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Republic of the Philippines


SUPREME COURT
Manila
EN BANC
G.R. No. L-12172

August 29, 1958

THE PEOPLE OF THE PHILIPPINES, plaintiff-appellee,


vs.
JUAN F. FAJARDO, ET AL., defendants-appellants.
Assistant Solicitor General Esmeraldo Umali and Higinio V. Catalan for appellee.
Prila, Pardalis and Pejo for appellants.
REYES, J. B. L., J.:
Appeal from the decision of the Court of First Instance of Camarines Sur convicting defendants-appellants
Juan F. Fajardo and Pedro Babilonia of a violation of Ordinance No. 7, Series of 1950, of the Municipality of
Baao, Camarines Sur, for having constructed without a permit from the municipal mayor a building that
destroys the view of the public plaza.
It appears that on August 15, 1950, during the incumbency of defendant-appellant Juan F. Fajardo as mayor of
the municipality of Baao, Camarines Sur, the municipal council passed the ordinance in question providing as
follows:
SECTION 1. Any person or persons who will construct or repair a building should, before
constructing or repairing, obtain a written permit from the Municipal Mayor.
SEC. 2. A fee of not less than P2.00 should be charged for each building permit and P1.00 for
each repair permit issued.
SEC. 3. PENALTY Any violation of the provisions of the above, this ordinance, shall make the
violation liable to pay a fine of not less than P25 nor more than P50 or imprisonment of not less
than 12 days nor more than 24 days or both, at the discretion of the court. If said building destroys
the view of the Public Plaza or occupies any public property, it shall be removed at the expense of
the owner of the building or house.
SEC. 4. EFFECTIVITY This ordinance shall take effect on its approval. (Orig. Recs., P. 3)
Four years later, after the term of appellant Fajardo as mayor had expired, he and his son in-law, appellant
Babilonia, filed a written request with the incumbent municipal mayor for a permit to construct a building
adjacent to their gasoline station on a parcel of land registered in Fajardo's name, located along the national
highway and separated from the public plaza by a creek (Exh. D). On January 16, 1954, the request was
denied, for the reason among others that the proposed building would destroy the view or beauty of the public
plaza (Exh. E). On January 18, 1954, defendants reiterated their request for a building permit (Exh. 3), but
again the request was turned down by the mayor. Whereupon, appellants proceeded with the construction of

the building without a permit, because they needed a place of residence very badly, their former house having
been destroyed by a typhoon and hitherto they had been living on leased property.
On February 26, 1954, appellants were charged before and convicted by the justice of the peace court of
Baao, Camarines Sur, for violation of the ordinance in question. Defendants appealed to the Court of First
Instance, which affirmed the conviction, and sentenced appellants to pay a fine of P35 each and the costs, as
well as to demolish the building in question because it destroys the view of the public plaza of Baao, in that "it
hinders the view of travelers from the National Highway to the said public plaza." From this decision, the
accused appealed to the Court of Appeals, but the latter forwarded the records to us because the appeal
attacks the constitutionality of the ordinance in question.
We find that the appealed conviction can not stand.
A first objection to the validity of the ordinance in question is that under it the mayor has absolute discretion to
issue or deny a permit. The ordinance fails to state any policy, or to set up any standard to guide or limit the
mayor's action. No purpose to be attained by requiring the permit is expressed; no conditions for its grant or
refusal are enumerated. It is not merely a case of deficient standards; standards are entirely lacking. The
ordinance thus confers upon the mayor arbitrary and unrestricted power to grant or deny the issuance of
building permits, and it is a settled rule that such an undefined and unlimited delegation of power to allow or
prevent an activity, per se lawful, is invalid (People vs. Vera, 65 Phil., 56; Primicias vs. Fugoso, 80 Phil., 71;
Schloss Poster Adv. Co. vs. Rock Hill, 2 SE (2d) 392)
The ordinance in question in no way controls or guides the discretion vested thereby in the
respondents. It prescribes no uniform rule upon which the special permission of the city is to be
granted. Thus the city is clothed with the uncontrolled power to capriciously grant the privilege to
some and deny it others; to refuse the application of one landowner or lessee and to grant that of
another, when for all material purposes, the two applying for precisely the same privileges under
the same circumstances. The danger of such an ordinance is that it makes possible arbitrary
discriminations and abuses in its execution, depending upon no conditions or qualifications
whatever, other than the unregulated arbitrary will of the city authorities as the touchstone by which
its validity is to be tested. Fundamental rights under our government do not depend for their
existence upon such a slender and uncertain thread. Ordinances which thus invest a city council
with a discretion which is purely arbitrary, and which may be exercised in the interest of a favored
few, are unreasonable and invalid. The ordinance should have established a rule by which its
impartial enforcement could be secured. All of the authorities cited above sustain this conclusion.
As was said in City of Richmond vs. Dudley, 129 Ind. 112,28 N. E. 312, 314 13 L. R. A. 587, 28
Am. St. Rep. 180: "It seems from the foregoing authorities to be well established that municipal
ordinances placing restrictions upon lawful conduct or the lawful use of property must, in order to
be valid, specify the rules and conditions to be observed in such conduct or business; and must
admit of the exercise of the privilege of all citizens alike who will comply with such rules and
conditions; and must not admit of the exercise, or of an opportunity for the exercise, of any
arbitrary discrimination by the municipal authorities between citizens who will so comply. (Schloss
Poster Adv. Co., Inc. vs. City of Rock Hill, et al., 2 SE (2d), pp. 394-395).
It is contended, on the other hand, that the mayor can refuse a permit solely in case that the proposed building
"destroys the view of the public plaza or occupies any public property" (as stated in its section 3); and in fact,
the refusal of the Mayor of Baao to issue a building permit to the appellant was predicated on the ground that
the proposed building would "destroy the view of the public plaza" by preventing its being seen from the public
highway. Even thus interpreted, the ordinance is unreasonable and oppressive, in that it operates to
permanently deprive appellants of the right to use their own property; hence, it oversteps the bounds of police

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power, and amounts to a taking of appellants property without just compensation. We do not overlook that the
modern tendency is to regard the beautification of neighborhoods as conducive to the comfort and happiness
of residents. But while property may be regulated in the interest of the general welfare, and in its pursuit, the
State may prohibit structures offensive to the sight (Churchill and Tait vs. Rafferty, 32 Phil. 580), the State may
not, under the guise of police power, permanently divest owners of the beneficial use of their property and
practically confiscate them solely to preserve or assure the aesthetic appearance of the community. As the
case now stands, every structure that may be erected on appellants' land, regardless of its own beauty, stands
condemned under the ordinance in question, because it would interfere with the view of the public plaza from
the highway. The appellants would, in effect, be constrained to let their land remain idle and unused for the
obvious purpose for which it is best suited, being urban in character. To legally achieve that result, the
municipality must give appellants just compensation and an opportunity to be heard.
An ordinance which permanently so restricts the use of property that it can not be used for any
reasonable purpose goes, it is plain, beyond regulation and must be recognized as a taking of the
property. The only substantial difference, in such case, between restriction and actual taking, is
that the restriction leaves the owner subject to the burden of payment of taxation, while outright
confiscation would relieve him of that burden. (Arverne Bay Constr. Co. vs. Thatcher (N.Y.) 117
ALR. 1110, 1116).
A regulation which substantially deprives an owner of all beneficial use of his property is
confiscation and is a deprivation within the meaning of the 14th Amendment. (Sundlum vs. Zoning
Bd., 145 Atl. 451; also Eatonvs. Sweeny, 177 NE 412; Taylor vs. Jacksonville, 133 So. 114).
Zoning which admittedly limits property to a use which can not reasonably be made of it cannot be
said to set aside such property to a use but constitutes the taking of such property without just
compensation. Use of property is an element of ownership therein. Regardless of the opinion of
zealots that property may properly, by zoning, be utterly destroyed without compensation, such
principle finds no support in the genius of our government nor in the principles of justice as we
known them. Such a doctrine shocks the sense of justice. If it be of public benefit that property
remain open and unused, then certainly the public, and not the private individuals, should bear the
cost of reasonable compensation for such property under the rules of law governing the
condemnation of private property for public use. (Tews vs. Woolhiser (1933) 352 I11. 212, 185 N.E.
827) (Emphasis supplied.)
The validity of the ordinance in question was justified by the court below under section 2243, par. (c), of the
Revised Administrative Code, as amended. This section provides:
SEC. 2243. Certain legislative powers of discretionary character. The municipal council shall
have authority to exercise the following discretionary powers:
x xx

x xx

x xx

(c) To establish fire limits in populous centers, prescribe the kinds of buildings that may be
constructed or repaired within them, and issue permits for the creation or repair thereof, charging a
fee which shall be determined by the municipal council and which shall not be less than two pesos
for each building permit and one peso for each repair permit issued. The fees collected under the
provisions of this subsection shall accrue to the municipal school fund.
Under the provisions of the section above quoted, however, the power of the municipal council to require the
issuance of building permits rests upon its first establishing fire limits in populous parts of the town and
prescribing the kinds of buildings that may be constructed or repaired within them. As there is absolutely no

showing in this case that the municipal council had either established fire limits within the municipality or set
standards for the kind or kinds of buildings to be constructed or repaired within them before it passed the
ordinance in question, it is clear that said ordinance was not conceived and promulgated under the express
authority of sec. 2243 (c) aforequoted.
We rule that the regulation in question, Municipal Ordinance No. 7, Series of 1950, of the Municipality of Baao,
Camarines Sur, was beyond the authority of said municipality to enact, and is therefore null and void. Hence,
the conviction of herein appellants is reversed, and said accused are acquitted, with costs de oficio. So
ordered.
Paras, C. J., Bengzon, Padilla, Montemayor, Reyes, A., Bautista Angelo, Concepcion, Endencia and Felix,
JJ.,concur.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-14078
March 7, 1919
RUBI, ET AL. (manguianes), plaintiffs,
vs.
THE PROVINCIAL BOARD OF MINDORO, defendant.
D. R. Williams & Filemon Sotto for plaintiff.
Office of the Solicitor-General Paredes for defendant.
MALCOLM, J.:
In one of the cases which denote a landmark in American Constitutional History (Worcester vs. Georgia
[1832], 6 Pet., 515), Chief Justice Marshall, the first luminary of American jurisprudence, began his opinion
(relating to the status of an Indian) with words which, with a slight change in phraseology, can be made to
introduce the present opinion This cause, in every point of view in which it can be placed, is of the deepest
interest. The legislative power of state, the controlling power of the constitution and laws, the rights if they
have any, the political existence of a people, the personal liberty of a citizen, are all involved in the subject now
to be considered.
To imitate still further the opinion of the Chief Justice, we adopt his outline and proceed first, to introduce the
facts and the issues, next to give a history of the so called "non-Christians," next to compare the status of the
"non-Christians" with that of the American Indians, and, lastly, to resolve the constitutional questions
presented.
I. INTRODUCTION.
This is an application for habeas corpus in favor of Rubi and other Manguianes of the Province of Mindoro. It
is alleged that the Maguianes are being illegally deprived of their liberty by the provincial officials of that
province. Rubi and his companions are said to be held on the reservation established at Tigbao, Mindoro,
against their will, and one Dabalos is said to be held under the custody of the provincial sheriff in the prison at
Calapan for having run away form the reservation.
The return of the Solicitor-General alleges:
1. That on February 1, 1917, the provincial board of Mindoro adopted resolution No. 25 which is as
follows:
The provincial governor, Hon. Juan Morente, Jr., presented the following resolution:
"Whereas several attempts and schemes have been made for the advancement of the
non-Christian people of Mindoro, which were all a failure,
"Whereas it has been found out and proved that unless some other measure is taken
for the Mangyan work of this province, no successful result will be obtained toward
educating these people.
"Whereas it is deemed necessary to obliged them to live in one place in order to make
a permanent settlement,
"Whereas the provincial governor of any province in which non-Christian inhabitants
are found is authorized, when such a course is deemed necessary in the interest of law
and order, to direct such inhabitants to take up their habitation on sites on unoccupied
public lands to be selected by him and approved by the provincial board.
"Whereas the provincial governor is of the opinion that the sitio of Tigbao on Lake
Naujan is a place most convenient for the Mangyanes to live on, Now, therefore be it

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"Resolved, that under section 2077 of the Administrative Code, 800 hectares of public land in the
sitio of Tigbao on Naujan Lake be selected as a site for the permanent settlement of Mangyanes in
Mindoro subject to the approval of the Honorable Secretary of the Interior, and
"Resolved further, That Mangyans may only solicit homesteads on this reservation providing that
said homestead applications are previously recommended by the provincial governor."
2. That said resolution No. 25 (series 1917) of the provincial board of Mindoro was approved by
the Secretary of the Interior of February 21, 1917.
3. That on December 4, 1917, the provincial governor of Mindoro issued executive order No. 2
which says:
"Whereas the provincial board, by Resolution No. 25, current series, has selected a
site in the sitio of Tigbao on Naujan Lake for the permanent settlement of Mangyanes
in Mindoro.
"Whereas said resolution has been duly approve by the Honorable, the Secretary of
the Interior, on February 21, 1917.
"Now, therefore, I, Juan Morente, jr., provincial governor of Mindoro, pursuant to the
provisions of section 2145 of the revised Administrative Code, do hereby direct that all
the Mangyans in the townships of Naujan and Pola and the Mangyans east of the Baco
River including those in the districts of Dulangan and Rubi's place in Calapan, to take
up their habitation on the site of Tigbao, Naujan Lake, not later than December 31,
1917.
"Any Mangyan who shall refuse to comply with this order shall upon conviction be
imprisoned not exceed in sixty days, in accordance with section 2759 of the revised
Administrative Code."
4. That the resolution of the provincial board of Mindoro copied in paragraph 1 and the executive
order of the governor of the same province copied in paragraph 3, were necessary measures for
the protection of the Mangyanes of Mindoro as well as the protection of public forests in which they
roam, and to introduce civilized customs among them.
5. That Rubi and those living in his rancheria have not fixed their dwelling within the reservation of
Tigbao and are liable to be punished in accordance with section 2759 of Act No. 2711.
6. That the undersigned has not information that Doroteo Dabalos is being detained by the sheriff
of Mindoro but if he is so detained it must be by virtue of the provisions of articles Nos. 2145 and
2759 of Act No. 2711.
It thus appears that the provincial governor of Mindoro and the provincial board thereof directed the
Manguianes in question to take up their habitation in Tigbao, a site on the shore of Lake Naujan, selected by
the provincial governor and approved by the provincial board. The action was taken in accordance with section
2145 of the Administrative Code of 1917, and was duly approved by the Secretary of the Interior as required
by said action. Petitioners, however, challenge the validity of this section of the Administrative Code. This,
therefore, becomes the paramount question which the court is called upon the decide.
Section 2145 of the Administrative Code of 1917 reads as follows:
SEC. 2145. Establishment of non-Christina upon sites selected by provincial governor. With the
prior approval of the Department Head, the provincial governor of any province in which nonChristian inhabitants are found is authorized, when such a course is deemed necessary in the
interest of law and order, to direct such inhabitants to take up their habitation on sites on
unoccupied public lands to be selected by him an approved by the provincial board.
In connection with the above-quoted provisions, there should be noted section 2759 of the same Code, which
read as follows:
SEC. 2759. Refusal of a non-Christian to take up appointed habitation. Any non-Christian who
shall refuse to comply with the directions lawfully given by a provincial governor, pursuant to
section two thousand one hundred and forty-five of this Code, to take up habitation upon a site
designated by said governor shall upon conviction be imprisonment for a period not exceeding
sixty days.
The substance of what is now found in said section 2145 is not new to Philippine law. The genealogical tree of
this section, if we may be permitted to use such terminology, would read: Section 2077, Administrative Code of
1916; section 62, Act No. 1397; section 2 of various special provincial laws, notably of Act No. 547, specifically
relating to the Manguianes; section 69, Act No. 387.
Section 2145 and its antecedent laws make use of the term "non-Christians." This word, as will later be
disclosed, is also found in varying forms in other laws of the Philippine Islands. In order to put the phrase in its
proper category, and in order to understand the policy of the Government of the Philippine Islands with
reference to the uncivilized elements of the Islands, it is well first of all to set down a skeleton history of the
attitude assumed by the authorities towards these "non-Christians," with particular regard for the legislation on
the subject.
II. HISTORY.
A. BEFORE ACQUISITION OF THE PHILIPPINE BY THE UNITED STATES.

The most important of the laws of the Indies having reference to the subject at hand are compiled in Book VI,
Title III, in the following language.
LAW I.
The Emperor Charles and the Prince, the governor, at Cigales, on March 21, 1551. Philip II at
Toledo, on February 19, 1560. In the forest of Segovia on September 13, 1565. In the Escorial on
November 10, 1568. Ordinance 149 of the poblaciones of 1573. In San Lorenzo, on May 20, 1578,
THAT THE "INDIOS" BE REDUCED INTO "POBLACIONES" COMMUNITIES).
In order that the indios may be instructed in the Sacred Catholic Faith and the evangelical law, and
in order that they may forget the blunders of their ancient rites and ceremonies to the end that they
may live in harmony and in a civilized manner, it has always been endeavored, with great care and
special attention, to use all the means most convenient to the attainment of these purposes. To
carry out this work with success, our Council of the Indies and other religious persons met at
various times; the prelates of new Spain assembled by order of Emperor Charles V of glorious
memory in the year one thousand five hundred and forty-six all of which meetings were
actuated with a desire to serve God an our Kingdom. At these meetings it was resolved
that indios be made to live in communities, and not to live in places divided and separated from
one another by sierras and mountains, wherein they are deprived of all spiritual and temporal
benefits and wherein they cannot profit from the aid of our ministers and from that which gives rise
to those human necessities which men are obliged to give one another. Having realized that
convenience of this resolution, our kings, our predecessors, by different orders, have entrusted
and ordered the viceroys, presidents, and governors to execute with great care and moderation
the concentration of the indios intoreducciones; and to deal with their doctrine with such
forbearance and gentleness, without causing inconveniences, so that those who would not
presently settle and who would see the good treatment and the protection of those already in
settlements would, of their own accord, present themselves, and it is ordained that they be not
required to pay taxes more than what is ordered. Because the above has been executed in the
greater part of our Indies, we hereby order and decree that the same be complied with in all the
remaining parts of the Indies, and the encomederos shall entreat compliance thereof in the manner
and form prescribed by the laws of this title.
xxx
xxx
xxx
LAW VIII.
Philip II at the Pardo, on December 1, 1573. Philip III at Madrid, October 10, 1618.
THE "REDUCCTIONES" BE MADE IN ACCORDANCE WITH THE CONDITIONS OF THIS LAW.
The places wherein the pueblos and reducciones shall be formed should have the facilities of
waters. lands, and mountains, ingress and egress, husbandry and passageway of one league
long, wherein the indioscan have their live stock that they may not be mixed with those of the
Spaniards.
LAW IX.
Philip II at Toledo, on February 19, 1956.
THAT THE "INDIOS" IN "REDUCCIONES" BE NOT DEPRIVED OF THE LANDS PREVIOUSLY HELD BY
THEM.
With more good-will and promptness, the indios shall be concentrated in reducciones. Provided
they shall not be deprived of the lands and granaries which they may have in the places left by
them. We hereby order that no change shall be made in this respect, and that they be allowed to
retain the lands held by them previously so that they may cultivate them and profit therefrom.
xxx
xxx
xxx
LAW XIII.
THE SAME AS ABOVE.
THAT THE "REDUCCIONES" BE NOT REMOVED WITHOUT ORDER OF THE KING, VICEROY, OR
COURT.
No governor, or magistrate, or alcalde mayor, or any other court, has the right to alter or to remove
thepueblos or the reducciones once constituted and founded, without our express order or that of
the viceroy, president, or the royal district court, provided, however, that the encomenderos,
priests, or indios request such a change or consent to it by offering or giving information to that en.
And, because these claims are often made for private interests and not for those of the indios, we
hereby order that this law be always complied with, otherwise the change will be considered
fraudulently obtained. The penalty of one thousand pesos shall be imposed upon the judge
or encomendero who should violate this law.
LAW XV.
Philip III at Madrid, on October 10, 1618.
THAT THERE BE MAYORS AND ALDERMEN IN THE "REDUCTIONES," WHO SHALL BE "INDIOS."
We order that in each town and reduccion there be a mayor, who should be an indio of the
same reduccion; if there be more than eighty houses, there should be two mayors and two

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aldermen, also indios; and, even if the town be a big one, there should, nevertheless, be more
than two mayors and four aldermen, If there be less than eighty indios but not less than forty, there
should be not more than one mayor and one alderman, who should annually elect nine others, in
the presence of the priests , as is the practice in town inhabited by Spaniards and indios.
LAW XXI.
Philip II, in Madrid, On May 2, 1563, and on November 25, 1578. At Tomar, on May 8, 1581. At
Madrid, on January 10, 1589. Philip III, at Todesillas, on July 12, 1600. Philip IV, at Madrid, on
October 1 and December 17, 1646. For this law and the one following, see Law I, Tit. 4, Book 7.
THAT IN THE TOWNS OF THE "INDIOS," THERE SHALL LIVE NO SPANIARDS, NEGROES, "MESTIZOS,"
AND MULATTOES.
We hereby prohibit and forbid Spaniards, negroes, mulattores, or mestizos to live to live in
the reduccionesand towns and towns of the indios, because it has been found that some
Spaniards who deal, trade, live, and associate with the indios are men of troublesome nature, of
dirty ways of living; robbers, gamblers, and vicious and useless men; and, to avoid the wrongs
done them, the indios would leave their towns and provinces; and the negroes, mestizos, and
mulattoes, besides maltreating them and utilizing their services, contaminate them with their bad
customs, idleness, and also some of their blunders and vices which may corrupt and pervert the
goal which we desire to reach with regard to their salvation, increase, and tranquillity. We hereby
order the imposition of grave penalties upon the commission of the acts above-mentioned which
should not be tolerated in the towns, and that the viceroys, presidents, governors, and courts take
great care in executing the law within their powers and avail themselves of the cooperation of the
ministers who are truly honest. As regards the mestizos and Indian and Chinese half-breeds
(zambaigos), who are children of indias and born among them, and who are to inherit their houses
and haciendas, they all not be affected by this law, it appearing to be a harsh thing to separate
them from their parents. (Law of the Indies, vol. 2, pp. 228, 229, 230, 231.)
A clear exposition of the purposes of the Spanish government, in its efforts to improve the condition of the less
advanced inhabitants of the Islands by concentrating them in "reducciones," is found in the Decree of the
Governor-General of the Philippine Islands of January 14, 1881, reading as follows:
It is a legal principle as well as a national right that every inhabitant of a territory recognized as an
integral part of a nation should respect and obey the laws in force therein; while, on other hand, it
is the duty to conscience and to humanity for all governments to civilize those backward races that
might exist in the nation, and which living in the obscurity of ignorance, lack of all the nations which
enable them to grasp the moral and material advantages that may be acquired in those towns
under the protection and vigilance afforded them by the same laws.
It is equally highly depressive to our national honor to tolerate any longer the separation and
isolation of the non-Christian races from the social life of the civilized and Christian towns; to allow
any longer the commission of depredations, precisely in the Island of Luzon wherein is located the
seat of the representative of the Government of the, metropolis.
It is but just to admit the fact that all the governments have occupied themselves with this most
important question, and that much has been heretofore accomplished with the help and self-denial
of the missionary fathers who have even sacrificed their lives to the end that those degenerate
races might be brought to the principles of Christianity, but the means and the preaching employed
to allure them have been insufficient to complete the work undertaken. Neither have the
punishments imposed been sufficient in certain cases and in those which have not been guarded
against, thus giving and customs of isolation.
As it is impossible to consent to the continuation of such a lamentable state of things, taking into
account the prestige which the country demands and the inevitable duty which every government
has in enforcing respect and obedience to the national laws on the part of all who reside within the
territory under its control, I have proceeded in the premises by giving the most careful study of this
serious question which involves important interests for civilization, from the moral and material as
well as the political standpoints. After hearing the illustrious opinions of all the local authorities,
ecclesiastics, and missionaries of the provinces of Northern Luzon, and also after finding the
unanimous conformity of the meeting held with the Archbishop of Manila, the Bishops of Jaro and
Cebu, and the provincial prelates of the orders of the Dominicans, Agustinians, Recoletos,
Franciscans, and Jesuits as also of the meeting of the Council of Authorities, held for the object so
indicated, I have arrived at an intimate conviction of the inevitable necessity of proceeding in a
practical manner for the submission of the said pagan and isolated races, as well as of the manner
and the only form of accomplishing such a task.
For the reasons above stated and for the purpose of carrying out these objects, I hereby
promulgate the following:
DECREE.
1. All the indian inhabitants (indios) of the Islands of Luzon are, from this date, to be governed by
the common law, save those exceptions prescribed in this decree which are bases upon the

differences of instructions, of the customs, and of the necessities of the different pagan races
which occupy a part of its territory.
2. The diverse rules which should be promulgated for each of these races which may be divided
into three classes; one, which comprises those which live isolated and roaming about without
forming a town nor a home; another, made up of those subdued pagans who have not as yet
entered completely the social life; and the third, of those mountain and rebellious pagans shall
be published in their respective dialects, and the officials, priests, and missionaries of the
provinces wherein they are found are hereby entrusted in the work of having these races learn
these rules. These rules shall have executive character, beginning with the first day of next April,
and, as to their compliance, they must be observed in the manner prescribed below.
3. The provincial authorities in conjunction with the priests shall proceed, from now on, with all the
means which their zeal may suggest to them, to the taking of the census of the inhabitants of the
towns or settlement already subdued, and shall adopt the necessary regulations for the
appointment of local authorities, if there be none as yet; for the construction of courts and schools,
and for the opening or fixing up of means of communication, endeavoring, as regards the
administrative organization of the said towns or settlements, that this be finished before the first
day of next July, so that at the beginning of the fiscal year they shall have the same rights and
obligations which affect the remaining towns of the archipelago, with the only exception that in the
first two years they shall not be obliged to render personal services other than those previously
indicated.
4. So long as these subdued towns or settlements are located infertile lands appropriate for
cultivation, the inhabitants thereof shall not be obliged to move their dwelling-houses; and only in
case of absolute necessity shall a new residence be fixed for them, choosing for this purpose the
place most convenient for them and which prejudices the least their interest; and, in either of these
cases, an effort must be made to establish their homes with the reach of the sound of the bell.
5. For the protection and defense of these new towns, there shall be established an armed force
composed precisely of native Christian, the organization and service of which shall be determined
in a regulations based upon that of the abolished Tercios de Policia (division of the Guardia Civil).
6. The authorities shall see to it that the inhabitants of the new towns understand all the rights and
duties affecting them and the liberty which they have as to where and now they shall till their lands
and sell the products thereof, with the only exception of the tobacco which shall be bought by
the Hacienda at the same price and conditions allowed other producers, and with the prohibition
against these new towns as well as the others from engaging in commerce of any other
transaction with the rebellious indios, the violation of which shall be punished with deportation.
7. In order to properly carry out this express prohibition, the limits of the territory of the
rebellious indios shall be fixed; and whoever should go beyond the said limits shall be detained
and assigned governmentally wherever convenient.
8. For the purpose of assisting in the conversion of the pagans into the fraternity of the Catholic
Church, all by this fact along be exempt for eight years from rendering personal labor.
9. The authorities shall offer in the name of the State to the races not subdued (aetas and
mountains igorrots the following advantages in returns for their voluntary submission: to live in
towns; unity among their families; concession of good lands and the right to cultivate them in the
manner they wish and in the way them deem most productive; support during a year, and clothes
upon effecting submission; respect for their habits and customs in so far as the same are not
opposed to natural law; freedom to decide of their own accord as to whether they want to be
Christians or not; the establishment of missions and families of recognized honesty who shall
teach, direct, protect, and give them security and trust them; the purchase or facility of the sale of
their harvests; the exemption from contributions and tributes for ten years and from thequintas (a
kind of tax) for twenty years; and lastly, that those who are governed by the local authorities as the
ones who elect such officials under the direct charge of the authorities of the province or district.
10. The races indicated in the preceding article, who voluntarily admit the advantages offered,
shall, in return, have the obligation of constituting their new towns, of constructing their town hall,
schools, and country roads which place them in communication with one another and with the
Christians; provided, the location of these towns be distant from their actual residences, when the
latter do not have the good conditions of location and cultivations, and provided further the putting
of families in a place so selected by them be authorized in the towns already constituted.
11. The armed force shall proceed to the prosecution and punishment of the tribes, that,
disregarding the peace, protection, and advantages offered them, continue in their rebellious
attitude on the first of next April, committing from now on the crimes and vexations against the
Christian towns; and for the this purposes, the Captain General's Office shall proceed with the
organization of the divisions of the Army which, in conjunction with the rural guards (cuadrilleros),
shall have to enter the territory of such tribes. On the expiration of the term, they shall destroy their
dwelling-houses, labors, and implements, and confiscate their products and cattle. Such a

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punishment shall necessarily be repeated twice a year, and for this purpose the military
headquarters shall immediately order a detachment of the military staff to study the zones where
such operations shall take place and everything conducive to the successful accomplishment of
the same.
12. The chiefs of provinces, priests, and missioners, local authorities, and other subordinates to
my authorities, local authorities, and other subordinates to may authority, civil as well as military
authorities, shall give the most effective aid and cooperation to the said forces in all that is within
the attributes and the scope of the authority of each.
13. With respect to the reduccion of the pagan races found in some of the provinces in the
southern part of the Archipelago, which I intend to visit, the preceding provisions shall conveniently
be applied to them.
14. There shall be created, under my presidency as Governor-General, Vice-Royal Patron, a
council or permanent commission which shall attend to and decide all the questions relative to the
application of the foregoing regulations that may be brought to it for consultations by the chiefs of
provinces and priests and missionaries.
15. The secondary provisions which may be necessary, as a complement to the foregoing, in
brining about due compliance with this decree, shall be promulgated by the respective official
centers within their respective jurisdictions. (Gaceta de Manila, No. 15) (Diccionario de la
Administracion, vol. 7, pp. 128-134.)
B. AFTER ACQUISITON OF THE PHILIPPINES BY THE UNITED STATES.
Ever since the acquisition of the Philippine Islands by the United States, the question as to the best method for
dealing with the primitive inhabitants has been a perplexing one.
1. Organic law.
The first order of an organic character after the inauguration of the American Government in the Philippines
was President McKinley's Instructions to the Commission of April 7, 1900, later expressly approved and
ratified by section 1 of the Philippine Bill, the Act of Congress of July 1, 1902. Portions of these instructions
have remained undisturbed by subsequent congressional legislation. One paragraph of particular interest
should here be quoted, namely:
In dealing with the uncivilized tribes of the Islands, the Commission should adopt the same course
followed by Congress in permitting the tribes of our North American Indians to maintain their tribal
organization and government and under which many of these tribes are now living in peace and
contentment, surrounded by civilization to which they are unable or unwilling to conform. Such
tribal governments should, however, be subjected to wise and firm regulation; and, without undue
or petty interference, constant and active effort should be exercised to prevent barbarous practices
and introduce civilized customs.
Next comes the Philippine Bill, the Act of Congress of July 1, 1902, in the nature of an Organic Act for the
Philippines. The purpose of section 7 of the Philippine Bill was to provide for a legislative body and, with this
end in view, to name the prerequisites for the organization of the Philippine Assembly. The Philippine
Legislature, composed of the Philippine Commission and the Philippine Assembly, was to have jurisdiction
over the Christian portion of the Islands. The Philippine Commission was to retain exclusive jurisdiction of that
part of said Islands inhabited by Moros or other non-Christian tribes.
The latest Act of Congress, nearest to a Constitution for the Philippines, is the Act of Congress of August 29,
1916, commonly known as the Jones Law. This transferred the exclusive legislative jurisdiction and authority
theretofore exercised by the Philippine Commission, to the Philippine Legislature (sec. 12). It divided the
Philippine Islands into twelve senatorial districts, the twelfth district to be composed of the Mountain Province,
Baguio, Nueva Vizcaya, and the Department of Mindanao and Sulu. The Governor-General of the Philippine
Islands was authorized to appoint senators and representatives for the territory which, at the time of the
passage of the Jones Law, was not represented in the Philippine Assembly, that is, for the twelfth district (sec.
16). The law establish a bureau to be known as the "Bureau of non-Christian Tribes" which shall have general
supervision over the public affairs of the inhabitants which are represented in the Legislature by appointed
senators and representatives( sec. 22).
Philippine organic law may, therefore, be said to recognized a dividing line between the territory not inhabited
by Moros or other non-Christian tribes, and the territory which Moros or other non-Christian tribes, and the
territory which is inhabited by Moros or other non-Christian tribes.
2. Statute law.
Local governments in the Philippines have been provided for by various acts of the Philippine Commission
and Legislature. The most notable are Acts Nos. 48 and 49 concerning the Province of Benguet and the
Igorots; Act NO. 82, the Municipal Code; ;Act no. 83, the Provincial Government Act; Act No. 183, the
Character of the city of Manila; Act No. 7887, providing for the organization and government of the Moro
Province; Act No. 1396, the Special Provincial Government Act; Act No. 1397, the Township Government Act;
Act No. 1667, relating to the organization of settlements; Act No. 1963, the Baguio charger; and Act No. 2408,
the Organic Act of the Department of Mindanao and Sulu. The major portion of these laws have been carried
forward into the Administrative Codes of 1916 an d1917.

Of more particular interest are certain special laws concerning the government of the primitive peoples.
Beginning with Act No. 387, sections 68-71, enacted on April 9, 1902, by the United States Philippine
Commission, having reference to the Province of Nueva Vizcaya, Acts Nos. 4111, 422, 445, 500, 547, 548,
549, 550, 579, 753, 855, 1113, 1145, 4568, 1306 were enacted for the provinces of Abra, Antique, Bataan,
Ilocos Norte, Ilocos Sur, Isabela. Lepanto-Bontoc, Mindoro, Misamis, Nueva Vizcaya, Pangasinan, Paragua
(Palawan), Tarlac, Tayabas, and Zambales. As an example of these laws, because referring to the
Manguianes, we insert Act No. 547:
No. 547. AN ACT PROVIDING FOR THE ESTABLISHMENT OF LOCAL CIVIL
GOVERNMENTS FOR THE MANGUIANES IN THE PROVINCE OF MINDORO.
By authority of the United States, be it enacted by the Philippine Commission, that:
SECTION 1. Whereas the Manguianes of the Provinces of Mindoro have not progressed
sufficiently in civilization to make it practicable to bring them under any form of municipal
government, the provincial governor is authorized, subject to the approval of the Secretary of the
Interior, in dealing with these Manguianes to appoint officers from among them, to fix their
designations and badges of office, and to prescribe their powers and duties: Provided, That the
powers and duties thus prescribed shall not be in excess of those conferred upon township officers
by Act Numbered Three hundred and eighty-seven entitled "An Act providing for the establishment
of local civil Governments in the townships and settlements of Nueva Vizcaya."
SEC. 2. Subject to the approval of the Secretary of the Interior, the provincial governor is further
authorized, when he deems such a course necessary in the interest of law and order, to direct
such Manguianes to take up their habitation on sites on unoccupied public lands to be selected by
him and approved by the provincial board. Manguianes who refuse to comply with such directions
shall upon conviction be imprisonment for a period not exceeding sixty days.
SEC. 3. The constant aim of the governor shall be to aid the Manguianes of his province to acquire
the knowledge and experience necessary for successful local popular government, and his
supervision and control over them shall be exercised to this end, an to the end that law and order
and individual freedom shall be maintained.
SEC. 4. When in the opinion of the provincial board of Mindoro any settlement of Manguianes has
advanced sufficiently to make such a course practicable, it may be organized under the provisions
of sections one to sixty-seven, inclusive, of Act Numbered three hundred and eighty-seven, as a
township, and the geographical limits of such township shall be fixed by the provincial board.
SEC. 5. The public good requiring the speedy enactment of this bill, the passage of the same is
hereby expedited in accordance with section two of 'An Act prescribing the order of procedure by
the Commission in the enactment of laws,' passed September twenty-sixth, nineteen hundred.
SEC. 6. This Act shall take effect on its passage.
Enacted, December 4, 1902.
All of these special laws, with the exception of Act No. 1306, were repealed by Act No. 1396 and 1397. The
last named Act incorporated and embodied the provisions in general language. In turn, Act No. 1397 was
repealed by the Administrative Code of 1916. The two Administrative Codes retained the provisions in
questions.
These different laws, if they of the non-Christian inhabitants of the Philippines and a settled and consistent
practice with reference to the methods to be followed for their advancement.
C. TERMINOLOGY.
The terms made use of by these laws, organic and statutory, are found in varying forms.
"Uncivilized tribes" is the denomination in President McKinley's instruction to the Commission.
The most commonly accepted usage has sanctioned the term "non-Christian tribes." These words are to be
found in section 7 of the Philippine Bill and in section 22 of the Jones Law. They are also to be found in Act
No. 253 of the Philippines Commission, establishing a Bureau of non-Christian Tribes and in Act No. 2674 of
the Philippine Legislature, carried forward into sections 701-705 of the Administrative Code of 1917,
reestablishing this Bureau. Among other laws which contain the phrase, there can be mentioned Acts Nos.
127, 128, 387, 547, 548, 549, 550, 1397, 1639, and 2551.
"Non-Christian people," "non-Christian inhabitants," and "non-Christian Filipinos" have been the favorite
nomenclature, in lieu of the unpopular word "tribes," since the coming into being of a Filipinized legislature.
These terms can be found in sections 2076, 2077, 2390, 2394, Administrative Code of 1916; sections 701705, 2145, 2422, 2426, Administrative Code of 1917; and in Acts Nos. 2404, 2435, 2444, 2674 of the
Philippine Legislatures, as well as in Act No. 1667 of the Philippine Commission.
The Administrative Code specifically provides that the term "non-Christian" shall include Mohammedans and
pagans. (Sec. 2576, Administrative Code of 1917; sec. 2561, Administrative Code of 1916, taken from Act No.
2408, sec. 3.)
D. MEANING OF TERM "NON-CHRISTIAN."
If we were to follow the literal meaning of the word "non-Christian," it would of course result in giving to it a
religious signification. Obviously, Christian would be those who profess the Christian religion, and nonChristians, would be those who do not profess the Christian religion. In partial corroboration of this view, there

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could also be cited section 2576 of the last Administrative Code and certain well-known authorities, as Zuiga,
"Estadismo de las Islas Filipinas," Professor Ferdinand Blumentritt, "Philippine Tribes and Languages," and Dr.
N. M. Saleeby, "The Origin of Malayan Filipinos." (See Blair & Robertson, "The Philippine Islands," 1493-1898,
vol. III, p. 300, note; Craig-Benitez, "Philippine Progress prior to 1898," vol. I. p. 107.)
Not content with the apparent definition of the word, we shall investigate further to ascertain what is its true
meaning.
In one sense, the word can have a geographical signification. This is plainly to be seen by the provisions of
many laws. Thus, according to the Philippine Bill, the authority of the Philippine Assembly was recognized in
the "territory" of the Islands not inhabited by Moros or other non-Christian tribes. Again, the Jones Law confers
similar recognition in the authorization of the twelfth senatorial district for the "territory not now represented in
the Philippine Assembly." The Philippines Legislature has, time and again, adopted acts making certain other
acts applicable to that "part" of the Philippine Islands inhabited by Moros or other non-Christian tribes.
Section 2145, is found in article XII of the Provincial Law of the Administrative Code. The first section of this
article, preceding section 2145, makes the provisions of the article applicable only in specially organized
provinces. The specially organized provinces are the Mountain Province, Nueva Vizcaya, Mindoro, Batanes,
and Palawan. These are the provinces to which the Philippine Legislature has never seen fit to give all the
powers of local self-government. They do not, however, exactly coincide with the portion of the Philippines
which is not granted popular representation. Nevertheless, it is still a geographical description.
It is well-known that within the specially organized provinces, there live persons some of who are Christians
and some of whom are not Christians. In fact, the law specifically recognizes this. ( Sec. 2422, Administrative
Code of 1917, etc.)
If the religious conception is not satisfactory, so against the geographical conception is likewise inadquate.
The reason it that the motive of the law relates not to a particular people, because of their religion, or to a
particular province because of its location, but the whole intent of the law is predicated n the civilization or lack
of civilization of the inhabitants.
At most, "non-Christian" is an awkward and unsatisfactory word. Apologetic words usually introduce the term.
"The so-called non-Christian" is a favorite expression. The Secretary of the Interior who for so many years had
these people under his jurisdiction, recognizing the difficulty of selecting an exact designation, speaks of the
"backward Philippine peoples, commonly known as the 'non-Christian tribes."' (See Hearings before the
Committee on the Philippines, United States Senate, Sixty-third Congress, third session on H.R. 18459, An Act
to declare the purpose of the People of the United States as to the future political status of the Philippine
Islands and to provide a more autonomous government for the Islands, pp. 346, 351; letter of the Secretary of
the Interior of June 30, 1906, circulated by the Executive Secretary.)
The idea that the term "non-Christian" is intended to relate to degree of civilization, is substantiated by
reference to legislative, judicial, and executive authority.
The legislative intent is borne out by Acts Nos. 48, 253, 387, 1667, and 2674, and sections 701 et seq, and
sections 2422 et seq, of the Administrative Code of 1917. For instance, Act No. 253 charged the Bureau of
non-Christian tribes to conduct "systematic investigations with reference to non-Christian tribes . . . with
special view to determining the most practicable means for bringing about their advancement in civilization
and material property prosperity."
As authority of a judicial nature is the decision of the Supreme Court in the case of United States vs. Tubban
[Kalinga] ([1915], 29, Phil., 434). The question here arose as to the effect of a tribal marriage in connection
with article 423 of the Penal code concerning the husband who surprises his wife in the act of adultery. In
discussing the point, the court makes use of the following language:
. . . we are not advised of any provision of law which recognizes as legal a tribal marriage of socalled non-Christians or members of uncivilized tribes, celebrated within that province without
compliance with the requisites prescribed by General Orders no. 68. . . . We hold also that the fact
that the accused is shown to be a member of an uncivilized tribe, of a low order of intelligence,
uncultured and uneducated, should be taken into consideration as a second marked extenuating
circumstance.
Of much more moment is the uniform construction of execution officials who have been called upon to
interpret and enforce the law. The official who, as a member of the Philippine Commission, drafted much of the
legislation relating to the so-called Christians and who had these people under his authority, was the former
Secretary of the Interior. Under date of June 30, 1906, this official addressed a letter to all governor of
provinces, organized under the Special Provincial Government Act, a letter which later received recognition by
the Governor-General and was circulated by the Executive Secretary, reading as follows:
Sir: Within the past few months, the question has arisen as to whether people who were originally
non-Christian but have recently been baptized or who are children of persons who have been
recently baptized are, for the purposes of Act 1396 and 1397, to be considered Christian or nonChristians.
It has been extremely difficult, in framing legislation for the tribes in these islands which are not
advanced far in civilization, to hit upon any suitable designation which will fit all cases. The number
of individual tribes is so great that it is almost out of the question to enumerate all of them in an

Act. It was finally decided to adopt the designation 'non-Christians' as the one most satisfactory,
but the real purpose of the Commission was not so much to legislate for people having any
particular religious belief as for those lacking sufficient advancement so that they could, to their
own advantage, be brought under the Provincial Government Act and the Municipal Code.
The mere act of baptism does not, of course, in itself change the degree of civilization to which the
person baptized has attained at the time the act of baptism is performed. For practical purposes,
therefore, you will give the member of so-called "wild tribes" of your province the benefit of the
doubt even though they may recently have embraced Christianity.
The determining factor in deciding whether they are to be allowed to remain under the jurisdiction
of regularly organized municipalities or what form of government shall be afforded to them should
be the degree of civilization to which they have attained and you are requested to govern yourself
accordingly.
I have discussed this matter with the Honorable, the Governor-General, who concurs in the opinion
above expressed and who will have the necessary instructions given to the governors of the
provinces organized under the Provincial Government Act. (Internal Revenue Manual, p. 214.)
The present Secretary of the Interior, in a memorandum furnished a member of this court, has the following to
say on the subject:
As far as names are concerned the classification is indeed unfortunate, but while no other better
classification has as yet been made the present classification should be allowed to stand . . . I
believe the term carries the same meaning as the expressed in the letter of the Secretary of the
Interior (of June 30, 1906, herein quoted). It is indicative of the degree of civilization rather than of
religious denomination, for the hold that it is indicative of religious denomination will make the law
invalid as against that Constitutional guaranty of religious freedom.
Another official who was concerned with the status of the non-Christians, was the Collector of Internal
Revenue. The question arose for ruling relatives to the cedula taxation of the Manobos and the Aetas.
Thereupon, the view of the Secretary of the Interior was requested on the point, who, by return indorsement,
agreed with the interpretation of the Collector of Internal Revenue. This Construction of the Collector of
Internal Revenue can be found in circular letter No. 188 of the Bureau of Internal Revenue, dated June 11,
1907, reading as follows (Internal Revenue Manual, p. 214):
The internal revenue law exempts "members of non-Christian tribes" from the payment of cedula
taxes. The Collector of Internal Revenue has interpreted this provision of law to mean not that
persons who profess some form of Christian worship are alone subject to the cedula tax, and that
all other person are exempt; he has interpreted it to mean that all persons preserving tribal
relations with the so-called non-Christian tribes are exempt from the cedula tax, and that all others,
including Jews, Mohammedans, Confucians, Buddists, etc., are subject to said tax so long as they
live in cities or towns, or in the country in a civilized condition. In other words, it is not so much a
matter of a man's form of religious worship or profession that decides whether or not he is subject
to the cedula tax; it is more dependent on whether he is living in a civilized manner or is associated
with the mountain tribes, either as a member thereof or as a recruit. So far, this question has not
come up as to whether a Christian, maintaining his religious belief, but throwing his lot and living
with a non-Christian tribe, would or would not be subject to the cedula tax. On one occasion a
prominent Hebrew of Manila claimed to this office that he was exempt from the cedula tax,
inasmuch as he was not a Christian. This Office, however, continued to collect cedula taxes from
all the Jews, East Indians, Arabs, Chinamen, etc., residing in Manila. Quite a large proportion of
the cedula taxes paid in this city are paid by men belonging to the nationalities mentioned.
Chinamen, Arabs and other s are quite widely scattered throughout the Islands, and a condition
similar to that which exist in Manila also exists in most of the large provincial towns. Cedula taxes
are therefore being collected by this Office in all parts of these Islands on the broad ground that
civilized people are subject to such taxes, and non-civilized people preserving their tribal relations
are not subject thereto.
(Sgd.) JNO. S. HORD,
Collector of Internal Revenue.
On September 17, 1910, the Collector of Internal Revenue addressed circular letter No. 327, approved by the
Secretary of Finance and Justice, to all provincial treasurers. This letter in part reads:
In view of the many questions that have been raised by provincial treasurers regarding cedula
taxes due from members of non-Christian tribes when they come in from the hills for the purposes
of settling down and becoming members of the body politic of the Philippine Islands, the following
clarification of the laws governing such questions and digest of rulings thereunder is hereby
published for the information of all concerned:
Non-Christian inhabitants of the Philippine Islands are so classed, not by reason of the fact that
they do not profess Christianity, but because of their uncivilized mode of life and low state of
development. All inhabitants of the Philippine Islands classed as members of non-Christian tribes
may be divided into three classes in so far as the cedula tax law is concerned . . .

