cases in admin law (part 1)

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Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. 127685 July 23, 1998

BLAS F. OPLE, petitioner,

vs.

RUBEN D. TORRES, ALEXANDER AGUIRRE, HECTOR VILLANUEVA, CIELITO HABITO, ROBERTBARBERS, CARMENCITA REODICA, CESAR SARINO, RENATO VALENCIA, TOMAS P. AFRICA,HEAD OF THE NATIONAL COMPUTER CENTER and CHAIRMAN OF THE COMMISSION ONAUDIT, respondents.

PUNO,J.:

The petition at bar is a commendable effort on the part of Senator Blas F. Ople to prevent the shrinking ofthe right to privacy, which the revered Mr. Justice Brandeis considered as "the most comprehensive ofrights and the right most valued by civilized men." 1 Petitioner Ople prays that we invalidateAdministrative Order No. 308 entitled "Adoption of a National Computerized Identification ReferenceSystem" on two important constitutional grounds,viz: one, it is a usurpation of the power of Congress tolegislate, and two, it impermissibly intrudes on our citizenry's protected zone of privacy. We grant thepetition for the rights sought to be vindicated by the petitioner need stronger barriers against furthererosion.

A.O. No. 308 was issued by President Fidel V. Ramos On December 12, 1996 and reads as follows:

ADOPTION OF A NATIONAL COMPUTERIZED

IDENTIFICATION REFERENCE SYSTEM

WHEREAS, there is a need to provide Filipino citizens and foreign residents with the facilityto conveniently transact business with basic service and social security providers and othergovernment instrumentalities;

WHEREAS, this will require a computerized system to properly and efficiently identifypersons seeking basic services on social security and reduce, if not totally eradicatefraudulent transactions and misrepresentations;

WHEREAS, a concerted and collaborative effort among the various basic services and socialsecurity providing agencies and other government intrumentalities is required to achievesuch a system;

NOW, THEREFORE, I, FIDEL V. RAMOS, President of the Republic of the Philippines, byvirtue of the powers vested in me by law, do hereby direct the following:

Sec. 1. Establishment of a National Compoterized Identification Reference System. Adecentralized Identification Reference System among the key basic services and socialsecurity providers is hereby established.

Sec. 2. Inter-Agency Coordinating Committee. An Inter-Agency Coordinating Committee(IACC) to draw-up the implementing guidelines and oversee the implementation of the

System is hereby created, chaired by the Executive Secretary, with the following asmembers:

Head, Presidential Management Staff

Secretary, National Economic Development Authority

Secretary, Department of the Interior and Local Government

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Secretary, Department of Health

Administrator, Government Service Insurance System,

Administrator, Social Security System,

Administrator, National Statistics Office

Managing Director, National Computer Center.

Sec. 3. Secretariat. The National Computer Center (NCC) is hereby designated as secretariatto the IACC and as such shall provide administrative and technical support to the IACC.

Sec. 4. Linkage Among Agencies. The Population Reference Number (PRN) generated by theNSO shall serve as the common reference number to establish a linkage among concernedagencies. The IACC Secretariat shall coordinate with the different Social Security andServices Agencies to establish the standards in the use of Biometrics Technology and incomputer application designs of their respective systems.

Sec. 5. Conduct of Information Dissemination Campaign. The Office of the Press Secretary,in coordination with the National Statistics Office, the GSIS and SSS as lead agencies andother concerned agencies shall undertake a massive tri-media information disseminationcampaign to educate and raise public awareness on the importance and use of the PRN andthe Social Security Identification Reference.

Sec. 6. Funding. The funds necessary for the implementation of the system shall be sourcedfrom the respective budgets of the concerned agencies.

Sec. 7. Submission of Regular Reports. The NSO, GSIS and SSS shall submit regular reportsto the Office of the President through the IACC, on the status of implementation of thisundertaking.

Sec. 8. Effectivity. This Administrative Order shall take effect immediately.

DONE in the City of Manila, this 12th day of December in the year of Our Lord, NineteenHundred and Ninety-Six.

(SGD.) FIDEL V. RAMOS

A.O. No. 308 was published in four newspapers of general circulation on January 22, 1997 and January23, 1997. On January 24, 1997, petitioner filed the instant petition against respondents, then ExecutiveSecretary Ruben Torres and the heads of the government agencies, who as members of the Inter-AgencyCoordinating Committee, are charged with the implementation of A.O. No. 308. On April 8, 1997, weissued a temporary restraining order enjoining its implementation.

Petitioner contends:

A. THE ESTABLISNMENT OF A NATIONAL COMPUTERIZED IDENTIFICATION REFERENCESYSTEM REQUIRES A LEGISLATIVE ACT. THE ISSUANCE OF A.O. NO. 308 BY THEPRESIDENT OF THE REPUBLIC OF THE PHILIPPINES IS, THEREFORE, ANUNCONSTITUTIONAL USURPATION OF THE LEGISLATIVE POWERS OF THE CONGRESS OFTHE REPUBLIC OF THE PHILIPPINES.

B. THE APPROPRIATION OF PUBLIC FUNDS BY THE PRESIDENT FOR THE IMPLEMENTATIONOF A.O. NO. 308 IS AN UNCONSTITUTIONAL USURPATION OF THE EXCLUSIVE RIGHT OFCONGRESS TO APPROPRIATE PUBLIC FUNDS FOR EXPENDITURE.

C. THE IMPLEMENTATION OF A.O. NO. 308 INSIDIOUSLY LAYS THE GROUNDWORK FOR ASYSTEM WHICH WILL VIOLATE THE BILL OF RIGHTS ENSHRINED IN THE CONSTITUTION. 2

Respondents counter-argue:

A. THE INSTANT PETITION IS NOT A JUSTICIABLE CASE AS WOULD WARRANT A JUDICIALREVIEW;

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B. A.O. NO. 308 [1996] WAS ISSUED WITHIN THE EXECUTIVE AND ADMINISTRATIVEPOWERS OF THE PRESIDENT WITHOUT ENCROACHING ON THE LEGISLATIVE POWERS OFCONGRESS;

C. THE FUNDS NECESSARY FOR THE IMPLEMENTATION OF THE IDENTIFICATIONREFERENCE SYSTEM MAY BE SOURCED FROM THE BUDGETS OF THE CONCERNEDAGENCIES;

D. A.O. NO. 308 [1996] PROTECTS AN INDIVIDUAL'S INTEREST IN PRIVACY. 3

We now resolve.

I

As is usual in constitutional litigation, respondents raise the threshold issues relating to the standing tosue of the petitioner and the justiciability of the case at bar. More specifically, respondents aver thatpetitioner has no legal interest to uphold and that the implementing rules of A.O. No. 308 have yet to bepromulgated.

These submissions do not deserve our sympathetic ear. Petitioner Ople is a distinguished member of ourSenate. As a Senator, petitioner is possessed of the requisite standing to bring suit raising the issue that

the issuance of A.O. No. 308 is a usurpation of legislative power. 4 As taxpayer and member of theGovernment Service Insurance System (GSIS), petitioner can also impugn the legality of the misalignmentof public funds and the misuse of GSIS funds to implement A.O. No. 308. 5

The ripeness for adjudication of the Petition at bar is not affected by the fact that the implementing rulesof A.O. No. 308 have yet to be promulgated. Petitioner Ople assails A.O. No. 308 as invalid per se and asinfirmed on its face. His action is not premature for the rules yet to be promulgated cannot cure its fataldefects. Moreover, the respondents themselves have started the implementation of A.O. No. 308 withoutwaiting for the rules. As early as January 19, 1997, respondent Social Security System (SSS) caused thepublication of a notice to bid for the manufacture of the National Identification (ID) card. 6 RespondentExecutive Secretary Torres has publicly announced that representatives from the GSIS and the SSS havecompleted the guidelines for the national identification system. 7 All signals from the respondents show

their unswerving will to implement A.O. No. 308 and we need not wait for the formality of the rules topass judgment on its constitutionality. In this light, the dissenters insistence that we tighten the rule onstanding is not a commendable stance as its result would be to throttle an important constitutionalprinciple and a fundamental right.

II

We now come to the core issues. Petitioner claims that A.O. No. 308 is not a mere administrative orderbut a law and hence, beyond the power of the President to issue. He alleges that A.O. No. 308 establishesa system of identification that is all-encompassing in scope, affects the life and liberty of every Filipinocitizen and foreign resident, and more particularly, violates their right to privacy.

Petitioner's sedulous concern for the Executive not to trespass on the lawmaking domain of Congress isunderstandable. The blurring of the demarcation line between the power of the Legislature to make lawsand the power of the Executive to execute laws will disturb their delicate balance of power and cannot beallowed. Hence, the exercise by one branch of government of power belonging to another will be given astricter scrutiny by this Court.

