Judicial Power

Muskrat vs US
Facts
An Act of Congress in 1902 alloted land to Cherokee Indians, including David Muskrat
and Henry Dick. Congress passed acts in 1904 and 1906 that limited the rights that
Indians on the land could exercise over it. Some Cherokees already on the land
contended that this act had the potential to unconstitutionally deprive them of their
property. Congress passed an act in 1907 granting federal courts the jurisdiction to
hear cases from Indians contesting the constitutionality of the 1904 and 1906 acts.
Under this act, Muskrat and Dick filed suit in the Court of Claims and appealed to the
Supreme Court.

Question
Can Congress authorize matters for judicial review that are not "cases" or
"controversies"?

Conclusion
No. Justice William R. Day delivered the opinion for a 7-0 court. The Court ruled that
Congress could not create jurisdiction for judicial review of a specific matter by way
of legislation. This is because "the right to declare an act of Congress
unconstitutional could only be exercised when a proper case between opposing
parties was submitted for judicial determination." The Constitution granted the
judiciary the power to decide "cases" and "controversies," but did not grant a
"general veto power...upon the legislation of Congress." In other words, the court
needs a reason or actual case in order to question the constitutionality of a law and
in turn rule it as null and void if needed.

KILOSBAYAN vs. MANUEL L. MORATO

FACTS:
In Jan. 25, 1995, PCSO and PGMC signed an Equipment Lease Agreement (ELA)
wherein PGMC leased online lottery equipment and accessories to PCSO. (Rental of
4.3% of the gross amount of ticket or at least P35,000 per terminal annually). 30% of
the net receipts is allotted to charity. Term of lease is for 8 years. PCSO is to employ
its own personnel and responsible for the facilities. Upon the expiration of lease,
PCSO may purchase the equipment for P25 million. Feb. 21, 1995. A petition was
filed to declare ELA invalid because it is the same as the Contract of Lease
Petitioner's Contention: ELA was same to the Contract of Lease.. It is still violative of
PCSO's charter. It is violative of the law regarding public bidding. It violates Sec. 2(2)
of Art. 9-D of the 1987 Constitution. Standing can no longer be questioned because it
has become the law of the case Respondent's reply: ELA is different from the
Contract of Lease. There is no bidding required. The power to determine if ELA is
advantageous is vested in the Board of Directors of PCSO. PCSO does not have funds.

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Petitioners seek to further their moral crusade. Petitioners do not have a legal
standing because they were not parties to the contract

ISSUES:
Whether or not the petitioners have standing?

HELD:
NO. STARE DECISIS cannot apply. The previous ruling sustaining the standing of the
petitioners is a departure from the settled rulings on real parties in interest
because no constitutional issues were actually involved. LAW OF THE CASE cannot
also apply. Since the present case is not the same one litigated by theparties before
in Kilosbayan vs. Guingona, Jr., the ruling cannot be in any sense be regarded as the
law of this case. The parties are the same but the cases are not. RULE ON
CONCLUSIVENESS cannot still apply. An issue actually and directly passed upon and
determine in a former suit cannot again be drawn in question in any future action
between the same parties involving a different cause of action. But the rule does not
apply to issues of law at least when substantially unrelated claims are involved.
When the second proceeding involves an instrument or transaction identical with,
but in a form separable from the one dealt with in the first proceeding, the Court is
free in the second proceeding to make an independent examination of the legal
matters at issue. Since ELA is a different contract, the previous decision does not
preclude determination of the petitioner's standing. STANDING is a concept in
constitutional law and here no constitutional question is actually involved. The more
appropriate issue is whether the petitioners are REAL PARTIES in INTEREST.

G.R. No. 92024 November 9, 1990

CONGRESSMAN ENRIQUE T. GARCIA (Second District of Bataan), petitioner,

vs.
THE BOARD OF INVESTMENTS, THE DEPARTMENT OF TRADE AND INDUSTRY,
LUZON PETROCHEMICAL CORPORATION, and PILIPINAS SHELL
CORPORATION, respondents.

Abraham C. La Vina for petitioner.

GUTIERREZ, JR., J.:

This is a petition to annul and set aside the decision of the Board of Investments
(BOI)/Department of Trade and Industry (DTI) approving the transfer of the site of the
proposed petrochemical plant from Bataan to Batangas and the shift of feedstock for that
plant from naphtha only to naphtha and/or liquefied petroleum gas (LPG).

This petition is a sequel to the petition in G.R. No. 88637 entitled "Congressman Enrique
T. Garcia v. the Board of Investments", September 7, 1989, where this Court issued a
decision, ordering the BOI as follows:

WHEREFORE, the petition for certiorari is granted. The Board of Investments is ordered:
(1) to publish the amended application for registration of the Bataan Petrochemical

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Corporation, (2) to allow the petitioner to have access to its records on the original and
amended applications for registration, as a petrochemical manufacturer, of the
respondent Bataan Petrochemical Corporation, excluding, however, privileged papers
containing its trade secrets and other business and financial information, and (3) to set for
hearing the petitioner's opposition to the amended application in order that he may
present at such hearing all the evidence in his possession in support of his opposition to
the transfer of the site of the BPC petrochemical plant to Batangas province. The hearing
shall not exceed a period of ten (10) days from the date fixed by the BOI, notice of which
should be served by personal service to the petitioner through counsel, at least three (3)
days in advance. The hearings may be held from day to day for a period of ten (10) days
without postponements. The petition for a writ of prohibition or preliminary injunction is
denied. No costs. (Rollo, pages 450-451)

However, acting on the petitioner's motion for partial reconsideration asking that we rule
on the import of P.D. Nos. 949 and 1803 and on the foreign investor's claim of right of final
choice of plant site, in the light of the provisions of the Constitution and the Omnibus
Investments Code of 1987, this Court on October 24, 1989, made the observation that
P.D. Nos. 949 and 1803 "do not provide that the Limay site should be the only
petrochemical zone in the country, nor prohibit the establishment of a petrochemical plant
elsewhere in the country, that the establishment of a petrochemical plant in Batangas
does not violate P.D. No. 949 and P.D. No. 1803.