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Whenever any member of an non-Christian tribe leaves his wild and uncivilized mode of life,
severs whatever tribal relations he may have had and attaches himself civilized community,
belonging a member of the body politic, he thereby makes himself subject to precisely the same
law that governs the other members of that community and from and after the date when he so
attaches himself to the community the same cedula and other taxes are due from him as from
other members thereof. If he comes in after the expiration of the delinquency period the same rule
should apply to him as to persons arriving from foreign countries or reaching the age of eighteen
subsequent to the expiration of such period, and a regular class A, D, F, or H cedula, as the case
may be, should be furnished him without penalty and without requiring him to pay the tax for
former years.
In conclusion, it should be borne in mind that the prime factors in determining whether or not a
man is subject to the regular cedula tax is not the circumstance that he does or does not profess
Christianity, nor even his maintenance of or failure to maintain tribal relations with some of the well
known wild tribes, but his mode of life, degree of advancement in civilization and connection or
lack of connection with some civilized community. For this reason so called "Remontados" and
"Montescos" will be classed by this office as members of non-Christian tribes in so far as the
application of the Internal Revenue Law is concerned, since, even though they belong to no well
recognized tribe, their mode of life, degree of advancement and so forth are practically the same
as those of the Igorrots and members of other recognized non-Christina tribes.
Very respectfully,
(Sgd.) ELLIS CROMWELL,
Collector of Internal Revenue,
Approved:
(Sgd.) GREGORIO ARANETA,
Secretary of Finance and Justice.
The two circular above quoted have since been repealed by Bureau of Internal Revenue Regulations No. 1,
promulgated by Venancio Concepcion, Acting Collector of Internal Revenue, and approved on April 16, 1915,
by Honorable Victorino Mapa, Secretary of Finance and Justice. Section 30 of the regulations is practically a
transcript of Circular Letter No. 327.
The subject has come before the Attorney-General for consideration. The Chief of Constabulary request the
opinion of the Attorney-General as to the status of a non-Christian who has been baptized by a minister of the
Gospel. The precise questions were these: "Does he remain non-Christian or is he entitled to the privileges of
a Christian? By purchasing intoxicating liquors, does he commit an infraction of the law and does the person
selling same lay himself liable under the provision of Act No. 1639?" The opinion of Attorney-General
Avancea, after quoting the same authorities hereinbefore set out, concludes:
In conformity with the above quoted constructions, it is probable that is probable that the person in
question remains a non-Christian, so that, in purchasing intoxicating liquors both he and the
person selling the same make themselves liable to prosecution under the provisions of Act No.
1639. At least, I advise you that these should be the constructions place upon the law until a court
shall hold otherwise.
Solicitor-General Paredes in his brief in this case says:
With respect to the meaning which the phrase non-Christian inhabitants has in the provisions of
the Administrative code which we are studying, we submit that said phrase does not have its
natural meaning which would include all non-Christian inhabitants of the Islands, whether Filipino
or strangers, civilized or uncivilized, but simply refers to those uncivilized members of the nonChristian tribes of the Philippines who, living without home or fixed residence, roam in the
mountains, beyond the reach of law and order . . .
The Philippine Commission in denominating in its laws that portion of the inhabitants of the
Philippines which live in tribes as non-Christian tribes, as distinguished from the common Filipinos
which carry on a social and civilized life, did not intended to establish a distinction based on the
religious beliefs of the individual, but, without dwelling on the difficulties which later would be
occasioned by the phrase, adopted the expression which the Spanish legislation employed to
designate the uncivilized portion of the inhabitants of the Philippines.
The phrase 'non-Christian inhabitants' used in the provisions of articles 2077 and 2741 of Act No.
2657 (articles 2145 and 2759) should be understood as equivalent to members of uncivilized tribes
of the Philippines, not only because this is the evident intention of the law, but because to give it its
lateral meaning would make the law null and unconstitutional as making distinctions base the
religion of the individual.
The Official Census of 1903, in the portion written by no less an authority than De. David P. Barrows, then
"Chief of the Bureau of non-Christian Tribes," divides the population in the Christian or Civilized Tribes, and
non-Christian or Wild Tribes. (Census of the Philippine Islands [1903], vol. 1, pp. 411 et seq). The present
Director of the Census, Hon. Ignacio Villamor, writes that the classification likely to be used in the Census now
being taken is: "Filipinos and Primitive Filipinos." In a Pronouncing Gazetteer and Geographical Dictionary of

the Philippine Islands, prepared in the Bureau of Insular Affairs, War Department, a sub-division under the title
non-Christian tribes is, "Physical and Political Characteristics of the non-Christian Tribes," which sufficiently
shows that the terms refers to culture and not to religion.
In resume, therefore, the Legislature and the Judiciary, inferentially, and different executive officials,
specifically, join in the proposition that the term "non-Christian" refers, not to religious belief, but, in a way , to
geographical area, and, more directly, to natives of the Philippine Islands of a law grade of civilization, usually
living in tribal relationship apart from settled communities.
E. THE MANGUIANES.
The so-called non-Christians are in various state approaching civilization. The Philippine Census of 1903
divided them into four classes. Of the third class, are the Manguianes (or Mangyans) of Mindoro.
Of the derivation of the name "Manguian" Dr. T. H. Pardo de Tavera in his Etimilogia de los nombres de Rozas
de Filipinas, says:
In Tagalog, Bicol, and Visaya, Manguian signifies "savage," "mountainer," "pagan," "negro." It may
be that the use of this word is applicable to a great number of Filipinos, but nevertheless it has
been applied only to certain inhabitants of Mindoro. Even in primitive times without doubt this
name was given to those of that island who bear it to-day, but its employed in three Filipino
languages shows that the radical ngian had in all these languages a sense to-day forgotten. In
Pampango this ending still exists and signifies "ancient," from which we can deduce that the name
was applied to men considered to be the ancient inhabitants, and that these men were pushed
back into the interior by the modern invaders, in whose language they were called the "ancients."
The Manguianes are very low in culture. They have considerable Negrito blood and have not advanced
beyond the Negritos in civilization. They are a peaceful, timid, primitive, semi-nomadic people. They number
approximately 15,000. The manguianes have shown no desire for community life, and, as indicated in the
preamble to Act No. 547, have not progressed sufficiently in civilization to make it practicable to bring them
under any form of municipal government. (See Census of the Philippine (Islands [1903], vol. I, pp. 22, 23,
460.)
III. COMPARATIVE THE AMERICAN INDIANS.
Reference was made in the Presidents' instructions to the Commission to the policy adopted by the United
States for the Indian Tribes. The methods followed by the Government of the Philippines Islands in its dealings
with the so-called non-Christian people is said, on argument, to be practically identical with that followed by
the United States Government in its dealings with the Indian tribes. Valuable lessons, it is insisted, can be
derived by an investigation of the American-Indian policy.
From the beginning of the United States, and even before, the Indians have been treated as "in a state of
pupilage." The recognized relation between the Government of the United States and the Indians may be
described as that of guardian and ward. It is for the Congress to determine when and how the guardianship
shall be terminated. The Indians are always subject to the plenary authority of the United States.
Chief Justice Marshall in his opinion in Worcester vs. Georgia, hereinbefore mentioned, tells how the
Congress passed an Act in 1819 "for promoting those humane designs of civilizing the neighboring Indians."
After quoting the Act, the opinion goes on "This act avowedly contemplates the preservation of the Indian
nations as an object sought by the United States, and proposes to effect this object by civilizing and converting
them from hunters into agriculturists."
A leading case which discusses the status of the Indians is that of the United States vs. Kagama ([1886], 118
U.S., 375). Reference is herein made to the clause of the United States Constitution which gives Congress
"power to regulate commerce with foreign nations, and among the several States, and with the Indian tribes."
The court then proceeds to indicate a brief history of the position of the Indians in the United States (a more
extended account of which can be found in Marshall's opinion in Worcester vs. Georgia, supra), as follows:
The relation of the Indian tribes living within the borders of the United States, both before and
since the Revolution, to the people of the United States, has always been an anomalous one and
of a complex character.
Following the policy of the European Governments in the discovery of American towards the
Indians who were found here, the colonies before the Revolution and the States and the United
States since, have recognized in the Indians a possessory right to the soil over which they roamed
and hunted and established occasional villages. But they asserted an ultimate title in the land
itself, by which the Indian tribes were forbidden to sell or transfer it to other nations or peoples
without the consent of this paramount authority. When a tribe wished to dispose of its lands, or any
part of it, or the State or the United States wished to purchase it, a treaty with the tribe was the
only mode in which this could be done. The United States recognized no right in private persons,
or in other nations, to make such a purchase by treaty or otherwise. With the Indians themselves
these relation are equally difficult to define. They were, and always have been, regarded as having
a semi-independent position when they preserved their tribal relations; not as States, not as nation
not a possessed of the fall attributes of sovereignty, but as a separate people, with the power of
regulating their internal and social relations, and thus far not brought under the laws of the Union
or of the State within whose limits they resided.

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The opinion then continues:
It seems to us that this (effect of the law) is within the competency of Congress. These Indian
tribes are the wards of the nation. The are communities dependent on the United States.
dependent largely for their daily food. Dependent for their political rights. They owe no allegiance
to the States, and receive from the no protection. Because of the local ill feeling, the people of the
States where they are found are often their deadliest enemies. From their very weakness and
helplessness, so largely due to the course of dealing of the Federal Government with them and the
treaties in which it has been promised, there arise the duty of protection, and with it the power.
This has always been recognized by the Executive and by Congress, and by this court, whenever
the question has arisen . . . The power of the General Government over these remnants of race
once powerful, now weak and diminished in numbers, is necessary to their protection, as well as to
the safety of those among whom they dwell. it must exist in that government, because it never has
existed anywhere else, because the theater of its exercise is within the geographical limits of the
United States, because it has never been denied, and because it alone can enforce its laws on all
the tribes.
In the later case of United States vs. Sandoval ([1913], 231 U.S., 28) the question to be considered was
whether the status of the Pueblo Indians and their lands was such that Congress could prohibit the
introduction of intoxicating liquor into those lands notwithstanding the admission of New Mexico to statehood.
The court looked to the reports of the different superintendent charged with guarding their interests and founds
that these Indians are dependent upon the fostering care and protection of the government "like reservation
Indians in general." Continuing, the court said "that during the Spanish dominion, the Indians of
the pueblos were treated as wards requiring special protection, where subjected to restraints and official
supervisions in the alienation of their property." And finally, we not the following: "Not only does the
Constitution expressly authorize Congress to regulate commerce with the Indians tribes, but long-continued
legislative and executive usage and an unbroken current of judicial decisions have attributed to the United
States as a superior and civilized nation the power and the duty of exercising a fostering care and protection
over all dependent Indian communities within its borders, whether within its original territory or territory
subsequently acquired, and whether within or without the limits of a state."
With reference to laws affecting the Indians, it has been held that it is not within the power of the courts to
overrule the judgment of Congress. For very good reason, the subject has always been deemed political in
nature, not subject to the jurisdiction of the judicial department of the government. (Matter of Heff [1905], 197
U.S., 488; U.S.vs. Celestine [1909], 215 U.S., 278; U.S. vs. Sandoval, supra; Worcester vs. Georgia, supra;
U.S. vs. Rogers [1846], 4 How., 567; the Cherokee Tobacco [1871], 11 Wall, 616; Roff vs. Burney [1897], 168
U.S., 218; Thomasvs. Gay [1898], 169 U.S.., 264; Lone Wolf vs. Hitchcock[1903], 187 U.S., 553;
Wallace vs. Adams [1907], 204 U.S., 415; Conley vs. Bollinger [1910], 216 U.S., 84; Tiger vs. Western Invest.
Co. [1911], 221 U.S., 286; U.S. vs. Lane [1913], 232 U.S.., 598; Cyr vs. Walker (1911], 29 Okla, 281; 35 L.R.A.
[N. S.], 795.) Whenever, therefore, the United States sets apart any public land as an Indian reservation, it has
full authority to pass such laws and authorize such measures as may be necessary to give to the Indians
thereon full protection in their persons and property. (U.S. vs. Thomas [1894], 151 U.S., 577.)
All this borne out by long-continued legislative and executive usage, and an unbroken line of judicial decisions.
The only case which is even remotely in point and which, if followed literally, might result in the issuance
of habeas corpus, is that of United States vs. Crook ([1879], Fed. Cas. No. 14891). This was a hearing upon
return to a writ ofhabeas corpus issued against Brigadier General George Crook at the relation of Standing
Bear and other Indians, formerly belonging to the Ponca Tribe of Indians. The petition alleged in substance
that the relators are Indians who have formerly belonged to the Ponca tribe of Indians, now located in the
Indian Territory; that they had some time previously withdrawn from the tribe, and completely severed their
tribal relations therewith, and had adopted the general habits of the whites, and were then endeavoring to
maintain themselves by their own exertions, and without aid or assistance from the general government; that
whilst they were thus engaged, and without being guilty of violating any of the laws of the United States, they
were arrested and restrained of their liberty by order of the respondent, George Crook. The substance of the
return to the writ was that the relators are individual members of, and connected with, the Ponca tribe of
Indians; that they had fled or escaped form a reservation situated some place within the limits of the Indian
Territory had departed therefrom without permission from the Government; and, at the request of the
Secretary of the Interior, the General of the Army had issued an order which required the respondent to arrest
and return the relators to their tribe in the Indian Territory, and that, pursuant to the said order, he had caused
the relators to be arrested on the Omaha Indian Territory.
The first question was whether an Indian can test the validity of an illegal imprisonment by habeas corpus. The
second question, of much greater importance, related to the right of the Government to arrest and hold the
relators for a time, for the purpose of being returned to the Indian Territory from which it was alleged the Indian
escaped. In discussing this question, the court reviewed the policy the Government had adopted in its dealing
with the friendly tribe of Poncase. Then, continuing, the court said: "Laws passed for the government of the
Indian country, and for the purpose of regulating trade and intercourse with the Indian tribes, confer upon
certain officers of the Government almost unlimited power over the persons who go upon the reservations

without lawful authority . . . Whether such an extensive discretionary power is wisely vested in the
commissioner of Indian affairs or not , need not be questioned. It is enough to know that the power rightfully
exists, and, where existing, the exercise of the power must be upheld." The decision concluded as follows:
The reasoning advanced in support of my views, leads me to conclude:
1. that an Indian is a 'person' within the meaning of the laws of the United States, and has,
therefore, the right to sue out a writ of habeas corpus in a federal court, or before a federal judge,
in all cases where he may be confined or in custody under color of authority of the United States or
where he is restrained of liberty in violation of the constitution or laws of the United States.
2. That General George Crook, the respondent, being commander of the military department of the
Platte, has the custody of the relators, under color of authority of the United States, and in violation
of the laws therefore.
3. That n rightful authority exists for removing by force any of the relators to the Indian Territory, as
the respondent has been directed to do.
4. that the Indians possess the inherent right of expatriation, as well as the more fortunate white
race, and have the inalienable right to "life, liberty, and the pursuit of happiness," so long as they
obey the laws and do not trespass on forbidden ground. And,
5. Being restrained of liberty under color of authority of the United States, and in violation of the
laws thereof, the relators must be discharged from custody, and it is so ordered.
As far as the first point is concerned, the decision just quoted could be used as authority to determine that
Rubi, the Manguian petitioner, a Filipino, and a citizen of the Philippine Islands, is a "person" within the
meaning of theHabeas Corpus Act, and as such, entitled to sue out a writ in the Philippine courts. (See also In
re Race Horse [1895], 70 Fed., 598.) We so decide.
As to the second point the facts in the Standing Bear case an the Rubi case are not exactly identical. But even
admitting similarity of facts, yet it is known to all that Indian reservations do exist in the United States, that
Indians have been taken from different parts of the country and placed on these reservation, without any
previous consultation as to their own wishes, and that, when once so located, they have been made to remain
on the reservation for their own good and for the general good of the country. If any lesson can be drawn form
the Indian policy of the United States, it is that the determination of this policy is for the legislative and
executive branches of the government and that when once so decided upon, the courts should not interfere to
upset a carefully planned governmental system. Perhaps, just as may forceful reasons exists for the
segregation as existed for the segregation of the different Indian tribes in the United States.
IV. CONSTITUTIONAL QUESTIONS.
A. DELEGATION OF LEGISLATIVE POWER.
The first constitutional objection which confronts us is that the Legislature could not delegate this power to
provincial authorities. In so attempting, it is contended, the Philippine Legislature has abdicated its authority
and avoided its full responsibility.
That the maxim of Constitutional Law forbidding the delegation of legislative power should be zealously
protected, we agree. An understanding of the rule will, however, disclose that it has not bee violated in his
instance.
The rule has nowhere been better stated than in the early Ohio case decided by Judge Ranney, and since
followed in a multitude of case, namely: "The true distinction therefore is between the delegation of power to
make the law, which necessarily involves a discretion as to what it shall be, and conferring an authority or
discretion as to its execution, to be exercised under and in pursuance of the law. The first cannot be done; to
the later no valid objection can be made." (Cincinnati, W. & Z. R. Co. vs. Comm'rs. Clinton County [1852], 1
Ohio S.t, 88.) Discretion, as held by Chief Justice Marshall in Wayman vs. Southard ([1825], 10 Wheat., 1)
may be committed by the Legislature to an executive department or official. The Legislature may make
decisions of executive departments of subordinate official thereof, to whom t has committed the execution of
certain acts, final on questions of fact. (U.S. vs. Kinkead [1918], 248 Fed., 141.) The growing tendency in the
decision is to give prominence to the "necessity" of the case.
Is not all this exactly what the Legislature has attempted to accomplish by the enactment of section 21454 of
the Administrative Code? Has not the Legislature merely conferred upon the provincial governor, with the
approval of the provincial board and the Department Head, discretionary authority as to the execution of the
law? Is not this "necessary"?
The case of West vs. Hitchock, ([1906], 205 U.S., 80) was a petition for mandamus to require the Secretary of
the Interior to approve the selection and taking of one hundred and sixty acres by the relator out of the lands
ceded to the United States by the Wichita and affiliated bands of Indians. Section 463 of the United States
Revised Statutes provided: "The Commissioner of Indian Affairs shall, under the direction of the Secretary of
the Interior, and agreeably to such regulations as the President may prescribe, have the management of all
Indian affairs, and of all matters arising out to the Indian relations." Justice Holmes said: "We should hesitate a
good deal, especially in view of the long established practice of the Department, before saying that this
language was not broad enough to warrant a regulation obviously made for the welfare of the rather helpless
people concerned. The power of Congress is not doubted. The Indians have been treated as wards of the
nation. Some such supervision was necessary, and has been exercised. In the absence of special provisions

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naturally it would be exercised by the Indian Department." (See also as corroborative authority, it any is
needed, Union Bridge Co. vs. U.S. [1907], 204 U.S.., 364, reviewing the previous decisions of the United
States Supreme Court: U.S. vs. Lane [1914], 232 U.S., 598.)
There is another aspect of the question, which once accepted, is decisive. An exception to the general rule.
sanctioned by immemorial practice, permits the central legislative body to delegate legislative powers to local
authorities. The Philippine Legislature has here conferred authority upon the Province of Mindoro, to be
exercised by the provincial governor and the provincial board.
Who but the provincial governor and the provincial board, as the official representatives of the province, are
better qualified to judge "when such as course is deemed necessary in the interest of law and order?" As
officials charged with the administration of the province and the protection of its inhabitants, who but they are
better fitted to select sites which have the conditions most favorable for improving the people who have the
misfortune of being in a backward state?
Section 2145 of the Administrative Code of 1917 is not an unlawful delegation of legislative power by the
Philippine Legislature to provincial official and a department head.
B. RELIGIOUS DISCRIMINATION
The attorney de officio, for petitioners, in a truly remarkable brief, submitted on behalf of his unknown clients,
says that "The statute is perfectly clear and unambiguous. In limpid English, and in words as plain and
unequivocal as language can express, it provides for the segregation of 'non-Christians' and none other." The
inevitable result, them, is that the law "constitutes an attempt by the Legislature to discriminate between
individuals because of their religious beliefs, and is, consequently, unconstitutional."
Counsel's premise once being conceded, his arguments is answerable the Legislature must be understood
to mean what it has plainly expressed; judicial construction is then excluded; religious equality is demanded by
the Organic Law; the statute has violated this constitutional guaranty, and Q. E. D. is invalid. But, as
hereinbefore stated, we do not feel free to discard the long continued meaning given to a common expression,
especially as classification of inhabitants according to religious belief leads the court to what it should avoid,
the nullification of legislative action. We hold that the term "non-Christian" refers to natives of the Philippines
Islands of a low grade of civilization, and that section 2145 of the Administrative Code of 1917, does not
discriminate between individuals an account of religious differences.
C. LIBERTY; DUE PROCESS OF LAW; EQUAL PROTECTION OF THE LAWS.
The third constitutional argument is grounded on those portions of the President's instructions of to the
Commission, the Philippine Bill, and the Jones Law, providing "That no law shall be enacted in said Islands
which shall deprive any person of life, liberty, or property without due process of law, or deny to any person
therein the equal protection of the laws." This constitutional limitation is derived from the Fourteenth
Amendment to the United States Constitution and these provisions, it has been said "are universal in their
application, to all persons within the territorial jurisdiction, without regard to any differences of race, of color, or
of nationality." (Yick Wo vs. Hopkins [1886], 118 U.S., 356.) The protection afforded the individual is then as
much for the non-Christian as for the Christian.
The conception of civil liberty has been variously expressed thus:
Every man may claim the fullest liberty to exercise his faculties, compatible with the possession of
like liberty by every other. (Spencer, Social Statistics, p. 94.)
Liberty is the creature of law, essentially different from that authorized licentiousness that
trespasses on right. That authorized licentiousness that trespasses on right. It is a legal and a
refined idea, the offspring of high civilization, which the savage never understood, and never can
understand. Liberty exists in proportion to wholesome restraint; the more restraint on others to
keep off from us, the more liberty we have . . . that man is free who is protected from injury. (II
Webster's Works, p. 393.)
Liberty consists in the ability to do what one caught to desire and in not being forced to do what
one ought not do desire. (Montesque, spirit of the Laws.)
Even liberty itself, the greatest of all rights, is no unrestricted license to ac according to one's own
will. It is only freedom from restraint under conditions essential to the equal enjoyment of the same
right by others. (Field, J., in Crowley vs. Christensen [1890], 137 U.S., 86.)
Liberty does not import "an absolute right in each person to be, at all times and in all
circumstances, wholly freed from restraint. There are manifold restraints to which every person is
necessarily subject for the common good. On any other basis, organized society could not exist
with safety to its members. Society based on the rule that each one is a law unto himself would
soon be confronted with disorder and anarchy. Real liberty for all could not exist under the
operation of a principle which recognizes the right of each individual person to use his own,
whether in respect of his person or his property, regardless of the injury that may be done to others
. . . There is, of course, a sphere with which the individual may asserts the supremacy of his own
will, and rightfully dispute the authority of any human government especially of any free
government existing under a written Constitution to interfere with the exercise of that will. But it
is equally true that in very well-ordered society charged with the duty of conserving the safety of its
members, the rights of the individual in respect of his liberty may at times, under the pressure of

great dangers, be subjected to such restraint to be enforced by reasonable regulations, as the


safety of the general public may demand." (Harlan, J., In Jacobson vs. Massachusetts [1905] 197
U.S., 11.)
Liberty is freedom to do right and never wrong; it is ever guided by reason and the upright and
honorable conscience of the individual. (Apolinario Mabini.)
Civil Liberty may be said to mean that measure of freedom which may be enjoyed in a civilized community,
consistently with the peaceful enjoyment of like freedom in others. The right to Liberty guaranteed by the
Constitution includes the right to exist and the right to be free from arbitrary personal restraint or servitude.
The term cannot be dwarfed into mere freedom from physical restraint of the person of the citizen, but is
deemed to embrace the right of man to enjoy the faculties with which he has been endowed by this Creator,
subject only to such restraints as are necessary for the common welfare. As enunciated in a long array of
authorities including epoch-making decisions of the United States Supreme Court, Liberty includes the right of
the citizens to be free to use his faculties in all lawful ways; to live an work where he will; to earn his livelihood
by an lawful calling; to pursue any avocations, an for that purpose. to enter into all contracts which may be
proper, necessary, and essential to his carrying out these purposes to a successful conclusion. The chief
elements of the guaranty are the right to contract, the right to choose one's employment, the right to labor, and
the right of locomotion.
In general, it may be said that Liberty means the opportunity to do those things which are ordinarily done by
free men. (There can be noted Cummings vs. Missouri [1866], 4 Wall, 277; Wilkinson vs. Leland [1829], 2
Pet., 627; Williams vs. Fears [1900], 179 U.S., 274; Allgeyer vs. Louisiana [1896], 165, U.S., 578;
State vs. Kreutzberg [1902], 114 Wis., 530. See 6 R.C.L., 258, 261.)
One thought which runs through all these different conceptions of Liberty is plainly apparent. It is this: "Liberty"
as understood in democracies, is not license; it is "Liberty regulated by law." Implied in the term is restraint by
law for the good of the individual and for the greater good of the peace and order of society and the general
well-being. No man can do exactly as he pleases. Every man must renounce unbridled license. The right of
the individual is necessarily subject to reasonable restraint by general law for the common good. Whenever
and wherever the natural rights of citizen would, if exercises without restraint, deprive other citizens of rights
which are also and equally natural, such assumed rights must yield to the regulation of law. The Liberty of the
citizens may be restrained in the interest of the public health, or of the public order and safety, or otherwise
within the proper scope of the police power. (See Hall vs. Geiger-Jones [1916], 242 U.S., 539; Hardie-Tynes
Manufacturing Co. vs. Cruz [1914], 189 Al., 66.)
None of the rights of the citizen can be taken away except by due process of law. Daniel Webster, in the
course of the argument in the Dartmouth College Case before the United States Supreme Court, since a
classic in forensic literature, said that the meaning of "due process of law" is, that "every citizen shall hold his
life, liberty, property, an immunities under the protection of the general rules which govern society." To
constitute "due process of law," as has been often held, a judicial proceeding is not always necessary. In some
instances, even a hearing and notice are not requisite a rule which is especially true where much must be left
to the discretion of the administrative officers in applying a law to particular cases. (See McGehee, Due
Process of Law, p. 371.) Neither is due process a stationary and blind sentinel of liberty. "Any legal proceeding
enforced by public authority, whether sanctioned by age and customs, or newly devised in the discretion of the
legislative power, in furtherance of the public good, which regards and preserves these principles of liberty and
justice, must be held to be due process of law." (Hurtado vs. California [1883], 110, U.S., 516.) "Due process
of law" means simply . . . "first, that there shall be a law prescribed in harmony with the general powers of the
legislative department of the Government; second, that this law shall be reasonable in its operation; third, that
it shall be enforced according to the regular methods of procedure prescribed; and fourth, that it shall be
applicable alike to all the citizens of the state or to all of a class." (U.S. vs. Ling Su Fan [1908], 10 Phil., 104,
affirmed on appeal to the United States Supreme Court. 1) "What is due process of law depends on
circumstances. It varies with the subject-matter and necessities of the situation." (Moyer vs. Peablody [1909],
212 U. S., 82.)
The pledge that no person shall be denied the equal protection of the laws is not infringed by a statute which is
applicable to all of a class. The classification must have a reasonable basis and cannot be purely arbitrary in
nature.
We break off with the foregoing statement, leaving the logical deductions to be made later on.
D. SLAVERY AND INVOLUNTARY SERVITUDE.
The fourth constitutional contention of petitioner relates to the Thirteen Amendment to the United States
Constitution particularly as found in those portions of Philippine Organic Law providing "That slavery shall not
exist in said Islands; nor shall involuntary servitude exist except as a punishment for crime whereof the party
shall have been duly convicted." It is quite possible that the Thirteenth Amendment, since reaching to "any
place subject to" the "jurisdiction" of the United States, has force in the Philippine. However this may be, the
Philippine Legislature has, by adoption, with necessary modifications, of sections 268 to 271 inclusive of the
United States Criminal Code, prescribed the punishment for these crimes. Slavery and involuntary servitude,
together wit their corollary, peonage, all denote "a condition of enforced, compulsory service of one to
another." (Hodges vs. U.S. [1906], 203 U.S., 1.) The term of broadest scope is possibly involuntary servitude.

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It has been applied to any servitude in fact involuntary, no matter under what form such servitude may have
been disguised. (Bailey vs. Alabama [1910], 219 U.S., 219.)
So much for an analysis of those constitutional provisions on which petitioners rely for their freedom. Next
must come a description of the police power under which the State must act if section 2145 is to be held valid.
E. THE POLICE POWER.
Not attempting to phrase a definition of police power, all that it is necessary to note at this moment is the
farreaching scope of the power, that it has become almost possible to limit its weep, and that among its
purposes is the power to prescribe regulations to promote the health, peace, morals, education, and good
order of the people, and to legislate so as to increase the industries of the State, develop its resources and
add to is wealth and prosperity. (See Barbier vs. Connolly [1884], 113 U.S., 27.) What we are not interested in
is the right of the government to restrain liberty by the exercise of the police power.
"The police power of the State," one court has said, . . . "is a power coextensive with self-protection, and is not
inaptly termed the 'law of overruling necessity.' It may be said to be that inherent and plenary power in the
State which enables it to prohibit all things hurtful to the comfort, safety and welfare of society." (Lake
View vs. Rose Hill Cemetery Co. [1873], 70 Ill., 191.) Carried onward by the current of legislation, the judiciary
rarely attempt to dam the on rushing power of legislative discretion, provided the purposes of the law do not go
beyond the great principles that mean security for the public welfare or do not arbitrarily interfere with the right
of the individual.
The Government of the Philippine Islands has both on reason and authority the right to exercise the sovereign
police power in the promotion of the general welfare and the public interest. "There can be not doubt that the
exercise of the police power of the Philippine Government belongs to the Legislature and that this power is
limited only by the Acts of Congress and those fundamental principles which lie at the foundation of all
republican forms of government." (Churchill and Tait vs. Rafferty [1915], 32 Phil., 580; U.S. vs. Pompeya
[1915], 31 Phil., 245.)
With the foregoing approximation of the applicable basic principles before us, before finally deciding whether
any constitutional provision has indeed been violated by section 2145 of the Administrative Code, we should
endeavor to ascertain the intention of the Legislature in enacting this section. If legally possible, such
legislative intention should be effectuated.
F. LEGISLATIVE INTENT.
The preamble of the resolution of the provincial board of Mindoro which set apart the Tigbao reservation, it will
be remembered, assigned as reasons fort the action, the following: (1) The failure of former attempts for the
advancement of the non-Christian people of the province; and (2) the only successfully method for educating
the Manguianes was to oblige them to live in a permanent settlement. The Solicitor-General adds the
following; (3) The protection of the Manguianes; (4) the protection of the public forests in which they roam; (5)
the necessity of introducing civilized customs among the Manguianes.
The present Secretary of the Interior says of the Tigbao reservation and of the motives for its selection, the
following:
To inform himself of the conditions of those Manguianes who were taken together to Tigbao, the
Secretary of the Interior on June 10 to 13, 1918, made a trip to the place. There he found that the
site selected is a good one; that creditable progress has been made in the clearing of forests,
construction of buildings, etc., that there appears to be encouraging reaction by the boys to the
work of the school the requirements of which they appear to meet with enthusiastic interest after
the first weeks which are necessarily a somewhat trying period for children wholly unaccustomed
to orderly behaviour and habit of life. He also gathered the impression that the results obtained
during the period of less than one year since the beginning of the institution definitely justify its
continuance and development.
Of course, there were many who were protesting against that segregation. Such was naturally to
be expected. But the Secretary of the Interior, upon his return to Manila, made the following
statement to the press:
"It is not deemed wise to abandon the present policy over those who prefer to live a
nomadic life and evade the influence of civilization. The Government will follow its
policy to organize them into political communities and to educate their children with the
object of making them useful citizens of this country. To permit them to live a wayfaring
life will ultimately result in a burden to the state and on account of their ignorance, they
will commit crimes and make depredation, or if not they will be subject to involuntary
servitude by those who may want to abuse them."
The Secretary of the Interior, who is the official charged with the supervision of all the non-Christian people,
has adopted as the polaris of his administration "the advancement of the non-Christian elements of our
population to equality and unification with the highly civilized Christian inhabitants." This is carried on by the
adoption of the following measures:
(a) Pursuance of the closer settlement policy whereby people of seminomadic race are induced to
leave their wild habitat and settle in organized communities.

(b) The extension of the public school system and the system of public health throughout the
regions inhabited by the non-Christian people.
(c) The extention of public works throughout the Mohammedan regions to facilitate their
development and the extention of government control.
(d) Construction of roads and trials between one place and another among non-Christians, to
promote social and commercial intercourse and maintain amicable relations among them and with
the Christian people.
(e) Pursuance of the development of natural economic resources, especially agriculture.
( f ) The encouragement of immigration into, and of the investment of private capital in, the fertile
regions of Mindanao and Sulu.
The Secretary adds:
To attain the end desired, work of a civilizing influence have been continued among the nonChristian people. These people are being taught and guided to improve their living conditions in
order that they may fully appreciate the benefits of civilization. Those of them who are still given to
nomadic habits are being persuaded to abandon their wild habitat and settle in organized
settlements. They are being made to understand that it is the purpose of the Government to
organize them politically into fixed and per manent communities, thus bringing them under the
control of the Government, to aid them to live and work, protect them from involuntary servitude
and abuse, educate their children, and show them the advantages of leading a civilized life with
their civilized brothers. In short, they are being impressed with the purposes and objectives of the
Government of leading them to economic, social, and political equality, and unification with the
more highly civilized inhabitants of the country. (See Report of the Department for 1917.)
The fundamental objective of governmental policy is to establish friendly relations with the so-called nonChristians, and to promote their educational, agricultural, industrial, and economic development and
advancement in civilization. (Note Acts Nos. 2208, 2404, 2444.) Act No. 2674 in reestablishing the Bureau of
non-Christian Tribes, defines the aim of the Government towards the non-Christian people in the following
unequivocal terms:
It shall be the duty of the Bureau of non-Christian Tribes to continue the work for advancement and
liberty in favor of the region inhabited by non-Christian Filipinos and foster by all adequate means
and in a systematical, rapid, and complete manner the moral, material, economic, social, and
political development of those regions, always having in view the aim of rendering permanent the
mutual intelligence between, and complete fusion of, all the Christian and non-Christian elements
populating the provinces of the Archipelago. (Sec. 3.)
May the Manguianes not be considered, as are the Indians in the United States, proper wards of the Filipino
people? By the fostering care of a wise Government, may not these unfortunates advance in the "habits and
arts of civilization?" Would it be advisable for the courts to intrude upon a plan, carefully formulated, and
apparently working out for the ultimate good of these people?
In so far as the Manguianes themselves are concerned, the purpose of the Government is evident. Here, we
have on the Island of Mindoro, the Manguianes, leading a nomadic life, making depredations on their more
fortunate neighbors, uneducated in the ways of civilization, and doing nothing for the advancement of the
Philippine Islands. What the Government wished to do by bringing than into a reservation was to gather
together the children for educational purposes, and to improve the health and morals was in fine, to begin
the process of civilization. this method was termed in Spanish times, "bringing under the bells." The same idea
adapted to the existing situation, has been followed with reference to the Manguianes and other peoples of the
same class, because it required, if they are to be improved, that they be gathered together. On these few
reservations there live under restraint in some cases, and in other instances voluntarily, a few thousands of the
uncivilized people. Segregation really constitutes protection for the manguianes.
Theoretically, one may assert that all men are created free and equal. Practically, we know that the axiom is
not precisely accurate. The Manguianes, for instance, are not free, as civilized men are free, and they are not
the equals of their more fortunate brothers. True, indeed, they are citizens, with many but not all the rights
which citizenship implies. And true, indeed, they are Filipinos. But just as surely, the Manguianes are citizens
of a low degree of intelligence, and Filipinos who are a drag upon the progress of the State.
In so far as the relation of the Manguianes to the State is concerned, the purposes of the Legislature in
enacting the law, and of the executive branch in enforcing it, are again plain. Settlers in Mindoro must have
their crops and persons protected from predatory men, or they will leave the country. It is no argument to say
that such crimes are punished by the Penal Code, because these penalties are imposed after commission of
the offense and not before. If immigrants are to be encouraged to develop the resources of the great Islands of
Mindoro, and its, as yet, unproductive regions, the Government must be in a position to guarantee peace and
order.
Waste lands do not produce wealth. Waste people do not advance the interest of the State. Illiteracy and
thriftlessness are not conducive to homogeneity. The State to protect itself from destruction must prod on the
laggard and the sluggard. The great law of overwhelming necessity is all convincing.
To quote again from the instructive memorandum of the Secretary of the Interior:

Page 11 of 66
Living a nomadic and a wayfaring life and evading the influence of civilization, they (the
manguianes) are engaged in the works of destruction burning and destroying the forests and
making illegal caigins thereon. Not bringing any benefit to the State but instead injuring and
damaging its interests, what will ultimately become of these people with the sort of liberty they wish
to preserve and for which they are now fighting in court? They will ultimately become a heavy
burden to the State and on account of their ignorance they will commit crimes and make
depredations, or if not they will be subjected to involuntary servitude by those who may want to
abuse them.
There is no doubt in my mind that this people a right conception of liberty and does not practice
liberty in a rightful way. They understand liberty as the right to do anything they will going from
one place to another in the mountains, burning and destroying forests and making illegal caigins
thereon.
Not knowing what true liberty is and not practising the same rightfully, how can they allege that
they are being deprived thereof without due process of law?
xxx
xxx
xxx
But does the Constitutional guaranty that 'no person shall be deprived of his liberty without due
process of law' apply to a class of persons who do not have a correct idea of what liberty is and do
not practise liberty in a rightful way?
To say that it does will mean to sanction and defend an erroneous idea of such class of persons as
to what liberty is. It will mean, in the case at bar, that the Government should not adopt any
measures looking to the welfare and advancement of the class of persons in question. It will mean
that this people should be let along in the mountains and in a permanent state of savagery without
even the remotest hope of coming to understand liberty in its true and noble sense.
In dealing with the backward population, like the Manguianes, the Government has been placed in
the alternative of either letting them alone or guiding them in the path of civilization. The latter
measure was adopted as the one more in accord with humanity and with national conscience.
xxx
xxx
xxx
The national legislation on the subject of non-Christian people has tended more and more towards
the education and civilization of such people and fitting them to be citizens. The progress of those
people under the tutelage of the Government is indeed encouraging and the signs of the times
point to a day which is not far distant when they will become useful citizens. In the light of what has
already been accomplished which has been winning the gratitude of most of the backward people,
shall we give up the noble work simply because a certain element, believing that their personal
interests would be injured by such a measure has come forward and challenged the authority of
the Government to lead this people in the pat of civilization? Shall we, after expending sweat,
treasure, and even blood only to redeem this people from the claws of ignorance and superstition,
now willingly retire because there has been erroneously invoked in their favor that Constitutional
guaranty that no person shall be deprived of his liberty without due process of law? To allow them
to successfully invoke that Constitutional guaranty at this time will leave the Government without
recourse to pursue the works of civilizing them and making them useful citizens. They will thus left
in a permanent state of savagery and become a vulnerable point to attack by those who doubt, nay
challenge, the ability of the nation to deal with our backward brothers.
The manguianes in question have been directed to live together at Tigbao. There they are being
taught and guided to improve their living conditions. They are being made to understand that they
object of the government is to organize them politically into fixed and permanent communities.
They are being aided to live and work. Their children are being educated in a school especially
established for them. In short, everything is being done from them in order that their advancement
in civilization and material prosperity may be assured. Certainly their living together in Tigbao does
not make them slaves or put them in a condition compelled to do services for another. They do not
work for anybody but for themselves. There is, therefore, no involuntary servitude.
But they are compelled to live there and prohibited from emigrating to some other places under
penalty of imprisonment. Attention in this connection is invited to the fact that this people, living a
nomadic and wayfaring life, do not have permanent individual property. They move from one place
to another as the conditions of living warrants, and the entire space where they are roving about is
the property of the nation, the greater part being lands of public domain. Wandering from one place
to another on the public lands, why can not the government adopt a measure to concentrate them
in a certain fixed place on the public lands, instead of permitting them to roam all over the entire
territory? This measure is necessary both in the interest of the public as owner of the lands about
which they are roving and for the proper accomplishment of the purposes and objectives of the
government. For as people accustomed to nomadic habit, they will always long to return to the
mountains and follow a wayfaring life, and unless a penalty is provinced for, you can not make
them live together and the noble intention of the Government of organizing them politically will
come to naught.

G. APPLICATION AND CONCLUSION.


Our exhaustive study should have left us in a position to answer specific objections and to reach a general
conclusion.
In the first place, it is argued that the citizen has the right, generally speaking, to go where he pleases. Could
be not, however, be kept away from certain localities ? To furnish an example from the Indian legislation. The
early Act of Congress of 1802 (2 U.S. Stat. at L., p. 141) Indian reservation. Those citizens certainly did not
possess absolute freedom of locomotion. Again the same law provided for the apprehension of marauding
Indians. Without any doubt, this law and other similar were accepted and followed time and again without
question.
It is said that, if we hold this section to be constitutional, we leave this weak and defenseless people confined
as in a prison at the mercy of unscrupulous official. What, it is asked, would be the remedy of any oppressed
Manguian? The answer would naturally be that the official into whose hands are given the enforcement of the
law would have little or not motive to oppress these people; on the contrary, the presumption would all be that
they would endeavor to carry out the purposes of the law intelligently and patriotically. If, indeed, they did illtreat any person thus confined, there always exists the power of removal in the hands of superior officers, and
the courts are always open for a redress of grievances. When, however, only the validity of the law is generally
challenged and no particular case of oppression is called to the attention of the courts, it would seems that the
Judiciary should not unnecessarily hamper the Government in the accomplishment of its laudable purpose.
The question is above all one of sociology. How far, consistently with freedom, may the right and liberties of
the individual members of society be subordinated to the will of the Government? It is a question which has
assailed the very existence of government from the beginning of time. Now purely an ethical or philosophical
subject, nor now to be decided by force, it has been transferred to the peaceful forum of the Judiciary. In
resolving such an issue, the Judiciary must realize that the very existence of government renders imperatives
a power to restrain the individual to some extent, dependent, of course, on the necessities of the class
attempted to be benefited. As to the particular degree to which the Legislature and the Executive can go in
interfering with the rights of the citizen, this is, and for a along time to come will be, impossible for the courts to
determine.
The doctrines of laissez faire and of unrestricted freedom of the individual, as axioms of economics and
political theory, are of the past. The modern period has shown as widespread belief in the amplest possible
demonstration of governmental activity. The courts unfortunately have sometimes seemed to trial after the
other two branches of the government in this progressive march.
Considered, therefore, purely as an exercise of the police power, the courts cannot fairly say that the
Legislature has exceeded its rightful authority. it is, indeed, an unusual exercise of that power. But a great
malady requires an equally drastic remedy.
Further, one cannot hold that the liberty of the citizen is unduly interfered without when the degree of
civilization of the Manguianes is considered. They are restrained for their own good and the general good of
the Philippines. Nor can one say that due process of law has not been followed. To go back to our definition of
due process of law and equal protection of the law, there exists a law ; the law seems to be reasonable; it is
enforced according to the regular methods of procedure prescribed; and it applies alike to all of a class.
As a point which has been left for the end of this decision and which, in case of doubt, would lead to the
determination that section 2145 is valid. it the attitude which the courts should assume towards the settled
policy of the Government. In a late decision with which we are in full accord, Gambles vs. Vanderbilt University
(200 Southwestern Reporter, 510) the Chief Justice of the Supreme Court of Tennessee writes:
We can seen objection to the application of public policy as a ratio decidendi. Every really new question that
comes before the courts is, in the last analysis, determined on that theory, when not determined by
differentiation of the principle of a prior case or line of cases, or by the aid of analogies furnished by such prior
case. In balancing conflicting solutions, that one is perceived to tip the scales which the court believes will best
promote the public welfare in its probable operation as a general rule or principle. But public policy is not a
thing inflexible. No court is wise enough to forecast its influence in all possible contingencies. Distinctions must
be made from time to time as sound reason and a true sense of justice may dictate."
Our attempt at giving a brief history of the Philippines with reference to the so-called non-Christians has been
in vain, if we fail to realize that a consistent governmental policy has been effective in the Philippines from
early days to the present. The idea to unify the people of the Philippines so that they may approach the
highest conception of nationality. If all are to be equal before the law, all must be approximately equal in
intelligence. If the Philippines is to be a rich and powerful country, Mindoro must be populated, and its fertile
regions must be developed. The public policy of the Government of the Philippine Islands is shaped with a
view to benefit the Filipino people as a whole. The Manguianes, in order to fulfill this governmental policy, must
be confined for a time, as we have said, for their own good and the good of the country.
Most cautiously should the power of this court to overrule the judgment of the Philippine Legislature, a
coordinate branch, be exercised. The whole tendency of the best considered case is toward non-interference
on the part of the courts whenever political ideas are the moving consideration. Justice Holmes, in one of the
aphorisms for which he is justly famous, said that "constitutional law, like other mortal contrivances, has to
take some chances." (Blinn vs. Nelson [1911], 222 U.S., 1.) If in the final decision of the many grave questions

Page 12 of 66
which this case presents, the courts must take "a chance," it should be with a view to upholding the law, with a
view to the effectuation of the general governmental policy, and with a view to the court's performing its duty in
no narrow and bigoted sense, but with that broad conception which will make the courts as progressive and
effective a force as are the other departments of the Government.
We are of the opinion that action pursuant to section 2145 of the Administrative Code does not deprive a
person of his liberty without due process of law and does not deny to him the equal protection of the laws, and
that confinement in reservations in accordance with said section does not constitute slavery and involuntary
servitude. We are further of the opinion that section 2145 of the Administrative Code is a legitimate exertion of
the police power, somewhat analogous to the Indian policy of the United States. Section 2145 of the
Administrative Code of 1917 is constitutional.
Petitioners are not unlawfully imprisoned or restrained of their liberty. Habeas corpus can, therefore, not issue.
This is the true ruling of the court. Costs shall be taxes against petitioners. So ordered.
Arellano, C.J., Torres and Avancea, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-24693

July 31, 1967

ERMITA-MALATE HOTEL AND MOTEL OPERATORS ASSOCIATION, INC., HOTEL DEL MAR INC. and
GO CHIU,petitioners-appellees,
vs.
THE HONORABLE CITY MAYOR OF MANILA, respondent-appellant.
VICTOR ALABANZA, intervenor-appellee.
Panganiban, Abad and Associates Law Office for respondent-appellant.
J. M. Aruego, Tenchavez and Associates for intervenor-appellee.

After which the alleged grievances against the ordinance were set forth in detail. There was the assertion of its
being beyond the powers of the Municipal Board of the City of Manila to enact insofar as it would regulate
motels, on the ground that in the revised charter of the City of Manila or in any other law, no reference is made
to motels; that Section 1 of the challenged ordinance is unconstitutional and void for being unreasonable and
violative of due process insofar as it would impose P6,000.00 fee per annum for first class motels and
P4,500.00 for second class motels; that the provision in the same section which would require the owner,
manager, keeper or duly authorized representative of a hotel, motel, or lodging house to refrain from
entertaining or accepting any guest or customer or letting any room or other quarter to any person or persons
without his filling up the prescribed form in a lobby open to public view at all times and in his presence,
wherein the surname, given name and middle name, the date of birth, the address, the occupation, the sex,
the nationality, the length of stay and the number of companions in the room, if any, with the name,
relationship, age and sex would be specified, with data furnished as to his residence certificate as well as his
passport number, if any, coupled with a certification that a person signing such form has personally filled it up
and affixed his signature in the presence of such owner, manager, keeper or duly authorized representative,
with such registration forms and records kept and bound together, it also being provided that the premises and
facilities of such hotels, motels and lodging houses would be open for inspection either by the City Mayor, or
the Chief of Police, or their duly authorized representatives is unconstitutional and void again on due process
grounds, not only for being arbitrary, unreasonable or oppressive but also for being vague, indefinite and
uncertain, and likewise for the alleged invasion of the right to privacy and the guaranty against selfincrimination; that Section 2 of the challenged ordinance classifying motels into two classes and requiring the
maintenance of certain minimum facilities in first class motels such as a telephone in each room, a dining
room or, restaurant and laundry similarly offends against the due process clause for being arbitrary,
unreasonable and oppressive, a conclusion which applies to the portion of the ordinance requiring second
class motels to have a dining room; that the provision of Section 2 of the challenged ordinance prohibiting a
person less than 18 years old from being accepted in such hotels, motels, lodging houses, tavern or common
inn unless accompanied by parents or a lawful guardian and making it unlawful for the owner, manager,
keeper or duly authorized representative of such establishments to lease any room or portion thereof more
than twice every 24 hours, runs counter to the due process guaranty for lack of certainty and for its
unreasonable, arbitrary and oppressive character; and that insofar as the penalty provided for in Section 4 of
the challenged ordinance for a subsequent conviction would, cause the automatic cancellation of the license of
the offended party, in effect causing the destruction of the business and loss of its investments, there is once
again a transgression of the due process clause.

FERNANDO, J.:
The principal question in this appeal from a judgment of the lower court in an action for prohibition is whether
Ordinance No. 4760 of the City of Manila is violative of the due process clause. The lower court held that it is
and adjudged it "unconstitutional, and, therefore, null and void." For reasons to be more specifically set forth,
such judgment must be reversed, there being a failure of the requisite showing to sustain an attack against its
validity.
The petition for prohibition against Ordinance No. 4760 was filed on July 5, 1963 by the petitioners, ErmitaMalate Hotel and Motel Operators Association, one of its members, Hotel del Mar Inc., and a certain Go Chiu,
who is "the president and general manager of the second petitioner" against the respondent Mayor of the City
of Manila who was sued in his capacity as such "charged with the general power and duty to enforce
ordinances of the City of Manila and to give the necessary orders for the faithful execution and enforcement of
such ordinances." (par. 1). It was alleged that the petitioner non-stock corporation is dedicated to the
promotion and protection of the interest of its eighteen (18) members "operating hotels and motels,
characterized as legitimate businesses duly licensed by both national and city authorities, regularly paying
taxes, employing and giving livelihood to not less than 2,500 person and representing an investment of more
than P3 million."1 (par. 2). It was then alleged that on June 13, 1963, the Municipal Board of the City of Manila
enacted Ordinance No. 4760, approved on June 14, 1963 by the then Vice-Mayor Herminio Astorga, who was
at the time acting as Mayor of the City of Manila. (par. 3).

