Camarines Norte Electric Cooperative, Inc. vs. Torres

The President of the Philippines lacks constitutional and statutory authority to take over and manage the internal affairs of an electric cooperative that has registered with the Cooperative Development Authority under the Cooperative Code of the Philippines, and cannot invoke the inherent police power of the State to justify such action absent a specific delegation of legislative power under Article VI, Sections 23(2) or 28(2) of the Constitution.

The case arises from the transition of electric cooperatives from regulation under Presidential Decree No. 269 (the National Electrification Administration Decree) to registration under Republic Act No. 6938 (Cooperative Code of the Philippines) and Republic Act No. 6939 (creating the Cooperative Development Authority). Following this transition, CANORECO registered with the CDA and became a full-fledged cooperative, thereby removing itself from the supervisory control of the NEA. The dispute centers on an intra-cooperative leadership conflict between two factions of the Board of Directors, which the CDA had already resolved with finality before the President issued the assailed takeover order.

• CANORECO was originally organized as an electric cooperative under Presidential Decree No. 269, as amended by Presidential Decree No. 1645, which granted the National Electrification Administration (NEA) supervisory and enforcement powers over electric cooperatives, including the power to designate acting general managers.
• On March 10, 1990, Republic Act No. 6938 (Cooperative Code) and Republic Act No. 6939 (creating the Cooperative Development Authority) were enacted, providing that electric cooperatives must register with the CDA within three years and that upon registration, the provisions of P.D. No. 1645 regarding NEA supervision would no longer apply.
• CANORECO registered with the CDA and on July 10, 1996, the CDA issued a Certificate of Registration certifying that CANORECO was a full-fledged cooperative under Republic Act No. 6938, thereby bringing its internal affairs under the governance of the Cooperative Code rather than P.D. No. 269.
• An intra-cooperative dispute arose between two factions of the Board of Directors: one led by Ruben Barrameda (petitioners) and another led by Norberto Ochoa (respondents' group), culminating in a contested special board meeting on May 28, 1995, where the Ochoa faction declared the incumbent positions vacant and elected themselves to office.
• The CDA ruled in favor of the Barrameda faction on February 15, 1996, declaring the May 28, 1995 meeting and all resulting elections null and void ab initio, recognizing the petitioners as the legitimate Board of Directors, and ordering a status quo regarding the General Manager position held by Reynaldo Abundo.
• Despite the CDA decision having become final and executory, and after the petitioners regained control through a writ of execution on September 26, 1996, the President issued Memorandum Order No. 409 on December 3, 1996, creating an Ad Hoc Committee to take over and manage CANORECO, effectively removing the petitioners from management and placing the cooperative under presidential control until a general membership meeting could be called.

• The President has no constitutional or statutory authority, whether express or implied, to take over or order the take-over of electric cooperatives, and the power to regulate business under police power does not include the power to take over, control, manage, or direct the operation of private enterprises.
• The relegation of the incumbent Board of Directors to mere advisory roles under Memorandum Order No. 409 constitutes an unlawful removal from office without due process of law, usurping the exclusive power of the general assembly to remove directors for cause under Article 51 of the Cooperative Code.
• CANORECO having registered with the CDA pursuant to R.A. No. 6938 and 6939, the provisions of P.D. No. 269 (as amended) granting the NEA supervisory powers no longer apply, and the President cannot rely on his power of supervision over the NEA to justify designating an acting general manager for CANORECO.
• The President lacks the authority to appoint or remove members of the board of directors of a private enterprise, including electric cooperatives, and the take-over violates the democratic nature of cooperatives and the statutory policy of state non-interference.

• N/A (The Office of the Solicitor General failed to file a comment despite multiple extensions of time granted by the Court, and was deemed to have waived the filing thereof; the case was subsequently submitted for decision based on the petitioners' pleadings and the records of the case.)

• Procedural Issues: Whether the Supreme Court can validly decide the case despite the failure of the Office of the Solicitor General to file a comment on behalf of the respondents.
• Substantive Issues: Whether the President has constitutional or statutory authority to issue Memorandum Order No. 409 taking over and managing CANORECO; whether police power can be invoked to justify such take-over; and whether the relegation of incumbent directors to advisory roles constitutes removal without due process in violation of the Cooperative Code.