Our resolution skirted the issue of whether the investor given the initial inducements and
other circumstances surrounding its first choice of plant site may change it simply because
it has the final choice on the matter. The Court merely ruled that the petitioner appears to
have lost interest in the case by his failure to appear at the hearing that was set by the BOI
after receipt of the decision, so he may be deemed to have waived the fruit of the
judgment. On this ground, the motion for partial reconsideration was denied.

A motion for reconsideration of said resolution was filed by the petitioner asking that we
resolve the basic issue of whether or not the foreign investor has the right of final choice of
plant site; that the non-attendance of the petitioner at the hearing was because the
decision was not yet final and executory; and that the petitioner had not therefor waived
the right to a hearing before the BOI.

In the Court's resolution dated January 17, 1990, we stated:

Does the investor have a "right of final choice" of plant site? Neither under the 1987
Constitution nor in the Omnibus Investments Code is there such a 'right of final choice.' In
the first place, the investor's choice is subject to processing and approval or disapproval
by the BOI (Art. 7, Chapter II, Omnibus Investments Code). By submitting its application
and amended application to the BOI for approval, the investor recognizes the sovereign
prerogative of our Government, through the BOI, to approve or disapprove the same after
determining whether its proposed project will be feasible, desirable and beneficial to our
country. By asking that his opposition to the LPC's amended application be heard by the
BOI, the petitioner likewise acknowledges that the BOI, not the investor, has the last word
or the "final choice" on the matter.

Secondly, as this case has shown, even a choice that had been approved by the BOI may
not be 'final', for supervening circumstances and changes in the conditions of a place may
dictate a corresponding change in the choice of plant site in order that the project will not
fail. After all, our country will benefit only when a project succeeds, not when it fails. (Rollo,
pp. 538-539)

Nevertheless, the motion for reconsideration of the petitioner was denied.

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A minority composed of Justices Melencio-Herrera, Gancayco, Sarmiento and
this ponente voted to grant the motion for reconsideration stating that the hearing set by
the BOI was premature as the decision of the Court was not yet final and executory; that
as contended by the petitioner the Court must first rule on whether or not the investor has
the right of final choice of plant site for if the ruling is in the affirmative, the hearing would
be a useless exercise; that in the October 19, 1989 resolution, the Court while upholding
validity of the transfer of the plant site did not rule on the issue of who has the final choice;
that they agree with the observation of the majority that "the investor has no final choice
either under the 1987 Constitution or in the Omnibus Investments Code and that it is the
BOI who decides for the government" and that the plea of the petitioner should be granted
to give him the chance to show the justness of his claim and to enable the BOI to give a
second hard look at the matter.

Thus, the herein petition which relies on the ruling of the Court in the resolution of January
17, 1990 in G.R. No. 88637 that the investor has no right of final choice under the 1987
Constitution and the Omnibus Investments Code.

Under P.D. No. 1803 dated January 16, 1981, 576 hectares of the public domain located
in Lamao, Limay, Bataan were reserved for the Petrochemical Industrial Zone under the
administration, management, and ownership of the Philippine National Oil Company
(PNOC).

The Bataan Refining Corporation (BRC) is a wholly government owned corporation,

located at Bataan. It produces 60% of the national output of naphtha.

Taiwanese investors in a petrochemical project formed the Bataan Petrochemical

Corporation (BPC) and applied with BOI for registration as a new domestic producer of
petrochemicals. Its application specified Bataan as the plant site. One of the terms and
conditions for registration of the project was the use of "naphtha cracker" and "naphtha"
as feedstock or fuel for its petrochemical plant. The petrochemical plant was to be a joint
venture with PNOC. BPC was issued a certificate of registration on February 24, 1988 by
BOI.

BPC was given pioneer status and accorded fiscal and other incentives by BOI, like: (1)
exemption from taxes on raw materials, (2) repatriation of the entire proceeds of
liquidation investments in currency originally made and at the exchange rate obtaining at
the time of repatriation; and (3) remittance of earnings on investments. As additional
incentive, the House of Representatives approved a bill introduced by the petitioner
eliminating the 48% ad valoremtax on naphtha if and when it is used as raw materials in
the petrochemical plant. (G.R. No. 88637, September 7, 1989, pp. 2-3. Rollo, pp.
441-442)

However, in February, 1989, A.T. Chong, chairman of USI Far East Corporation, the
major investor in BPC, personally delivered to Trade Secretary Jose Concepcion a letter
dated January 25, 1989 advising him of BPC's desire to amend the original registration
certification of its project by changing the job site from Limay, Bataan, to Batangas. The
reason adduced for the transfer was the insurgency and unstable labor situation, and the
presence in Batangas of a huge liquefied petroleum gas (LPG) depot owned by the
Philippine Shell Corporation.

The petitioner vigorously opposed the proposal and no less than President Aquino
expressed her preference that the plant be established in Bataan in a conference with the
Taiwanese investors, the Secretary of National Defense and The Chief of Staff of the
Armed Forces.