There was a plea for the issuance of preliminary injunction and for a final judgment declaring the above
ordinance null and void and unenforceable. The lower court on July 6, 1963 issued a writ of preliminary
injunction ordering respondent Mayor to refrain from enforcing said Ordinance No. 4760 from and after July 8,
1963.
In the a answer filed on August 3, 1963, there was an admission of the personal circumstances regarding the
respondent Mayor and of the fact that petitioners are licensed to engage in the hotel or motel business in the
City of Manila, of the provisions of the cited Ordinance but a denial of its alleged nullity, whether on statutory or
constitutional grounds. After setting forth that the petition did fail to state a cause of action and that the
challenged ordinance bears a reasonable relation, to a proper purpose, which is to curb immorality, a valid and
proper exercise of the police power and that only the guests or customers not before the court could complain
of the alleged invasion of the right to privacy and the guaranty against self incrimination, with the assertion that
the issuance of the preliminary injunction ex parte was contrary to law, respondent Mayor prayed for, its
dissolution and the dismissal of the petition.
Instead of evidence being offered by both parties, there was submitted a stipulation of facts dated September
28, 1964, which reads:
1. That the petitioners Ermita-Malate Hotel and Motel Operators Association, Inc. and Hotel del
Mar Inc. are duly organized and existing under the laws of the Philippines, both with offices in the

Page 13 of 66
City of Manila, while the petitioner Go Chin is the president and general manager of Hotel del Mar
Inc., and the intervenor Victor Alabanza is a resident of Baguio City, all having the capacity to sue
and be sued;
2. That the respondent Mayor is the duly elected and incumbent City Mayor and chief executive of
the City of Manila charged with the general power and duty to enforce ordinances of the City of
Manila and to give the necessary orders for the faithful execution and enforcement of such
ordinances;
3. That the petitioners are duly licensed to engage in the business of operating hotels and motels
in Malate and Ermita districts in Manila;
4. That on June 13, 1963, the Municipal Board of the City of Manila enacted Ordinance No. 4760,
which was approved on June 14, 1963, by Vice-Mayor Herminio Astorga, then the acting City
Mayor of Manila, in the absence of the respondent regular City Mayor, amending sections 661,
662, 668-a, 668-b and 669 of the compilation of the ordinances of the City of Manila besides
inserting therein three new sections. This ordinance is similar to the one vetoed by the respondent
Mayor (Annex A) for the reasons stated in its 4th Indorsement dated February 15, 1963 (Annex B);
5. That the explanatory note signed by then Councilor Herminio Astorga was submitted with the
proposed ordinance (now Ordinance 4760) to the Municipal Board, copy of which is attached
hereto as Annex C;
6. That the City of Manila derived in 1963 an annual income of P101,904.05 from license fees paid
by the 105 hotels and motels (including herein petitioners) operating in the City of
Manila.1wph1.t
Thereafter came a memorandum for respondent on January 22, 1965, wherein stress was laid on the
presumption of the validity of the challenged ordinance, the burden of showing its lack of conformity to the
Constitution resting on the party who assails it, citing not only U.S. v. Salaveria, but likewise applicable
American authorities. Such a memorandum likewise refuted point by point the arguments advanced by
petitioners against its validity. Then barely two weeks later, on February 4, 1965, the memorandum for
petitioners was filed reiterating in detail what was set forth in the petition, with citations of what they
considered to be applicable American authorities and praying for a judgment declaring the challenged
ordinance "null and void and unenforceable" and making permanent the writ of preliminary injunction issued.
After referring to the motels and hotels, which are members of the petitioners association, and referring to the
alleged constitutional questions raised by the party, the lower court observed: "The only remaining issue here
being purely a question of law, the parties, with the nod of the Court, agreed to file memoranda and thereafter,
to submit the case for decision of the Court." It does appear obvious then that without any evidence submitted
by the parties, the decision passed upon the alleged infirmity on constitutional grounds of the challenged
ordinance, dismissing as is undoubtedly right and proper the untenable objection on the alleged lack of
authority of the City of Manila to regulate motels, and came to the conclusion that "the challenged Ordinance
No. 4760 of the City of Manila, would be unconstitutional and, therefore, null and void." It made permanent the
preliminary injunction issued against respondent Mayor and his agents "to restrain him from enforcing the
ordinance in question." Hence this appeal.
As noted at the outset, the judgment must be reversed. A decent regard for constitutional doctrines of a
fundamental character ought to have admonished the lower court against such a sweeping condemnation of
the challenged ordinance. Its decision cannot be allowed to stand, consistently with what has hitherto been the
accepted standards of constitutional adjudication, in both procedural and substantive aspects.

Primarily what calls for a reversal of such a decision is the absence of any evidence to offset the presumption
of validity that attaches to a challenged statute or ordinance. As was expressed categorically by Justice
Malcolm: "The presumption is all in favor of validity x x x . The action of the elected representatives of the
people cannot be lightly set aside. The councilors must, in the very nature of things, be familiar with the
necessities of their particular municipality and with all the facts and circumstances which surround the subject
and necessitate action. The local legislative body, by enacting the ordinance, has in effect given notice that the
regulations are essential to the well being of the people x x x . The Judiciary should not lightly set aside
legislative action when there is not a clear invasion of personal or property rights under the guise of police
regulation.2
It admits of no doubt therefore that there being a presumption of validity, the necessity for evidence to rebut it
is unavoidable, unless the statute or ordinance is void on its face which is not the case here. The principle has
been nowhere better expressed than in the leading case of O'Gorman & Young v. Hartford Fire Insurance
Co.,3 where the American Supreme Court through Justice Brandeis tersely and succinctly summed up the
matter thus: The statute here questioned deals with a subject clearly within the scope of the police power. We
are asked to declare it void on the ground that the specific method of regulation prescribed is unreasonable
and hence deprives the plaintiff of due process of law. As underlying questions of fact may condition the
constitutionality of legislation of this character, the resumption of constitutionality must prevail in the absence
of some factual foundation of record for overthrowing the statute." No such factual foundation being laid in the
present case, the lower court deciding the matter on the pleadings and the stipulation of facts, the presumption
of validity must prevail and the judgment against the ordinance set aside.
Nor may petitioners assert with plausibility that on its face the ordinance is fatally defective as being repugnant
to the due process clause of the Constitution. The mantle of protection associated with the due process
guaranty does not cover petitioners. This particular manifestation of a police power measure being specifically
aimed to safeguard public morals is immune from such imputation of nullity resting purely on conjecture and
unsupported by anything of substance. To hold otherwise would be to unduly restrict and narrow the scope of
police power which has been properly characterized as the most essential, insistent and the least limitable of
powers,4extending as it does "to all the great public needs." 5 It would be, to paraphrase another leading
decision, to destroy the very purpose of the state if it could be deprived or allowed itself to be deprived of its
competence to promote public health, public morals, public safety and the genera welfare. 6 Negatively put,
police power is "that inherent and plenary power in the State which enables it to prohibit all that is hurt full to
the comfort, safety, and welfare of society.7
There is no question but that the challenged ordinance was precisely enacted to minimize certain practices
hurtful to public morals. The explanatory note of the Councilor Herminio Astorga included as annex to the
stipulation of facts, speaks of the alarming increase in the rate of prostitution, adultery and fornication in
Manila traceable in great part to the existence of motels, which "provide a necessary atmosphere for
clandestine entry, presence and exit" and thus become the "ideal haven for prostitutes and thrill-seekers." The
challenged ordinance then proposes to check the clandestine harboring of transients and guests of these
establishments by requiring these transients and guests to fill up a registration form, prepared for the purpose,
in a lobby open to public view at all times, and by introducing several other amendatory provisions calculated
to shatter the privacy that characterizes the registration of transients and guests." Moreover, the increase in
the licensed fees was intended to discourage "establishments of the kind from operating for purpose other
than legal" and at the same time, to increase "the income of the city government." It would appear therefore
that the stipulation of facts, far from sustaining any attack against the validity of the ordinance, argues
eloquently for it.
It is a fact worth noting that this Court has invariably stamped with the seal of its approval, ordinances
punishing vagrancy and classifying a pimp or procurer as a vagrant; 8 provide a license tax for and regulating
the maintenance or operation of public dance halls; 9 prohibiting gambling;10 prohibiting jueteng;11 and
monte;12prohibiting playing of panguingui on days other than Sundays or legal holidays; 13 prohibiting the
operation of pinball machines;14 and prohibiting any person from keeping, conducting or maintaining an opium

Page 14 of 66
joint or visiting a place where opium is smoked or otherwise used, 15 all of which are intended to protect public
morals.
On the legislative organs of the government, whether national or local, primarily rest the exercise of the police
power, which, it cannot be too often emphasized, is the power to prescribe regulations to promote the health,
morals, peace, good order, safety and general welfare of the people. In view of the requirements of due
process, equal protection and other applicable constitutional guaranties however, the exercise of such police
power insofar as it may affect the life, liberty or property of any person is subject to judicial inquiry. Where such
exercise of police power may be considered as either capricious, whimsical, unjust or unreasonable, a denial
of due process or a violation of any other applicable constitutional guaranty may call for correction by the
courts.
We are thus led to considering the insistent, almost shrill tone, in which the objection is raised to the question
of due process.16 There is no controlling and precise definition of due process. It furnishes though a standard
to which the governmental action should conform in order that deprivation of life, liberty or property, in each
appropriate case, be valid. What then is the standard of due process which must exist both as a procedural
and a substantive requisite to free the challenged ordinance, or any governmental action for that matter, from
the imputation of legal infirmity sufficient to spell its doom? It is responsiveness to the supremacy of reason,
obedience to the dictates of justice. Negatively put, arbitrariness is ruled out and unfairness avoided. To satisfy
the due process requirement, official action, to paraphrase Cardozo, must not outrun the bounds of reason
and result in sheer oppression. Due process is thus hostile to any official action marred by lack of
reasonableness. Correctly it has been identified as freedom from arbitrariness. It is the embodiment of the
sporting idea of fair play.17 It exacts fealty "to those strivings for justice" and judges the act of officialdom of
whatever branch "in the light of reason drawn from considerations of fairness that reflect [democratic]
traditions of legal and political thought." 18 It is not a narrow or "technical conception with fixed content
unrelated to time, place and circumstances," 19 decisions based on such a clause requiring a "close and
perceptive inquiry into fundamental principles of our society." 20 Questions of due process are not to be treated
narrowly or pedantically in slavery to form or phrases. 21
It would thus be an affront to reason to stigmatize an ordinance enacted precisely to meet what a municipal
lawmaking body considers an evil of rather serious proportion an arbitrary and capricious exercise of authority.
It would seem that what should be deemed unreasonable and what would amount to an abdication of the
power to govern is inaction in the face of an admitted deterioration of the state of public morals. To be more
specific, the Municipal Board of the City of Manila felt the need for a remedial measure. It provided it with the
enactment of the challenged ordinance. A strong case must be found in the records, and, as has been set
forth, none is even attempted here to attach to an ordinance of such character the taint of nullity for an alleged
failure to meet the due process requirement. Nor does it lend any semblance even of deceptive plausibility to
petitioners' indictment of Ordinance No. 4760 on due process grounds to single out such features as the
increased fees for motels and hotels, the curtailment of the area of freedom to contract, and, in certain
particulars, its alleged vagueness.
Admittedly there was a decided increase of the annual license fees provided for by the challenged ordinance
for hotels and motels, 150% for the former and over 200% for the latter, first-class motels being required to
pay a P6,000 annual fee and second-class motels, P4,500 yearly. It has been the settled law however, as far
back as 1922 that municipal license fees could be classified into those imposed for regulating occupations or
regular enterprises, for the regulation or restriction of non-useful occupations or enterprises and for revenue
purposes only.22 As was explained more in detail in the above Cu Unjieng case: (2) Licenses for non-useful
occupations are also incidental to the police power and the right to exact a fee may be implied from the power
to license and regulate, but in fixing amount of the license fees the municipal corporations are allowed a much
wider discretion in this class of cases than in the former, and aside from applying the well-known legal
principle that municipal ordinances must not be unreasonable, oppressive, or tyrannical, courts have, as a
general rule, declined to interfere with such discretion. The desirability of imposing restraint upon the number
of persons who might otherwise engage in non-useful enterprises is, of course, generally an important factor in

the determination of the amount of this kind of license fee. Hence license fees clearly in the nature of privilege
taxes for revenue have frequently been upheld, especially in of licenses for the sale of liquors. In fact, in the
latter cases the fees have rarely been declared unreasonable. 23
Moreover in the equally leading case of Lutz v. Araneta24 this Court affirmed the doctrine earlier announced by
the American Supreme Court that taxation may be made to implement the state's police power. Only the other
day, this Court had occasion to affirm that the broad taxing authority conferred by the Local Autonomy Act of
1959 to cities and municipalities is sufficiently plenary to cover a wide range of subjects with the only limitation
that the tax so levied is for public purposes, just and uniform. 25
As a matter of fact, even without reference to the wide latitude enjoyed by the City of Manila in imposing
licenses for revenue, it has been explicitly held in one case that "much discretion is given to municipal
corporations in determining the amount," here the license fee of the operator of a massage clinic, even if it
were viewed purely as a police power measure.26 The discussion of this particular matter may fitly close with
this pertinent citation from another decision of significance: "It is urged on behalf of the plaintiffs-appellees that
the enforcement of the ordinance could deprive them of their lawful occupation and means of livelihood
because they can not rent stalls in the public markets. But it appears that plaintiffs are also dealers in
refrigerated or cold storage meat, the sale of which outside the city markets under certain conditions is
permitted x x x . And surely, the mere fact, that some individuals in the community may be deprived of their
present business or a particular mode of earning a living cannot prevent the exercise of the police power. As
was said in a case, persons licensed to pursue occupations which may in the public need and interest be
affected by the exercise of the police power embark in these occupations subject to the disadvantages which
may result from the legal exercise of that power." 27
Nor does the restriction on the freedom to contract, insofar as the challenged ordinance makes it unlawful for
the owner, manager, keeper or duly authorized representative of any hotel, motel, lodging house, tavern,
common inn or the like, to lease or rent room or portion thereof more than twice every 24 hours, with a proviso
that in all cases full payment shall be charged, call for a different conclusion. Again, such a limitation cannot be
viewed as a transgression against the command of due process. It is neither unreasonable nor arbitrary.
Precisely it was intended to curb the opportunity for the immoral or illegitimate use to which such premises
could be, and, according to the explanatory note, are being devoted. How could it then be arbitrary or
oppressive when there appears a correspondence between the undeniable existence of an undesirable
situation and the legislative attempt at correction. Moreover, petitioners cannot be unaware that every
regulation of conduct amounts to curtailment of liberty which as pointed out by Justice Malcolm cannot be
absolute. Thus: "One thought which runs through all these different conceptions of liberty is plainly apparent. It
is this: 'Liberty' as understood in democracies, is not license; it is 'liberty regulated by law.' Implied in the term
is restraint by law for the good of the individual and for the greater good of the peace and order of society and
the general well-being. No man can do exactly as he pleases. Every man must renounce unbridled license.
The right of the individual is necessarily subject to reasonable restraint by general law for the common good x
x x The liberty of the citizen may be restrained in the interest of the public health, or of the public order and
safety, or otherwise within the proper scope of the police power." 28
A similar observation was made by Justice Laurel: "Public welfare, then, lies at the bottom of the enactment of
said law, and the state in order to promote the general welfare may interfere with personal liberty, with
property, and with business and occupations. Persons and property may be subjected to all kinds of restraints
and burdens, in order to secure the general comfort, health, and prosperity of the state x x x To this
fundamental aim of our Government the rights of the individual are subordinated. Liberty is a blessing without
which life is a misery, but liberty should not be made to prevail over authority because then society will fall into
anarchy. Neither should authority be made to prevail over liberty because then the individual will fall into
slavery. The citizen should achieve the required balance of liberty and authority in his mind through education
and personal discipline, so that there may be established the resultant equilibrium, which means peace and
order and happiness for all.29

Page 15 of 66
It is noteworthy that the only decision of this Court nullifying legislation because of undue deprivation of
freedom to contract, People v. Pomar,30 no longer "retains its virtuality as a living principle. The policy
of laissez faire has to some extent given way to the assumption by the government of the right of intervention
even in contractual relations affected with public interest. 31 What may be stressed sufficiently is that if the
liberty involved were freedom of the mind or the person, the standard for the validity of governmental acts is
much more rigorous and exacting, but where the liberty curtailed affects at the most rights of property, the
permissible scope of regulatory measure is wider.32 How justify then the allegation of a denial of due process?
Lastly, there is the attempt to impugn the ordinance on another due process ground by invoking the principles
of vagueness or uncertainty. It would appear from a recital in the petition itself that what seems to be the
gravamen of the alleged grievance is that the provisions are too detailed and specific rather than vague or
uncertain. Petitioners, however, point to the requirement that a guest should give the name, relationship, age
and sex of the companion or companions as indefinite and uncertain in view of the necessity for determining
whether the companion or companions referred to are those arriving with the customer or guest at the time of
the registry or entering the room With him at about the same time or coming at any indefinite time later to join
him; a proviso in one of its sections which cast doubt as to whether the maintenance of a restaurant in a motel
is dependent upon the discretion of its owners or operators; another proviso which from their standpoint would
require a guess as to whether the "full rate of payment" to be charged for every such lease thereof means a
full day's or merely a half-day's rate. It may be asked, do these allegations suffice to render the ordinance void
on its face for alleged vagueness or uncertainty? To ask the question is to answer it. From Connally v. General
Construction Co.33 toAdderley v. Florida,34 the principle has been consistently upheld that what makes a
statute susceptible to such a charge is an enactment either forbidding or requiring the doing of an act that men
of common intelligence must necessarily guess at its meaning and differ as to its application. Is this the
situation before us? A citation from Justice Holmes would prove illuminating: "We agree to all the generalities
about not supplying criminal laws with what they omit but there is no canon against using common sense in
construing laws as saying what they obviously mean." 35
That is all then that this case presents. As it stands, with all due allowance for the arguments pressed with
such vigor and determination, the attack against the validity of the challenged ordinance cannot be considered
a success. Far from it. Respect for constitutional law principles so uniformly held and so uninterruptedly
adhered to by this Court compels a reversal of the appealed decision.
Wherefore, the judgment of the lower court is reversed and the injunction issued lifted forthwith. With costs.
Reyes, J.B.L., Makalintal, Bengzon, J.P., Zaldivar, Sanchez, Castro and Angeles, JJ., concur.
Concepcion, C.J. and Dizon, J., are on leave.
EN BANC
[G.R. Nos. 84132-33 : December 10, 1990.]
192 SCRA 257
NATIONAL DEVELOPMENT COMPANY AND NEW AGRIX, INC., Petitioners, vs. PHILIPPINE VETERANS
BANK, THE EX-OFFICIO SHERIFF and GODOFREDO QUILING, in his capacity as Deputy Sheriff of
Calamba, Laguna, Respondents.
DECISION
CRUZ, J.:
This case involves the constitutionality of a presidential decree which, like all other issuances of President
Marcos during his regime, was at that time regarded as sacrosanct. It is only now, in a freer atmosphere, that
his acts are being tested by the touchstone of the fundamental law that even then was supposed to limit
presidential action.:rd
The particular enactment in question is Pres. Decree No. 1717, which ordered the rehabilitation of the Agrix
Group of Companies to be administered mainly by the National Development Company. The law outlined the
procedure for filing claims against the Agrix companies and created a Claims Committee to process these

claims. Especially relevant to this case, and noted at the outset, is Sec. 4(1) thereof providing that "all
mortgages and other liens presently attaching to any of the assets of the dissolved corporations are hereby
extinguished."
Earlier, the Agrix Marketing, Inc. (AGRIX) had executed in favor of private respondent Philippine Veterans
Bank a real estate mortgage dated July 7, 1978, over three (3) parcels of land situated in Los Baos, Laguna.
During the existence of the mortgage, AGRIX went bankrupt. It was for the expressed purpose of salvaging
this and the other Agrix companies that the aforementioned decree was issued by President Marcos.
Pursuant thereto, the private respondent filed a claim with the AGRIX Claims Committee for the payment of its
loan credit. In the meantime, the New Agrix, Inc. and the National Development Company, petitioners herein,
invoking Sec. 4 (1) of the decree, filed a petition with the Regional Trial Court of Calamba, Laguna, for the
cancellation of the mortgage lien in favor of the private respondent. For its part, the private respondent took
steps to extrajudicially foreclose the mortgage, prompting the petitioners to file a second case with the same
court to stop the foreclosure. The two cases were consolidated.
After the submission by the parties of their respective pleadings, the trial court rendered the impugned
decision. Judge Francisco Ma. Guerrero annulled not only the challenged provision, viz., Sec. 4 (1), but the
entire Pres. Decree No. 1717 on the grounds that: (1) the presidential exercise of legislative power was a
violation of the principle of separation of powers; (2) the law impaired the obligation of contracts; and (3) the
decree violated the equal protection clause. The motion for reconsideration of this decision having been
denied, the present petition was filed.:rd
The petition was originally assigned to the Third Division of this Court but because of the constitutional
questions involved it was transferred to the Court en banc. On August 30, 1988, the Court granted the
petitioner's prayer for a temporary restraining order and instructed the respondents to cease and desist from
conducting a public auction sale of the lands in question. After the Solicitor General and the private respondent
had filed their comments and the petitioners their reply, the Court gave due course to the petition and ordered
the parties to file simultaneous memoranda. Upon compliance by the parties, the case was deemed submitted.
The petitioners contend that the private respondent is now estopped from contesting the validity of the decree.
In support of this contention, it cites the recent case of Mendoza v. Agrix Marketing, Inc., 1 where the
constitutionality of Pres. Decree No. 1717 was also raised but not resolved. The Court, after noting that the
petitioners had already filed their claims with the AGRIX Claims Committee created by the decree, had simply
dismissed the petition on the ground of estoppel.
The petitioners stress that in the case at bar the private respondent also invoked the provisions of Pres.
Decree No. 1717 by filing a claim with the AGRIX Claims Committee. Failing to get results, it sought to
foreclose the real estate mortgage executed by AGRIX in its favor, which had been extinguished by the
decree. It was only when the petitioners challenged the foreclosure on the basis of Sec. 4 (1) of the decree,
that the private respondent attacked the validity of the provision. At that stage, however, consistent with
Mendoza, the private respondent was already estopped from questioning the constitutionality of the decree.
The Court does not agree that the principle of estoppel is applicable.
It is not denied that the private respondent did file a claim with the AGRIX Claims Committee pursuant to this
decree. It must be noted, however, that this was done in 1980, when President Marcos was the absolute ruler
of this country and his decrees were the absolute law. Any judicial challenge to them would have been futile,
not to say foolhardy. The private respondent, no less than the rest of the nation, was aware of that reality and
knew it had no choice under the circumstances but to conform.:nad
It is true that there were a few venturesome souls who dared to question the dictator's decisions before the
courts of justice then. The record will show, however, that not a single act or issuance of President Marcos
was ever declared unconstitutional, not even by the highest court, as long as he was in power. To rule now
that the private respondent is estopped for having abided with the decree instead of boldly assailing it is to
close our eyes to a cynical fact of life during that repressive time.
This case must be distinguished from Mendoza, where the petitioners, after filing their claims with the AGRIX
Claims Committee, received in settlement thereof shares of stock valued at P40,000.00 without protest or
reservation. The herein private respondent has not been paid a single centavo on its claim, which was kept
pending for more than seven years for alleged lack of supporting papers. Significantly, the validity of that claim
was not questioned by the petitioner when it sought to restrain the extrajudicial foreclosure of the mortgage by
the private respondent. The petitioner limited itself to the argument that the private respondent was estopped
from questioning the decree because of its earlier compliance with its provisions.
Independently of these observations, there is the consideration that an affront to the Constitution cannot be
allowed to continue existing simply because of procedural inhibitions that exalt form over substance.
The Court is especially disturbed by Section 4(1) of the decree, quoted above, extinguishing all mortgages and
other liens attaching to the assets of AGRIX. It also notes, with equal concern, the restriction in Subsection (ii)
thereof that all "unsecured obligations shall not bear interest" and in Subsection (iii) that "all accrued interests,
penalties or charges as of date hereof pertaining to the obligations, whether secured or unsecured, shall not
be recognized."

Page 16 of 66
These provisions must be read with the Bill of Rights, where it is clearly provided in Section 1 that "no person
shall be deprived of life, liberty or property without due course of law nor shall any person be denied the equal
protection of the law" and in Section 10 that "no law impairing the obligation of contracts shall be passed."
In defending the decree, the petitioners argue that property rights, like all rights, are subject to regulation
under the police power for the promotion of the common welfare. The contention is that this inherent power of
the state may be exercised at any time for this purpose so long as the taking of the property right, even if
based on contract, is done with due process of law.
This argument is an over-simplification of the problem before us. The police power is not a panacea for all
constitutional maladies. Neither does its mere invocation conjure an instant and automatic justification for
every act of the government depriving a person of his life, liberty or property.
A legislative act based on the police power requires the concurrence of a lawful subject and a lawful method.
In more familiar words, a) the interests of the public generally, as distinguished from those of a particular class,
should justify the interference of the state; and b) the means employed are reasonably necessary for the
accomplishment of the purpose and not unduly oppressive upon individuals. 2
Applying these criteria to the case at bar, the Court finds first of all that the interests of the public are not
sufficiently involved to warrant the interference of the government with the private contracts of AGRIX. The
decree speaks vaguely of the "public, particularly the small investors," who would be prejudiced if the
corporation were not to be assisted. However, the record does not state how many there are of such investors,
and who they are, and why they are being preferred to the private respondent and other creditors of AGRIX
with vested property rights.:-cralaw
The public interest supposedly involved is not identified or explained. It has not been shown that by the
creation of the New Agrix, Inc. and the extinction of the property rights of the creditors of AGRIX, the interests
of the public as a whole, as distinguished from those of a particular class, would be promoted or protected.
The indispensable link to the welfare of the greater number has not been established. On the contrary, it would
appear that the decree was issued only to favor a special group of investors who, for reasons not given, have
been preferred to the legitimate creditors of AGRIX.
Assuming there is a valid public interest involved, the Court still finds that the means employed to rehabilitate
AGRIX fall far short of the requirement that they shall not be unduly oppressive. The oppressiveness is patent
on the face of the decree. The right to property in all mortgages, liens, interests, penalties and charges owing
to the creditors of AGRIX is arbitrarily destroyed. No consideration is paid for the extinction of the mortgage
rights. The accrued interests and other charges are simply rejected by the decree. The right to property is
dissolved by legislative fiat without regard to the private interest violated and, worse, in favor of another private
interest.
A mortgage lien is a property right derived from contract and so comes under the protection of the Bill of
Rights. So do interests on loans, as well as penalties and charges, which are also vested rights once they
accrue. Private property cannot simply be taken by law from one person and given to another without
compensation and any known public purpose. This is plain arbitrariness and is not permitted under the
Constitution.
And not only is there arbitrary taking, there is discrimination as well. In extinguishing the mortgage and other
liens, the decree lumps the secured creditors with the unsecured creditors and places them on the same level
in the prosecution of their respective claims. In this respect, all of them are considered unsecured creditors.
The only concession given to the secured creditors is that their loans are allowed to earn interest from the date
of the decree, but that still does not justify the cancellation of the interests earned before that date. Such
interests, whether due to the secured or the unsecured creditors, are all extinguished by the decree. Even
assuming such cancellation to be valid, we still cannot see why all kinds of creditors, regardless of security,
are treated alike.
Under the equal protection clause, all persons or things similarly situated must be treated alike, both in the
privileges conferred and the obligations imposed. Conversely, all persons or things differently situated should
be treated differently. In the case at bar, persons differently situated are similarly treated, in disregard of the
principle that there should be equality only among equals.-nad
One may also well wonder why AGRIX was singled out for government help, among other corporations where
the stockholders or investors were also swindled. It is not clear why other companies entitled to similar
concern were not similarly treated. And surely, the stockholders of the private respondent, whose mortgage
lien had been cancelled and legitimate claims to accrued interests rejected, were no less deserving of
protection, which they did not get. The decree operated, to use the words of a celebrated case, 3 "with an evil
eye and an uneven hand."
On top of all this, New Agrix, Inc. was created by special decree notwithstanding the provision of Article XIV,
Section 4 of the 1973 Constitution, then in force, that:
SEC. 4. The BatasangPambansa shall not, except by general law, provide for the formation, organization, or
regulation of private corporations, unless such corporations are owned or controlled by the Government or any
subdivision or instrumentality thereof. 4
The new corporation is neither owned nor controlled by the government. The National Development
Corporation was merely required to extend a loan of not more than P10,000,000.00 to New Agrix, Inc. Pending

payment thereof, NDC would undertake the management of the corporation, but with the obligation of making
periodic reports to the Agrix board of directors. After payment of the loan, the said board can then appoint its
own management. The stocks of the new corporation are to be issued to the old investors and stockholders of
AGRIX upon proof of their claims against the abolished corporation. They shall then be the owners of the new
corporation. New Agrix, Inc. is entirely private and so should have been organized under the Corporation Law
in accordance with the above-cited constitutional provision.
The Court also feels that the decree impairs the obligation of the contract between AGRIX and the private
respondent without justification. While it is true that the police power is superior to the impairment clause, the
principle will apply only where the contract is so related to the public welfare that it will be considered
congenitally susceptible to change by the legislature in the interest of the greater number. 5 Most present-day
contracts are of that nature. But as already observed, the contracts of loan and mortgage executed by AGRIX
are purely private transactions and have not been shown to be affected with public interest. There was
therefore no warrant to amend their provisions and deprive the private respondent of its vested property rights.
It is worth noting that only recently in the case of the Development Bank of the Philippines v. NLRC, 6 we
sustained the preference in payment of a mortgage creditor as against the argument that the claims of
laborers should take precedence over all other claims, including those of the government. In arriving at this
ruling, the Court recognized the mortgage lien as a property right protected by the due process and contract
clauses notwithstanding the argument that the amendment in Section 110 of the Labor Code was a proper
exercise of the police power.:nad
The Court reaffirms and applies that ruling in the case at bar.
Our finding, in sum, is that Pres. Decree No. 1717 is an invalid exercise of the police power, not being in
conformity with the traditional requirements of a lawful subject and a lawful method. The extinction of the
mortgage and other liens and of the interest and other charges pertaining to the legitimate creditors of AGRIX
constitutes taking without due process of law, and this is compounded by the reduction of the secured
creditors to the category of unsecured creditors in violation of the equal protection clause. Moreover, the new
corporation, being neither owned nor controlled by the Government, should have been created only by general
and not special law. And insofar as the decree also interferes with purely private agreements without any
demonstrated connection with the public interest, there is likewise an impairment of the obligation of the
contract.
With the above pronouncements, we feel there is no more need to rule on the authority of President Marcos to
promulgate Pres. Decree No. 1717 under Amendment No. 6 of the 1973 Constitution. Even if he had such
authority, the decree must fall just the same because of its violation of the Bill of Rights.
WHEREFORE, the petition is DISMISSED. Pres. Decree No. 1717 is declared UNCONSTITUTIONAL. The
temporary restraining order dated August 30, 1988, is LIFTED. Costs against the petitioners.-nad
SO ORDERED.
Fernan (C.J.), Narvasa, Gutierrez, Jr., Paras, Gancayco Padilla, Bidin, Sarmiento, Grio-Aquino,
Medialdea and Regalado, JJ., concur.
Melencio-Herrera, J., In the result. In Dumlao v. COMELEC, 95 SCRA 392 (1980), a portion of the
second paragraph of section 4 of Batas PambansaBlg. 52 was declared null and void for being
unconstitutional.
Feliciano, J., is on leave.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-49112 February 2, 1979
LEOVILLO C. AGUSTIN, petitioner,
vs.
HON. ROMEO F. EDU, in his capacity as Land Transportation Commissioner; HON. JUAN PONCE
ENRILE, in his capacity as Minister of National Defense; HON. ALFREDO L. JUINIO, in his capacity as
Minister Of Public Works, Transportation and Communications; and HON: BALTAZAR AQUINO, in his
capacity as Minister of Public Highways, respondents.
Leovillo C. Agustin Law Office for petitioner.

Page 17 of 66
Solicitor General Estelito P. Mendoza, Assistant Solicitor General Ruben E. Agpalo and Solicitor Amado D.
Aquino for respondents.

FERNANDO, J.:
The validity of a letter of Instruction 1 providing for an early seaming device for motor vehicles is assailed in
this prohibition proceeding as being violative of the constitutional guarantee of due process and, insofar as the
rules and regulations for its implementation are concerned, for transgressing the fundamental principle of nondelegation of legislative power. The Letter of Instruction is stigmatized by petitioner who is possessed of the
requisite standing, as being arbitrary and oppressive. A temporary restraining order as issued and respondents
Romeo F. Edu, Land Transportation Commissioner Juan Ponce Enrile, Minister of National Defense; Alfredo L.
Juinio, Minister of Public Works, Transportation and Communications; and Baltazar Aquino, Minister of Public
Highways; were to answer. That they did in a pleading submitted by Solicitor General Estelito P.
Mendoza. 2 Impressed with a highly persuasive quality, it makes devoid clear that the imputation of a
constitutional infirmity is devoid of justification The Letter of Instruction on is a valid police power measure. Nor
could the implementing rules and regulations issued by respondent Edu be considered as amounting to an
exercise of legislative power. Accordingly, the petition must be dismissed.
The facts are undisputed. The assailed Letter of Instruction No. 229 of President Marcos, issued on December
2, 1974, reads in full: "[Whereas], statistics show that one of the major causes of fatal or serious accidents in
land transportation is the presence of disabled, stalled or parked motor vehicles along streets or highways
without any appropriate early warning device to signal approaching motorists of their presence; [Whereas], the
hazards posed by such obstructions to traffic have been recognized by international bodies concerned with
traffic safety, the 1968 Vienna Convention on Road Signs and Signals and the United Nations Organization
(U.N.); [Whereas], the said Vienna Convention which was ratified by the Philippine Government under P.D.
No. 207, recommended the enactment of local legislation for the installation of road safety signs and devices;
[Now, therefore, I, Ferdinand E. Marcos], President of the Philippines, in the interest of safety on all streets
and highways, including expressways or limited access roads, do hereby direct: 1. That all owners, users or
drivers of motor vehicles shall have at all times in their motor vehicles at least one (1) pair of early warning
device consisting of triangular, collapsible reflectorized plates in red and yellow colors at least 15 cms. at the
base and 40 cms. at the sides. 2. Whenever any motor vehicle is stalled or disabled or is parked for thirty (30)
minutes or more on any street or highway, including expressways or limited access roads, the owner, user or
driver thereof shall cause the warning device mentioned herein to be installed at least four meters away to the
front and rear of the motor vehicle staged, disabled or parked. 3. The Land Transportation Commissioner shall
cause Reflectorized Triangular Early Warning Devices, as herein described, to be prepared and issued to
registered owners of motor vehicles, except motorcycles and trailers, charging for each piece not more than
15 % of the acquisition cost. He shall also promulgate such rules and regulations as are appropriate to
effectively implement this order. 4. All hereby concerned shall closely coordinate and take such measures as
are necessary or appropriate to carry into effect then instruction. 3 Thereafter, on November 15, 1976, it was
amended by Letter of Instruction No. 479 in this wise. "Paragraph 3 of Letter of Instruction No. 229 is hereby
amended to read as follows: 3. The Land transportation Commissioner shall require every motor vehicle owner
to procure from any and present at the registration of his vehicle, one pair of a reflectorized early warning
device, as d bed of any brand or make chosen by mid motor vehicle . The Land Transportation Commissioner
shall also promulgate such rule and regulations as are appropriate to effectively implement this order.'" 4 There
was issued accordingly, by respondent Edu, the implementing rules and regulations on December 10,
1976.5 They were not enforced as President Marcos on January 25, 1977, ordered a six-month period of
suspension insofar as the installation of early warning device as a pre-registration requirement for motor
vehicle was concerned. 6 Then on June 30, 1978, another Letter of Instruction 7 the lifting of such suspension
and directed the immediate implementation of Letter of Instruction No. 229 as amended. 8 It was not until
August 29, 1978 that respondent Edu issued Memorandum Circular No. 32, worded thus: "In pursuance of
Letter of Instruction No. 716, dated June 30, 1978, the implementation of Letter of Instruction No. 229, as

amended by Letter of Instructions No. 479, requiring the use of Early Warning Devices (EWD) on motor
vehicle, the following rules and regulations are hereby issued: 1. LTC Administrative Order No. 1, dated
December 10, 1976; shall now be implemented provided that the device may come from whatever source and
that it shall have substantially complied with the EWD specifications contained in Section 2 of said
administrative order; 2. In order to insure that every motor vehicle , except motorcycles, is equipped with the
device, a pair of serially numbered stickers, to be issued free of charge by this Commission, shall be attached
to each EWD. The EWD. serial number shall be indicated on the registration certificate and official receipt of
payment of current registration fees of the motor vehicle concerned. All Orders, Circulars, and Memoranda in
conflict herewith are hereby superseded, This Order shall take effect immediately. 9 It was for immediate
implementation by respondent Alfredo L. Juinio, as Minister of Public Works, transportation, and
Communications. 10
Petitioner, after setting forth that he "is the owner of a Volkswagen Beetle Car, Model 13035, already properly
equipped when it came out from the assembly lines with blinking lights fore and aft, which could very well
serve as an early warning device in case of the emergencies mentioned in Letter of Instructions No. 229, as
amended, as well as the implementing rules and regulations in Administrative Order No. 1 issued by the land
transportation Commission," 11 alleged that said Letter of Instruction No. 229, as amended, "clearly violates the
provisions and delegation of police power, [sic] * * *: " For him they are "oppressive, unreasonable, arbitrary,
confiscatory, nay unconstitutional and contrary to the precepts of our compassionate New Society." 12 He
contended that they are "infected with arbitrariness because it is harsh, cruel and unconscionable to the
motoring public;" 13 are "one-sided, onerous and patently illegal and immoral because [they] will make
manufacturers and dealers instant millionaires at the expense of car owners who are compelled to buy a set of
the so-called early warning device at the rate of P 56.00 to P72.00 per set." 14 are unlawful and
unconstitutional and contrary to the precepts of a compassionate New Society [as being] compulsory and
confiscatory on the part of the motorists who could very well provide a practical alternative road safety device,
or a better substitute to the specified set of EWD's." 15 He therefore prayed for a judgment both the assailed
Letters of Instructions and Memorandum Circular void and unconstitutional and for a restraining order in the
meanwhile.
A resolution to this effect was handed down by this Court on October 19, 1978: "L-49112 (Leovillo C. Agustin v.
Hon. Romeo F. Edu, etc., et al.) Considering the allegations contained, the issues raised and the arguments
adduced in the petition for prohibition with writ of p prohibitory and/or mandatory injunction, the Court
Resolved to (require) the respondents to file an answer thereto within ton (10) days from notice and not to
move to dismiss the petition. The Court further Resolved to [issue] a [temporary restraining order] effective as
of this date and continuing until otherwise ordered by this Court. 16
Two motions for extension were filed by the Office of the Solicitor General and granted. Then on November
15, 1978, he Answer for respondents was submitted. After admitting the factual allegations and stating that
they lacked knowledge or information sufficient to form a belief as to petitioner owning a Volkswagen Beetle
car," they "specifically deny the allegations and stating they lacked knowledge or information sufficient to form
a belief as to petitioner owning a Volkswagen Beetle Car, 17 they specifically deny the allegations in
paragraphs X and XI (including its subparagraphs 1, 2, 3, 4) of Petition to the effect that Letter of Instruction
No. 229 as amended by Letters of Instructions Nos. 479 and 716 as well as Land transportation Commission
Administrative Order No. 1 and its Memorandum Circular No. 32 violates the constitutional provisions on due
process of law, equal protection of law and undue delegation of police power, and that the same are likewise
oppressive, arbitrary, confiscatory, one-sided, onerous, immoral unreasonable and illegal the truth being that
said allegations are without legal and factual basis and for the reasons alleged in the Special and Affirmative
Defenses of this Answer." 18 Unlike petitioner who contented himself with a rhetorical recital of his litany of
grievances and merely invoked the sacramental phrases of constitutional litigation, the Answer, in
demonstrating that the assailed Letter of Instruction was a valid exercise of the police power and implementing
rules and regulations of respondent Edu not susceptible to the charge that there was unlawful delegation of
legislative power, there was in the portion captioned Special and Affirmative Defenses, a citation of what
respondents believed to be the authoritative decisions of this Tribunal calling for application. They
are Calalang v. Williams, 19 Morfe v. Mutuc, 20 and Edu v. Ericta. 21 Reference was likewise made to the 1968

Page 18 of 66
Vienna Conventions of the United Nations on road traffic, road signs, and signals, of which the Philippines was
a signatory and which was duly ratified. 22 Solicitor General Mendoza took pains to refute in detail, in language
calm and dispassionate, the vigorous, at times intemperate, accusation of petitioner that the assailed Letter of
Instruction and the implementing rules and regulations cannot survive the test of rigorous scrutiny. To repeat,
its highly-persuasive quality cannot be denied.
This Court thus considered the petition submitted for decision, the issues being clearly joined. As noted at the
outset, it is far from meritorious and must be dismissed.
1. The Letter of Instruction in question was issued in the exercise of the police power. That is conceded by
petitioner and is the main reliance of respondents. It is the submission of the former, however, that while
embraced in such a category, it has offended against the due process and equal protection safeguards of the
Constitution, although the latter point was mentioned only in passing. The broad and expansive scope of the
police power which was originally Identified by Chief Justice Taney of the American Supreme Court in an 1847
decision as "nothing more or less than the powers of government inherent in every sovereignty" 23 was
stressed in the aforementioned case of Edu v. Ericta thus: "Justice Laurel, in the first leading decision after the
Constitution came into force,Calalang v. Williams, Identified police power with state authority to enact
legislation that may interfere with personal liberty or property in order to promote the general welfare. Persons
and property could thus 'be subjected to all kinds of restraints and burdens in order to we the general comfort,
health and prosperity of the state.' Shortly after independence in 1948, Primicias v. Fugoso reiterated the
doctrine, such a competence being referred to as 'the power to prescribe regulations to promote the health,
morals, peace, education, good order or safety, and general welfare of the people. The concept was set forth
in negative terms by Justice Malcolm in a pre-Commonwealth decision as 'that inherent and plenary power in
the State which enables it to prohibit all things hurtful to the comfort, safety and welfare of society. In that
sense it could be hardly distinguishable as noted by this Court in Morfe v. Mutuc with the totality of legislative
power. It is in the above sense the greatest and most powerful at. tribute of government. It is, to quote Justice
Malcolm anew, 'the most essential, insistent, and at least table powers, I extending as Justice Holmes aptly
pointed out 'to all the great public needs.' Its scope, ever-expanding to meet the exigencies of the times, even
to anticipate the future where it could be done, provides enough room for an efficient and flexible response to
conditions and circumstances thus assuring the greatest benefits. In the language of Justice Cardozo: 'Needs
that were narrow or parochial in the past may be interwoven in the present with the well-being of the nation.
What is critical or urgent changes with the time.' The police power is thus a dynamic agency, suitably vague
and far from precisely defined, rooted in the conception that men in organizing the state and imposing upon its
government limitations to safeguard constitutional rights did not intend thereby to enable an individual citizen
or a group of citizens to obstruct unreasonably the enactment of such salutary measures calculated to
communal peace, safety, good order, and welfare." 24
2. It was thus a heavy burden to be shouldered by petitioner, compounded by the fact that the particular police
power measure challenged was clearly intended to promote public safety. It would be a rare occurrence
indeed for this Court to invalidate a legislative or executive act of that character. None has been called to our
attention, an indication of its being non-existent. The latest decision in point, Edu v. Ericta, sustained the
validity of the Reflector Law, 25 an enactment conceived with the same end in view. Calalang v. Williams found
nothing objectionable in a statute, the purpose of which was: "To promote safe transit upon, and. avoid
obstruction on roads and streets designated as national roads * * *. 26 As a matter of fact, the first law sought
to be nullified after the effectivity of the 1935 Constitution, the National Defense Act, 27 with petitioner failing in
his quest, was likewise prompted by the imperative demands of public safety.
3. The futility of petitioner's effort to nullify both the Letter of Instruction and the implementing rules and
regulations becomes even more apparent considering his failure to lay the necessary factual foundation to
rebut the presumption of validity. So it was held in Ermita-Malate Hotel and Motel Operators Association, Inc.
v. City Mayor of Manila. 28 The rationale was clearly set forth in an excerpt from a decision of Justice Branders
of the American Supreme Court, quoted in the opinion: "The statute here questioned deals with a subject
clearly within the scope of the police power. We are asked to declare it void on the ground that the specific

method of regulation prescribed is unreasonable and hence deprives the plaintiff of due process of law. As
underlying questions of fact may condition the constitutionality of legislation of this character, the presumption
of constitutionality must prevail in the absence of some factual foundation of record in overthrowing the
statute. 29
4. Nor did the Solicitor General as he very well could, rely solely on such rebutted presumption of validity. As
was pointed out in his Answer "The President certainly had in his possession the necessary statistical
information and data at the time he issued said letter of instructions, and such factual foundation cannot be
defeated by petitioner's naked assertion that early warning devices 'are not too vital to the prevention of
nighttime vehicular accidents' because allegedly only 390 or 1.5 per cent of the supposed 26,000 motor
vehicle accidents that in 1976 involved rear-end collisions (p. 12 of petition). Petitioner's statistics is not
backed up by demonstrable data on record. As aptly stated by this Honorable Court: Further: "It admits of no
doubt therefore that there being a presumption of validity, the necessity for evidence to rebut it is unavoidable,
unless the statute or ordinance is void on its face, which is not the case here"' * * *. But even as g the verity of
petitioner's statistics, is that not reason enough to require the installation of early warning devices to prevent
another 390 rear-end collisions that could mean the death of 390 or more Filipinos and the deaths that could
likewise result from head-on or frontal collisions with stalled vehicles?" 30 It is quite manifest then that the
issuance of such Letter of Instruction is encased in the armor of prior, careful study by the Executive
Department. To set it aside for alleged repugnancy to the due process clause is to give sanction to conjectural
claims that exceeded even the broadest permissible limits of a pleader's well known penchant for
exaggeration.
5. The rather wild and fantastic nature of the charge of oppressiveness of this Letter of Instruction was
exposed in the Answer of the Solicitor General thus: "Such early warning device requirement is not
an expensive redundancy, nor oppressive, for car owners whose cars are already equipped with 1) blinking
lights in the fore and aft of said motor vehicles,' 2) "battery-powered blinking lights inside motor vehicles," 3)
"built-in reflectorized tapes on front and rear bumpers of motor vehicles," or 4) "well-lighted two (2) petroleum
lamps (the Kinke) * * * because: Being universal among the signatory countries to the said 1968 Vienna
Conventions, and visible even under adverse conditions at a distance of at least 400 meters, any motorist from
this country or from any part of the world, who sees a reflectorized rectangular early seaming device installed
on the roads, highways or expressways, will conclude, without thinking, that somewhere along the travelled
portion of that road, highway, or expressway, there is a motor vehicle which is stationary, stalled or disabled
which obstructs or endangers passing traffic. On the other hand, a motorist who sees any of the
aforementioned other built in warning devices or the petroleum lamps will not immediately get adequate
advance warning because he will still think what that blinking light is all about. Is it an emergency vehicle? Is it
a law enforcement car? Is it an ambulance? Such confusion or uncertainty in the mind of the motorist will thus
increase, rather than decrease, the danger of collision. 31
6. Nor did the other extravagant assertions of constitutional deficiency go unrefuted in the Answer of the
Solicitor General "There is nothing in the questioned Letter of Instruction No. 229, as amended, or in
Administrative Order No. 1, which requires or compels motor vehicle owners to purchase the early warning
device prescribed thereby. All that is required is for motor vehicle owners concerned like petitioner, to equip
their motor vehicles with a pair of this early warning device in question, procuring or obtaining the same from
whatever source. In fact, with a little of industry and practical ingenuity, motor vehicle owners can even
personally make or produce this early warning device so long as the same substantially conforms with the
specifications laid down in said letter of instruction and administrative order. Accordingly the early warning
device requirement can neither be oppressive, onerous, immoral, nor confiscatory, much less does it make
manufacturers and dealers of said devices 'instant millionaires at the expense of car owners' as petitioner so
sweepingly concludes * * *. Petitioner's fear that with the early warning device requirement 'a more subtle
racket may be committed by those called upon to enforce it * * * is an unfounded speculation. Besides, that
unscrupulous officials may try to enforce said requirement in an unreasonable manner or to an unreasonable
degree, does not render the same illegal or immoral where, as in the instant case, the challenged Letter of
Instruction No. 229 and implementing order disclose none of the constitutional defects alleged against it. 32

