people. No alien must be allowed to enjoy, exploit and develop A legally organized foreign-owned corporation may be granted an exploration
our natural resources. As a matter of fact, that principle proceeds from the fact permit, which vests it with the right to conduct exploration for all minerals in
that our natural resources are gifts from God to the Filipino people and it would specified areas, i.e., to enter, occupy and explore the same. Eventually, the
be a breach of that special blessing from God if we will allow aliens to exploit our foreign-owned corporation, as such permittee, may apply for a financial and
natural resources. technical assistance agreement.
I voted in favor of the Jamir proposal because it is not really exploitation that we Mining operation, as the law defines it, means mining
granted to the alien corporations but only for them to render financial or activities involving exploration, feasibility, development, utilization,
technical assistance. It is not for them to enjoy our natural resources. and processing.
The opinion of another member of the CONCOM is persuasive and leaves no doubt The underlying assumption in all these provisions is that the foreign contractor
as to the intention of the framers to eliminate service contracts altogether. manages the mineral resources, just like the foreign contractor in a service
Comm. Nolledo supported this view, he said that, Are service contracts allowed contract.
under the new Constitution? No. Under the new Constitution, foreign investors A foreign contractor may even convert its FTAA into a mineral agreement if the
(fully alien-owned) can NOT participate in Filipino enterprises except to provide: economic viability of the contract area is found to be inadequate to justify large-
(1) Technical Assistance for highly technical enterprises; and (2) Financial scale mining operations, provided that it reduces its equity in the corporation,
Assistance for large-scale enterprises. partnership, association or cooperative to forty percent (40%).
The case then mentioned UP professors, who worked on the draft, which basically Finally, under the Act, an FTAA contractor warrants that it has or has access to all
say the same thing, that the participation of the foreigners are limited and this is the financing, managerial, and technical expertise. . . . This suggests that an FTAA
because we still assert our sovereignty to our natural resources. contractor is bound to provide some management assistance a form of
In sum Sec. 2 permits allows technical assistance or financial assistance assistance that has been eliminated and, therefore, proscribed by the present
agreements, and only for large-scale activities. These are contract forms which Charter.



By allowing foreign contractors to manage or operate all the aspects of the mining drafters opted to use involving when they could have simply
operation, the above-cited provisions of R.A. No. 7942 have in effect conveyed saidagreements for financial or technical assistance, if that was their intention
beneficial ownership over the nations mineral resources to these contractors, to begin with. In this case, the limitation would be very clear and no further
leaving the State with nothing but bare title thereto. debate would ensue.
In contrast, the use of the word involving signifies the possibility of the
Synthesis of the MR, which was decided by the Court on December 2004, penned by J. inclusion of other forms of assistance or activities having to do with,
Panganiban. (Reversed the decision stated above) otherwise related to or compatible with financial or technical assistance. The
word involving as used in this context has three connotations that can be
Subsequent selling to Sagittarius which is a company (60%) owned by Filipinos removed differentiated thus: one, the sense of concerning, having to do with, or
the said transaction from the prohibition. affecting; two, entailing, requiring, implying or necessitating;
The nullity of the FTAA was obviously premised upon the contractor being
and three, including, containing or comprising.
a foreign corporation. Had the FTAA been originally issued to a Filipino-owned
If the real intention of the drafters was to confine foreign corporations to
corporation, there would have been no constitutionality issue to speak of. Upon
financial or technical assistance and nothing more, their language would have
the other hand, the conveyance of the WMCP FTAA to a Filipino corporation can
certainly been so unmistakably restrictive and stringent as to leave no doubt
be likened to the sale of land to a foreigner who subsequently acquires Filipino
in anyones mind about their true intent. For example, they would have used
citizenship, or who later resells the same land to a Filipino citizen. The conveyance
the sentence foreign corporations are absolutely prohibited from involvement
would be validated, as the property in question would no longer be owned by a
in the management or operation of mining or similar ventures or words of
disqualified vendee.
similar import. A search for such stringent wording yields negative results.
We believe that this case is clearly analogous to Halili, in which the land acquired
Thus, we come to the inevitable conclusion that there was a conscious and
by a non-Filipino was re-conveyed to a qualified vendee and the original
deliberate decision to avoid the use of restrictive wording that bespeaks an
transaction was thereby cured. Paraphrasing Halili, the same rationale applies to
intent not to use the expression agreements x x x involving either technical
the instant case: assuming arguendo the invalidity of its prior grant to a foreign
or financial assistance in an exclusionary and limiting manner.
corporation, the disputed FTAA -- being now held by a Filipino corporation -- can
Deletion of Service Contracts was not to ban it per se but to avoid the pitfalls of the
no longer be assailed; the objective of the constitutional provision -- to keep the previous models
exploration, development and utilization of our natural resources in Filipino hands Nowhere in the above-quoted Section can be discerned the objective to keep out
-- has been served. of foreign hands the management or operation of mining activities or the plan to
More accurately speaking, the present situation is one degree better than that eradicate service contracts as these were understood in the 1973 Constitution.
obtaining in Halili, in which the original sale to a non-Filipino was clearly and Still, petitioners maintain that the deletion or omission from the 1987 Constitution
indisputably violative of the constitutional prohibition and thus void ab initio. In of the term service contracts found in the 1973 Constitution sufficiently proves
the present case, the issuance/grant of the subject FTAA to the then foreign- the drafters intent to exclude foreigners from the management of the affected
owned WMCP was not illegal, void or unconstitutional at the time. The matter had enterprises.
to be brought to court, precisely for adjudication as to whether the FTAA and the To our mind, however, such intent cannot be definitively and conclusively
Mining Law had indeed violated the Constitution. Since, up to this point, the established from the mere failure to carry the same expression or term over to the
decision of this Court declaring the FTAA void has yet to become final, to all intents
new Constitution, absent a more specific, explicit and unequivocal statement to
and purposes, the FTAA must be deemed valid and constitutional. that effect. What petitioners seek (a complete ban on foreign participation in the
The restrictive interpretation of the ponencia in the January case finds no support.
management of mining operations, as previously allowed by the earlier
Justice Panganiban explained that based on Francisco Case, the words of the
Constitutions) is nothing short of bringing about a momentous sea change in the
Constitution should be given their ordinary meaning.
economic and developmental policies; and the fundamentally capitalist, free-
We do not see how applying a strictly literal or verba legis interpretation of enterprise philosophy of our government.
paragraph 4 could inexorably lead to the conclusions arrived at in
A literal and restrictive interpretation of paragraph 4, such as that proposed by
the ponencia. First, the drafters choice of words -- their use of the
petitioners, suffers from certain internal logical inconsistencies that generate
phrase agreements x x x involving either technical or financial assistance --
ambiguities in the understanding of the provision. As a matter of fact, financial,
does not indicate the intent to exclude other modes of assistance. The
and even technical assistance, regardless of the nationality of its source, would be



welcomed in the mining industry anytime with open arms, on account of the Through the foregoing provisions, the government agencies concerned are
dearth of local capital and the need to continually update technological know-how empowered to approve or disapprove -- hence, in a position to influence, direct,
and improve technical skills. and change -- the various work programs and the corresponding minimum
The last point needs to be emphasized: if merely financial or technical assistance expenditure commitments for each of the exploration, development and
agreements are allowed, there would be no need to limit them to large-scale utilization phases of the enterprise. Once they have been approved, the
mining operations, as there would be far greater need for them in the smaller- contractors compliance with its commitments therein will be monitored. Figures
scale mining activities (and even in non-mining areas). Obviously, the provision in for mineral production and sales are regularly monitored and subjected to
question was intended to refer to agreements other than those for mere financial government review, to ensure that the products and by-products are disposed of
or technical assistance. at the best prices; copies of sales agreements have to be submitted to and
In like manner, there would be no need to require the President of the Republic to registered with MGB (Mines and GeoSciences to ha? Hindi Magandang Gabi
report to Congress, if only financial or technical assistance agreements are Bayan).
involved. Such agreements are in the nature of foreign loans that -- pursuant to The contractor is mandated to open its books of accounts and records for scrutiny,
Section 20 of Article VII of the 1987 Constitution -- the President may contract or to enable the State to determine that the government share has been fully
guarantee, merely with the prior concurrence of the Monetary Board. paid. The State may likewise compel compliance by the contractor with
The conclusion is clear and inescapable -- a verba legis construction shows that mandatory requirements on mine safety, health and environmental protection,
paragraph 4 is not to be understood as one limited only to foreign loans (or other and the use of anti-pollution technology and facilities. The contractor is also
forms of financial support) and to technical assistance. There is definitely more to obligated to assist the development of the mining community, and pay royalties to
it than that. These are provisions permitting participation by foreign companies; the indigenous peoples concerned.
requiring the Presidents report to Congress; and using, as yardstick, contributions Violation of any of the FTAAs terms and conditions, and/or non-compliance with
based on economic growth and general welfare. These were neither accidentally statutes or regulations, may be penalized by cancellation of the FTAA. Such
inserted into the Constitution nor carelessly cobbled together by the drafters in lip sanction is significant to a contractor who may have yet to recover the tens or
service to shallow nationalism. hundreds of millions of dollars sunk into a mining project.
The Government is still granted full control of the activities. Dispositive: WHEREFORE, the Court RESOLVES to GRANT the respondents and the
Control, as utilized in Section 2 of Article XII, must be taken to mean a degree of intervenors Motions for Reconsideration; to REVERSE and SET ASIDE this Courts January 27,
control sufficient to enable the State to direct, restrain, regulate and govern the 2004 Decision; to DISMISS the Petition; and to issue this new judgment
affairs of the extractive enterprises. declaring CONSTITUTIONAL (1) Republic Act No. 7942 (the Philippine Mining Law), (2) its
Control by the State may be on a macro level, through the establishment of Implementing Rules and Regulations contained in DENR Administrative Order (DAO) No.
policies, guidelines, regulations, industry standards and similar measures that 9640 -- insofar as they relate to financial and technical assistance agreements referred to in
paragraph 4 of Section 2 of Article XII of the Constitution; and (3) the Financial and Technical
would enable government to regulate the conduct of affairs in various enterprises,
Assistance Agreement (FTAA) dated March 30, 1995 executed by the government and
and restrain activities deemed not desirable or beneficial, with the end in view of
Western Mining Corporation Philippines Inc. (WMCP), except Sections 7.8 and 7.9 of the
ensuring that these enterprises contribute to the economic development and subject FTAA which are hereby INVALIDATED for being contrary to public policy and for
general welfare of the country, conserve the environment, and uplift the well- being grossly disadvantageous to the government.
being of the local affected communities. Such a degree of control would be
compatible with permitting the foreign contractor sufficient and reasonable
management authority over the enterprise it has invested in, to ensure efficient Sec. 5: Cruz v DENR (RR)
and profitable operation. GR No. 135385 | 12/6/2000 | PER CURIAM
The States full control and supervision over mining operations are ensured Petitioner/s: ISAGANI CRUZ and CESAR EUROPA
Respondent/s: SECRETARY OF DENR, SEC. OF DBM, CHAIRMAN AND COMMISSIONERS OF NICP
through the following provisions in RA 7942: Sections 8, 9, 16, 19, 24, 35[(b), (e), (There is also a super long list of intervenors including Juan Flavier and the CHR)
(f), (g), (h), (k), (l), (m) and (o)], 40, 57, 66, 69, 70, and Chapters XI and XVII; as well
as the following provisions of DAO 96-40: Sections7[(d) and (f)], 35(a-2), 53[(a-4) SUMMARY: "Assailed is the constitutionality of the IPRA because it amounts to unlawful
and (d)], 54, 56[(g), (h), (l), (m) and (n)], 56(2), 60, 66, 144, 168, 171 and 270, and deprivation of the States ownership over the lands of the public domain as well as minerals
also Chapters XV, XVI and XXIV. and other natural resources in violation of the Regalian Doctrine. Also providing an all-



encompassing definition of ancestral domains or ancestral lands violates the rights of o Commission on Human Rights (CHR) likewise filed a Motion to Intervene
private landowners. The SC said it was constitutional (because voting was 7-7). and/or to Appear as Amicus Curiae, asserting that IPRA is an expression
of the principle of parens patriae and that the State has the responsibility
Ancestral domains: all areas belonging to ICC/IPP under a claim of ownership since time to protect and guarantee the rights of those who are at a serious
immemorial or as a consequence of government projects or other voluntary dealings with disadvantage like indigenous peoples.
the government. Ancestral lands are held by ICC/IP under the same conditions as ancestral o Another group, composed of the Ikalahan Indigenous People and the
domains but are limited to those not merely occupied and possessed but utilized under a Haribon Foundation for the Conservation of Natural Resources, Inc.
claim of individual or traditional group ownership. - Native title in Carnio case that says that (Haribon, et al.), agree with the NCIP and Flavier, et al. that IPRA is
native title is private land and was never public thus never belonged to the state. - All lands consistent with the Constitution and pray that the petition for
that were not acquired by government belongs to the public domain has an exception any prohibition and mandamus be dismissed.
land that should have been in the possession of an occupant and of his predecessors-in o The motions for intervention of the aforesaid groups and organizations
interest since time immemorial. were granted.
Petitioners assail the constitutionality of the following provisions of the IPRA and
The Certificate of Ancestral Title (CADT) is only a formality as ownership is recognized under its Implementing Rules on the ground that they amount to an unlawful
customary law and can co-exist with the civil law concept. - The natural resources are still deprivation of the States ownership over lands of the public domain as well as
owned by the state and not included in the enumeration in IPRA. It merely grants minerals and other natural resources therein, in violation of the regalian doctrine
management over them to the ICC/IP." (CREDITS TO Dianna Wilwayco & friends digest group embodied in Section 2, Article XII of the Constitution:
A2013)` (1) Section 3(a) which defines the extent and coverage of ancestral
domains, and Section 3(b) which, in turn, defines ancestral lands;
(2) Section 5, in relation to section 3(a), which provides that ancestral
FACTS domains including inalienable public lands, bodies of water, mineral
Petitioners Isagani Cruz and Cesar Europa brought this suit for prohibition and and other resources found within ancestral domains are private but
mandamus as citizens and taxpayers, assailing the constitutionality of certain community property of the indigenous peoples;
provisions of Republic Act No. 8371 (R.A. 8371), otherwise known as the (3) Section 6 in relation to section 3(a) and 3(b) which defines the
Indigenous Peoples Rights Act of 1997 (IPRA), and its Implementing Rules and composition of ancestral domains and ancestral lands;
Regulations (Implementing Rules). (4) Section 7 which recognizes and enumerates the rights of the
September 29, 1998 SC Resolution: required respondents to comment. indigenous peoples over the ancestral domains;
o In compliance, NCIP, the government agency created under the IPRA to (5) Section 8 which recognizes and enumerates the rights of the
implement its provisions, filed their Comment to the Petition, in which indigenous peoples over the ancestral lands;
they defend the constitutionality of the IPRA and pray that the petition (6) Section 57 which provides for priority rights of the indigenous
be dismissed for lack of merit. peoples in the harvesting, extraction, development or exploration of
o Respondents Secretary of the Department of Environment and Natural minerals and other natural resources within the areas claimed to be
Resources (DENR) and Secretary of the Department of Budget and their ancestral domains, and the right to enter into agreements with
Management (DBM) filed through the Solicitor General a consolidated nonindigenous peoples for the development and utilization of natural
Comment. The Solicitor General is of the view that the IPRA is partly resources therein for a period not exceeding 25 years, renewable for
unconstitutional on the ground that it grants ownership over natural not more than 25 years; and
resources to indigenous peoples and prays that the petition be granted (7) Section 58 which gives the indigenous peoples the responsibility to
in part. maintain, develop, protect and conserve the ancestral domains and
Intervenors: portions thereof which are found to be necessary for critical
o A group of intervenors composed of Sen. Juan Flavier, one of the authors watersheds, mangroves, wildlife sanctuaries, wilderness, protected
of the IPRA, Mr. Ponciano Bennagen, a member of the 1986 areas, forest cover or reforestation.
Constitutional Commission, and the leaders and members of 112 groups Other contentions of petitioners:
of indigenous peoples (Flavier, et. al), filed their Motion for Leave to o By providing for an all-encompassing definition of ancestral domains
Intervene. They join the NCIP in defending the constitutionality of IPRA and ancestral lands which might even include private lands found
and praying for the dismissal of the petition. within said areas, Sections 3(a) and 3(b) violate the rights of private
landowners.