The line that delineates Legislative and Executive power is not indistinct. Legislative power is "theauthority, under the Constitution, to make laws, and to alter and repeal them." 8 The Constitution, as thewill of the people in their original, sovereign and unlimited capacity, has vested this power in the Congressof the Philippines. 9 The grant of legislative power to Congress is broad, general andcomprehensive. 10 The legislative body possesses plenary power for all purposes of civilgovernment. 11 Any power, deemed to be legislative by usage and tradition, is necessarily possessed byCongress, unless the Constitution has lodged it elsewhere. 12 In fine, except as limited by the Constitution,

either expressly or impliedly, legislative power embraces all subjects and extends to matters of generalconcern or common interest. 13

While Congress is vested with the power to enact laws, the President executes the laws. 14 The executivepower is vested in the Presidents. 15 It is generally defined as the power to enforce and administer thelaws. 16 It is the power of carrying the laws into practical operation and enforcing their due observance. 17

As head of the Executive Department, the President is the Chief Executive. He represents the governmentas a whole and sees to it that all laws are enforced by the officials and employees of his department. 18 He

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has control over the executive department, bureaus and offices. This means that he has the authority toassume directly the functions of the executive department, bureau and office or interfere with thediscretion of its officials. 19 Corollary to the power of control, the President also has the duty of supervisingthe enforcement of laws for the maintenance of general peace and public order. Thus, he is grantedadministrative power over bureaus and offices under his control to enable him to discharge his dutieseffectively. 20

Administrative power is concerned with the work of applying policies and enforcing orders as determinedby proper governmental organs. 21 It enables the President to fix a uniform standard of administrative

efficiency and check the official conduct of his agents. 22 To this end, he can issue administrative orders,rules and regulations.

Prescinding from these precepts, we hold that A.O. No. 308 involves a subject that is not appropriate to becovered by an administrative order. An administrative order is:

Sec. 3.Administrative Orders. Acts of the President which relate to particular aspects ofgovernmental operation in pursuance of his duties as administrative head shall bepromulgated in administrative orders. 23

An administrative order is an ordinance issued by the President which relates to specific aspects inthe administrative operation of government. It must be in harmony with the law and should be for

the sole purpose of implementing the law and carrying out the legislative policy.24

We reject theargument that A.O. No. 308 implements the legislative policy of the Administrative Code of 1987.The Code is a general law and "incorporates in a unified document the major structural, functionaland procedural principles of governance." 25 and "embodies changes in administrative structure andprocedures designed to serve the people." 26 The Code is divided into seven (7) Books: Book Ideals with Sovereignty and General Administration, Book II with the Distribution of Powers of thethree branches of Government, Book III on the Office of the President, Book IV on the ExecutiveBranch, Book V on Constitutional Commissions, Book VI on National Government Budgeting, andBook VII on Administrative Procedure. These Books contain provisions on the organization, powersand general administration of the executive, legislative and judicial branches of government, theorganization and administration of departments, bureaus and offices under the executive branch,the organization and functions of the Constitutional Commissions and other constitutional bodies,the rules on the national government budget, as well as guideline for the exercise by administrativeagencies of quasi-legislative and quasi-judicial powers. The Code covers both the internaladministration of government, i.e, internal organization, personnel and recruitment, supervisionand discipline, and the effects of the functions performed by administrative officials on privateindividuals or parties outside government. 27

It cannot be simplistically argued that A.O. No. 308 merely implements the Administrative Code of 1987.It establishes for the first time a National Computerized Identification Reference System. Such a Systemrequires a delicate adjustment of various contending state policies the primacy of national security, theextent of privacy interest against dossier-gathering by government, the choice of policies, etc. Indeed, thedissent of Mr. Justice Mendoza states that the A.O. No. 308 involves the all-important freedom of thought.As said administrative order redefines the parameters of some basic rights of our citizenry vis-a-vis theState as well as the line that separates the administrative power of the President to make rules and the

legislative power of Congress, it ought to be evident that it deals with a subject that should be covered bylaw.

Nor is it correct to argue as the dissenters do that A.D. No. 308 is not a law because it confers no right,imposes no duty, affords no proctection, and creates no office. Under A.O. No. 308, a citizen cannottransact business with government agencies delivering basic services to the people without thecontemplated identification card. No citizen will refuse to get this identification card for no one can avoiddealing with government. It is thus clear as daylight that without the ID, a citizen will have difficultyexercising his rights and enjoying his privileges. Given this reality, the contention that A.O. No. 308 givesno right and imposes no duty cannot stand.

Again, with due respect, the dissenting opinions unduly expand the limits of administrative legislation and

consequently erodes the plenary power of Congress to make laws. This is contrary to the establishedapproach defining the traditional limits of administrative legislation. As well stated by Fisher: ". . . Manyregulations however, bear directly on the public. It is here that administrative legislation must herestricted in its scope and application. Regulations are not supposed to be a substitute for the generalpolicy-making that Congress enacts in the form of a public law. Although administrative regulations areentitled to respect, the authority to prescribe rules and regulations is not an independent source of powerto make laws." 28

III

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Assuming, arguendo, that A.O. No. 308 need not be the subject of a law, still it cannot pass constitutionalmuster as an administrative legislation because facially it violates the right to privacy. The essence ofprivacy is the "right to be let alone." 29 In the 1965 case of Griswold v. Connecticut, 30 the United StatesSupreme Court gave more substance to the right of privacy when it ruled that the right has aconstitutional foundation. It held that there is a right of privacy which can be found within the penumbrasof the First, Third, Fourth, Fifth and Ninth Amendments,31viz:

Specific guarantees in the Bill of Rights have penumbras formed by emanations from theseguarantees that help give them life and substance . . . various guarantees create zones of

privacy. The right of association contained in the penumbra of the First Amendment is one,as we have seen. The Third Amendment in its prohibition against the quartering of soldiers"in any house" in time of peace without the consent of the owner is another facet of thatprivacy. The Fourth Amendment explicitly affirms the ''right of the people to be secure intheir persons, houses and effects, against unreasonable searches and seizures." The FifthAmendment in its Self-Incrimination Clause enables the citizen to create a zone of privacywhich government may not force him to surrender to his detriment. The Ninth Amendmentprovides: "The enumeration in the Constitution, of certain rights, shall not be construed todeny or disparage others retained by the people."

In the 1968 case ofMorfe v. Mutuc, 32 we adopted the Griswold ruling that there is a constitutionalright to privacy. Speaking thru Mr. Justice, later Chief Justice, Enrique Fernando, we held:

xxx xxx xxx

The Griswold case invalidated a Connecticut statute which made the use of contraceptives acriminal offence on the ground of its amounting to an unconstitutional invasion of the rightof privacy of married persons; rightfully it stressed "a relationship lying within the zone ofprivacy created by several fundamental constitutional guarantees." It has wider implicationsthough. The constitutional right to privacy has come into its own.

So it is likewise in our jurisdiction. The right to privacy as such is accorded recognitionindependently of its identification with liberty; in itself, it is fully deserving of constitutionalprotection. The language of Prof. Emerson is particularly apt: "The concept of limitedgovernment has always included the idea that governmental powers stop short of certainintrusions into the personal life of the citizen. This is indeed one of the basic distinctionsbetween absolute and limited government. Ultimate and pervasive control of the individual,in all aspects of his life, is the hallmark of the absolute state. In contrast, a system oflimited government safeguards a private sector, which belongs to the individual, firmlydistinguishing it from the public sector, which the state can control. Protection of this privatesector protection, in other words, of the dignity and integrity of the individual hasbecome increasingly important as modern society has developed. All the forces of atechnological age industrialization, urbanization, and organization operate to narrowthe area of privacy and facilitate intrusion into it. In modern terms, the capacity to maintainand support this enclave of private life marks the difference between a democratic and atotalitarian society."

Indeed, if we extend our judicial gaze we will find that the right of privacy is recognized and enshrined inseveral provisions of our Constitution. 33 It is expressly recognized in section 3 (1) of the Bill of Rights:

Sec. 3. (1) The privacy of communication and correspondence shall be inviolable exceptupon lawful order of the court, or when public safety or order requires otherwise asprescribed by law.

Other facets of the right to privacy are protectad in various provisions of the Bill of Rights, viz: 34

Sec. 1. No person shall be deprived of life, liberty, or property without due process of law,nor shall any person be denied the equal protection of the laws.

Sec. 2. The right of the people to be secure in their persons, houses papers, and effectsagainst unreasonable searches and seizures of whatever nature and for any purpose shallbe inviolable, and no search warrant or warrant of arrest shall issue except upon probablecause to be determined personally by the judge after examination under oath or affirmationof the complainant and the witnesses he may produce, and particularly describing the placeto be searched and the persons or things to be seized.

xxx xxx xxx

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Sec. 6. The liberty of abode and of changing the same within the limits prescribed by lawshall not be impaired except upon lawful order of the court. Neither shall the right to travelbe impaired except in the interest of national security, public safety, or public health as maybe provided by law.

xxx xxx xxx

Sec. 8. The right of the people, including those employed in the public and private sectors,to form unions, associations, or societies for purposes not contrary to law shall not be

abridged.

Sec. 17. No person shall be compelled to be a witness against himself.