Page 19 of 66
7 It does appear clearly that petitioner's objection to this Letter of Instruction is not premised on lack of power,
the justification for a finding of unconstitutionality, but on the pessimistic, not to say negative, view he
entertains as to its wisdom. That approach, it put it at its mildest, is distinguished, if that is the appropriate
word, by its unorthodoxy. It bears repeating "that this Court, in the language of Justice Laurel, 'does not pass
upon questions of wisdom justice or expediency of legislation.' As expressed by Justice Tuason: 'It is not the
province of the courts to supervise legislation and keep it within the bounds of propriety and common sense.
That is primarily and exclusively a legislative concern.' There can be no possible objection then to the
observation of Justice Montemayor. 'As long as laws do not violate any Constitutional provision, the Courts
merely interpret and apply them regardless of whether or not they are wise or salutary. For they, according to
Justice Labrador, 'are not supposed to override legitimate policy and * * * never inquire into the wisdom of the
law.' It is thus settled, to paraphrase Chief Justice Concepcion in Gonzales v. Commission on Elections, that
only congressional power or competence, not the wisdom of the action taken, may be the basis for declaring a
statute invalid. This is as it ought to be. The principle of separation of powers has in the main wisely allocated
the respective authority of each department and confined its jurisdiction to such a sphere. There would then be
intrusion not allowable under the Constitution if on a matter left to the discretion of a coordinate branch, the
judiciary would substitute its own. If there be adherence to the rule of law, as there ought to be, the last
offender should be courts of justice, to which rightly litigants submit their controversy precisely to maintain
unimpaired the supremacy of legal norms and prescriptions. The attack on the validity of the challenged
provision likewise insofar as there may be objections, even if valid and cogent on is wisdom cannot be
sustained. 33
8. The alleged infringement of the fundamental principle of non-delegation of legislative power is equally
without any support well-settled legal doctrines. Had petitioner taken the trouble to acquaint himself with
authoritative pronouncements from this Tribunal, he would not have the temerity to make such an assertion.
An exempt from the aforecited decision of Edu v. Ericta sheds light on the matter: "To avoid the taint of
unlawful delegation, there must be a standard, which implies at the very least that the legislature itself
determines matters of principle and lays down fundamental policy. Otherwise, the charge of complete
abdication may be hard to repel A standard thus defines legislative policy, marks its maps out its boundaries
and specifies the public agency to apply it. It indicates the circumstances under which the legislative command
is to be effected. It is the criterion by which legislative purpose may be carried out. Thereafter, the executive or
administrative office designated may in pursuance of the above guidelines promulgate supplemental rules and
regulations. The standard may be either express or implied. If the former, the non-delegation objection is
easily met. The standard though does not have to be spelled out specifically. It could be implied from the
policy and purpose of the act considered as a whole. In the Reflector Law clearly, the legislative objective is
public safety. What is sought to be attained as in Calalang v. Williams is "safe transit upon the roads.' This is to
adhere to the recognition given expression by Justice Laurel in a decision announced not too long after the
Constitution came into force and effect that the principle of non-delegation "has been made to adapt itself to
the complexities of modern governments, giving rise to the adoption, within certain limits, of the principle of
"subordinate legislation" not only in the United States and England but in practically all modern governments.'
He continued: 'Accordingly, with the growing complexity of modern life, the multiplication of the subjects of
governmental regulation, and the increased difficulty of administering the laws, there is a constantly growing
tendency toward the delegation of greater powers by the legislature and toward the approval of the practice by
the courts.' Consistency with the conceptual approach requires the reminder that what is delegated is authority
non-legislative in character, the completeness of the statute when it leaves the hands of Congress being
assumed." 34
9. The conclusion reached by this Court that this petition must be dismissed is reinforced by this consideration.
The petition itself quoted these two whereas clauses of the assailed Letter of Instruction: "[Whereas], the
hazards posed by such obstructions to traffic have been recognized by international bodies concerned with
traffic safety, the 1968 Vienna Convention on Road Signs and Signals and the United Nations Organization
(U.N.); [Whereas], the said Vionna Convention, which was ratified by the Philippine Government under P.D.
No. 207, recommended the enactment of local legislation for the installation of road safety signs and devices; *
* * " 35 It cannot be disputed then that this Declaration of Principle found in the Constitution possesses
relevance: "The Philippines * * * adopts the generally accepted principles of international law as part of the law

of the land * * *." 36 The 1968 Vienna Convention on Road Signs and Signals is impressed with such a
character. It is not for this country to repudiate a commitment to which it had pledged its word. The concept
of Pacta sunt servanda stands in the way of such an attitude, which is, moreover, at war with the principle of
international morality.
10. That is about all that needs be said. The rather court reference to equal protection did not even elicit any
attempt on the Part of Petitioner to substantiate in a manner clear, positive, and categorical why such a casual
observation should be taken seriously. In no case is there a more appropriate occasion for insistence on what
was referred to as "the general rule" in Santiago v. Far Eastern Broadcasting Co., 37 namely, "that the
constitutionality of a law wig not be considered unless the point is specially pleaded, insisted upon, and
adequately argued." 38 "Equal protection" is not a talismanic formula at the mere invocation of which a party to
a lawsuit can rightfully expect that success will crown his efforts. The law is anything but that.
WHEREFORE, this petition is dismissed. The restraining order is lifted. This decision is immediately executory.
No costs.
Castro, C.J., Barredo, Antonio, Santos, Fernandez, Guerrero, Abad Santos, De Castro and Melencio-Herrera,
concur.
Makasiar, J, reserves the right to file a separate opinion.
Aquino J., took no part.
Concepcion J., is on leave.
Castro, C.J., certifies that Justice Concepcion concurs in their decision.
THIRD DIVISION
[G.R. No. 127073. January 29, 1998]
JOSE P. DANS, JR., petitioner, vs. PEOPLE OF THE PHILIPPINES, respondent.
[G.R. No. 126995. January 29, 1998]
IMELDA R. MARCOS, petitioner, vs. THE HONORABLE SANDIGANBAYAN (FIRST DIVISION), AND THE
PEOPLE OF THE PHILIPPINES,respondents.
DECISION
ROMERO, J.:
A mans signature, even if merely a flourish or even if indecipherable, may signify authority, agreement,
acknowledgment and ownership. As indelible as his fingerprints, dental records or DNA genetic map, it
denotes trust and honor. But the same trust and honor may be tainted by polluted intentions, as when signing
is done in bad faith, or to perpetrate a fraud, to deceive others, or to commit a crime. The petitions at bar will
illustrate how ones John Hancock can bring a man, or a woman for that matter, to ruin.
Sometime in 1984, then Minister of Human Settlements Imelda R. Marcos and then Transportation and
Communications Minister Jose P. Dans, Jr., petitioners herein, entered into several contracts involving the
Light Rail Transit Authority (LRTA) and the Philippine General Hospital Foundation, Inc. (PGHFI). Concurrently
and respectively, Marcos and Dans served as ex-oficio Chairman and ex-oficio Vice-Chairman of the LRTA,
and as Chairman and Director of the Board of Trustees of the PGHFI. By virtue of these agreements, which
were authorized and in fact ratified by the LRTA Board of Directors, two vacant LRTA lots consisting of a
7,340-square meter parcel of land located in Pasay City (the Pasay lot), and a 1,141.20-square meter lot in
Carriedo, Sta. Cruz, Manila (the Sta. Cruz lot), were leased out to the PGHFI. Specifically, the LRTA and the
PGHFI, represented by Dans and Marcos, respectively, approved three deeds, namely, an Agreement for the
Development of the Areas Adjacent to the Light Rail Transit System Stations and the Management and
Operation of the Concession Areas Therein, [1] and two lease agreements [2] dated June 8 and June 18, 1984,
covering the Pasay and the Sta. Cruz lots. The terms of the lease agreements were identical except as to the
price: the lease would be good for 25 years subject to an annual escalation of 7.5%; PGHFI had the right to
sublease the lots; and the monthly lease was P102,760.00 for the Pasay lot and P92,437.20 for the Sta. Cruz
lot. Within the same month, the Pasay lot was subleased by PGHFI, through Marcos, to Transnational

Page 20 of 66
Construction Corporation (TNCC)[3] for P734,000.00 a month, while the Sta. Cruz lot was allegedly [4] subleased
to Joy Mart Consolidated Corporation (Joy Mart) [5] forP199,710.00 per month.
Because of these deeds, petitioners were charged on January 14, 1992, with a violation of Republic Act
No. 3019 (the Anti-Graft and Corrupt Practices Act), to wit:
Criminal Case No. 17449
The undersigned Special Prosecution Officer I, Office of the Special Prosecutor, hereby accuses
IMELDA R. MARCOS and JOSE P. DANS, JR. of Violation of Section 3(g) of RA 3019, as
amended, committed as follows:
That on or about September 8, 1982, and for sometime prior or subsequent thereto,
in Manila, Philippines, and within the jurisdiction of this Honorable Court, the accused
IMELDA R. MARCOS and JOSE P. DANS, JR., public officers, being then the
Chairman and Vice-Chairman, respectively, of the Light Rail Transit Authority (LRTA),
a government corporate entity created under Executive Order No. 603 of the former
President Ferdinand E. Marcos, while in the performance of their official functions,
taking advantage of their positions and committing the crime in relation to their
offices, did then and there wilfully, unlawfully and criminally conspiring with one
another, enter on behalf of the aforesaid government corporation into an agreement
for the development of the areas adjacent to the LRTA stations and the management
and operation of the concession areas therein, with the Philippine General Hospital
Foundation, Inc. (PGHFI), a private enterprise, under terms and conditions manifestly
and grossly disadvantageous to the government.
CONTRARY TO LAW.
Criminal Case No. 17450
The undersigned Special Prosecution Officer I, Office of the Special Prosecutor, hereby accuses
IMELDA R. MARCOS and JOSE P. DANS, JR. of Violation of Section 3(g) of RA 3019, as
amended, committed as follows:
That on or about June 8, 1984, and for sometime prior or subsequent thereto, in
Makati, Metro Manila, Philippines, and within the jurisdiction of this Honorable Court,
the accused IMELDA R. MARCOS and JOSE P. DANS, JR., public officers, being
then the Chairman and Vice-Chairman, respectively, of the Light Rail Transit Authority
(LRTA), a government corporate entity created under Executive Order No. 603 of the
former President Ferdinand E. Marcos, while in the performance of their official
functions, taking advantage of their positions and committing the crime in relation to
their offices, did then and there wilfully, unlawfully and criminally conspiring with one
another, enter on behalf of the aforesaid government corporation into a Lease
Agreement covering LRTA property located in Pasay City, with the Philippine General
Hospital Foundation, Inc. (PGHFI), a private enterprise, under terms and conditions
manifestly and grossly disadvantageous to the government.
CONTRARY TO LAW.
Criminal Case No. 17451
The undersigned Special Prosecution Officer I, Office of the Special Prosecutor, hereby accuses
IMELDA R. MARCOS of Violation of Section 3(d) of RA 3019, as amended, committed as
follows:
That on or about June 8, 1984, and for sometime prior or subsequent thereto, in
Makati, Metro Manila, Philippines, and within the jurisdiction of this Honorable Court,
the accused IMELDA R. MARCOS, a public officer, being then the Chairman of the
Light Rail Transit Authority (LRTA), a government corporate entity created under
Executive Order No. 603 of the former President Ferdinand E. Marcos, while in the
performance of her official functions, taking advantage of her position and committing
the offense in relation to her office, did then and there wilfully, unlawfully and
criminally accepted employment and/or acted as Chairman of (the) Philippine
General Hospital Foundation, Inc. (PGHFI), a private corporation duly organized
under the laws of the Philippines, which private enterprise had, at that time(,) pending
business transactions with the accused, in her capacity as Chairman of LRTA.
CONTRARY TO LAW.
Criminal Case No. 17452
The undersigned Special Prosecution Officer I, Office of the Special Prosecutor, hereby accuses
JOSE P. DANS, JR. of Violation of Section 3(d) of RA 3019, as amended, committed as follows:
That on or about June 8, 1984, and for sometime prior or subsequent thereto, in
Makati, Metro Manila, Philippines, and within the jurisdiction of this Honorable Court,
the accused JOSE P. DANS, JR., a public officer, being then the Vice-Chairman of
the Light Rail Transit Authority (LRTA), a government corporate entity created under
Executive Order No. 603 of the former President Ferdinand E. Marcos, while in the

performance of his official functions, taking advantage of his position and committing
the offense in relation to his office, did then and there wilfully, unlawfully and
criminally accepted employment and/or acted as Director of (the) Philippine General
Hospital Foundation, Inc. (PGHFI), a private corporation duly organized under the
laws of the Philippines, which private enterprise had, at that time(,) pending business
transactions with the accused, in his capacity as Vice-Chairman of LRTA.
CONTRARY TO LAW.
Criminal Case No. 17453
The undersigned Special Prosecution Officer, Office of the Special Prosecutor, hereby accuses
IMELDA R. MARCOS and JOSE P. DANS, JR. of Violation of Section 3(g) of RA 3019, as
amended, committed as follows:
That on or about June 18, 1984, and for sometime prior or subsequent thereto, in
Makati, Metro Manila, Philippines, and within the jurisdiction of this Honorable Court,
the accused IMELDA R. MARCOS and JOSE P. DANS, JR., public officers, being
then the Chairman and Vice-Chairman, respectively, of the Light Rail Transit Authority
(LRTA), a government corporate entity created under Executive Order No. 603 of the
former President Ferdinand E. Marcos, while in the performance of their official
functions, taking advantage of their positions and committing the crime in relation to
their offices, did then and there wilfully, unlawfully and criminally conspiring with one
another, enter on behalf of the aforesaid government corporation into a Lease
Agreement covering LRTA property located in Sta. Cruz, Manila, with the Philippine
General Hospital Foundation, Inc. (PGHFI), a private enterprise, under terms and
conditions manifestly and grossly disadvantageous to the government.
CONTRARY TO LAW.
In short, Marcos and Dans were separately charged under Criminal Case Nos. 17451 and 17452 for
accepting employment in and/or acting as Chairman and Director, respectively, of the PGHFI while the latter
had pending business (the lease agreements) with the LRTA, which they both also headed. With regard to the
other cases, Criminal Case Nos. 17449, 17450 and 17453, the accusations against both of them stemmed
from the contracts they signed in representation of the LRTA and of the PGHFI which were allegedly entered
into under terms and conditions manifestly and grossly disadvantageous to the government.
When arraigned, petitioners pleaded not guilty to all of the charges. Before trial could commence, Dans
moved for the advance examination of defense witness Ramon F. Cuervo, Jr., a real estate broker, appraiser
and friend of Dans who, as an expert witness, was in a position to inform the court that the agreed lease prices
stated in the subject agreements were fair based on standard industry valuation standards. The court a
quo granted said motion, and Cuervo was allowed to testify on August 12, 13, and 19, 1992.During this time,
Marcos never questioned Cuervo and later expressed that she had no desire to further examine him. [6] Five
days after the final hearing of Cuervos testimony, the trial of the five cases opened with the formal offer of the
prosecutions documentary evidence, which included, inter alia, the five agreements mentioned earlier. On
November 23, 1992, the court issued an order admitting all the exhibits except Exhibits D and E as to Dans,
who challenged the two sublease agreements, and Exhibit E-1 as to Marcos, who, while accepting the validity
of said sublease agreement, nevertheless questioned the authenticity of her signature thereon.
In Criminal Case No. 17543, Dans filed a Motion to Dismiss (demurrer to evidence) dated December 7,
1992, but the court denied the same, as well as his motion for reconsideration thereof.
By the time the case was submitted for decision, Marcos had neither submitted a formal offer of
evidence, despite notice of the courts orders [7] to do so, nor the required memorandum. She did file a motion
for inhibition of the justices of the Sandiganbayans First Division on the ground of pre-judgment of her case
based on the courts denial of Dans demurrer to evidence, but this was denied in the courts resolution of May
20, 1993.
On September 24, 1993, the court a quo rendered judgment,[8] acquitting petitioners in Criminal Case
Nos. 17449, 17451, and 17452, but convicting them in Criminal Case Nos. 17450 and 17453. The decretal
portion of the assailed decision is reproduced hereunder:
WHEREFORE, judgment is now rendered
1. ACQUITTING the accused IMELDA R. MARCOS and the accused JOSE P. DANS,
JR. of the charge in Criminal Case No. 17449, there being no manifest and gross
disadvantage brought about by the contract dated September 8, 1982;
2. ACQUITTING accused IMELDA R. MARCOS in Criminal Case No. 17451, it not
having been demonstrated that the Information charging her had given her adequate
notice of the acts for which she could be held liable under the law;
3. ACQUITTING accused JOSE P. DANS, JR. in Criminal Case No. 17452, it not
having been demonstrated that the Information charging him had given him adequate
notice of the acts for which he could be held liable under the law;
and considering that the charges against them have been proved beyond reasonable
doubt

Page 21 of 66
4. CONVICTING accused IMELDA R. MARCOS and JOSE P. DANS, JR. in Criminal
Case No. 17450 under Sec. 3(g) of R.A. No. 3019, otherwise known as the Anti-Graft
and Corrupt Practices Act, and hereby imposes upon each accused the penalty of
imprisonment for an indeterminate period of nine (9) years and one (1) day as
minimum to twelve (12) years and ten (10) days as maximum.
Both accused shall also suffer the additional penalty of perpetual disqualification from
public office as provided in Sec. 9 of R.A. No. 3019;
5. CONVICTING accused IMELDA R. MARCOS and JOSE P. DANS, JR. in Criminal
Case No. 17453 under Sec. 3(g) of R.A. No. 3019, otherwise known as the Anti-Graft
and Corrupt Practices Act, and hereby imposes upon each accused the penalty of
imprisonment for the indeterminate period of nine (9) years and one (1) day as
minimum to twelve (12) years and ten (10) days as maximum.
Both accused shall also suffer the additional penalty of perpetual disqualification from
public office as provided in Sec. 9 of R.A. No. 3019.
The Ombudsman is given thirty (30) days from today within which to make a determination of
whether or not the other members of the Board of Directors of the Light Rail Transit Authority
during the relevant periods with respect to the lease contracts dated June 8, 1984 and June 18,
1984 executed by said Authority with the Philippine General Hospital Foundation, Inc. may also
be prosecuted under Sec. 3(g) of R.A. No. 3019, and to report to this Court at the end of said
period whatever determination he has made including the steps intended to be taken hereon
towards a new preliminary investigation, if the same is appropriate.
The bonds posted for the provisional liberty of accused IMELDA R. MARCOS and accused JOSE
P. DANS, JR. in Criminal Case No. 17449, No. 17451 and No. 17452 are hereby CANCELLED.
SO ORDERED.
Petitioners filed their respective motions for reconsideration of the courts decision on October 8,
1993. The Office of the Solicitor General also filed a motion for partial reconsideration on the same date,
seeking civil indemnity for the People of the Philippines. On November 13, 1996, respondent court
promulgated two resolutions, one denying the motion of Dans, [9] and another denying that of Marcos and
modifying the assailed September 24, 1993, decision with the addition of a sixth paragraph in the dispositive
portion which dealt with the civil liability of petitioners, viz.:[10]
6. Accused IMELDA R. MARCOS and JOSE P. DANS, JR. are hereby ordered jointly and
solidarily to reimburse the Light Railway Transit Authority for the prejudice that they have caused
to said Light Railway Transit Authority through the lease contracts which they executed.
(a) Under Criminal Case No. 17450, the sum of THIRTY TWO MILLION ONE
HUNDRED SEVENTY TWO THOUSAND PESOS (P32,172,000.00);
(b) Under Criminal Case No. 17453, the sum of NINETY TWO MILLION TWO
HUNDRED SIXTY EIGHT THOUSAND EIGHT HUNDRED FORTY PESOS
(P92,268,840.00).
Aggrieved, petitioners separately elevated their case to this Court for a review on the following grounds:
G.R. No. 127073
I. Respondent Court erred in denying petitioners demurrer to evidence in Criminal Case No.
17453 on the basis of baseless assumptions and conjectures not established by
evidence. Worse, in violation of mandatory rules of evidence, the denial of the demurrer was
made to rest on the advance, conditional testimony of defense witness Ramon Cuervo which had
not yet been offered in evidence.
II. Respondent Court erred in concluding that the two lease contracts in question were manifestly
and grossly disadvantageous to the government despite unrebutted evidence that their terms
and conditions were fair and reasonable and did not prejudice the Government.
III. Respondent Court erred when it assumed without evidentiary basis that LRTA had put up or
would put up buildings on the leased land.
IV. Respondent Court erred in holding that the lease contracts were also grossly
disadvantageous to the Government because non-payment of rentals . . . was not actionable
unless the rentals were in arrears for one year, citing the stipulation: Should there be a delay in
any payment of the rental consideration equivalent to one year, the lessor shall have the right to
take possession of the premises, the property and improvements thereon, the ownership of all
improvements thereby accruing to the lessor. (Stip. II, par. 4).
V. Assuming without admitting that LRTA would receive less than fair rental under the disputed
lease contracts, respondent Court erred when it considered injury to LRTA as necessarily an
injury to the Government, notwithstanding that such supposed injury to LRTA was offset by the
corresponding benefit enuring to the Philippine General Hospital (a government hospital funded
by government funds), which is inconsistent with the theory that the disputed lease contracts
were disadvantageous to the Government. Under Sec. 3(g) of R.A. No. 3019 which seeks to
protect public interest in general by condemning contracts disadvantageous to the Government,

the term government is used in its widest sense so as to include the national government, the
government-owned and government-controlled corporations, and all other instrumentalities or
agencies of the Republic of the Philippines and their branches. [Sec. 2(a)].
VI. While respondent Court was duty-bound to be just and impartial, it failed to give petitioner a
fair trial, who was thereby denied due process of law. Respondent Court was plainly biased
against, if not downright hostile to, petitioner; it unfairly allied itself with the prosecution, which
made it prosecutor and judge at the same time.
VII. Aside from the foregoing, the appealed decision is flawed by fatal infirmities which have
effectively denied petitioner due process of law.
G.R. No. 126995
A. The questioned Decision is a nullity because Section 3 (g) of the Anti-Graft and Corrupt
Practices Act (RA 3019, as amended) is unconstitutional for being, on its face, void for
vagueness.
B. The questioned Decision is a nullity because Section 3 (g) of the Anti-Graft and Corrupt
Practices Act (RA 3019, as amended) is unconstitutional for being a rider.
C. The questioned Decision is a nullity because the Informations in SB Criminal Cases Nos.
17450 and 17453 did not state all the essential facts constituting the offense but instead stated
conclusions of law, thereby denying the Petitioner her constitutional right to be informed of the
nature and the cause of the accusation against her (Sec. 14 (2), Bill of Rights).
D. The questioned Decision is a nullity because the Information in said SB Criminal Cases Nos.
17450 and 17453 charged only two of the total number of members in the Board of Directors of
the LRTA and the Board of Directors of the PGH Foundation, who had participated in the
collective acts, thereby singling Petitioner and her companion for discriminatory prosecution, in
violation of her right to Equal Protection of the Laws, which violation existed from the filing of the
information and cannot be cured by post hoc proceedings.
E. The questioned Decision is a nullity, because of the participation therein of Mr. Justice
Garchitorena, whose long-standing bias and hostility towards President Marcos and Petitioner
Imelda R. Marcos prevented him from having the requisite cold neutrality of an impartial judge, in
violation of her right as an accused person to Procedural Due Process of Law.
F. The questioned Decision is a nullity because Petitioner was denied of her Constitutional Right
to counsel.
1. Facts of record showing that Petitioner was deprived of and denied her Right to
Counsel.
2. Under the circumstances of record, the absence of counsel resulting from
imposition of suspension from the practice of law upon her retained counsel,
constituted deprivation of or denial of the Right to Counsel.
3. Facts of record showing legal representation of Petitioner Imelda Marcos was not
adequate.
G. The questioned Decision is premature and had disregarded the constitutional right of the
Petitioner to present evidence in her behalf. Her right to testify in her own behalf is a guaranteed
right, the exercise of which is her personal choice alone, and which counsel had no authority to
waive in her behalf. Besides, counsel being suspended, he could not have made a waiver. This
constitutional right to be heard by himself and counsel she is invoking now, as part of her right to
due process (Sec. 14 (1) and (2), Bill of Rights).
H. The questioned Decision is a nullity for it was rendered in derogation of Petitioners subsisting
right to be heard and to submit evidence in her defense. The finding of waiver is a prejudicial
error. The evidence thereof on the record is tenuous. A waiver by an accused person of the right
to be heard in her defense, including her right to testify in her own behalf must be indubitable,
and is valid only if personally exercised through her own manifestation in open court.
I. The questioned Decision is a nullity because the crime charged was not proven beyond a
reasonable doubt, and the presumption of innocence was not overcome, which is required by
Due Process.
1. There was no disadvantage to the Government.
i. PGH Foundation is part of the Government.
ii. There was no disadvantage to the Government because the PGH,
which is part of the Government benefitted.
iii. Facts of record, especially the questioned leases, show no
disadvantage.
iv. Conviction was based on pure speculation.
v. Respondent Sandiganbayan (First Division) erred in holding the
leases disadvantageous as to rental in absence of evidence existing at
the time that higher rentals should have been paid.

Page 22 of 66
vi. Respondent Sandiganbayan erred in holding that rentals for subleases were evidence of disadvantage when such sub-leases were
made later and negotiated by a charitable foundation deserving of
support through higher rentals.
2. Assuming arguendo alleged disadvantage, the same was not manifest nor gross.
3. Petitioner Marcos did not enter into the questioned lease contracts on behalf of the
Government.
4. The charge of conspiracy was not proved hence no basis for liability.
5. Conviction was based on weakness of defense evidence and not (on) strength of
prosecutions evidence.
J. The questioned Decision and Resolution are null and void because the Respondent
Sandiganbayan (First Division) acted without jurisdiction in issuing the questioned Decision and
Resolution since the records clearly show that the Court with jurisdiction over these cases is the
Special Division of Five Justices created by Admin. Order 288-93 pursuant to Sec. 5 of PD 1606
as amended and not Respondent Sandiganbayan (First Division).
The Court resolved to consolidate the two cases inasmuch as they raise similar issues and seek the
same reliefs. The questions may be stated thus:
1) Was respondent court correct in denying the demurrer to evidence of petitioner Dans in Criminal Case No.
17453?
After the prosecution had rested its case, Dans filed a Motion to Dismiss (Demurrer to Evidence) dated
December 7, 1992, based on Section 15, Rule 119 of the Rules of Court. [11] He argued that the prosecution
failed to establish the fact that the lease agreement covering the Sta. Cruz lot (Exhibit C) was manifestly and
grossly disadvantageous to the government. [12]
On February 10, 1993, the court a quo denied the said motion in this wise:
Since per testimony of witness Ramon Cuervo, Jr. (tsn, pp. 20 to 26, August 13, 1992) that considering the
nature of the terminal at the Sta. Cruz Station, which would be (the) subject of the lease contract between the
Light Rail Transit Authority and the PGH Foundation, Inc. (Exhibit C), the rental of the premises in question
could go up to P400,000.00 per month if the LRTA would put up the building as against the stipulated rental
of P92,437.00 actually entered into between the parties, there would appear cause to believe that the lease
contract in question was grossly disadvantageous for (sic) the government.
For this reason, the Demurrer to Evidence of accused Jose P. Dans, Jr., dated December 7, 1992, is DENIED
for lack of merit.
Dans questioned the denial on the ground that the demurrer should have been resolved solely on the
basis of the prosecutions evidence; and even assuming that it could be resolved using the evidence for the
defense, the latter must have been previously formally offered. [13]
These arguments are specious and must, therefore, be rejected.
Although a demurrer to evidence must be resolved based on the evidence of the prosecution, there is
nothing in the rules which would bar the court from taking cognizance of any matter taken up during the trial or
which has become part of the records of the case, especially in this instance where the disputed evidence was
taken in advance at the request of the defendant himself. Additionally, it is erroneous to suppose that Cuervos
testimony was not formally offered at the time because (t)estimonial evidence is formally offered by the calling
of the witness to the stand. [14] Thus, we find merit in the manner by which the trial court justified the denial of
Dans demurrer to evidence,[15] viz.:
First, the advance testimony of Mr. Cuervo taken at the instance of Engr. Dans on August 12 and
13, 1992, was already part of the record(s) in these cases when the Demurrer to Evidence was
filed by Engr. Dans on December 7, 1992. The testimony was introduced into the record in
exactly the same manner as any other testimony would be presented in evidence during
trial. x x x.
Being already part of the record in these cases, the advance testimony of Mr. Cuervo could be
taken judicial notice of.
xxx xxx xxx
. . . . (J)udicial notice takes the place of proof and is of equal force. As a means of establishing
facts it is therefore superior to evidence. In its appropriate field it displaces evidence since, as it
stands for proof, it fulfills the objects which the evidence is designed to fulfill and makes evidence
unnecessary.[16] Consequently, the party desiring to establish a fact is relieved, when judicial
notice is taken of the fact, from introducing evidence to prove it. [17]
Second, having been given in the course of the proceedings in these cases, the testimony of Mr.
Cuervo constitutes judicial admission of Engr. Dans who made it part of the record of these
cases.
xxx xxx xxx
As in judicial notice of a fact, admissions made in the course of the judicial proceedings are
substitutes for, and dispense with, the actual proof of facts. [18] The party benefited by the
admission is relieved of the duty of presenting evidence of the admitted fact and (t)he court, for

the proper decision of the case, may and should consider, without the introduction of evidence,
the fact admitted by the parties. [19]
Third, since the advance testimony of Mr. Cuervo was given in open court and duly recorded, the
Court could not just ignore the solemn declarations therein on the technicality that the testimony
had not been formally offered in evidence. x x x.
In any event, even if the testimony of Cuervo were to be excluded, there was enough evidence
proffered by the prosecution, particularly Exhibits B (the lease agreement in favor of the PGHFI) and D (the
sublease agreement in favor of TNCC) which would have more than justified the denial of the demurrer. In
other words, notwithstanding Cuervos testimony, these exhibits constitute solid documentary proof of
petitioners liability under Section 3(g) of R.A. No. 3019, as amended, as will be shown later in our discussion
of Issue No. 5, Was the evidence properly appreciated by respondent court?
2) Were the informations filed in Criminal Case Nos. 17450 and 17453 sufficient in form?
There appears to be no doubt that the questioned informations are reasonably adequate as to apprise
Marcos on the nature and cause of the accusations against her. In the case of Luciano v. Estrella,[20] the Court
had occasion to enumerate the elements of the crime under Section 3(g), R.A. No. 3019, namely, (1) that the
accused is a public officer; (2) that he entered into a contract or transaction on behalf of the government; and
(3) that such contract or transaction is grossly and manifestly disadvantageous to the government.The
allegations in the two informations are hereby reproduced for quick reference:
That on or about June 8 [18], 1984, and for sometime prior or subsequent thereto, in Makati,
Metro Manila, Philippines, and within the jurisdiction of this Honorable Court, the accused
IMELDA R. MARCOS and JOSE P. DANS, JR., public officers, being then the Chairman and
Vice-Chairman, respectively, of the Light Rail Transit Authority (LRTA), a government corporate
entity created under Executive Order No. 603 of the former President Ferdinand E. Marcos, while
in the performance of their official functions, taking advantage of their positions and committing
the crime in relation to their offices, did then and there wilfully, unlawfully and criminally
conspiring with one another, enter on behalf of the aforesaid government corporation into a
Lease Agreement covering LRTA property located in Pasay City [Sta. Cruz, Manila], with the
Philippine General Hospital Foundation, Inc. (PGHFI), a private enterprise, under terms and
conditions manifestly and grossly disadvantageous to the government.[21](Underscoring supplied)
As can be readily observed, the informations meet the minimum requirements for them to be upheld in court.
It is also alleged that for a criminal complaint or information to sufficiently inform the accused of the
nature and cause of the accusation against him, all the essential facts constituting the offense must be stated
therein, and not mere conclusions of law.[22]
Assuming that the matters which Marcos wanted to see alleged in the informations are not evidentiary
in character, and that they are really vague and ambiguous, other courses of action could have been taken,
such as filing a motion for a bill of particulars. This is what the Court precisely suggested in People v. Arlegui,
[23]
viz.:
. . . A bill of particulars while provided for under Section 6 of Rule 116 is not a popular procedure
among lawyers for the accused in criminal cases. For one thing, it may invite an amended
information which is not only clearer but may also be stronger and more
incriminating. However, it would have clarified and corrected at an early stage the kind of doubt
which the accused in this particular case alleged to have entertained. Section 6 of Rule 116
provides:
SEC. 6. Bill of Particulars. -- Defendant may, at any time on or before arraignment,
move for or demand a more definite statement or a bill of particulars of any matter
which is not averred with sufficient definiteness or particularity to enable him properly
to plead or prepare for trial. The motion shall point out the defects complained of and
the details desired.[24]
The more appropriate procedure under the circumstances would have been an order from the
court directing the Fiscal to amend the information because the defect, if there ever was one,
was curable by the simplest of amendments or clarifications. (Underscoring supplied)
In fact, the records reveal that Marcos did file such a motion.[25] After the prosecution had filed its answer
thereto, she was given an opportunity to file a reply, but she did not, thereby indicating that she was satisfied
with what was already stated in the answer.
3) Is Section 3(g), R.A. No. 3019, as amended, constitutional?
The validity of this provision is being assailed by petitioner Marcos on grounds of vagueness and
superfluity. She claims that the phrase manifestly and grossly disadvantageous to the government is vague for
it does not set a definite standard by which the court will be guided, thus, leaving it open to human subjectivity.
There is, however, nothing vague about the statute. The assailed provision answers the basic query
What is the violation? Anything beyond this, the hows and the whys, are evidentiary matters which the law
itself cannot possibly disclose in view of the uniqueness of every case. The disadvantage in this instance is
something that still has to be addressed by the States evidence as the trial progresses. It may be said that the
law is intended to be flexible in order to allow the judge a certain latitude in determining if the disadvantage to

Page 23 of 66
the government occasioned by the act of a public officer in entering into a particular contract is, indeed, gross
and manifest.
The personal circumstances of an accused are, in this regard, also immaterial, because of the nature of
the statute. As the Court declared in Luciano, [26]
. . . In other words, the act treated thereunder partakes of the nature of a malum prohibitum; it is
the commission of that act as defined by the law, not the character or effect thereof, that
determines whether or not the provision has been violated. And this construction would be in
consonance with the announced purpose for which Republic Act (No.) 3019 was enacted, which
is the repression of certain acts of public officers and private persons constituting graft or corrupt
practices or which may lead thereto. Note that the law does not merely contemplate repression of
acts that are unlawful or corrupt per se, but even of those that may lead to or result in graft and
corruption. Thus, to require for conviction under the Anti-Graft and Corrupt Practices Act that the
validity of the contract or transaction be first proved would be to enervate, if not defeat, the
intention of the Act.
We, therefore, affirm the constitutionality of Section 3(g) of R.A No. 3019, as amended.
4) Was petitioner Marcos deprived of her constitutional right to be heard by herself or counsel?
Marcos claims that she was not adequately represented by counsel at the trial due to the suspension
from the practice of law of her counsel of record, Atty. Antonio Coronel. It appears from the records, however,
that during the absence of Atty. Coronel and sometime thereafter, she was still represented by other lawyers,
including Renato Dilag, Luis Sillano, Perfecto V. Fernandez, Jose and Cristobal Fernandez, Vicente D. Millora,
Juan T. David, Balbino Diego, and the law firm of Manuel M. Lazaro and Associates. The representation of
Atty. Millora and the Fernandezes subsisted even in this Court, where they were later substituted by Atty.
Estelito Mendoza. In any event, at the time Atty. Coronel and his replacements withdrew their respective
appearances, all evidence had already been presented. It is just that Marcos opted not to present any
evidence for her defense, relying, perhaps, on what she perceived to be glaringly weak prosecution
evidence. Or it is not impossible or far-fetched that her refusal may have been due to her indifference to or
open defiance of the justice system.
5) Was the evidence properly appreciated by respondent court?
In proclaiming his innocence, Dans relied only on his and Cuervos testimony. Marcos, on the other
hand, presented no evidence at all, claiming that she had been prejudged by respondent court. The
prosecution submitted documentary evidence and nothing else. The question that must first be answered,
therefore, is: Was the States evidence sufficient to prove beyond a shadow of a doubt that the accused,
petitioners herein, committed the crimes for which they were held accountable?
Petitioners were charged with and found guilty of violating Section 3(g) of R.A. No. 3019, as
amended. It states thus:
SEC. 3. Corrupt practices of public officers. -- In addition to acts or omissions of public officers
already penalized by existing law, the following shall constitute corrupt practices of any public
officer and are hereby declared to be unlawful:
xxx xxx xxx
(g) Entering, on behalf of the Government, into any contract or transaction manifestly and grossly
disadvantageous to the same, whether or not the public officer profited or will profit thereby.
It is clear that for liability to attach under the aforequoted provision, the public officer concerned must
have entered into a contract which is manifestly and grossly disadvantageous to the Government. The court a
quo phrased the focal issue in these petitions in this wise: (A)re exhibits A, B and C, the Lease Agreements
executed by the LRTA with the PGH Foundation over the LRT property at the stations in Pasay City and Sta.
Cruz (Manila) manifestly and grossly disadvantageous to the government?
A perusal of the prosecutions documentary evidence would readily reveal, even from a laymans
perspective, that the Government was seriously prejudiced in the transactions under review.
We concur with the observation of the court a quo that, by itself, Exhibit A, the mother contract which
initially granted the PGHFI a virtual exclusive license or franchise over the subject properties, would neither be
prejudicial (n)or beneficial to anybody, because it did not refer to any specific property or
consideration. Hence, petitioners were correctly acquitted in Criminal Case No. 17449, which was based on
this agreement.
With regard to Criminal Case Nos. 17450 and 17453, the Court is likewise constrained to agree with
the trial court that the Government suffered a manifest and gross disadvantage with the execution of the two
lease agreements, Exhibits B and C. The facts in this regard are undisputed.
The monthly rental price agreed upon between the LRTA and the PGHFI for the lease of the Pasay lot
was P102,760.00, and for the Sta. Cruz lot, it was P92,437.20. Barely ten days later, the very same properties
were subleased by PGHFI to private entities for P734,000.00 (for the Pasay lot) and P199,710.00 (for the Sta.
Cruz lot). The difference in the lease price is too enormous to ignore, for no market force could possibly have
raised the rental cost in the same site by that margin in just over a week. Even by conservative estimates, the
properties could have originally been leased out for at least P500,000.00[27] more. The Government was
thereby deprived of at least an additional half a million pesos per month.

Indubitably, there was some kind of conflict of interest in the premises. Marcos and Dans, who were
then Cabinet members, occupied the highest positions in the Boards of the LRTA and the PGHFI in a
concurrent capacity at the time the questioned deals were made. They were, as it were, playing both ends; but
on paper, one was acting for the lessor and the other for the lessee. The fact that petitioners were cleared of
the charge that they acted improperly in accepting seats in the PGHFI Board of Trustees at the time when it
had pending business transactions with the LRTA, of which they were also officers is of no moment. First, their
acquittal in Criminal Case No. 17451 and No. 17452 was simply due to the insufficiency of the
informations. Second, the accusation in said informations have no bearing whatsoever on the subject matter of
the other cases filed against them as signatories to the assailed lease agreements. Even Justice Garchitorena
had occasion to advert to this conflict of interest in his resolution of November 13, 1996. [28]
The focus now shifts to the testimony of defense witness Ramon Cuervo. An examination of the
pleadings filed in these petitions, including all their attachments, would demonstrate the confusion sown by
Cuervos expert opinion. Petitioners insist that Cuervo confirmed their allegation that the lease price stated in
the questioned agreements was a fair valuation based on the comparative rental costs in the immediate
vicinity of the subject properties. This inference was drawn from Cuervos calculation of the fair monthly rental
value of the Pasay lot at P73,400.00[29] and the Sta. Cruz lot at P80,825.64,[30] using standard appraisal
techniques in the industry.
The court, on the other hand, interpreted his testimony differently and arrived at a much higher
valuation, that is, P210,000.00 a month for the Pasay lot and P400,000.00 monthly for the Sta. Cruz lot.
In view of this conflict in opinion, with petitioners and respondent court holding steadfast to their
respective interpretations of Cuervos testimony, this Court has no alternative but to fall back on the
documentary evidence.
Dans, in his motion to dismiss dated December 7, 1992, actually made an implied recognition that the
prosecution was able to establish the manifest and gross disadvantage to the government brought about by
the lease agreement over the Pasay lot (Exhibit B), when he raised no objection to the presentation by the
prosecution of the sublease agreement between the PGHFI and TNCC over the same property (Exhibit
D). Just as he read the lease and sublease agreements over the Sta. Cruz lot (Exhibits C and E) together in
order to demonstrate to the court that the prosecutions evidence in Criminal Case No. 17453 was weak,
Exhibit B must also be appreciated in connection with Exhibit D so that the gross and manifest disadvantage
to the government in Criminal Case No. 17450 can be established.
It must be noted that Dans objected vigorously to Exhibit E on the ground that it was a mere photocopy
of the original. Despite diligent efforts to locate an original duplicate or an authentic copy, the prosecution
could not produce one, so that as to Dans, said exhibit was not admitted. The same cannot be said of Marcos
who never challenged the authenticity of Exhibit E, although she contested the validity of her signature thereon
as representative of the PGHFI, the lessor.
For a better appreciation of the evidence at hand, the lease agreements (Exhibits B and C) must be
read simultaneously with the sublease agreements (Exhibits D and E).While Dans signed the lease
agreements in behalf of the LRTA, he apparently had no hand in the ensuing sublease of the properties, as
indicated by the absence of his signature from the two subsequent agreements. Marcos, on the other
hand, represented the PGHFI twice, first in the lease contract and later in the sublease agreements. Within the
very brief period of time that separated the lease and the sublease of the LRTAs prime lots, Marcos inevitably
generated a situation where the LRTA, a government corporation, [31] lost out to the PGHFI, a private
enterprise[32] headed by Marcos herself.
But, considering that there is an allegation of conspiracy in the informations, the sufficiency of which we
have earlier upheld, should the liability of Dans be the same as that of Marcos?
The court a quo entertained no doubt that the prosecutions evidence amply established a conspiracy
between Dans and Marcos, thus:
. . . ., (T)he avowed purpose of both accused in entering into the Lease Agreements was not to
earn additional income for the use of the LRTA in its operations, but to give financial assistance
to the PGHF in the pursuit of its charitable objectives.
xxx xxx xxx
This expressly admitted purpose explains why the rentals stipulated in the Lease Agreements
were so low that when compared with the rentals provided in the Sub-Lease Agreements, the
latter deceivingly appear, to borrow the words of Mr. Cuervo, to be extra-ordinarily high. To have
fixed much higher rentals would have been to reduce the income which both the accused would
like the PGHF to earn from the lease contracts. And the rentals in the Lease Agreements all the
more became very low in light of the fact that the Agreement for the development of the areas
adjacent to the LRT stations was without any valuable consideration. [33]
xxx xxx xxx
In these cases, Engr. Dans and Mrs. Marcos had a common objective, namely, to lease in favor
of the PGHF the Pasay City and Sta. Cruz properties under such terms and conditions so
favorable to the PGHF as to result in manifest and gross disadvantage to the LRTA. This

Page 24 of 66
common purpose they pursued together and in concert with each other, being in the position to
do so because they were both ranking officials of the LRTA and the PGHF.
Thus, on September 8, 1982, avowedly desirous to extend financial support to the PGHF (not to
the PGH), Engr. Dans, representing the LRTA, and Mrs. Marcos, as chairman of the PGHF,
executed an agreement wherein without any valuable consideration, the latter was granted
(exclusive) authority to develop areas adjacent to the LRT stations and to operate commercial
concessions therein.
In furtherance of their common design and pursuant to their intention to financially benefit the
PGHF, Engr. Dans and Mrs. Marcos, acting in their said representative capacities, entered into a
Lease Agreement on June 8, 1984, over the Pasay City area for P102,760.00 a month and
another Lease Agreement ten days later over the Sta. Cruz Area for P92,437.20 per month. As
already demonstrated, the monthly rentals and other stipulations in both contracts placed the
LRTA in a manifestly and grossly disadvantageous position.
Engr. Dans and Mrs. Marcos were, therefore, both co-conspirators for having acted in conspiracy
with each other and co-principals by direct participation for having taken direct part in the
execution of the acts charged. Engr. Dans could not have committed the offenses without Mrs.
Marcos and vice-versa.[34]
While these observations cannot be said to be flawed, they were made only after the trial, in fact, after
the assailed decision was promulgated, and these conclusions are the courts alone. The prosecution never
attempted to establish a connection between the two defendants in committing the acts for which they were
charged. It is a fundamental rule, however, that a charge of conspiracy must be proven just like any other
criminal accusation, that is, independently and beyond reasonable doubt. [35] In this regard, therefore, this
Courts opinion that the alleged conspiracy between the petitioners was not sufficiently established by the
States evidence.
6) Were the members of the Sandiganbayans First Division biased against petitioners? Consequently, is the
assailed decision dated September 24, 1993, valid?
Petitioners consider erroneous the active participation of the members of the Sandiganbayans First
Division during the hearing of Cuervos testimony. The records reveal that, indeed, the court a quo may have
participated more actively than usual in the examination of Cuervo in order to elicit from him the information
that would nail down the prosecutions basic theory, thus rendering unassailable the conclusions which are
now being impugned by petitioners who argue that the extensive questioning of Cuervo [36] made the
Sandiganbayan, particularly Justice Garchitorena, not only a judge, but a prosecutor as well.
To be sure, instead of being satisfied with Cuervos testimonial affirmation of what it had all along
considered to be the fair rental value of the properties, the court a quo relied on his responses to numerous
postulated queries thereby concluding there was a gross disparity in the lease price, as agreed upon by the
parties, and the projected rental price, as estimated by Cuervo. Indeed, if the trial courts conclusions were to
be followed, the Pasay lot should fetch a monthly rental of P210,000.00 and the Sta. Cruz
lot, P400,000.00.These figures are extrapolated from the potential rental price of the lots, considering its
location.
Petitioners point out that the limitations on the right of judges to ask questions during the trial were not
observed by the Sandiganbayan. They accuse Justice Garchitorena of acting more of a prosecutor than the
impartial judge he is supposed to be, particularly during the examination of Cuervo. Lest we be distracted by
this allegation of bias on the part of respondent court, it must be remembered that petitioners were never
prejudiced by such questioning, [37] which is about the only thing that would make a string of queries by a judge
objectionable. As the following discussion will reveal, the trial courts interpretation of Cuervos testimony is
immaterial because of the sufficiency of the documentary evidence of the prosecution to prove the charges
against herein petitioners.
In view of the circumstances obtaining here, we find that the trial courts active role in this regard was
necessary to clarify the mostly technical aspect of Cuervos testimony.Respondent court defended its action by
declaring that:
It was precisely for the reason that Mr. Cuervo was merely asked by Engr. Dans lawyer as to the
fair and reasonable rentals of the leased premises as without improvements, without the LRT
stations being adjacent thereto, and not parts of commercial centers, that the Court, through
Presiding Justice Garchitorena, was constrained to propound questions on the fair and
reasonable rentals of the leased areas by considering them as not ordinary parcels of land. [38]
The Court notes that while petitioners have been making such an outcry since the promulgation of the
questioned judgment regarding the line of questioning followed by respondent court, none of them ever
objected to such queries during the trial. Neither did they attempt to salvage the situation by asking questions
on re-direct examination if they harbored the impression that the courts cross-examination seriously prejudiced
their case. This observation was likewise made by the court a quo, to wit:
It is now too late in the day to object to the alleged leading, misleading, and badgering questions
of the Presiding Justice Garchitorena and to ask (the court) to expunge the answers thereto from
the record. Needless to say, Engr. Dans (and Marcos, for that matter) should have done so when

the supposed objectionable nature of the questions and/or answers were propounded or given.
(Section 36, Rule 132, 1985 Rules on Evidence). As it happened, he (and she) did not even raise
his (and her) objections at the close of the testimony of Mr. Cuervo. He (and she) did not also ask
re-direct questions to correct whatever mistakes or misimpressions allegedly crept into Mr.
Cuervos testimony. Instead, he formally offered the entire testimony without making any
exceptions or reservations.[39]
We should stress that in affirming the conviction of petitioner Marcos, this Court relies mainly on the
prosecutions documentary evidence showing the chasmic disparity between the P102,760.00 monthly rental
stipulated in Exhibit B and the P734,000.00 monthly rental provided in Exhibit D. The testimony of Cuervo is,
at best, opinion only, but the amounts mentioned in the said two exhibits are facts which cannot be altered by
opinion, however expert. Regardless of Cuervos expert opinion on the probable rental rate of the Pasay lot,
the stubborn fact and cold reality is that the PGHFI was able to lease it out for an amount that was seven
times more than what it stipulated to pay the government. The sublease (Exhibit D) is the best monument to
the gross and manifest disadvantage suffered by the government due to the willful actions of Marcos. Hence,
even if the questions of Justice Garchitorena and the answers thereto of Cuervo were totally ignored by this
Court, the prosecutions evidence would still firmly stand, and would definitely be more than sufficient to
warrant a conviction beyond reasonable doubt.
Going further, petitioners insist that some impropriety attended the promulgation of the challenged
decision. This allegation stems from the dissolution of the Special Division earlier created by Justice
Garchitorena because of the lack of unanimity among the members of the First Division.
It appears from the records that Justice Narciso T. Atienza initially wanted to acquit the defendants in
Criminal Case Nos. 17449, 17451 and 17452, while Justices Garchitorena and Balajadia wanted to convict
them in Criminal Case Nos. 17450, 17451, 17452 and 17453. There was, therefore, no unanimous vote in
Criminal Case Nos. 17451 and 17452. Thereupon, a Special Division was constituted, with the addition of
Justices Augusto M. Amores and Cipriano A. del Rosario. Over an informal luncheon among the members of
the newly-created Special Division, [40] however, where the merits of the cases were incidentally discussed, an
understanding was reached whereby the two newly-appointed members agreed with Justice Atienza that
the defendants should be cleared of the charges in Criminal Case Nos. 17451 and 17452. The stance of those
present was that if the actual voting were to take place, the majority would acquit the defendants in Criminal
Case Nos. 17451 and 17452. Consequently, Justices Garchitorena and Balajadia decided to change their
opinions in said two cases, thus giving the First Division a unanimous vote in all the cases. There seemed to
be no further need for the Special Division; hence, it was dissolved. The result is the assailed decision
promulgated, as scheduled, on September 24, 1993.
Petitioners point out that once the Special Division was created, the First Division was thereby divested
of jurisdiction to decide the case. They also maintain that the informal discussion of the merits of the cases
inside a restaurant was unofficial business and, therefore, should have no binding effect.
While it is true that under Section 5 of Presidential Decree No. 1606, as amended, when a unanimous
vote is not reached by a division, two other justices shall be designated by the Presiding Justice to sit in a
special division, and their majority vote shall be required to reach a valid verdict, this provision does not totally
rule out a situation where all members of the 3-justice division eventually come to a common agreement to
reach a unanimous decision, thus, making another divisions participation in these cases redundant.This is
exactly what transpired in this case. The change of heart of Justices Garchitorena and Balajadia, though
reached unofficially, may be perceived as a supervening event which rendered the Special Divisions functions
superfluous. In any case, the fact that Justice Atienza signed his concurrence cured the defect, if any, in the
questioned judgment; again, an illustration of the curative effect of ones signature. Petitioners are of the
impression that this chain of events was meant to railroad their conviction, thus making the magistrates
concerned vulnerable to criticism. While the Court is averse to encouraging this kind of behavior in judges, it is
of the view, however, that the assailed decision is in harmony with the basic right of an accused to a speedy
disposition of his case. This, to our mind, is more important than any consideration of technical impropriety in
resolving a case.
Summing up, was the guilt of petitioners proved beyond a reasonable doubt by the prosecution?
We distinguish.
In Criminal Case No. 17453, we do not concur with the conclusions reached by the court a quo. The
culpability of petitioners in this case stems from their entering into the lease agreement (Exhibit C) over the
Sta. Cruz lot under terms and conditions manifestly and grossly disadvantageous to the government, which, in
this instance, is the LRTA. To prove this assertion, the prosecution presented in evidence the sublease
agreement (Exhibit E) over the same property showing the disparity in the rental price. While the authenticity
of Exhibit D, which was used to prove the manifest and gross disadvantage to the government occasioned by
Exhibit B, was admitted by the court and by the parties themselves, the validity of Exhibit E cannot, even up to
this point, be determined with certainty because it is a mere uncertified photocopy of the original. Thus, the
gross and manifest disadvantage to the government, which Exhibit E was supposed to engender, remains an
allegation which cannot be proved by other direct evidence. The fact that only Dans objected to its