o Question the provisions of the IPRA defining the powers and jurisdiction (3) The issuance of a writ of prohibition directing the Secretary of the
of the NCIP and making customary law applicable to the settlement of Department of Environment and Natural Resources to cease and desist
disputes involving ancestral domains and ancestral lands on the ground from implementing Department of Environment and Natural Resources
that these provisions violate the due process clause of the Constitution Circular No. 2, series of 1998;
(1) sections 51 to 53 and 59 which detail the process of (4) The issuance of a writ of prohibition directing the Secretary of Budget
delineation and recognition of ancestral domains and which and Management to cease and desist from disbursing public funds for
vest on the NCIP the sole authority to delineate ancestral the implementation of the assailed provisions of R.A. 8371; and
domains and ancestral lands; (5) The issuance of a writ of mandamus commanding the Secretary of
Environment and Natural Resources to comply with his duty of carrying
(2) Section 52[i] which provides that upon certification by out the States constitutional mandate to control and supervise the
the NCIP that a particular area is an ancestral domain and exploration, development, utilization and conservation of Philippine
upon notification to the following officials, namely, the natural resources.
Secretary of Environment and Natural Resources, Secretary
of Interior and Local Governments, Secretary of Justice and ISSUE:
Commissioner of the National Development Corporation, (Note: This case is unique in the sense that in the Per Curiam Resolution, after the above-
the jurisdiction of said officials over said area terminates; mentioned facts, the Court did not explain the issues per se but rather enumerated the
votes of the members of the Court. The Court did not even enumerate the issues.)
(3) Section 63 which provides the customary law, traditions
and practices of indigenous peoples shall be applied first RATIO:
with respect to property rights, claims of ownership, (Note: Thus, this part is all about the votes. 7-7 kasi so it was not decisive for purposes of
hereditary succession and settlement of land disputes, and ruling on the issues but, the majority vote not having been reached, the petition is
that any doubt or ambiguity in the interpretation thereof DISMISSED.)
shall be resolved in favor of the indigenous peoples;
7 voted to dismiss.
(4) Section 65 which states that customary laws and o (1) Justice Kapunan, (2) Chief Justice Davide, and Justices (3) Bellosillo,
practices shall be used to resolve disputes involving (4) Quisumbing, and (5) Santiago sustain the validity of the challenged
indigenous peoples; and provisions of R.A. 8371.
o (6) Justice Puno sustained all challenged provisions of the law with the
(5) Section 66 which vests on the NCIP the jurisdiction over exception of:
all claims and disputes involving rights of the indigenous ! (i) Section 1, Part II, Rule III of NCIP Administrative Order No.
[5]
peoples. 1, series of 1998, (ii) the IRR of the IPRA, and (iii) Section 57 of
o Assail the validity of Rule VII, Part II, Section 1 of the NCIP Administrative the IPRA which he contends should be interpreted as dealing
Order No. 1, series of 1998, which provides that the administrative with the large-scale exploitation of natural resources and
relationship of the NCIP to the Office of the President is characterized should be read in conjunction with Section 2, Article XII of the
as a lateral but autonomous relationship for purposes of policy and 1987 Constitution.
program coordination. They contend that said Rule infringes upon the ! (7) Justice Mendoza voted to dismiss the petition solely on the
Presidents power of control over executive departments under Section ground that it does not raise a justiciable controversy and
17, Article VII of the Constitution. petitioners do not have standing to question the
Petitioners pray for the following: constitutionality of R.A. 8371.
(1) A declaration that Sections 3, 5, 6, 7, 8, 52[I], 57, 58, 59, 63, 65 and 66 7 voted to grant.
and other related provisions of R.A. 8371 are unconstitutional and o (1) Justice Panganiban expresses the view that:
invalid; ! Sections 3 (a)(b), 5, 6, 7 (a)(b), 8, and related provisions of
(2) The issuance of a writ of prohibition directing the Chairperson and R.A. 8371 are unconstitutional.
Commissioners of the NCIP to cease and desist from implementing the ! He reserves judgment on the constitutionality of Sections 58,
assailed provisions of R.A. 8371 and its Implementing Rules; 59, 65, and 66 of the law, which he believes must await the



filing of specific cases by those whose rights may have been with the widow's usufruct and the remaining 2/3 with a usufruct in favor of
violated by the IPRA. Wanda.
o (2) Justice Vitug expresses the view that Sections 3(a), 7, and 57 of R.A. Jorge and Roberto opposed on the grounds: (a) that the provisions for vulgar
8371 are unconstitutional. substitution in favor of Wanda with respect to the widow's usufruct and in favor of
o Justices (3) Melo, (4) Pardo, (5) Buena, (6) Gonzaga-Reyes, and (7) De Juan Pablo Jankowski and Horacio V. Ramirez, with respect to Wanda's usufruct
Leon join in the separate opinions of Justices Panganiban and Vitug. are invalid because the first heirs Marcelle and Wanda survived the testator; (b)
As the votes were equally divided (7 to 7) and the necessary majority was not that the provisions for fideicommissary substitutions are also invalid because the
st nd
obtained, the case was redeliberated upon. However, after redeliberation, the 1 heirs are not related to the 2 heirs or substitutes within the first degree, as
voting remained the same. Accordingly, pursuant to Rule 56, Section 7 of the provided in Article 863 of the CC; (c) that the grant of a usufruct over real
Rules of Civil Procedure, the petition is DISMISSED. property in the Philippines in favor of Wanda, who is an alien, violates Sec 5, Art
III of the Constitution; and that (d) the proposed partition of the testator's interest
in the Santa Cruz (Escolta) Building between the widow Marcelle and the
appellants, violates the testator's express win to give this property to them
Sec. 7 LC: approved the project of partition
1. Ramirez v Vda de Ramirez (KF)
ISSUE: (Relevant topic): WON the usufruct in favor of Wanda is valid YES, valid
Petitioner-Appellee: Testate Estate of Jose Eugenio Ramirez, Maria Luisa Palacios, Administratrix
Legatees, Oppositors-Appellants: Marcelle D. Vda. De Ramirez, et al., Oppositors, Jorge And Roberto

Ramirez HELD: IN VIEW OF THE FOREGOING, the estate of Jose Eugenio Ramirez is hereby ordered distributed as
G.R. No. L-27952 | February 15, 1982 | Abad Santos, J. follows:
1/2 thereof to his widow as her legitime;

1/2 thereof which is the free portion to Roberto and Jorge Ramirez in naked ownership and the usufruct
SUMMARY: to Wanda de Wrobleski with a simple substitution in favor of Juan Pablo Jankowski and Horace V.
Jose Ramirez died and leave widow Marcelle Demoron de Ramirez; his two grandnephews Ramirez. The distribution herein ordered supersedes that of the court a quo. No special pronouncement
Roberto and Jorge Ramirez; and his companion Wanda de Wrobleski as his heirs. His will was as to costs. SO ORDERED.
admitted to probate by the CFI of Manila. Administratix submitted a project of partition:
to the widow and to Jorge and Roberto; 1/3 of free portion to widow usufruct and 2/3 of RATIO: The appellants claim that the usufruct over real properties of the estate in favor of
free portion to Wanda usufruct. Jorge and Roberto opposed the 2/3 usufruct to Wanda Wanda is void because it violates the constitutional prohibition against the acquisition of
ISSUE: WON the 2/3 usufruct is valid lands by aliens.
SC: VALID. We uphold the usufruct in favor of Wanda because a usufruct, albeit a real right,
does NOT vest title to the land in the usufructuary and it is the vesting of title to land in favor The 1935 Constitution which is controlling provides as follows:
of aliens which is proscribed by the Constitution SEC. 5. Save in cases of hereditary succession, no private agricultural land shall be
transferred or assigned except to individuals, corporations, or associations qualified to
FACTS: acquire or hold lands of the public domain in the Philippines. (Art. XIII.)
Main issue in this appeal is the manner of partitioning the estate of Jose Ramirez.
Principal beneficiaries: widow Marcelle Demoron de Ramirez; his two The court a quo upheld the validity of the usufruct given to Wanda on the ground that the
grandnephews Roberto and Jorge Ramirez; and his companion Wanda de Constitution covers not only succession by operation of law but also testamentary
Wrobleski. Marcelle is a French who lives in Paris, while Wanda is an Austrian who succession. We are of the opinion that the Constitutional provision which enables aliens to
lives in Spain. acquire private lands does not extend to testamentary succession for otherwise the
Jose Eugenio Ramirez, a Filipino national, died in Spain on December 11, 1964, prohibition will be for naught and meaningless. Any alien would be able to circumvent the
with only his widow as compulsory heir. His will was admitted to probate by the prohibition by paying money to a Philippine landowner in exchange for a devise of a piece
CFI of Manila, Branch X, on July 27, 1965. Maria Luisa Palacios was appointed of land.
administratrix of the estate.
Inventory and Testamentary Disposition in Spanish This opinion notwithstanding, We uphold the usufruct in favor of Wanda because a
6/23/1966: the administratrix submitted a project of partition as follows: the usufruct, albeit a real right, does NOT vest title to the land in the usufructuary and it is the
Property divided into 2 parts. One part shall go to the widow 'en pleno dominio" in vesting of title to land in favor of aliens which is proscribed by the Constitution.
satisfaction of her legitime; the other part or "free portion" shall go to Jorge and NOT IMPT PARTS:
Roberto "en nuda propriedad." Furthermore, 1/3 of the free portion is charged



1. LEGITIME OF THE WIFE: It is the 1/3 usufruct over the free portion which the appellants alienation of private lands be done only in favor of Filipino Citizens to ensure the policy of
question and justifiably so. It appears that the court a quo approved the usufruct in favor of nationalization. Thus, non-Filipinos cannot acquire or hold title to private lands or to lands of
Marcelle because the testament provides for a usufruct in her favor of one-third of the the public domain, except only by way of legal succession. However, in this case, the effect
estate. The court a quo erred for Marcelle who is entitled to of the estate "en pleno of the subsequent sale by an alien vendee to a Filipino citizen can no longer be impugned on
dominio" as her legitime and which is more than what she is given under the will is not the basis of the invalidity of the initial transfer. The objective of the constitutional provision--
entitled to have any additional share in the estate. To give Marcelle more than her legitime to keep our land in Filipino hands--has been served by the sale to Cataniag of the said parcels
will run counter to the testator's intention for as stated above his dispositions even impaired of land. As to the right of redemption, the Halilis cannot exercise such right because the land
her legitime and tended to favor Wanda. in dispute is an urban land. It is only rural lands, as explicitly stated in the NCC, wherein they
may assert their right of redemption.
2. SUBSTITUTIONS: It will be noted that the testator provided for a vulgar substitution in
respect of the legacies of Roberto and Jorge, the appellants. The appellants do not question FACTS:
the legality of the substitution so provided. The appellants question the sustitucion vulgar y Simeon de Guzman, an American citizen, died in 1968, leaving real properties in
fideicomisaria a favor de Da. Wanda in connection with the 1/3 usufruct over the estate the Philippines.
given to the widow Marcelle However, this question has become moot because as We have His forced heirs were his widow, Helen Meyers Guzman, and his son, David Rey
ruled above, the widow is not entitled to any usufruct. Guzman, both of whom are also American citizens.
On August 9, 1989, Helen executed a deed of quitclaim (Annex A-Complaint),
The appellants also question the sustitucion vulgar y fideicomisaria in connection with assigning, transferring and conveying to David Rey all her rights, titles and interests
Wanda's usufruct over 2/3 of the estate in favor of Juan Pablo Jankowski and Horace v. in and over six parcels of land which the two of them inherited from Simeon.
Ramirez. They allege that the substitution in its vulgar aspect as void because Wanda Among the said parcels of land is that now in litigation, situated in Bagbaguin, Sta.
survived the testator or stated differently because she did not predecease the testator. But Maria, Bulacan, containing an area of 6,695 square meters.
dying before the testator is not the only case for vulgar substitution for it also includes The quitclaim was registered and a TCT was issued in the name of David Rey.
refusal or incapacity to accept the inheritance as provided in Art. 859 of the CC. Hence, the On February 5, 1991, David Rey sold the land to Emiliano Cataniag, upon which TCT
vulgar substitution is valid. No. T-120259 was cancelled and TCT No. T-130721(M) was issued in the latters
As regards the substitution in its fideicommissary aspect, the appellants are correct in their name.[4]
claim that it is void for the following reasons: (a) The substitutes (Juan Pablo Jankowski and Petitioners, who are owners of the adjoining lot, filed a complaint before RTC
Horace V. Ramirez) are not related to Wanda, the heir originally instituted. Art. 863 of the CC questioning the constitutionality and validity of the two conveyances, and claiming
validates a fideicommissary substitution "provided such substitution does not go beyond one ownership based on their right of legal redemption under Art. 1621[5]of the Civil
degree from the heir originally instituted." and (b) There is no absolute duty imposed on Code.
Wanda to transmit the usufruct to the substitutes as required by Arts. 865 and 867 of the RTC" dismissed the complaint, ruling that Helens waiver of her inheritance in
Civil Code. In fact, the appellee admits "that the testator contradicts the establishment of a favor of her son was not contrary to the constitutional prohibition against the sale
fideicommissary substitution when he permits the properties subject of the usufruct to be of land to an alien. Also, the land was urban hence petitioners had no reason to
sold upon mutual agreement of the usufructuaries and the naked owners." invoke their right of redemption.
CA" denied the appeal and affirmed the factual findings of the RTC that the land
was urban.
2. Halili v CA (RL) o Citing Tejido vs. Zamacoma and Yap vs. Grageda, it further held that,
G.R. No. 113539 | March 12, 1998 | PANGANIBAN, J. although the transfer of the land to David Rey may have been invalid for
CELSO R. HALILI and ARTHUR R. HALILI, petitioners, vs. COURT OF APPEALS, HELEN MEYERS GUZMAN, DAVID REY
GUZMAN and EMILIANO CATANIAG, respondents. being contrary to the Constitution, there was no more point in allowing
herein petitioners to recover the property, since it has passed on to and
SUMMARY: Simeon de Guzman (American citizen) died leaving real properties in the was thus already owned by a qualified person.
Philippines. His widow, Helen, executed a deed of quitclaim assigning all her rights over the
six parcels of land she inherited in favor of their son, David Rey. Both of them are American ISSUES: W/N the land is urban. YES.
citizens. David Rey sold a parcel of land to Emiliano Cataniag. The Halilis, owner of the (IMPT) W/N the sale to Cataniag is validYES.
adjacent land questions the validity of the sale as well as asserting their right of redemption
over the said lot. The SC held that while the quitclaim in favor of David Rey collided with the HELD: Petition has no merit. WHEREFORE, the petition is hereby DENIED. The challenged
prohibition on the conveyance of private lands in favor of aliens, the same was ratified by Decision is AFFIRMED. Costs against petitioner.
the subsequent sale of the parcel of land to a Filipino Citizen. The Constitution intended that



