Facts:

The case involves Santiago P. Alalayan and the Philippine Power and Development Company as petitioners-appellants against the National Power Corporation (NPC) and the Administrator of Economic Coordination as respondents-appellees. The proceedings began in the lower court to challenge the validity of a provision in Republic Act No. 3043, which was enacted on June 17, 1961. This provision allowed the NPC to require franchise holders, who received at least 50% of their electric power from it, to limit their net profits to a maximum of twelve percent annually of their investments plus two months of operating expenses. The petitioners, both franchise holders of electric plants in Laguna, argued that this provision was unconstitutional as it violated the single subject rule and due process rights, particularly the liberty to contract. The lower court upheld the validity of the provision, leading to the appeal by Alalayan. The case was marked by a series of events, including the NP...

Facts:

Parties and Proceedings

• Santiago P. Alalayan, originally joined by Philippine Power and Development Company, is the petitioner acting in his own behalf and for the benefit of all persons sharing a common or general interest with him.
• The petition challenges Section 3 of Republic Act No. 3043, a provision added as an amendatory rider to the Act, which governs the supply of electric power to franchise holders.

Nature and Background of the Statutory Provision

• The challenged provision authorizes the National Power Corporation (NPC) to require, in any contract with a franchise holder who acquires at least 50% of its electric power from NPC, that the holder shall not realize a net profit exceeding twelve percent annually of its investments plus two-month operating expenses.
• The provision further empowers NPC to renew all existing contracts with franchise holders to ensure the effective implementation of the said limitation.
• Petitioners contend that, as a rider, the provision is not only extraneous to the main subject of the bill but also is unconstitutional for failing the requirement that a bill’s title state its sole subject.

Contractual and Legislative Context

• The petition recites the existence of long-term contracts between NPC and 137 electric power franchise holders, including petitioner Alalayan, which were originally designed to continue indefinitely unless terminated with two years’ written notice.
• The factual record includes evidence such as copies of contracts, resolutions, and correspondence on rate increases, showing that NPC had previously adjusted rates (notably a 17.5% increase) and deferred enforcement dates, prompting business concerns.
• The enactment of legislative measures, including an initial act increasing NPC’s capital stock and later a law purportedly expanding the capital and incorporating the rider, forms part of the context within which the challenged provision was adopted.

Procedural History and Relief Sought

• The petition filed for declaratory relief alleged that the provision violates:
• The constitutional requirement that a bill “shall embrace only one subject which shall be expressed in the title” (thus prohibiting the insertion of riders not germane to the main subject).
• The due process guarantee by infringing upon the liberty to contract.
• A request for a writ of preliminary injunction was made to prevent NPC from enforcing the rate increase provision pending a final judgment on the merits.
• The lower court denied the writ and, after due hearings with submission of facts and memoranda by the parties, ruled in favor of the validity and constitutionality of the challenged provision.

Submissions and Evidentiary Matters

• The petition and subsequent partial stipulation of facts included:
• Testimonies about contractual terms on power supply, including specific rate schedules and provisions regarding rate increases.
• Documentary evidence such as letters from NPC approving and deferring rate increases, contracts detailing power supply terms, and transcripts of congressional debates on the legislation (House Bill No. 5377 and Senate Bill No. 613).
• The evidentiary record established that NPC had long engaged in similar regulatory practices and that the contested statutory measure affected both new and pre-existing contracts.

Decision at the Lower Court Level

• The lower court, after considering the facts, legal submissions, and constitutional arguments, upheld the validity of Section 3 of Republic Act No. 3043.
• The decision affirmed that the provision did not violate constitutional limitations regarding the subject matter of bills or the due process and non-impairment clauses.

Issue:

Legality of the Legislative Rider

• Whether the provision in Section 3 of Republic Act No. 3043, being introduced as an amendment (rider) to an existing act, violates the constitutional requirement that “no bill which may be enacted into law shall embrace more than one subject which shall be expressed in the title.”

Due Process and the Liberty to Contract

• Whether imposing a limit on the net profits of franchise holders (capped at twelve percent plus two-month operating expenses) infringes upon the petitioners’ constitutional right to contract freely.
• Whether such limitations constitute an impairment of contractual obligations, particularly where contracts for the supply of electric power were already in existence.

Application of Police Power Versus Contractual Protection

• Whether the regulation, as an exercise of NPC’s authority under the public’s welfare and police power, can lawfully apply to both new contracts and those already established without violating the non-impairment clause of the Constitution.

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Doctrine:

• (Subscriber-Only)