Zones of privacy are likewise recognized and protected in our laws. The Civil Code provides that "[e]veryperson shall respect the dignity, personality, privacy and peace of mind of his neighbors and otherpersons" and punishes as actionable torts several acts by a person of meddling and prying into the privacyof another. 35 It also holds a public officer or employee or any private individual liable for damages for anyviolation of the rights and liberties of another person, 36and recognizes the privacy of letters and otherprivate communications. 37 The Revised Penal Code makes a crime the violation of secrets by anofficer, 38 the revelation of trade and industrial secrets, 39 and trespass to dwelling. 40 Invasion of privacyis an offense in special laws like the Anti-Wiretapping Law, 41 the Secrecy of Bank Deposits Act 42 and the

Intellectual Property Code.43

The Rules of Court on privileged communication likewise recognize theprivacy of certain information. 44

Unlike the dissenters, we prescind from the premise that the right to privacy is a fundamental rightguaranteed by the Constitution, hence, it is the burden of government to show that A.O. No. 308 isjustified by some compelling state interest and that it is narrowly drawn. A.O. No. 308 is predicated ontwo considerations: (1) the need to provides our citizens and foreigners with the facility to convenientlytransact business with basic service and social security providers and other government instrumentalitiesand (2) the need to reduce, if not totally eradicate, fraudulent transactions and misrepresentations bypersons seeking basic services. It is debatable whether these interests are compelling enough to warrantthe issuance of A.O. No. 308. But what is not arguable is the broadness, the vagueness, the overbreadthof A.O. No. 308 which if implemented will put our people's right to privacy in clear and present danger.

The heart of A.O. No. 308 lies in its Section 4 which provides for a Population Reference Number (PRN) asa "common reference number to establish a linkage among concerned agencies" through the use of"Biometrics Technology" and "computer application designs."

Biometry or biometrics is "the science of the applicatin of statistical methods to biological facts; amathematical analysis of biological data." 45 The term "biometrics" has evolved into a broad category oftechnologies which provide precise confirmation of an individual's identity through the use of theindividual's own physiological and behavioral characteristics. 46 A physiological characteristic is a relativelystable physical characteristic such as a fingerprint, retinal scan, hand geometry or facial features. Abehavioral characteristic is influenced by the individual's personality and includes voice print, signatureand keystroke. 47 Most biometric idenfication systems use a card or personal identificatin number (PIN) forinitial identification. The biometric measurement is used to verify that the individual holding the card or

entering the PIN is the legitimate owner of the card or PIN. 48

A most common form of biological encoding is finger-scanning where technology scans a fingertip andturns the unique pattern therein into an individual number which is called a biocrypt. The biocrypt isstored in computer data banks 49 and becomes a means of identifying an individual using a service. Thistechnology requires one's fingertip to be scanned every time service or access is provided. 50 Anothermethod is the retinal scan. Retinal scan technology employs optical technology to map the capillarypattern of the retina of the eye. This technology produces a unique print similar to a fingerprint. 51 Another biometric method is known as the "artificial nose." This device chemically analyzes theunique combination of substances excreted from the skin of people. 52 The latest on the list of biometricachievements is the thermogram. Scientists have found that by taking pictures of a face using infra-redcameras, a unique heat distribution pattern is seen. The different densities of bone, skin, fat and blood

vessels all contribute to the individual's personal "heat signature."53

In the last few decades, technology has progressed at a galloping rate. Some science fictions are nowscience facts. Today, biometrics is no longer limited to the use of fingerprint to identify an individual. It isa new science that uses various technologies in encoding any and all biological characteristics of anindividual for identification. It is noteworthy that A.O. No. 308 does not state what specific biologicalcharacteristics and what particular biometrics technology shall be used to identify people who will seek itscoverage. Considering the banquest of options available to the implementors of A.O. No. 308, the fearthat it threatens the right to privacy of our people is not groundless.

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A.O. No. 308 should also raise our antennas for a further look will show that it does not state whetherencoding of data is limited to biological information alone for identification purposes. In fact, the SolicitorGeneral claims that the adoption of the Identification Reference System will contribute to the "generationof population data for development planning." 54This is an admission that the PRN will not be used solelyfor identification but the generation of other data with remote relation to the avowed purposes of A.O. No.308. Clearly, the indefiniteness of A.O. No. 308 can give the government the roving authority to store andretrieve information for a purpose other than the identification of the individual through his PRN.

The potential for misuse of the data to be gathered under A.O. No. 308 cannot be undarplayed as the

dissenters do. Pursuant to said administrative order, an individual must present his PRN everytime hedeals with a government agency to avail of basic services and security. His transactions with thegovernment agency will necessarily be recorded whether it be in the computer or in the documentaryfile of the agency. The individual's file may include his transactions for loan availments, income taxreturns, statement of assets and liabilities, reimbursements for medication, hospitalization, etc. The morefrequent the use of the PRN, the better the chance of building a huge formidable informatin base throughthe electronic linkage of the files. 55 The data may be gathered for gainful and useful governmentpurposes; but the existence of this vast reservoir of personal information constitutes a covert invitation tomisuse, a temptation that may be too great for some of our authorities to resist. 56

We can even grant, arguendo, that the computer data file will be limited to the name, address and otherbasic personal infomation about the individual. 57 Even that hospitable assumption will not save A.O. No.

308 from constitutional infirmity for again said order does not tell us in clear and categorical terms howthese information gathered shall he handled. It does not provide who shall control and access the data,under what circumstances and for what purpose. These factors are essential to safeguard the privacy andguaranty the integrity of the information. 58 Well to note, the computer linkage gives other governmentagencies access to the information. Yet, there are no controls to guard against leakage of information.When the access code of the control programs of the particular computer system is broken, an intruder,without fear of sanction or penalty, can make use of the data for whatever purpose, or worse, manipulatethe data stored within the system. 59

It is plain and we hold that A.O. No. 308 falls short of assuring that personal information which will begathered about our people will only be processed for unequivocally specified purposes. 60 The lack ofproper safeguards in this regard of A.O. No. 308 may interfere with the individual's liberty of abode andtravel by enabling authorities to track down his movement; it may also enable unscrupulous persons to

access confidential information and circumvent the right against self-incrimination; it may pave the wayfor "fishing expeditions" by government authorities and evade the right against unreasonable searchesand seizures. 61 The possibilities of abuse and misuse of the PRN, biometrics and computer technology areaccentuated when we consider that the individual lacks control over what can be read or placed on his ID,much less verify the correctness of the data encoded. 62They threaten the very abuses that the Bill ofRights seeks to prevent. 63

The ability of sophisticated data center to generate a comprehensive cradle-to-grave dossier on anindividual and transmit it over a national network is one of the most graphic threats of the computerrevolution. 64 The computer is capable of producing a comprehensive dossier on individuals out ofinformation given at different times and for varied purposes. 65 It can continue adding to the stored dataand keeping the information up to date. Retrieval of stored date is simple. When information of a

privileged character finds its way into the computer, it can be extracted together with other data on thesubject. 66Once extracted, the information is putty in the hands of any person. The end of privacy begins.

Though A.O. No. 308 is undoubtedly not narrowly drawn, the dissenting opinions would dismiss its dangerto the right to privacy as speculative and hypothetical. Again, we cannot countenance such a laidbackposture. The Court will not be true to its role as the ultimate guardian of the people's liberty if it would notimmediately smother the sparks that endanger their rights but would rather wait for the fire that couldconsume them.

We reject the argument of the Solicitor General that an individual has a reasonable expectation of privacywith regard to the Natioal ID and the use of biometrics technology as it stands on quicksand. Thereasonableness of a person's expectation of privacy depends on a two-part test: (1) whether by hisconduct, the individual has exhibited an expectation of privacy; and (2) whether this expectation is onethat society recognizes as reasonable.67The factual circumstances of the case determines thereasonableness of the expectation. 68 However, other factors, such as customs, physical surroundings andpractices of a particular activity, may serve to create or diminish this expectation. 69 The use of biometricsand computer technology in A.O. No. 308 does not assure the individual of a reasonable expectation ofprivacy. 70 As technology advances, the level of reasonably expected privacy decreases. 71 The measure ofprotection granted by the reasonable expectation diminishes as relevant technology becomes more widelyaccepted. 72 The security of the computer data file depends not only on the physical inaccessibility of thefile but also on the advances in hardware and software computer technology. A.O. No. 308 is so widely

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drawn that a minimum standard for a reasonable expectation of privacy, regardless of technology used,cannot be inferred from its provisions.

The rules and regulations to be by the IACC cannot remedy this fatal defect. Rules and regulations merelyimplement the policy of the law or order. On its face, A.O. No. gives the IACC virtually infettereddiscretion to determine the metes and bounds of the ID System.

Nor do your present laws prvide adequate safeguards for a reasonable expectation of privacy.Commonwealth Act. No. 591 penalizes the disclosure by any person of data furnished by the individual to

the NSO with imprisonment and fine. 73 Republic Act. No. 1161 prohibits public disclosure of SSSemployment records and reports. 74 These laws, however, apply to records and data with the NSO and theSSS. It is not clear whether they may be applied to data with the other government agencies forming partof the National ID System. The need to clarify the penal aspect of A.O. No. 308 is another reason why itsenactment should be given to Congress.