RATIO: The Krivenko rule was reiterated in Ong Ching Po vs. CA which involves a sale of
land to a Chinese citizen.
1. The Land is urban, thus no right of redemption. o The SC held that the capacity to acquire private land is made
Whether the land in dispute is rural or urban is a factual question which, as a rule, dependent upon the capacity to acquire or hold lands of the public
is not reviewable by this Court. domain. Private land may be transferred or conveyed only to
Basic and long-settled is the doctrine that findings of fact of a trial judge, when individuals or entities qualified to acquire lands of the public domain
affirmed by the CA are binding upon the SC, save for certain exceptions (i.e. factual o The 1935 Constitution reserved the right to participate in the
findings is manifestly mistaken, absurd or impossible, GAD, etc.) disposition, exploitation, development and utilization of all lands of the
The instant case does not fall within any of the exceptions. public domain and other natural resources of the Philippines for Filipino
In fact, the conclusion of the RTC that it is urban land is based on clear and citizens or corporations at least sixty percent of the capital of which was
convincing evidencebecause the community where it is located is a commercial owned by Filipinos.
area thriving in business activities. o Aliens, whether individuals or corporations, have been disqualified from
Furthermore, despite agricultural appearing on the tax declaration of Helen, the acquiring public lands; hence, they have also been disqualified from
Land Regulatory Board attested that the subject property is commercial and the acquiring private lands.
trend of development along the road is commercial. In fine, non-Filipinos cannot acquire or hold title to private lands or to lands of
No Ground to Invoke Right of Redemption because the land is urban in character, the public domain, except only by way of legal succession.
the Halilis cannot invoke the right to redemption. Such right is only applicable in But what is the effect of a subsequent sale by the disqualified alien vendee to a
lands rural in character. qualified Filipino citizen?
o if land is invalidly transferred to an alien who subsequently becomes a
2. The Sale to Cataniag is valid. (IMPT!!!) citizen or transfers it to a citizen, the flaw in the original transaction is
considered cured and the title of the transferee is rendered valid.
It is true that Helens quitclaim in favor of David Rey collided with the Constitution, Thus, in United Church Board of World Ministries vs. Sebastian, in which an alien
Article XII, Section 7 of which provides: resident who owned properties in the Philippines devised to an American non-
o SEC. 7. Save in cases of hereditary succession, no private lands shall be stock corporation part of his shares of stock in a Filipino corporation that owned a
transferred or conveyed except to individuals, corporations, or tract of land in Davao del Norte, the Court sustained the invalidity of such legacy.
associations qualified to acquire or hold lands of the public domain. o However, upon proof that ownership of the American corporation has
The landmark case of Krivenko vs. Register of Deeds settled the issue as to who are passed on to a 100 percent Filipino corporation, the Court ruled that the
qualified (and disqualified) to own public as well as private lands in the Philippines. defect in the will was rectified by the subsequent transfer of the
o The SC held that: Under section 1 of Article XIII [now Sec. 2, Art. XII] of property.
the Constitution, natural resources, with the exception of public The present case is similar to De Castro vs. Tan.
agricultural land, shall not be alienated, and with respect to public o In that case, a residential lot was sold to a Chinese. Upon his death, his
agricultural lands, their alienation is limited to Filipino citizens. But this widow and children executed an extrajudicial settlement, whereby said
constitutional purpose conserving agricultural resources in the hands of lot was allotted to one of his sons who became a naturalized Filipino.
Filipino citizens may easily be defeated by the Filipino citizens The Court did not allow the original vendor to have the sale annulled and
themselves who may alienate their agricultural lands in favor of aliens. to recover the property, for the reason that the land has since become
o It would be futile to prohibit the alienation of public agricultural lands to the property of a naturalized Filipino citizen who is constitutionally
aliens if they may be freely so alienated upon their becoming private qualified to own land.
agricultural lands in the hands of Filipino citizens. Likewise, in the cases of Sarsosa vs. Cuenco, Godinez vs. Pak Luen, Vasquez vs. Li
o Undoubtedly, section 5 [now Sec. 7] is intended to insure the policy of Seng Gia and Herrera vs. Luy Kim Guan, which similarly involved the sale of land to
nationalization contained in section 1 [now Sec. 2]. an alien who thereafter sold the same to a Filipino citizen, the Court again applied
o It must be noticed that the persons against whom the prohibition is the rule that the subsequent sale can no longer be impugned on the basis of the
directed in section 5 [now Sec. 7] are the very same persons who under invalidity of the initial transfer.
section 1 [now Sec. 2] are disqualified to acquire or hold lands of the o The rationale of this principle was explained in Vasquez vs. Li Seng Giap
public domain in the Philippines. thus: x x x [I]f the ban on aliens from acquiring not only agricultural but
o And the subject matter of both sections is the same, namely, the non also urban lands, as construed by this Court in the Krivenko case, is to
transferability of agricultural land to aliens. x x x[18] preserve the nations lands for future generations of Filipinos, that aim



or purpose would not be thwarted but achieved by making lawful the because their mother, a Chinese national, was prohibited by law to own land in
acquisition of real estate by aliens who became Filipino citizens by the Philippines.
naturalization.[29] With regard to the house, it is petitioners position that ownership of her share in
Accordingly, since the disputed land is now owned by Private Respondent the ancestral home was transferred to her brother under the guise of a simulated
Cataniag, a Filipino citizen, the prior invalid transfer can no longer be assailed. contract to defeat any claims by her estranged husband. As proof of her co-
The objective of the constitutional provision -- to keep our land in Filipino hands ownership of the house, petitioner maintains that she has never been charged
-- has been served. rent by her brother for her continued residence in the same.
Respondents, on the other hand, predicate their claim to the disputed properties
on the transfer certificates of title covering the lots issued in their fathers name
and a deed of sale dated April 26, 1982 signed by petitioner herself, covering her
share in the ancestral house. Both the trial court and the Court of Appeals (CA)
3. Osmea v Osmea (RC) recognized the validity of said documents and rendered judgment in favor of
G.R. No. 171911 | Jan 26, 2010 | Corona, J. respondents. The trial court enjoined petitioner from utilizing the litigated land for
Petitioner: Bernarda Osmea her orchid business and ordered her to leave the house immediately. The CA
Respondents: Nicasio Osmea, Tomas Osmea, heirs of Francisco Osmea and Sixta Osmea
modified the decision by declaring petitioner a co-owner of the litigated ancestral
house to the extent of the shares she inherited from two of her siblings.
DOCTRINE:
Only Filipinos may own lands. ISSUE:
Doctrine of unclean hands, Petitioner was party to the fraud so she cannot now claim it W/N CA erred in giving credence to the deed of sale and finding respondents were co-
was fraudulent. owners? NO

SUMMARY: HELD: WHEREFORE, the petition is hereby DENIED.
Bernarda wants her share over parcels of land, which were not included in the will of her
mom. These lands were registered to her brother Francisco, who was a Filipino citizen. She RATIO:
claims that it was like that bec he was the only one who could hold on to since Chinese si
AFFIRM CA, factual findings of lower court and CA are binding.
Mom. Further, she didnt sell her share to the ancestral home fraudulent daw ang contract
Assuming arguendo that the litigated lots were actually the properties of Chiong
was only to protect her share from her husband. Anyhow she now wants her share. Lower
Tan Sy and that the same were only put in the name of respondents father
courts said she had no share, SC upheld these findings of fact. Even assuming arguendo na
because he was the only Filipino citizen in the family at the time the properties
mali yung CA, the courts will not grant her share of the lands because hindi na man Filipino
were purchased, this Court will not consent to any violation of the constitutional
Mom niya, so she couldnt actually own/transmit land. So Bernarda doesnt get anything
prohibition on foreign ownership of land. Moreover, by signing the deed of sale

dated April 26, 1982 (where petitioner transferred her share in the ancestral house
FACTS:
to respondents father), petitioner would have been a party to the alleged
The parties to this case are descendants of spouses Quintin Chiong Osmea and
simulated document. This Court has oft repeated that he who comes to court must
Chiong Tan Sy. Petitioner is the couples daughter while respondents Nicasio and
come with clean hands. Considering that the right over the litigated properties
Jose Osmea are their grandchildren. The dispute revolves around two parcels of
claimed by petitioner stems allegedly from illegal acts, no affirmative relief of any
land, Lots 4 and 5, and the ancestral house standing on Lot 4.
kind is available. This Court leaves the parties where they have placed themselves.
Before her death, Chiong Tan Sy executed a last will and testament in which she

enumerated her properties. The ancestral house subject of the instant case was

specifically mentioned in the said document; however, the litigated lots were not.
The titles to the lots were in the name of respondents father, Ignacio, petitioners Sec. 10
elder brother. Upon his demise, respondents transferred title to their own names.
Petitioner asserts that she is a co-owner of the three litigated properties. She
1. Manila Prince Hotel v GSIS (CG)
argues that the two lots were her mothers properties and were part of the G.R. No. 122156 | February 3, 1997 | BELLOSILLO, J.
PETITIONER: Manila Prince Hotel Corporation (Manila Prince)
inheritance that she and her siblings received upon Chiong Tan Sys death. She RESPONDENTS: Government Service Insurance System (GSIS), Manila Hotel Corporation (MHC), Committee on
claims that the lots were placed in the name of her brother Ignacio merely Privatization (CP) and Office of the Government Corporate Counsel (OGCC)



SUMMARY: This case is concerning the sale of 51% of the shares of Manila Hotel. Two In a subsequent letter, Manila Prince sent a managers check issued by Philtrust Bank for
bidders participated: Manila Prince, a Filipino owned corporation, and Renong Berhad, a P33M as Bid Security to match the bid of the Malaysian Group, Messrs. Renong Berhad x
Malaysian firm. The latter initially submitted a higher bid price per share. Pending the x x x which GSIS refused to accept.
declaration of Renong Berhad as the winner, Manila Prince matched its bid price, which GSIS Perhaps apprehensive that GSIS has disregarded the tender of the matching bid and that
refused to accept. Manila Prince then filed a petition for prohibition and mandamus and was the sale of 51% of the MHC may be hastened by GSIS and consummated with Renong
also issued a TRO enjoining the respondents from consummating the sale to Renong Berhad, Manila Prince came to this Court on prohibition and mandamus.
Berhard. The issue is WON the Manila Hotel is part of our National Patrimony, and therefore, The Court issued a TRO enjoining respondents from perfecting and consummating the
the Filipino First Policy is applicable YES. National Patrimony not only refers to natural sale to the Malaysian firm.
resources but also to the cultural heritage of Filipinos. It can be gleaned that Manila Hotel The Court En Banc accepted the instant case after it was referred to it by the First
has become a landmark. For more than eight (8) decades Manila Hotel has bore mute Division. The case was then set for oral arguments with former Chief Justice Enrique M.
witness to the triumphs and failures, loves and frustrations of the Filipinos, and its existence Fernando and Fr. Joaquin G. Bernas, S.J., as amici curiae.
is impressed with public interest. This, therefore, makes the Filipino First Policy applicable. Petitioner Arguments:
When there is qualified Filipino bidder, then it should be given preference. It may seem to o Invokes Sec. 10, second par., Art. XII, of the 1987 Constitution and submits that the
discourage investors but it has been made part of the Constitution, which the investors must Manila Hotel has been identified with the Filipino nation and has practically become
always consider. Further, The Manila Hotel or, for that matter, 51% of the MHC, is not just a historical monument which reflects the vibrancy of Philippine heritage and culture
any commodity to be sold to the highest bidder solely for the sake of privatization. We are Therefore, it has become a part of the national patrimony.
talking about a hotel where heads of states would prefer to be housed as a strong o Petitioner also argues that since 51% of the shares of the MHC carries with it the
manifestation of their desire to cloak the dignity of the highest state function to their official ownership of the business of the hotel which is owned by GSIS, a GOCC, the hotel
visits to the Philippines. Thus the Manila Hotel has played and continues to play a significant business of respondent GSIS being a part of the tourism industry is unquestionably a
role as an authentic repository of twentieth century Philippine history and culture. In this part of the national economy.
sense, it has become truly a reflection of the Filipino soul - a place with a history of o Manila Prince should be preferred after it has matched the bid offer of the Malaysian
grandeur; a most historical setting that has played a part in the shaping of a country. firm.
Respondents except. They maintain that:
FACTS: o Sec. 10, second par., Art. XII, of the 1987 Constitution is merely a statement of
2
The Filipino First Policy enshrined in the 1987 Constitution is invoked by Manila Prince in principle and policy since it is not a self-executing provision and requires
its bid to acquire 51% of the shares of the MHC, which owns the historic Manila implementing legislation(s).
Hotel. Opposing, respondents maintain that the provision is not self-executing but o Granting that this provision is self-executing, Manila Hotel does not fall under the
requires an implementing legislation for its enforcement. Corollarily, they ask whether term national patrimony. According to respondents, while Manila Prince speaks of
the 51% shares form part of the national economy and patrimony covered by the the guests who have slept in the hotel and the events that have transpired therein
protective mantle of the Constitution. which make the hotel historic, these alone do not make the hotel fall under
The controversy arose when GSIS, pursuant to the privatization program of the the patrimony of the nation.
Philippine Government under Proclamation No. 50, decided to sell through public o Granting that the Manila Hotel forms part of the national patrimony, the
bidding 30% to 51% of the issued and outstanding shares of MHC. constitutional provision invoked is still inapplicable since what is being sold is only
The winning bidder, or the eventual strategic partner, is to provide management 51% of the outstanding shares of the corporation, not the hotel building nor the land
expertise and/or an international marketing/reservation system, and financial support to upon which the building stands.
strengthen the profitability and performance of the Manila Hotel. o The submission by Manila Prince of a matching bid is premature.
In a close bidding, only 2 bidders participated: Manila Prince, a Filipino corporation,
which offered to buy 51% of the MHC or 15.3M shares at P41.58 per share, and Renong ISSUE:
Berhad, a Malaysian firm, with ITT-Sheraton as its hotel operator, which bid for the same WON Art. 12, sec. 10, par. 2, mandating the State to give preference to qualified Filipinos is
number of shares at P44.00 per share, or P2.42 more than the bid of petitioner. self-executing YES
Pending the declaration of Renong Berhard as the winning bidder/strategic partner and WON the Manila Hotel is part of national patrimony, and therefore, the Filipino First Policy
the execution of the necessary contracts, Manila Prince, in a letter to GSIS, matched the must be applied YES
bid price of P44.00 per share tendered by Renong Berhad.
DISPOSITIVE PORTION: WHEREFORE, respondents GOVERNMENT SERVICE INSURANCE SYSTEM,