Page 25 of 66
admissibility does not mean that it is valid as to Marcos. As a result, both petitioners should be, as they are
hereby, acquitted in Criminal Case No. 17453 on ground of reasonable doubt.
In Criminal Case No. 17450, we must further qualify our judgment.
As regards petitioner Dans, the Court is of the opinion that the prosecution failed to prove his guilt in
committing the offenses charged beyond a reasonable doubt. We believe that his liability, if any, could only
stem from a knowledge of the terms of the sublease agreements, Exhibits D and E, which formed the core of
the Courts appraisal of the manifest and gross disadvantage to the government. Exhibit E, as already
discussed, was correctly disregarded by the court a quo for being unauthenticated. Even though he was a
Board Director of the PGHFI, Dans denied any knowledge of the execution of Exhibits D and E, and his denial
was never disproved by the prosecution. In fact, his signature does not appear in either sublease
agreements. Neither was the alleged conspiracy between him and Marcos established by the prosecution.
It is this Courts opinion, however, that the guilt of petitioner Marcos was proved by the State beyond
reasonable doubt. She was charged with violation of Section 3(g) of R.A. No. 3019, as amended, for executing
a lease agreement (Exhibit B) in behalf of the PGHFI, a private enterprise of which she was the Chairman,
over a lot located in Pasay City owned by the LRTA, a government corporation of which she was undeniably
also the Chairman. The consideration therefor was shown to be unfair and unreasonable upon comparison
with the rental price stipulated in the sublease agreement (Exhibit D) which she subsequently signed for the
PGHFI in favor of TNCC. That she should be held responsible is shown by the presence of her signature in
Exhibits A to E, where she acts in different capacities. She cannot, under these circumstances, claim
ignorance of the great disparity between the rental price stipulated in the lease and the sublease
agreements. Consequently, in Criminal Case No. 17450, the conviction of petitioner Marcos should be, as it is
hereby, upheld.
Finally, the Court observes that the Sandiganbayan awarded damages to the People in the amount
of P32,172,000.00 in Criminal Case No. 17450 and P92,268,840.00 in Criminal Case No. 17453. This must be
accordingly corrected.
Considering that petitioners were acquitted in Criminal Case No. 17453 due to lack of evidence, the
Court deems them likewise free from any civil liability since the fact from which such liability might arise no
longer exists.[41]
On the other hand, in Criminal Case No. 17450, the Court observes that an error has been committed
in the computation of the damages to be awarded to the People. The trial court based its figures on the
amount it perceived to be the fair rental value of the Pasay lot, as estimated by Cuervo, less the rental price
stated in Exhibit B. Thus, it deductedP102,760.00 (the stipulated monthly rental for the Pasay lot)
from P210,000.00 (Cuervos estimate, as interpreted by the court a quo) to arrive at a difference
of P107,240.00, which was multiplied by 12 months to reach an annual loss of P1,286,880.00.[42] This amount
was then multiplied by the life span of the lease contract, which is 25 years, to come up with the final award
of P32,172,000.00.[43]
Since the estimates of Cuervo were found to be mere estimates, it is difficult to imagine why the trial
court used them as basis for its calculation of damages. As we have already demonstrated, the gross and
manifest disadvantage to the government in Criminal Case No. 17450 was determined by comparing Exhibits
B and D. The conviction of Marcos was predicated on the nexus between these two documents, as well as on
her obvious conflict of interest in entering into them. By the same token, her civil liability must also be made to
depend on these two pieces of evidence. The correct figures should be those stated in Exhibits B and D, to
wit: P734,000.00 (the stipulated monthly sublease rental for the Pasay lot) less P102,760.00 (the agreed
monthly lease price for said property) times 12 months times 25 years. Thus, P734,000.00 - P102,760.00
= P631,240.00 x 12 months = P7,574,880.00 x 25 years = P189,372,000.00.
WHEREFORE, judgment is hereby rendered:
1) AFFIRMING the CONVICTION of petitioner Imelda R. Marcos in Criminal Case No. 17450, with the
modification that said petitioner is hereby ordered to pay the Light Rail Transit Authority (LRTA) the amount of
ONE HUNDRED EIGHTY-NINE MILLION, THREE HUNDRED SEVENTY-TWO THOUSAND PESOS
(P189,372,000.00), as and by way of reimbursement for the prejudice caused thereto resulting from the
execution of the lease contract dated June 8, 1984; and
2) REVERSING the CONVICTION of petitioner Imelda R. Marcos in Criminal Case No. 17453 and of petitioner
Jose P. Dans, Jr. in Criminal Case No. 17450 and No. 17453, on ground of reasonable doubt.
Costs against petitioners.
SO ORDERED.
Narvasa, C.J. (Chairman), and Panganiban, JJ., concurs.
Melo, and Francisco JJ., see concurring and dissenting opinion.
EN BANC
[G.R. No. 111953. December 12, 1997]
HON. RENATO C. CORONA, in his capacity as Assistant Secretary for Legal Affairs, HON. JESUS B.
GARCIA, in his capacity as Acting Secretary, Department of Transportation and
Communications, and ROGELIO A. DAYAN, in his capacity as General Manager of Philippine

Ports Authority, petitioners, vs. UNITED HARBOR PILOTS ASSOCIATION OF THE


PHILIPPINES and MANILA PILOTS ASSOCIATION,respondents.
DECISION
ROMERO, J.:
In issuing Administrative Order No. 04-92 (PPA-AO No. 04-92), limiting the term of appointment of
harbor pilots to one year subject to yearly renewal or cancellation, did the Philippine Ports Authority (PPA)
violate respondents right to exercise their profession and their right to due process of law?
The PPA was created on July 11, 1974, by virtue of Presidential Decree No. 505. On December 23,
1975, Presidential Decree No. 857 was issued revising the PPAs charter.Pursuant to its power of control,
regulation, and supervision of pilots and the pilotage profession, [1] the PPA promulgated PPA-AO-03-85 [2] on
March 21, 1985, which embodied the Rules and Regulations Governing Pilotage Services, the Conduct of
Pilots and Pilotage Fees in Philippine Ports. These rules mandate, inter alia, that aspiring pilots must be
holders of pilot licenses [3] and must train as probationary pilots in outports for three months and in the Port of
Manila for four months. It is only after they have achieved satisfactory performance [4] that they are
given permanent and regular appointments by the PPA itself [5] to exercise harbor pilotage until they reach the
age of 70, unless sooner removed by reason of mental or physical unfitness by the PPA General
Manager. [6] Harbor pilots in every harbor district are further required to organize themselves into pilot
associations which would make available such equipment as may be required by the PPA for effective pilotage
services. In view of this mandate, pilot associations invested in floating, communications, and office
equipment. In fact, every new pilot appointed by the PPA automatically becomes a member of a pilot
association and is required to pay a proportionate equivalent equity or capital before being allowed to assume
his duties, as reimbursement to the association concerned of the amount it paid to his predecessor.
Subsequently, then PPA General Manager Rogelio A. Dayan issued PPA-AO No. 04-92 [7] on July 15,
1992, whose avowed policy was to instill effective discipline and thereby afford better protection to the port
users through the improvement of pilotage services. This was implemented by providing therein that all
existing regular appointments which have been previously issued either by the Bureau of Customs or the PPA
shall remain valid up to 31 December 1992 only and that all appointments to harbor pilot positions in all
pilotage districts shall, henceforth, be only for a term of one (1) year from date of effectivity subject to yearly
renewal or cancellation by the Authority after conduct of a rigid evaluation of performance.
On August 12, 1992, respondents United Harbor Pilots Association and the Manila Pilots Association,
through Capt. Alberto C. Compas, questioned PPA-AO No. 04-92 before the Department of Transportation and
Communication, but they were informed by then DOTC Secretary Jesus B. Garcia that the matter of reviewing,
recalling or annulling PPAs administrative issuances lies exclusively with its Board of Directors as its
governing body.
Meanwhile, on August 31, 1992, the PPA issued Memorandum Order No. 08-92 [8] which laid down the
criteria or factors to be considered in the reappointment of harbor pilots,viz.: (1) Qualifying Factors: [9] safety
record and physical/mental medical exam report and (2) Criteria for Evaluation: [10] promptness in servicing
vessels, compliance with PPA Pilotage Guidelines, number of years as a harbor pilot, average GRT of vessels
serviced as pilot, awards/commendations as harbor pilot, and age.
Respondents reiterated their request for the suspension of the implementation of PPA-AO No. 04-92,
but Secretary Garcia insisted on his position that the matter was within the jurisdiction of the Board of
Directors of the PPA. Compas appealed this ruling to the Office of the President (OP), reiterating his
arguments before the DOTC.
On December 23, 1992, the OP issued an order directing the PPA to hold in abeyance the
implementation of PPA-AO No. 04-92. In its answer, the PPA countered that said administrative order was
issued in the exercise of its administrative control and supervision over harbor pilots under Section 6-a (viii),
Article IV of P. D. No. 857, as amended, and it, along with its implementing guidelines, was intended to restore
order in the ports and to improve the quality of port services.
On March 17, 1993, the OP, through then Assistant Executive Secretary for Legal Affairs Renato C.
Corona, dismissed the appeal/petition and lifted the restraining order issued earlier. [11] He concluded that PPAAO No. 04-92 applied to all harbor pilots and, for all intents and purposes, was not the act of Dayan, but of the
PPA, which was merely implementing Section 6 of P.D. No. 857, mandating it to control, regulate and
supervise pilotage and conduct of pilots in any port district.
On the alleged unconstitutionality and illegality of PPA-AO No. 04-92 and its implementing memoranda
and circulars, Secretary Corona opined that:
The exercise of ones profession falls within the constitutional guarantee against wrongful deprivation of, or
interference with, property rights without due process. In the limited context of this case, PPA-AO 04-92 does
not constitute a wrongful interference with, let alone a wrongful deprivation of, the property rights of those
affected thereby. As may be noted, the issuance aims no more than to improve pilotage services by limiting
the appointment to harbor pilot positions to one year, subject to renewal or cancellation after a rigid evaluation
of the appointees performance.
PPA-AO 04-92 does not forbid, but merely regulates, the exercise by harbor pilots of their profession in PPAs
jurisdictional area. (Emphasis supplied)

Page 26 of 66
Finally, as regards the alleged absence of ample prior consultation before the issuance of the
administrative order, Secretary Corona cited Section 26 of P.D. No. 857, which merely requires the PPA to
consult with relevant Government agencies. Since the PPA Board of Directors is composed of the Secretaries
of the DOTC, the Department of Public Works and Highways, the Department of Finance, and the Department
of Environment and Natural Resources, as well as the Director-General of the National Economic
Development Agency, the Administrator of the Maritime Industry Authority (MARINA), and the private sector
representative who, due to his knowledge and expertise, was appointed by the President to the Board, he
concluded that the law has been sufficiently complied with by the PPA in issuing the assailed administrative
order.
Consequently, respondents filed a petition for certiorari, prohibition and injunction with prayer for the
issuance of a temporary restraining order and damages, before Branch 6 of the Regional Trial Court of Manila,
which was docketed as Civil Case No. 93-65673. On September 6, 1993, the trial court rendered the following
judgment: [12]
WHEREFORE, for all the foregoing, this Court hereby rules that:
1. Respondents (herein petitioners) have acted in excess of jurisdiction and with grave abuse of
discretion and in a capricious, whimsical and arbitrary manner in promulgating PPA
Administrative Order 04-92 including all its implementing Memoranda, Circulars and
Orders;
2. PPA Administrative Order 04-92 and its implementing Circulars and Orders are declared null and void;
3. The respondents are permanently enjoined from implementing PPA Administrative Order 04-92 and its
implementing Memoranda, Circulars and Orders.
No costs.
SO ORDERED.
The court a quo pointed out that the Bureau of Customs, the precursor of the PPA, recognized pilotage
as a profession and, therefore, a property right under Callanta v.Carnation Philippines, Inc. [13] Thus,
abbreviating the term within which that privilege may be exercised would be an interference with the property
rights of the harbor pilots.Consequently, any withdrawal or alteration of such property right must be strictly
made in accordance with the constitutional mandate of due process of law. This was apparently not followed
by the PPA when it did not conduct public hearings prior to the issuance of PPA-AO No. 04-92; respondents
allegedly learned about it only after its publication in the newspapers. From this decision, petitioners elevated
their case to this Court on certiorari.
After carefully examining the records and deliberating on the arguments of the parties, the Court is
convinced that PPA-AO No. 04-92 was issued in stark disregard of respondents right against deprivation of
property without due process of law. Consequently, the instant petition must be denied.
Section 1 of the Bill of Rights lays down what is known as the due process clause of the
Constitution, viz.:
SECTION 1. No person shall be deprived of life, liberty, or property without due process of law,
x x x.
In order to fall within the aegis of this provision, two conditions must concur, namely, that there is a
deprivation and that such deprivation is done without proper observance of due process. When one speaks of
due process of law, however, a distinction must be made between matters of procedure and matters of
substance. In essence, procedural due process refers to the method or manner by which the law is enforced,
while substantive due process requires that the law itself, not merely the procedures by which the law would
be enforced, is fair, reasonable, and just. [14] PPA-AO No. 04-92 must be examined in light of this distinction.
Respondents argue that due process was not observed in the adoption of PPA-AO No. 04-92 allegedly
because no hearing was conducted whereby relevant government agencies and the pilots themselves could
ventilate their views. They are obviously referring to the procedural aspect of the enactment. Fortunately, the
Court has maintained a clear position in this regard, a stance it has stressed in the recent case
of Lumiqued v. Hon. Exevea, [15] where it declared that (a)s long as a party was given the opportunity to defend
his interests in due course, he cannot be said to have been denied due process of law, for this opportunity to
be heard is the very essence of due process. Moreover, this constitutional mandate is deemed satisfied if a
person is granted an opportunity to seek reconsideration of the action or ruling complained of.
In the case at bar, respondents questioned PPA-AO No. 04-92 no less than four times [16] before the
matter was finally elevated to this Tribunal. Their arguments on this score, however, fail to persuade. While
respondents emphasize that the Philippine Coast Guard, which issues the licenses of pilots after administering
the pilots examinations, was not consulted, [17] the facts show that the MARINA, which took over the licensing
function of the Philippine Coast Guard, was duly represented in the Board of Directors of the PPA.Thus,
petitioners correctly argued that, there being no matters of naval defense involved in the issuance of the
administrative order, the Philippine Coast Guard need not be consulted. [18]
Neither does the fact that the pilots themselves were not consulted in any way taint the validity of the
administrative order. As a general rule, notice and hearing, as the fundamental requirements of procedural due
process, are essential only when an administrative body exercises its quasi-judicial function. In the

performance of its executive or legislative functions, such as issuing rules and regulations, an administrative
body need not comply with the requirements of notice and hearing. [19]
Upon the other hand, it is also contended that the sole and exclusive right to the exercise of harbor
pilotage by pilots is a settled issue. Respondents aver that said right has become vested and can only be
withdrawn or shortened by observing the constitutional mandate of due process of law. Their argument has
thus shifted from the procedural to one of substance. It is here where PPA-AO No. 04-92 fails to meet the
condition set by the organic law.
There is no dispute that pilotage as a profession has taken on the nature of a property right. Even
petitioner Corona recognized this when he stated in his March 17, 1993, decision that (t)he exercise of ones
profession falls within the constitutional guarantee against wrongful deprivation of, or interference with,
property rights without due process. [20]He merely expressed the opinion that (i)n the limited context of this
case, PPA-AO 04-92 does not constitute a wrongful interference with, let alone a wrongful deprivation of, the
property rights of those affected thereby, and that PPA-AO 04-92 does not forbid, but merely regulates, the
exercise by harbor pilots of their profession. As will be presently demonstrated, such supposition is gravely
erroneous and tends to perpetuate an administrative order which is not only unreasonable but also
superfluous.
Pilotage, just like other professions, may be practiced only by duly licensed individuals. Licensure is the
granting of license especially to practice a profession. It is also the system of granting licenses (as for
professional practice) in accordance with established standards. [21] A license is a right or permission granted
by some competent authority to carry on a business or do an act which, without such license, would be
illegal. [22]
Before harbor pilots can earn a license to practice their profession, they literally have to pass through
the proverbial eye of a needle by taking, not one but five examinations, each followed by actual training and
practice. Thus, the court a quo observed:
Petitioners (herein respondents) contend, and the respondents (herein petitioners) do not deny, that here (sic)
in this jurisdiction, before a person can be a harbor pilot, he must pass five (5) government professional
examinations, namely, (1) For Third Mate and after which he must work, train and practice on board a vessel
for at least a year; (2) For Second Mate and after which he must work, train and practice for at least a year;
(3) For Chief Mate and after which he must work, train and practice for at least a year; (4) For a Master
Mariner and after which he must work as Captain of vessels for at least two (2) years to qualify for an
examination to be a pilot; and finally, of course, that given for pilots.
Their license is granted in the form of an appointment which allows them to engage in pilotage until
they retire at the age 70 years. This is a vested right. Under the terms of PPA-AO No. 04-92, (a)ll existing
regular appointments which have been previously issued by the Bureau of Customs or the PPA shall remain
valid up to 31 December 1992 only, and (a)ll appointments to harbor pilot positions in all pilotage districts shall,
henceforth, be only for a term of one (1) year from date of effectivity subject to renewal or cancellation by the
Authority after conduct of a rigid evaluation of performance.
It is readily apparent that PPA-AO No. 04-92 unduly restricts the right of harbor pilots to enjoy their
profession before their compulsory retirement. In the past, they enjoyed a measure of security knowing that
after passing five examinations and undergoing years of on-the-job training, they would have a license which
they could use until their retirement, unless sooner revoked by the PPA for mental or physical unfitness. Under
the new issuance, they have to contend with an annual cancellation of their license which can be temporary or
permanent depending on the outcome of their performance evaluation. Veteran pilots and neophytes alike are
suddenly confronted with one-year terms which ipso facto expire at the end of that period. Renewal of their
license is now dependent on a rigid evaluation of performance which is conducted only after the license has
already been cancelled. Hence, the use of the term renewal. It is this pre-evaluation cancellation which
primarily makes PPA-AO No. 04-92 unreasonable and constitutionally infirm. In a real sense, it is a deprivation
of property without due process of law.
The Court notes that PPA-AO No. 04-92 and PPA-MO No. 08-92 are already covered by PPA-AO No.
03-85, which is still operational. Respondents are correct in pointing out that PPA-AO No. 04-92 is a
surplusage [23] and, therefore, an unnecessary enactment. PPA-AO 03-85 is a comprehensive order setting
forth the Rules and Regulations Governing Pilotage Services, the Conduct of Pilots and Pilotage Fees in
Philippine Ports. It provides, inter alia, for the qualification, appointment, performance evaluation, disciplining
and removal of harbor pilots - matters which are duplicated in PPA-AO No. 04-92 and its implementing
memorandum order. Since it adds nothing new or substantial, PPA-AO No. 04-92 must be struck down.
Finally, respondents insinuation that then PPA General Manager Dayan was responsible for the
issuance of the questioned administrative order may have some factual basis; after all, power and authority
were vested in his office to propose rules and regulations. The trial courts finding of animosity between him
and private respondents might likewise have a grain of truth. Yet the number of cases filed in court between
private respondents and Dayan, including cases which have reached this Court, cannot certainly be
considered the primordial reason for the issuance of PPA-AO No. 04-92. In the absence of proof to the
contrary, Dayan should be presumed to have acted in accordance with law and the best of professional
motives. In any event, his actions are certainly always subject to scrutiny by higher administrative authorities.

Page 27 of 66
WHEREFORE, the instant petition is hereby DISMISSED and the assailed decision of the court a
quo dated September 6, 1993, in Civil Case No. 93-65673 is AFFIRMED. No pronouncement as to costs.
SO ORDERED.
Narvasa, C.J., Regalado, Davide, Jr., Bellosillo, Melo, Puno, Vitug, Kapunan, Mendoza,
Francisco, and Panganiban, JJ., concur.
FIRST DIVISION
[G.R. No. 121777. January 24, 2001]
THE PEOPLE OF THE PHILIPPINES, plaintiff-appellee, vs. CAROL M. DELA PIEDRA, accusedappellant.
DECISION
KAPUNAN, J.:
Accused-appellant Carol M. dela Piedra questions her conviction for illegal recruitment in large scale
and assails, as well, the constitutionality of the law defining and penalizing said crime.
The Court affirms the constitutionality of the law and the conviction of the accused, but reduces the
penalty imposed upon her.
The accused was charged before the Regional Trial Court of Zamboanga City in an information
alleging:
That on or about January 30, 1994, in the City of Zamboanga, Philippines, and within the jurisdiction of this
Honorable Court, the above-named accused, without having previously obtained from the Philippine Overseas
Employment Administration, a license or authority to engage in recruitment and overseas placement of
workers, did then and there, wilfully, unlawfully and feloniously, offer and promise for a fee employment abroad
particularly in Singapore thus causing Maria Lourdes Modesto [y] Gadrino, Nancy Araneta y Aliwanag and
Jennelyn Baez y Timbol, all qualified to apply, in fact said Maria Lourdes Modesto had already advanced the
amount of P2,000.00 to the accused for and in consideration of the promised employment which did not
materialized [sic] thus causing damage and prejudice to the latter in the said sum; furthermore, the acts
complained of herein tantamount [sic] to economic sabotage in that the same were committed in large scale. [1]
Arraigned on June 20, 1994, the accused pleaded not guilty[2] to these charges.
At the trial, the prosecution presented five (5) witnesses, namely, Erlie Ramos, SPO2 Erwin
Manalopilar, Eileen Fermindoza, Nancy Araneta and Lourdes Modesto. The succeeding narration is gathered
from their testimonies:
On January 30, 1994, at exactly 10:00 in the morning, Erlie Ramos, Attorney II of the Philippine
Overseas Employment Agency (POEA), received a telephone call from an unidentified woman inquiring about
the legitimacy of the recruitment conducted by a certain Mrs. Carol Figueroa. Ramos, whose duties include the
surveillance of suspected illegal recruiters, immediately contacted a friend, a certain Mayeth Bellotindos, so
they could both go to No. 26-D, Tetuan Highway, Sta. Cruz, Zamboanga City, where the recruitment was
reportedly being undertaken. Upon arriving at the reported area at around 4:00 p.m., Bellotindos entered the
house and pretended to be an applicant. Ramos remained outside and stood on the pavement, from where he
was able to see around six (6) persons in the houses sala. Ramos even heard a woman, identified as Carol
Fegueroa, talk about the possible employment she has to provide in Singapore and the documents that the
applicants have to comply with. Fifteen (15) minutes later, Bellotindos came out with a bio-data form in hand.
On February 1, 1994, Ramos conferred with a certain Capt. Mendoza of the Criminal Investigation
Service (CIS) to organize the arrest of the alleged illegal recruiter. Also present were other members of the
CIS, including Col. Rodolfo Almonte, Regional Director of the PNP-CIS for Region IX, Eileen Fermindoza, and
a certain SPO3 Santos. The group planned to entrap the illegal recruiter the next day by having Fermindoza
pose as an applicant.[3]
On February 2, 1994, at around 8:00 p.m., Col. Almonte directed the case to SPO2 Erwin Manalopilar,
a member of the Philippine National Police who was assigned as an investigator of the CIS, to conduct a
surveillance of the area to confirm the report of illegal recruitment. Accordingly, he, along with Eileen
Fermindoza, immediately proceeded to Tetuan Highway. The two did not enter the house where the
recruitment was supposedly being conducted, but Fermindoza interviewed two people who informed them that
some people do go inside the house. Upon returning to their office at around 8:30 a.m., the two reported to
Capt. Mendoza who organized a team to conduct the raid.
The raiding team, which included Capt. Mendoza, SPO2 Manalopilar, Fermindoza and a certain Oscar
Bucol, quickly set off and arrived at the reported scene at 9:30 that morning. There they met up with Erlie
Ramos of the POEA. Fermindoza then proceeded to enter the house while the rest of the team posted
themselves outside to secure the area. Fermindoza was instructed to come out after she was given a bio-data
form, which will serve as the teams cue to enter the house. [4]
Fermindoza introduced herself as a job applicant to a man and a woman, apparently the owners of the
house, and went inside. There, she saw another woman, later identified as Jasmine, coming out of the
bathroom. The man to whom Fermindoza earlier introduced herself told Jasmine that Fermindoza was
applying for a position. Jasmine, who was then only wearing a towel, told her that she would just get
dressed. Jasmine then came back and asked Fermindoza what position she was applying for. Fermindoza

replied that she was applying to be a babysitter or any other work so long as she could go abroad. Jasmine
then gave her an application form.
A few minutes later, a certain Carol arrived. Jasmine informed Carol that Fermindoza was an
applicant. Fermindoza asked Carol what the requirements were and whether she (Fermindoza) was
qualified. Carol told Fermindoza that if she had a passport, she could fill up the application
papers. Fermindoza replied that she had no passport yet. Carol said she need not worry since Jasmine will
prepare the passport for her. While filling up the application form, three women who appeared to be friends of
Jasmine arrived to follow up the result of their applications and to give their advance payment. Jasmine got
their papers and put them on top of a small table. Fermindoza then proceeded to the door and signaled to the
raiding party by raising her hand.
Capt. Mendoza asked the owners of the house, a married couple, for permission to enter the
same. The owners granted permission after the raiding party introduced themselves as members of the
CIS. Inside the house, the raiding party saw some supposed applicants. Application forms, already filled up,
were in the hands of one Mrs. Carol Figueroa. The CIS asked Figueroa if she had a permit to recruit. Figueroa
retorted that she was not engaged in recruitment. Capt. Mendoza nevertheless proceeded to arrest
Figueroa. He took the application forms she was holding as the raiding party seized the other papers [5] on the
table.[6]
The CIS team then brought Figueroa, a certain Jasmine Alejandro, and the three women suspected to
be applicants, to the office for investigation.[7]
In the course of their investigation, the CIS discovered that Carol Figueroa had many aliases, among
them, Carol Llena and Carol dela Piedra. The accused was not able to present any authority to recruit when
asked by the investigators.[8] A check by Ramos with the POEA revealed that the acused was not licensed or
authorized to conduct recruitment. [9] A certification[10] dated February 2, 1994 stating thus was executed by
Renegold M. Macarulay, Officer-in-Charge of the POEA.
The CIS likewise interviewed the supposed applicants, Lourdes Modesto, Nancy Araneta and Jennelyn
Baez, all registered nurses working at the Cabato Medical Hospital, who executed their respective written
statements.[11]
At the trial, Nancy Araneta, 23, recounted that she was at Jasmine Alejandros house in the afternoon of
January 30, 1994. Araneta had learned from Sandra Aquino, also a nurse at the Cabato Medical Hospital, that
a woman was there to recruit job applicants for Singapore.
Araneta and her friends, Jennelyn Baez and Sandra Aquino, arrived at Jasmines house at around 4:30
p.m. Jasmine welcomed them and told them to sit down. They listened to the recruiter who was then talking to
a number of people. The recruiter said that she was recruiting nurses for Singapore. Araneta and her friends
then filled up bio-data forms and were required to submit pictures and a transcript of records. They were also
told to pay P2,000, and the rest will be salary deduction. Araneta submitted her bio-data form to Carol that
same afternoon, but did not give any money because she was not yet sure.
On the day of the raid on February 2, 1994, Araneta was again at the Alejandro residence to submit her
transcript of records and her picture. She arrived at the house 30 minutes before the raid but did not witness
the arrest since she was at the porch when it happened. [12]
Maria Lourdes Modesto, 26, was also in Jasmine Alejandros house on January 30, 1994. A friend of
Jasmine had informed her that there was someone recruiting in Jasmines house. Upon arriving at the
Alejandro residence, Lourdes was welcomed by Jasmine.
Lourdes recalled that Carol Figueroa was already briefing some people when she arrived. Carol
Figueroa asked if they would like a good opportunity since a hospital was hiring nurses. She gave a
breakdown of the fees involved: P30,000 for the visa and the round trip ticket, and P5,000 as placement fee
and for the processing of the papers. The initial payment was P2,000, while P30,000 will be by salary
deduction.
Lourdes filled up the application form and submitted it to Jasmine. After the interview, she gave the
initial payment of P2,000 to Jasmine, who assured Lourdes that she was authorized to receive the money. On
February 2, 1994, however, Lourdes went back to the house to get back the money. Jasmine gave back the
money to Lourdes after the raid.[13]
Denial comprised the accuseds defense.
Carol dela Piedra, 37, is a housewife and a resident of Cebu City. Her husband is a businessman from
Cebu, the manager of the Region 7 Branch of the Grollier International Encyclopedia. They own an apartment
in Cebu City, providing lodging to students.
The accused claimed that she goes to Singapore to visit her relatives. She first traveled to Singapore
on August 21, 1993 as a tourist, and came back to the Philippines on October 20 of the same year. Thereafter,
she returned to Singapore on December 10, 1993.
On December 21, 1993, while in Singapore, the accused was invited to a Christmas party sponsored
by the Zamboanga City Club Association. On that occasion, she met a certain Laleen Malicay, who sought her
help. A midwife, Malicay had been working in Singapore for six (6) years. Her employer is a certain Mr. Tan, a
close friend of Carol.

Page 28 of 66
According to the accused, Malicay sent P15,000 home for her father who was then seriously ill. Malicay
was not sure, however, whether her father received the money so she requested the accused to verify from
her relatives receipt thereof. She informed the accused that she had a cousin by the name of Jasmine
Alejandro. Malicay gave the accused Jasmines telephone number, address and a sketch of how to get there.
The accused returned to the country on January 21, 1994. From Cebu City, the accused flew to
Zamboanga City on January 23, 1994 to give some presents to her friends.
On January 30, 1994, the accused called up Jasmine Alejandro, Laleen Malicays cousin, to inform her
that she would be going to her house. At around noon that day, the accused, accompanied by her friend Hilda
Falcasantos, arrived at the house where she found Jasmine entertaining some friends. Jasmine came down
with two of her friends whom she introduced as her classmates. Jasmine told them that the accused was a
friend of Laleen Malicay.
The accused relayed to Jasmine Malicays message regarding the money the latter had sent. Jasmine
assured her that they received the money, and asked Carol to tell Malicay to send more money for medicine
for Malicays mother. Jasmine also told her that she would send something for Malicay when the accused goes
back to Singapore. The accused replied that she just needed to confirm her flight back to Cebu City, and will
return to Jasmines house. After the meeting with Jasmine, the accused went shopping with Hilda
Falcasantos. The accused was in the house for only fifteen (15) minutes.
On February 2, 1994, the accused went to the Philippine Airlines office at 7:30 in the morning to confirm
her 5:30 p.m. flight to Cebu City. She then proceeded to Jasmines residence, arriving there at past 8 a.m.
Inside the house, she met a woman who asked her, Are you Carol from Singapore? The accused, in
turn, asked the woman if she could do anything for her. The woman inquired from Carol if she was
recruiting. Carol replied in the negative, explaining that she was there just to say goodbye to Jasmine. The
woman further asked Carol what the requirements were if she (the woman) were to go to Singapore. Carol
replied that she would need a passport.
Two (2) minutes later, three (3) girls entered the house looking for Jasmine. The woman Carol was
talking with then stood up and went out. A minute after, three (3) members of the CIS and a POEA official
arrived. A big man identified himself as a member of the CIS and informed her that they received a call that
she was recruiting. They told her she had just interviewed a woman from the CIS. She denied this, and said
that she came only to say goodbye to the occupants of the house, and to get whatever Jasmine would be
sending for Laleen Malicay. She even showed them her ticket for Cebu City.
Erlie Ramos then went up to Jasmines room and returned with some papers. The accused said that
those were the papers that Laleen Malicay requested Jasmine to give to her (the accused). The accused
surmised that because Laleen Malicay wanted to go home but could not find a replacement, one of the
applicants in the forms was to be her (Malicays) substitute. Ramos told the accused to explain in their office.
The accused denied in court that she went to Jasmines residence to engage in recruitment. She
claimed she came to Zamboanga City to visit her friends, to whom she could confide since she and her
husband were having some problems. She denied she knew Nancy Araneta or that she brought information
sheets for job placement. She also denied instructing Jasmine to collect P2,000 from alleged applicants as
processing fee.[14]
The accused presented two witnesses to corroborate her defense.
The first, Jasmine Alejandro, 23, testified that she met the accused for the first time only on January 30,
1994 when the latter visited them to deliver Laleen Malicays message regarding the money she sent. Carol,
who was accompanied by a certain Hilda Falcasantos, stayed in their house for 10 to 15 minutes only. Carol
came back to the house a few days later on February 2 at around 8:00 in the morning to get the envelope for
the candidacy of her daughter. Jasmine did not elaborate.
Jasmine denied that she knew Nancy Araneta or Lourdes Modesto. She denied that the accused
conducted recruitment. She claimed she did not see Carol distribute bio-data or application forms to job
applicants. She disclaimed any knowledge regarding the P2,000 application fee. [15]
The other defense witness, Ernesto Morales, a policeman, merely testified that the accused stayed in
their house in No. 270 Tugbungan, Zamboanga City, for four (4) days before her arrest, although she would
sometimes go downtown alone. He said he did not notice that she conducted any recruitment. [16]
On May 5, 1995, the trial court rendered a decision convicting the accused, thus:
WHEREFORE, in view of all the foregoing consideration[s][,] this Court finds the accused Carol dela Piedra
alias Carol Llena and Carol Figueroa guilty beyond reasonable doubt of Illegal Recruitment committed in a
large scale and hereby sentences her to suffer the penalty of LIFE IMPRISONMENT and to pay a fine of
P100,000.00, and also to pay the costs.
Being a detention prisoner, the said accused is entitled to the full time of the period of her detention during the
pendency of this case under the condition set forth in Article 29 of the Revised Penal Code.
SO ORDERED.[17]
The accused, in this appeal, ascribes to the trial court the following errors:
I
WITH DUE RESPECT, THE LOWER COURT ERRED IN NOT FINDING SEC. 13 (B) OF P.D. 442[,] AS
AMENDED[,] OTHERWISE KNOWN AS [THE] ILLEGAL RECRUITMENT LAW UNCONSTITUTIONAL.

II
WITH DUE RESPECT, THE LOWER COURT ERRED IN NOT HOLDING THAT THE APPREHENDING
TEAM COMPOSED OF POEA AND CIS REPRESENTATIVES ENTERED INTO [sic] THE
RESIDENCE OF JASMIN[E] ALEJANDRO WITHOUT ANY SEARCH WARRANT IN VIOLATION OF
ARTICLE III, SECTION 2 OF THE PHILIPPINE CONSTITUTION, AND ANY EVIDENCE OBTAINED IN
VIOLATION THEREOF, SHALL BE INADMISSIBLE FOR ANY PURPOSE IN ANY PROCEEDING AS
PROVIDED UNDER ARTICLE III, SECTION 3, (2) OF THE SAME CONSTITUTION;
III
WITH DUE RESPECT, THE LOWER COURT ERRED IN IGNORING THAT WHEN SPO2 [sic]
EILE[E]N FERMINDOZA ENTERED THE RESIDENCE OF JASMIN[E] ALEJANDRO, THERE WAS
NO CRIME COMMITTED WHATSOEVER, HENCE THE ARREST OF THE ACCUSED-APPELLANT
WAS ILLEGAL;
[IV]
WITH DUE RESPECT, THE LOWER COURT ERRED IN NOT DISCOVERING THAT SPO2 [sic]
EILE[E]N FERMINDOZA WAS NOT ILLEGALLY RECRUITED BY THE ACCUSED-APPELLANT,
HENCE, ACCUSED-APPELLANT SHOULD BE ACQUITTED;
V
WITH DUE RESPECT, THE LOWER COURT ERRED IN NOT DETECTING THAT NANCY ARANETA
WAS NOT ILLEGALLY RECRUITED BY THE ACCUSED-APPELLANT, HENCE, ACCUSED SHOULD
BE EXONERATED;
VI
WITH DUE RESPECT, THE LOWER COURT ERRED IN NOT REALIZING THAT MARIA LOURDES
MODESTO WAS NOT ILLEGALLY RECRUITED BY THE ACCUSED-APPELLANT, HENCE,
ACCUSED-APPELLANT SHOULD BE EXCULPATED;
VII
WITH DUE RESPECT, THE LOWER COURT ERRED IN FINDING THAT THE ACCUSEDAPPELLANT WAS CHARGED WITH LARGE SCALE ILLEGAL RECRUITMENT ON JANUARY 30,
1994, THE DATE STATED IN THE INFORMATION AS THE DATE OF THE CRIME, BUT ACCUSED
WAS ARRESTED ON FEB. 2, 1994 AND ALL THE EVIDENCES [sic] INDICATED [sic] THAT THE
ALLEGED CRIME WERE [sic] COMMITTED ON FEB. 2, 1994, HENCE, THE INFORMATION IS
FATALLY DEFECTIVE;
VIII
WITH DUE RESPECT, THE LOWER COURT ERRED IN NOT FINDING THAT THE ALLEGED CRIME
OF ILLEGAL RECRUITMENT WAS COMMITTED NOT ON [sic] LARGE SCALE, HENCE, THE
PENALTY SHOULD NOT BE LIFE IMPRISONMENT;
IX
WITH DUE RESPECT, THE LOWER COURT ERRED IN NOT FINDING THAT THOSE EVIDENCES
[sic] SEIZED AT THE HOUSE OF JASMIN[E] ALEJANDRO AND PRESENTED TO THE COURT
WERE PLANTED BY A BOGUS ATTORNEY[,] ERLIE S. RAMOS OF THE POEA;
X
WITH DUE RESPECT, THE LOWER COURT ERRED IN NOT DISCOVERING THAT ACCUSEDAPPELLANT DID NOT RECEIVE ANY PAYMENT EVEN A SINGLE CENTAVO FROM THE ALLEGED
VICTIMS WHO DID NOT SUFFER DAMAGE IN ANY MANNER, YET SHE WAS CONVICTED TO
SERVE HER ENTIRE LIFE BEHIND PRISON BARS.SUCH PUNISHMENT WAS CRUEL AND
UNUSUAL, HENCE, A WANTON VIOLATION OF THE CONSTITUTION.[18]
In the first assigned error, appellant maintains that the law defining recruitment and placement violates
due process. Appellant also avers, as part of her sixth assigned error, that she was denied the equal
protection of the laws.
We shall address the issues jointly.
Appellant submits that Article 13 (b) of the Labor Code defining recruitment and placement is void for
vagueness and, thus, violates the due process clause. [19]
Due process requires that the terms of a penal statute must be sufficiently explicit to inform those who
are subject to it what conduct on their part will render them liable to its penalties. [20] A criminal statute that fails
to give a person of ordinary intelligence fair notice that his contemplated conduct is forbidden by the statute, or
is so indefinite that it encourages arbitrary and erratic arrests and convictions, is void for vagueness. [21] The
constitutional vice in a vague or indefinite statute is the injustice to the accused in placing him on trial for an
offense, the nature of which he is given no fair warning. [22]
We reiterated these principles in People vs. Nazario:[23]
As a rule, a statute or act may be said to be vague when it lacks comprehensible standards that men of
common intelligence must necessarily guess at its meaning and differ as to its application. It is repugnant to
the Constitution in two respects: (1) it violates due process for failure to accord persons, especially the parties
targeted by it, fair notice of the conduct to avoid; and (2) it leaves law enforcers unbridled discretion in carrying
out its provisions and become an arbitrary flexing of the Government muscle.

Page 29 of 66
We added, however, that:
x x x the act must be utterly vague on its face, that is to say, it cannot be clarified by either a saving clause or
by construction. Thus, in Coates v. City of Cincinnati, the U.S. Supreme Court struck down an ordinance that
had made it illegal for three or more persons to assemble on any sidewalk and there conduct themselves in a
manner annoying to persons passing by. Clearly, the ordinance imposed no standard at all because one may
never know in advance what annoys some people but does not annoy others.
Coates highlights what has been referred to as a perfectly vague act whose obscurity is evident on its face. It
is to be distinguished, however, from legislation couched in imprecise languagebut which nonetheless
specifies a standard though defectively phrasedin which case, it may be saved by proper construction.
Here, the provision in question reads:
ART. 13. Definitions.(a) x x x.
(b) Recruitment and placement refers to any act of canvassing, enlisting, contracting, transporting, utilizing,
hiring or procuring workers, and includes referrals, contract services, promising or advertising for employment,
locally or abroad, whether for profit or not: Provided, That any person or entity which, in any manner, offers or
promises for a fee employment to two or more persons shall be deemed engaged in recruitment and
placement.
x x x.
When undertaken by non-licensees or non-holders of authority, recruitment activities are punishable as
follows:
ART. 38. Illegal Recruitment. (a) Any recruitment activities, including the prohibited practices enumerated
under Article 34 of this Code, to be undertaken by non-licensees or non-holders of authority shall be deemed
illegal and punishable under Article 39 of this Code. The Ministry of Labor and Employment or any law
enforcement officer may initiate complaints under this Article.
(b) Illegal recruitment when committed by a syndicate or in large scale shall be considered an offense
involving economic sabotage and shall be penalized in accordance with Article 39 hereof.
Illegal recruitment is deemed committed by a syndicate if carried out by a group of three (3) or more persons
conspiring and/or confederating with one another in carrying out any unlawful or illegal transaction, enterprise
or scheme defined under the first paragraph hereof. Illegal recruitment is deemed committed in large scale if
committed against three (3) or more persons individually or as a group.
x x x.
Art. 39. Penalties. (a) The penalty of life imprisonment and a fine of One Hundred Thousand Pesos
(P100,000) shall be imposed if illegal recruitment constitutes economic sabotage as defined herein:
(b) Any licensee or holder of authority found violating or causing another to violate any provision of this Title or
its implementing rules and regulations, shall upon conviction thereof, suffer the penalty of imprisonment of not
less than five years or a fine of not less than P10,000 nor more than P50,000 or both such imprisonment and
fine, at the discretion of the court;
(c) Any person who is neither a licensee nor a holder of authority under this Title found violating any provision
thereof or its implementing rules and regulations shall, upon conviction thereof, suffer the penalty of
imprisonment of not less than four years nor more than eight years or a fine of not less than P20,000 nor more
than P100,000 or both such imprisonment and fine, at the discretion of the court;
x x x.
In support of her submission that Article 13 (b) is void for vagueness, appellant invokes People vs.
Panis,[24] where this Court, to use appellants term, criticized the definition of recruitment and placement as
follows:
It is unfortunate that we can only speculate on the meaning of the questioned provision for lack of
records of debates and deliberations that would otherwise have been available if the Labor Code had been
enacted as a statute rather than a presidential decree is that they could be, and sometimes were, issued
without previous public discussion or consultation, the promulgator heeding only his own counsel or those of
his close advisers in their lofty pinnacle of power. The not infrequent results are rejection, intentional or not, of
the interest of the greater number and, as in the instant case, certain esoteric provisions that one cannot read
against the background facts usually reported in the legislative journals.
If the Court in Panis had to speculate on the meaning of the questioned provision, appellant asks, what more
the ordinary citizen who does not possess the necessary [legal] knowledge?
Appellant further argues that the acts that constitute recruitment and placement suffer from overbreadth
since by merely referring a person for employment, a person may be convicted of illegal recruitment.
These contentions cannot be sustained.
Appellants reliance on People vs. Panis is misplaced. The issue in Panis was whether, under the
proviso of Article 13 (b), the crime of illegal recruitment could be committed only whenever two or more
persons are in any manner promised or offered any employment for a fee. The Court held in the negative,
explaining:
As we see it, the proviso was intended neither to impose a condition on the basic rule nor to provide an
exception thereto but merely to create a presumption. The presumption is that the individual or entity is
engaged in recruitment and placement whenever he or it is dealing with two or more persons to whom, in

consideration of a fee, an offer or promise of employment is made in the course of the canvassing, enlisting,
contracting, transporting, utilizing, hiring or procuring (of) workers.
The number of persons dealt with is not an essential ingredient of the act of recruitment and placement of
workers. Any of the acts mentioned in the basic rule in Article 13(b) will constitute recruitment and placement
even if only one prospective worker is involved. The proviso merely lays down a rule of evidence that where a
fee is collected in consideration of a promise or offer of employment to two or more prospective workers, the
individual or entity dealing with them shall be deemed to be engaged in the act of recruitment and
placement. The words shall be deemed create that presumption.
This is not unlike the presumption in article 217 of the Revised Penal Code, for example, regarding the failure
of a public officer to produce upon lawful demand funds or property entrusted to his custody. Such failure shall
be prima facie evidence that he has put them to personal use; in other words, he shall be deemed to have
malversed such funds or property. In the instant case, the word shall be deemed should by the same token be
given the force of a disputable presumption or of prima facie evidence of engaging in recruitment and
placement.
It is unfortunate that we can only speculate on the meaning of the questioned provision for lack of records of
debates and deliberations that would otherwise have been available if the Labor Code had been enacted as a
statute rather than a presidential decree is that they could be, and sometimes were, issued without previous
public discussion or consultation, the promulgator heeding only his own counsel or those of his close advisers
in their lofty pinnacle of power. The not infrequent results are rejection, intentional or not, of the interest of the
greater number and, as in the instant case, certain esoteric provisions that one cannot read against the
background facts usually reported in the legislative journals.
At any rate, the interpretation here adopted should give more force to the campaign against illegal recruitment
and placement, which has victimized many Filipino workers seeking a better life in a foreign land, and
investing hard-earned savings or even borrowed funds in pursuit of their dream, only to be awakened to the
reality of a cynical deception at the hands of their own countrymen.
Evidently, therefore, appellant has taken the penultimate paragraph in the excerpt quoted above out of
context. The Court, in Panis, merely bemoaned the lack of records that would help shed light on the meaning
of the proviso. The absence of such records notwithstanding, the Court was able to arrive at a reasonable
interpretation of the proviso by applying principles in criminal law and drawing from the language and intent of
the law itself. Section 13 (b), therefore, is not a perfectly vague act whose obscurity is evident on its face. If at
all, the proviso therein is merely couched in imprecise language that was salvaged by proper construction. It is
not void for vagueness.
An act will be declared void and inoperative on the ground of vagueness and uncertainty, only upon a showing
that the defect is such that the courts are unable to determine, with any reasonable degree of certainty, what
the legislature intended. x x x. In this connection we cannot pretermit reference to the rule that legislation
should not be held invalid on the ground of uncertainty if susceptible of any reasonable construction that will
support and give it effect. An Act will not be declared inoperative and ineffectual on the ground that it furnishes
no adequate means to secure the purpose for which it is passed, if men of common sense and reason can
devise and provide the means, and all the instrumentalities necessary for its execution are within the reach of
those intrusted therewith.[25]
That Section 13 (b) encompasses what appellant apparently considers as customary and harmless
acts such as labor or employment referral (referring an applicant, according to appellant, for employment to a
prospective employer) does not render the law overbroad. Evidently, appellant misapprehends concept of
overbreadth.
A statute may be said to be overbroad where it operates to inhibit the exercise of individual freedoms
affirmatively guaranteed by the Constitution, such as the freedom of speech or religion. A generally worded
statute, when construed to punish conduct which cannot be constitutionally punished is unconstitutionally
vague to the extent that it fails to give adequate warning of the boundary between the constitutionally
permissible and the constitutionally impermissible applications of the statute. [26]
In Blo Umpar Adiong vs. Commission on Elections,[27] for instance, we struck down as void for
overbreadth provisions prohibiting the posting of election propaganda in any place including private vehicles
other than in the common poster areas sanctioned by the COMELEC. We held that the challenged provisions
not only deprived the owner of the vehicle the use of his property but also deprived the citizen of his right to
free speech and information. The prohibition in Adiong, therefore, was so broad that it covered even
constitutionally guaranteed rights and, hence, void for overbreadth. In the present case, however, appellant did
not even specify what constitutionally protected freedoms are embraced by the definition of recruitment and
placement that would render the same constitutionally overbroad.
Appellant also invokes the equal protection clause [28] in her defense. She points out that although the
evidence purportedly shows that Jasmine Alejandro handed out application forms and even received Lourdes
Modestos payment, appellant was the only one criminally charged. Alejandro, on the other hand, remained
scot-free. From this, appellant concludes that the prosecution discriminated against her on grounds of regional
origins. Appellant is a Cebuana while Alejandro is a Zamboanguea, and the alleged crime took place in
Zamboanga City.