Next, the Solicitor General urges us to validate A.O. No. 308's abridgment of the right of privacy by usingthe rational relationship test. 75 He stressed that the purposes of A.O. No. 308 are: (1) to streamline andspeed up the implementation of basic government services, (2) eradicate fraud by avoiding duplication ofservices, and (3) generate population data for development planning. He cocludes that these purposesjustify the incursions into the right to privacy for the means are rationally related to the end. 76

We are not impressed by the argument. In Morfe v. Mutuc,77

we upheld the constitutionality of R.A. 3019,the Anti-Graft and Corrupt Practices Act, as a valid police power measure. We declared that the law, incompelling a public officer to make an annual report disclosing his assets and liabilities, his sources ofincome and expenses, did not infringe on the individual's right to privacy. The law was enacted to promotemorality in public administration by curtailing and minimizing the opportunities for official corruption andmaintaining a standard of honesty in the public service. 78

The same circumstances do not obtain in the case at bar. For one, R.A. 3019 is a statute, not anadministrative order. Secondly, R.A. 3019 itself is sufficiently detailed. The law is clear on what practiceswere prohibited and penalized, and it was narrowly drawn to avoid abuses. IN the case at bar, A.O. No.308 may have been impelled by a worthy purpose, but, it cannot pass constitutional scrutiny for it is notnarrowly drawn. And we now hod that when the integrity of a fundamental right is at stake, this court willgive the challenged law, administrative order, rule or regulation a stricter scrutiny. It will not do for theauthorities to invoke the presumption of regularity in the performance of official duties. Nor is it enoughfor the authorities to prove that their act is not irrational for a basic right can be diminished, if notdefeated, even when the government does not act irrationally. They must satisfactorily show the presenceof compelling state interests and that the law, rule or regulation is narrowly drawn to preclude abuses.This approach is demanded by the 1987 Constitution whose entire matrix is designed to protect humanrights and to prevent authoritarianism. In case of doubt, the least we can do is to lean towards the stancethat will not put in danger the rights protected by the Constitutions.

The case ofWhalen v. Roe79citedby the Solicitor General is also off-line. In Whalen, the United StatesSupreme Court was presented with the question of whether the State of New York could keep acentralized computer record of the names and addresses of all persons who obtained certain drugspursuant to a doctor's prescription. The New York State Controlled Substance Act of 1972 required

physicians to identify parties obtaining prescription drugs enumerated in the statute, i.e., drugs with arecognized medical use but with a potential for abuse, so that the names and addresses of the patientscan be recorded in a centralized computer file of the State Department of Health. The plaintiffs, who werepatients and doctors, claimed that some people might decline necessary medication because of their fearthat the computerized data may be readily available and open to public disclosure; and that oncedisclosed, it may stigmatize them as drug addicts. 80 The plaintiffs alleged that the statute invaded aconstitutionally protected zone of privacy, i.e., the individual interest in avoiding disclosure of personalmatters, and the interest in independence in making certain kinds of important decisions. The U.S.Supreme Court held that while an individual's interest in avoiding disclosuer of personal matter is anaspect of the right to privacy, the statute did not pose a grievous threat to establish a constitutionalviolation. The Court found that the statute was necessary to aid in the enforcement of laws designed tominimize the misuse of dangerous drugs. The patient-identification requirement was a product of anorderly and rational legislative decision made upon recommmendation by a specially appointedcommission which held extensive hearings on the matter. Moreover, the statute was narrowly drawn andcontained numerous safeguards against indiscriminate disclosure. The statute laid down the procedure andrequirements for the gathering, storage and retrieval of the informatin. It ebumerated who wereauthorized to access the data. It also prohibited public disclosure of the data by imposing penalties for itsviolation. In view of these safeguards, the infringement of the patients' right to privacy was justified by avalid exercise of police power. As we discussed above, A.O. No. 308 lacks these vital safeguards.

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Even while we strike down A.O. No. 308, we spell out in neon that the Court is not per se agains the useof computers to accumulate, store, process, retvieve and transmit data to improve our bureaucracy.Computers work wonders to achieve the efficiency which both government and private industry seek.Many information system in different countries make use of the computer to facilitate important socialobjective, such as better law enforcement, faster delivery of public services, more efficient managementof credit and insurance programs, improvement of telecommunications and streamlining of financialactivities. 81 Used wisely, data stored in the computer could help good administration by making accurateand comprehensive information for those who have to frame policy and make key decisions. 82 Thebenefits of the computer has revolutionized information technology. It developed the

internet,83

introduced the concept of cyberspace84

and the information superhighway where theindividual, armed only with his personal computer, may surf and search all kinds and classes ofinformation from libraries and databases connected to the net.

In no uncertain terms, we also underscore that the right to privacy does not bar all incursions intoindividual privacy. The right is not intended to stifle scientific and technological advancements thatenhance public service and the common good. It merely requires that the law be narrowly focused 85 anda compelling interest justify such intrusions. 86 Intrusions into the right must be accompanied by propersafeguards and well-defined standards to prevent unconstitutional invasions. We reiterate that any law ororder that invades individual privacy will be subjected by this Court to strict scrutiny. The reason for thisstance was laid down in Morfe v. Mutuc, to wit:

The concept of limited government has always included the idea that governmental powersstop short of certain intrusions into the personal life of the citizen. This is indeed one of thebasic disctinctions between absolute and limited government. Ultimate and pervasive controlof the individual, in all aspects of his life, is the hallmark of the absolute state. In contrast, asystem of limited government safeguards a private sector, which belongs to the individual,firmly distinguishing it from the public sector, which the state can control. Protection of thisprivate sector protection, in other words, of the dignity and integrity of the individual has become increasingly important as modern society has developed. All the forces of atechnological age industrialization, urbanization, and organization operate to narrowthe area of privacy and facilitate intrusion into it. In modern terms, the capacity to maintainand support this enclave of private life marks the difference between a democratic and atotalitarian society. 87

IV

The right to privacy is one of the most threatened rights of man living in a mass society. The threatsemanate from various sources governments, journalists, employers, social scientists, etc. 88 In th caseat bar, the threat comes from the executive branch of government which by issuing A.O. No. 308pressures the people to surrender their privacy by giving information about themselves on the pretext thatit will facilitate delivery of basic services. Given the record-keeping power of the computer, only theindifferent fail to perceive the danger that A.O. No. 308 gives the government the power to compile adevastating dossier against unsuspecting citizens. It is timely to take note of the well-worded warning ofKalvin, Jr., "the disturbing result could be that everyone will live burdened by an unerasable record of hispast and his limitations. In a way, the threat is that because of its record-keeping, the society will havelost its benign capacity to forget." 89 Oblivious to this counsel, the dissents still say we should not be too

quick in labelling the right to privacy as a fundamental right. We close with the statement that the right toprivacy was not engraved in our Constitution for flattery.

IN VIEW WHEREOF, the petition is granted and Adminisrative Order No. 308 entitled "Adoption of aNational Computerized Identification Reference System" declared null and void for being unconstitutional.

SO ORDERED.


Manila

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FIRST DIVISION

G.R. No. 103533 December 15, 1998

MANILA JOCKEY CLUB, INC. AND PHILIPPINE RACING CLUB, INC., petitioners,vs.THE COURT OF APPEALS AND PHILIPPINE RACING COMMISSION, respondents.

QUISUMBING,J.:

This is a Petition for Review on Certiorariseeking the reversal of the decision 1 of the Court of Appeals inCA-G.R. SP No. 25251 dated September 17, 1991 and the resolution 2 dated January 8, 1992, whichdenied the motion for reconsideration. At issue here is the control and disposition of "breakages" 3 inconnection with the conduct of horse-racing.

The pertinent facts on record are as follows:

On June 18, 1948, Congress approved Republic Act No. 309, entitled "An Act to Regulate Horse-Racing inthe Philippines." This Act consolidated all existing laws and amended inconsistent provisions relative tohorse racing. It provided for the distribution of gross receipts from the sale of betting tickets, but is silenton the allocation of so-called "breakages." Thus the practice, according to the petitioners, was to use the"breakages" for the anti-bookies drive and other sales promotions activities of the horse racing clubs.

On October 23, 1992, petitioners, Manila Jockey Club, Inc. (MJCI) and Philippine Racing Club, Inc. (PRCI),were granted franchises to operate and maintain race tracks for horse racing in the City of Manila and theProvince of Rizal by virtue of Republic Act Nos. 6631 and 6632, respectively, and allowed to hold horseraces, with bets, on the following dates:

. . . Saturdays, Sundays and official holidays of the year, excluding Thursday and Fridays ofthe Holy Week, June twelfth, commonly known as Independence Day, Election Day andDecember thirtieth, commonly known as Rizal Day.

(Sec. 5 of R.A. 6631)

. . . Saturday, Sundays, and official holiday of the year, except on those official holidayswhere the law expressly provides that no horse races are to be held. The grantee may alsoconduct races on the eve of any public holiday to start not earlier than five-thirty (5:30)o'clock in the afternoon but not to exceed five days a year.