2
MANILA HOTEL CORPORATION, COMMITTEE ON PRIVATIZATION and OFFICE OF THE GOVERNMENT
In the grant of rights, privileges, and concessions covering the national economy and patrimony, the State shall give CORPORATE COUNSEL are directed to CEASE and DESIST from selling 51% of the shares of the Manila
preference to qualified Filipinos



Hotel Corporation to RENONG BERHAD, and to ACCEPT the matching bid of petitioner MANILA PRINCE o Dubbed as the Official Guest House of the Philippine Government, it plays host to
HOTEL CORPORATION to purchase the subject 51% of the shares of the Manila Hotel Corporation dignitaries and official visitors who are accorded the traditional Philippine
at P44.00 per share and thereafter to execute the necessary agreements and documents to effect the hospitality.
sale, to issue the necessary clearances and to do such other acts and deeds as may be necessary for the
o During World War II, the hotel was converted by the Japanese Military
purpose.
Administration into a military headquarters.

o When the American forces returned to recapture Manila the hotel was selected by
RATIO:
3 the Japanese together with Intramuros as the two (2) places for their final stand.
Art. XII, Sec. 10 , par. 2 is self-executing.
o Thereafter, in the 1950s and 1960s, the hotel became the center of political
Respondents argue that the non-self-executing nature of Sec. 10, second par., of Art. XII
activities, playing host to almost every political convention.
is implied from the tenor of the first and third paragraphs of the same section, which
o In 1970 the hotel reopened after a renovation and reaped numerous international
undoubtedly are not self-executing. The argument is flawed.
recognitions, an acknowledgment of the Filipino talent and ingenuity.
A constitutional provision may be self-executing in one part and non-self-executing in
st rd o In 1986 the hotel was the site of a failed coup d etat where an aspirant for vice-
another. Sec. 10, 1 and 3 paragraphs are not self-executing but it does not follow that
nd president was proclaimed President of the Philippine Republic.
the 2 par. also is.
For more than eight (8) decades Manila Hotel has bore mute witness to the triumphs
Sec. 10, second par., Art. XII of the 1987 Constitution is a mandatory, positive command
and failures, loves and frustrations of the Filipinos; its existence is impressed with public
which is complete in itself and which needs no further guidelines or implementing laws
interest; its own historicity associated with our struggle for sovereignty, independence
or rules for its enforcement.
and nationhood.
From its very words the provision does not require any legislation to put it in

operation. It is per se judicially enforceable.
The Filipino First Policy is applicable

Verily, Manila Hotel has become part of our national economy and patrimony. For sure,
Manila Hotel is part of our national patrimony [Most impt.]
51% of the equity of the MHC comes within the purview of the constitutional shelter for
As regards our national patrimony, a member of the 1986 Constitutional
it comprises the majority and controlling stock, so that anyone who acquires or owns the
Commission explains: The patrimony of the Nation that should be conserved and
51% will have actual control and management of the hotel.
developed refers not only to our rich natural resources but also to the cultural heritage
The term qualified Filipinos as used in our Constitution also includes corporations at least
of our race. It also refers to our intelligence in arts, sciences and letters. Therefore, we
60% of which is owned by Filipinos
should develop not only our lands, forests, mines and other natural resources but also
Paragraph 2 of Section 10 explicitly mandates the Pro-Filipino bias in all economic
the mental ability or faculty of our people.
concerns. It is better known as the FILIPINO FIRST Policy x x x x This provision was
In its plain and ordinary meaning, the term patrimony pertains to heritage. When the
never found in previous Constitutions x x x x
Constitution speaks of national patrimony, it refers not only to the natural resources of
The term qualified Filipinos simply means that preference shall be given to those
the Philippines, but also to the cultural heritage of the Filipinos.
citizens who can make a viable contribution to the common good, because of credible
Manila Hotel has become a landmark - a living testimonial of Philippine heritage.
competence and efficiency.
o While it was restrictively an American hotel when it first opened in 1912, it
It certainly does NOT mandate the pampering and preferential treatment to Filipino
immediately evolved to be truly Filipino.
citizens or organizations that are incompetent or inefficient, since such an indiscriminate
o Formerly a concourse for the elite, it has since then become the venue of various
preference would be counterproductive and inimical to the common good.
significant events, which have shaped Philippine history. It was called the Cultural
In the granting of economic rights, privileges, and concessions, when a choice has to be
Center of the 1930s.
made between a qualified foreigner and a qualified Filipino, the latter shall be
chosen over the former.

3
Lastly, the word qualified is also determinable. Petitioner was so considered by
The Congress shall, upon recommendation of the economic and planning agency, when the national interest dictates,
reserve to citizens of the Philippines or to corporations or associations at least sixty per centum of whose capital is
respondent GSIS and selected as one of the qualified bidders. It was pre-qualified by
owned by such citizens, or such higher percentage as Congress may prescribe, certain areas of investments. The respondent GSIS in accordance with its own guidelines so that the sole inference here is
Congress shall enact measures that will encourage the formation and operation of enterprises whose capital is wholly that petitioner has been found to be possessed of proven management expertise in the
owned by Filipinos.
hotel industry, or it has significant equity ownership in another hotel company, or it has

In the grant of rights, privileges, and concessions covering the national economy and patrimony, the State shall give an overall management and marketing proficiency to successfully operate the Manila
preference to qualified Filipinos. Hotel.
Certainly, the constitutional mandate itself is reason enough not to award the block of
The State shall regulate and exercise authority over foreign investments within its national jurisdiction and in
accordance with its national goals and priorities. shares immediately to the foreign bidder notwithstanding its submission of a higher, or



even the highest, bid. In fact, we cannot conceive of a stronger reason than the 2. Army and Navy v CA (RL)
constitutional injunction itself.
G.R. No. 110223 | April 8, 1997 | KAPUNAN, J.
In the instant case, where a foreign firm submits the highest bid in a public bidding Petitioner: ARMY AND NAVY CLUB OF MANILA, INC.
concerning the grant of rights, privileges and concessions covering the national economy Respondent: HONORABLE COURT OF APPEALS, HON. WILFREDO D. REYES, as Judge REGIONAL TRIAL COURT OF
and patrimony, thereby exceeding the bid of a Filipino, there is no question that the MANILA, BRANCH 36 (formerly (Branch 17), HON. A. CAESAR SANGCO, as Judge, METROPOLITAN TRIAL COURT,
BRANCH 17-MANILA and the CITY OF MANILA, represented herein by MAYOR ALFREDO LIM
Filipino will have to be allowed to match the bid of the foreign entity.

And if the Filipino matches the bid of a foreign firm the award should go to the
SUMMARY: The City of Manila is the owner of a parcel of land in South Blvd. Cor. Manila
Filipino. It must be so if we are to give life and meaning to the Filipino First
Bay. Petitioner entered into a lease contract with private respondent sometime in January,
Policy provision of the 1987 Constitution.
1983. In said lease contract, it agreed to: 1) pay an annual a rent of P250,000.00 with a 10%
This Court does not discount the apprehension that this policy may discourage foreign
increase every two (2) years; 2) pay the realty tax due on the land; and 3) construct a
investors. But the Constitution and laws of the Philippines are understood to be always
modern multi-storey hotel provided for therein within five (5) years which shall belong to
open to public scrutiny.
the City upon expiration or termination of the lease without right of reimbursement for the
These are given factors, which investors must consider when venturing into business in a
cost of construction. However, petitioner failed to pay the rents for 7 consecutive years.
foreign jurisdiction. Any person therefore desiring to do business in the Philippines or
Petitioner also failed to erect a multi-storey hotel in the site and to pay the realty taxes. For
with any of its agencies or instrumentalities is presumed to know his rights and
violations of the lease contract and after several demands, the City of Manila had no other
obligations under the Constitution and the laws of the forum.
recourse but to file the action for illegal detainer and demand petitioner's eviction from the

premises. The MTC, RTC and the CA ruled in favor of the City and ordered that petitioner
The Manila Hotel or, for that matter, 51% of the MHC, is not just any commodity to be sold to
vacate the area and to pay the rentals and taxes. The issue is w/n petitioner was ejected
the highest bidder solely for the sake of privatization.
from the premises validly. The SC upheld the lower courts decision.
The Filipino First Policy is a product of Philippine nationalism. It is embodied in the 1987
Constitution not merely to be used as a guideline for future legislation but primarily to The contention by ANCM that Army and Navy Club has been declared a national historical
be enforced; so must it be enforced. landmark by the National Historical Commission holds no water. While the declaration that it
This Court as the ultimate guardian of the Constitution will never shun, under any is a historical landmark is not objectionable, the recognition is specious. Citing the Manila
reasonable circumstance, the duty of upholding the majesty of the Constitution, which it Hotel case, which enumerated the procedure on how to declare a property as a historical
is tasked to defend. landmark, the SC held that there is no showing that the procedure to declare the property as
It is worth emphasizing that it is not the intention of this Court to impede and diminish, a historical landmark has been complied with. The City of Manila even observed that the
much less undermine, the influx of foreign investments. Far from it, the Court signatories thereto are officers and members of the Club making such certification self-
encourages and welcomes more business opportunities but avowedly sanctions the serving. Furthermore, the same was issued 3 years after the suit was instituted, thus
preference for Filipinos whenever such preference is ordained by the Constitution. showing that it was merely an afterthought. Nonetheless, such certification does not give
Privatization of a business asset for purposes of enhancing its business viability and any authority to the petitioner to lay claim of ownership, or any right over the subject
preventing further losses, regardless of the character of the asset, should not take property. Nowhere in the law does it state that such recognition grants possessory rights
precedence over non-material values. over the property to the petitioner. Nor is the National Historical Commission given the
A commercial, nay even a budgetary, objective should not be pursued at the expense of authority to vest such right of ownership or possession of a private property to the
national pride and dignity. For the Constitution enshrines higher and nobler non- petitioner. As a mere lessee, it is bound to comply with its contract, and failure to do so
material values. warrants its ejectment. Such was the case. Considering that there is no genuine issue as to
Nationalism is inherent in the very concept of the Philippines being a democratic and any material fact, a summary judgment is proper. The argument that it was declared a
republican state, with sovereignty residing in the Filipino people and from whom all historical landmark, is not a substantial issue of fact which does not, in any way, alter or
government authority emanates. affect the merit of the ejectment suit.
We are talking about a hotel where heads of states would prefer to be housed as a
strong manifestation of their desire to cloak the dignity of the highest state function to FACTS:
their official visits to the Philippines. On November 29, 1989 the City of Manila filed an action against Army and Navy
Thus the Manila Hotel has played and continues to play a significant role as an authentic Club of Manila (ANCM) with the Metropolitan Trial Court for ejectment.
repository of twentieth century Philippine history and culture. In this sense, it has The complaint alleged that:
become truly a reflection of the Filipino soul - a place with a history of grandeur; a most o The City of Manila is the owner of a parcel of land (12,705.30 sq. m.)
historical setting that has played a part in the shaping of a country. located at South Blvd cor. Manila Bay, Manila, covered by TCT No.



156868/1059 of the Register of Deeds of Manila, together with the On July 27, 1990, the MTC denied the petitioner's motion for leave to admit its
improvements thereon known as the Army and Navy of Manila; amended answer for lack of merit.
o ANCM occupies the said land and building by virtue of a contract of MTC" ruled in favor of the City of Manila and ordered ANCM to vacate the said
Lease executed in January 1983. property as well as pay its rentals.
o The Lease Contract provides that the lessee shall construct a hotel at a RTC" AFFIRMED summary judgment of the MTC.
cost not less than P50M pesos which shall automatically belong to the CA" DISMISSED the appeal and denied the MR. It also denied the motion for
lessor upon expiration or termination of the lease agreement without issuance of a writ of execution pending appeal filed by the City of Manila.
right of reimbursement for the construction costs provided that the
construction shall be commenced within 1 year and completed within 5 ISSUE: WON the Respondent Courts gravely erred in upholding the ouster of petition from
years from the date of approval of the lease contract, and that the plans the disputed premises which is a clear transgression of the formal declaration of the site of
and specifications will be approved by the lessor. petitioner as a historical landmark?NO. (To put it simply, WON petitioner was ejected from
! ANCM failed or refused to construct the hotel despite demands the disputed premises validlyYES!!!)
of the City of Manila, who has agreed to the continued
retention of the property on a lease-back agreement on the HELD: There is no merit in the petition. CA decision AFFIRMED.
basis of the warranties of defendant to put up a contemporary
multi-storied building; RATIO:
o Par. 3 of the Contract of Lease also stipulates that the lessee shall pay Article 1673 of the New Civil Code is explicit that a lessor may judicially eject a
P250k a year, payable in 12 monthly installments within the first 5 days lessee for the ff reasons:
of each month, without necessity of demand, but subject to rental o The period agreed upon expires
adjustment after the first five days, without again necessity of demand, o Lack of payment of the price stipulated
further subject to rental adjustment after the first 5 years of the lease at o Violation of the conditions agreed upon in the contract
a rate of not more than 10% per annum every 2 years, or on the basis of o When the lessee devotes the thing leaser for other purposes than that
the increase in the prevailing market value of the leased premises stipulated, causing deterioration of the same.
whichever is higher. ANCM argues that the Army and Navy Club has been declared a national
! ANCM reneged on its rental obligation notwithstanding City of historical landmark by the National Historical Commission on June 29, 1992
Manilas demand to pay, starting from January 1983 to the which the lower courts allegedly never gave due consideration. Its existence
present, and its rental account stood at P1.6M as of May, 1989; should not in any way be undermined by the simple ejectment suit filed against it.
o Par. 4 of the Contract of Lease also provides that the lessee shall pay the Petitioner contends that all parties are enjoined by law to preserve its existence
realty tax due on the land and improvements as well as govt fees and and site.
charges prescribed by law. o It presented the Certificate of Transfer and Acceptance of the Historical
! ANCM violated its undertaking to pay the taxes due on the land Marker granted to it pursuant to R.A. 4846, as amended by PD 374 which
and improvement, resulting to an aggregate realty tax liability provides that it shall be "the policy of the State to preserve and protect
of P3.8M as of December 1989. the important cultural properties and National Cultural Treasures of the
o Repeated demands by City of Manila had been made but ANCM nation and to safeguard their intrinsic value."
remained unfazed. While the declaration that it is a historical landmark is not objectionable, the
o Because of this, the City of Manila rescinded the Contract of Lease and recognition is specious.
demanded that ANCM vacate. However, ANCM remains to be in the said Fr. B as amicus curiae in the Manila Hotel case, which dealt with the historical
property. character of Manila Hotel, stated therein that:
o The reasonable rental value for ANCMs continued use and occupancy of o The country's artistic and historic wealth is a proper subject for the
the subject premises which is a prime property P636,467.00 a month in exercise of police power:". . . which the State may regulate." This is a
the context of the prevailing rental rates of comparable real property. function of the legislature. And once regulation comes in, due process
On December 29, 1989 ANCM filed its answer and on February 22, 1990, it filed a also comes into play. When the classification of property into historical
"Motion for Leave to File and for Admission of Amended Answer" asserting treasures or landmarks will involve the imposition of limits on
additional special and affirmative defenses. ownership, the Bill of Rights demands that it be done with due process
On May 23, 1990, the City of Manila filed a Motion for Summary Judgment on the both substantive and procedural.
ground that there exists no genuine triable issue in the case.