Page 30 of 66
The argument has no merit.
At the outset, it may be stressed that courts are not confined to the language of the statute under
challenge in determining whether that statute has any discriminatory effect. A statute nondiscriminatory on its
face may be grossly discriminatory in its operation. [29] Though the law itself be fair on its face and impartial in
appearance, yet, if it is applied and administered by public authority with an evil eye and unequal hand, so as
practically to make unjust and illegal discriminations between persons in similar circumstances, material to
their rights, the denial of equal justice is still within the prohibition of the Constitution. [30]
The prosecution of one guilty person while others equally guilty are not prosecuted, however, is not, by
itself, a denial of the equal protection of the laws. [31] Where the official action purports to be in conformity to the
statutory classification, an erroneous or mistaken performance of the statutory duty, although a violation of the
statute, is not without more a denial of the equal protection of the laws. [32] The unlawful administration by
officers of a statute fair on its face, resulting in its unequal application to those who are entitled to be treated
alike, is not a denial of equal protection unless there is shown to be present in it an element
of intentional or purposeful discrimination. This may appear on the face of the action taken with respect to a
particular class or person, or it may only be shown by extrinsic evidence showing a discriminatory design over
another not to be inferred from the action itself. But a discriminatory purpose is not presumed, there must
be a showing of clear and intentional discrimination. [33] Appellant has failed to show that, in charging
appellant in court, that there was a clear and intentional discrimination on the part of the prosecuting officials.
The discretion of who to prosecute depends on the prosecutions sound assessment whether the
evidence before it can justify a reasonable belief that a person has committed an offense. [34] The presumption
is that the prosecuting officers regularly performed their duties, [35] and this presumption can be overcome only
by proof to the contrary, not by mere speculation. Indeed, appellant has not presented any evidence to
overcome this presumption. The mere allegation that appellant, a Cebuana, was charged with the commission
of a crime, while a Zamboanguea, the guilty party in appellants eyes, was not, is insufficient to support a
conclusion that the prosecution officers denied appellant equal protection of the laws.
There is also common sense practicality in sustaining appellants prosecution.
While all persons accused of crime are to be treated on a basis of equality before the law, it does not follow
that they are to be protected in the commission of crime. It would be unconscionable, for instance, to excuse a
defendant guilty of murder because others have murdered with impunity. The remedy for unequal enforcement
of the law in such instances does not lie in the exoneration of the guilty at the expense of society x x
x. Protection of the law will be extended to all persons equally in the pursuit of their lawful occupations, but no
person has the right to demand protection of the law in the commission of a crime. [36]
Likewise,
[i]f the failure of prosecutors to enforce the criminal laws as to some persons should be converted into a
defense for others charged with crime, the result would be that the trial of the district attorney for nonfeasance
would become an issue in the trial of many persons charged with heinous crimes and the enforcement of law
would suffer a complete breakdown. [37]
We now come to the third, fourth and fifth assigned errors, all of which involve the finding of guilt by the
trial court.
Illegal recruitment is committed when two elements concur. First, the offender has no valid license or
authority required by law to enable one to lawfully engage in recruitment and placement of workers. Second,
he or she undertakes either any activity within the meaning of recruitment and placement defined under Article
13 (b), or any prohibited practices enumerated under Article 34 of the Labor Code. [38] In case of illegal
recruitment in large scale, a third element is added: that the accused commits said acts against three or more
persons, individually or as a group.[39]
In this case, the first element is present. The certification of POEA Officer-in-Charge Macarulay states
that appellant is not licensed or authorized to engage in recruitment and placement.
The second element is also present. Appellant is presumed engaged in recruitment and placement
under Article 13 (b) of the Labor Code. Both Nancy Araneta and Lourdes Modesto testified that appellant
promised them employment for a fee. Their testimonies corroborate each other on material points: the briefing
conducted by appellant, the time and place thereof, the fees involved.Appellant has not shown that these
witnesses were incited by any motive to testify falsely against her. The absence of evidence as to an improper
motive actuating the principal witnesses of the prosecution strongly tends to sustain that no improper motive
existed and that their testimony is worthy of full faith and credence. [40]
Appellants denials cannot prevail over the positive declaration of the prosecution witnesses. Affirmative
testimony of persons who are eyewitnesses of the fact asserted easily overrides negative testimony.[41]
That appellant did not receive any payment for the promised or offered employment is of no
moment. From the language of the statute, the act of recruitment may be for profit or not; it suffices that the
accused promises or offers for a fee employment to warrant conviction for illegal recruitment.
The testimonies of Araneta and Modesto, coming as they do from credible witnesses, meet the
standard of proof beyond reasonable doubt that appellant committed recruitment and placement.We therefore
do not deem it necessary to delve into the second and third assigned errors assailing the legality of appellants
arrest and the seizure of the application forms. A warrantless arrest, when unlawful, has the effect of

invalidating the search incidental thereto and the articles so seized are rendered inadmissible in evidence.
[42]
Here, even if the documents seized were deemed inadmissible, her conviction would stand in view of
Araneta and Modestos testimonies.
Appellant attempts to cast doubt on the prosecutions case by claiming in her ninth assigned error that
Erlie Ramos of the POEA supposedly planted the application forms. She also assails his character, alleging
that he passed himself off as a lawyer, although this was denied by Ramos.
The claim of frame-up, like alibi, is a defense that has been invariably viewed by the Court with disfavor
for it can easily be concocted but difficult to prove. [43] Apart from her self-serving testimony, appellant has not
offered any evidence that she was indeed framed by Ramos. She has not even hinted at any motive for
Ramos to frame her. Law enforcers are presumed to have performed their duties regularly in the absence of
evidence to the contrary.[44]
Considering that the two elements of lack of license or authority and the undertaking of an activity
constituting recruitment and placement are present, appellant, at the very least, is liable for simple illegal
recruitment. But is she guilty of illegal recruitment in large scale? We find that she is not.
A conviction for large scale illegal recruitment must be based on a finding in each case of illegal
recruitment of three or more persons whether individually or as a group. [45] In this case, only two persons,
Araneta and Modesto, were proven to have been recruited by appellant. The third person named in the
complaint as having been promised employment for a fee, Jennelyn Baez, was not presented in court to
testify.
It is true that law does not require that at least three victims testify at the trial; nevertheless, it is
necessary that there is sufficient evidence proving that the offense was committed against three or more
persons.[46] In this case, evidence that appellant likewise promised her employment for a fee is sketchy. The
only evidence that tends to prove this fact is the testimony of Nancy Araneta, who said that she and her
friends, Baez and Sandra Aquino, came to the briefing and that they (she and her friends) filled up application
forms.
The affidavit[47] Baez executed jointly with Araneta cannot support Aranetas testimony. The affidavit was
neither identified, nor its contents affirmed, by Baez. Insofar as it purports to prove that appellant recruited
Baez, therefore, the affidavit is hearsay and inadmissible. [48] In any case, hearsay evidence, such as the said
affidavit, has little probative value.[49]
Neither can appellant be convicted for recruiting CIS agent Eileen Fermindoza or even the other
persons present in the briefing of January 30, 1994. Appellant is accused of recruiting only the three persons
named in the information Araneta, Modesto and Baez. The information does not include Fermindoza or the
other persons present in the briefing as among those promised or offered employment for a fee. To convict
appellant for the recruitment and placement of persons other than those alleged to have been offered or
promised employment for a fee would violate her right to be informed of the nature and cause of the
accusation against her.[50]
In any event, the purpose of the offer of the testimonies of Araneta, Morales and Fermindoza,
respectively, was limited as follows:
FISCAL BELDUA:
Your Honor please, we are offering the oral testimony of the witness, as one of those recruited by the
accused, and also to identify some exhibits for the prosecution and as well as to identify the
accused.[51]
xxx
FISCAL BELDUA:
We are offering the oral testimony of the witness, Your Honor, to testify on the fact about her recruitment
by the accused and immediately before the recruitment, as well as to identify some exhibits for the
prosecution, and also the accused in this case, Your Honor.[52]
xxx
FISCAL BELDUA:
This witness is going to testify that at around that date Your Honor, she was connected with the CIS, that
she was instructed together with a companion to conduct a surveillance on the place where the
illegal recruitment was supposed to be going on, that she acted as an applicant, Your Honor, to
ascertain the truthfulness of the illegal recruitment going on, to identify the accused, as well as to
identify some exhibits for the prosecution. [53]
xxx
Courts may consider a piece of evidence only for the purpose for which it was offered, [54] and the purpose of
the offer of their testimonies did not include the proving of the purported recruitment of other supposed
applicants by appellant.
Appellant claims in her seventh assigned error that the information is fatally defective since it charges
her with committing illegal recruitment in large scale on January 30, 1994 while the prosecution evidence
supposedly indicates that she committed the crime on February 2, 1994.
We find that the evidence for the prosecution regarding the date of the commission of the crime does
not vary from that charged in the information. Both Nancy Araneta and Lourdes Modesto testified that on

Page 31 of 66
January 30, 1994, while in the Alejandro residence, appellant offered them employment for a fee. Thus, while
the arrest was effected only on February 2, 1994, the crime had already been committed three (3) days earlier
on January 30, 1994.
The eighth and tenth assigned errors, respectively, pertain to the penalty of life imprisonment imposed
by the trial court as well as the constitutionality of the law prescribing the same, appellant arguing that it is
unconstitutional for being unduly harsh. [55]
The penalty of life imprisonment imposed upon appellant must be reduced. Because the prosecution
was able to prove that appellant committed recruitment and placement against two persons only, she cannot
be convicted of illegal recruitment in large scale, which requires that recruitment be committed against three or
more persons. Appellant can only be convicted of two counts of simple illegal recruitment, one for that
committed against Nancy Araneta, and another count for that committed against Lourdes Modesto. Appellant
is sentenced, for each count, to suffer the penalty of four (4) to six (6) years of imprisonment and to pay a fine
of P30,000.00. This renders immaterial the tenth assigned error, which assumes that the proper imposable
penalty upon appellant is life imprisonment.
WHEREFORE, the decision of the regional trial court is MODIFIED. Appellant is hereby declared guilty
of illegal recruitment on two (2) counts and is sentenced, for each count, to suffer the penalty of four (4) to six
(6) years of imprisonment and to pay a fine of P30,000.00.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Puno, Pardo, and Ynares-Santiago, JJ., concur.
EN BANC
ABAKADA GURO PARTY LIST (Formerly AASJAS) OFFICERS
SAMSON S. ALCANTARA and ED VINCENT S. ALBANO,
Petitioners,

- versus -

G.R. No. 168056


Present:
DAVIDE, JR., C.J.,
PUNO,
PANGANIBAN,
QUISUMBING,
YNARES-SANTIAGO,
SANDOVAL-GUTIERREZ,
CARPIO,
AUSTRIA-MARTINEZ,
CORONA,
CARPIO-MORALES,
CALLEJO, SR.,
AZCUNA,
TINGA,
CHICO-NAZARIO, and
GARCIA, JJ.

THE HONORABLE EXECUTIVE SECRETARY EDUARDO ERMITA;


HONORABLE SECRETARY OF THE DEPARTMENT OF FINANCE
CESAR PURISIMA; and HONORABLE COMMISSIONER OF
INTERNAL REVENUE GUILLERMO PARAYNO, JR.,
Respondents.

- versus EXECUTIVE SECRETARY EDUARDO R. ERMITA, CESAR V.


PURISIMA, SECRETARY OF FINANCE, GUILLERMO L. PARAYNO,
JR., COMMISSIONER OF THE BUREAU OF INTERNAL REVENUE,
Respondents.
x-------------------------x

G.R. No. 168461

- versus CESAR V. PURISIMA, in his capacity as Secretary of the Department


of Finance and GUILLERMO L. PARAYNO, JR., in his capacity as
Commissioner of Internal Revenue,
Respondents.

x-------------------------x
AQUILINO Q. PIMENTEL, JR., LUISA P. EJERCITO-ESTRADA,
JINGGOY E. ESTRADA, PANFILO M. LACSON, ALFREDO S. LIM,
JAMBY A.S. MADRIGAL, AND SERGIO R. OSMEA III,
Petitioners,

ASSOCIATION OF PILIPINAS SHELL DEALERS, INC. represented by


its
President,
ROSARIO
ANTONIO;
PETRON
DEALERS
ASSOCIATION represented by its President, RUTH E. BARBIBI;
ASSOCIATION OF CALTEX DEALERS OF THE PHILIPPINES
represented by its President, MERCEDITAS A. GARCIA; ROSARIO
ANTONIO doing business under the name and style of ANB NORTH
SHELL SERVICE STATION; LOURDES MARTINEZ doing business
under the name and style of SHELL GATE N. DOMINGO; BETHZAIDA
TAN doing business under the name and style of ADVANCE SHELL
STATION; REYNALDO P. MONTOYA doing business under the name
and style of NEW LAMUAN SHELL SERVICE STATION; EFREN
SOTTO doing business under the name and style of RED FIELD
SHELL SERVICE STATION; DONICA CORPORATION represented by
its President, DESI TOMACRUZ; RUTH E. MARBIBI doing business
under the name and style of R&R PETRON STATION; PETER M.
UNGSON doing business under the name and style of CLASSIC
STAR GASOLINE SERVICE STATION; MARIAN SHEILA A. LEE doing
business under the name and style of NTE GASOLINE & SERVICE
STATION; JULIAN CESAR P. POSADAS doing business under the
name and style of STARCARGA ENTERPRISES; ADORACION
MAEBO doing business under the name and style of CMA
MOTORISTS CENTER; SUSAN M. ENTRATA doing business under
the name and style of LEONAS GASOLINE STATION and SERVICE
CENTER; CARMELITA BALDONADO doing business under the name
and style of FIRST CHOICE SERVICE CENTER; MERCEDITAS A.
GARCIA doing business under the name and style of LORPED
SERVICE CENTER; RHEAMAR A. RAMOS doing business under the
name and style of RJRAM PTT GAS STATION; MA. ISABEL
VIOLAGO doing business under the name and style of VIOLAGOPTT SERVICE CENTER; MOTORISTS HEART CORPORATION
represented by its Vice-President for Operations, JOSELITO F.
FLORDELIZA; MOTORISTS HARVARD CORPORATION represented
by its Vice-President for Operations, JOSELITO F. FLORDELIZA;
MOTORISTS HERITAGE CORPORATION represented by its VicePresident for Operations, JOSELITO F. FLORDELIZA; PHILIPPINE
STANDARD OIL CORPORATION represented by its Vice-President
for Operations, JOSELITO F. FLORDELIZA; ROMEO MANUEL doing
business under the name and style of ROMMAN GASOLINE
STATION; ANTHONY ALBERT CRUZ III doing business under the
name and style of TRUE SERVICE STATION,
Petitioners,

G.R. No. 168207

x-------------------------x
FRANCIS JOSEPH G. ESCUDERO, VINCENT CRISOLOGO,
EMMANUEL JOEL J. VILLANUEVA, RODOLFO G. PLAZA, DARLENE
ANTONINO-CUSTODIO, OSCAR G. MALAPITAN, BENJAMIN C.
AGARAO, JR. JUAN EDGARDO M. ANGARA, JUSTIN MARC SB.
CHIPECO, FLORENCIO G. NOEL, MUJIV S. HATAMAN, RENATO B.
MAGTUBO, JOSEPH A. SANTIAGO, TEOFISTO DL. GUINGONA III,
RUY ELIAS C. LOPEZ, RODOLFO Q. AGBAYANI and TEODORO A.
CASIO,
Petitioners,
- versus -

G.R. No. 168463

Page 32 of 66
also certified it as urgent on February 8, 2005. The House of Representatives approved the bill on second and
third reading on February 28, 2005.

CESAR V. PURISIMA, in his capacity as Secretary of Finance,


GUILLERMO L. PARAYNO, JR., in his capacity as Commissioner of
Internal Revenue, and EDUARDO R. ERMITA, in his capacity as
Executive Secretary,

Meanwhile, the Senate Committee on Ways and Means approved Senate Bill No.
1950[4] on March 7, 2005, in substitution of Senate Bill Nos. 1337, 1838 and 1873, taking into consideration
House Bill Nos. 3555 and 3705. Senator Ralph G. Recto sponsored Senate Bill No. 1337, while Senate Bill
Nos. 1838 and 1873 were both sponsored by Sens. Franklin M. Drilon, Juan M. Flavier and Francis N.
Pangilinan. The President certified the bill on March 11, 2005, and was approved by the Senate on second
and third reading on April 13, 2005.

Respondents.
x-------------------------x
BATAAN GOVERNOR ENRIQUE T. GARCIA, JR.
Petitioner,

G.R. No. 168730

- versus -

Before long, the Conference Committee on the Disagreeing Provisions of House Bill No. 3555,
House Bill No. 3705, and Senate Bill No. 1950, after having met and discussed in full free and conference,
recommended the approval of its report, which the Senate did on May 10, 2005, and with the House of
Representatives agreeing thereto the next day, May 11, 2005.

HON. EDUARDO R. ERMITA, in his capacity as the Executive


Secretary; HON. MARGARITO TEVES, in his capacity as Secretary of
Finance; HON. JOSE MARIO BUNAG, in his capacity as the OIC
Commissioner of the Bureau of Internal Revenue; and HON.
ALEXANDER AREVALO, in his capacity as the OIC Commissioner of
the Bureau of Customs,

On May 23, 2005, the enrolled copy of the consolidated House and Senate version was
transmitted to the President, who signed the same into law on May 24, 2005. Thus, came R.A. No. 9337.

Promulgated:
September 1, 2005

Respondents.

On the same date, April 13, 2005, the Senate agreed to the request of the House of
Representatives for a committee conference on the disagreeing provisions of the proposed bills.

x-----------------------------------------------------------x
DECISION
AUSTRIA-MARTINEZ, J.:
The expenses of government, having for their object the interest of all,
should be borne by everyone, and the more man enjoys the advantages of society, the
more he ought to hold himself honored in contributing to those expenses.
-Anne Robert Jacques Turgot (1727-1781)
French statesman and economist
Mounting budget deficit, revenue generation, inadequate fiscal allocation for education, increased
emoluments for health workers, and wider coverage for full value-added tax benefits these are the reasons
why Republic Act No. 9337 (R.A. No. 9337) [1] was enacted. Reasons, the wisdom of which, the Court even
with its extensive constitutional power of review, cannot probe. The petitioners in these cases, however,
question not only the wisdom of the law, but also perceived constitutional infirmities in its passage.

July 1, 2005 is the effectivity date of R.A. No. 9337. [5] When said date came, the Court issued a
temporary restraining order, effective immediately and continuing until further orders, enjoining respondents
from enforcing and implementing the law.
Oral arguments were held on July 14, 2005. Significantly, during the hearing, the Court speaking
through Mr. Justice Artemio V. Panganiban, voiced the rationale for its issuance of the temporary restraining
order on July 1, 2005, to wit:
J. PANGANIBAN : . . . But before I go into the details of your presentation, let me just
tell you a little background. You know when the law
took effect on July 1, 2005, the Court issued a TRO
at about 5 oclock in the afternoon. But before that,
there was a lot of complaints aired on television and
on radio. Some people in a gas station were
complaining that the gas prices went up by 10%.
Some people were complaining that their electric bill
will go up by 10%. Other times people riding in
domestic air carrier were complaining that the prices
that theyll have to pay would have to go up by 10%.
While all that was being aired, per your presentation
and per our own understanding of the law, thats not
true. Its not true that the e-vat law necessarily
increased prices by 10% uniformly isnt it?
ATTY. BANIQUED : No, Your Honor.
J. PANGANIBAN : It is not?

Every law enjoys in its favor the presumption of constitutionality. Their arguments notwithstanding,
petitioners failed to justify their call for the invalidity of the law. Hence, R.A. No. 9337 is not unconstitutional.
LEGISLATIVE HISTORY
R.A. No. 9337 is a consolidation of three legislative bills namely, House Bill Nos. 3555 and 3705,
and Senate Bill No. 1950.
House Bill No. 3555 was introduced on first reading on January 7, 2005. The House Committee
on Ways and Means approved the bill, in substitution of House Bill No. 1468, which Representative (Rep.) Eric
D. Singson introduced on August 8, 2004. The President certified the bill on January 7, 2005 for immediate
enactment. On January 27, 2005, the House of Representatives approved the bill on second and third reading.
[2]

ATTY. BANIQUED : Its not, because, Your Honor, there is an Executive Order that
granted the Petroleum companies some subsidy . . .
interrupted
J. PANGANIBAN : Thats correct . . .
ATTY. BANIQUED : . . . and therefore that was meant to temper the impact . . .
interrupted
J. PANGANIBAN : . . . mitigating measures . . .

House Bill No. 3705[3] on the other hand, substituted House Bill No. 3105 introduced by Rep.
Salacnib F. Baterina, and House Bill No. 3381 introduced by Rep. Jacinto V. Paras. Its mother bill is House Bill
No. 3555. The House Committee on Ways and Means approved the bill on February 2, 2005. The President

ATTY. BANIQUED : Yes, Your Honor.

Page 33 of 66
J. PANGANIBAN : As a matter of fact a part of the mitigating measures would be the
elimination of the Excise Tax and the import duties.
That is why, it is not correct to say that the VAT as to
petroleum dealers increased prices by 10%.
ATTY. BANIQUED : Yes, Your Honor.
J. PANGANIBAN : And therefore, there is no justification for increasing the retail price
by 10% to cover the E-Vat tax. If you consider the
excise tax and the import duties, the Net Tax would
probably be in the neighborhood of 7%? We are not
going into exact figures I am just trying to deliver a
point that different industries, different products,
different services are hit differently. So its not
correct to say that all prices must go up by 10%.
ATTY. BANIQUED : Youre right, Your Honor.

Finance, to raise the VAT rate to 12%, effective January 1, 2006, after any of the following conditions have
been satisfied, to wit:
. . . That the President, upon the recommendation of the Secretary of
Finance, shall, effective January 1, 2006, raise the rate of value-added tax to twelve
percent (12%), after any of the following conditions has been satisfied:
(i) Value-added tax collection as a percentage of Gross Domestic Product
(GDP) of the previous year exceeds two and four-fifth percent (2 4/5%); or
(ii) National government deficit as a percentage of GDP of the previous
year exceeds one and one-half percent (1 %).
Petitioners argue that the law is unconstitutional, as it constitutes abandonment by Congress of its
exclusive authority to fix the rate of taxes under Article VI, Section 28(2) of the 1987 Philippine Constitution.
G.R. No. 168207

J. PANGANIBAN : Now. For instance, Domestic Airline companies, Mr. Counsel, are at
present imposed a Sales Tax of 3%. When this EVat law took effect the Sales Tax was also removed
as a mitigating measure. So, therefore, there is no
justification to increase the fares by 10% at best
7%, correct?
ATTY. BANIQUED : I guess so, Your Honor, yes.
J. PANGANIBAN : There are other products that the people were complaining on that
first day, were being increased arbitrarily by 10%.
And thats one reason among many others this
Court had to issue TRO because of the confusion in
the implementation. Thats why we added as an
issue in this case, even if its tangentially taken up
by the pleadings of the parties, the confusion in the
implementation of the E-vat. Our people were
subjected to the mercy of that confusion of an
across the board increase of 10%, which you
yourself now admit and I think even the Government
will admit is incorrect. In some cases, it should be
3% only, in some cases it should be 6% depending
on these mitigating measures and the location and
situation of each product, of each service, of each
company, isnt it?
ATTY. BANIQUED : Yes, Your Honor.
J. PANGANIBAN : Alright. So thats one reason why we had to issue a TRO pending
the clarification of all these and we wish the
government will take time to clarify all these by
means of a more detailed implementing rules, in
case the law is upheld by this Court. . . .[6]

On June 9, 2005, Sen. Aquilino Q. Pimentel, Jr., et al., filed a petition for certiorari likewise
assailing the constitutionality of Sections 4, 5 and 6 of R.A. No. 9337.
Aside from questioning the so-called stand-by authority of the President to increase the VAT rate to
12%, on the ground that it amounts to an undue delegation of legislative power, petitioners also contend that
the increase in the VAT rate to 12% contingent on any of the two conditions being satisfied violates the due
process clause embodied in Article III, Section 1 of the Constitution, as it imposes an unfair and additional tax
burden on the people, in that: (1) the 12% increase is ambiguous because it does not state if the rate would be
returned to the original 10% if the conditions are no longer satisfied; (2) the rate is unfair and unreasonable, as
the people are unsure of the applicable VAT rate from year to year; and (3) the increase in the VAT rate, which
is supposed to be an incentive to the President to raise the VAT collection to at least 2 4/5 of the GDP of the
previous year, should only be based on fiscal adequacy.
Petitioners further claim that the inclusion of a stand-by authority granted to the President by the
Bicameral Conference Committee is a violation of the no-amendment rule upon last reading of a bill laid down
in Article VI, Section 26(2) of the Constitution.
G.R. No. 168461
Thereafter, a petition for prohibition was filed on June 29, 2005, by the Association
of Pilipinas Shell Dealers, Inc., et al., assailing the following provisions of R.A. No. 9337:
1) Section 8, amending Section 110 (A)(2) of the NIRC, requiring that the input tax on
depreciable goods shall be amortized over a 60-month period, if the
acquisition, excluding the VAT components, exceeds One Million Pesos
(P1, 000,000.00);
2) Section 8, amending Section 110 (B) of the NIRC, imposing a 70% limit on the
amount of input tax to be credited against the output tax; and
3) Section 12, amending Section 114 (c) of the NIRC, authorizing the Government or
any of its political subdivisions, instrumentalities or agencies, including
GOCCs, to deduct a 5% final withholding tax on gross payments of goods
and services, which are subject to 10% VAT under Sections 106 (sale of
goods and properties) and 108 (sale of services and use or lease of
properties) of the NIRC.

The Court also directed the parties to file their respective Memoranda.
G.R. No. 168056
Before R.A. No. 9337 took effect, petitioners ABAKADA GURO Party List, et al., filed a petition for
prohibition on May 27, 2005. They question the constitutionality of Sections 4, 5 and 6 of R.A. No. 9337,
amending Sections 106, 107 and 108, respectively, of the National Internal Revenue Code (NIRC). Section 4
imposes a 10% VAT on sale of goods and properties, Section 5 imposes a 10% VAT on importation of goods,
and Section 6 imposes a 10% VAT on sale of services and use or lease of properties. These questioned
provisions contain a uniform proviso authorizing the President, upon recommendation of the Secretary of

Petitioners contend that these provisions are unconstitutional for being arbitrary, oppressive,
excessive, and confiscatory.
Petitioners argument is premised on the constitutional right of non-deprivation of life, liberty or
property without due process of law under Article III, Section 1 of the Constitution. According to petitioners, the
contested sections impose limitations on the amount of input tax that may be claimed. Petitioners also argue
that the input tax partakes the nature of a property that may not be confiscated, appropriated, or limited
without due process of law. Petitioners further contend that like any other property or property right, the input

Page 34 of 66
tax credit may be transferred or disposed of, and that by limiting the same, the government gets to tax a profit
or value-added even if there is no profit or value-added.

ISSUES
The Court defined the issues, as follows:

Petitioners also believe that these provisions violate the constitutional guarantee of equal
protection of the law under Article III, Section 1 of the Constitution, as the limitation on the creditable input tax
if: (1) the entity has a high ratio of input tax; or (2) invests in capital equipment; or (3) has several transactions
with the government, is not based on real and substantial differences to meet a valid classification.
Lastly, petitioners contend that the 70% limit is anything but progressive, violative of Article VI,
Section 28(1) of the Constitution, and that it is the smaller businesses with higher input tax to output tax ratio
that will suffer the consequences thereof for it wipes out whatever meager margins the petitioners make.

PROCEDURAL ISSUE
Whether R.A. No. 9337 violates the following provisions of the Constitution:
a. Article VI, Section 24, and
b. Article VI, Section 26(2)
SUBSTANTIVE ISSUES

G.R. No. 168463


Several members of the House of Representatives led by Rep. Francis Joseph G. Escudero filed
this petition for certiorari on June 30, 2005. They question the constitutionality of R.A. No. 9337 on the
following grounds:
1) Sections 4, 5, and 6 of R.A. No. 9337 constitute an undue delegation of legislative
power, in violation of Article VI, Section 28(2) of the Constitution;
2) The Bicameral Conference Committee acted without jurisdiction in deleting the no
pass on provisions present in Senate Bill No. 1950 and House Bill No.
3705; and
3) Insertion by the Bicameral Conference Committee of Sections 27, 28, 34, 116, 117,
119, 121, 125,[7] 148, 151, 236, 237 and 288, which were present in Senate
Bill No. 1950, violates Article VI, Section 24(1) of the Constitution, which
provides that all appropriation, revenue or tariff bills shall originate
exclusively in the House of Representatives

1. Whether Sections 4, 5 and 6 of R.A. No. 9337, amending Sections 106, 107 and 108
of the NIRC, violate the following provisions of the Constitution:
a. Article VI, Section 28(1), and
b. Article VI, Section 28(2)
2. Whether Section 8 of R.A. No. 9337, amending Sections 110(A)(2) and 110(B) of the
NIRC; and Section 12 of R.A. No. 9337, amending Section 114(C) of the NIRC, violate
the following provisions of the Constitution:
a. Article VI, Section 28(1), and
b. Article III, Section 1
RULING OF THE COURT
As a prelude, the Court deems it apt to restate the general principles and concepts of value-added
tax (VAT), as the confusion and inevitably, litigation, breeds from a fallacious notion of its nature.

G.R. No. 168730


On the eleventh hour, Governor Enrique T. Garcia filed a petition for certiorari and prohibition on
July 20, 2005, alleging unconstitutionality of the law on the ground that the limitation on the creditable input tax
in effect allows VAT-registered establishments to retain a portion of the taxes they collect, thus violating the
principle that tax collection and revenue should be solely allocated for public purposes and expenditures.
Petitioner Garcia further claims that allowing these establishments to pass on the tax to the consumers is
inequitable, in violation of Article VI, Section 28(1) of the Constitution.

The VAT is a tax on spending or consumption. It is levied on the sale, barter, exchange or lease of
goods or properties and services. [8] Being an indirect tax on expenditure, the seller of goods or services may
pass on the amount of tax paid to the buyer,[9] with the seller acting merely as a tax collector.[10] The burden of
VAT is intended to fall on the immediate buyers and ultimately, the end-consumers.
In contrast, a direct tax is a tax for which a taxpayer is directly liable on the transaction or business
it engages in, without transferring the burden to someone else. [11] Examples are individual and corporate
income taxes, transfer taxes, and residence taxes.[12]

RESPONDENTS COMMENT
The Office of the Solicitor General (OSG) filed a Comment in behalf of respondents. Preliminarily,
respondents contend that R.A. No. 9337 enjoys the presumption of constitutionality and petitioners failed to
cast doubt on its validity.
Relying on the case of Tolentino vs. Secretary of Finance, 235 SCRA
630 (1994), respondents argue that the procedural issues raised by petitioners, i.e., legality of the bicameral
proceedings, exclusive origination of revenue measures and the power of the Senate concomitant thereto,
have already been settled. With regard to the issue of undue delegation of legislative power to the President,
respondents contend that the law is complete and leaves no discretion to the President but to increase the
rate to 12% once any of the two conditions provided therein arise.

In the Philippines, the value-added system of sales taxation has long been in existence, albeit in a
different mode. Prior to 1978, the system was a single-stage tax computed under the cost deduction method
and was payable only by the original sellers. The single-stage system was subsequently modified, and a
mixture of the cost deduction method and tax credit method was used to determine the value-added tax
payable.[13] Under the tax credit method, an entity can credit against or subtract from the VAT charged on its
sales or outputs the VAT paid on its purchases, inputs and imports. [14]
It was only in 1987, when President Corazon C. Aquino issued Executive Order No. 273, that the
VAT system was rationalized by imposing a multi-stage tax rate of 0% or 10% on all sales using the tax credit
method.[15]

Respondents also refute petitioners argument that the increase to 12%, as well as the 70%
limitation on the creditable input tax, the 60-month amortization on the purchase or importation of capital
goods exceeding P1,000,000.00, and the 5% final withholding tax by government agencies, is arbitrary,
oppressive, and confiscatory, and that it violates the constitutional principle on progressive taxation, among
others.

E.O. No. 273 was followed by R.A. No. 7716 or the Expanded VAT Law, [16] R.A. No. 8241 or the
Improved VAT Law,[17] R.A. No. 8424 or the Tax Reform Act of 1997, [18] and finally, the presently beleaguered
R.A. No. 9337, also referred to by respondents as the VAT Reform Act.

Finally, respondents manifest that R.A. No. 9337 is the anchor of the governments fiscal reform
agenda. A reform in the value-added system of taxation is the core revenue measure that will tilt the balance
towards a sustainable macroeconomic environment necessary for economic growth.

PROCEDURAL ISSUE
I.
Whether R.A. No. 9337 violates the following provisions of the Constitution:

The Court will now discuss the issues in logical sequence.

Page 35 of 66
a. Article VI, Section 24, and
b. Article VI, Section 26(2)

Each Conference Committee Report shall contain a detailed and


sufficiently explicit statement of the changes in, or amendments to the subject
measure, and shall be signed by a majority of the members of each House panel,
voting separately.

A. The Bicameral Conference Committee


Petitioners Escudero, et al., and Pimentel, et al., allege that the Bicameral Conference Committee
exceeded its authority by:
1) Inserting the stand-by authority in favor of the President in Sections 4, 5, and 6 of
R.A. No. 9337;
2) Deleting entirely the no pass-on provisions found in both the House and Senate
bills;
3) Inserting the provision imposing a 70% limit on the amount of input tax to be credited
against the output tax; and
4) Including the amendments introduced only by Senate Bill No. 1950 regarding other
kinds of taxes in addition to the value-added tax.

A comparative presentation of the conflicting House and Senate provisions


and a reconciled version thereof with the explanatory statement of the conference
committee shall be attached to the report.
...
The creation of such conference committee was apparently in response to a problem, not
addressed by any constitutional provision, where the two houses of Congress find themselves in disagreement
over changes or amendments introduced by the other house in a legislative bill. Given that one of the most
basic powers of the legislative branch is to formulate and implement its own rules of proceedings and to
discipline its members, may the Court then delve into the details of how Congress complies with its internal
rules or how it conducts its business of passing legislation? Note that in the present petitions, the issue is not
whether provisions of the rules of both houses creating the bicameral conference committee are
unconstitutional, but whether the bicameral conference committee has strictly complied with the rules
of both houses, thereby remaining within the jurisdiction conferred upon it by Congress.

Petitioners now beseech the Court to define the powers of the Bicameral Conference Committee.
It should be borne in mind that the power of internal regulation and discipline are intrinsic in any
legislative body for, as unerringly elucidated by Justice Story, [i]f the power did not exist, it would be utterly
impracticable to transact the business of the nation, either at all, or at least with decency, deliberation,
and order.[19] Thus, Article VI, Section 16 (3) of the Constitution provides that each House may determine the
rules of its proceedings. Pursuant to this inherent constitutional power to promulgate and implement its own
rules of procedure, the respective rules of each house of Congress provided for the creation of a Bicameral
Conference Committee.

In
the
recent
case
of Farias
vs.
The
Executive
Secretary,[20] the
Court En
Banc, unanimously reiterated and emphasized its adherence to the enrolled bill doctrine, thus, declining
therein petitioners plea for the Court to go behind the enrolled copy of the bill. Assailed in said case was
Congresss creation of two sets of bicameral conference committees, the lack of records of said committees
proceedings, the alleged violation of said committees of the rules of both houses, and the disappearance or
deletion of one of the provisions in the compromise bill submitted by the bicameral conference committee. It
was argued that such irregularities in the passage of the law nullified R.A. No. 9006, or the Fair Election Act.
Striking down such argument, the Court held thus:

Thus, Rule XIV, Sections 88 and 89 of the Rules of House of Representatives provides as follows:
Sec. 88. Conference Committee. In the event that the House does not
agree with the Senate on the amendment to any bill or joint resolution, the differences
may be settled by the conference committees of both chambers.
In resolving the differences with the Senate, the House panel shall, as
much as possible, adhere to and support the House Bill. If the differences with the
Senate are so substantial that they materially impair the House Bill, the panel shall
report such fact to the House for the latters appropriate action.
Sec. 89. Conference Committee Reports. . . . Each report shall contain a
detailed, sufficiently explicit statement of the changes in or amendments to the subject
measure.
...
The Chairman of the House panel may be interpellated on the Conference
Committee Report prior to the voting thereon. The House shall vote on the Conference
Committee Report in the same manner and procedure as it votes on a bill on third and
final reading.
Rule XII, Section 35 of the Rules of the Senate states:
Sec. 35. In the event that the Senate does not agree with the House of
Representatives on the provision of any bill or joint resolution, the differences shall be
settled by a conference committee of both Houses which shall meet within ten (10)
days after their composition. The President shall designate the members of the Senate
Panel in the conference committee with the approval of the Senate.

Under the enrolled bill doctrine, the signing of a bill by the Speaker of the
House and the Senate President and the certification of the Secretaries of both Houses
of Congress that it was passed are conclusive of its due enactment. A review of cases
reveals the Courts consistent adherence to the rule. The Court finds no reason to
deviate from the salutary rule in this case where the irregularities alleged by the
petitioners mostly involved the internal rules of Congress, e.g., creation of the
2nd or 3rd Bicameral Conference Committee by the House. This Court is not the
proper forum for the enforcement of these internal rules of Congress, whether
House or Senate. Parliamentary rules are merely procedural and with their
observance the courts have no concern. Whatever doubts there may be as to the
formal validity of Rep. Act No. 9006 must be resolved in its favor. The Court
reiterates its ruling in Arroyo vs. De Venecia, viz.:
But the cases, both here and abroad, in varying
forms of expression, all deny to the courts the power to
inquire into allegations that, in enacting a law, a House of
Congress failed to comply with its own rules, in the
absence of showing that there was a violation of a
constitutional provision or the rights of private
individuals. In Osmea v. Pendatun, it was held: At any rate,
courts have declared that the rules adopted by deliberative
bodies are subject to revocation, modification or waiver at the
pleasure of the body adopting them. And it has been said that
Parliamentary rules are merely procedural, and with their
observance, the courts have no concern. They may be
waived or disregarded by the legislative body.
Consequently, mere failure to conform to parliamentary
usage will not invalidate the action (taken by a deliberative
body) when the requisite number of members have agreed
to a particular measure.[21] (Emphasis supplied)

Page 36 of 66
The foregoing declaration is exactly in point with the present cases, where petitioners allege
irregularities committed by the conference committee in introducing changes or deleting provisions in the
House and Senate bills. Akin to the Farias case,[22] the present petitions also raise an issue regarding the
actions taken by the conference committee on matters regarding Congress compliance with its own internal
rules. As stated earlier, one of the most basic and inherent power of the legislature is the power to formulate
rules for its proceedings and the discipline of its members. Congress is the best judge of how it should conduct
its own business expeditiously and in the most orderly manner. It is also the sole
concern of Congress to instill discipline among the members of its conference committee if it believes that said
members violated any of its rules of proceedings. Even the expanded jurisdiction of this Court cannot apply to
questions regarding only the internal operation of Congress, thus, the Court is wont to deny a review of the
internal proceedings of a co-equal branch of government.
Moreover, as far back as 1994 or more than ten years ago, in the case of Tolentino vs. Secretary
of Finance,[23] the Court already made the pronouncement that[i]f a change is desired in the practice [of the
Bicameral Conference Committee] it must be sought in Congress since this question is not covered by
any constitutional provision but is only an internal rule of each house. [24] To date, Congress has not
seen it fit to make such changes adverted to by the Court. It seems, therefore, that Congress finds the
practices of the bicameral conference committee to be very useful for purposes of prompt and efficient
legislative action.
Nevertheless, just to put minds at ease that no blatant irregularities tainted the proceedings of the
bicameral conference committees, the Court deems it necessary to dwell on the issue. The Court observes
that there was a necessity for a conference committee because a comparison of the provisions of House Bill
Nos. 3555 and 3705 on one hand, and Senate Bill No. 1950 on the other, reveals that there were indeed
disagreements. As pointed out in the petitions, said disagreements were as follows:
House Bill No. 3555

House Bill No.3705

utilities shall not apply to


residential
end-users.
VAT
shall
be
absorbed
by
generation,
transmission, and distribution
companies.
With regard to 70% limit on input tax credit
Provides that the input tax
credit for capital goods on
which a VAT has been paid
shall be equally distributed
over 5 years or the
depreciable life of such
capital goods; the input tax
credit for goods and
services other than capital
goods shall not exceed 5%
of the total amount of such
goods and services; and
for persons engaged in
retail trading of goods, the
allowable input tax credit
shall not exceed 11% of
the total amount of goods
purchased.

No similar provision

Provides that the input tax credit


for capital goods on which a VAT
has been paid shall be equally
distributed over 5 years or the
depreciable life of such capital
goods; the input tax credit for
goods and services other than
capital goods shall not exceed
90% of the output VAT.

Senate Bill No. 1950


With regard to amendments to be made to NIRC provisions regarding income and excise
taxes

With regard to Stand-By Authority in favor of President


No similar provision
Provides for 12% VAT on
every sale of goods or
properties (amending Sec.
106 of NIRC); 12% VAT on
importation
of
goods
(amending Sec. 107 of
NIRC); and 12% VAT on
sale of services and use or
lease
of
properties
(amending Sec. 108 of
NIRC)

Provides for 12% VAT in


general on sales of goods or
properties and reduced rates
for sale of certain locally
manufactured
goods
and
petroleum products and raw
materials to be used in the
manufacture thereof (amending
Sec. 106 of NIRC); 12% VAT
on importation of goods and
reduced rates for certain
imported products including
petroleum products (amending
Sec. 107 of NIRC); and 12%
VAT on sale of services and
use or lease of properties and
a reduced rate for certain
services
including
power
generation (amending Sec. 108
of NIRC)

Provides for a single rate of 10%


VAT on sale of goods or
properties (amending Sec. 106
of NIRC), 10% VAT on sale of
services including sale of
electricity
by
generation
companies, transmission and
distribution companies, and use
or lease of properties (amending
Sec. 108 of NIRC)

Provides that the VAT imposed


on power generation and on
the sale of petroleum products
shall
be
absorbed
by
generation
companies
or
sellers, respectively, and shall
not be passed on to consumers

Provided for amendments to


several
NIRC
provisions
regarding corporate income,
percentage,
franchise
and
excise taxes

The disagreements between the provisions in the House bills and the Senate bill were with regard
to (1) what rate of VAT is to be imposed; (2) whether only the VAT imposed on electricity generation,
transmission and distribution companies should not be passed on to consumers, as proposed in the Senate
bill, or both the VAT imposed on electricity generation, transmission and distribution companies and the VAT
imposed on sale of petroleum products should not be passed on to consumers, as proposed in the House bill;
(3) in what manner input tax credits should be limited; (4) and whether the NIRC provisions on corporate
income taxes, percentage, franchise and excise taxes should be amended.
There being differences and/or disagreements on the foregoing provisions of the House and
Senate bills, the Bicameral Conference Committee was mandated by the rules of both houses of Congress to
act on the same by settling said differences and/or disagreements. The Bicameral Conference Committee
acted on the disagreeing provisions by making the following changes:

With regard to the no pass-on provision


No similar provision

No similar provision

Provides that the VAT imposed


on sales of electricity by
generation
companies
and
services
of
transmission
companies
and
distribution
companies, as well as those of
franchise grantees of electric

1. With regard to the disagreement on the rate of VAT to be imposed, it would appear from the
Conference Committee Report that the Bicameral Conference Committee tried to bridge the gap in the
difference between the 10% VAT rate proposed by the Senate, and the various rates with 12% as the highest
VAT rate proposed by the House, by striking a compromise whereby the present 10% VAT rate would be
retained until certain conditions arise, i.e., the value-added tax collection as a percentage of gross domestic
product (GDP) of the previous year exceeds 2 4/5%, or National Government deficit as a percentage of GDP
of the previous year exceeds 1%, when the President, upon recommendation of the Secretary of Finance shall
raise the rate of VAT to 12% effective January 1, 2006.
2. With regard to the disagreement on whether only the VAT imposed on electricity generation,
transmission and distribution companies should not be passed on to consumers or whether both the VAT
imposed on electricity generation, transmission and distribution companies and the VAT imposed on sale of

Page 37 of 66
petroleum products may be passed on to consumers, the Bicameral Conference Committee chose to settle
such disagreement by altogether deleting from its Report any no pass-on provision.
3. With regard to the disagreement on whether input tax credits should be limited or not, the
Bicameral Conference Committee decided to adopt the position of the House by putting a limitation on the
amount of input tax that may be credited against the output tax, although it crafted its own language as to the
amount of the limitation on input tax credits and the manner of computing the same by providing thus:
(A) Creditable Input Tax. . . .
...
Provided, The input tax on goods purchased or imported in a
calendar month for use in trade or business for which deduction
for depreciation is allowed under this Code, shall be spread
evenly over the month of acquisition and the fifty-nine (59)
succeeding months if the aggregate acquisition cost for such
goods, excluding the VAT component thereof, exceeds one
million Pesos (P1,000,000.00): PROVIDED, however, that if the
estimated useful life of the capital good is less than five (5)
years, as used for depreciation purposes, then the input VAT
shall be spread over such shorter period: . . .
(B) Excess Output or Input Tax. If at the end of any taxable
quarter the output tax exceeds the input tax, the excess shall be
paid by the VAT-registered person. If the input tax exceeds the
output tax, the excess shall be carried over to the succeeding
quarter or quarters: PROVIDED that the input tax inclusive of
input VAT carried over from the previous quarter that may be
credited in every quarter shall not exceed seventy percent
(70%) of the output VAT: PROVIDED, HOWEVER, THAT any
input tax attributable to zero-rated sales by a VAT-registered
person may at his option be refunded or credited against other
internal revenue taxes, . . .
4. With regard to the amendments to other provisions of the NIRC on corporate income tax,
franchise, percentage and excise taxes, the conference committee decided to include such amendments and
basically adopted the provisions found in Senate Bill No. 1950, with some changes as to the rate of the tax to
be imposed.
Under the provisions of both the Rules of the House of Representatives and Senate Rules, the
Bicameral Conference Committee is mandated to settle the differences between the disagreeing provisions in
the House bill and the Senate bill. The term settle is synonymous to reconcile and harmonize. [25] To reconcile
or harmonize disagreeing provisions, the Bicameral Conference Committee may then (a) adopt the specific
provisions of either the House bill or Senate bill, (b) decide that neither provisions in the House bill or the
provisions in the Senate bill would
be carried into the final form of the bill, and/or (c) try to arrive at a compromise between the disagreeing
provisions.
In the present case, the changes introduced by the Bicameral Conference Committee on
disagreeing provisions were meant only to reconcile and harmonize the disagreeing provisions for it did not
inject any idea or intent that is wholly foreign to the subject embraced by the original provisions.
The so-called stand-by authority in favor of the President, whereby the rate of 10% VAT wanted by
the Senate is retained until such time that certain conditions arise when the 12% VAT wanted by the House
shall be imposed, appears to be a compromise to try to bridge the difference in the rate of VAT proposed by
the two houses of Congress. Nevertheless, such compromise is still totally within the subject of what rate of
VAT should be imposed on taxpayers.

The no pass-on provision was deleted altogether. In the transcripts of the proceedings of the
Bicameral Conference Committee held on May 10, 2005, Sen. Ralph Recto, Chairman of the Senate Panel,
explained the reason for deleting the no pass-on provision in this wise:
. . . the thinking was just to keep the VAT law or the VAT bill simple. And we
were thinking that no sector should be a beneficiary of legislative grace, neither should
any sector be discriminated on. The VAT is an indirect tax. It is a pass on-tax. And lets
keep it plain and simple. Lets not confuse the bill and put a no pass-on provision. Twothirds of the world have a VAT system and in this two-thirds of the globe, I have yet to
see a VAT with a no pass-though provision. So, the thinking of the Senate is basically
simple, lets keep the VAT simple.[26] (Emphasis supplied)
Rep. Teodoro Locsin further made the manifestation that the no pass-on provision never really
enjoyed the support of either House.[27]
With regard to the amount of input tax to be credited against output tax, the Bicameral Conference
Committee came to a compromise on the percentage rate of the limitation or cap on such input tax credit, but
again, the change introduced by the Bicameral Conference Committee was totally within the intent of both
houses to put a cap on input tax that may be
credited against the output tax. From the inception of the subject revenue bill in the House of Representatives,
one of the major objectives was to plug a glaring loophole in the tax policy and administration by creating vital
restrictions on the claiming of input VAT tax credits . . . and [b]y introducing limitations on the claiming of tax
credit, we are capping a major leakage that has placed our collection efforts at an apparent disadvantage. [28]
As to the amendments to NIRC provisions on taxes other than the value-added tax proposed in
Senate Bill No. 1950, since said provisions were among those referred to it, the conference committee had to
act on the same and it basically adopted the version of the Senate.
Thus, all the changes or modifications made by the Bicameral Conference Committee were
germane to subjects of the provisions referred
to it for reconciliation. Such being the case, the Court does not see any grave abuse of discretion amounting to
lack or excess of jurisdiction committed by the Bicameral Conference Committee. In the earlier cases
of Philippine Judges Association vs. Prado [29] and Tolentino vs. Secretary of Finance, [30] the Court recognized
the long-standing legislative practice of giving said conference committee ample latitude for compromising
differences between the Senate and the House. Thus, in the Tolentinocase, it was held that:
. . . it is within the power of a conference committee to include in its report
an entirely new provision that is not found either in the House bill or in the Senate bill. If
the committee can propose an amendment consisting of one or two provisions, there is
no reason why it cannot propose several provisions, collectively considered as an
amendment in the nature of a substitute, so long as such amendment is germane to
the subject of the bills before the committee. After all, its report was not final but
needed the approval of both houses of Congress to become valid as an act of the
legislative department. The charge that in this case the Conference Committee
acted as a third legislative chamber is thus without any basis. [31] (Emphasis
supplied)
B. R.A. No. 9337 Does Not Violate Article VI, Section 26(2) of
the Constitution on the No-Amendment Rule
Article VI, Sec. 26 (2) of the Constitution, states:
No bill passed by either House shall become a law unless it has passed
three readings on separate days, and printed copies thereof in its final form have been
distributed to its Members three days before its passage, except when the President
certifies to the necessity of its immediate enactment to meet a public calamity or
emergency. Upon the last reading of a bill, no amendment thereto shall be allowed,
and the vote thereon shall be taken immediately thereafter, and the yeas and nays
entered in the Journal.

Page 38 of 66
Petitioners argument that the practice where a bicameral conference committee is allowed to add
or delete provisions in the House bill and the Senate bill after these had passed three readings is in effect a
circumvention of the no amendment rule (Sec. 26 (2), Art. VI of the 1987 Constitution), fails to convince the
Court to deviate from its ruling in the Tolentino case that:
Nor is there any reason for requiring that the Committees Report in these
cases must have undergone three readings in each of the two houses. If that be the
case, there would be no end to negotiation since each house may seek modification of
the compromise bill. . . .
Art. VI. 26 (2) must, therefore, be construed as referring only to bills
introduced for the first time in either house of Congress, not to the conference
committee report.[32] (Emphasis supplied)
The Court reiterates here that the no-amendment rule refers only to the procedure to be
followed by each house of Congress with regard to bills initiated in each of said respective houses,
before said bill is transmitted to the other house for its concurrence or amendment. Verily, to construe
said provision in a way as to proscribe any further changes to a bill after one house has voted on it would lead
to absurdity as this would mean that the other house of Congress would be deprived of its constitutional power
to amend or introduce changes to said bill. Thus, Art. VI, Sec. 26 (2) of the Constitution cannot be taken to
mean that the introduction by the Bicameral Conference Committee of amendments and modifications to
disagreeing provisions in bills that have been acted upon by both houses of Congress is prohibited.
C. R.A. No. 9337 Does Not Violate Article VI, Section 24 of the
Constitution on Exclusive Origination of Revenue
Bills
Coming to the issue of the validity of the amendments made regarding the NIRC provisions on
corporate income taxes and percentage, excise taxes. Petitioners refer to the following provisions, to wit:

Article VI, Section 24 of the Constitution reads:


Sec. 24. All appropriation, revenue or tariff bills, bills authorizing increase of
the public debt, bills of local application, and private bills shall originate exclusively in
the House of Representatives but the Senate may propose or concur with
amendments.
In the present cases, petitioners admit that it was indeed House Bill Nos. 3555 and 3705 that
initiated the move for amending provisions of the NIRC dealing mainly with the value-added tax. Upon
transmittal of said House bills to the Senate, the Senate came out with Senate Bill No. 1950 proposing
amendments not only to NIRC provisions on the value-added tax but also amendments to NIRC provisions on
other kinds of taxes. Is the introduction by the Senate of provisions not dealing directly with the value- added
tax, which is the only kind of tax being amended in the House bills, still within the purview of the constitutional
provision authorizing the Senate to propose or concur with amendments to a revenue bill that originated from
the House?
The foregoing question had been squarely answered in the Tolentino case, wherein the Court held,
thus:
. . . To begin with, it is not the law but the revenue bill which is required by
the Constitution to originate exclusively in the House of Representatives. It is important
to emphasize this, because a bill originating in the House may undergo such extensive
changes in the Senate that the result may be a rewriting of the whole. . . . At this point,
what is important to note is that, as a result of the Senate action, a distinct bill may be
produced. To insist that a revenue statute and not only the bill which initiated the
legislative process culminating in the enactment of the law must substantially be
the same as the House bill would be to deny the Senates power not only
to concur with amendmentsbut also to propose amendments. It would be to
violate the coequality of legislative power of the two houses of Congress and in fact
make the House superior to the Senate.

