G.R. No. L-24396 July 29, 1968
SANTIAGO P. ALALAYAN, ET AL., suing in his behalf and for the benefit of all other persons having common or general interest with him in accordance with Sec. 12, Rule 3, Rules of Court, petitioners-appellants, vs. NATIONAL POWER CORPORATION and ADMINISTRATOR OF ECONOMIC COORDINATION, respondents-appellees.

FACTS

Petitioners, Santiago P. Alalayan and Philippine Power and Development Company, were franchise holders of electric plants in Laguna who had existing contracts with the National Power Corporation (NPC) for the supply of electric power. These contracts were to continue indefinitely unless terminated by either party with two years’ written notice. Republic Act No. 3043, which took effect on June 17, 1961, purportedly to increase NPC’s authorized capital stock, contained a provision (Section 3) empowering NPC, in contracts for the supply of power to a franchise holder receiving at least 50% of its power from NPC, to require as a condition that such franchise holder “shall not realize a net profit of more than twelve percent annually of its investments plus two-month operating expenses.” NPC could also renew all existing contracts to give effect to this provision. NPC approved a rate increase and threatened to cease supply if petitioners did not sign revised contracts incorporating the new rates and the 12% profit limitation. Petitioners filed a declaratory relief proceeding, assailing the provision as an unconstitutional rider violating the constitutional requirement that a bill shall not embrace more than one subject expressed in its title, and as a violation of the due process guarantee by infringing upon their liberty to contract. The lower court sustained the provision’s validity. The Philippine Power and Development Company’s motion to dismiss was granted, leaving Alalayan as the sole petitioner.

ISSUE

1. Whether Section 3 of Republic Act No. 3043 is an unconstitutional rider for violating the constitutional provision that no bill shall embrace more than one subject which shall be expressed in its title.
2. Whether Section 3 of Republic Act No. 3043 violates the due process clause by impairing the petitioners’ liberty to contract.

RULING

The Supreme Court sustained the lower court, upholding the validity and constitutionality of the challenged provision.
1. On the first issue, the Court held the provision was not an unconstitutional rider. The constitutional requirement is aimed against omnibus bills and log-rolling legislation. The title of the bill, which referred to amending the charter of the NPC, was comprehensive enough to reasonably include the general object of the statute. The legislature is not required to make the title a complete index; mere details need not be set forth. The provision amending the NPC charter by adding the contested section was germane to the subject of regulating the NPC and its relations with franchise holders. The Court applied a liberal, not a strict, test in determining compliance with the constitutional requirement.
2. On the second issue, the Court held the provision did not violate due process. The liberty of contract is not absolute and is subject to regulation for the promotion of public welfare, especially in businesses affected with public interest, such as public utilities. The power of the State to regulate public utilities is pervasive. The statutory limitation of a 12% net profit on franchise holders receiving power from the NPC is a valid exercise of police power to promote social justice and prevent excessive profits. The provision does not confiscate property but merely regulates the use and enjoyment thereof. The obligation of contracts is subject to the reasonable exercise of the police power of the State. The law applies to all similarly situated and is neither oppressive nor discriminatory.