Republic vs. Dela Merced & Sons

Administrative due process is satisfied by a fair and reasonable opportunity to explain one's side through position papers and motions, without requiring a formal trial-type hearing; a Certificate of Non-Coverage exempts a project only from securing an Environmental Compliance Certificate but not from compliance with other environmental laws such as the Clean Water Act; the constitutional prohibition against excessive fines under Article III, Section 19(1) of the Constitution applies exclusively to criminal prosecutions and not to administrative penalties; and the period of violation for computing daily fines under Section 28 of Republic Act No. 9275 continues until the violator actually complies with effluent standards as verified by sampling, not from the date of issuance of a Temporary Lifting Order.

N. Dela Merced & Sons, Inc. owned and operated the Guadalupe Commercial Complex, a wet market and eatery situated alongside the biologically dead Pasig River. Following inspections by the Department of Environment and Natural Resources - Environmental Management Bureau, the company was found to be operating without the required discharge permit and releasing wastewater that failed to conform with DENR Effluent Standards, prompting administrative enforcement actions under the Clean Water Act of 2004.

• On July 13, 2006, the Environmental Management Bureau-National Capital Region (EMB-NCR) inspected the Guadalupe Commercial Complex and found violations of Section 1 of DENR Administrative Order No. 2004-26 for operating air pollution source installations without a permit to operate, and Section 27(i) of Republic Act No. 9275 for operating a facility that discharged regulated water pollutants without a discharge permit.
• On August 28, 2006, the EMB-NCR served a Notice of Violation upon Dela Merced & Sons, stating the charges and ordering compliance with requirements.
• Dela Merced & Sons requested and was granted an extension of time to comply with the Notice of Violation requirements.
• On October 11, 2006, the EMB-NCR conducted a follow-up inspection, collected effluent samples from the facility, and laboratory tests showed the sample failed to conform to DENR Effluent Standards.
• On February 6, 2007, the DENR Secretary issued a Cease and Desist Order against Dela Merced & Sons for violation of Republic Act No. 9275, informing the company that no Temporary Lifting Order would issue unless required documents were submitted.
• On March 30, 2007, the EMB-NCR partially executed the Cease and Desist Order by sealing the kitchen sinks of identified locators, while issuing warnings to the wet market and ground floor kitchenettes.
• On April 3, 2007, Dela Merced & Sons filed a Motion for Reconsideration of the Cease and Desist Order and submitted documents required for a Temporary Lifting Order.
• On July 3, 2007, the Pollution Adjudication Board issued a Temporary Lifting Order valid for 150 days.
• On August 9, 2007, the EMB-DENR issued a Certificate of Non-Coverage to Dela Merced & Sons pursuant to Presidential Decree No. 1586, certifying the project was not covered by the Environmental Impact Statement System.
• On November 14, 2007, the EMB-NCR conducted another effluent sampling, and results submitted subsequently showed the effluent conformed to DENR Effluent Standards.
• On November 13, 2008, the Pollution Adjudication Board issued an Order imposing a fine of P3.98 million on Dela Merced & Sons, computed at P10,000 per day for 398 days of violation from October 12, 2006 to November 13, 2007.
• Dela Merced & Sons filed a Motion for Reconsideration which was denied on January 30, 2009.

• N. Dela Merced & Sons, Inc. (in G.R. No. 201658): Argued that the fine was imposed without due process of law because it was never given an opportunity to present evidence to dispute the alleged violation through a trial-type proceeding. Contended that the Certificate of Non-Coverage issued under Presidential Decree No. 1586 exempted it from the requirements of Republic Act No. 9275. Asserted that Section 28 of Republic Act No. 9275 is unconstitutional under Article III, Section 19(1) of the Constitution for being excessive, arbitrary, and unconscionable, allegedly threatening the company's business survival. Claimed that the computation of the fine was erroneous because the period from the issuance of the Temporary Lifting Order on July 3, 2007 up to the date of compliance on November 13, 2007 should be excluded.
• Republic of the Philippines, represented by the Pollution Adjudication Board (in G.R. No. 201501): Contested the Court of Appeals' reduction of the fine from P3.98 million to P2.63 million, arguing that the appellate court erred in finding unreasonable delay on the part of the EMB-NCR in conducting effluent sampling. Maintained that the sampling was conducted within the 150-day period prescribed in the Temporary Lifting Order and that the period of violation should not be cut short by the mere issuance of the Temporary Lifting Order but should extend until actual compliance was verified.