(Sec. 7 of R.A. 6632)

Said laws carried provisions on the allocation of "breakages" to beneficiaries as follows:

Franchise Laws

R.A. 6631 4 R.A. 6632 5

(for MJCI) (for PRCI)

Provincial or city hospitals 25%

Rehabilitation of drug addicts 25% 50%

For the benefit of Philippine

Amateur Athletes Federation 50% 25%

Charitable institutions 25%

On March 20, 1974, Presidential Decree No. 420 was issued creating the Philippine Racing Commission(PHILRACOM), giving it exclusive jurisdiction and control over every aspect of the conduct of horse racing,including the framing and scheduling of races. 6 By virtue of this power, the PHILRACOM authorized theholding of races on Wednesdays starting on December 22, 1976. 7

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In connection with the new schedule of races, petitioners made a joint query regarding the ownership ofbreakages accumulated during Wednesday races. In response to the query, PHILRACOM rendered itsopinion in a letter dated September 20, 1978. It declared that the breakages belonged to the racing clubsconcerned, to wit:

We find no further need to dissect the provisions of P.D. 420 to come to a legal conclusion.As can be clearly seen from the foregoing discussion and based on the establishedprecedents, there can be no doubt that the breakage of Wednesday races shall belong tothe racing club concerned. 8

Consequently, the petitioners allocated the proceeds of breakages for their own business purpose:

Thereafter, PHILRACOM authorized the holding of races on Thursdays from November 15, 1984 toDecember 31, 1984 and on Tuesdays since January 15, 1985 up to the present. These mid-week races arein addition to those days specifically mentioned in R.A. 6631 and R.A. 6632. Likewise, petition allocatedthe breakages from these races for their own uses.

On December 16, 1986 President Corazon Aquino amended certain provisions Sec. 4 of R.A. 8631 andSec. 6 of R.A. 6632 through Executive Orders No. 88 and 89. Under these Executive Orders, breakageswere allocated to beneficiaries, as follows:

Franchise Laws

E.O. 89 9 E.O. 88 10

(for MJCI) (for PRCI)

Provincial or city hospitals 25%

Rehabilitation of drug addicts 25% 50%

For the benefit of Philippine

Racing Commission 50% 25%

Charitable institutions 25%

On April 23, 1987, PHILRACOM itself addressed a query to the Office of the President asking which agencyis entitled to dispose of the proceeds of the "breakages" derived from the Tuesday and Wednesday races.

In a letter dated May 21, 1987, the Office of the President, through then Deputy Executive SecretaryCatalino Macaraig, Jr., replied that "the disposition of the breakages rightfully belongs to PHILRACOM, notonly those derived from the Saturday, Sunday and holiday races, but also from the Tuesday andWednesday races in accordance with the distribution scheme prescribed in said Executive Orders". 11

Controversy arose when herein respondent PHILRACOM, sent a series of demand letters to petitionersMJCI and PRCI, requesting its share in the "breakages" of mid-week-races and proof of remittances toother legal beneficiaries as provided under the franchise laws. On June 8, 1987, PHILRACOM sent a letterof demand to petitioners MJCI and PRCI asking them to remit PHILRACOM's share in the "breakages"derived from the Tuesday, Wednesday and Thursday races in this wise:

xxx xxx xxx

Pursuant to Board Resolution dated December 21, 1986, and Executive Order Nos. 88 and89 series of 1986, and the authority given by the Office of the President dated May 21,1987, please remit to the Commission the following:

1) PHILRACOM's share in the breakages derived from Wednesday racing forthe period starting December 22, 1976 up to the December 31, 1986.

2) PHILRACOM's share in the breakages derived from Thursday racing for theperiod starting November 15, 1984 up to December 31, 1984; and

3) PHILRACOM's share in the breakages derived from Tuesday racing for theperiod starting January 15, 1985 up to December, 1986.

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4) Kindly furnish the Commission with the breakdown ofallbreakages derivedfrom Tuesday, Thursdays and Wednesdays racing that you have remitted tothe legal beneficiaries. 12

On June 16, 1987, petitioners MJCI and PRCI sought reconsideration 13 of the May 21, 1987 opinion ofthen Deputy Executive Secretary Macaraig, but the same was denied by the Office of the President in itsletter dated April 11, 1988. 14

On April 25, 1988, PHILRACOM wrote another letter 15 to the petitioners MJCI and PRCI seeking the

remittance of its share in the breakages. Again, on June 13, 1990, PHILRACOM reiterated its previousdemand embodied in its letter of April 25, 1 988. 16

Petitioners ignored said demand. Instead, they filed a Petition for Declaratory Relief before the RegionalTrial Court, Branch 150 of Makati, on the ground that there is a conflict between the previous opinion ofPHILRACOM dated September 20, 1978 and the present position of PHILRACOM, as declared and affirmedby the Office of the President in its letters dated May 21, 1987 and April 11, 1988. Petitioners averred thatthere was an "actual controversy" between the parties, which should be resolved.

On March 11, 1991, the trial court rendered judgment, disposing as follows:

WHEREFORE, and in view of all the foregoing considerations, the Court hereby declares and

decides as follows:

a) Executive Orders Nos. 88 and 89 do not and cannot cover the dispositionand allocation of mid-week races, particularly those authorized to be heldduring Tuesdays, Wednesdays and those which are not authorized underRepublic Acts 6631 and 6632; and

b) The ownership by the Manila Jockey Club, Inc. and the Philippine RacingClub, Inc. of the breakages they derive from mid-week races shall not bedisturbed, with the reminder that the breakages should be strictly and whollyutilized for the purpose for which ownership thereof has been vested uponsaid racing entities.

SO ORDERED. 17

Dissatisfied, respondent PHILRACOM filed a Petition for Certiorariwith prayer for the issuance of a writ ofpreliminary injunction before this Court, raising the lone question of whether or not E.O. Nos. 88 and 89cover breakages derived from the mid-week races. However, we referred the case to the Court of Appeals,which eventually reversed the decision of the trial court, and ruled as follows:

xxx xxx xxx

The decision on the part of PHILRACOM to authorize additional racing days had the effect ofwidening the scope of Section 5 of RA 6631 and Section 7 of RA 6632. Consequently,

private respondents derive their privilege to hold races on the designated days not onlytheir franchise acts but also from the order issued by the PHILRACOM. No provision of lawbecame inconsistent with the passage of the Order granting additional racing days. Neitherwas there a special provision set to govern those mid-week races. The reason is simple.There was no need for any new provisions because there are enough general provisions tocover them. The provisions on the disposition and allocation of breakages being general incharacter apply to breakages derived on any racing day. 18

xxx xxx xxx

WHEREFORE, based on the foregoing analysis and interpretation of the laws in question, thejudgment of the trial court is hereby SET ASIDE. Decision is hereby rendered:

1. declaring Section 4 of RA 6631 as amended by E.O. 89 and Section 6 of RA 6632 asamended by E.O. 88 to cover the disposition and allocation of breakages derivedon allraces conducted by private respondents on any racing day, whether as provided forunder Section 4 of RA 6631 or Section 6 of RA 6632 or as ordered by PHILRACOM in theexercise of its powers under P.D. 420;

2. ordering private respondent to remit to PHILRACOM its share under E.O. 88 and E.O. 89derived from races held on Tuesday, Wednesdays, Thursday as authorized by PHILRACOM.

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SO ORDERED. 19

Petitioners filed a motion for reconsideration, but it was denied for lack of merit, with respondent Court ofAppeals further declaring that:

xxx xxx xxx

In so far as the prospective application of Executive Orders Nos. 88 and 89 is concerned.We have no disagreement with the respondents. Since PHILRACOM became the beneficiaryof the breakages only upon effectivity of Executive Order Nos. 88 and 89, it is thereforeentitled to such breakages from December 16, 1986 when said Executive Orders wereissued. However, we do not concede that respondents are entitled to breakages prior toDecember 16, 1986 because it is clear that the applicable laws from 1976 to December 16,1986 were R.A. 6631 and R.A. 6632, which specifically apportion the breakages to specifiedbeneficiaries among which was the PAAF, a government agency. Since respondents admitthat PHILRACOM (Petitioner) was merely placed in lieu of PAAF as beneficiary/recipient ofbreakages, then whatever breakages was due to PAAF as one of the beneficiaries under R.A.Nos. 6631 and 6632 accrued to or should belong to PHILRACOM as successor to the defunctPAAF.

Finding the Motion for Reconsideration without merit, and for reasons indicated, the Motion

is denied.

SO ORDERED. 20

Consequent to the aforequoted adverse decision, petitioners MJCI and PRCI filed this petition for reviewunder Rule 45.

The main issue brought by the parties for the Court's resolution is: Who are the rightful beneficiaries ofthe breakages derived from mid-week races? This issue also carries an ancillary question: assumingPHILRACOM is entitled to the mid-week breakages under the law, should the petitioners remit the moneyfrom the time the mid-week races started, or only upon the promulgation of E.O. Nos. 88 and 89?

