Philippine Contractors Accreditation Board v. Manila Water Company, Inc. G.R. No. 217590 | March 10, 2020

 CASE DIGEST

Philippine Contractors Accreditation Board v. Manila Water Company, Inc.

G.R. No. 217590 | March 10, 2020

EN BANC, GESMUNDO, J.

 

Unconstitutionality of PCAB’s Implementing Rules; Limits of Administrative Rule-Making

 

The clear letter of the law is controlling and cannot be amended by a mere administrative rule issued for its implementation. 

 

Manila Water Company, Inc. sought accreditation for its foreign contractors to undertake construction projects for its waterworks and sewerage systems. The Philippine Contractors Accreditation Board (PCAB) denied the request, citing Section 3.1, Rule 3 of the Revised Rules and Regulations Governing Licensing and Accreditation of Constructors, which reserved Regular Licenses for Filipino-owned firms (at least 60% Filipino equity participation) while allowing foreign firms only a Special License for a single specific project. 

Manila Water filed a Petition for Declaratory Relief, arguing that the rule was unconstitutional as it imposed foreign ownership restrictions without Congressional authority. The Regional Trial Court (RTC) ruled in favor of Manila Water, declaring Section 3.1, Rule 3 void for exceeding PCAB’s delegated powers under Republic Act No. 4566 (Contractors’ License Law). 

PCAB appealed, asserting that it had the authority to regulate the construction industry and that the rule was consistent with the 1987 Constitution’s policy on professions and national economic protectionism. The case reached the Supreme Court.

 

 

Whether Section 3.1, Rule 3 of PCAB’s Implementing Rules, which imposes nationality restrictions on contractor licensing, is unconstitutional. 

YES. The Supreme Court struck down the nationality-based licensing requirement as unconstitutional, ruling that: 

1.    PCAB exceeded its delegated powers – The Contractors’ License Law (R.A. No. 4566) does not impose nationality restrictions on contractor licensing, and PCAB had no authority to create such a limitation. Administrative rules cannot go beyond the law they seek to implement. 

2.    Contracting is not a profession – PCAB wrongly classified construction as a profession subject to nationality restrictions under Section 14, Article XII of the 1987 Constitution. The Court clarified that construction is an industry, not a profession, and thus, should not be subject to restrictions on professional practice. 

3.    The restriction violates economic competition principles – The nationality-based rule unfairly restricted market entry, discouraging foreign investment in the construction industry, and contradicting economic policies promoting open competition. 

4.    The rule lacked basis in the Constitution or law – The Court emphasized that only Congress can impose nationality restrictions on economic activities under Section 10, Article XII of the Constitution, and there was no law reserving the construction industry exclusively for Filipinos.

 

Since Republic Act No. 4566 does not impose nationality-based restrictions, PCAB had no authority to create them through its rules. The Court affirmed the RTC ruling and declared void the nationality-based restrictions under Section 3.1, Rule 3 of PCAB’s Implementing Rules.

 

 

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Montelibano V. Bacolod-Murcia Milling Co. [G.R. No. L-15092 | May 18, 1962]

 CASE DIGEST

MONTELIBANO V. BACOLOD-MURCIA MILLING CO.

G.R. No. L-15092 | May 18, 1962

EN BANC, REYES, J.B.L

 

Business Judgement Rule

 

It is a well-known rule of law that questions of policy or of management are left solely to the honest decision of officers and directors of a corporation, and the court is without authority to substitute its judgment for that of the board of directors; the board is the business manager of the corporation, and so long as it acts in good faith, its orders are not reviewable by the courts.

  

Plaintiffs-appellants, including Alfredo and Alejandro Montelibano and Gonzaga & Co., were sugar planters with milling contracts with Bacolod-Murcia Milling Co., Inc. The original 1919 milling contract stipulated a 45%-55% division of sugar production (mill-planters). In 1936, an amended contract increased the planters' share to 60%, extending the contract for an additional 15 years. Additionally, the milling company’s Board of Directors passed a resolution (August 20, 1936) stating that if other sugar centrals in Negros Occidental granted better terms to their planters, Bacolod-Murcia would provide the same to its own planters. 

By 1951-1952, other sugar mills had increased planters’ shares beyond 60%. Plaintiffs demanded similar adjustments based on the 1936 resolution. The milling company refused, arguing that the resolution was ultra vires (beyond corporate powers) and amounted to an unenforceable donation. The trial court ruled in favor of the defendant, dismissing the complaint. Plaintiffs appealed.

 

Whether the resolution passed by Bacolod-Murcia Milling Co. increasing planters’ shares upon fulfilment of a condition was a valid corporate act and enforceable against the company. 