Section 27
28(A)(1)
28(B)(1)
34(B)(1)
116
117
119
121
148
151
236
237
288

Rates of Income Tax on Domestic


Corporation
Tax on Resident Foreign Corporation
Inter-corporate Dividends
Inter-corporate Dividends
Tax on Persons Exempt from VAT
Percentage Tax on domestic carriers and
keepers of Garage
Tax on franchises
Tax on banks and Non-Bank Financial
Intermediaries
Excise Tax on manufactured oils and other
fuels
Excise Tax on mineral products
Registration requirements
Issuance of receipts or sales or commercial
invoices
Disposition of Incremental Revenue

Petitioners claim that the amendments to these provisions of the NIRC did not at all originate from
the House. They aver that House Bill No. 3555 proposed amendments only regarding Sections 106, 107, 108,
110 and 114 of the NIRC, while House Bill No. 3705 proposed amendments only to Sections 106, 107,108,
109, 110 and 111 of the NIRC; thus, the other sections of the NIRC which the Senate amended but which
amendments were not found in the House bills are not intended to be amended by the House of
Representatives. Hence, they argue that since the proposed amendments did not originate from the House,
such amendments are a violation of Article VI, Section 24 of the Constitution.
The argument does not hold water.

Given, then, the power of the Senate to propose amendments, the


Senate can propose its own version even with respect to bills which are required
by the Constitution to originate in the House.
...
Indeed, what the Constitution simply means is that the initiative for filing
revenue, tariff or tax bills, bills authorizing an increase of the public debt, private bills
and bills of local application must come from the House of Representatives on the
theory that, elected as they are from the districts, the members of the House can be
expected to be more sensitive to the local needs and problems. On the other
hand, the senators, who are elected at large, are expected to approach the same
problems from the national perspective. Both views are thereby made to bear on
the enactment of such laws.[33] (Emphasis supplied)
Since there is no question that the revenue bill exclusively originated in the House of
Representatives, the Senate was acting within its
constitutional power to introduce amendments to the House bill when it included provisions in Senate Bill No.
1950 amending corporate income taxes, percentage, excise and franchise taxes. Verily, Article VI, Section 24
of the Constitution does not contain any prohibition or limitation on the extent of the amendments that may be
introduced by the Senate to the House revenue bill.
Furthermore, the amendments introduced by the Senate to the NIRC provisions that had not been
touched in the House bills are still in furtherance of the intent of the House in initiating the subject revenue
bills. The Explanatory Note of House Bill No. 1468, the very first House bill introduced on the floor, which was
later substituted by House Bill No. 3555, stated:
One of the challenges faced by the present administration is the urgent and
daunting task of solving the countrys serious financial problems. To do this,
government expenditures must be strictly monitored and controlled and revenues must

Page 39 of 66
be significantly increased. This may be easier said than done, but our fiscal authorities
are still optimistic the government will be operating on a balanced budget by the year
2009. In fact, several measures that will result to significant expenditure savings have
been identified by the administration. It is supported with a credible package of
revenue measures that include measures to improve tax administration and
control the leakages in revenues from income taxes and the value-added tax
(VAT). (Emphasis supplied)
Rep. Eric D. Singson, in his sponsorship speech for House Bill No. 3555, declared that:
In the budget message of our President in the year 2005, she reiterated
that we all acknowledged that on top of our agenda must be the restoration of the
health of our fiscal system.
In order to considerably lower the consolidated public sector deficit and
eventually achieve a balanced budget by the year 2009, we need to seize windows
of opportunities which might seem poignant in the beginning, but in the long run
prove effective and beneficial to the overall status of our economy. One such
opportunity is a review of existing tax rates, evaluating the relevance given our
present conditions.[34] (Emphasis supplied)

As the Court has said, the Senate can propose amendments and in fact, the amendments made
on provisions in the tax on income of corporations are germane to the purpose of the house bills which is to
raise revenues for the government.
Likewise, the Court finds the sections referring to other percentage and excise taxes germane to
the reforms to the VAT system, as these sections would cushion the effects of VAT on consumers. Considering
that certain goods and services which were subject to percentage tax and excise tax would no longer be VATexempt, the consumer would be burdened more as they would be paying the VAT in addition to these taxes.
Thus, there is a need to amend these sections to soften the impact of VAT. Again, in his sponsorship speech,
Sen. Recto said:
However, for power plants that run on oil, we will reduce to zero the present
excise tax on bunker fuel, to lessen the effect of a VAT on this product.
For electric utilities like Meralco, we will wipe out the franchise tax in
exchange for a VAT.
And in the case of petroleum, while we will levy the VAT on oil products, so
as not to destroy the VAT chain, we will however bring down the excise tax on socially
sensitive products such as diesel, bunker, fuel and kerosene.
...

Notably therefore, the main purpose of the bills emanating from the House of Representatives is to
bring in sizeable revenues for the government
to supplement our countrys serious financial problems, and improve tax administration and control of the
leakages in revenues from income taxes and value-added taxes. As these house bills were transmitted to the
Senate, the latter, approaching the measures from the point of national perspective, can introduce
amendments within the purposes of those bills. It can provide for ways that would soften the impact of the VAT
measure on the consumer, i.e., by distributing the burden across all sectors instead of putting it entirely on the
shoulders of the consumers. The sponsorship speech of Sen. Ralph Recto on why the provisions on income
tax on corporation were included is worth quoting:
All in all, the proposal of the Senate Committee on Ways and Means will
raise P64.3 billion in additional revenues annually even while by mitigating prices of
power, services and petroleum products.

What do all these exercises point to? These are not contortions of giving to
the left hand what was taken from the right. Rather, these sprang from our concern of
softening the impact of VAT, so that the people can cushion the blow of higher prices
they will have to pay as a result of VAT.[36]
The other sections amended by the Senate pertained to matters of tax administration which are
necessary for the implementation of the changes in the VAT system.
To reiterate, the sections introduced by the Senate are germane to the subject matter and
purposes of the house bills, which is to supplement our countrys fiscal deficit, among others. Thus, the Senate
acted within its power to propose those amendments.

However, not all of this will be wrung out of VAT. In fact, only P48.7 billion
amount is from the VAT on twelve goods and services. The rest of the tab P10.5 billionwill be picked by corporations.

SUBSTANTIVE ISSUES
I.
Whether Sections 4, 5 and 6 of R.A. No. 9337, amending Sections 106, 107 and 108 of the NIRC, violate the
following provisions of the Constitution:

What we therefore prescribe is a burden sharing between


corporate Philippines and the consumer. Why should the latter bear all the pain? Why
should the fiscal salvation be only on the burden of the consumer?

a. Article VI, Section 28(1), and


b. Article VI, Section 28(2)
A. No Undue Delegation of Legislative Power

The corporate worlds equity is in form of the increase in the corporate


income tax from 32 to 35 percent, but up to 2008 only. This will raise P10.5 billion a
year. After that, the rate will slide back, not to its old rate of 32 percent, but two notches
lower, to 30 percent.
Clearly, we are telling those with the capacity to pay, corporations, to bear
with this emergency provision that will be in effect for 1,200 days, while we put our
fiscal house in order. This fiscal medicine will have an expiry date.
For their assistance, a reward of tax reduction awaits them. We intend to
keep the length of their sacrifice brief. We would like to assure them that not because
there is a light at the end of the tunnel, this government will keep on making the tunnel
long.
The responsibility will not rest solely on the weary shoulders of the small
man. Big business will be there to share the burden. [35]

Petitioners ABAKADA GURO Party List, et al., Pimentel, Jr., et al., and Escudero, et al. contend in
common that Sections 4, 5 and 6 of R.A. No. 9337, amending Sections 106, 107 and 108, respectively, of the
NIRC giving the President the stand-by authority to raise the VAT rate from 10% to 12% when a certain
condition is met, constitutes undue delegation of the legislative power to tax.
The assailed provisions read as follows:
SEC. 4. Sec. 106 of the same Code, as amended, is hereby further
amended to read as follows:
SEC. 106. Value-Added Tax on Sale of Goods or Properties.
(A) Rate and Base of Tax. There shall be levied, assessed and
collected on every sale, barter or exchange of goods or
properties, a value-added tax equivalent to ten percent (10%) of
the gross selling price or gross value in money of the goods or
properties sold, bartered or exchanged, such tax to be paid by

Page 40 of 66
the seller or transferor:provided, that the President, upon the
recommendation of the Secretary of Finance, shall,
effective January 1, 2006, raise the rate of value-added tax
to twelve percent (12%), after any of the following
conditions has been satisfied.
(i)

value-added tax collection as a percentage of


Gross Domestic Product (GDP) of the previous
year exceeds two and four-fifth percent (2 4/5%)
or

(ii) national government deficit as a percentage of GDP of


the previous year exceeds one and one-half
percent (1 %).
SEC. 5. Section 107 of the same Code, as amended, is hereby further
amended to read as follows:
SEC. 107. Value-Added Tax on Importation of Goods.
(A) In General. There shall be levied, assessed and collected
on every importation of goods a value-added tax equivalent to
ten percent (10%) based on the total value used by the Bureau
of Customs in determining tariff and customs duties, plus
customs duties, excise taxes, if any, and other charges, such
tax to be paid by the importer prior to the release of such goods
from customs custody: Provided, That where the customs
duties are determined on the basis of the quantity or volume of
the goods, the value-added tax shall be based on the landed
cost plus excise taxes, if any: provided, further, that the
President, upon the recommendation of the Secretary of
Finance, shall, effective January 1, 2006, raise the rate of
value-added tax to twelve percent (12%) after any of the
following conditions has been satisfied.
(i) value-added tax collection as a percentage of Gross
Domestic Product (GDP) of the previous year
exceeds two and four-fifth percent (2 4/5%) or
(ii) national government deficit as a percentage of GDP of
the previous year exceeds one and one-half
percent (1 %).
SEC. 6. Section 108 of the same Code, as amended, is hereby further
amended to read as follows:
SEC. 108. Value-added Tax on Sale of Services and Use or
Lease of Properties
(A) Rate and Base of Tax. There shall be levied, assessed and
collected, a value-added tax equivalent to ten percent (10%) of
gross receipts derived from the sale or exchange of
services: provided, that the President, upon the
recommendation of the Secretary of Finance, shall,
effective January 1, 2006, raise the rate of value-added tax
to twelve percent (12%), after any of the following
conditions has been satisfied.
(i) value-added tax collection as a percentage of Gross
Domestic Product (GDP) of the previous year
exceeds two and four-fifth percent (2 4/5%) or
(ii) national government deficit as a percentage of GDP of
the previous year exceeds one and one-half
percent (1 %). (Emphasis supplied)

Petitioners allege that the grant of the stand-by authority to the President to increase the VAT rate
is a virtual abdication by Congress of its exclusive power to tax because such delegation is not within the
purview of Section 28 (2), Article VI of the Constitution, which provides:
The Congress may, by law, authorize the President to fix within specified
limits, and may impose, tariff rates, import and export quotas, tonnage and wharfage
dues, and other duties or imposts within the framework of the national development
program of the government.
They argue that the VAT is a tax levied on the sale, barter or exchange of goods and properties as
well as on the sale or exchange of services, which cannot be included within the purview of tariffs under the
exempted delegation as the latter refers to customs duties, tolls or tribute payable upon merchandise to the
government and usually imposed on goods or merchandise imported or exported.
Petitioners ABAKADA GURO Party List, et al., further contend that delegating to the President the
legislative power to tax is contrary to republicanism. They insist that accountability, responsibility and
transparency should dictate the actions of Congress and they should not pass to the President the decision to
impose taxes. They also argue that the law also effectively nullified the Presidents power of control, which
includes the authority to set aside and nullify the acts of her subordinates like the Secretary of Finance, by
mandating the fixing of the tax rate by the President upon the recommendation of the Secretary of Finance.
Petitioners Pimentel, et al. aver that the President has ample powers to cause, influence or create
the conditions provided by the law to bring about either or both the conditions precedent.
On the other hand, petitioners Escudero, et al. find bizarre and revolting the situation that the
imposition of the 12% rate would be subject to the whim of the Secretary of Finance, an unelected bureaucrat,
contrary to the principle of no taxation without representation. They submit that the Secretary of Finance is not
mandated to give a favorable recommendation and he may not even give his recommendation. Moreover, they
allege that no guiding standards are provided in the law on what basis and as to how he will make his
recommendation. They claim, nonetheless, that any recommendation of the Secretary of Finance can easily
be brushed aside by the President since the former is a mere alter ego of the latter, such that, ultimately, it is
the President who decides whether to impose the increased tax rate or not.
A brief discourse on the principle of non-delegation of powers is instructive.
The principle of separation of powers ordains that each of the three great branches of government
has exclusive cognizance of and is supreme in matters falling within its own constitutionally allocated sphere.
[37]
A logical
corollary to the doctrine of separation of powers is the principle of non-delegation of powers, as expressed in
the Latin maxim: potestas delegata non delegari potestwhich means what has been delegated, cannot be
delegated.[38] This doctrine is based on the ethical principle that such as delegated power constitutes not only
a right but a duty to be performed by the delegate through the instrumentality of his own judgment and not
through the intervening mind of another.[39]
With respect to the Legislature, Section 1 of Article VI of the Constitution provides that the
Legislative power shall be vested in the Congress of the Philippineswhich shall consist of a Senate and a
House of Representatives. The powers which Congress is prohibited from delegating are those which are
strictly, or inherently and exclusively, legislative. Purely legislative power, which can never be delegated, has
been described as the authority to make a complete law complete as to the time when it shall take effect
and as to whom it shall be applicable and to determine the expediency of its enactment.[40] Thus, the
rule is that in order that a court may be justified in holding a statute unconstitutional as a delegation of
legislative power, it must appear that the power involved is purely legislative in nature that is, one appertaining
exclusively to the legislative department. It is the nature of the power, and not the liability of its use or the
manner of its exercise, which determines the validity of its delegation.
Nonetheless, the general rule barring delegation of legislative powers is subject to the following
recognized limitations or exceptions:
(1) Delegation of tariff powers to the President under Section 28 (2) of Article VI of the
Constitution;
(2) Delegation of emergency powers to the President under Section 23 (2) of Article VI
of the Constitution;

Page 41 of 66
(3) Delegation to the people at large;
(4) Delegation to local governments; and
(5) Delegation to administrative bodies.

leaving to some other person or body the power to determine when the specified
contingency has arisen. (Emphasis supplied).[46]
In Edu vs. Ericta,[47] the Court reiterated:

In every case of permissible delegation, there must be a showing that the delegation itself is valid.
It is valid only if the law (a) is complete in itself, setting forth therein the policy to be executed, carried out, or
implemented by the delegate; [41] and (b) fixes a standard the limits of which are sufficiently determinate and
determinable to which the delegate must conform in the performance of his functions. [42] A sufficient standard
is one which defines legislative policy, marks its limits, maps out its boundaries and specifies the public
agency to apply it. It indicates the circumstances under which the legislative command is to be effected.
[43]
Both tests are intended to prevent a total transference of legislative authority to the delegate, who is not
allowed to step into the shoes of the legislature and exercise a power essentially legislative. [44]
In People vs. Vera,[45] the Court, through eminent Justice Jose P. Laurel, expounded on the
concept and extent of delegation of power in this wise:
In testing whether a statute constitutes an undue delegation of legislative
power or not, it is usual to inquire whether the statute was complete in all its terms and
provisions when it left the hands of the legislature so that nothing was left to the
judgment of any other appointee or delegate of the legislature.
...
The true distinction, says Judge Ranney, is between the delegation of
power to make the law, which necessarily involves a discretion as to what it shall
be, and conferring an authority or discretion as to its execution, to be exercised
under and in pursuance of the law. The first cannot be done; to the latter no valid
objection can be made.
...
It is contended, however, that a legislative act may be made to the effect as
law after it leaves the hands of the legislature. It is true that laws may be made
effective on certain contingencies, as by proclamation of the executive or the adoption
by the people of a particular community. In Wayman vs. Southard, the Supreme Court
of the United States ruled that the legislature may delegate a power not legislative
which it may itself rightfully exercise. The power to ascertain facts is such a power
which may be delegated. There is nothing essentially legislative in ascertaining
the existence of facts or conditions as the basis of the taking into effect of a law.
That is a mental process common to all branches of the
government. Notwithstanding the apparent tendency, however, to relax the rule
prohibiting delegation of legislative authority on account of the complexity arising from
social and economic forces at work in this modern industrial age, the orthodox
pronouncement of Judge Cooley in his work on Constitutional Limitations finds
restatement in Prof. Willoughby's treatise on the Constitution of the United States in the
following language speaking of declaration of legislative power to administrative
agencies: The principle which permits the legislature to provide that the
administrative agent may determine when the circumstances are such as require
the application of a law is defended upon the ground that at the time this
authority is granted, the rule of public policy, which is the essence of the
legislative act, is determined by the legislature. In other words, the legislature, as
it is its duty to do, determines that, under given circumstances, certain executive
or administrative action is to be taken, and that, under other circumstances,
different or no action at all is to be taken. What is thus left to the administrative
official is not the legislative determination of what public policy demands, but
simply the ascertainment of what the facts of the case require to be done
according to the terms of the law by which he is governed. The efficiency of an
Act as a declaration of legislative will must, of course, come from Congress, but
the ascertainment of the contingency upon which the Act shall take effect may
be left to such agencies as it may designate. The legislature, then, may provide
that a law shall take effect upon the happening of future specified contingencies

What cannot be delegated is the authority under the Constitution to make


laws and to alter and repeal them; the test is the completeness of the statute in all its
terms and provisions when it leaves the hands of the legislature. To determine whether
or not there is an undue delegation of legislative power, the inquiry must be directed to
the scope and definiteness of the measure enacted. The legislative does not
abdicate its functions when it describes what job must be done, who is to do it,
and what is the scope of his authority. For a complex economy, that may be the only
way in which the legislative process can go forward. A distinction has rightfully been
made between delegation of power to make the laws which necessarily involves
a discretion as to what it shall be, which constitutionally may not be done, and
delegation of authority or discretion as to its execution to be exercised under
and in pursuance of the law, to which no valid objection can be made. The
Constitution is thus not to be regarded as denying the legislature the necessary
resources of flexibility and practicability. (Emphasis supplied).[48]
Clearly, the legislature may delegate to executive officers or bodies the power to determine certain
facts or conditions, or the happening of contingencies, on which the operation of a statute is, by its terms,
made to depend, but the legislature must prescribe sufficient standards, policies or limitations on their
authority.[49] While the power to tax cannot be delegated to executive agencies, details as to the enforcement
and administration of an exercise of such power may be left to them, including the power to determine the
existence of facts on which its operation depends.[50]
The rationale for this is that the preliminary ascertainment of facts as basis for the enactment of
legislation is not of itself a legislative function, but is simply ancillary to legislation. Thus, the duty of correlating
information and making recommendations is the kind of subsidiary activity which the legislature may perform
through its members, or which it may delegate to others to perform. Intelligent legislation on the complicated
problems of modern society is impossible in the absence of accurate information on the part of the legislators,
and any reasonable method of securing such information is proper. [51] The Constitution as a continuously
operative charter of government does not require that Congress find for itself
every fact upon which it desires to base legislative action or that it make for itself detailed determinations
which it has declared to be prerequisite to application of legislative policy to particular facts and circumstances
impossible for Congress itself properly to investigate.[52]
In the present case, the challenged section of R.A. No. 9337 is the common proviso in Sections 4,
5 and 6 which reads as follows:
That the President, upon the recommendation of the Secretary of Finance,
shall, effective January 1, 2006, raise the rate of value-added tax to twelve percent
(12%), after any of the following conditions has been satisfied:
(i) Value-added tax collection as a percentage of
Gross Domestic Product (GDP) of the previous year exceeds
two and four-fifth percent (2 4/5%); or
(ii) National government deficit as a percentage of
GDP of the previous year exceeds one and one-half percent (1
%).
The case before the Court is not a delegation of legislative power. It is simply a delegation of
ascertainment of facts upon which enforcement and administration of the increase rate under the law is
contingent. The legislature has made the operation of the 12% rate effective January 1, 2006, contingent upon
a specified fact or condition. It leaves the entire operation or non-operation of the 12% rate upon factual
matters outside of the control of the executive.

Page 42 of 66
No discretion would be exercised by the President. Highlighting the absence of discretion is the
fact that the word shall is used in the common proviso. The use of the word shall connotes a mandatory
order. Its use in a statute denotes an imperative obligation and is inconsistent with the idea of discretion.
[53]
Where the law is clear and unambiguous, it must be taken to mean exactly what it says, and courts have no
choice but to see to it that the mandate is obeyed. [54]
Thus, it is the ministerial duty of the President to immediately impose the 12% rate upon the
existence of any of the conditions specified by Congress. This is a duty which cannot be evaded by the
President. Inasmuch as the law specifically uses the word shall, the exercise of discretion by the President
does not come into play. It is a clear directive to impose the 12% VAT rate when the specified conditions are
present. The time of taking into effect of the 12% VAT rate is based on the happening of a certain specified
contingency, or upon the ascertainment of certain facts or conditions by a person or body other than the
legislature itself.
The Court finds no merit to the contention of petitioners ABAKADA GURO Party List, et al. that the
law effectively nullified the Presidents power of control over the Secretary of Finance by mandating the fixing
of the tax rate by the President upon the recommendation of the Secretary of Finance. The Court cannot also
subscribe to the position of petitioners
Pimentel, et al. that the word shall should be interpreted to mean may in view of the phrase upon the
recommendation of the Secretary of Finance. Neither does the Court find persuasive the submission of
petitioners Escudero, et al. that any recommendation by the Secretary of Finance can easily be brushed aside
by the President since the former is a mere alter ego of the latter.
When one speaks of the Secretary of Finance as the alter ego of the President, it simply means
that as head of the Department of Finance he is the assistant and agent of the Chief Executive. The
multifarious executive and administrative functions of the Chief Executive are performed by and through the
executive departments, and the acts of the secretaries of such departments, such as the Department of
Finance, performed and promulgated in the regular course of business, are, unless disapproved or reprobated
by the Chief Executive, presumptively the acts of the Chief Executive. The Secretary of Finance, as such,
occupies a political position and holds office in an advisory capacity, and, in the language of Thomas
Jefferson, "should be of the President's bosom confidence" and, in the language of Attorney-General Cushing,
is subject to the direction of the President." [55]
In the present case, in making his recommendation to the President on the existence of either of
the two conditions, the Secretary of Finance is not acting as the alter ego of the President or even her
subordinate. In such instance, he is not subject to the power of control and direction of the President. He is
acting as the agent of the legislative department, to determine and declare the event upon which its expressed
will is to take effect. [56] The Secretary of Finance becomes the means or tool by which legislative policy is
determined and implemented, considering that he possesses all the facilities to gather data and information
and has a much broader perspective to properly evaluate them. His function is to gather and collate statistical
data and other pertinent information and verify if any of the two conditions laid out by Congress is present. His
personality in such instance is in reality but a projection of that of Congress. Thus, being the agent of
Congress and not of the President, the President cannot alter or modify or nullify, or set aside the findings of
the Secretary of Finance and to substitute the judgment of the former for that of the latter.
Congress simply granted the Secretary of Finance the authority to ascertain the existence of a
fact, namely, whether by December 31, 2005, the value-added tax collection as a percentage of Gross
Domestic Product (GDP) of the previous year exceeds two and four-fifth percent (2 4/5%) or the national
government deficit as a percentage of GDP of the previous year exceeds one and one-half percent (1%). If
either of these two instances has occurred, the Secretary of Finance, by legislative mandate, must submit
such information to the President. Then the 12% VAT rate must be imposed by the President effective January
1, 2006. There is no undue delegation of legislative power but only of the discretion as to the
execution of a law. This is constitutionally permissible.[57] Congress does not abdicate its functions or
unduly delegate power when it describes what job must be done, who must do it, and what is the scope of his
authority; in our complex economy that is frequently the only way in which the legislative process can go
forward.[58]
As to the argument of petitioners ABAKADA GURO Party List, et al. that delegating to the
President the legislative power to tax is contrary to the principle of republicanism, the same deserves scant
consideration. Congress did not delegate the power to tax but the mere implementation of the law. The intent
and will to increase the VAT rate to 12% came from Congress and the task of the President is to simply

execute the legislative policy. That Congress chose to do so in such a manner is not within the province of the
Court to inquire into, its task being to interpret the law.[59]
The insinuation by petitioners Pimentel, et al. that the President has ample powers to cause, influence or
create the conditions to bring about either or both the conditions precedent does not deserve any merit as this
argument is highly speculative. The Court does not rule on allegations which are manifestly conjectural, as
these may not exist at all. The Court deals with facts, not fancies; on realities, not appearances. When the
Court acts on appearances instead of realities, justice and law will be short-lived.
B. The 12% Increase VAT Rate Does Not Impose an Unfair and
Unnecessary Additional Tax Burden
Petitioners Pimentel, et al. argue that the 12% increase in the VAT rate imposes an unfair and
additional tax burden on the people. Petitioners also argue that the 12% increase, dependent on any of the 2
conditions set forth in the contested provisions, is ambiguous because it does not state if the VAT rate would
be returned to the original 10% if the rates are no longer satisfied. Petitioners also argue that such rate is
unfair and unreasonable, as the people are unsure of the applicable VAT rate from year to year.
Under the common provisos of Sections 4, 5 and 6 of R.A. No. 9337, if any of the two conditions
set forth therein are satisfied, the President shall increase the VAT rate to 12%. The provisions of the law are
clear. It does not provide for a return to the 10% rate nor does it empower the President to so revert if, after
the rate is increased to 12%, the VAT collection goes below the 2 4/5 of the GDP of the previous year or that the
national government deficit as a percentage of GDP of the previous year does not exceed 1%.
Therefore, no statutory construction or interpretation is needed. Neither can conditions or
limitations be introduced where none is provided for. Rewriting the law is a forbidden ground that only
Congress may tread upon.[60]
Thus, in the absence of any provision providing for a return to the 10% rate, which in this case the
Court finds none, petitioners argument is, at best, purely speculative. There is no basis for petitioners fear of a
fluctuating VAT rate because the law itself does not provide that the rate should go back to 10% if the
conditions provided in Sections 4, 5 and 6 are no longer present. The rule is that where the provision of the
law is clear and unambiguous, so that there is no occasion for the court's seeking the legislative intent, the law
must be taken as it is, devoid of judicial addition or subtraction. [61]
Petitioners also contend that the increase in the VAT rate, which was allegedly an incentive to the
President to raise the VAT collection to at least 2 4/5 of the GDP of the previous year, should be based on fiscal
adequacy.
Petitioners obviously overlooked that increase in VAT collection is not the only condition. There is
another condition, i.e., the national government deficit as a percentage of GDP of the previous year exceeds
one and one-half percent (1 %).
Respondents explained the philosophy behind these alternative conditions:
1.

VAT/GDP Ratio > 2.8%

The condition set for increasing VAT rate to 12% have economic or fiscal
meaning. If VAT/GDP is less than 2.8%, it means that government has weak or no
capability of implementing the VAT or that VAT is not effective in the function of the tax
collection. Therefore, there is no value to increase it to 12% because such action will
also be ineffectual.
2.

Natl Govt Deficit/GDP >1.5%

The condition set for increasing VAT when deficit/GDP is 1.5% or less
means the fiscal condition of government has reached a relatively sound position or is
towards the direction of a balanced budget position. Therefore, there is no need to
increase the VAT rate since the fiscal house is in a relatively healthy position.
Otherwise stated, if the ratio is more than 1.5%, there is indeed a need to increase the
VAT rate.[62]

Page 43 of 66
That the first condition amounts to an incentive to the President to increase the VAT collection
does not render it unconstitutional so long as there is a public purpose for which the law was passed, which in
this case, is mainly to raise revenue. In fact, fiscal adequacy dictated the need for a raise in revenue.
The principle of fiscal adequacy as a characteristic of a sound tax system was originally stated by
Adam Smith in his Canons of Taxation (1776), as:
IV. Every tax ought to be so contrived as both to take out and to keep out of the
pockets of the people as little as possible over and above what it brings into
the public treasury of the state.[63]
It simply means that sources of revenues must be adequate to meet government expenditures and
their variations.[64]
The dire need for revenue cannot be ignored. Our country is in a quagmire of financial woe. During
the Bicameral Conference Committee hearing, then Finance Secretary Purisima bluntly depicted the countrys
gloomy state of economic affairs, thus:
First, let me explain the position that the Philippines finds itself in right now.
We are in a position where 90 percent of our revenue is used for debt service. So, for
every peso of revenue that we currently raise, 90 goes to debt service. Thats interest
plus amortization of our debt. So clearly, this is not a sustainable situation. Thats the
first fact.
The second fact is that our debt to GDP level is way out of line compared to
other peer countries that borrow money from that international financial markets. Our
debt to GDP is approximately equal to our GDP. Again, that shows you that this is not a
sustainable situation.
The third thing that Id like to point out is the environment that we are
presently operating in is not as benign as what it used to be the past five years.

to judge. In the Farias case, the Court refused to consider the various arguments raised therein that dwelt on
the wisdom of Section 14 of R.A. No. 9006 (The Fair Election Act), pronouncing that:
. . . policy matters are not the concern of the Court. Government policy is
within the exclusive dominion of the political branches of the government. It is not for
this Court to look into the wisdom or propriety of legislative determination. Indeed,
whether an enactment is wise or unwise, whether it is based on sound economic
theory, whether it is the best means to achieve the desired results, whether, in short,
the legislative discretion within its prescribed limits should be exercised in a particular
manner are matters for the judgment of the legislature, and the serious conflict of
opinions does not suffice to bring them within the range of judicial cognizance. [66]
In the same vein, the Court in this case will not dawdle on the purpose of Congress or the
executive policy, given that it is not for the judiciary to "pass upon questions of wisdom, justice or expediency
of legislation.[67]
II.
Whether Section 8 of R.A. No. 9337, amending Sections 110(A)(2) and 110(B) of the NIRC; and Section 12 of
R.A. No. 9337, amending Section 114(C) of the NIRC, violate the following provisions of the Constitution:
a. Article VI, Section 28(1), and
b. Article III, Section 1
A. Due Process and Equal Protection Clauses
Petitioners Association of Pilipinas Shell Dealers, Inc., et al. argue that Section 8 of R.A. No. 9337,
amending Sections 110 (A)(2), 110 (B), and Section 12 of R.A. No. 9337, amending Section 114 (C) of the
NIRC are arbitrary, oppressive, excessive and confiscatory. Their argument is premised on the constitutional
right against deprivation of life, liberty of property without due process of law, as embodied in Article III,
Section 1 of the Constitution.

What do I mean by that?


In the past five years, weve been lucky because we were operating in a
period of basically global growth and low interest rates. The past few months, we have
seen an inching up, in fact, a rapid increase in the interest rates in the leading
economies of the world. And, therefore, our ability to borrow at reasonable prices is
going to be challenged. In fact, ultimately, the question is our ability to access the
financial markets.
When the President made her speech in July last year, the environment
was not as bad as it is now, at least based on the forecast of most financial institutions.
So, we were assuming that raising 80 billion would put us in a position where we can
then convince them to improve our ability to borrow at lower rates. But conditions have
changed on us because the interest rates have gone up. In fact, just within this room,
we tried to access the market for a billion dollars because for this year alone,
the Philippines will have to borrow 4 billion dollars. Of that amount, we have borrowed
1.5 billion. We issued last January a 25-year bond at 9.7 percent cost. We were trying
to access last week and the market was not as favorable and up to now we have not
accessed and we might pull back because the conditions are not very good.
So given this situation, we at the Department of Finance believe that we
really need to front-end our deficit reduction. Because it is deficit that is causing the
increase of the debt and we are in what we call a debt spiral. The more debt you have,
the more deficit you have because interest and debt service eats and eats more of your
revenue. We need to get out of this debt spiral. And the only way, I think, we can get
out of this debt spiral is really have a front-end adjustment in our revenue base. [65]
The image portrayed is chilling. Congress passed the law hoping for rescue from an inevitable
catastrophe. Whether the law is indeed sufficient to answer the states economic dilemma is not for the Court

Petitioners also contend that these provisions violate the constitutional guarantee of equal
protection of the law.
The doctrine is that where the due process and equal protection clauses are invoked, considering
that they are not fixed rules but rather broad standards, there is a need for proof of such persuasive character
as would lead to such a conclusion. Absent such a showing, the presumption of validity must prevail. [68]
Section 8 of R.A. No. 9337, amending Section 110(B) of the NIRC imposes a limitation on the
amount of input tax that may be credited against the output tax. It states, in part: [ P]rovided, that the input tax
inclusive of the input VAT carried over from the previous quarter that may be credited in every quarter shall not
exceed seventy percent (70%) of the output VAT:
Input Tax is defined under Section 110(A) of the NIRC, as amended, as the value-added tax
due from or paid by a VAT-registered person on the importation of goods or local purchase of good and
services, including lease or use of property, in the course of trade or business, from a VAT-registered person,
and Output Tax is the value-added tax due on the sale or lease of taxable goods or properties or services by
any person registered or required to register under the law.
Petitioners claim that the contested sections impose limitations on the amount of input tax that may
be claimed. In effect, a portion of the input tax that has already been paid cannot now be credited against the
output tax.
Petitioners argument is not absolute. It assumes that the input tax exceeds 70% of the output tax,
and therefore, the input tax in excess of 70% remains uncredited. However, to the extent that the input tax is
less than 70% of the output tax, then 100% of such input tax is still creditable.
More importantly, the excess input tax, if any, is retained in a businesss books of accounts and
remains creditable in the succeeding quarter/s. This is explicitly allowed by Section 110(B), which provides
that if the input tax exceeds the output tax, the excess shall be carried over to the succeeding quarter or

Page 44 of 66
quarters. In addition, Section 112(B) allows a VAT-registered person to apply for the issuance of a tax credit
certificate or refund for any unused input taxes, to the extent that such input taxes have not been applied
against the output taxes. Such unused input tax may be used in payment of his other internal revenue taxes.
The non-application of the unutilized input tax in a given quarter is not ad infinitum, as petitioners
exaggeratedly contend. Their analysis of the effect of the 70% limitation is incomplete and one-sided. It ends
at the net effect that there will be unapplied/unutilized inputs VAT for a given quarter. It does not proceed
further to the fact that such unapplied/unutilized input tax may be credited in the subsequent periods as
allowed by the carry-over provision of Section 110(B) or that it may later on be refunded through a tax credit
certificate under Section 112(B).
Therefore, petitioners argument must be rejected.
On the other hand, it appears that petitioner Garcia failed to comprehend the operation of the 70%
limitation on the input tax. According to petitioner, the limitation on the creditable input tax in effect allows VATregistered establishments to retain a portion of the taxes they collect, which violates the principle that tax
collection and revenue should be for public purposes and expenditures
As earlier stated, the input tax is the tax paid by a person, passed on to him by the seller, when he
buys goods. Output tax meanwhile is the tax due to the person when he sells goods. In computing the VAT
payable, three possible scenarios may arise:
First, if at the end of a taxable quarter the output taxes charged by the seller are equal to the input
taxes that he paid and passed on by the suppliers, then no payment is required;
Second, when the output taxes exceed the input taxes, the person shall be liable for the excess,
which has to be paid to the Bureau of Internal Revenue (BIR); [69]and
Third, if the input taxes exceed the output taxes, the excess shall be carried over to the
succeeding quarter or quarters. Should the input taxes result from zero-rated or effectively zero-rated
transactions, any excess over the output taxes shall instead be refunded to the taxpayer or credited against
other internal revenue taxes, at the taxpayers option. [70]
Section 8 of R.A. No. 9337 however, imposed a 70% limitation on the input tax. Thus, a person can
credit his input tax only up to the extent of 70% of the output tax. In laymans term, the value-added taxes that
a person/taxpayer paid and passed on to him by a seller can only be credited up to 70% of the value-added
taxes that is due to him on a taxable transaction. There is no retention of any tax collection because the
person/taxpayer has already previously paid the input tax to a seller, and the seller will subsequently remit
such input tax to the BIR. The party directly liable for the payment of the tax is the seller. [71] What only needs to
be done is for the person/taxpayer to apply or credit these input taxes, as evidenced by receipts, against his
output taxes.

SEC. 110. Tax Credits.


(A) Creditable Input Tax.
Provided, That the input tax on goods purchased or imported in a calendar month for
use in trade or business for which deduction for depreciation is allowed under this
Code, shall be spread evenly over the month of acquisition and the fifty-nine (59)
succeeding months if the aggregate acquisition cost for such goods, excluding the VAT
component thereof, exceeds One million pesos (P1,000,000.00): Provided, however,
That if the estimated useful life of the capital goods is less than five (5) years, as used
for depreciation purposes, then the input VAT shall be spread over such a shorter
period: Provided, finally, That in the case of purchase of services, lease or use of
properties, the input tax shall be creditable to the purchaser, lessee or license upon
payment of the compensation, rental, royalty or fee.
The foregoing section imposes a 60-month period within which to amortize the creditable input tax
on purchase or importation of capital goods with acquisition cost of P1 Million pesos, exclusive of the VAT
component. Such spread out only poses a delay in the crediting of the input tax. Petitioners argument is
without basis because the taxpayer is not permanently deprived of his privilege to credit the input tax.
It is worth mentioning that Congress admitted that the spread-out of the creditable input tax in this
case amounts to a 4-year interest-free loan to the government. [76] In the same breath, Congress also justified
its move by saying that the provision was designed to raise an annual revenue of 22.6 billion. [77] The
legislature also dispelled the fear that the provision will fend off foreign investments, saying that foreign
investors have other tax incentives provided by law, and citing the case of China, where despite a 17.5% noncreditable VAT, foreign investments were not deterred. [78] Again, for whatever is the purpose of the 60-month
amortization, this involves executive economic policy and legislative wisdom in which the Court cannot
intervene.
With regard to the 5% creditable withholding tax imposed on payments made by the government
for taxable transactions, Section 12 of R.A. No. 9337, which amended Section 114 of the NIRC, reads:
SEC. 114. Return and Payment of Value-added Tax.

Petitioners Association of Pilipinas Shell Dealers, Inc., et al. also argue that the input tax partakes
the nature of a property that may not be confiscated, appropriated, or limited without due process of law.

(C) Withholding of Value-added Tax. The Government or any of its political


subdivisions, instrumentalities or agencies, including government-owned or controlled
corporations (GOCCs) shall, before making payment on account of each purchase of
goods and services which are subject to the value-added tax imposed in Sections 106
and 108 of this Code, deduct and withhold a final value-added tax at the rate of five
percent (5%) of the gross payment thereof: Provided, That the payment for lease or
use of properties or property rights to nonresident owners shall be subject to ten
percent (10%) withholding tax at the time of payment. For purposes of this Section, the
payor or person in control of the payment shall be considered as the withholding agent.

The input tax is not a property or a property right within the constitutional purview of the due
process clause. A VAT-registered persons entitlement to the creditable input tax is a mere statutory privilege.

The value-added tax withheld under this Section shall be remitted within
ten (10) days following the end of the month the withholding was made.

The distinction between statutory privileges and vested rights must be borne in mind for persons
have no vested rights in statutory privileges. The state may change or take away rights, which were created by
the law of the state, although it may not take away property, which was vested by virtue of such rights. [72]
Under the previous system of single-stage taxation, taxes paid at every level of distribution are not
recoverable from the taxes payable, although it becomes part of the cost, which is deductible from the gross
revenue. When Pres. Aquino issued E.O. No. 273 imposing a 10% multi-stage tax on all sales, it was then that
the crediting of the input tax paid on purchase or importation of goods and services by VAT-registered persons
against the output tax was introduced. [73] This was adopted by the Expanded VAT Law (R.A. No. 7716), [74] and
The Tax Reform Act of 1997 (R.A. No. 8424).[75] The right to credit input tax as against the output tax is clearly
a privilege created by law, a privilege that also the law can remove, or in this case, limit.
Petitioners also contest as arbitrary, oppressive, excessive and confiscatory, Section 8 of R.A. No.
9337, amending Section 110(A) of the NIRC, which provides:

Section 114(C) merely provides a method of collection, or as stated by respondents, a more


simplified VAT withholding system. The government in this case is constituted as a withholding agent with
respect to their payments for goods and services.
Prior to its amendment, Section 114(C) provided for different rates of value-added taxes to be
withheld -- 3% on gross payments for purchases of goods; 6% on gross payments for services supplied by
contractors other than by public works contractors; 8.5% on gross payments for services supplied by public
work contractors; or 10% on payment for the lease or use of properties or property rights to nonresident
owners. Under the present Section 114(C), these different rates, except for the 10% on lease or property rights
payment to nonresidents, were deleted, and a uniform rate of 5% is applied.
The Court observes, however, that the law the used the word final. In tax usage, final, as opposed
to creditable, means full. Thus, it is provided in Section 114(C): final value-added tax at the rate of five percent
(5%).

Page 45 of 66
In Revenue Regulations No. 02-98, implementing R.A. No. 8424 (The Tax Reform Act of 1997), the
concept of final withholding tax on income was explained, to wit:
SECTION 2.57. Withholding of Tax at Source
(A) Final Withholding Tax. Under the final withholding tax system the
amount of income tax withheld by the withholding agent is constituted as full and final
payment of the income tax due from the payee on the said income. The liability for
payment of the tax rests primarily on the payor as a withholding agent. Thus, in case of
his failure to withhold the tax or in case of underwithholding, the deficiency tax shall be
collected from the payor/withholding agent.
(B) Creditable Withholding Tax. Under the creditable withholding tax
system, taxes withheld on certain income payments are intended to equal or at least
approximate the tax due of the payee on said income. Taxes withheld on income
payments covered by the expanded withholding tax (referred to in Sec. 2.57.2 of these
regulations) and compensation income (referred to in Sec. 2.78 also of these
regulations) are creditable in nature.
As applied to value-added tax, this means that taxable transactions with the government are
subject to a 5% rate, which constitutes as full payment of the tax payable on the transaction. This represents
the net VAT payable of the seller. The other 5% effectively accounts for the standard input VAT (deemed input
VAT), in lieu of the actual input VAT directly or attributable to the taxable transaction. [79]
The Court need not explore the rationale behind the provision. It is clear that Congress intended to
treat differently taxable transactions with the government. [80]This is supported by the fact that under the old
provision, the 5% tax withheld by the government remains creditable against the tax liability of the seller or
contractor, to wit:
SEC. 114. Return and Payment of Value-added Tax.
(C) Withholding of Creditable Value-added Tax. The Government or any
of its political subdivisions, instrumentalities or agencies, including government-owned
or controlled corporations (GOCCs) shall, before making payment on account of each
purchase of goods from sellers and services rendered by contractors which are subject
to the value-added tax imposed in Sections 106 and 108 of this Code, deduct and
withhold the value-added tax due at the rate of three percent (3%) of the gross
payment for the purchase of goods and six percent (6%) on gross receipts for services
rendered by contractors on every sale or installment payment which shall
be creditable against the value-added tax liability of the seller or contractor :
Provided, however, That in the case of government public works contractors, the
withholding rate shall be eight and one-half percent (8.5%): Provided, further, That the
payment for lease or use of properties or property rights to nonresident owners shall be
subject to ten percent (10%) withholding tax at the time of payment. For this purpose,
the payor or person in control of the payment shall be considered as the withholding
agent.
The valued-added tax withheld under this Section shall be remitted within
ten (10) days following the end of the month the withholding was made. (Emphasis
supplied)

that should the actual input tax exceed 5% of gross payments, the excess may form part of the cost. Equally,
should the actual input tax be less than 5%, the difference is treated as income. [81]
Petitioners also argue that by imposing a limitation on the creditable input tax, the government gets
to tax a profit or value-added even if there is no profit or value-added.
Petitioners stance is purely hypothetical, argumentative, and again, one-sided. The Court will not
engage in a legal joust where premises are what ifs, arguments, theoretical and facts, uncertain. Any
disquisition by the Court on this point will only be, as Shakespeare describes life in Macbeth,[82] full of sound
and fury, signifying nothing.
Whats more, petitioners contention assumes the proposition that there is no profit or value-added.
It need not take an astute businessman to know that it is a matter of exception that a business will sell goods
or services without profit or value-added. It cannot be overstressed that a business is created precisely for
profit.
The equal protection clause under the Constitution means that no person or class of persons shall
be deprived of the same protection of laws which is enjoyed by other persons or other classes in the same
place and in like circumstances.[83]
The power of the State to make reasonable and natural classifications for the purposes of taxation
has long been established. Whether it relates to the subject of taxation, the kind of property, the rates to be
levied, or the amounts to be raised, the methods of assessment, valuation and collection, the States power is
entitled to presumption of validity. As a rule, the judiciary will not interfere with such power absent a clear
showing of unreasonableness, discrimination, or arbitrariness.[84]
Petitioners point out that the limitation on the creditable input tax if the entity has a high ratio of
input tax, or invests in capital equipment, or has several transactions with the government, is not based on real
and substantial differences to meet a valid classification.
The argument is pedantic, if not outright baseless. The law does not make any classification in the
subject of taxation, the kind of property, the rates to be levied or the amounts to be raised, the methods of
assessment, valuation and collection. Petitioners alleged distinctions are based on variables that bear different
consequences. While the implementation of the law may yield varying end results depending on ones profit
margin and value-added, the Court cannot go beyond what the legislature has laid down and interfere with the
affairs of business.
The equal protection clause does not require the universal application of the laws on all persons or
things without distinction. This might in fact sometimes result in unequal protection. What the clause requires
is equality among equals as determined according to a valid classification. By classification is meant the
grouping of persons or things similar to each other in certain particulars and different from all others in these
same particulars.[85]
Petitioners brought to the Courts attention the introduction of Senate Bill No. 2038 by Sens. S.R.
Osmea III and Ma. Ana Consuelo A.S. Madrigal on June 6, 2005, and House Bill No. 4493 by Rep. Eric D.
Singson. The proposed legislation seeks to amend the 70% limitation by increasing the same to 90%. This,
according to petitioners, supports their stance that the 70% limitation is arbitrary and confiscatory. On this
score, suffice it to say that these are still proposed legislations. Until Congress amends the law, and absent
any unequivocal basis for its unconstitutionality, the 70% limitation stays.
B. Uniformity and Equitability of Taxation
Article VI, Section 28(1) of the Constitution reads:

As amended, the use of the word final and the deletion of the word creditable exhibits Congresss
intention to treat transactions with the government differently. Since it has not been shown that the class
subject to the 5% final withholding tax has been unreasonably narrowed, there is no reason to invalidate the
provision. Petitioners, as petroleum dealers, are not the only ones subjected to the 5% final withholding tax. It
applies to all those who deal with the government.
Moreover, the actual input tax is not totally lost or uncreditable, as petitioners believe. Revenue
Regulations No. 14-2005 or the Consolidated Value-Added Tax Regulations 2005 issued by the BIR, provides

The rule of taxation shall be uniform and equitable. The Congress shall
evolve a progressive system of taxation.
Uniformity in taxation means that all taxable articles or kinds of property of the same class shall be
taxed at the same rate. Different articles may be taxed at different amounts provided that the rate is uniform on
the same class everywhere with all people at all times.[86]

Page 46 of 66
In this case, the tax law is uniform as it provides a standard rate of 0% or 10% (or 12%) on all
goods and services. Sections 4, 5 and 6 of R.A. No. 9337, amending Sections 106, 107 and 108, respectively,
of the NIRC, provide for a rate of 10% (or 12%) on sale of goods and properties, importation of goods, and
sale of services and use or lease of properties. These same sections also provide for a 0% rate on certain
sales and transaction.
Neither does the law make any distinction as to the type of industry or trade that will bear the 70%
limitation on the creditable input tax, 5-year amortization of input tax paid on purchase of capital goods or the
5% final withholding tax by the government. It must be stressed that the rule of uniform taxation does not
deprive Congress of the power to classify subjects of taxation, and only demands uniformity within the
particular class.[87]
R.A. No. 9337 is also equitable. The law is equipped with a threshold margin. The VAT rate of 0%
or 10% (or 12%) does not apply to sales of goods or services with gross annual sales or receipts not
exceeding P1,500,000.00.[88] Also, basic marine and agricultural food products in their original state are still not
subject to the tax,[89] thus ensuring that prices at the grassroots level will remain accessible. As was stated
in Kapatiran ng mga Naglilingkod sa Pamahalaan ng Pilipinas, Inc. vs. Tan:[90]
The disputed sales tax is also equitable. It is imposed only on sales of
goods or services by persons engaged in business with an aggregate gross annual
sales exceedingP200,000.00. Small corner sari-sari stores are consequently exempt
from its application. Likewise exempt from the tax are sales of farm and marine
products, so that the costs of basic food and other necessities, spared as they are from
the incidence of the VAT, are expected to be relatively lower and within the reach of the
general public.
It is admitted that R.A. No. 9337 puts a premium on businesses with low profit margins, and unduly
favors those with high profit margins. Congress was not oblivious to this. Thus, to equalize the weighty burden
the law entails, the law, under Section 116, imposed a 3% percentage tax on VAT-exempt persons under
Section 109(v), i.e., transactions with gross annual sales and/or receipts not exceeding P1.5 Million. This acts
as a equalizer because in effect, bigger businesses that qualify for VAT coverage and VAT-exempt taxpayers
stand on equal-footing.
Moreover, Congress provided mitigating measures to cushion the impact of the imposition of the
tax on those previously exempt. Excise taxes on petroleum products [91] and natural gas[92] were reduced.
Percentage tax on domestic carriers was removed. [93] Power producers are now exempt from paying franchise
tax.[94]
Aside from these, Congress also increased the income tax rates of corporations, in order to
distribute the burden of taxation. Domestic, foreign, and non-resident corporations are now subject to a 35%
income tax rate, from a previous 32%. [95] Intercorporate dividends of non-resident foreign corporations are still
subject to 15% final withholding tax but the tax credit allowed on the corporations domicile was increased to
20%.[96] The Philippine Amusement and Gaming Corporation (PAGCOR) is not exempt from income taxes
anymore.[97] Even the sale by an artist of his works or services performed for the production of such works was
not spared.
All these were designed to ease, as well as spread out, the burden of taxation, which would
otherwise rest largely on the consumers. It cannot therefore be gainsaid that R.A. No. 9337 is equitable.
C.