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Despite speeches in the Senate and House opposing the Transfer of the project to
Batangas, BPC filed on April 11, 1989 its request for approval of the amendments. Its
application is as follows: "(l) increasing the investment amount from US $220 million to US
$320 million; (2) increasing the production capacity of its naphtha cracker, polythylene
plant and polypropylene plant; (3) changing the feedstock from naphtha only to "naphtha
and/or liquefied petroleum gas;" and (4) transferring the job site from Limay, Bataan, to
Batangas. (Annex B to Petition; Rollo, p. 25)

Notwithstanding opposition from any quarters and the request of the petitioner addressed
to Secretary Concepcion to be furnished a copy of the proposed amendment with its
attachments which was denied by the BOI on May 25, 1989, BOI approved the revision of
the registration of BPC's petrochemical project. (Petition, Annex F; Rollo, p. 32; See pp. 4
to 6, Decision in G.R. No. 88637; supra.)

BOI Vice-Chairman Tomas I. Alcantara testifying before the Committee on Ways and
Means of the Senate asserted that:

The BOI has taken a public position preferring Bataan over Batangas as the site of the
petrochemical complex, as this would provide a better distribution of industries around the
Metro Manila area. ... In advocating the choice of Bataan as the project site for the
petrochemical complex, the BOI, however, made it clear, and I would like to repeat this
that the BOI made it clear in its view that the BOI or the government for that matter could
only recomend as to where the project should be located. The BOI recognizes and
respect the principle that the final chouce is still with the proponent who would in the final
analysis provide the funding or risk capital for the project. (Petition, P. 13; Annex D to the
petition)

This position has not been denied by BOI in its pleadings in G.R. No. 88637 and in the
present petition.

Section 1, Article VIII of the 1987 Constitution provides:

SECTION 1. The judicial power shall be vested in one Supreme Court and in such lower
courts as may be established by law.

Judicial power includes the duty of the courts of justice to settle actual controversies
involving rights which are legally demandable and enforceable, and to determine whether
or not there has been a grave abuse of discretion amounting to lack or excess of
jurisdiction on the part of any branch or instrumentality of the Government.

There is before us an actual controversy whether the petrochemical plant should remain in
Bataan or should be transferred to Batangas, and whether its feedstock originally of
naphtha only should be changed to naphtha and/or liquefied petroleum gas as the
approved amended application of the BPC, now Luzon Petrochemical Corporation (LPC),
shows. And in the light of the categorical admission of the BOI that it is the investor who
has the final choice of the site and the decision on the feedstock, whether or not it
constitutes a grave abuse of discretion for the BOI to yield to the wishes of the investor,
national interest notwithstanding.

We rule that the Court has a constitutional duty to step into this controversy and determine
the paramount issue. We grant the petition.

First, Bataan was the original choice as the plant site of the BOI to which the BPC agreed.
That is why it organized itself into a corporation bearing the name Bataan. There is
available 576 hectares of public land precisely reserved as the petrochemical zone in
Limay, Bataan under P.D. No. 1803. There is no need to buy expensive real estate for the

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site unlike in the proposed transfer to Batangas. The site is the result of careful study long
before any covetous interests intruded into the choice. The site is ideal. It is not unduly
constricted and allows for expansion. The respondents have not shown nor reiterated that
the alleged peace and order situation in Bataan or unstable labor situation warrant a
transfer of the plant site to Batangas. Certainly, these were taken into account when the
firm named itself Bataan Petrochemical Corporation. Moreover, the evidence proves the
contrary.

Second, the BRC, a government owned Filipino corporation, located in Bataan produces
60% of the national output of naphtha which can be used as feedstock for the plant in
Bataan. It can provide the feedstock requirement of the plant. On the other hand, the
country is short of LPG and there is need to import the same for use of the plant in
Batangas. The local production thereof by Shell can hardly supply the needs of the
consumers for cooking purposes. Scarce dollars will be diverted, unnecessarily, from
vitally essential projects in order to feed the furnaces of the transferred petrochemical
plant.

Third, naphtha as feedstock has been exempted by law from the ad valorem tax by the
approval of Republic Act No. 6767 by President Aquino but excluding LPG from
exemption from ad valorem tax. The law was enacted specifically for the petrochemical
industry. The policy determination by both Congress and the President is clear. Neither
BOI nor a foreign investor should disregard or contravene expressed policy by shifting the
feedstock from naphtha to LPG.

Fourth, under Section 10, Article XII of the 1987 Constitution, it is the duty of the State to
"regulate and exercise authority over foreign investments within its national jurisdiction
and in accordance with its national goals and priorities." The development of a self-reliant
and independent national economy effectively controlled by Filipinos is mandated in
Section 19, Article II of the Constitution.

In Article 2 of the Omnibus Investments Code of 1987 "the sound development of the
national economy in consonance with the principles and objectives of economic
nationalism" is the set goal of government.

Fifth, with the admitted fact that the investor is raising the greater portion of the capital for
the project from local sources by way of loan which led to the so-called "petroscam
scandal", the capital requirements would be greatly minimized if LPC does not have to buy
the land for the project and its feedstock shall be limited to naphtha which is certainly
more economical, more readily available than LPG, and does not have to be imported.

Sixth, if the plant site is maintained in Bataan, the PNOC shall be a partner in the venture
to the great benefit and advantage of the government which shall have a participation in
the management of the project instead of a firm which is a huge multinational corporation.

In the light of all the clear advantages manifest in the plant's remaining in Bataan,
practically nothing is shown to justify the transfer to Batangas except a near-absolute
discretion given by BOI to investors not only to freely choose the site but to transfer it from
their own first choice for reasons which remain murky to say the least.

And this brings us to a prime consideration which the Court cannot rightly ignore.