YES. The Supreme Court reversed the lower court’s ruling, holding that the resolution was a valid corporate act and binding upon Bacolod-Murcia Milling Co. The resolution was not a donation but an amendment to the milling contract meant to induce planters to agree to a longer contract term. The resolution was passed in good faith and was within the authority of the Board of Directors. 

Thus, since the Board of Directors acted within its discretion and in furtherance of corporate objectives, the resolution was enforceable, requiring the milling company to grant the increased sugar shares to the planters.

 

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Simon vs. Commission on Human Rights G.R. No. 100150 [January 5, 1994]

 CONSTITUTIONAL LAW

Simon vs. Commission on Human Rights

G.R. No. 100150 [January 5, 1994]

 EN BANC, VITUG, J.

 

Powers of Commission on Human Rights (CHR) to investigate civil and political rights violation of citizen; 

The Commission on Human Rights (CHR) is limited to investigating violations of civil and political rights, as defined by the Constitution. Economic rights and privileges, such as the right to engage in business, do not fall under the CHR’s jurisdiction unless they are directly linked to civil or political rights violations. Furthermore, the CHR’s contempt powers are confined to enforcing compliance with its investigative mandates and cannot be used to enforce orders in matters outside its constitutional authority.

 

In July 1990, the Quezon City government issued a demolition notice to vendors occupying stalls and shanties along North EDSA. The notice, signed by petitioner Carlos Quimpo, instructed the private respondents—members of the North EDSA Vendors Association—to vacate the premises within three days to make way for the development of a “People’s Park.” The respondents sought assistance from the Commission on Human Rights (CHR), filing a complaint to stop the demolition. 

The CHR issued several orders to halt the demolition and provide financial assistance to the affected vendors. It also cited the petitioners for contempt when the demolition proceeded despite its directives. The petitioners challenged the CHR’s jurisdiction, arguing that the issues raised did not fall under human rights violations involving civil or political rights as envisioned by the Constitution. They claimed that the respondents’ rights to engage in business were merely privileges, not enforceable human rights.

 

Whether or not the CHR have jurisdiction to investigate the demolition of vendors’ stalls and shanties as a human rights violation involving civil and political rights. 

NO. The Supreme Court ruled that the CHR’s jurisdiction is confined to investigating violations of civil and political rights and that it exceeded its authority in this case. The Court invalidated the CHR’s orders to stop the demolition and its imposition of contempt penalties. 

The Court explained that civil rights pertain to an individual’s entitlements as a citizen, such as property rights, equal protection under the law, and contractual freedom. Political rights relate to participation in governmental functions, such as suffrage and holding public office. Human rights violations, as contemplated by the Constitution, are those involving severe breaches of civil and political rights, such as torture, enforced disappearances, or political detention. 

The Court found that the demolition of stalls and shanties, planned for the construction of a public park, did not constitute a human rights violation involving civil or political rights. The claimed “right to engage in business” was a mere privilege and not among the inalienable rights protected under the CHR’s jurisdiction. 

On the CHR’s power to cite for contempt, the Court held that this authority is limited to enforcing its operational guidelines and rules of procedure necessary to carry out its investigative function. The CHR’s contempt powers do not extend to enforcing resolutions on matters beyond its jurisdiction, such as halting a demolition based on alleged economic rights violations.

 

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Philippine Blooming Mills vs. Philippine Blooming Mills G.R. No. L-31195 [June 5, 1973]

 CONSTITUTIONAL LAW

Philippine Blooming Mills vs. Philippine Blooming Mills

G.R. No. L-31195 [June 5, 1973]

EN BANC, MAKASIAR, J.

 

Bill of Rights; Freedom to Associate

Government agencies are strictly limited to the powers expressly conferred upon them by their enabling statutes. Any act or contract entered into beyond the scope of such powers is ultra vires and void.

 

The petitioner Philippine Blooming Mills Employees Organization (hereinafter referred to as PBMEO) is a legitimate labor union composed of the employees of the respondent Philippine Blooming Mills Co., Inc., and petitioners Nicanor Tolentino, Florencio Padrigano, Rufino Roxas, Mariano de Leon, Asencion Paciente, Bonifacio Vacuna, Benjamin Pagcu and Rodulfo Munsod are officers and members of the petitioner Union. PBMEO decided to stage a mass demonstration in front of Malacañang to express their grievances against the alleged abuses of the Pasig Police. 

Petitioners claim that on March 1, 1969, they decided to stage a mass demonstration at Malacañang on March 4, 1969, in protest against alleged abuses of the Pasig police, to be participated in by the workers in the first shift (from 6 A.M. to 2 P.M.) as well as those in the regular second and third shifts (from 7 A.M. to 4 P.M. and from 8 A.M. to 5 P.M., respectively); and that they informed the respondent Company of their proposed demonstration. The Philippine Blooming Mills Inc., called for a meeting with the leaders of the PBMEO after learning about the planned mass demonstration. During the meeting, the planned demonstration was confirmed by the union. But it was stressed out by the union that the demonstration was not a strike against the company but was in factual exercise of the laborers inalienable constitutional right to freedom of expression, freedom of speech and freedom for petition for redress of grievances. 