o x x x the current general law on the subject is R.A. 4846, approved on o Nonetheless, such certification does not give any authority to the
June 18, 1966, and amended by P.D. No. 374. The Act prescribes the petitioner to lay claim of ownership, or any right over the subject
manner of classifying historical and cultural properties thus: property.
! The National Museum shall be the agency of the government o Nowhere in the law does it state that such recognition grants possessory
which, shall implement the provisions of this Act. rights over the property to the petitioner.
! The Director of the Museum shall undertake a census of the o Nor is the National Historical Commission given the authority to vest
important cultural properties of the Philippines xxx. such right of ownership or possession of a private property to the
! The Director is authorized to convene panels of experts xxx petitioner.
Each panel shall, after careful study and deliberation, decide o The law merely states that it shall be the policy of state to preserve and
which among the cultural properties in their field of protect the important cultural properties and National Cultural Treasures
specialization shall be designated as "National Cultural of the nation and to safeguard their intrinsic value.
Treasures" or "Important Cultural Properties." o In line with this, any restoration, reconstruction or preservation of
! The Director shall within ten days of such action by the panel historical buildings shall only be made under the supervision of the
transmit their decision and cause the designation-list to be Director of the National Museum.
published in at least two newspapers of general circulation. o The authority of the National Historical Commission is limited only to the
The same procedure shall be followed in the declassification of supervision of any reconstruction, restoration or preservation of the
important cultural properties and national treasures. architectural design of the identified historical building and nothing
! In designation of a particular cultural property as a "national more.
cultural treasure," the following procedure shall be observed: o Even assuming that such recognition made by the National Historical
Notice to owner of the property (if privately owned) Commission is valid, the historical significance of the Club, if any, shall
at least 15 days prior to the intended designation and not be affected if petitioner's eviction from the premises is warranted.
shall be invited to attend the deliberations and be o Unfortunately, petitioner is merely a lessee of the property.
given a chance to be heard. o By virtue of the lease contract, petitioner had obligations to fulfill.
Decisions of the panel are appealable through MR o Petitioner can not just hide behind some recognition bestowed upon it in
and then to another panel chairmanned by the Sec. order to escape from its obligation or remain in possession. It violated
of Education, whose decision shall be final and the terms and conditions of the lease contract. Thus, petitioner's
binding. eviction from the premises is inevitable.
Within each kind or class of objects, only the rare and
unique objects may be designated as "National Procedural Issue Re: Summary Judgment (Not so Impt).
Cultural Treasures." The SC finds no reversible error in the summary judgment rendered by the trial
Designated "National Cultural Treasures" shall be court.
marked, described, and photographed by the A summary judgment is one granted by the court upon motion by a party for an
National Museum. expeditious settlement of the case, there appearing from the pleadings,
! Thus, for Manila Hotel to be treated as special cultural or depositions, admissions, and affidavits that there are no important questions or
historical property, it must go through the procedure described issues of fact involved (except as to the amount of damages), and that therefore
above. Eloquent nationalistic endorsements of classification the moving party is entitled to a judgment as a matter of law.
will not transform a piece of property into a legally In the case at bar, there is clearly no substantial triable issue.
recognized historical landmark. . . . o Petitioner does not deny the existence of the lease contract executed
In the case at bar, there is no showing that the procedure to declare the property with the City of Manila and it admitted that it failed to pay the rents and
as a historical landmark has been complied with. real estate taxes and construction of a multi-storey building.
o The City of Manila even observed that the signatories thereto are officers Considering that there is no genuine issue as to any material fact, a summary
and members of the Club making such certification self-serving. judgment is proper.
o It behooves us to think why the declaration was conferred only in 1992, o The argument that it was declared a historical landmark, is not a
three (3) years after the action for ejectment was instituted. substantial issue of fact which does not, in any way, alter or affect the
o We can only surmise that this was merely an afterthought, an attempt to merit of the ejectment suit.
thwart any legal action taken against the petitioner.



The lower court did not err in rejecting to accept the amended Answer because it in the case of Mr. Saguisag, who sued as a private law practitioner, member of the
was filed 1 year after the original answer was filed. It tried to put up defenses Integrated Bar of the Philippines, taxpayer and concerned citizen.
which are entirely in contradiction to its original answer such as denying the claim PETRON was originally registered with the Securities and Exchange Commission
of ownership of the City of Manila over the said property after having admitted the (SEC) in 1966 under the corporate name "Esso Philippines, Inc." (ESSO) as a
same. subsidiary of Esso Eastern, Inc. and Mobil Petroleum Company, Inc.
In 1973, at the height of the world-wide oil crisis brought about by the Middle East
conflicts, the Philippine government acquired ESSO through the PNOC. ESSO
became a wholly-owned company of the government under the corporate name
Sec. 11 PETRON and as a subsidiary of PNOC.
1. Bagatsing v Committee (MT) In acquiring PETRON, the government aimed to have a buffer against the vagaries
G.R. No. 112399 July 14, 1995 of oil prices in the international market. It was felt that PETRON can serve as a
Petitioner: REPRESENTATIVE AMADO S. BAGATSING counterfoil against price manipulation that might go unchecked if all the oil
vs.
Respondents: COMMITTEE ON PRIVATIZATION, PHILIPPINE NATIONAL OIL COMPANY and THE HONORABLE EXECUTIVE
companies were foreign-owned. Indeed, PETRON helped alleviate the energy
SECRETARY crises that visited the country from 1973 to 1974, 1979 to 1980, and 1990 to 1991.
G.R. No. 115994 July 14, 1995 PETRON owns the largest, most modern complex refinery in the Philippines with a
Petitioners: NEPTALI A. GONZALES, ERNESTO A. MACEDA, JOHN H. OSMEA, WIGBERTO E. TAADA, JOKER O.
nameplate capacity of 155,000 barrels per stream day. It is also the country's
ARROYO, AMADO D. BAGATSING, and RENE A.V. SAGUISAG
vs. biggest combined retail and wholesale market of refined petroleum products. In
Respondents: DELFIN LAZARO, in his capacity as Chairman of the Philippine National Oil Company, MONICO JACOB, in 1992, it garnered a 39.8% share of all domestic products sold, and at year end its
his capacity as President of PNOC, COMMITTEE ON PRIVATIZATION, PHILIPPINE NATIONAL OIL COMPANY, PETRON assets totalled P24.4 billion. PETRON's income as of September 1993 was P2.7
CORPORATION, and ARAMCO OVERSEAS COMPANY B.V.
billion. It is listed as the No. 1 corporation in terms of assets and income in the

Philippines.
Summary: (remember focus of this case is the definition of public utility thats it I didnt
On December 8, 1986, President Corazon C. Aquino promulgated Proclamation No.
discuss other issues anymore which was not provided for in the syllabus)
50 in the exercise of her legislative power under the Freedom Constitution.
Former Pres Ramos approved the sale of Petron. The petitioners in this case are assailing
The Proclamation is entitled "Proclaiming and Launching a Program for the
that Petron is a public utility therefore it cannot be sold for privatization more than the
Expeditious Disposition and Privatization of Certain Government Corporations
ownership requirement which the constitution requires. Issue is won petron is a public
and/or the Assets thereof, and Creating the Committee on Privatization and the
utility. The court disagrees. A "public utility" under the Constitution and the Public Service
Asset Privatization Trust."
Law is one organized "for hire or compensation" to serve the public, which is given the right
to demand its service. PETRON is not engaged in oil refining for hire and compensation to Implicit in the Proclamation is the need to raise revenue for the Government and
process the oil of other parties. Hence, the refining of petroleum products sourced from the ideal of leaving business to the private sector. The Government can then
abroad as is done by Petron, is not within the contemplation of the law. concentrate on the delivery of basic services and the performance of vital public
functions.
Facts: On December 2, 1991, President Fidel V. Ramos noted that "[t]he privatization
The petition for prohibition in G.R. No. 112399 sought: (1) to nullify the bidding program has proven successful and beneficial to the economy in terms of
expanding private economic activity, improving investment climate, broadening
conducted for the sale of a block of shares constituting 40% of the capital stock
(40% block) of Petron Corporation (PETRON) and the award made to Aramco ownership base and developing capital markets, and generating substantial
Overseas Company, B.V. (ARAMCO) as the highest bidder in the bidding conducted revenues for priority government expenditure," but "[t]here is still much potential
on December 15, 1993; and (2) to stop the sale of said block of shares to ARAMCO. for harnessing private initiative to undertake in behalf of government certain
The Supplemental Petition in said case sought to annul the bidding of the 40% activities which can be more effectively and efficiently undertaken by the private
block held on December 15, 1993 and to set aside the award given to ARAMCO. sector".
The petition in G.R. No. 112399 was filed by Representative Amado S. Bagatsing In its meeting held on September 9, 1992, the PNOC Board of Directors approved
while the petition in G.R. No. 115994 was filed by Senators Neptali A. Gonzales, Specific Thrust No. 6 and moved "to bring to the attention of the Administration
Ernesto A. Maceda, John H. Osmea and Wigberto E. Taada, Representatives the need to privatize Petron whether or not there will be deregulation [of the oil
Joker Arroyo and Amado D. Bagatsing and former Senator Rene A.V. Saguisag all industry]".
in their capacity as members of Congress, taxpayers and concerned citizens, except In a letter dated October 21, 1992, Secretary Ramon R. Del Rosario, as Chairman of
the Committee on Privatization, endorsed to President Ramos the proposal of
PNOC to "privatize 65% of the stock of Petron, open to both foreign as well as



domestic investors." Secretary Del Rosario added: "The entry of foreign investors The term "public service" includes every person that now or hereafter may own, operate,
in this field is expected to result in improved technology and know-how and will manage, or control in the Philippines, for hire or compensation, with general or limited
enable Petron to have access to international information network as well as clientele, whether permanent, occasional, or accidental and done for general business
access to external markets and refining contracts". purposes, any common carrier, railroad, street railway, . . . and other similar public services: .
On January 12, 1993, the Cabinet approved the privatization of PETRON as part of . . .
the Energy Sector Action Plan. More pertinent is Section 7 of R.A. No. 387, the Petroleum Act of 1949, which
On June 10, 1993, in a letter addressed to Secretary Ernesto C. Leung, the COP provides:
Chairman, President Ramos approved the privatization of PETRON up to a Petroleum operation a public utility. Everything relating to the exploration for and
maximum of 65% of its capital stock. exploitation of petroleum which may consist naturally or below the surface of the earth, and
The Petron Privatization Working Committee (PWC) was thus formed. It finalized a everything relating to the manufacture,refining, storage, or transportation by special
privatization strategy with 40% of the shares to be sold to a strategic partner and methods of petroleum, as provided for in this Act, is hereby declared to be of public utility.
20% to the general public through the initial public offering and employees stock A "public utility" under the Constitution and the Public Service Law is one
option plan. organized "for hire or compensation" to serve the public, which is given the right
On August 10, 1993, the President approved the 40% 40% 20% privatization to demand its service. PETRON is not engaged in oil refining for hire and
strategy of PETRON. compensation to process the oil of other parties.
The invitation to bid was published in several newspapers of general circulation, Likewise, the activities considered as "public utility" under Section 7 of R.A. No.
both local and foreign. The deadline for the submission of proposals was set for 387 refer only to petroleum which is indigenous to the Philippines. Hence, the
December 15, 1993 at 5:00 P.M. refining of petroleum products sourced from abroad as is done by Petron, is not
The bid of ARAMCO was for US$502 million while the bid of PETRONAS was for within the contemplation of the law.
US$421 million. The PNOC Board of Directors then passed Resolution No. 866, S. We agree with the opinion of the Secretary of Justice that the refining of imported
1993, declaring ARAMCO the winning bidder. crude oil is not regulated by, nor is it within the scope and purview of the
Issue: WON Petron is a public utility?-NO. Petroleum Act of 1949. He said: Examination of our statute books fails to reveal
Ratio: any law or legal provision which, in explicit terms, either permits or prohibits the
Petitioners contend that PETRON is a public utility, in which foreign ownership of establishment and operation of oil refineries that would refine only imported
its equity shall not exceed 40% thereof and the foreign participation in the crude oil (Opinion, No. 267, S. 1955).
governing body shall be limited to their proportionate share in its capital. WHEREFORE, the petitions are DISMISSED.
According to petitioners, ARAMCO is entitled only to a maximum of four seats in SO ORDERED.
the ten-man board but was given five seats.
This issue hinges on whether the business of oil refining is a "public utility" within
the purview of Section 11, Article XII of the 1987 Constitution (adopted from Sec. 2. Gamboa v Teves (JM)
5, Art. XIV of the 1973 Constitution), which provides: GR 176579| June 28, 2011
No franchise, certificate, or any other form of authorization for the operation of a Carpio, J.
public utility shall be granted except to citizens of the Philippines or to corporations or Petitioner: Wilson P. Gamboa
Respondents: Finance Secretary Teves plus a lot more (please see original
associations organized under the laws of the Philippines at least sixty per centum of whose for a complete index
capital is owned by such citizens, nor shall such franchise, certificate or authorization be
exclusive in character for a longer period than fifty years. Neither shall any such franchise or SUMMARY:
right be granted except under the condition that it shall be subject to amendment, This is a petition to nullify the sale of shares of stock of Philippine Telecommunications
alteration, or repeal by the Congress when the common good so requires. The State shall Investment Corporation (PTIC) by the government of the Republic of the Philippines, acting
encourage equity participation in public utilities by the general public. The participation of through the Inter-Agency Privatization Council (IPC), to Metro Pacific Assets Holdings, Inc.
foreign investors in the governing body of any public utility enterprise shall be limited to their (MPAH), an affiliate of First Pacific Company Limited (First Pacific), a Hong Kong-based
proportionate share in its capital and all the executive and managing officers of such investment management and holding company and a shareholder of the Philippine Long
corporation or association must be citizens of the Philippines(Emphasis supplied). Distance Telephone Company (PLDT).
Implementing Section 8 of Article XIV of the 1935 Constitution, the progenitor of The petitioner questioned the sale on the ground that it also involved an indirect
Section 5 of Article XIV of the 1973 Constitution, is Section 13(b) of the Public sale of 12 million shares (or about 6.3 percent of the outstanding common shares) of PLDT
Service Act, which provides: owned by PTIC to First Pacific. With the this sale, First Pacifics common shareholdings in



PLDT increased from 30.7 percent to 37 percent, thereby increasing the total common non-voting and earn only 1/70 of the dividends that PLDT common shares earn, grossly
shareholdings of foreigners in PLDT to about 81.47%. This, according to the petitioner, violates the constitutional requirement of 60 percent Filipino control and Filipino beneficial
violates Section 11, Article XII of the 1987 Philippine Constitution which limits foreign ownership of a public utility.
ownership of the capital of a public utility to not more than 40%.