Section 1, Article XII of the Constitution provides that:

xxx xxx xxx

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The State shall promote industrialization and full employment based on sound agricultural
development and agrarian reform, through industries that make full and efficient use of
human and natural resources, and which are competitive in both domestic and foreign
markets. However, the State shall protect Filipino enterprises against unfair foreign
competition and trade practices.

xxx xxx xxx

Every provision of the Constitution on the national economy and patrimony is infused with
the spirit of national interest. The non-alienation of natural resources, the State's full
control over the development and utilization of our scarce resources, agreements with
foreigners being based on real contributions to the economic growth and general welfare
of the country and the regulation of foreign investments in accordance with national goals
and priorities are too explicit not to be noticed and understood.

A petrochemical industry is not an ordinary investment opportunity. It should not be

treated like a garment or embroidery firm, a shoe-making venture, or even an assembler
of cars or manufacturer of computer chips, where the BOI reasoning may be accorded
fuller faith and credit. The petrochemical industry is essential to the national interest. In
other ASEAN countries like Indonesia and Malaysia, the government superintends the
industry by controlling the upstream or cracker facility.

In this particular BPC venture, not only has the Government given unprecedented favors,
among them:

(1) For an initial authorized capital of only P20 million, the Central Bank gave an eligible
relending credit or relending facility worth US $50 million and a debt to swap arrangement
for US $30 million or a total accommodation of US $80 million which at current exchange
rates is around P2080 million.

(2) A major part of the company's capitalization shall not come from foreign sources but
from loans, initially a Pl Billion syndicated loan, to be given by both government banks and
a consortium of Philippine private banks or in common parlance, a case of 'guiniguisa sa
sariling manteca.'

(3) Tax exemptions and privileges were given as part of its 'preferred pioneer status.'

(4) Loan applications of other Philippine firms will be crowded out of the Asian
Development Bank portfolio because of the petrochemical firm's massive loan request.
(Taken from the proceedings before the Senate Blue Ribbon Committee).

but through its regulatory agency, the BOI, it surrenders even the power to make a
company abide by its initial choice, a choice free from any suspicion of unscrupulous
machinations and a choice which is undoubtedly in the best interests of the Filipino
people.

The Court, therefore, holds and finds that the BOI committed a grave abuse of discretion
in approving the transfer of the petrochemical plant from Bataan to Batangas and
authorizing the change of feedstock from naphtha only to naphtha and/or LPG for the
main reason that the final say is in the investor all other circumstances to the contrary
notwithstanding. No cogent advantage to the government has been shown by this transfer.
This is a repudiation of the independent policy of the government expressed in numerous
laws and the Constitution to run its own affairs the way it deems best for the national
interest.

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One can but remember the words of a great Filipino leader who in part said he would not
mind having a government run like hell by Filipinos than one subservient to foreign
dictation. In this case, it is not even a foreign government but an ordinary investor whom
the BOI allows to dictate what we shall do with our heritage.

WHEREFORE, the petition is hereby granted. The decision of the respondent Board of
Investments approving the amendment of the certificate of registration of the Luzon
Petrochemical Corporation on May 23, 1989 under its Resolution No. 193, Series of 1989,
(Annex F to the Petition) is SET ASIDE as NULL and VOID. The original certificate of
registration of BPC' (now LPC) of February 24, 1988 with Bataan as the plant site and
naphtha as the feedstock is, therefore, ordered maintained.

SO ORDERED.

Gacia vs Board of Invesments

Facts

The Bataan Petrochemical Corporation (BPC), a Taiwanese private corporation,

applied for registration with the Board of Investments (BOI) in February 1988 as a
new domestic producer of petrochemicals in the Philippines. It originally specified
the province of Bataan as the site for the proposed investment but later submitted
an amended application to change the site to Batangas. Unhappy with the change of
the site, Congressman Enrique Garcia of the Second District of Bataan requested a
copy of BPC’s original and amended application documents.

The BOI denied the request on the basis that the investors in BPC had declined to
give their consent to the release of the documents requested, and that Article 81 of
the Omnibus Investments Code protected the confidentiality of those documents
absent consent to disclose.

The BOI subsequently approved the amended application without holding a second
hearing or publishing notice of the amended application. Garcia filed a petition
before the Supreme Court.

Decision Overview

The Court ruled that the BOI violated Garcia’s Constitutional right to have access to
information on matters of public concern under Article III, Section 7 of the
Constitution. The Court found that the inhabitants of Bataan had an “interest in the
establishment of the petrochemical plant in their midst [that] is actual, real, and vital
because it will affect not only their economic life, but even the air they breathe”. [p.
4] The Court also ruled that BPC’s amended application was in fact a second
application that required a new public notice to be filed and a new hearing to be
held.

Although Article 81 of the Omnibus Investments Code provides that “all applications
and their supporting documents filed under this code shall be confidential and shall
not be disclosed to any person, except with the consent of the applicant,” the Court

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emphasized that Article 81 provides for disclosure “on the orders of a court of
competent jurisdiction”. [p. 4] The Court ruled that it had jurisdiction to order
disclosure of the application, amended application, and supporting documents filed
with the BOI under Article 81, with certain exceptions.

The Court went on to note that despite the right to access information, “the
Constitution does not open every door to any and all information” because “the law
may exempt certain types of information from public scrutiny”. [p. 4] Thus it
excluded “the trade secrets and confidential, commercial, and financial information
of the applicant BPC, and matters affecting national security” from its order. [p. 4]
The Court did not provide a test for what information is excluded from the
Constitutional privilege to access public information, nor did it specify the kinds of
information that BPC could withhold under its ruling.

G.R. No. L-28113 March 28, 1969

THE MUNICIPALITY OF MALABANG, LANAO DEL SUR, and AMER MACAORAO

BALINDONG, petitioners,
vs.
PANGANDAPUN BENITO, HADJI NOPODIN MACAPUNUNG, HADJI HASAN
MACARAMPAD, FREDERICK V. DUJERTE MONDACO ONTAL, MARONSONG
ANDOY, MACALABA INDAR LAO. respondents.