Petitioners assert that franchise laws should be construed to apply the distribution scheme specifically andexclusively to the racing days enumerated in Sec. 5 of R.A. 6631, and Sec. 7 of R.A. 6632. They claim thatdisposition of breakages under these laws should be limited to races conducted on "all Saturdays,Sundays, and official holidays of the year, except, on those official holidays where the law expresslyprovides that no horse races are to be held", hence, there is no doubt that the breakages of Wednesdayraces shall belong to the racing clubs concerned. 21 They even advance the view that "where a statute byits terms is expressly limited to certain matters, it may not by interpretation or construction be extendedto other matters" 22

However, respondent PHILRACOM contends that R.A. Nos. 6631 and 6632 are laws intended primarily togrant petitioners their respective franchises to construct, operate, and maintain a race track for horseracing. 23 When PHILRACOM added mid-week races, the franchises given to the petitioners remained the

same. Logically, what applies to races authorized under Republic Act Nos. 6631 and 6632 should alsoapply to races additionally authorized by PHILRACOM, namely mid-week races, because these are generalprovisions which apply general rues and procedures governing the operation of the races. Consequently, ifthe authorized racing days are extended, these races must therefore be governed by the same rules andprovisions generally provided therein.

We find petitioners' position on the main issue lacking in merit and far from persuasive.

Franchise laws are privileges 24 conferred by the government on corporations to do that "which does notbelong to the citizens of the country generally by common right". 25 As a rule, a franchise springs fromcontracts between the sovereign power and the private corporation for purposes of individual advantageas well as public benefit. 26Thus, a franchise partakes of a double nature and character. 27 In so far as itaffects or concerns the public, it ispublic juris and subject to governmental control. 28 The legislature may

prescribe the conditions and terms upon which it may be held, and the duty of grantee to the publicexercising it. 29

As grantees of a franchise, petitioners derive their existence from the same. Petitioners' operations aregoverned by all existing rules relative to horse racing provided they are not inconsistent with each otherand could be reasonably harmonized. Therefore, the applicable laws are R.A. 309, as amended, R.A. 6631and 6632, as amended by E.O. 88 and 89, P.D. 420 and the orders issued PHILRACOM. Consequently,every statute should be construed in such a way that will harmonize it with existing laws. This principle isexpressed in the legal maxim "interpretare et concordare leges legibus est optimus interpretandi", that is,

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to interpret and to do it in such a way as to harmonize laws with laws is the best method ofinterpretation. 30

A reasonable reading of the horse racing laws favors the determination that the entities enumerated in thedistribution scheme provided under R.A. Nos. 6631 and 6632, as amended by Executive Orders 88 and89, are the rightful beneficiaries of breakages from mid-week races. Petitioners should therefore remit theproceeds of breakages to those benefactors designated by the aforesaid laws.

The holding of horse races on Wednesdays is in addition to the existing schedule of races authorized by

law. Since this new schedule became part of R.A. 6631 and 6632 the set of procedures in the franchiselaws applicable to the conduct of horse racing business must likewise be applicable to Wednesday or othermid-week races. A fortiori, the granting of the mid-week races does not require another legislative act toreiterate the manner of allocating the proceeds of betting tickets. Neither does the allocation of breakagesunder the same provision need to be isolated to construe another distribution scheme. No law can beviewed in a condition of isolation or as the beginning of a new legal system. 31 A supplemental lawbecomes an addition to the existing statutes, or a section thereof; and its effect is not to change in anyway the provisions of the latter but merely to extend the operation thereof, or give additional power toenforce its provisions, as the case may be. In enacting a particular statute, legislators are presumed tohave full knowledge and to taken full cognizance of the existing laws on the same subject or those relatingthereto.

Proceeding to the subsidiary issue, the period for the remittance of breakages to the beneficiaries shouldhave commenced from the time PHILRACOM authorized the holding of mid-week races because R.A. Nos.6631 and 6632 were ready in effect then. The petitioners contend that they cannot be held retroactivelyliable to respondent PHILRACOM for breakages prior to the effectivity of E.O. Nos. 88 and 89. They assertthat the real intent behind E.O. Nos. 88 and 89 was to favor the respondent PHILRACOM anew with thebenefits which formerly had accrued in favor of Philippine Amateur Athletic Federation (PAAF). They opinethat since laws operate prospectively unless the legislator intends to give them retroactive effect, theaccrual of these breakages should start on December 16, 1986, the date of effectivity of E.O. Nos. 88 and89. 32 Now, even if one of the benefactors of breakages, the PAAF, asprovided by R.A. 6631 and 6632 hadceased operation, it is still not proper for the petitioners to presume that they were entitled to PAAF'sshare. When the petitioners mistakenly appropriated the breakages for themselves, they became theimplied trustees for those legally entitled to the proceeds. This is in consonance with Article 1456 of theCivil Code, which provides that:

Art. 1456 If property is acquired through mistake or fraud, the person obtaining it is, byforce of law, considered a trustee of an implied trust for the benefit of the person fromwhom the property comes.

The petitioners should have properly set aside amount for the defunct PAAF, until an alternativebeneficiary was designated, which as subsequentlyprovided for by Executive Order Nos. 88 and 89, isPHILRACOM:

xxx xxx xxx

Secs. 2 All the cash balances and accumulated amounts corresponding to the share of the

Philippine Amateur Athletic Federation/Ministry of Youth and Sports Development, pursuantto Section 6 of Republic Act No. 6632, not remitted by the Philippine Racing Club,Inc./Manila Jockey Club Inc., are hereby transferred to the Philippine Racing Commission tobe constituted into a TRUST FUND to be used exclusively for the payment of additionalprizes for races sponsored by the Commission and for necessary outlays and other expensesrelative to horse-breeding activities of the National Stud Farm. . . . . . . [E.O. No. 88]

xxx xxx xxx

Sec. 2. Any provision of law to the contrary notwithstanding, all cash balances andaccumulated amounts corresponding to the share of the Philippine Amateur AthleticFederation/Ministry of Youth and Sports Development, pursuant to Republic Act No. 6631,

not remitted by the Manila Jockey Club, Inc., are hereby constituted into a TRUST FUND tobe used exclusively for the payment of additional prizes for races sponsored by thePhilippine Racing Commission and for the necessary capital outlays and other expensesrelative to horse-breeding activities of the National Stud Farm. . . . . . . . [E.O. No. 89]

While herein petitioners might have relied on a prior opinion issued by an administrative body, the well-entrenched principle is that the State could not be estopped by a mistake committed by its officials oragents. 33 Well-settled also is the rule that the erroneous application of the law by public officers does notprevent a subsequent correct application of the law. 34 Although there was an initial interpretation of the

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law by PHILRACOM, a court of law could not be precluded from setting that interpretation aside if later onit is shown to be inappropriate.

Moreover, the detrimental consequences of depriving the city hospitals and other institutions of the fundsneeded for rehabilitation of drug dependents and other patients are all too obvious. It goes without sayingthat the allocation of breakages in favor of said institutions is a policy decision in pursuance of socialdevelopment goals worthy of judicial approbation.

Nor could we be oblivious to the reality that horse racing although authorized by law is still a form of

gambling. Gambling is essentially antagonistic to the aims of enhancing national productivity and self-reliance. 35 For this reason, legislative franchises impose limitations on horse racing and betting.Petitioner's contention that a gambling franchise is a public contract protected by the Constitutionalprovision on non-impairment of contract could not be left unqualified. For as well said in Lim vs.Pacquing: 36

. . . it should be remembered that a franchise is not in the strict sense a simple contract butrather it is, more importantly, a mere privilege specially in matters which are within thegovernment's power to regulate and even prohibit through the exercise of the police power.Thus, a gambling franchise is always subject to the exercise of police power for the publicwelfare. 37

That is why we need to stress anew that a statute which authorizes a gambling activity or business shouldbe strictly construed, and every reasonable doubt be resolved so as to limit rather than expand thepowers and rights claimed by franchise holders under its authority. 38

WHEREFORE, there being no reversible error, the appealed decision and the resolution of the respondentCourt of Appeals in CA-G.R. SP No. 25251, are hereby AFFIRMED, and the instant petition is herebyDENIED for lack of merit.

Costs against petitioners.

SO ORDERED.


Manila

EN BANC

G.R. No. 82849 August 2, 1989

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CEBU OXYGEN & ACETYLENE CO., INC. (COACO) petitioner,vs.SECRETARY FRANKLIN M. DRILON OF THE DEPARTMENT OF LABOR AND EMPLOYMENT,ASSISTANT REGIONAL DIRECTOR CANDIDO CUMBA OF THE DEPARTMENT OF LABOR ANDEMPLOYMENT, REGIONAL OFFICE NO. 7 AND CEBU OXYGEN-ACETYLENE & CENTRAL VISAYASEMPLOYEES ASSOCIATION (COACVEA) respondents.

Michael L. Rama for petitioner.

Armando M. Alforque for private respondent.

GANCAYCO,J.;

The principal issue raised in this petition is whether or not an Implementing Order of the Secretary ofLabor and Employment (DOLE) can provide for a prohibition not contemplated by the law it seeks toimplement.

The undisputed facts are as follows:

Petitioner and the union of its rank and file employees, Cebu Oxygen, Acetylene and Central VisayasEmployees Association (COAVEA) entered into a collective bargaining agreement (CBA) covering the years

1986 to 1988. Pursuant thereto, the management gave salary increases as follows:

ARTICLE IV SALARIES/RICE RATION

Section 1. The COMPANY agrees that for and during the three (3) year effectivity of thisAGREEMENT, it will grant to all regular covered employees the following salary increases:

Salaries:

1) For the first year which will be paid on January 14, 1986 P200 to each coveredemployee.