• Procedural: The Supreme Court may proceed to decide the case on the merits despite the respondents' failure to file a comment, as the issues presented are purely legal and constitutional in nature, the facts are fully established in the records, and the petitioners' right to relief is clear and indisputable; the OSG's motion to admit its belated comment was denied as the Court had already declared the case submitted for decision.
• Substantive: Memorandum Order No. 409 is declared invalid and unconstitutional for lack of legal basis; the President has no inherent or delegated authority to take over the internal management of a cooperative registered under R.A. No. 6938, as Article 38 and Article 39 vest the conduct and management of cooperative affairs exclusively in the board of directors elected by the general assembly, and Article 34 and Article 51 reserve exclusively to the general assembly the power to elect and remove directors for cause after due hearing.
• The President cannot invoke police power to justify the take-over because police power, while inherent in the government, is primarily lodged in the legislature and can only be exercised by the President through specific constitutional delegation under Article VI, Sections 23(2) or 28(2) of the Constitution (emergency powers or tariff fixing), which is absent in this case; no law delegates to the President the power to take over cooperatives, and Article 98 of R.A. No. 6938 expressly reserves the internal affairs of public service cooperatives to governance by the Cooperative Code.
• The Memorandum Order violates the inherent limitation on the President's supervisory power over administrative agencies, as the CDA decision had already become final and executory fifteen days after receipt by the adversely affected party, and under Section 15, Chapter III of Book VII of the Administrative Code of 1987, even the Office of the President is bound by final resolutions of administrative agencies under its supervision and cannot supplant or overturn them.
• The take-over violates the fundamental principle enshrined in Article 4(2) of R.A. No. 6938 that cooperatives are democratic organizations whose affairs shall be administered by persons elected or appointed in a manner agreed upon by the members, and contravenes Section 1 of R.A. No. 6939 establishing a state policy of non-interference in cooperative management.

• Police Power and Its Inherent Limitations — Defined as the power inherent in government to enact laws within constitutional limits to promote order, safety, health, morals, and general welfare; primarily lodged in the legislature, it may only be exercised by the President through valid delegation under specific constitutional provisions (Art. VI, Sec. 23(2) and 28(2)), and cannot be invoked to justify executive take-over of private enterprises without such delegation.
• Democratic Nature of Cooperatives — Cooperatives are democratic organizations whose internal affairs must be administered by persons elected or appointed by the members as agreed upon in their by-laws, creating an inherent limitation against state interference in management decisions reserved to the general assembly and board of directors.
• Finality of Administrative Decisions — Administrative decisions become final and executory fifteen days after receipt by the adversely affected party unless timely appeal or review is sought; this finality binds even the Office of the President exercising supervisory control over the agency, embodying the principle of non quieta movere that terminated proceedings should not be disturbed.
• Non-Interference in Cooperative Management — The State is mandated by Section 1 of R.A. No. 6939 to maintain a policy of non-interference in the management and operation of cooperatives, except as specifically provided by law, establishing a statutory limitation on executive intervention.

• "Police power is the power inherent in a government to enact laws, within constitutional limits, to promote the order, safety, health, morals, and general welfare of society."
• "Administrative decisions must end sometime, as fully as public policy demands that finality be written on judicial controversies. Public interest requires that proceedings already terminated should not be altered at every step, for the rule of non quieta movere prescribes that what had already been terminated should not be disturbed."
• "Cooperatives are democratic organizations and that their affairs shall be administered by persons elected or appointed in a manner agreed upon by the members."
• "The State shall, except as provided in said Act, maintain a policy of non-interference in the management and operation of cooperatives."

• Antique Sawmills, Inc. v. Zayco, 17 SCRA 316 (1966) — Cited for the principle that administrative decisions must achieve finality and that the rule of non quieta movere requires that terminated proceedings should not be disturbed, supporting the holding that the CDA's final decision could not be overturned by the Office of the President.
• 16 C.J.S. Constitutional Law § 195 (1956) — Cited as authority for the definition of police power as the inherent power of government to enact laws for the promotion of order, safety, health, morals, and general welfare.

• Article VI, Sections 23(2) and 28(2) of the 1987 Constitution — Constitutional provisions allowing Congress to delegate specific powers to the President during emergencies or for fixing tariff rates; the Court held that no such delegation exists authorizing the President to take over cooperatives.
• Article 4(2), Article 34, Article 38, Article 39, Article 43, Article 51, Article 98, Article 121, and Article 128 of Republic Act No. 6938 (Cooperative Code of the Philippines) — Provisions establishing the democratic nature of cooperatives, vesting management power in the board of directors, reserving the exclusive power to elect and remove directors to the general assembly, governing the internal affairs of public service cooperatives, providing for settlement of intra-cooperative disputes, and establishing the transition period for registration with the CDA.
• Section 8 and Section 17 of Republic Act No. 6939 (Cooperative Development Authority Act) — Provisions on mediation and conciliation of cooperative disputes and the requirement for cooperatives under P.D. No. 269 to register with the CDA.
• Sections 3 and 5 of Presidential Decree No. 1645 — Provisions amending P.D. No. 269 to grant NEA supervisory and enforcement powers over electric cooperatives; held inapplicable to CANORECO after its registration with the CDA.
• Section 15, Chapter III of Book VII of Executive Order No. 292 (Administrative Code of 1987) — Provision establishing that decisions of administrative agencies become final and executory after fifteen days and bind the Office of the President.

• N/A (The decision was unanimous with eleven justices concurring; Justice Quisumbing took no part due to involvement in an Office of the President matter, and Justice Purisima took no part as he did not take part in the deliberation.)