The company asked them to cancel the demonstration for it would interrupt the normal course of their business which may result in the loss of revenue. This was backed up with the threat of the possibility that the workers would lose their jobs if they pushed through with the rally. A second meeting took place where the company reiterated their appeal that while the workers may be allowed to participate, those from the 1st and regular shifts should not absent themselves to participate, otherwise, they would be dismissed. Since it was too late to cancel the plan, the rally took place and the officers of the PBMEO were eventually dismissed for a violation of the ‘No Strike and No Lockout’ clause of their Collective Bargaining Agreement. The lower court decided in favour of Philippine Blooming Mills Co., Inc., and the officers of the PBMEO were found guilty of bargaining in bad faith. The PBMEO’s motion for reconsideration was subsequently denied by the Court of Industrial Relations for being filed two days late.

 

Whether or not the workers who joined the strike violated the Collective Bargaining Agreement?

NO. While the Bill of Rights also protects property rights, the primacy of human rights over property rights is recognized. Because these freedoms are "delicate and vulnerable, as well as supremely precious in our society" and the "threat of sanctions may deter their exercise almost as potently as the actual application of sanctions," they "need breathing space to survive," permitting government regulation only "with narrow specificity." Property and property rights can be lost thru prescription; but human rights are imprescriptible. In the hierarchy of civil liberties, the rights of free expression, free assembly and petition, are not only civil rights but also political rights essential to man's enjoyment of his life, to his happiness and to his full and complete fulfillment. Thru these freedoms the citizens can participate not merely in the periodic establishment of the government through their suffrage but also in the administration of public affairs as well as in the discipline of abusive public officers. The citizen is accorded these rights so that he can appeal to the appropriate governmental officers or agencies for redress and protection as well as for the imposition of the lawful sanctions on erring public officers and employees.      

 

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BAUTISTA VS. JUNIO G.R. No L-50908 [January 31, 1984]

 CONSTITUTIONAL LAW

BAUTISTA VS. JUNIO

G.R. No L-50908 [January 31, 1984]

EN BANC, FERNANDO C.J

 

Lawful Subject; Police Power; LOI; No Violation of Equal Protection Clause

 

Police power refers to the capacity of the states to regulate behavior and enforce order within their territory to promote the health, safety, morals, and general welfare of their inhabitants.

 

The constitutionality of Letter of Instruction (LOI) No. 869, a response to protracted oil crisis, banning the use of private motor vehicles with H (heavy) and EH (extra heavy) plates on week-ends and holidays, was assailed for being allegedly violative of the due process and equal protection guarantees of the Constitution.

 

Petitioners also contends that Memorandum Circular No. 39 issued by herein respondents imposing penalties of fine, confiscation of the vehicle and cancellation of license of owners of the above specified vehicles found violating such LOI, is likewise unconstitutional, for being violative of the doctrine of “undue delegation of legislative power.”

 

Respondents denied the above allegations.

 

Whether or not Letter of Instruction 869 as implemented by Memorandum Circular No. 39 is violative of certain constitutional rights.

 

NO. The disputed regulatory measure is an appropriate response to a problem that presses urgently for solution, wherein its reasonableness is immediately apparent. Thus, due process is not ignored, much less infringed. The exercise of police power may cut into the rights to liberty and property for the promotion of the general welfare. Those adversely affected may invoke the equal protection clause only if they can show a factual foundation for its invalidity.

 

Moreover, since LOI No. 869 and MC No. 39 were adopted pursuant to the Land Transportation and Traffic Code which contains a specific provision as to penalties, the imposition of a fine or the suspension of registration under the conditions therein set forth is valid with the exception of the impounding of a vehicle.

 

 

Important Legal Principles

1. Police Power:
• The case emphasizes the extent of police power, which is the inherent authority of the state to enact laws and regulations to promote public welfare, safety, and morals. The decision recognized that local governments possess police power to regulate land use and zoning.
2. Due Process:
• The ruling also highlighted the importance of due process in the exercise of police power. Even though the government has broad authority, it must not infringe upon individual rights without following appropriate legal procedures. The principles of fairness and justice in regulatory actions were upheld.
3. Lawful Subject:
• The Court discussed the necessity for regulations enacted under police power to pertain to lawful subjects. The regulations must be justified on legitimate grounds pertinent to public health, safety, or morals and must also align with constitutional safeguards.

 
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