CASTRO, J.:

The petitioner Amer Macaorao Balindong is the mayor of Malabang, Lanao del Sur,
while the respondent Pangandapun Bonito is the mayor, and the rest of the respondents
are the councilors, of the municipality of Balabagan of the same province. Balabagan was
formerly a part of the municipality of Malabang, having been created on March 15, 1960,
by Executive Order 386 of the then President Carlos P. Garcia, out of barrios and sitios1 of
the latter municipality.

The petitioners brought this action for prohibition to nullify Executive Order 386 and to
restrain the respondent municipal officials from performing the functions of their respective
office relying on the ruling of this Court in Pelaez v. Auditor General 2 and Municipality of
San Joaquin v. Siva. 3

In Pelaez this Court, through Mr. Justice (now Chief Justice) Concepcion, ruled: (1) that
section 23 of Republic Act 2370 [Barrio Charter Act, approved January 1, 1960], by
vesting the power to create barrios in the provincial board, is a "statutory denial of the
presidential authority to create a new barrio [and] implies a negation of the bigger power
to create municipalities," and (2) that section 68 of the Administrative Code, insofar as it
gives the President the power to create municipalities, is unconstitutional (a) because it
constitutes an undue delegation of legislative power and (b) because it offends against
section 10 (1) of article VII of the Constitution, which limits the President's power over
local governments to mere supervision. As this Court summed up its discussion: "In short,
even if it did not entail an undue delegation of legislative powers, as it certainly does, said
section 68, as part of the Revised Administrative Code, approved on March 10, 1917,
must be deemed repealed by the subsequent adoption of the Constitution, in 1935, which
is utterly incompatible and inconsistent with said statutory enactment."

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 On the other hand, the respondents, while admitting the facts alleged in the petition,
nevertheless argue that the rule announced in Pelaez can have no application in this case
because unlike the municipalities involved in Pelaez, the municipality of Balabagan is at
least a de facto corporation, having been organized under color of a statute before this
was declared unconstitutional, its officers having been either elected or appointed, and
the municipality itself having discharged its corporate functions for the past five years
preceding the institution of this action. It is contended that as a de facto corporation, its
existence cannot be collaterally attacked, although it may be inquired into directly in an
action for quo warranto at the instance of the State and not of an individual like the
petitioner Balindong.

It is indeed true that, generally, an inquiry into the legal existence of a municipality is
reserved to the State in a proceeding for quo warranto or other direct proceeding, and that
only in a few exceptions may a private person exercise this function of government. 4 But
the rule disallowing collateral attacks applies only where the municipal corporation is at
least a de facto corporations. 5 For where it is neither a corporation de jure nor de facto,
but a nullity, the rule is that its existence may be, questioned collaterally or directly in any
action or proceeding by any one whose rights or interests ate affected thereby, including
the citizens of the territory incorporated unless they are estopped by their conduct from
doing so. 6

And so the threshold question is whether the municipality of Balabagan is a de

facto corporation. As earlier stated, the claim that it is rests on the fact that it was
organized before the promulgation of this Court's decision in Pelaez. 7

Accordingly, we address ourselves to the question whether a statute can lend color of
validity to an attempted organization of a municipality despite the fact that such statute is
subsequently declared unconstitutional. lawphi1 .ñ et

This has been a litigiously prolific question, sharply dividing courts in the United States.
Thus, some hold that a de facto corporation cannot exist where the statute or charter
creating it is unconstitutional because there can be no de facto corporation where there
can be no de jure one, 8 while others hold otherwise on the theory that a statute is binding
until it is condemned as unconstitutional. 9

An early article in the Yale Law Journal offers the following analysis:

It appears that the true basis for denying to the corporation a de facto status lay in the
absence of any legislative act to give vitality to its creation. An examination of the cases
holding, some of them unreservedly, that a de facto office or municipal corporation can
exist under color of an unconstitutional statute will reveal that in no instance did the invalid
act give life to the corporation, but that either in other valid acts or in the constitution itself
the office or the corporation was potentially created....

The principle that color of title under an unconstitutional statute can exist only where
there is some other valid law under which the organization may be effected, or at least an
authority in potentia by the state constitution, has its counterpart in the negative
propositions that there can be no color of authority in an unconstitutional statute that
plainly so appears on its face or that attempts to authorize the ousting of a de jure or de
facto municipal corporation upon the same territory; in the one case the fact would imply
the imputation of bad faith, in the other the new organization must be regarded as a mere
usurper....

As a result of this analysis of the cases the following principles may be deduced which
seem to reconcile the apparently conflicting decisions:

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I. The color of authority requisite to the organization of a de facto municipal corporation
may be:

1. A valid law enacted by the legislature.

2. An unconstitutional law, valid on its face, which has either (a) been upheld for a time by
the courts or (b) not yet been declared void; provided that a warrant for its creation can be
found in some other valid law or in the recognition of its potential existence by the general
laws or constitution of the state.

II. There can be no de facto municipal corporation unless either directly or potentially,
such a de jurecorporation is authorized by some legislative fiat.

III. There can be no color of authority in an unconstitutional statute alone, the invalidity of
which is apparent on its face.