• Pollution Adjudication Board (in G.R. No. 201658): Argued that Dela Merced & Sons was not denied due process as it participated in all stages of the administrative proceeding, was given notice, extension to comply, opportunity to submit a position paper, and filed a motion for reconsideration. Asserted that the Certificate of Non-Coverage only exempted the company from securing an Environmental Compliance Certificate but not from compliance with other environmental laws like the Clean Water Act. Contended that the constitutional challenge to Section 28 of Republic Act No. 9275 constituted a collateral attack and that the issue was not the lis mota of the case.
• N. Dela Merced & Sons, Inc. (in G.R. No. 201501): Defended the Court of Appeals' reduction of the fine, arguing that the EMB-NCR's delay in conducting the effluent sampling was unreasonable and that the period of violation should end on the date of the Temporary Lifting Order issuance when the company demonstrated sincere intention to comply.

• Procedural Issues:
  • Whether the constitutional challenge to Section 28 of Republic Act No. 9275 was properly raised before the Court or constituted a collateral attack.
  • Whether the issue of constitutionality was the lis mota of the case such that the Court was compelled to resolve it.
• Substantive Issues:
  • Whether Dela Merced & Sons was denied due process of law in the administrative proceedings before the Pollution Adjudication Board.
  • Whether the issuance of a Certificate of Non-Coverage exempts a project proponent from compliance with Republic Act No. 9275 (The Clean Water Act).
  • Whether Section 28 of Republic Act No. 9275, imposing fines of not less than P10,000 nor more than P200,000 per day of violation, is unconstitutional under Article III, Section 19(1) of the Constitution for being excessive.
  • Whether the amount of the fine imposed was correctly computed, specifically whether the period from the issuance of the Temporary Lifting Order to the date of verified compliance should be excluded.

• Procedural: The Court ruled that the attempt to assail the constitutionality of Section 28 of Republic Act No. 9275 constituted a collateral attack, which is contrary to the rule that issues of constitutionality must be pleaded directly. Furthermore, the issue was not the lis mota of the case because the case could be resolved on other grounds (statutory interpretation and application), hence the constitutional question was avoided. The presumption of constitutionality therefore stands.
• Substantive: The Court held that Dela Merced & Sons was not denied due process. Administrative due process requires only a fair and reasonable opportunity to explain one's side, which was satisfied through the company's participation in all stages, submission of position papers, and opportunity to file a motion for reconsideration. A formal trial-type hearing is not required in administrative proceedings. The Court ruled that a Certificate of Non-Coverage issued under Presidential Decree No. 1586 exempts the holder only from securing an Environmental Compliance Certificate under the Environmental Impact Statement System, but does not exempt compliance with other environmental laws such as the Clean Water Act, as non-critical projects may still be required to provide additional environmental safeguards. The Court held that even if the constitutional issue were reached, Section 28 of Republic Act No. 9275 is not unconstitutional. The prohibition against excessive fines under Article III, Section 19(1) applies only to criminal prosecutions, not to administrative penalties. Moreover, for a penalty to be considered unconstitutional, it must be flagrantly and plainly oppressive or so disproportionate as to shock the moral sense of reasonable persons, which standard was not met. Finally, the Court upheld the full fine of P3.98 million, ruling that the Court of Appeals erred in reducing it. The period of violation for computing fines extends from the date of violation on October 12, 2006 until the date when compliance was actually verified on November 13, 2007, not merely until the issuance of the Temporary Lifting Order. The issuance of a Temporary Lifting Order does not equate to compliance; it merely allows limited operation pending compliance. The EMB-NCR's conduct of sampling on November 14, 2007 was within the 150-day Temporary Lifting Order period and could not be characterized as unreasonable delay.