ISSUE: Does the term capital in Section 11, Article XII of the Constitution refer to the total FACTS:
common shares only, or to the total outstanding capital stock (combined total of common This is a petition to nullify the sale of shares of stock of Philippine Telecommunications
and non-voting preferred shares) of PLDT, a public utility? Investment Corporation (PTIC) by the government of the Republic of the Philippines, acting
through the Inter-Agency Privatization Council (IPC), to Metro Pacific Assets Holdings, Inc.
HELD: (MPAH), an affiliate of First Pacific Company Limited (First Pacific), a Hong Kong-based
The term capital in Section 11, Article XII of the Constitution refers only to shares of stock investment management and holding company and a shareholder of the Philippine Long
entitled to vote in the election of directors, and thus in the present case only to common Distance Telephone Company (PLDT).
shares, and not to the total outstanding capital stock comprising both common and non-
voting preferred shares of PLDT. The petitioner questioned the sale on the ground that it also involved an indirect
Considering that common shares have voting rights which translate to control, as opposed to sale of 12 million shares (or about 6.3 percent of the outstanding common shares) of PLDT
preferred shares which usually have no voting rights, the term capital in Section 11, Article owned by PTIC to First Pacific. With the this sale, First Pacifics common shareholdings in
XII of the Constitution refers only to common shares. However, if the preferred shares also PLDT increased from 30.7 percent to 37 percent, thereby increasing the total common
have the right to vote in the election of directors, then the term capital shall include such shareholdings of foreigners in PLDT to about 81.47%. This, according to the petitioner,
preferred shares because the right to participate in the control or management of the violates Section 11, Article XII of the 1987 Philippine Constitution which limits foreign
corporation is exercised through the right to vote in the election of directors. In short, the ownership of the capital of a public utility to not more than 40%.
term capital in Section 11, Article XII of the Constitution refers only to shares of stock that
can vote in the election of directors. ISSUE: Does the term capital in Section 11, Article XII of the Constitution refer to the total
common shares only, or to the total outstanding capital stock (combined total of common
Only holders of common shares can vote in the election of directors of PLDT, meaning only and non-voting preferred shares) of PLDT, a public utility?
common shareholders exercise control over PLDT. Conversely, holders of preferred shares,
who have no voting rights in the election of directors, do not have any control over PLDT. HELD: WHEREFORE, we PARTLY GRANT the petition and rule that the term capital in
In fact, under PLDTs Articles of Incorporation, holders of common shares have voting Section 11, Article XII of the 1987 Constitution refers only to shares of stock entitled to vote
rights for all purposes, while holders of preferred shares have no voting right for any in the election of directors, and thus in the present case only to common shares, and not to
purpose whatsoever. the total outstanding capital stock (common and non-voting preferred shares). Respondent
Chairperson of the Securities and Exchange Commission is DIRECTED to apply this definition
It must be stressed, and respondents do not dispute, that foreigners hold a majority of the of the term capital in determining the extent of allowable foreign ownership in respondent
common shares of PLDT. In fact, based on PLDTs 2010 General Information Sheet Philippine Long Distance Telephone Company, and if there is a violation of Section 11, Article
(GIS), which is a document required to be submitted annually to the Securities and Exchange XII of the Constitution, to impose the appropriate sanctions under the law.
Commission, foreigners hold 120,046,690 common shares of PLDT whereas Filipinos hold
only 66,750,622 common shares. In other words, foreigners hold 64.27% of the total number [The Court partly granted the petition and held that the term capital in Section
of PLDTs common shares, while Filipinos hold only 35.73%. Since holding a majority of the 11, Article XII of the Constitution refers only to shares of stock entitled to vote in the election
common shares equates to control, it is clear that foreigners exercise control over PLDT. of directors of a public utility, or in the instant case, to the total common shares of PLDT.]
Such amount of control unmistakably exceeds the allowable 40 percent limit on foreign
ownership of public utilities expressly mandated in Section 11, Article XII of the RATIO:
Constitution. Section 11, Article XII (National Economy and Patrimony) of the 1987 Constitution
mandates the Filipinization of public utilities, to wit:
The legal and beneficial ownership of 60 percent of the outstanding capital stock must rest Section 11. No franchise, certificate, or any other form of authorization for the operation
in the hands of Filipinos in accordance with the constitutional mandate. Full beneficial of a public utility shall be granted except to citizens of the Philippines or to corporations or
ownership of 60 percent of the outstanding capital stock, coupled with 60 percent of the associations organized under the laws of the Philippines, at least sixty per centum of
voting rights, is constitutionally required for the States grant of authority to operate a public whose capital is owned by such citizens; nor shall such franchise, certificate, or
utility. The undisputed fact that the PLDT preferred shares, 99.44% owned by Filipinos, are authorization be exclusive in character or for a longer period than fifty years. Neither shall



any such franchise or right be granted except under the condition that it shall be subject to who owns the all-important voting stock, which necessarily equates to control of the
amendment, alteration, or repeal by the Congress when the common good so requires. The public utility.
State shall encourage equity participation in public utilities by the general public. The
participation of foreign investors in the governing body of any public utility enterprise shall
be limited to their proportionate share in its capital, and all the executive and managing ILLUSTRATION
officers of such corporation or association must be citizens of the Philippines. We shall illustrate the glaring anomaly in giving a broad definition to the term capital. Let
us assume that a corporation has 100 common shares owned by foreigners and 1,000,000
STOCK ENTITLED TO VOTE non-voting preferred shares owned by Filipinos, with both classes of share having a par value
The term capital in Section 11, Article XII of the Constitution refers only to shares of of one peso (P1.00) per share. Under the broad definition of the term capital, such
stock entitled to vote in the election of directors, and thus in the present case only to corporation would be considered compliant with the 40 percent constitutional limit on
common shares, and not to the total outstanding capital stock comprising both common foreign equity of public utilities since the overwhelming majority, or more than 99.999
and non-voting preferred shares of PLDT. percent, of the total outstanding capital stock is Filipino owned. This is obviously absurd.

Indisputably, one of the rights of a stockholder is the right to participate in the control or In the example given, only the foreigners holding the common shares have voting rights in
management of the corporation. This is exercised through his vote in the election of the election of directors, even if they hold only 100 shares. The foreigners, with a
directors because it is the board of directors that controls or manages the corporation. In minuscule equity of less than 0.001 percent, exercise control over the public utility. On the
the absence of provisions in the articles of incorporation denying voting rights to preferred other hand, the Filipinos, holding more than 99.999 percent of the equity, cannot vote in
shares, preferred shares have the same voting rights as common shares. However, preferred the election of directors and hence, have no control over the public utility. This starkly
shareholders are often excluded from any control, that is, deprived of the right to vote in the circumvents the intent of the framers of the Constitution, as well as the clear language of
election of directors and on other matters, on the theory that the preferred shareholders are the Constitution, to place the control of public utilities in the hands of Filipinos. It also
merely investors in the corporation for income in the same manner as bondholders. renders illusory the State policy of an independent national economy effectively
controlled by Filipinos.
Considering that common shares have voting rights which translate to control, as opposed
to preferred shares which usually have no voting rights, the term capital in Section 11, The example given is not theoretical but can be found in the real world, and in fact exists in
Article XII of the Constitution refers only to common shares. However, if the preferred the present case.
shares also have the right to vote in the election of directors, then the term capital shall
include such preferred shares because the right to participate in the control or
management of the corporation is exercised through the right to vote in the election of Only holders of common shares can vote in the election of directors of PLDT, meaning only
directors. In short, the term capital in Section 11, Article XII of the Constitution refers common shareholders exercise control over PLDT. Conversely, holders of preferred shares,
only to shares of stock that can vote in the election of directors. who have no voting rights in the election of directors, do not have any control over PLDT.
In fact, under PLDTs Articles of Incorporation, holders of common shares have voting
rights for all purposes, while holders of preferred shares have no voting right for any
FULL BENEFECIAL OWNERSHIP, Not mere legal title purpose whatsoever.
Mere legal title is insufficient to meet the 60 percent Filipino-owned capital required in the
Constitution. Full beneficial ownership of 60 percent of the outstanding capital stock, It must be stressed, and respondents do not dispute, that foreigners hold a majority of the
coupled with 60 percent of the voting rights, is required. The legal and beneficial ownership common shares of PLDT. In fact, based on PLDTs 2010 General Information Sheet
of 60 percent of the outstanding capital stock must rest in the hands of Filipino nationals in (GIS), which is a document required to be submitted annually to the Securities and Exchange
accordance with the constitutional mandate. Otherwise, the corporation is considered as Commission, foreigners hold 120,046,690 common shares of PLDT whereas Filipinos hold
non-Philippine nationals. only 66,750,622 common shares. In other words, foreigners hold 64.27% of the total
number of PLDTs common shares, while Filipinos hold only 35.73%. Since holding a
majority of the common shares equates to control, it is clear that foreigners exercise
To construe broadly the term capital as the total outstanding capital stock, including control over PLDT. Such amount of control unmistakably exceeds the allowable 40 percent
both common and non-voting preferred shares, grossly contravenes the intent and letter limit on foreign ownership of public utilities expressly mandated in Section 11, Article XII
of the Constitution that the State shall develop a self-reliant and independent national of the Constitution.
economy effectively controlled by Filipinos. A broad definition unjustifiably disregards



As shown in PLDTs 2010 GIS, as submitted to the SEC, the par value of PLDT common shares Sec. 17: David v Arroyo (RK)
is P5.00 per share, whereas the par value of preferred shares is P10.00 per share. In other
PROFESSOR RANDOLF S. DAVID, LORENZO TANADA III, RONALD LLAMAS, H. HARRY L. ROQUE, JR., JOEL RUIZ
words, preferred shares have twice the par value of common shares but cannot elect BUTUYAN, ROGER R. RAYEL, GARY S. MALLARI, ROMEL REGALADO BAGARES, CHRISTOPHER F.C.
directors and have only 1/70 of the dividends of common shares. Moreover, 99.44% of the BOLASTIG, Petitioners,
preferred shares are owned by Filipinos while foreigners own only a minuscule 0.56% of the -versus-
GLORIA MACAPAGAL-ARROYO, AS PRESIDENT AND COMMANDER-IN-CHIEF, EXECUTIVE SECRETARY EDUARDO
preferred shares. Worse, preferred shares constitute 77.85% of the authorized capital stock
ERMITA, HON. AVELINO CRUZ II, SECRETARY OF NATIONAL DEFENSE, GENERAL GENEROSO SENGA, CHIEF OF STAFF,
of PLDT while common shares constitute only 22.15%. This undeniably shows that ARMED FORCES OF THE PHILIPPINES, DIRECTOR GENERAL ARTURO LOMIBAO, CHIEF, PHILIPPINE NATIONAL POLICE,
beneficial interest in PLDT is not with the non-voting preferred shares but with the Respondents.
common shares, blatantly violating the constitutional requirement of 60 percent Filipino G.R. No. 171396 | 2006-05-03
control and Filipino beneficial ownership in a public utility. *Long Case = Long Digest

The legal and beneficial ownership of 60 percent of the outstanding capital stock must rest SUMMARY:
in the hands of Filipinos in accordance with the constitutional mandate. Full beneficial
ownership of 60 percent of the outstanding capital stock, coupled with 60 percent of the On February 24, 2006, as the nation celebrated the 20th Anniversary of the Edsa People
voting rights, is constitutionally required for the States grant of authority to operate a Power I, President Arroyo issued Presidential Proclamation No. 1017 (PP 1017) declaring a
public utility. The undisputed fact that the PLDT preferred shares, 99.44% owned by state of national emergency. On the same day, the President also issued General Order No.
Filipinos, are non-voting and earn only 1/70 of the dividends that PLDT common shares 5 implementing PP 1017 and directing the AFP and PNP to take appropriate actions to
earn, grossly violates the constitutional requirement of 60 percent Filipino control and suppress and prevent acts of terrorism and lawless violence. The factual basis cited by the
Filipino beneficial ownership of a public utility. Arroyo camp for the executive issuances was the alleged existence of plot attempts from the
political opposition and NPA to unseat or assassinate President Arroyo. It was argued that
In short, Filipinos hold less than 60 percent of the voting stock, and earn less than the plot attempts were a clear and present danger that justified the orders.
60 percent of the dividends, of PLDT. This directly contravenes the express command in
Section 11, Article XII of the Constitution that [n]o franchise, certificate, or any other form Thereafter, during the dispersal of the rallyists along EDSA, police arrested (without warrant)
of authorization for the operation of a public utility shall be granted except to x x x Randolf S. David, a UP professor and newspaper columnist, and Ronald Llamas, president of
corporations x x x organized under the laws of the Philippines, at least sixty per centum of party-list Akbayan. Also, in the early morning of February 25, 2006, operatives of the
whose capital is owned by such citizens x x x. Criminal Investigation and Detection Group (CIDG) of the PNP, on the basis of PP 1017 and
G.O. No. 5, raided the Daily Tribune offices in Manila. One week after the issuance of PP
To repeat, (1) foreigners own 64.27% of the common shares of PLDT, which class 1017 and GO No. 5, President Arroyo issued Proclamation No. 1021 declaring that the state
of shares exercises the sole right to vote in the election of directors, and thus exercise of national emergency has ceased to exist. Petitions were filed challenging the
control over PLDT; (2) Filipinos own only 35.73% of PLDTs common shares, constituting a constitutionality of and G.O. No. 5 and PP 1017.
minority of the voting stock, and thus do not exercise control over PLDT; (3) preferred
shares, 99.44% owned by Filipinos, have no voting rights; (4) preferred shares earn only 1/70 The Court finds and so holds that PP 1017 is constitutional insofar as it constitutes a call by
of the dividends that common shares earn; (5) preferred shares have twice the par value of the President for the AFP to prevent or suppress lawless violence. The proclamation is
common shares; and (6) preferred shares constitute 77.85% of the authorized capital stock sustained by Section 18, Article VII of the Constitution and the relevant jurisprudence.
of PLDT and common shares only 22.15%. This kind of ownership and control of a public However, PP 1017's extraneous provisions giving the President express or implied power (1)
utility is a mockery of the Constitution. to issue decrees; (2) to direct the AFP to enforce obedience to all laws even those not
related to lawless violence as well as decrees promulgated by the President; and (3) to
Incidentally, the fact that PLDT common shares with a par value of P5.00 have a impose standards on media or any form of prior restraint on the press, are ultra vires
current stock market value of P2,328.00 per share, while PLDT preferred shares with a par and unconstitutional. The Court also rules that under Section 17, Article XII of the
value of P10.00 per share have a current stock market value ranging from only P10.92 Constitution, the President, in the absence of a legislation, cannot take over privately-owned
to P11.06 per share, is a glaring confirmation by the market that control and beneficial public utility and private business affected with public interest.
ownership of PLDT rest with the common shares, not with the preferred shares.
On Section 17, Article XII
Section 17, Article XII must be understood as an aspect of the emergency powers
clause. The taking over of private business affected with public interest is just another facet
of the emergency powers generally reposed upon Congress. Thus, when Section 17 states