IV. There can be no de facto corporation created to take the place of an existing de
jure corporation, as such organization would clearly be a usurper.10

In the cases where a de facto municipal corporation was recognized as such despite the
fact that the statute creating it was later invalidated, the decisions could fairly be made to
rest on the consideration that there was some other valid law giving corporate vitality to
the organization. Hence, in the case at bar, the mere fact that Balabagan was organized
at a time when the statute had not been invalidated cannot conceivably make it a de
factocorporation, as, independently of the Administrative Code provision in question, there
is no other valid statute to give color of authority to its creation. Indeed, in Municipality of
San Joaquin v. Siva, 11 this Court granted a similar petition for prohibition and nullified an
executive order creating the municipality of Lawigan in Iloilo on the basis of
thePelaez ruling, despite the fact that the municipality was created in 1961, before section
68 of the Administrative Code, under which the President had acted, was invalidated. 'Of
course the issue of de facto municipal corporation did not arise in that case.

In Norton v. Shelby Count, 12 Mr. Justice Field said: "An unconstitutional act is not a law;
it confers no rights; it imposes no duties; it affords no protection; it creates no office; it is,
in legal contemplation, as inoperative as though it had never been passed." Accordingly,
he held that bonds issued by a board of commissioners created under an invalid statute
were unenforceable.

Executive Order 386 "created no office." This is not to say, however, that the acts done
by the municipality of Balabagan in the exercise of its corporate powers are a nullity
because the executive order "is, in legal contemplation, as inoperative as though it had
never been passed." For the existence of Executive, Order 386 is "an operative fact which
cannot justly be ignored." As Chief Justice Hughes explained in Chicot County Drainage
District v. Baxter State Bank: 13

The courts below have proceeded on the theory that the Act of Congress, having been
found to be unconstitutional, was not a law; that it was inoperative, conferring no rights
and imposing no duties, and hence affording no basis for the challenged decree. Norton v.
Shelby County, 118 U.S. 425, 442; Chicago, I. & L. Ry. Co. v. Hackett, 228 U.S. 559, 566.
It is quite clear, however, that such broad statements as to the effect of a determination of
unconstitutionality must be taken with qualifications. The actual existence of a statute,
prior to such a determination, is an operative fact and may have consequences which
cannot justly be ignored. The past cannot always be erased by a new judicial declaration.
The effect of the subsequent ruling as to invalidity may have to be considered in various
aspects — with respect to particular relations, individual and corporate, and particular
conduct, private and official. Questions of rights claimed to have become vested, of status

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of prior determinations deemed to have finality and acted upon accordingly, of public
policy in the light of the nature both of the statute and of its previous application, demand
examination. These questions are among the most difficult of those which have engaged
the attention of courts, state and federal, and it is manifest from numerous decisions that
an all-inclusive statement of a principle of absolute retroactive invalidity cannot be
justified.

There is then no basis for the respondents' apprehension that the invalidation of the
executive order creating Balabagan would have the effect of unsettling many an act done
in reliance upon the validity of the creation of that municipality. 14

ACCORDINGLY, the petition is granted, Executive Order 386 is declared void, and the
respondents are hereby permanently restrained from performing the duties and functions
of their respective offices. No pronouncement as to costs.

Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez and Capistrano, JJ., concur.
Teehankee and Barredo, JJ., took no part.

Carpio-Morales vs. Binay

FACTS:
– The Ombudsman’s argument against the CA’s lack of subject matter jurisdiction
over the main petition, and her corollary prayer for its dismissal, is based on her
interpretation of Section 14, RA 6770, or the Ombudsman Act, which reads in full:

Section 14. Restrictions. – No writ of injunction shall be issued by any court to delay
an investigation being conducted by the Ombudsman under this Act, unless there is
a prima facie evidence that the subject matter of the investigation is outside the
jurisdiction of the Office of the Ombudsman.

No court shall hear any appeal or application for remedy against the decision or
findings of the Ombudsman, except the Supreme Court, on pure question of law.

– The Ombudsman’s maintains that the first paragraph of Section 14, RA 6770
textually prohibits courts from extending provisional injunctive relief to delay any
investigation conducted by her office. Despite the usage of the general phrase “[n]o
writ of injunction shall be issued by any court,” the Ombudsman herself concedes
that the prohibition does not cover the Supreme Court.

ISSUE:
Are the first and second paragraphs of Sec. 14 of R.A. No. 6770, valid and
constitutional?

RULING:The first paragraph is declared INEFFECTIVE until the Court adopts the same
as part of the rules of procedure through an administrative circular duly issued; The
second paragraph is declared UNCONSTITUTIONAL AND INVALID.

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The Court rules that when Congress passed the first paragraph of Section 14, RA
6770 and, in so doing, took away from the courts their power to issue a TRO and/or
WPI to enjoin an investigation conducted by the Ombudsman, it encroached upon
this Court’s constitutional rule-making authority. Through this provision, Congress
interfered with a provisional remedy that was created by this Court under its duly
promulgated rules of procedure, which utility is both integral and inherent to every
court’s exercise of judicial power. Without the Court’s consent to the proscription, as
may be manifested by an adoption of the same as part of the rules of procedure
through an administrative circular issued therefor, there thus, stands to be a
violation of the separation of powers principle.

In addition, it should be pointed out that the breach of Congress in prohibiting

provisional injunctions, such as in the first paragraph of Section 14, RA 6770, does
not only undermine the constitutional allocation of powers; it also practically dilutes
a court’s ability to carry out its functions. This is so since a particular case can easily
be mooted by supervening events if no provisional injunctive relief is extended while
the court is hearing the same.

Since the second paragraph of Section 14, RA 6770 limits the remedy against
“decision or findings” of the Ombudsman to a Rule 45 appeal and thus – similar to
the fourth paragraph of Section 27, RA 6770- attempts to effectively increase the
Supreme Court’s appellate jurisdiction without its advice and concurrence, it is
therefore concluded that the former provision is also unconstitutional and perforce,
invalid. Contrary to the Ombudsman’s posturing, Fabian should squarely apply since
the above-stated Ombudsman Act provisions are in part materia in that they “cover
the same specific or particular subject matter,” that is, the manner of judicial review
over issuances of the Ombudsman.