IT IS HEREBY EXPRESSLY AGREED AND UNDERSTOOD THAT THIS PAY INCREASE SHALL BECREDITED AS PAYMENT TO ANY MANDATED GOVERNMENT WAGE ADJUSTMENT ORALLOWANCE INCREASES WHICH MAY BE ISSUED BY WAY OF LEGISLATION, DECREE ORPRESIDENT

2) For the second year which will be paid on January 16, 1987-P 200 to each coveredemployee.

IT IS HEREBY EXPRESSLY AGREED AND UNDERSTOOD THAT THIS PAY INCREASE SHALL BECREDITED AS PAYMENT TO ANY DATED GOVERNMENT WAGE ADJUSTMENT OR ALLOWANCEINCREASES WHICH MAY BE ISSUED BY WAY OF LEGISLATION, DECREE OR PRESIDENTIALEDICT COUNTED FROM THE ABOVE DATE TO THE NEXT INCREASE.

3) For the third year which will be paid on January 16, 1988 P300 to each coveredemployee.

IT IS HEREBY EXPRESSLY AGREED AND UNDERSTOOD THAT THIS PAY INCREASE SHALL BECREDITED AS PAYMENT TO ANY MANDATED GOVERNMENT WAGE ADJUSTMENT ORALLOWANCE INCREASES WHICH MAY BE ISSUED BY WAY OF LEGISLATION, DECREE ORPRESIDENTIAL EDICT COUNTED FROM THE ABOVE DATE TO THE NEXT INCREASE.

IF THE WAGE ADJUSTMENT OF ALLOWANCE INCREASES DECREED BY LAW, LEGISLATIONOR PRESIDENTIAL qqqEDICT IN ANY PARTICULAR YEAR SHALL BE HIGHER THAN THEFOREGOING INCREASES IN THAT PARTICULAR YEAR, THEN THE COMPANY SHALL PAY THE

DIFFERENCE.

On December 14, 1987, Republic Act No. 6640 was passed increasing the minimum wage, as follows:

Sec. 2. The statutory minimum wage rates of workers and employees in the private sector,whether agricultural or non-agricultural, shall be increased by ten pesos (P10.00) per day,except non-agricultural workers and employees outside Metro Manila who shall receive anincrease of eleven pesos (P11.00) per day: Provided, that those already receiving above theminimum wage up to one hundred pesos (Pl 00.00 shall receive an increase of ten pesos (Pl

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0.00) per day. Excepted from the provisions of this Act are domestic helpers and personsemployed in the personal service of another.

The Secretary of Labor issued the pertinent rules implementing the provisions of Republic Act No. 6640.Section 8 thereof provides:

Section 8. Wage Increase Under Individual/Collective Agreements. No wage increase shallbe credited as compliance with the increase prescribed herein unless expressly providedunder valid individual written/collective agreements; and, provided further, that such wage

increase was granted in anticipation of the legislated wage increase under the act. Suchincreases shall not include anniversary wage increases provided on collective agreements.

In sum, Section 8 of the implementing rules prohibits the employer from crediting anniversary wageincreases negotiated under a collective bargaining agreement against such wage increases mandated byRepublic Act No. 6640.

Accordingly, petitioner credited the first year increase of P200.00 under the CBA and added the differenceof P61.66 (rounded to P62.00) and P31.00 to the monthly salary and the 13th month pay, respectively, ofits employees from the effectivity of Republic Act No. 6640 on December 14,1987 to February 15, 1988.

On February 22, 1988, a Labor and Employment Development Officer, pursuant to Inspection Authority

No. 058-88, commenced a routine inspection of petitioner's establishment. Upon completion of theinspection on March 10, 1988, and based on payrolls and other records, he found that petitionercommitted violations of the law as follows:

1. Under payment of Basic Wage per R.A. No. 6640 covering the period of two (2) monthsrepresenting 208 employees who are not receiving wages above P100/day prior to theeffectivity of R.A. No. 6640 in the aggregate amount of EIGHTY THREE THOUSAND ANDTWO HUNDRED PESOS (P83,200.00); and

2. Under payment of 13th month pay for the year 1987, representing 208 employees whoare not receiving wages above P 100/day prior to the effectivity of R.A. No. 6640 in theaggregate amount of FORTY EIGHT THOUSAND AND FORTY EIGHT PESOS (P48,048.00).

On April 7, 1988, respondent Assistant Regional Director, issued an Order instructing petitioner to pay its208 employees the aggregate amount of P 131,248.00, computed as follows:

Computation sheet of differentials due to COACO-Cebu Workers.

Salary Differentials:

a) From December 14/87 to February 15/88

= P200.00/mo x 2 months

= P400.00

= P400 x 208 employees (who are not receiving above P100/day as wages before theeffectivity of R.A. No. 6640)

=P 83,200.00

b) 13th month pay differentials of the year 1987:

= P231.00 x 208 employees (who are not receiving above P100/day as wages before theeffectivity of RA. No. 6640)

=P48,048.00

Total = P131,248.00

In sum, the Assistant Regional Director ordered petitioner to pay the deficiency of P200.00 in the monthlysalary and P 231.00 in the 13th month pay of its employees for the period stated. Petitioner protested theOrder of the Regional Director on the ground that the anniversary wage increases under the CBA can becredited against the wage increase mandated by Republic Act No. 6640. Hence, petitioner contended that

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inasmuch as it had credited the first year increase negotiated under the CBA, it was liable only for a salarydifferential of P 62.00 and a 13th month pay differential of P31.00. Petitioner argued that the payment ofthe differentials constitutes full compliance with Republic Act No. 6640. Apparently, the protest was notentertained. Petitioner brought the case immediately to this Court without appealing the matter to theSecretary of Labor and Employment. On May 9,1988, this Court issued a temporary restraining orderenjoining the Assistant Regional Director from enforcing his Order dated April 7, 1988. 1The thrust of theargument of petitioner is that Section 8 of the rules implementing the provisions of Republic Act No. 6640particularly the provision excluding anniversary wage increases from being credited to the wage increaseprovided by said law is null and void on the ground that the same unduly expands the provisions of the

said law.

This petition is impressed with merit.

Public respondents aver that petitioner should have first appealed to the Secretary of Labor before goingto court. It is fundamental that in a case where only pure questions of law are raised, the doctrine ofexhaustion of administrative remedies cannot apply because issues of law cannot be resolved with finalityby the administrative officer. Appeal to the administrative officer of orders involving questions of lawwould be an exercise in futility since administrative officers cannot decide such issues with finality. 2 Thequestions raised in this petition are questions of law. Hence, the failure to exhaust administrativeremedies cannot be considered fatal to this petition.

As to the issue of the validity of Section 8 of the rules implementing Republic Act No. 6640, whichprohibits the employer from crediting the anniversary wage increases provided in collective bargainingagreements, it is a fundamental rule that implementing rules cannot add or detract from the provisions oflaw it is designed to implement. The provisions of Republic Act No. 6640, do not prohibit the crediting ofCBA anniversary wage increases for purposes of compliance with Republic Act No. 6640. The implementingrules cannot provide for such a prohibition not contemplated by the law. Administrative regulationsadopted under legislative authority by a particular department must be in harmony with the provisions ofthe law, and should be for the sole purpose of carrying into effect its general provisions. The law itselfcannot be expanded by such regulations. An administrative agency cannot amend an act ofCongress. 3 Thus petitioner's contention that the salary increases granted by it pursuant to the existingCBA including anniversary wage increases should be considered in determining compliance with the wageincrease mandated by Republic Act No. 6640, is correct. However, the amount that should only becredited to petitioner is the wage increase for 1987 under the CBA when the law took effect. The wage

increase for 1986 had already accrued in favor of the employees even before the said law was enacted.

Petitioner therefor correctly credited its employees P62.00 for the differential of two (2) months increaseand P31.00 each for the differential in 13th month pay, after deducting the P200.00 anniversary wageincrease for 1987 under the CBA. Indeed, it is stipulated in the CBA that in case any wage adjustment orallowance increase decreed by law, legislation or presidential edict in any particular year shall be higherthan the foregoing increase in that particular year, then the company (petitioner) shall pay the difference.

WHEREFORE, the petition is hereby GRANTED. The Order of the respondent Assistant Regional Directordated April 7, 1988 is modified in that petitioner is directed to pay its 208 employees so entitled theamount of P62.00 each as salary differential for two (2) months and P31.00 as 13th month pay differentialin full compliance with the provisions of Republic Act No. 6640. Section 8 of the rules implementing

Republic 6640, is hereby declared null and void in so far as it excludes the anniversary wage increasesnegotiated under collective bargaining agreements from being credited to the wage increase provided forunder Republic Act No. 6440. This decision is immediately executory.


Manila

FIRST DIVISION

G.R. No. 131082 June 19, 2000

ROMULO, MABANTA, BUENAVENTURA, SAYOC & DE LOS ANGELES, petitioner,vs.HOME DEVELOPMENT MUTUAL FUND, respondent.