that the the State may, during the emergency and under reasonable terms prescribed by The reasons behind these issuances are found in their Whereas clauses.
o
it, temporarily take over or direct the operation of any privately owned public utility or ! That the political opposition has been conspiring with the NDF-CCP-
business affected with public interest, it refers to Congress, not the President. Now, NPA and the extreme right military adventurists to bring down the
whether or not the President may exercise such power is dependent on whether Congress GMA administration
may delegate it to him pursuant to a law prescribing the reasonable terms thereof. ! That the claims of these elements have been magnified by certain
segments of the national media
Let it be emphasized that while the President alone can declare a state of national ! That these series of actions are hurting the economy
emergency, however, without legislation, he has no power to take over privately-owned The Solicitor General enumerated the factual bases for the two questioned issuances.
public utility or business affected with public interest. The President cannot decide They are:
whether exceptional circumstances exist warranting the take over of privately-owned o February 17, 2006: Oplan Hackle I was discovered detailing bombings and
public utility or business affected with public interest. Nor can he determine when such attacks during the PMA alumni homecoming in Baguio in order to kill selected
exceptional circumstances have ceased. Likewise, without legislation, the President has no officials and the president.
power to point out the types of businesses affected with public interest that should be taken o February 21, 2006: Lt. San Juan was arrested who announced through DZRH
th
over. In short, the President has no absolute authority to exercise all the powers of the that the madalos d-day would be on Feb 24, the 20 anniversary of EDSA
State under Section 17, Article VII in the absence of an emergency powers act passed by o February 23, 2006:
Congress. ! PNP Chief Lomibao intercepted information that members of the
PNP-SAF were planning to defect.
In the same vein, the Court finds G.O. No. 5 valid. It is an Order issued by the President, ! Businessmen and mid-level govt officials plotted moves to bring
acting as Commander-in-Chief, addressed to subalterns in the AFP to carry out the provisions down GMA;
of PP 1017. Significantly, it also provides a valid standard, that the military and the police ! Pastor Saycon called US govt that plans are in place after GMA
should take only the 'necessary and appropriate actions and measures to suppress and toppled;
prevent acts of lawless violence.' But the words 'acts of terrorism' found in G.O. No. 5 have ! Danilo Lim was quoted saying all systems go for the planned
not been legally defined and made punishable by Congress and should thus be deemed movement vs. GMA.
deleted from the said G.O. While 'terrorism' has been denounced generally in media, no law ! Lim and Querubin also confided with AFP Chief of Staff Senga that a
has been enacted to guide the military, and eventually the courts, to determine the limits of huge number of armed soldiers will join the rallies and break from
the AFP's authority in carrying out this portion of G.O. No. 5. the chain of command;
! The CPP-NPA announced that it was looking forward to the task of
Facts: bringing down GMA;
The case involves 7 consolidated petitions questioning the constitutionality of ! There were plans to bomb telecommunication towers and cell sites
Presidential Proclamation No. 1017 (PP 1017) and General Order No. 5 (GO 5). in Bulacan and Bataan;
th
February 24, 2006: 20 Anniversary of EDSA ! At midnight, GMA convened a meeting with cabinet and security
o GMA issued PP 1017 declaring a state of national emergency on the basis of a advisers; directed AFP and PNP to account for all their men;
concerted conspiracy by the (1) political opposition, (2) NDF-CPP-NPA, and (3) suspended classes to protect the students.
4
military adventurists to unseat and/or assassinate the president. Petitioners enumerated the following events that occurred after the issuance of PP
5
o On the same day, GMA issued GO 5 to implement PP 1017. 1017 and GO 5. They are:
o Office of the President cancelled all EDSA anniv programs and all permits to

4
.PP 1017 NOW, THEREFORE, I, Gloria Macapagal-Arroyo, President of the Republic of the Philippines and hold rallies. That the warrantless arrest and take-over of facilities, including
Commander-in-Chief of the Armed Forces of the Philippines, by virtue of the powers vested upon me by Section 18, media, can already be implemented was announced.
Article 7 of the Philippine Constitution which states that: 'The President. . . whenever it becomes necessary, . . . may call o Undeterred, groups from the KMU, NAFLU-KMU and together with other
out (the) armed forces to prevent or suppress. . .rebellion. . .,' and in my capacity as their Commander-in-Chief, do
hereby command the Armed Forces of the Philippines, to maintain law and order throughout the Philippines, prevent
protesters marched towards EDSA. During the dispersal operations by the
or suppress all forms of lawless violence as well as any act of insurrection or rebellion and to enforce obedience to all police, Randolf David and his companion, Ronal Llamas (Akbayan President)
the laws and to all decrees, orders and regulations promulgated by me personally or upon my direction; and as were arrested.
provided in Section 17, Article 12 of the Constitution do hereby declare a State of National Emergency.
5
.GO 5 NOW, THEREFORE, I GLORIA MACAPAGAL-ARROYO, by virtue of the powers vested in me under the
Constitution as President of the Republic of the Philippines, and Commander-in-Chief of the Republic of the Philippines,
and pursuant to Proclamation No. 1017 dated February 24, 2006, do hereby call upon the Armed Forces of the I hereby direct the Chief of Staff of the AFP and the Chief of the PNP, as well as the officers and men of the AFP and
Philippines (AFP) and the Philippine National Police (PNP), to prevent and suppress acts of terrorism and lawless PNP, to immediately carry out the necessary and appropriate actions and measures to suppress and prevent acts of
violence in the country; terrorism and lawless violence.



o February 25, 2006: supervening events so that a declaration thereon would be of no practical use or value.
! CIDG raided the Daily Tribune and confiscated news stories,
documents, pictures, and mock ups of the Saturday issue. As a general rule, courts decline jurisdiction over cases rendered moot. However, courts will
Policemen were, thereafter, stationed inside and outside the Daily decide cases, otherwise moot and academic, in the following situations:
Tribune office. The police also surrounded the premises of another 1. there is a grave violation of the Constitution;
opposition paper, Malaya, and its tabloid Abante. 2. the exceptional character of the situation and the paramount public interest is
This served as warning to media outlets not to connive or involved;
do anything that would help the rebels bring down this 3. when constitutional issue raised requires formulation of controlling principles to
government. guide the bench, the bar, and the public;
PNP warned that it would take over any media 4. the case is capable of repetition yet evading review.
organization that would not follow the standards set by
the government during the state of national emergency. President Arroyo's issuance of PP 1021 did not render the present petitions moot and
! Crispin Beltran (Anakpawis and Chair of KMU) was arrested using an academic. During the eight days that PP 1017 was operative, the police officers committed
arrest warrant dated 1985. When KMU members went to Crame, illegal acts in implementing it. Moreover, all the above exceptions are present to justify the
they ware not disallowed entry and 2 members were later arrested. Court's assumption of jurisdiction over the petitions.
o Satur Ocampo (Bayan Muna Rep.) eluded arrest when Police went after him
during a forum in Sulo Hotel. 2. STANDING - YES
o Josel Virador (Bayan Muna Rep.) was arrested in Davao.
o Attempts were made to arrest Rafael Mariano (Anakpawis), Teodoro Casino In public suits, our courts adopt the 'direct injury' test which states that the person who
(Bayan Muna) and Liza Maza (Gabriela). impugns the validity of a statute must have 'a personal and substantial interest in the case
March 3, 2006: GMA issued Presidential Proclamation 1021 (PP 1021) lifting the state of such that he has sustained, or will sustain direct injury as a result.
national emergency.
However, being a mere procedural technicality, the requirement of locus standi maybe
Issues: waived. Thus, even where the petitioners have failed to show direct injury,they have been
A. PROCEDURAL: allowed to sue under the principle of 'transcendental importance.'
1. MOOTNESS: Whether the issuance of PP 1021 renders the petitions moot and
academic. Petitioners David, Llamas and the Tribune suffered 'direct injury' resulting from the 'illegal
2. STANDING: Whether petitioners in 171485 (Escudero et al.), G.R. Nos. arrest' and 'unlawful search' committed by police operatives pursuant to PP 1017.
171400 (ALGI), 171483 (KMU et al.), 171489 (Cadiz et al.),
and 171424 (Legarda) have legal standing. KMU's assertion that PP 1017 and G.O. No. 5 violated its right to peaceful assembly may be
deemed sufficient to give it legal standing. Organizations may be granted standing to assert
B. SUBSTANTIVE: the rights of their members. The courts took judicial notice of the announcement by the
1. JUDICIAL REVIEW: Whether the Supreme Court can review the factual bases Office of the President banning all rallies and canceling all permits for public assemblies
of PP 1017. following the issuance of PP 1017 and G.O. No. 5.
2. CONSTITUTIONALITY: Whether PP 1017 and G.O. No. 5 are unconstitutional.
a. Facial Challenge The national officers of the Integrated Bar of the Philippines (IBP) have no legal
b. Constitutional Basis standing,having no direct or potential injury which the IBP as an institution or its members
c. As Applied Challenge may suffer as a consequence of the issuance of PP No. 1017 and G.O. No.5. The mere
invocation by the IBP of its duty to preserve the rule of law is too general an interest.
However, in view of the transcendental importance oft he issue, the Court vested them
Held: with locus standi.

A. PROCEDURAL B. SUBSTANTIVE
1. MOOTNESS - NO 1. JUDICIAL REVIEW: Political Question, Calling-Out Power

A moot and academic case is one that ceases to present a justiciable controversy by virtue of While the President's 'calling-out' power is a discretionary power solely vested in his



wisdom, 'this does not prevent an examination of whether such power was exercised within First provision:
permissible constitutional limits or whether it was exercised in a manner constituting grave
abuse of discretion.' 'by virtue of the power vested upon me by Section 18, Artilce VII' do hereby command the
Armed Forces of the Philippines, to maintain law and order throughout the Philippines,
As to how the Court may inquire into the President's exercise of power, the standard is not prevent or suppress all forms of lawless violence as well any act of insurrection or rebellion'
correctness, but arbitrariness. The test is that 'judicial inquiry can go no further than to
satisfy the Court not that the President's decision is correct,' but that 'the President did not Second provision:
act arbitrarily.'(citing Lansang v. Garcia)
'and to enforce obedience to all the laws and to all decrees, orders and regulations
To show arbitrariness, it must be shown that the President's decision is totally bereft of promulgated by me personally or upon my direction;'
factual basis. If this is not proven, the Court cannot thereafter undertake an independent
investigation beyond the pleadings.' (citing IBP v Zamora) (IMPT!) Third provision:

Petitioners failed to show that President Arroyo's exercise of the calling-out power, by 'as provided in Section 17, Article XII of the Constitution do hereby declare a State of
issuing PP 1017, is totally bereft of factual basis. The government presented reports of National Emergency.'
events leading to the issuance PP 1017 (i.e. escape and threats of Magdalo group, defections
in military, etc.) which was not contradicted by petitioners. Hence, the President was
justified in issuing PP 1017 calling for military aid. b-1 Constitutional Basis; Calling Out Power (First Provision of PP 1017)

6
3. CONSTITUTIONALITY Section 18, Article VII of the Constitution grants the President, as Commander-in-Chief, a
'sequence' of graduated powers. From the most to the least benign, these are: the calling-
out power, the power to suspend the privilege of the writ of habeas corpus, and the power
a-1. Facial Challenge (Overbreadth Doctrine) to declare Martial Law. Citing IBP v. Zamora, the Court ruled that the only criterion for the
exercise of the calling-out power is that 'whenever it becomes necessary,' the President
The overbreadth doctrine is an analytical tool developed for testing 'on their faces' statutes
in free speech cases. PP 1017 is not primarily directed to speech or even speech-related
6
. Sec. 18. The President shall be the Commander-in-Chief of all armed forces of the Philippines
conduct. It is actually a call upon the AFP to prevent or suppress all forms of lawless and whenever it becomes necessary, he may call out such armed forces to prevent or suppress lawless violence,
violence. invasion or rebellion. In case of invasion or rebellion, when the public safety requires it, he may, for a period not
exceeding sixty days, suspend the privilege of the writ of habeas corpus or place the Philippines or any part thereof
under martial law. Within forty-eight hours from the proclamation of martial law or the suspension of the privilege of
Claims of facial overbreadth are entertained in cases involving statutes which, by their the writ of habeas corpus, the President shall submit a report in person or in writing to the Congress. The Congress,
terms, seek to regulate only 'spoken words' and 'overbreadth claims have been curtailed voting jointly, by a vote of at least a majority of all its Members in regular or special session, may revoke such
when invoked against ordinary criminal laws that are sought to be applied to protected proclamation or suspension, which revocation shall not be set aside by the President. Upon the initiative of the
President, the Congress may, in the same manner, extend such proclamation or suspension for a period to be
conduct.'
determined by the Congress, if the invasion or rebellion shall persist and public safety requires it.

a-2. Facial Challenge (Vagueness) The Congress, if not in session, shall within twenty-four hours following such proclamation or suspension, convene in
accordance with its rules without need of a call.

Related to the 'overbreadth' doctrine is the 'void for vagueness doctrine' which holds that 'a The Supreme Court may review, in an appropriate proceeding filed by any citizen, the sufficiency of the factual bases of
law is facially invalid if men of common intelligence must necessarily guess at its meaning the proclamation of martial law or the suspension of the privilege of the writ or the extension thereof, and must
and differ as to its application.' It is subject to the same principles governing overbreadth promulgate its decision thereon within thirty days from its filing.

doctrine. For one, it is also an analytical tool for testing 'on their faces' statutes in free
A state of martial law does not suspend the operation of the Constitution, nor supplant the functioning of the civil
speech cases. And like overbreadth, it is said that a litigant may challenge a statute on its courts or legislative assemblies, nor authorize the conferment of jurisdiction on military courts and agencies over
face only if it is vague in all its possible applications. civilians where civil courts are able to function, nor automatically suspend the privilege of the writ.