Note that since the second paragraph of Section 14, RA 6770 is clearly determinative
of the existence of the CA’s subject matter jurisdiction over the main CA-G.R. SP No.
139453 petition, including all subsequent proceedings relative thereto, as the
Ombudsman herself has developed, the Court deems it proper to resolve this issue
ex mero motu (on its own motion):
Constitutional questions, not raised in the regular and orderly procedure in the trial
are ordinarily rejected unless the jurisdiction of the court below or that of the
appellate court is involved in which case it may be raised at any time or on the
court’s own motion. The Court ex mero motu may take cognizance of lack of
jurisdiction at any point in the case where that fact is developed. The court has a
clearly recognized right to determine its own jurisdiction in any proceeding.

Mode of Sitting
People vs. Gacott, Jr.
Facts:
For failure to check the citations of the prosecution, the order of respondent RTC
Judge Eustaquio Gacott, Jr. dismissing a criminal case was annulled by the SC. The
respondent judge was also sanctioned with a reprimand and a fine of P10,000.00 for

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gross ignorance of the law. The judgment was made by the Second Division of the SC.

Issue: Whether or not the Second Division of the SC has the competence to
administratively discipline respondent judge

Held: To support the Court’s ruling, Justice Regalado relied on his recollection of a
conversation with former Chief Justice Roberto Concepcion who was the Chairman
of the Committee on the Judiciary of the 1986 Constitutional Commission of which
Regalado was also a member.

The very text of the present Sec. 11, Art. VIII of the Constitution clearly shows that
there are actually two situations envisaged therein. The first clause which states that
“the SC en banc shall have the power to discipline judges of lower courts,” is a
declaration of the grant of that disciplinary power to, and the determination of the
procedure in the exercise thereof by, the Court en banc. It was not therein intended
that all administrative disciplinary cases should be heard and decided by the whole
Court since it would result in an absurdity.

The second clause, which refers to the second situation contemplated therein and is
intentionally separated from the first by a comma, declares on the other hand that
the Court en banc can “order their dismissal by a vote of a majority of the Members
who actually took part in the deliberations on the issues in the case and voted
therein.” In this instance, the administrative case must be deliberated upon and
decided by the full Court itself.

Pursuant to the first clause which confers administrative disciplinary power to the
Court en banc, a decision en banc is needed only where the penalty to be imposed is
the dismissal of a judge, officer or employee of the Judiciary, disbarment of a lawyer,
or either the suspension of any of them for a period of more than 1 year or a fine
exceeding P10, 000.00 or both.

Indeed, to require the entire Court to deliberate upon and participate in all
administrative matters or cases regardless of the sanctions, imposable or imposed,
would result in a congested docket and undue delay in the adjudication of cases in
the Court, especially in administrative matters, since even cases involving the
penalty of reprimand would require action by the Court en banc.

Appointment of Qualifications

KILOSBAYAN FOUNDATION ET AL v ERMITA

FACTS:

Petitioner filed a petition to set aside the appointment of Gregory Ong as Associate
Justice of the Supreme Court. Petitioner alleged that Ong is not a natural-born citizen

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and thus, is disqualified to become a member of the Supreme Court. Respondent
Ermita, on the other hand, contended that Ong was appointed from a list of
candidates given by the JBC and they have referred the matter back to the latter for
the determination of the issue regarding Ong’s citizenship. Respondent Ong
contended that he is truly a natural-born citizen, following a series of changes in
nationalities and whatnot with respect to his ancestors. He also contended that the
petitioner has no standing to file the said petition.

HELD:

First, on the issue of standing, the petitioners have standing as the issue involved is
of utmost importance—the citizenship of a person to be appointed as a member of
the Supreme Court.
Second, on the principal issue of the case, the Court took judicial notice of Ong’s
petition to be admitted to the Philippine Bar. In his petition to be admitted to the
Philippine bar, respondent alleged that he is qualified to be admitted because among
others he is a Filipino citizen, and that he became a citizen because his father
became a naturalized Filipino citizen and being a minor then, thus he too became a
Filipino citizen. As part of his evidence, he submitted his birth certificate and the
naturalization papers of his father.
It was on basis of these allegations under oath and the submitted evidence of no less
than Ong that the Court allowed him to take his oath as a lawyer. It is clear therefore,
that from the records of this Court, Ong is a naturalized Filipino citizen. The alleged
subsequent recognition of his natural-born status by the Bureau of Immigration and
the DOJ cannot amend the final decision of the trial court stating that Ong and his
mother were naturalized along with his father. Furthermore, as the
petitioner correctly submitted, no substantial change in an entry in the
civil register can be made without a judicial order. Change in the citizenship status is
a substantial change. The long string of events that Ong alleged leading to him being
a natural-born citizen, all entail factual assertions that need to be threshed out in
proper judicial proceedings.
NOTE: In this case, there has been no ouster from an appointment. There may
be approval of the appointment but it lacks other acts that will complete
the appointment.
The last act in an appointment is the delivery of the commission. It is now up to the
appointee—he must accept the appointment, take an oath of office, assume office,
etc. It doesn’t end here. The CSC can either reject or approve of the appointment.
When the appointee doesn’t pursue all the acts to assume office, the question is
whether or not he can be held liable. The law doesn’t provide really that there is a
period to accept or reject an appointment.

