[ G.R. No. 217590, March 10, 2020 ]
PHILIPPINE CONTRACTORS ACCREDITATION BOARD, PETITIONER, V. MANILA WATER COMPANY, INC., RESPONDENT.
CONCURRING OPINION
PERLAS-BERNABE, J.:
This case calls upon the Court to determine the validity of Section 3.1, Rule 3 (Section 3.1) of the Rules and Regulations Governing Licensing and Accreditation of Constructors in the Philippines or the Implementing Rules and Regulations of Republic Act No. (RA) 45661 (IRR) issued by petitioner Philippine Contractors Accreditation Board (PCAB) which created a classification of licenses based on nationality, to wit:
RULE 3 CONTRACTOR'S LICENSE
SECTION 3.1 License Types. Two types of licenses are hereby instituted and designated as follows:
a) The Regular License
"Regular License" means a license of the type issued to a domestic construction firm which shall authorize the licensee to engage in construction contracting within the field and scope of his license classification(s) for as long as the license validity is maintained through annual renewal; unless renewal is denied or the license is suspended, cancelled or revoked for cause(s).
The Regular License shall be reserved for and issued only to constructor-firms of Filipino sole proprietorship, or partnership/corporation with at least seventy percent (70%)* Filipino equity participation and duly organized and existing under and by virtue of the laws of the Philippines.
*Adjusted to 60% under Art. 48 of Chapter III, Book II of the Omnibus Investment Code of 1987
b) The Special License
"Special License" means a license of the type issued to a joint venture, a consortium, a foreign constructor or a project owner which shall authorize the licensee to engage only in the construction of a single specific undertaking/project. In case the licensee is a foreign firm, the license authorization shall be further subject to condition(s) as may have been imposed by the proper Philippine government authority in the grant of the privilege for him to so engage in construction contracting in the Philippines. Annual renewal shall be required for as long as the undertaking/project is in progress, but shall be restricted to only as many times as necessary for completion of the same.
The following can qualify only for the Special License:
ba) A joint venture, consortium or any such similar association organized for a single specific undertaking/project;
bb) A foreign firm legally allowed by the proper Philippine government authority to undertake construction activities in the Philippines.
bc) A project owner undertaking by himself, sans the service of a constructor, the construction of a project intended for sale, lease, commercial/industrial use or any other income generating purpose.2
This issue was brought to the fore through a petition for declaratory relief filed by respondent Manila Water Company, Inc. (respondent). Essentially, it is respondent's position that PCAB usurped legislative powers vested in Congress under Section 10, Article XII of the 1987 Constitution (Section 10, Article XII): when it imposed a nationality requirement in the issuance of regular licenses.3 It argues that by issuing the assailed provision, PCAB took it upon itself to "reserve to citizens of the Philippines" the issuance of a regular license. The constitutional provision reads:
Section 10. The Congress shall, upon recommendation of the economic and planning agency, when the national interest dictates, reserve to citizens of the Philippines or to corporations or associations at least sixty per centum of whose capital is owned by such citizens, or such higher percentage as Congress may prescribe, certain areas of investments. The Congress shall enact measures that will encourage the formation and operation of enterprises whose capital is wholly owned by Filipinos.
x x x x (Emphases supplied)
Respondent likewise asserts that the assailed provision is void for being a product of PCAB's improper exercise of rule-making power as it creates requirements not found in and contrary to RA 4566.4
For its part, PCAB counters that the assailed IRR provision is consistent with the Constitution because it does not prohibit foreign contractors in the Philippines but merely regulates the kind and extent of license given to them.5 The regulation is necessary to ensure continuous and updated monitoring and regulation of foreign contractors, who are not based in the Philippines, and thus, situated beyond the government's reach for possible enforcement of the contractor's liability/warranty under existing laws.6
PCAB further stresses that it is authorized under Section 57 of RA 4566 to "issue, suspend and revoke licenses of contractors" and under Section 178 to "adopt reasonably necessary rules and regulations to effect the classification of contractors."9 PCAB insists that while RA 4566 does not explicitly mention a classification between local and foreign contractors, this does not necessarily mean that PCAB has no authority to establish such classifications.10
In striking down the assailed provision, the ponencia explains that while Section 17 of RA 4566 authorizes PCAB to adopt rules to effect classification, nothing in that law shows Congress' intent to discriminate against foreign contractors. It states that there is no basis in any law enacted by Congress for the equity requirement set by PCAB in the assailed regulation.11
I concur.