• Administrative Due Process — Defined as a fair and reasonable opportunity to explain one's side, which does not require a formal trial-type hearing or strict application of technical rules of procedure. An administrative agency may resolve cases based on position papers, affidavits, or documentary evidence, and any procedural defect is cured by the filing of a motion for reconsideration.
• Collateral Attack on Constitutionality — The rule that the constitutionality of a law must be attacked directly and not collaterally; the presumption of validity remains unless annulled in a direct proceeding.
• Lis Mota — The requirement that for a court to undertake judicial review of a constitutional question, the issue of constitutionality must be the very lis mota (cause of the action) such that the case cannot be resolved without disposing of the constitutional question; if another ground exists, the constitutional issue should be avoided.
• Scope of Certificate of Non-Coverage (CNC) — A Certificate of Non-Coverage issued under Presidential Decree No. 1586 certifies that a project is not covered by the Environmental Impact Statement System and is not required to secure an Environmental Compliance Certificate, but it does not exempt the project proponent from compliance with other applicable environmental laws and regulations.
• Excessive Fines Clause — Article III, Section 19(1) of the Constitution prohibiting excessive fines applies only to criminal prosecutions and not to administrative penalties. For a penalty to be deemed excessive and unconstitutional, it must be flagrantly and plainly oppressive or so disproportionate to the offense as to shock the moral sense of all reasonable persons.

• "In administrative proceedings, a fair and reasonable opportunity to explain one's side suffices to meet the requirements of due process."
• "Administrative due process cannot be fully equated with due process in its strict judicial sense. In the former, a formal or trial-type hearing is not always necessary, and technical rules of procedure are not strictly applied."
• "The constitutional prohibition on the imposition of excessive fines applies only to criminal prosecutions."
• "For a penalty to be considered obnoxious to the Constitution, it needs to be more than merely being harsh, excessive, out of proportion, or severe. To come under the prohibition, the penalty must be flagrantly and plainly oppressive or so disproportionate to the offense committed as to shock the moral sense of all reasonable persons as to what is right and proper under the circumstances."
• "The fixing of penalties for the violation of statutes is primarily a legislative function, and the courts hesitate to interfere, unless the fine provided for is so far excessive as to shock the sense of mankind."

• Special People, Inc. Foundation v. Canda — Cited for the definition and scope of a Certificate of Non-Coverage under the Environmental Impact Statement System.
• Leynes v. People — Cited for the principle that an entity is not exempted from compliance with applicable environmental laws despite the issuance of a Certificate of Non-Coverage.
• PEZA v. Pearl City Manufacturing Corp. — Cited for the standard of administrative due process requiring only a fair opportunity to be heard.
• Disciplinary Board, Land Transportation Office v. Gutierrez (citing Vivo v. PAGCOR) — Cited for the distinction between administrative and judicial due process.
• Saguisag v. Ochoa — Cited for the requisites of judicial review, particularly the lis mota requirement.
• Serrano v. NLRC — Cited for the principle that the constitutional prohibition on excessive fines applies only to criminal prosecutions.
• People v. Dionisio and People v. Dela Cruz — Cited for the standard determining when a penalty is excessive and unconstitutional.
• U.S. v. Borromeo — Cited for the principle that fixing penalties is a legislative function courts hesitate to interfere with unless the fine is so excessive as to shock the sense of mankind.

• Section 28, Republic Act No. 9275 (The Clean Water Act of 2004) — Provides for the imposition of fines of not less than P10,000 nor more than P200,000 for every day of violation; the basis for the administrative penalty imposed.
• Section 27(i), Republic Act No. 9275 — Prohibits operating a facility that discharges regulated water pollutants without a discharge permit.
• Section 5, Presidential Decree No. 1586 (Philippine Environmental Impact Statement System) — States that environmentally non-critical projects are not required to submit an environmental impact statement but may be required to provide additional environmental safeguards; basis for ruling that Certificate of Non-Coverage does not exempt compliance with other laws.
• Section 19(1), Article III, 1987 Constitution — Prohibits the imposition of excessive fines; held to apply only to criminal prosecutions.
• Rule 43, Rules of Court — Governs appeals from quasi-judicial agencies to the Court of Appeals; invoked in the procedural history.
• Rule 45, Rules of Court — Governs petitions for review on certiorari to the Supreme Court; basis for the consolidated petitions.