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Non-Judicial Work for Judges

Garcia vs Macaraig
Facts:
Judge Catalino Macaraig, Jr. took his oath as Judge of the CFI of Laguna and San
Pablo City on June 29, 1970. The court, being one of the 112 newly created CFI
branches, had to be organized from scratch. From July 1, 1970 to February 28, 1971,
Macaraig was not able to assume the duties and functions of a judge due to the fact
that his Court Room can not be properly established due to problems as to location
and as to appropriations to make his Court up and running. When Macaraig realized
that it would be some time before he could actually preside over his court, he
applied for an extended leave (during the 16 years he had worked in the Department
of Justice, he had, due to pressure of duties, never gone on extended leave, resulting
in his forfeiting all the leave benefits he had earned beyond the maximum ten
months allowed by the law). The Secretary of Justice, however, convinced
Macaraig to forego his leave and instead to assist the Secretary, without being
extended a formal detail, whenever he was not busy attending to the needs of his
court.
Paz Garcia on the other hand filed a complaint alleging that Macaraig is incompetent,
dishonest and has acted in violation of his oath as a judge. Garcia said that
Macaraig has not submitted the progress of his Courts as required by law. And that
Macaraig has received salaries as a judge while he is fully aware that he has not been
performing the duties of a judge. Also questioned was the fact that a member of the
judiciary is helping the the DOJ, a department of the executive oi charge of
prosecution of cases.
ISSUE: Whether or not Macaraig has acted with incompetence and dishonesty as
Judge.
HELD: No. Macaraig’s inability to perform his judicial duties under the circumstances
mentioned above does not constitute incompetence. Macaraig was, like every
lawyer who gets his first appointment to the bench, eager to assume his judicial
duties and rid himself of the stigma of being ‘a judge without a sala’, but forces and
circumstances beyond his control prevented him from discharging his judicial duties.
On the other hand, none of these is to be taken as meaning that the Court looks with
favor at the practice of long standing, to be sure, of judges being detailed in the DOJ
to assist the Secretary even if it were only in connection with his work of exercising
administrative authority over the courts. The line between what a judge may do and
what he may not do in collaborating or working with other offices or officers under
the other great departments of the government must always be kept clear and
jealously observed, lest the principle of separation of powers on which our
government rests by mandate of the people thru the Constitution be gradually
eroded by practices purportedly motivated by good intentions in the interest of the
public service.
The fundamental advantages and the necessity of the independence of said three
departments from each other, limited only by the specific constitutional precepts on
check and balance between and among them, have long been acknowledged as

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more paramount than the serving of any temporary or passing governmental
conveniences or exigencies. It is thus of grave importance to the judiciary under our
present constitutional scheme of government that no judge of even the lowest court
in this Republic should place himself in a position where his actuations on matters
submitted to him for action or resolution would be subject to review and prior
approval and, worst still, reversal, before they can have legal effect, by any authority
other than the Court of Appeals or the Supreme Court, as the case may be. Needless
to say, the Court feels very strongly that it is best that this practice is discontinued.

IN RE: MANZANO
Facts:

Judge Rodolfo Manzano sent a letter to the Supreme Court requesting to allow him
to accept appointment as a member of the Ilocos Norte Provincial Committe on
Justice create pursuant to Presidential Executive Order No. 856 as amended by EO
No. 326.

Issue:
Whether or not Judge Manzano can accept appointment as a member of INPCJ.

Held:
No. The committee was created by the executive branch of the government where
its members discharge administrative functions. Though it may be quasi-judicial, it is
still administrative in nature. Judge Manzano is not a subordinate of an executive or
legislative official, however eminent. His integrity in the adjudication of cases
contribute to the solidity of such structure. RTC Judges may only render assistance to
the aforesaid committees when such assistance are reasonably incidental to the
fulfillment of their judicial functions.

Salary
Nitafan vs Commissioner of Internal Revenue
Facts:
Judge David Nitafan and several other judges of the Manila Regional Trial Court seek
to prohibit the Commissioner of Internal Revenue (CIR) from making any deduction
of withholding taxes from their salaries or compensation for such would tantamount
to a diminution of their salary, which is unconstitutional. Earlier however, or on June
7, 1987, the Court en banc had already reaffirmed the directive of the Chief Justice
which directs the continued withholding of taxes of the justices and the judges of the
judiciary – but the SC decided to rule on this case nonetheless to settle the issue
once and for all.
ISSUE:
Whether or not the members of the judiciary are exempt from the payment of
income tax.

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HELD:
No. The clear intent of the framers of the Constitution, based on their deliberations,
was NOT to exempt justices and judges from general taxation. Members of the
judiciary, just like members of the other branches of the government, are subject to
income taxation. What is provided for by the constitution is that salaries of judges
may not be decreased during their continuance in office. They have a fix salary which
may not be subject to the whims and caprices of congress. But the salaries of the
judges shall be subject to the general income tax as well as other members of the
judiciary.
But may the salaries of the members of the judiciary be increased?
Yes. The Congress may pass a law increasing the salary of the members of the
judiciary and such increase will immediately take effect thus the incumbent
members of the judiciary (at the time of the passing of the law increasing their salary)
shall benefit immediately.
Congress can also pass a law decreasing the salary of the members of the judiciary
but such will only be applicable to members of the judiciary which were appointed
AFTER the effectivity of such law.

Removal
In Re Gonzales

FACTS:
Special Prosecutor Raul Gonzales forwarded to Justice Marcelo Fernan an
anonymous letter-complaint together with a telegram of MiguelCuenco in relations
to the disbarment charges against the justice.

ISSUE(S):
Whether or not a member of the Supreme Court may be disbarred during his term of
office.

HELD:
NO. A public officer who under the Constitution is required to be a member of the
Philippine bar as a qualification for the office held by him and who may be removed
from office only by impeachment, cannot be charged with disbarment during the
incumbency of such public officer. Such public officer, during his incumbency, cannot
be charged criminally with any offense which carries with it the penalty of removal
from office, or any penalty service of which would amount to removal from office.

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