At the onset, I deem it apt to clarify that that Section 3.1 did not violate, Section 10, Article XII. The constitutional provision states that Congress shall reserve to Filipino citizens certain areas of development. In my view, when a nationality requirement is set for a particular industry in the Philippines, foreigners who exceed the threshold are no longer allowed to engage in the industry. This is not the case here. While Section 3.1 creates a barrier to entry for foreign contractors, it does not prohibit them from engaging in the Philippine construction industry. It merely imposes a more stringent restriction on them. Hence, no usurpation of Congress' power under Section 10, Article XII occurred.
On this score, it is relevant to mention that RA 7042,12 or the "Foreign Investments Act of 1991," mandates the formulation of a Foreign Investment Negative List which specifies investment areas that are reserved to Filipino nationals, such that foreign players are not allowed to engage in those areas.13 In contrast, the assailed IRR provision still allows foreign contractors to engage in the construction business albeit with a more restrictive license. As PCAB explains, the more stringent licensing regulation for foreign contractors is necessary to ensure! "continuous and updated monitoring and regulation of foreign contractors - who are x x x situated beyond the reach of the x x x government for possible enforcement of the contractor's liability/warranty."14 Hence, PCAB is correct in saying that Section 3.1 does not restrict the construction industry to Filipinos, but rather, regulates the issuance of licenses to foreign contractors based on its perceived considerations pertinent to these foreign contractors' nature of being based outside the Philippines.15
This notwithstanding, and as the ponencia holds,16 PCAB has exceeded its delegated authority to make the foregoing license classification, which hence, renders Section 3.1 altogether null and void.
"Fundamental is the precept in administrative law that the rule-making power delegated to an administrative agency is limited and defined by the statute conferring the power. For this reason, valid objections to the exercise of this power lie where it conflicts with the authority granted by the legislature."17 The Court has ruled that "administrative regulations that alter or amend the statute or enlarge or impair its scope are void, and courts not only may, but it is their obligation to strike down such regulations."18
In this case, PCAB anchors its authority to create the nationality-based classifications of licenses on Sections 5 and 17 of RA 4566, to wit:
Section 5. Powers and Duties of the Board. The Board is vested with authority to issue, suspend and revoke licenses of contractor, to investigate such violations of this Act and the regulations thereunder as may come to its knowledge x x x
x x x x
Section 17. Power to Classify and Limit Operations. — The Board may adopt reasonably necessary rules and regulations to effect the classification of contractors in a manner consistent with established usage and procedure as found in the construction business, and may limit the field and scope of the operations of a licensed contractor to those in which he is classified to engage, as respectively defined in section nine. A licensee may make application for classification and be thus classified in more than one classification if the licensee meets the qualifications prescribed by the Board for such additional classification or classifications. No additional application or license fee shall be charged for qualifying or classifying a licensee in additional classifications. (Emphases and underscoring supplied)
However, a cursory examination of RA 4566's provisions shows that Section 17 thereof is not a proper basis for PCAB to create license types based on nationality. The phrase "to effect the classification of contractors" under Section, 17 should be read in relation to Section 16 of RA 4566 which provides for an enumeration of the statutorily-mandated classifications for the contracting business, viz.:
Section 16. Classification. - For the purpose of classification, the contracting business includes any or all of the following branches.
(a) General engineering contracting;
(b) General building contracting; and
(c) Specialty contracting.
These terms are then correspondingly defined in subsections (c), (d), and (e), Section 919 of RA 4566.
Pursuant to the directive under Section 17 of RA 4566 for PCAB to "effect the classification of contractors," Section 5.1, Rule 5 of the IRR on "License Classification and Categorization" sub-classified the three (3) main contracting classifications as defined in Section 9 of RA 4566 by areas of specialization. However, PCAB went beyond the prescribed classifications under Section 16 of RA 4566 and proceeded to create the nationality-based license types under Section 3.1. Furthermore, while Section 5 of RA 4566 authorizes PCAB to "issue, suspend and revoke licenses of contractors," this general authority to issue licenses must be read in conjunction with Sections 16 and 17 of RA 4566 if the licensing power of PCAB is to be exercised to the extent that PCAB would be effectively creating substantial classifications between certain types of contractors. Indeed, "every part of the statute must be interpreted with reference to the context, i.e., that every part of the statute must be considered together with the other parts, and kept subservient to the general intent of the whole enactment. Because the law must not be read in truncated parts, its provisions must be read in relation to the whole law."20
Accordingly, PCAB exceeded the confines of the delegating statute when it created the nationality-based license types under Section 3.1, rendering the same, as well as the correlative provisions mentioned in the ponencia, void.
Footnotes
1 Entitled "An Act Creating the Philippine Licensing Board for Contractors, Prescribing Its Powers, Duties and Functions, Providing Funds Therefor, and for Other Purposes," approved on June 19, 1965.
