Title
Alalayan vs. National Power Corp.
Case
G.R. No. L-24396
Decision Date
Jul 29, 1968
Petitioners challenged Section 3 of RA 3043, limiting franchise holders' profits, claiming it violated the one-subject rule, due process, and non-impairment clause. SC upheld the law, ruling it a valid exercise of police power.
constitutionality
one subject per bill
due process clause
A

Case Summary (G.R. No. L-24396)

Petitioner, Respondent, and Relief Sought

Petitioner (Alalayan) sought declaratory relief and injunctive relief seeking: (1) a preliminary injunction enjoining NPC from enforcing the challenged provision; and (2) a declaration that the provision (Section 3 of RA No. 3043) is null and void for being unconstitutional and an injunction permanently prohibiting NPC from implementing it. Philippine Power and Development Company later withdrew, leaving Alalayan as sole petitioner.

Key Dates and Procedural History

Petitioner’s contracts with NPC continued indefinitely subject to two years’ notice for termination. RA No. 3043 was approved June 17, 1961. NPC announced a rate increase (approximately 17.5%) with deferred effective dates and threatened to cease supply if petitioners refused to sign revised contracts. The trial court denied the preliminary injunction (March 21, 1963) and later, after hearings and submission of memoranda, sustained the constitutionality of Section 3 (January 30, 1965). The decision on appeal affirmed dismissal of the petition.

Applicable Law and Statutory Provision Challenged

Section 3, Republic Act No. 3043 authorized NPC, in any contract for supply of electric power to a franchise holder receiving at least 50% of its power from NPC, to require as a contract condition that the franchise holder “shall not realize a net profit of more than twelve percent annually of its investments plus two-month operating expenses.” The provision also authorized NPC to renew existing contracts to give effect to this limitation and empowered the Public Service Commission to order any verified excess profit to be returned pro rata to customers in cash or as billing credits.

Issues Presented

  1. Whether Section 3 of RA No. 3043 is invalid as a rider in violation of the constitutional provision that “no bill which may be enacted into law shall embrace more than one subject which shall be expressed in the title” (single-subject/title requirement).
  2. Whether Section 3 violates due process by infringing petitioners’ liberty to contract or otherwise effects a confiscation of property or an unconstitutional impairment of contractual obligations.

Analysis — Single-Subject and Title Requirement

The Court applied a liberal rather than hyper-technical test to the single-subject/title requirement. The constitutional provision is intended to prevent omnibus or log-rolling legislation and surprise, but it does not require that a title catalogue every detail. When a law amends an earlier statute, a general reference to the law to be amended is sufficient; there is no need to disclose in the title the exact form of amendment. The Court relied on prior precedents establishing that titles must be reasonably comprehensive to inform legislators and the public of the statute’s nature, scope, and consequences, but need not mirror every provision. Applying that standard, the Court held Section 3 was germane to the act and not an unconstitutional rider; the title of the amendatory act was sufficiently broad to include the general object effected by Section 3.

Analysis — Due Process and Liberty to Contract

The Court treated the challenge under the due process clause in the framework of police power and regulatory legislation. It emphasized that property rights and the liberty to contract are subject to reasonable regulation in the interest of the general welfare. Due process requires that governmental action not be arbitrary or oppressive and that it be reasonable and justifiable. The welfare-state considerations underlying regulatory measures (including protection of consumers and promotion of social justice) permit restrictions on business profits so long as the exercise of police power conforms to due process standards. The Court found no arbitrary or unreasonable action in the enactment of Section 3.

Analysis — Confiscation and Presumption of Validity

Petitioner’s contention that the 12% net-profit ceiling (plus two-month operating expenses) was confiscatory was rejected. The Court noted existing precedent treating similar profit limitations as permissible and observed that, absent factual proof demonstrating a confiscatory effect, the statutory provision should be upheld under the presumption of validity that attends legislative enactments. In short, without evidentiary demonstration that the limit deprived petitioner of property in the sense of confiscation or denial of due process, the constitutional objection failed.

Analysis — Applicability to Existing Contracts and Impairment of Contracts

The Court addressed the implicit argument that applying Section 3 to preexisting contracts would impair contractual obligations in violation of the constitutional prohibition against laws impairing contracts. It reiterated established doctrine that regulatory statutes enacted under the police power may validly apply to utilities and other enterprises already in operation; the non-impairment guarantee does not render the police power inoperative as to existing contracts. The Court explained that the constitutionally protected non-impairment guarantee must be harmonized with the state’s pol

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