The suspension of the privilege of the writ shall apply only to persons judicially charged for rebellion or offenses
inherent in or directly connected with invasion.
PP 1017 may be divided into three parts:
During the suspension of the privilege of the writ, any person thus arrested or detained shall be judicially charged
within three days, otherwise he shall be released.



may call the armed forces 'to prevent or suppress lawless violence, invasion or rebellion.' promulgated by me personally or upon my direction; and as provided in Section 17, Article
XII of the Constitution do hereby declare a state of national emergency.
Considering the circumstances then prevailing, President Arroyo found it necessary to issue
PP 1017. Owing to her Office's vast intelligence network, she is in the best position to PP 1017 is unconstitutional insofar as it grants the President, during a state of emergency,
determine the actual condition of the country. authority to temporarily take over or direct the operation of any privately-owned public
utility or business affected with public interest, without authority or delegation from
There is a distinction between the President's authority to declare a 'state of rebellion' and Congress.
the authority to proclaim a state of national emergency. In declaring a state of national
emergency, President Arroyo did not only rely on Section 18, Article VII of the Constitution, a A distinction must be drawn between the President's authority to declare 'a state of national
provision calling on the AFP to prevent or suppress lawless violence, invasion or rebellion. emergency' and to exercise emergency powers. While the President alone can declare a
She also relied on Section 17, Article XII, a provision on the State's extraordinary power to state of national emergency, however, the exercise of emergency powers, such as the
take over privately-owned public utility and business affected with public interest. taking over of privately owned public utility or business affected with public interest,
requires a delegation from Congress. The President has no absolute authority to exercise
PP 1017 is not a declaration of Martial Law. It is merely an exercise of President Arroyo's allthe powers of the State under Section 17, Article VII in the absence of an emergency
calling-out power. As such, it cannot be used to justify acts that can be done only under a powers act passed by Congress.
valid declaration of Martial Law. Specifically, (a) arrests and seizures without judicial
warrants; (b) ban on public assemblies; (c) take-over of news media and agencies and press Congress may grant emergency powers to the President, subject to certain conditions, thus:
censorship; and (d) issuance of Presidential Decrees, are powers which can be exercised by
the President as Commander-in-Chief only where there is a valid declaration of Martial Law 1. There must be a war or other emergency.
or suspension of the writ of habeas corpus. 2. The delegation must be for a limited period only
3. The delegation must be subject to such restrictions as the Congress may prescribe.
b-2. Constitutional Basis; 'Take Care' Power (Second Provision of PP 1017) 4. The emergency powers must be exercised to carry out a national policy declared
by Congress
The second provision pertains to the power of the President to ensure that the laws be
7
faithfully executed. This is based on Section 17, Article VII of the Constitution. Section 17, Article XII must be understood as an aspect of the emergency powers
clause. The taking over of private business affected with public interest is just another facet
PP 1017 is unconstitutional insofar as it grants President Arroyo the authority to promulgate of the emergency powers generally reposed upon Congress. Thus, when Section 17 states
'decrees.' Legislative power is peculiarly within the province of the Legislature. Neither that the the State may, during the emergency and under reasonable terms prescribed by
Martial Law nor a state of rebellion nor a state of emergency can justify President Arroyo's it, temporarily take over or direct the operation of any privately owned public utility or
exercise of legislative power by issuing decrees. Presidential Decrees are laws which are of business affected with public interest, it refers to Congress, not the President. Now,
the same category and binding force as statutes because they were issued by then President whether or not the President may exercise such power is dependent on whether Congress
Marcos in the exercise of his legislative power during the period of Martial Law under the may delegate it to him pursuant to a law prescribing the reasonable terms thereof.
1973 Constitution.
Emergency, as a generic term, connotes the existence of conditions suddenly intensifying the

degree of existing danger to life or well-being beyond that which is accepted as
President Arroyo has no authority to enact decrees. It follows that these decrees are void
normal. Implicit in this definitions are the elements of intensity, variety, and perception.
and, therefore, cannot be enforced. With respect to 'laws,' she cannot call the military to
Emergencies, as perceived by legislature or executive in the United Sates since 1933, have
enforce or implement certain laws, such as customs laws, laws governing family and
been occasioned by a wide range of situations, classifiable under three (3) principal heads: a)
property relations, laws on obligations and contracts and the like. She can only order the
economic, b) natural disaster, and c) national security. Emergency, as contemplated in
military, under PP 1017, to enforce laws pertinent to its duty to suppress lawless violence.
our Constitution, is of the same breadth. It may include rebellion, economic crisis, pestilence

or epidemic, typhoon, flood, or other similar catastrophe of nationwide proportions or
b-3. Constitutional Basis; Take Over Power (Third Provision of PP 1017)
effect.

x x x and to enforce obedience to all the laws and to all decrees, orders, and regulations
Let it be emphasized that while the President alone can declare a state of national
emergency, however, without legislation, he has no power to take over privately-owned

7 public utility or business affected with public interest. The President cannot decide
.SEC. 17. The President shall have control of all the executive departments, bureaus, and offices. He shall ensure that
the laws be faithfully executed. whether exceptional circumstances exist warranting the take over of privately-owned



public utility or business affected with public interest. Nor can he determine when such
exceptional circumstances have ceased. Likewise, without legislation, the President has no FINAL NOTE: The SC discussed Doctrines of Several Political Theorists on the Power of the
power to point out the types of businesses affected with public interest that should be taken President in Times of Emergency. Im not sure if its relevant but just in case he goes shotgun,
over. In short, the President has no absolute authority to exercise all the powers of the I pasted the text below. You may skip it. Its theoretical and educational. [TOOK IT OUT NA.
State under Section 17, Article VII in the absence of an emergency powers act passed by REFER TO THE ORIG DIGEST PERO SIGURO NAMAN DI NA TATANUNGIN NI DEAN ITO JT]
Congress. .

c. Constitutionality; 'As Applied' Challenge Sec. 18: Republic v PLDT (1968) (MR)
GR No. L-18841. January 27, 1969.
Courts do not declare statutes invalid merely because they may afford an opportunity for Petitioner: Republic of the Philippines (RP)
abuse in the manner of application. The validity of a statute or ordinance is to be Respondent: Phil. Long Distance Telephone Company (PLDT)
determined from its general purpose and its efficiency to accomplish the end desired, not
from its effects in a particular case. Very competent summary

d-1. Others; 'Acts of Terrorism' PLDT has legislative franchise to operate telephone services within the country and
transmission of msgs between the PH and other countries. BOT was created under EO 94
G.O. No. 5 mandates the AFP and the PNP to immediately carry out the 'necessary and empowered to operate communications services also. BOT entered into an agreement with
appropriate actions and measures to suppress and prevent acts of terrorism and lawless PLDT to rent the latters trunk lines for use of the government offices. But BOT eventually
violence.' extended its services to the public. PLDT complained that BOT violated their terms by serving
the public and therefore competing with it. PLDT cut off the trunk lines rented by BOT,
The Court declares that the 'acts of terrorism' portion of G.O. No. 5 is unconstitutional. Since resulting in an isolation of the PH from communication with other countries (except the US
there is no law defining 'acts of terrorism,' it is President Arroyo alone, under G.O. No. 5, for which BOT had a contract with another corporation, RCA). BOT commenced suit in the
who has the discretion to determine what acts constitute terrorism. Consequently,there can CFI praying that PLDT be commanded to enter into a contract with it for these telephone
be indiscriminate arrest without warrants, breaking into offices and residences, taking over services. PLDT claims that it has no obligation to enter into such contract and that because
the media enterprises. These acts go far beyond the calling-out power of the President. Yet PLDT violated their terms of agreement, it had reason to sever the trunk line connections.
these can be effected in the name of G.O. No. 5 under the guise of suppressing acts of
terrorism. CFI ruling" (1) PLDT cannot be ordered to enter into a contract. (2) BOT did not act with bad
faith as PLDT should have known that the former had a public reach. And because of the
d-2. Others; Right to Peacably Assemble prejudice to the PH resulting from the disconnection of the trunk lines, the connection
should be kept. Both parties appealed
David's warrantless arrest was unjustified. David, et al. were arrested while they were
exercising their right to peaceful assembly. They were not committing any crime, neither SC ruling"
was there a showing of a clear and present danger that warranted the limitation of that On syllabus topic (read Art. XII, sec. 18):
right. As can be gleaned from circumstances, the charges of inciting to sedition and violation Eminent is usually used on real property, but theres no reason why it cant apply to private
of BP 880 were mere afterthought. property subjected to a burden for public use and benefit. If under section 6, Article XIII, of
the Constitution (this is now Art. XII, sec. 18), the State may, in the interest of national
The wholesale cancellation of all permits to rally is a blatant disregard of the principle that welfare, transfer utilities to public ownership upon payment of just compensation, there is
'freedom of assembly is not to be limited, much less denied, except on a showing of a clear no reason why the State may not require a public utility to render services in the general
and present danger of a substantive evil that the State has a right to prevent.' interest, provided just compensation is paid therefor. The beneficiaries of the agreement of
interconnection would be the telephone user serviced by both BOT and RP and so the
Moreover, under BP 880, the authority to regulate assemblies and rallies is lodged with the condemnation would be for public use. Also, nothing in EO 94 (creating the BOT) precludes
local government units. They have the power to issue permits and to revoke such permits the BOT from resorting to condemnation proceedings where needed to that the BOT can
after due notice and hearing on the determination of the presence of clear and present function unhampered. Nothing prevents the expansion of services by BOT either, even if
danger. Here, petitioners were not even notified and heard on the revocation of their initially it said it would only be used for govt offices.
permits.
On other issues:



1. Public Service Commission (PSC) does have jurisdiction of PLDT but it cannot have case and until further order of the court because the severance of the trunk lines
jurisdiction over an RP instrumentality (BOT) so the complaint was properly lodged with the has cause isolation of the PH
court In its answer, PLDT said it has no obligation to enter into a contract with BOT and
2. There is no competition because as it is, the combined supply of services of the BOT and also that it was justified in disconnecting the trunk lines because BOT violated their
PLDT cannot satisfy the public demand for telephone service anyway terms
3. PLDT continued accepting rental payments long after discovering that BOT started serving CFI ruling " PLDT cannot be compelled to enter into contract with BOT; and BOT
the public, implying assent did not commit any fraud because PLDT should have known that because BOT was
4. US authorities: Where a contract entered into by a private party has served the greater a govt institution, it would eventually expand its services to the public; and in view
public, it becomes imbued with public interest and the party cannot now proceed with his of the seriousness of the prejudice to the PH resulting from disconnection, the
property as purely private but must consider public rights order for reconnection must be made permanent
Both parties appealed directly to SC
Reyes, J.B.L., J.
Issue(s)
Facts Can PLDT be compelled to enter into a contract with BOT? YES, by virtue of Art. XII, sec. 18
RP exercises its governmental powers thru its branches and instrumentalities, one
of which is the Bureau of Telecommunications (BOT), created under EO 94, Ratio
empowered basically to operate wire-telegraph and radio-telegraph offices;
investigate, consolidate, negotiate for, operate and maintain wire- telephone or Syllabus topic: transfer to public ownership utilities and other private enterprises to be
radio telephone communication service throughout the Philippines by utilizing operated by the Government
such existing facilities in cities, towns, and provinces Its correct that RP cannot be compelled to contract with PLDT but RP, in the
PLDT is a public service corporation holing a legislative franchise (Act 3426) to exercise of eminent domain may require PLDT to permit this agreement as the
install and operate a telephone system in throughout the PH as well as electrical needs of the govt may require, subject to the payment of just compensation
transmission of msgs within the PH and between the PH and other countries Eminent is usually used on real property, but theres no reason why it cant apply
RCA Communications Inc (RCA) is an American corp authorized to transact to private property subjected to a burden for public use and benefit
business in the PH and by assignment is a grantee of legislative privilege to operate If under section 6, Article XIII, of the Constitution (this is now Art. XII, sec. 18), the
the reception and transmission of long distance wireless msgs and broadcasting State may, in the interest of national welfare, transfer utilities to public ownership
and radiotelephone communication services upon payment of just compensation, there is no reason why the State may not
The Bureau of Telecommunications (BOT) meanwhile set up its own Government require a public utility to render services in the general interest, provided just
Telephone system using its own equipment and also by renting trunk lines from compensation is paid therefor.
PLDT to enable govt offices to call private parties. One of the rules of the The beneficiaries of the agreement of interconnection would be the telephone
agreement was the prohibition of public use of the service. However, BOT user serviced by both BOT and RP and so the condemnation would be for public
eventually extended it services to the general public use
PLDT complained to the BOT that it was violating the conditions of their agreement Also, nothing in EO 94 (creating the BOT) precludes the BOT from resorting to
by using their trunk lines not only for use of govt offices but also to serve the condemnation proceedings where needed to that the BOT can function
general public, thus competing with PLDTs business. Having not received a reply, unhampered. Nothing prevents it also from engaging in commercial activities or
PLDT disconnected the trunk lines rented by the BOT. Because of that, the PH was from serving the general public. Just because BOT had stated that the services
isolated from the rest of the world on telephone services (except for with the US would be limited to govt offices, it does not mean that future expansion could not
it entered into an agreement with RCA, a US corp with authority to transact be undertaken by it
business here, for these communications so hindi niya sa PLDT kinukuha yon) A perusal of RPs complaint shows that the averments actually make out a case for
It is a fact that throughout the years, neither the PLDT nor the BOT has been able compulsory rendering of services by PLDT. The LC should have proceeded to treat
to fulfill the public demand for telephone service (SC later on uses this to say that the case as one for condemnation of services and determine the just
PLDT cant complain of competition because there are much more subscribers compensation for the same
than both of them are capable of servicing anyway).
Compromise between the parties failed. RP filed suit against PLDR in CFI Manila Jurisdiction
praying that PLDT be commanded to execute a contract with the BOT for the use On the plea of PLDT that court had no jurisdiction but the Public Service
of the formers facilities. The CFI ordered the reconnection by PLDT pending the Commission (PSC): While PLDT is a public utility corporation whose franchise is



under control of the PSC, the telecommunications network owned by the RP is
operated by a govt instrumentality (BOT) and so exempt from the jurisdiction of
PSC (as per Public Service Act)

Competition
On the competition issue: (1)This is hypothetical because the demand right now
exceeds the supply; (2) the charter of PLDT explicitly states that the rights granted
to it are not exclusive and the RP can grant other persons a franchise; (3) when
PLDT entered into an agreement with BOT, it should have known that the latter
had a public reach
Also, PLDT accepted rental payments long after it discovered that RP had been
using the trunk lines for commercial purposes, implying assent. It cannot now
unilaterally sever the connection
There are US authorities to this effect: where parties have entered into a contract
voluntarily and it has resulted in continuous use and patronization and has
established public convenience, the public acquired an interest in its continuance.
The private party can no longer deal with it as private property only, but must be
subject to the rights of the public


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