2 Rollo, p. 91; emphasis supplied.
3 See id. at 204-205.
4 See id. at 196-197.
5 Id. at 32.
6 Id. at 33.
7 Section 5. Powers and Duties of the Board.- The Board is vested with authority to issue, suspend and revoke licenses of contractors, to investigate such violations of this Act and the regulations thereunder as may come to its knowledge and, for this purpose, issue subpoena and subpoena duces tecum to secure appearance of witnesses in connection with the charges presented to the Board, and to discharge such other powers and duties affecting the construction industry in the Philippines.
x x x x (Emphasis supplied)
8 Section 17. Power to Classify and Limit Operations. -The Board may adopt reasonably necessary rules and regulations to effect the classification of contractors in a manner consistent with established usage and procedure as found in the construction business, and may limit the field and scope of the operations of a licensed contractor to those in which he is classified to engage, as respectively defined in section nine. A licensee may make application for classification and be thus classified in more than one classification if the licensee meets the qualifications prescribed by the Board for such additional classification or classifications. No additional application or license fee shall be charged for qualifying or classifying a licensee in additional classifications. (Emphasis supplied)
9 See rollo, p. 30.
10 Id. at 31.
11 See ponencia, pp. 15-16.
12 Entitled "AN ACT TO PROMOTE FOREIGN INVESTMENTS, PRESCRIBE THE PROCEDURES FOR REGISTERING ENTERPRISES DOING BUSINESS IN THE PHILIPPINES, AND FOR OTHER PURPOSES," approved on June 13, 1991.
13 See Section 8 of RA 7042.
14 Rollo, p. 33.
15 See id. at 32. See also ponencia, pp. 4-5.
16 See ponencia, p. 19.
17 Re: Entitlement to Hazard Pay of Supreme Court Medical and Dental Clinic Personnel, 592 Phil. 389, 398 (2008); emphasis supplied.
18 Department of Agrarian Reform v. Carriedo, 778 Phil. 656, 681 (2016). See also Re: Entitlement to Hazard Pay of Supreme Court Medical and Dental Clinic Personnel, id. at 399-400, which provides: "Indeed, when an administrative agency enters into the exercise of the specific power of implementing a statute, it is bound by what is provided for in the same legislative enactment in as much as its rule-making power is a delegated legislative power which may not be used either to abridge the authority given by the Congress or the Constitution or to enlarge the power beyond the scope intended. The power may not be validly extended by implication beyond what may be necessary for its just and reasonable execution. In other words, the function of promulgating rules and regulations may be legitimately exercised only for the purpose of carrying out the provisions of a law, inasmuch as the power is confined to implementing the law or putting it into effect. Therefore, such rules and regulations must not be inconsistent with the provisions of existing laws, particularly the statute being administered and implemented by the agency concerned, that is to say, the statute to which the issuance relates. Constitutional and statutory provisions control with respect to what rules and regulations may be promulgated by such a body, as well as with respect to what fields are subject to regulation by it."
19 Section 9. Definition of Terms. - As used in this Act:
xxxx
(c) A "general engineering contractor" is a person whose principal contracting business is in connection with fixed works requiring specialized engineering knowledge and skill, including the following divisions or subjects: irrigation, drainage, water power, water supply, flood control, inland waterways, harbors, docks and wharves, shipyards and ports, dams, hydroelectric projects, levees, river control and reclamation works, railroads, highways, streets and roads, tunnels, airports and airways, waste reduction plants, bridges, overpasses, underpasses and other similar works, pipelines and other system for the transmission of petroleum and other liquid or gaseous substances, land leveling and earth moving projects, excavating, grading, trenching, paving and surfacing work.
(d) A "general building contractor" is a person whose principal contracting business is in connection with any structure built, being built, or to be built, for the support, shelter and enclosure of persons, animals, chattels or movable property of any kind, requiring in its construction the use of more than two unrelated building trades or crafts, or to do or superintend the whole or any part thereof. Such structure includes sewers and sewerage disposal plants and systems, parks, playgrounds and other recreational works, refineries, chemical plants, and similar industrial plants requiring specialized engineering knowledge and skill, powerhouses, power plants and other utility plants and installations, mines and metallurgical plants, cement and concrete works in connection with the abovementioned fixed works.
A person who merely furnishes material s or supplies under section eleven without fabricating them into, or consuming them in the performance of the work of the general building contractor does not necessarily fall within this definition.
(e) A "specialty contractor" is a person whose operations pertain to the performance of construction work requiring special skill and whose principal contracting business involves the use of specialized building trades or crafts.
20 Philippine International Trading Corporation v. Commission on Audit, 635 Phil. 447, 454 (2010).
The Lawphil Project - Arellano Law Foundation