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DAVIDE, JR., C.J.:

Once again, this Court is confronted with the issue of the validity of the Amendments to the Rules andRegulations Implementing Republic Act No. 7742, which require the existence of a plan providing for bothprovident/retirement and housing benefits for exemption from the Pag-IBIG Fund coverage underPresidential Decree No. 1752, as amended.

Pursuant to Section 19 1 of P.D. No. 1752, as amended by R.A. No. 7742, petitioner Romulo, Mabanta,Buenaventura, Sayoc and De Los Angeles (hereafter PETITIONER), a law firm, was exempted for the

period 1 January to 31 December 1995 from the Pag-IBIG Fund coverage by respondent HomeDevelopment Mutual Fund (hereafter HDMF) because of a superior retirement plan. 2

On 1 September 1995, the HDMF Board of Trustees, pursuant to Section 5 of Republic Act No. 7742,issued Board Resolution No. 1011, Series of 1995, amending and modifying the Rules and RegulationsImplementing R.A. No. 7742. As amended, Section 1 of Rule VII provides that for a company to beentitled to a waiver or suspension of Fund coverage, 3 it must have a plan providing for bothprovident/retirement and housing benefits superior to those provided under the Pag-IBIG Fund.

On 16 November 1995, PETITIONER filed with the respondent an application for Waiver or Suspension ofFund Coverage because of its superior retirement plan. 4 In support of said application, PETITIONERsubmitted to the HDMF a letter explaining that the 1995 Amendments to the Rules are invalid. 5

In a letter dated 18 March 1996, the President and Chief Executive Officer of HDMF disapprovedPETITIONER's application on the ground that the requirement that there should be both a providentretirement fund and a housing plan is clear in the use of the phrase "and/or," and that the RulesImplementing R.A. No. 7742 did not amend nor repeal Section 19 of P.D. No. 1752 but merely implementthe law. 6

PETITIONER's appeal 7 with the HDMF Board of Trustees was denied for having been rendered moot andacademic by Board Resolution No. 1208, Series of 1996, removing the availment of waiver of themandatory coverage of the Pag-IBIG Fund, except for distressed employers. 8

On 31 March 1997, PETITIONER filed a petition for review 9 before the Court of Appeals. On motion by

HDMF, the Court of Appeals dismissed10

the petition on the ground that the coverage of employers andemployees under the Home Development Mutual Fund is mandatory in character as clearly worded inSection 4 of P.D. No. 1752, as amended by R.A. No. 7742. There is no allegation that petitioner is adistressed employer to warrant its exemption from the Fund coverage. As to the amendments to the Rulesand Regulations Implementing R.A. No. 7742, the same are valid. Under P.D. No. 1752 and R.A. No. 7742the Board of Trustees of the HDMF is authorized to promulgate rules and regulations, as well asamendments thereto, concerning the extension, waiver or suspension of coverage under the Pag-IBIGFund. And the publication requirement was amply met, since the questioned amendments were publishedin the 21 October 1995 issue of the Philippine Star, which is a newspaper of general circulation.

PETITIONER's motion for reconsideration 11 was denied. 12 Hence, on 6 November 1997, PETITIONER fileda petition before this Court assailing the 1995 and the 1996 Amendments to the Rules and RegulationsImplementing Republic Act No. 7742 for being contrary to law. In support thereof, PETITIONER contendsthat the subject 1995 Amendments issued by HDMF are inconsistent with the enabling law, P.D. No. 1752,as amended by R.A. No. 7742, which merely requires as a pre-condition for exemption from coverage theexistence of either a superior provident/retirement plan or a superior housing plan, and not theconcurrence of both plans. Hence, considering that PETITIONER has a provident plan superior to thatoffered by the HDMF, it is entitled to exemption from the coverage in accordance with Section 19 of P.D.No. 1752. The 1996 Amendment are also void insofar as they abolished the exemption granted by Section19 of P.D. 1752, as amended. The repeal of such exemption involves the exercise of legislative power,which cannot be delegated to HMDF.

PETITIONER also cites Section 9 (1), Chapter 2, Book VII of the Administrative Code of 1987, whichprovides:

Sec. 9. Public Participation (1) If not otherwise required by law, an agency shall, as far aspracticable, publish or circulate notices of proposed rules and afford interested parties theopportunity to submit their views prior to the adoption of any rule.

Since the Amendments to the Rules and Regulations Implementing Republic Act No. 7742 involve animposition of an additional burden, a public hearing should have first been conducted to give chance to theemployers, like PETITIONER, to be heard before the HDMF adopted the said Amendments. Absent suchpublic hearing, the amendments should be voided.

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Finally, PETITIONER contends that HDMF did not comply with Section 3, Chapter 2, Book VII of theAdministrative Code of 1987, which provides that "[e]very agency shall file with the University of thePhilippines Law Center three (3) certified copies of every rule adopted by it."

On the other hand, the HDMF contends that in promulgating the amendments to the rules and regulationswhich require the existence of a plan providing for both provident andhousing benefits for exemption fromthe Fund Coverage, the respondent Board was merely exercising its rule-making power under Section 13of P.D. No. 1752. It had the option to use "and" only instead of "or" in the rules on waiver in order toeffectively implement the Pag-IBIG Fund Law. By choosing "and," the Board has clarified the confusion

brought about by the use of "and/or" in Section 19 of P.D. No. 1752, as amended.

As to the public hearing, HDMF maintains that as can be clearly deduced from Section 9(1), Chapter 2,Book VII of the Revised Administrative Code of 1987, public hearing is required only when the law soprovides, and if not, only if the same is practicable. It follows that public hearing is only optional ordiscretionary on the part of the agency concerned, except when the same is required by law. P.D. No.1752 does not require that pubic hearing be first conducted before the rules and regulations implementingit would become valid and effective. What it requires is the publication of said rules and regulations atleast once in a newspaper of general circulation. Having published said 1995 and 1996 Amendmentsthrough the Philippine Star on 21 October 1995 1 and 15 November 1996, 14respectively, HDMF hascomplied with the publication requirement.

Finally, HDMF claims that as early as 18 October 1996, it had already filed certified true copies of theAmendments to the Rules and Regulations with the University of the Philippines Law Center. This fact isevidenced by certified true copies of the Certification from the Office of the National AdministrativeRegister of the U.P. Law Center. 15

We find for the PETITIONER.

The issue of the validity of the 1995 Amendments to the Rules and Regulations Implementing R.A. No.7742, specifically Section I, Rule VII on Waiver and Suspension, has been squarely resolved in therelatively recent case ofChina Banking Corp. v. The Members of the Board of Trustees of the HDMF.16 Weheld in that case that Section 1 of Rule VII of the Amendments to the Rules and Regulations ImplementingR.A. No. 7742, and HDMF Circular No. 124-B prescribing the Revised Guidelines and Procedure for FilingApplication for Waiver or Suspension of Fund Coverage under P.D. No. 1752, as amended by R.A. No.7742, are null and void insofar as they require that an employer should have both a provident/retirementplan and a housing plan superior to the benefits offered by the Fund in order to qualify for waiver orsuspension of the Fund coverage. In arriving at said conclusion, we ruled:

The controversy lies in the legal signification of the words "and/or."

In the instant case, the legal meaning of the words "and/or" should be taken in its ordinarysignification, i.e., "either and or; e.g. butter and/or eggs means butter and eggs or butter or eggs.

The term "and/or" means that the effect shall be given to both the conjunctive "and" andthe disjunctive "or"; or that one word or the other may be taken accordingly as one or theother will best effectuate the purpose intended by the legislature as gathered from thewhole statute. The term is used to avoid a construction which by the use of the disjunctive"or" alone will exclude the combination of several of the alternatives or by the use of theconjunctive "and" will exclude the efficacy of any one of the alternatives standing alone.

It is accordingly ordinarily held that the intention of the legislature in using the term "and/or" isthat the word "and" and the word "or" are to be used interchangeably.

It . . . seems to us clear from the language of the enabling law that Section 19 of P.D. No. 1752intended that an employer with a provident plan oran employee housing plan superior to that ofthe fund may obtain exemption from coverage. If the law had intended that the employee [sic]should have both a superior provident plan anda housing plan in order to qualify for exemption, itwould have used the words "and" instead of "and/or." Notably, paragraph (a) of Section 19

requires for annual certification of waiver or suspension, that the features of the plan or plans aresuperior to the fund or continue to be so. The law obviously contemplates that the existence ofeither plan is considered as sufficient basis for the grant of an exemption; needless to state, theconcurrence of both plans is more than sufficient. To require the existence of both plans wouldradically impose a more stringent condition for waiver which was not clearly envisioned by thebasic law. By removing the disjunctive word "or" in the implementing rules the respondent Boardhas exceeded its authority.

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It is without doubt that the HDMF Board has rule-making power as provided in Section 51 17 of R.A. No.7742 and Section 13 18 of P.D. No. 1752. However, it is well-settled that rules and regulations, which arethe product of a delegated power to create new and additional legal provisions th

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