Progressivity of Taxation

Lastly, petitioners contend that the limitation on the creditable input tax is anything but regressive.
It is the smaller business with higher input tax-output tax ratio that will suffer the consequences.
Progressive taxation is built on the principle of the taxpayers ability to pay. This principle was also
lifted from Adam Smiths Canons of Taxation, and it states:
I. The subjects of every state ought to contribute towards the support of the
government, as nearly as possible, in proportion to their respective abilities;
that is, in proportion to the revenue which they respectively enjoy under the
protection of the state.

Taxation is progressive when its rate goes up depending on the resources of the person affected.
[98]

The VAT is an antithesis of progressive taxation. By its very nature, it is regressive. The principle of
progressive taxation has no relation with the VAT system inasmuch as the VAT paid by the consumer or
business for every goods bought or services enjoyed is the same regardless of income. In
other words, the VAT paid eats the same portion of an income, whether big or small. The disparity lies in the
income earned by a person or profit margin marked by a business, such that the higher the income or profit
margin, the smaller the portion of the income or profit that is eaten by VAT. A converso, the lower the income
or profit margin, the bigger the part that the VAT eats away. At the end of the day, it is really the lower income
group or businesses with low-profit margins that is always hardest hit.
Nevertheless, the Constitution does not really prohibit the imposition of indirect taxes, like the VAT.
What it simply provides is that Congress shall "evolve a progressive system of taxation." The Court stated in
the Tolentino case, thus:
The Constitution does not really prohibit the imposition of indirect taxes
which, like the VAT, are regressive. What it simply provides is that Congress shall
evolve a progressive system of taxation. The constitutional provision has been
interpreted to mean simply that direct taxes are . . . to be preferred [and] as much as
possible, indirect taxes should be minimized. (E. FERNANDO, THE CONSTITUTION
OF THE PHILIPPINES 221 (Second ed. 1977)) Indeed, the mandate to Congress is
not to prescribe, but to evolve, a progressive tax system. Otherwise, sales taxes, which
perhaps are the oldest form of indirect taxes, would have been prohibited with the
proclamation of Art. VIII, 17 (1) of the 1973 Constitution from which the present Art. VI,
28 (1) was taken. Sales taxes are also regressive.
Resort to indirect taxes should be minimized but not avoided entirely
because it is difficult, if not impossible, to avoid them by imposing such taxes according
to the taxpayers' ability to pay. In the case of the VAT, the law minimizes the regressive
effects of this imposition by providing for zero rating of certain transactions (R.A. No.
7716, 3, amending 102 (b) of the NIRC), while granting exemptions to other
transactions. (R.A. No. 7716, 4 amending 103 of the NIRC) [99]
CONCLUSION
It has been said that taxes are the lifeblood of the government. In this case, it is just an enema, a
first-aid measure to resuscitate an economy in distress. The Court is neither blind nor is it turning a deaf ear
on the plight of the masses. But it does not have the panacea for the malady that the law seeks to remedy. As
in other cases, the Court cannot strike down a law as unconstitutional simply because of its yokes.
Let us not be overly influenced by the plea that for every wrong there is a
remedy, and that the judiciary should stand ready to afford relief. There are
undoubtedly many wrongs the judicature may not correct, for instance, those involving
political questions. . . .
Let us likewise disabuse our minds from the notion that the judiciary is the
repository of remedies for all political or social ills; We should not forget that the
Constitution has judiciously allocated the powers of government to three distinct and
separate compartments; and that judicial interpretation has tended to the preservation
of the independence of the three, and a zealous regard of the prerogatives of each,
knowing full well that one is not the guardian of the others and that, for official wrongdoing, each may be brought to account, either by impeachment, trial or by the ballot
box.[100]
The words of the Court in Vera vs. Avelino[101] holds true then, as it still holds true now. All things
considered, there is no raison d'tre for the unconstitutionality of R.A. No. 9337.
WHEREFORE, Republic Act No. 9337 not being unconstitutional, the petitions in G.R. Nos.
168056, 168207, 168461, 168463, and 168730, are herebyDISMISSED.

Page 47 of 66
There being no constitutional impediment to the full enforcement and implementation of R.A. No.
9337, the temporary restraining order issued by the Court on July 1, 2005 is LIFTED upon finality of herein
decision.
SO ORDERED.
EN BANC
[G.R. No. 146494. July 14, 2004]
GOVERNMENT SERVICE INSURANCE SYSTEM, Cebu City Branch, petitioner, vs. MILAGROS O.
MONTESCLAROS, respondent.
DECISION
CARPIO, J.:
The Case
This is a petition for review on certiorari of the Decision[1] dated 13 December 2000 of the Court of
Appeals in CA-G.R. CV No. 48784. The Court of Appeals affirmed the Decision [2] of the Regional Trial Court,
Branch 21, Cebu City (trial court), which held that Milagros Orbiso Montesclaros is entitled to survivorship
pension.
The Facts
Sangguniang Bayan member Nicolas Montesclaros (Nicolas) married Milagros Orbiso (Milagros) on 10
[3]
July 1983. Nicolas was a 72- year old widower when he married Milagros who was then 43 years old.
On 4 January 1985, Nicolas filed with the Government Service Insurance System (GSIS) an application
for retirement benefits effective 18 February 1985 under Presidential Decree No. 1146 or the Revised
Government Service Insurance Act of 1977 (PD 1146). In his retirement application, Nicolas designated his
wife Milagros as his sole beneficiary.[4] Nicolas last day of actual service was on 17 February 1985.[5] On 31
January 1986, GSIS approved Nicolas application for retirement effective 17 February 1984, granting a lump
sum payment of annuity for the first five years and a monthly annuity thereafter. [6] Nicolas died on 22 April
1992. Milagros filed with GSIS a claim for survivorship pension under PD 1146. On 8 June 1992, GSIS denied
the claim because under Section 18 of PD 1146, the surviving spouse has no right to survivorship pension if
the surviving spouse contracted the marriage with the pensioner within three years before the pensioner
qualified for the pension. [7] According to GSIS, Nicolas wed Milagros on 10 July 1983, less than one year from
his date of retirement on 17 February 1984.
On 2 October 1992, Milagros filed with the trial court a special civil action for declaratory relief
questioning the validity of Section 18 of PD 1146 disqualifying her from receiving survivorship pension.
On 9 November 1994, the trial court rendered judgment declaring Milagros eligible for survivorship
pension. The trial court ordered GSIS to pay Milagros the benefits due including interest. Citing Articles
115[8] and 117[9] of the Family Code, the trial court held that retirement benefits, which the pensioner has
earned for services rendered and for which the pensioner has contributed through monthly salary deductions,
are onerous acquisitions. Since retirement benefits are property the pensioner acquired through labor, such
benefits are conjugal property. The trial court held that the prohibition in Section 18 of PD 1146 is deemed
repealed for being inconsistent with the Family Code, a later law.The Family Code has retroactive effect if it
does not prejudice or impair vested rights.
GSIS appealed to the Court of Appeals, which affirmed the decision of the trial court. Hence, this
petition for review.
In the meantime, in a letter dated 10 January 2003, Milagros informed the Court that she has accepted
GSIS decision disqualifying her from receiving survivorship pension and that she is no longer interested in
pursuing the case.[10] Commenting on Milagros letter, GSIS asserts that the Court must decide the case on the
merits.[11]
The Court will resolve the issue despite the manifestation of Milagros. The issue involves not only the
claim of Milagros but also that of other surviving spouses who are similarly situated and whose claims GSIS
would also deny based on the proviso. Social justice and public interest demand that we resolve the
constitutionality of the proviso.
The Ruling of the Court of Appeals
The Court of Appeals agreed with the trial court that the retirement benefits are onerous and conjugal
because the pension came from the deceased pensioners salary deductions. The Court of Appeals held that
the pension is not gratuitous since it is a deferred compensation for services rendered.
The Issues
GSIS raises the following issues:
1. Whether Section 16 of PD 1146 entitles Milagros to survivorship pension;
2. Whether retirement benefits form part of conjugal property;
3. Whether Articles 254 and 256 of the Family Code repealed Section 18 of PD 1146. [12]
The Courts Ruling
The pertinent provisions of PD 1146 on survivorship benefits read:

SEC. 16. Survivorship Benefits. When a member or pensioner dies, the beneficiary shall be entitled to
survivorship benefits provided for in sections seventeen and eighteen hereunder. The survivorship pension
shall consist of:
(1) basic survivorship pension which is fifty percent of the basic monthly pension; and
(2) dependents pension not exceeding fifty percent of the basic monthly pension payable in accordance with
the rules and regulations prescribed by the System.
SEC. 17. Death of a Member. (a) Upon the death of a member, the primary beneficiaries shall be entitled to:
(1) the basic monthly pension which is guaranteed for five years; Provided, That, at the option of the
beneficiaries, it may be paid in lump sum as defined in this Act: Provided, further, That, the member is entitled
to old-age pension at the time of his death; or
(2) the basic survivorship pension which is guaranteed for thirty months and the dependents
pension; Provided, That, the deceased had paid at least thirty-six monthly contributions within the five-year
period immediately preceding his death, or a total of at least one hundred eighty monthly contributions prior
to his death.
(b) At the end of the guaranteed periods mentioned in the preceding sub-section (a), the survivorship pension
shall be paid as follows:
(1) when the dependent spouse is the only survivor, he shall receive the basic survivorship pension for life or
until he remarries;
(2) when only dependent children are the survivors, they shall be entitled to the survivorship pension for as
long as they are qualified;
(3) when the survivors are the dependent spouse and the dependent children, they shall be entitled to the
survivorship pension so long as there are dependent children and, thereafter, the surviving spouse shall
receive the basic survivorship pension for life or until he remarries.
(c) In the absence of primary beneficiaries, the secondary beneficiaries designated by the deceased and
recorded in the System, shall be entitled to:
(1) a cash payment equivalent to thirty times the basic survivorship pension when the member is qualified for
old-age pension; or
(2) a cash payment equivalent to fifty percent of the average monthly compensation for each year he paid
contributions, but not less than five hundred pesos; Provided, That, the member paid at least thirty-six monthly
contributions within the five-year period immediately preceding his death or paid a total of at least one hundred
eighty monthly contributions prior to his death.
(d) When the primary beneficiaries are not entitled to the benefits mentioned in paragraph (a) of this section,
they shall receive a cash payment equivalent to one hundred percent of the average monthly compensation
for each year the member paid contributions, but not less than five hundred pesos. In the absence of primary
beneficiaries, the amount shall revert to the funds of the System.
SEC. 18. Death of a Pensioner. Upon the death of a pensioner, the primary beneficiaries shall receive the
applicable pension mentioned under paragraph (b) of section seventeen of this Act:Provided, That, the
dependent spouse shall not be entitled to said pension if his marriage with the pensioner is contracted
within three years before the pensioner qualified for the pension.When the pensioner dies within the
period covered by the lump sum, the survivorship pension shall be paid only after the expiration of the said
period. This shall also apply to the pensioners living as of the effectivity of this Act, but the survivorship benefit
shall be based on the monthly pension being received at the time of death. (Emphasis supplied)
Under PD 1146, the primary beneficiaries are (1) the dependent spouse until such spouse
remarries, and (2) the dependent children.[13] The secondary beneficiaries are the dependent parents and
legitimate descendants except dependent children. [14] The law defines dependent as the legitimate,
legitimated, legally adopted, acknowledged natural or illegitimate child who is unmarried, not gainfully
employed, and not over twenty-one years of age or is over twenty-one years of age but physically or mentally
incapacitated and incapable of self-support. The term also includes the legitimate spouse dependent for
support on the member, and the legitimate parent wholly dependent on the member for support. [15]
The main question for resolution is the validity of the proviso in Section 18 of PD 1146, which proviso
prohibits the dependent spouse from receiving survivorship pension if such dependent spouse married the
pensioner within three years before the pensioner qualified for the pension (the proviso).
We hold that the proviso, which was the sole basis for the rejection by GSIS of Milagros claim, is
unconstitutional because it violates the due process clause. The proviso is also discriminatory and denies
equal protection of the law.
Retirement Benefits as Property Interest
Under Section 5 of PD 1146, it is mandatory for the government employee to pay monthly
contributions. PD 1146 mandates the government to include in its annual appropriation the necessary amounts
for its share of the contributions. It is compulsory on the government employer to take off and withhold from
the employees monthly salaries their contributions and to remit the same to GSIS. [16] The government
employer must also remit its corresponding share to GSIS. [17] Considering the mandatory salary deductions
from the government employee, the government pensions do not constitute mere gratuity but form part of
compensation.

Page 48 of 66
In a pension plan where employee participation is mandatory, the prevailing view is that employees
have contractual or vested rights in the pension where the pension is part of the terms of employment. [18] The
reason for providing retirement benefits is to compensate service to the government. Retirement benefits to
government employees are part of emolument to encourage and retain qualified employees in the government
service. Retirement benefits to government employees reward them for giving the best years of their lives in
the service of their country.[19]
Thus, where the employee retires and meets the eligibility requirements, he acquires a vested right to
benefits that is protected by the due process clause. [20] Retirees enjoy a protected property interest whenever
they acquire a right to immediate payment under pre-existing law. [21] Thus, a pensioner acquires a vested right
to benefits that have become due as provided under the terms of the public employees pension statute. [22] No
law can deprive such person of his pension rights without due process of law, that is, without notice and
opportunity to be heard.[23]
In addition to retirement and disability benefits, PD 1146 also provides for benefits to survivors of
deceased government employees and pensioners. Under PD 1146, the dependent spouse is one of the
beneficiaries of survivorship benefits. A widows right to receive pension following the demise of her husband is
also part of the husbands contractual compensation.[24]
Denial of Due Process
The proviso is contrary to Section 1, Article III of the Constitution, which provides that [n]o person shall
be deprived of life, liberty, or property without due process of law, nor shall any person be denied the equal
protection of the laws. The proviso is unduly oppressive in outrightly denying a dependent spouses claim for
survivorship pension if the dependent spouse contracted marriage to the pensioner within the three-year
prohibited period. There is outright confiscation of benefits due the surviving spouse without giving the
surviving spouse an opportunity to be heard. The proviso undermines the purpose of PD 1146, which is to
assure comprehensive and integrated social security and insurance benefits to government employees and
their dependents in the event of sickness, disability, death, and retirement of the government employees.
The whereas clauses of PD 1146 state:
WHEREAS, the Government Service Insurance System in promoting the efficiency and welfare of the
employees of the Government of the Philippines, administers the laws that grant to its members social security
and insurance benefits;
WHEREAS, it is necessary to preserve at all times the actuarial solvency of the funds administered by the
System; to guarantee to the government employee all the benefits due him; and to expand and increase the
benefits made available to him and his dependents to the extent permitted by available resources;
WHEREAS, provisions of existing laws have impeded the efficient and effective discharge by the System of its
functions and have unduly hampered the System from being more responsive to the dramatic changes of the
times and from meeting the increasing needs and expectations of the Filipino public servant;
WHEREAS, provisions of existing laws that have prejudiced, rather than benefited, the government employee;
restricted, rather than broadened, his benefits, prolonged, rather than facilitated the payment of benefits, must
now yield to his paramount welfare;
WHEREAS, the social security and insurance benefits of government employees must be continuously reexamined and improved to assure comprehensive and integrated social security and insurance programs that
will provide benefits responsive to their needs and those of their dependents in the event of sickness,
disability, death, retirement, and other contingencies; and to serve as a fitting reward for dedicated public
service;
WHEREAS, in the light of existing economic conditions affecting the welfare of government employees, there
is a need to expand and improve the social security and insurance programs administered by the Government
Service Insurance System, specifically, among others, by increasing pension benefits, expanding disability
benefits, introducing survivorship benefits, introducing sickness and income benefits, and eventually extending
the compulsory coverage of these programs to all government employees regardless of employment status.
PD 1146 has the following purposes:
a. to preserve at all times the actuarial solvency of the funds administered by the System;
b. to guarantee to the government employee all the benefits due him; and
c. to expand, increase, and improve the social security and insurance benefits made available to
him and his dependents such as:
increasing pension benefits
expanding disability benefits
introducing survivorship benefits
introducing sickness income benefits
extending compulsory membership to all
government employees irrespective of status [25]
The law extends survivorship benefits to the surviving and qualified beneficiaries of the deceased
member or pensioner to cushion the beneficiaries against the adverse economic effects resulting from the
death of the wage earner or pensioner.[26]
Violation of the Equal Protection Clause

The surviving spouse of a government employee is entitled to receive survivors benefits under a
pension system. However, statutes sometimes require that the spouse should have married the employee for
a certain period before the employees death to prevent sham marriages contracted for monetary
gain. One example is the Illinois Pension Code which restricts survivors annuity benefits to a surviving spouse
who was married to a state employee for at least one year before the employees death. The Illinois pension
system classifies spouses into those married less than one year before a members death and those married
one year or more. The classification seeks to prevent conscious adverse risk selection of deathbed marriages
where a terminally ill member of the pension system marries another so that person becomes eligible for
benefits. In Sneddon v. The State Employees Retirement System of Illinois, [27] the Appellate Court of
Illinois held that such classification was based on difference in situation and circumstance, bore a rational
relation to the purpose of the statute, and was therefore not in violation of constitutional guarantees of due
process and equal protection.
A statute based on reasonable classification does not violate the constitutional guaranty of the equal
protection of the law.[28] The requirements for a valid and reasonable classification are: (1) it must rest on
substantial distinctions; (2) it must be germane to the purpose of the law; (3) it must not be limited to existing
conditions only; and (4) it must apply equally to all members of the same class. [29] Thus, the law may treat and
regulate one class differently from another class provided there are real and substantial differences to
distinguish one class from another.[30]
The proviso in question does not satisfy these requirements. The proviso discriminates against the
dependent spouse who contracts marriage to the pensioner within three years before the pensioner qualified
for the pension.[31] Under the proviso, even if the dependent spouse married the pensioner more than three
years before the pensioners death, the dependent spouse would still not receive survivorship pension if the
marriage took place within three years before the pensioner qualified for pension. The object of the prohibition
is vague. There is no reasonable connection between the means employed and the purpose intended. The
law itself does not provide any reason or purpose for such a prohibition. If the purpose of the proviso is to
prevent deathbed marriages, then we do not see why the proviso reckons the three-year prohibition from the
date the pensioner qualified for pension and not from the date the pensioner died. The classification does not
rest on substantial distinctions. Worse, the classification lumps all those marriages contracted within three
years before the pensioner qualified for pension as having been contracted primarily for financial convenience
to avail of pension benefits.
Indeed, the classification is discriminatory and arbitrary. This is probably the reason Congress deleted
the proviso in Republic Act No. 8291 (RA 8291), [32] otherwise known as the Government Service Insurance Act
of 1997, the law revising the old charter of GSIS (PD 1146). Under the implementing rules of RA 8291, the
surviving spouse who married the member immediately before the members death is still qualified to receive
survivorship pension unless the GSIS proves that the surviving spouse contracted the marriage solely to
receive the benefit.[33]
Thus, the present GSIS law does not presume that marriages contracted within three years before
retirement or death of a member are sham marriages contracted to avail of survivorship benefits. The present
GSIS law does not automatically forfeit the survivorship pension of the surviving spouse who contracted
marriage to a GSIS member within three years before the members retirement or death. The law
acknowledges that whether the surviving spouse contracted the marriage mainly to receive survivorship
benefits is a matter of evidence. The law no longer prescribes a sweeping classification that unduly prejudices
the legitimate surviving spouse and defeats the purpose for which Congress enacted the social legislation.
WHEREFORE, the petition is DENIED for want of merit. We declare VOID for being violative of the
constitutional guarantees of due process and equal protection of the law the proviso in Section 18 of
Presidential Decree No. 1146, which proviso states that the dependent spouse shall not be entitled to said
pension if his marriage with the pensioner is contracted within three years before the pensioner qualified for
the pension. The Government Service Insurance System cannot deny the claim of Milagros O. Montesclaros
for survivorship benefits based on this invalid proviso.
No pronouncement as to costs.
SO ORDERED.
Davide, Jr., C.J., Puno, Vitug, Panganiban, Quisumbing, Ynares-Santiago, Sandoval-Gutierrez, AustriaMartinez, Corona, Carpio-Morales, Callejo, Sr., Azcuna, and Tinga, JJ.,concur.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 158793
June 8, 2006
JAMES MIRASOL, RICHARD SANTIAGO, and LUZON MOTORCYCLISTS FEDERATION,
INC., Petitioners,
vs.
DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS and TOLL REGULATORY BOARD, Respondents.
DECISION

Page 49 of 66
CARPIO, J.:
This petition for review on certiorari1 seeks to reverse the Decision dated 10 March 2003 of the Regional Trial
Court, Branch 147, Makati City (RTC) in Civil Case No. 01-034, as well as the RTCs Order dated 16 June
2003 which denied petitioners Motion for Reconsideration. Petitioners assert that Department of Public Works
and Highways (DPWH) Department Order No. 74 (DO 74), Department Order No. 215 (DO 215), and the
Revised Rules and Regulations on Limited Access Facilities of the Toll Regulatory Board (TRB) violate
Republic Act No. 2000 (RA 2000) or the Limited Access Highway Act. Petitioners also seek to declare
Department Order No. 123 (DO 123) and Administrative Order No. 1 (AO 1) 2 unconstitutional.
Antecedent Facts
The facts are not in dispute. As summarized by the Solicitor General, the facts are as follows:
1. On January 10, 2001, petitioners filed before the trial court a Petition for Declaratory Judgment
with Application for Temporary Restraining Order and Injunction docketed as Civil Case No. 01034. The petition sought the declaration of nullity of the following administrative issuances for
being inconsistent with the provisions of Republic Act 2000, entitled "Limited Access Highway Act"
enacted in 1957:
a. DPWH Administrative Order No. 1, Series of 1968;
b. DPWH Department Order No. 74, Series of 1993;
c. Art. II, Sec. 3(a) of the Revised Rules on Limited Access Facilities promulgated in
199[8] by the DPWH thru the Toll Regulatory Board (TRB).
2. Previously, pursuant to its mandate under R.A. 2000, DPWH issued on June 25, 1998
Department Order (DO) No. 215 declaring the Manila-Cavite (Coastal Road) Toll Expressway as
limited access facilities.
3. Accordingly, petitioners filed an Amended Petition on February 8, 2001 wherein petitioners
sought the declaration of nullity of the aforesaid administrative issuances. Moreover, petitioners
prayed for the issuance of a temporary restraining order and/or preliminary injunction to prevent
the enforcement of the total ban on motorcycles along the entire breadth of North and South Luzon
Expressways and the Manila-Cavite (Coastal Road) Toll Expressway under DO 215.
4. On June 28, 2001, the trial court, thru then Presiding Judge Teofilo Guadiz, after due hearing,
issued an order granting petitioners application for preliminary injunction. On July 16, 2001, a writ
of preliminary injunction was issued by the trial court, conditioned upon petitioners filing of cash
bond in the amount ofP100,000.00, which petitioners subsequently complied with.
5. On July 18, 2001, the DPWH acting thru the TRB, issued Department Order No. 123 allowing
motorcycles with engine displacement of 400 cubic centimeters inside limited access facilities (toll
ways).
6. Upon the assumption of Honorable Presiding Judge Ma. Cristina Cornejo, both the petitioners
and respondents were required to file their respective Memoranda. Petitioners likewise filed [their]
Supplemental Memorandum. Thereafter, the case was deemed submitted for decision.
7. Consequently, on March 10, 2003, the trial court issued the assailed decision dismissing the
petition but declaring invalid DO 123. Petitioners moved for a reconsideration of the dismissal of
their petition; but it was denied by the trial court in its Order dated June 16, 2003. 3
Hence, this petition.
The RTCs Ruling
The dispositive portion of the RTCs Decision dated 10 March 2003 reads:
WHEREFORE, [t]he Petition is denied/dismissed insofar as petitioners seek to declare null and void ab initio
DPWH Department Order No. 74, Series of 1993, Administrative Order No. 1, and Art. II, Sec. 3(a) of the
Revised Rules on Limited Access Facilities promulgated by the DPWH thru the TRB, the presumed validity
thereof not having been overcome; but the petition is granted insofar as DPWH Department Order No. 123 is
concerned, declaring the same to be invalid for being violative of the equal protection clause of the
Constitution.
SO ORDERED.4
The Issues
Petitioners seek a reversal and raise the following issues for resolution:
1. WHETHER THE RTCS DECISION IS ALREADY BARRED BY RES JUDICATA;
2. WHETHER DO 74, DO 215 AND THE TRB REGULATIONS CONTRAVENE RA 2000; AND
3. WHETHER AO 1 AND DO 123 ARE UNCONSTITUTIONAL.5
The Ruling of the Court
The petition is partly meritorious.
Whether the RTCs Decision Dismissing Petitioners Case is Barred by Res Judicata
Petitioners rely on the RTCs Order dated 28 June 2001, which granted their prayer for a writ of preliminary
injunction. Since respondents did not appeal from that Order, petitioners argue that the Order became "a final
judgment" on the issues. Petitioners conclude that the RTC erred when it subsequently dismissed their petition
in its Decision dated 10 March 2003.

Petitioners are mistaken. As the RTC correctly stated, the Order dated 28 June 2001 was not an adjudication
on the merits of the case that would trigger res judicata. A preliminary injunction does not serve as a final
determination of the issues. It is a provisional remedy, which merely serves to preserve the status quo until the
court could hear the merits of the case.6 Thus, Section 9 of Rule 58 of the 1997 Rules of Civil Procedure
requires the issuance of a final injunction to confirm the preliminary injunction should the court during trial
determine that the acts complained of deserve to be permanently enjoined. A preliminary injunction is a mere
adjunct, an ancillary remedy which exists only as an incident of the main proceeding. 7
Validity of DO 74, DO 215 and the TRB Regulations
Petitioners claim that DO 74,8 DO 215,9 and the TRBs Rules and Regulations issued under them violate the
provisions of RA 2000. They contend that the two issuances unduly expanded the power of the DPWH in
Section 4 of RA 2000 to regulate toll ways. Petitioners assert that the DPWHs regulatory authority is limited to
acts like redesigning curbings or central dividing sections. They claim that the DPWH is only allowed to redesign the physical structure of toll ways, and not to determine "who or what can be qualified as toll way
users."10
Section 4 of RA 200011 reads:
SEC. 4. Design of limited access facility. The Department of Public Works and Communications is
authorized to so design any limited access facility and to so regulate, restrict, or prohibit access as to
best serve the traffic for which such facility is intended; and its determination of such design shall be final.
In this connection, it is authorized to divide and separate any limited access facility into separate roadways by
the construction of raised curbings, central dividing sections, or other physical separations, or by designating
such separate roadways by signs, markers, stripes, and the proper lane for such traffic by appropriate signs,
markers, stripes and other devices. No person, shall have any right of ingress or egress to, from or across
limited access facilities to or from abutting lands, except at such designated points at which access may be
permitted, upon such terms and conditions as may be specified from time to time. (Emphasis supplied)
On 19 February 1968, Secretary Antonio V. Raquiza of the Department of Public Works and
Communicationsissued AO 1, which, among others, prohibited motorcycles on limited access highways. The
pertinent provisions of AO 1 read:
SUBJECT: Revised Rules and Regulations Governing Limited Access Highways
By virtue of the authority granted the Secretary [of] Public Works and Communications under Section
3 of R.A. 2000, otherwise known as the Limited Access Highway Act, the following rules and regulations
governing limited access highways are hereby promulgated for the guidance of all concerned:
xxxx
Section 3 On limited access highways, it is unlawful for any person or group of persons to:
xxxx
(h) Drive any bicycle, tricycle, pedicab, motorcycle or any vehicle (not motorized);
x x x x12 (Emphasis supplied)
On 5 April 1993, Acting Secretary Edmundo V. Mir of the Department of Public Works and Highways issued
DO 74:
SUBJECT: Declaration of the North Luzon Expressway from Balintawak to Tabang and the South Luzon
Expressway from Nichols to Alabang as Limited Access Facilities
Pursuant to Section 2 of Republic Act No. 2000, a limited access facility is defined as "a highway or street
especially designed for through traffic, and over, from, or to which owners or occupants of abutting land or
other persons have no right or easement or only a limited right or easement of access, light, air or view by
reason of the fact that their proper[t]y abuts upon such limited access facility or for any other reason. Such
highways or streets may be parkways, from which trucks, buses, and other commerical [sic] vehicles shall be
excluded; or they may be free ways open to use by all customary forms of street and highway traffic."
Section 3 of the same Act authorizes the Department of Public Works and Communications (now Department
of Public Works and Highways) "to plan, designate, establish, regulate, vacate, alter, improve, maintain, and
provide limited access facilities for public use wherever it is of the opinion that traffic conditions, present or
future, will justify such special facilities."
Therefore, by virtue of the authority granted above, the Department of Public Works and Highways hereby
designates and declares the Balintawak to Tabang Sections of the North Luzon Expressway, and the Nichols
to Alabang Sections of the South Luzon Expressways, to be LIMITED ACCESS HIGHWAYS/FACILITIES
subject to such rules and regulations that may be imposed by the DPWH thru the Toll Regulatory Board (TRB).
In view thereof, the National Capital Region (NCR) of this Department is hereby ordered, after consultation
with the TRB and in coordination with the Philippine National Police (PNP), to close all illegal openings along
the said Limited Access Highways/Facilities. In this connection, the NCR is instructed to organize its own
enforcement and security group for the purpose of assuring the continued closure of the right-of-way fences
and the implementation of the rules and regulations that may be imposed by the DPWH thru the TRB.
This Order shall take effect immediately.13
On 25 June 1998, then DPWH Secretary Gregorio R. Vigilar issued DO 215:
SUBJECT: Declaration of the R-1 Expressway, from Seaside drive to Zapote, C-5 Link Expressway, from
Zapote to Noveleta, of the Manila Cavite Toll Expressway as Limited Access Facility.

Page 50 of 66
Pursuant to Section 2 of Republic Act No. 2000, a limited access facility is defined as "a highway or street
especially designed for through traffic, and over, from, or to which owners or occupants of abutting land or
other persons have no right or easement or only a limited right or easement of access, light, air or view by
reason of the fact that their property abuts upon such limited access facility or for any other reason. Such
highways or streets may be parkways, from which trucks, buses, and other commercial vehicles shall be
excluded; or they may be free ways open to use by all customary forms of street and highway traffic."
Section 3 of the same Act authorizes the Department of Public Works and Communications (now Department
of Public Works and Highways) "to plan, designate, establish, regulate, vacate, alter, improve, maintain, and
provide limited access facilities for public use wherever it is of the opinion that traffic conditions, present or
future, will justify such special facilities."
Therefore, by virtue of the authority granted above, the Department of Public Works and Highways hereby
designates and declares the R-1 Expressway, C-5 Link Expressway and the R-1 Extension Expressway
Sections of the Manila Cavite Toll Expressway to be LIMITED ACCESS HIGHWAYS/FACILITIES subject to
such rules and regulations that may be imposed by the DPWH thru the Toll Regulatory Board (TRB).
In view thereof, the National Capital Region (NCR) of this Department is hereby ordered, after consultation
with the TRB and in coordination with the Philippine National Police (PNP), to close all illegal openings along
the said Limited Access Highways/Facilities. In this connection, the NCR is instructed to organize its own
enforcement and security group for the purpose of assuring the continued closure of the right-of-way fences
and the implementation of the rules and regulations that may be imposed by the DPWH thru the TRB.
This Order shall take effect immediately.14
The RTC held that Section 4 of RA 2000 expressly authorized the DPWH to design limited access facilities
and to regulate, restrict, or prohibit access as to serve the traffic for which such facilities are intended.
According to the RTC, such authority to regulate, restrict, or prohibit logically includes the determination of
who and what can and cannot be permitted entry or access into the limited access facilities. Thus, the RTC
concluded that AO 1, DO 74, and the Revised Rules and Regulations on Limited Access Facilities, which ban
motorcycles entry or access to the limited access facilities, are not inconsistent with RA 2000.
RA 2000, otherwise known as the Limited Access Highway Act, was approved on 22 June 1957. Section 4 of
RA 2000 provides that "[t]he Department of Public Works and Communications is authorized to so design
any limited access facility and to so regulate, restrict, or prohibit access as to best serve the traffic for which
such facility is intended." The RTC construed this authorization to regulate, restrict, or prohibit access to
limited access facilities to apply to the Department of Public Works and Highways (DPWH).
The RTCs ruling is based on a wrong premise. The RTC assumed that the DPWH derived its authority from
its predecessor, the Department of Public Works and Communications, which is expressly authorized to
regulate, restrict, or prohibit access to limited access facilities under Section 4 of RA 2000. However, such
assumption fails to consider the evolution of the Department of Public Works and Communications.
Under Act No. 2711, otherwise known as the Revised Administrative Code, approved on 10 March 1917, there
were only seven executive departments, namely: the Department of the Interior, the Department of Finance,
the Department of Justice, the Department of Agriculture and Commerce, the Department of Public Works
and Communications, the Department of Public Instruction, and the Department of Labor.15 On 20 June
1964, Republic Act No. 413616 created the Land Transportation Commission under the Department of Public
Works and Communications. Later, the Department of Public Works and Communications was restructured
into theDepartment of Public Works, Transportation and Communications.
On 16 May 1974, Presidential Decree No. 458 (PD 458) separated the Bureau of Public Highways from the
Department of Public Works, Transportation and Communications and created it as a department to be known
as Department of Public Highways. Under Section 3 of PD 458, the Department of Public Highways is
"responsible for developing and implementing programs on the construction and maintenance of roads,
bridges and airport runways."
With the amendment of the 1973 Philippine Constitution in 1976, resulting in the shift in the form of
government, national agencies were renamed from Departments to Ministries. Thus, the Department of Public
Works, Transportation and Communications became the Ministry of Public Works, Transportation and
Communications.
On 23 July 1979, then President Ferdinand E. Marcos issued Executive Order No. 546 (EO 546), creating
aMinistry of Public Works and a Ministry of Transportation and Communications.17 Under Section 1 of
EO 546, the Ministry of Public Works assumed the public works functions of the Ministry of Public Works,
Transportation and Communications. The functions of the Ministry of Public Works were the
"construction, maintenance and repair of port works, harbor facilities, lighthouses, navigational aids, shore
protection works, airport buildings and associated facilities, public buildings and school buildings, monuments
and other related structures, as well as undertaking harbor and river dredging works, reclamation of foreshore
and swampland areas, water supply, and flood control and drainage works." 18
On the other hand, the Ministry of Transportation and Communications became the "primary policy,
planning, programming, coordinating, implementing, regulating and administrative entity of the executive
branch of the government in the promotion, development, and regulation of a dependable and coordinated

network of transportation and communication systems." 19 The functions of the Ministry of Transportation
and Communications were:
a. Coordinate and supervise all activities of the Ministry relative to transportation and
communications;
b. Formulate and recommend national policies and guidelines for the preparation and
implementation of an integrated and comprehensive transportation and communications
system at the national, regional and local levels;
c. Establish and administer comprehensive and integrated programs for transportation and
communication, and for this purpose, may call on any agency, corporation, or organization,
whether government or private, whose development programs include transportation and
communications as an integral part to participate and assist in the preparation and implementation
of such programs;
d. Regulate, whenever necessary, activities relative to transportation and communications
and prescribe and collect fees in the exercise of such power;
e. Assess, review and provide direction to transportation and communications research and
development programs of the government in coordination with other institutions concerned; and
f. Perform such other functions as may be necessary to carry into effect the provisions of this
Executive Order.20 (Emphasis supplied)
On 27 July 1981, then President Marcos issued Executive Order No. 710 (EO 710), which merged the Ministry
of Public Works and the Ministry of Public Highways for "greater simplicity and economy in operations." 21 The
restructured agency became known as the Ministry of Public Works and Highways. Under Section 1 of EO
710 the functions of the Ministry of Public Works and the Ministry of Public Highways 22 were transferred to the
Ministry of Public Works and Highways.
Upon the ratification of the 1987 Constitution in February 1987, the former Ministry of Public Works and
Highways became the Department of Public Works and Highways (DPWH) and the former Ministry of
Transportation and Communications became the Department of Transportation and Communications
(DOTC).
DPWH issued DO 74 and DO 215 declaring certain expressways as limited access facilities on 5 April 1993
and 25 June 1998, respectively. Later, the TRB, under the DPWH, issued the Revised Rules and Regulations
on Limited Access Facilities. However, on 23 July 1979, long before these department orders and regulations
were issued, the Ministry of Public Works, Transportation and Communications was divided into two
agencies theMinistry of Public Works and the Ministry of Transportation and Communications by
virtue of EO 546. The question is, which of these two agencies is now authorized to regulate, restrict, or
prohibit access to limited access facilities?23
Under Section 1 of EO 546, the Ministry of Public Works (now DPWH) assumed the public works functions
of theMinistry of Public Works, Transportation and Communications. On the other hand, among the
functions of theMinistry of Transportation and Communications (now Department of Transportation and
Communications [DOTC]) were to (1) formulate and recommend national policies and guidelines for the
preparation and implementation of an integrated and comprehensive transportation and communications
systems at the national, regional, and local levels; and (2) regulate, whenever necessary, activities relative to
transportation and communications and prescribe and collect fees in the exercise of such power. Clearly,
under EO 546, it is the DOTC, not the DPWH, which has authority to regulate, restrict, or prohibit access to
limited access facilities.
Even under Executive Order No. 125 (EO 125)24 and Executive Order No. 125-A (EO 125-A),25 which further
reorganized the DOTC, the authority to administer and enforce all laws, rules and regulations relative to
transportation is clearly with the DOTC. 26
Thus, DO 74 and DO 215 are void because the DPWH has no authority to declare certain expressways as
limited access facilities. Under the law, it is the DOTC which is authorized to administer and enforce all laws,
rules and regulations in the field of transportation and to regulate related activities.
Since the DPWH has no authority to regulate activities relative to transportation, the TRB 27 cannot derive its
power from the DPWH to issue regulations governing limited access facilities. The DPWH cannot delegate a
power or function which it does not possess in the first place. Since DO 74 and DO 215 are void, it follows that
the rules implementing them are likewise void.
Whether AO 1 and DO 123 are Unconstitutional
DPWH Secretary Simeon A. Datumanong issued DO 123 on 18 July 2001. DO 123 reads in part:
SUBJECT: Revised Rules and Regulations Governing Limited Access Highways
By virtue of the authority granted the Secretary of Public Works and Highways under Section 3 of R.A.
2000, otherwise known as the Limited Access Highway Act, the following revised rules and regulations
governing limited access highways are hereby promulgated for the guidance of all concerned:
1. Administrative Order No. 1 dated February 19, 1968, issued by the Secretary of the then Department of
Public Works and Communications, is hereby amended by deleting the word "motorcycles" mentioned in
Section 3(h) thereof. Therefore, motorcycles are hereby allowed to operate inside the toll roads and
limited access highways, subject to the following:

Page 51 of 66
a. Motorcycles shall have an engine displacement of at least 400 cubic centimeters (cc) provided that:
x x x x28 (Emphasis supplied)
The RTCs Decision dated 10 March 2003 declared DO 123 unconstitutional on the ground that it violates the
equal protection clause by allowing only motorcycles with at least 400 cubic centimeters engine displacement
to use the toll ways. The RTC reasoned that the creation of a distinction within the class of motorcycles was
not based on real differences.
We need not pass upon the constitutionality of the classification of motorcycles under DO 123. As previously
discussed, the DPWH has no authority to regulate limited access highways since EO 546 has devolved this
function to the DOTC. Thus, DO 123 is void for want of authority of the DPWH to promulgate it.
On the other hand, the assailed portion of AO 1 states:
Section 3. On limited access highways, it is unlawful for any person or group of persons to:
xxxx
(h) Drive any bicycle, tricycle, pedicab, motorcycle or any vehicle (not motorized);
xxxx
Petitioners assail the DPWHs failure to provide "scientific" and "objective" data on the danger of having
motorcycles plying our highways. They attack this exercise of police power as baseless and unwarranted.
Petitioners belabor the fact that there are studies that provide proof that motorcycles are safe modes of
transport. They also claim that AO 1 introduces an unreasonable classification by singling-out motorcycles
from other motorized modes of transport. Finally, petitioners argue that AO 1 violates their right to travel.
Petitioners arguments do not convince us.
We emphasize that the Secretary of the Department of Public Works and Communications issued AO 1
on 19 February 1968.
Section 3 of RA 200029 authorized the issuance of the guidelines. In contrast, DPWH issued DO 74, DO 215
and DO 123 after EO 546 devolved to the DOTC the authority to regulate limited access highways.
We now discuss the constitutionality of AO 1. Administrative issuances have the force and effect of law. 30 They
benefit from the same presumption of validity and constitutionality enjoyed by statutes. 31 These two precepts
place a heavy burden upon any party assailing governmental regulations. The burden of proving
unconstitutionality rests on such party.32 The burden becomes heavier when the police power is at issue.
The use of public highways by motor vehicles is subject to regulation as an exercise of the police power of the
state.33 The police power is far-reaching in scope and is the "most essential, insistent and illimitable" of all
government powers.34 The tendency is to extend rather than to restrict the use of police power. The sole
standard in measuring its exercise is reasonableness.35 What is "reasonable" is not subject to exact definition
or scientific formulation. No all-embracing test of reasonableness exists, 36 for its determination rests upon
human judgment applied to the facts and circumstances of each particular case. 37
We find that AO 1 does not impose unreasonable restrictions. It merely outlines several precautionary
measures, to which toll way users must adhere. These rules were designed to ensure public safety and the
uninhibited flow of traffic within limited access facilities. They cover several subjects, from what lanes should
be used by a certain vehicle, to maximum vehicle height. The prohibition of certain types of vehicles is but one
of these. None of these rules violates reason. The purpose of these rules and the logic behind them are quite
evident. A toll way is not an ordinary road. The special purpose for which a toll way is constructed necessitates
the imposition of guidelines in the manner of its use and operation. Inevitably, such rules will restrict certain
rights. But the mere fact that certain rights are restricted does not invalidate the rules.
Consider Section 3(g) of AO 1, which prohibits the conduct of rallies inside toll ways. 38 The regulation affects
the right to peaceably assemble. The exercise of police power involves restriction, restriction being implicit in
the power itself. Thus, the test of constitutionality of a police power measure is limited to an inquiry on whether
the restriction imposed on constitutional rights is reasonable, and not whether it imposes a restriction on those
rights.
None of the rules outlined in AO 1 strikes us as arbitrary and capricious. The DPWH, through the Solicitor
General, maintains that the toll ways were not designed to accommodate motorcycles and that their presence
in the toll ways will compromise safety and traffic considerations. The DPWH points out that the same study
the petitioners rely on cites that the inability of other drivers to detect motorcycles is the predominant cause of
accidents.39Arguably, prohibiting the use of motorcycles in toll ways may not be the "best" measure to ensure
the safety and comfort of those who ply the toll ways.
However, the means by which the government chooses to act is not judged in terms of what is "best," rather,
on simply whether the act is reasonable. The validity of a police power measure does not depend upon the
absolute assurance that the purpose desired can in fact be probably fully accomplished, or upon the certainty
that it will best serve the purpose intended. 40 Reason, not scientific exactitude, is the measure of the validity of
the governmental regulation. Arguments based on what is "best" are arguments reserved for the Legislatures
discussion. Judicial intervention in such matters will only be warranted if the assailed regulation is patently
whimsical. We do not find the situation in this case to be so.
Neither do we find AO 1 oppressive. Petitioners are not being deprived of their right to use the limited access
facility. They are merely being required, just like the rest of the public, to adhere to the rules on how to use the

facility. AO 1 does not infringe upon petitioners right to travel but merely bars motorcycles, bicycles, tricycles,
pedicabs, and any nonmotorized vehicles as the mode of traveling along limited access highways. 41 Several cheap, accessible and
practical alternative modes of transport are open to petitioners. There is nothing oppressive in being required
to take a bus or drive a car instead of ones scooter, bicycle, calesa, or motorcycle upon using a toll way.
Petitioners reliance on the studies they gathered is misplaced. Police power does not rely upon the existence
of definitive studies to support its use. Indeed, no requirement exists that the exercise of police power must
first be conclusively justified by research. The yardstick has always been simply whether the governments act
is reasonable and not oppressive. 42 The use of "reason" in this sense is simply meant to guard against
arbitrary and capricious government action. Scientific certainty and conclusiveness, though desirable, may not
be demanded in every situation. Otherwise, no government will be able to act in situations demanding the
exercise of its residual powers because it will be tied up conducting studies.
A police power measure may be assailed upon proof that it unduly violates constitutional limitations like due
process and equal protection of the law.43 Petitioners attempt to seek redress from the motorcycle ban under
the aegis of equal protection must fail. Petitioners contention that AO 1 unreasonably singles out motorcycles
is specious. To begin with, classification by itself is not prohibited. 44
A classification can only be assailed if it is deemed invidious, that is, it is not based on real or substantial
differences. As explained by Chief Justice Fernando in Bautista v. Juinio:45
x x x To assure that the general welfare be promoted, which is the end of law, a regulatory measure may cut
into the rights to liberty and property. Those adversely affected may under such circumstances invoked the
equal protection clause only if they can show that the governmental act assailed, far from being inspired by the
attainment of the common weal was prompted by the spirit of hostility, or at the very least, discrimination that
finds no support in reason. It suffices then that the laws operate equally and uniformly on all persons under
similar circumstances or that all persons must be treated in the same manner, the conditions not being
different, both in the privileges conferred and the liabilities imposed. Favoritism and undue preference cannot
be allowed. For the principle is that equal protection and security shall be given to every person under
circumstances, which if not identical is analogous. If law be looked upon in terms of burden or charges, those
that fall within a class should be treated in the same fashion, whatever restrictions cast on some in the group
equally binding the rest.
We find that it is neither warranted nor reasonable for petitioners to say that the only justifiable classification
among modes of transport is the motorized against the non-motorized. Not all motorized vehicles are created
equal. A 16-wheeler truck is substantially different from other light vehicles. The first may be denied access to
some roads where the latter are free to drive. Old vehicles may be reasonably differentiated from newer
models.46 We find that real and substantial differences exist between a motorcycle and other forms of transport
sufficient to justify its classification among those prohibited from plying the toll ways. Amongst all types of
motorized transport, it is obvious, even to a child, that a motorcycle is quite different from a car, a bus or a
truck. The most obvious and troubling difference would be that a two-wheeled vehicle is less stable and more
easily overturned than a four-wheeled vehicle.
A classification based on practical convenience and common knowledge is not unconstitutional simply
because it may lack purely theoretical or scientific uniformity. Moreover, we take note that the Philippines is
home to a host of unique motorized modes of transport ranging from modified hand-carts (kuliglig) to bicycle
"sidecars" outfitted with a motor. To follow petitioners argument to its logical conclusion would open up toll
ways to all these contraptions. Both safety and traffic considerations militate against any ruling that would
bring about such a nightmare.
Petitioners complain that the prohibition on the use of motorcycles in toll ways unduly deprive them of their
right to travel.
We are not persuaded.
A toll way is not an ordinary road. As a facility designed to promote the fastest access to certain destinations,
its use, operation, and maintenance require close regulation. Public interest and safety require the imposition
of certain restrictions on toll ways that do not apply to ordinary roads. As a special kind of road, it is but
reasonable that not all forms of transport could use it.
The right to travel does not mean the right to choose any vehicle in traversing a toll way. The right to travel
refers to the right to move from one place to another. Petitioners can traverse the toll way any time they
choose using private or public four-wheeled vehicles. Petitioners are not denied the right to move from Point A
to Point B along the toll way. Petitioners are free to access the toll way, much as the rest of the public can. The
mode by which petitioners wish to travel pertains to the manner of using the toll way, a subject that can be
validly limited by regulation.
Petitioners themselves admit that alternative routes are available to them. Their complaint is that these routes
are not the safest and most convenient. Even if their claim is true, it hardly qualifies as an undue curtailment of
their freedom of movement and travel. The right to travel does not entitle a person to the best form of transport
or to the most convenient route to his destination. The obstructions found in normal streets, which petitioners
complain of (i.e., potholes, manholes, construction barriers, etc.), are not suffered by them alone.

Page 52 of 66
Finally, petitioners assert that their possession of a drivers license from the Land Transportation Office (LTO)
and the fact that their vehicles are registered with that office entitle them to use all kinds of roads in the
country. Again, petitioners are mistaken. There exists no absolute right to drive. On the contrary, this privilege,
is heavily regulated. Only a qualified group is allowed to drive motor vehicles: those who pass the tests
administered by the LTO. A drivers license issued by the LTO merely allows one to drive a particular mode of
transport. It is not a license to drive or operate any form of transportation on any type of road. Vehicle
registration in the LTO on the other hand merely signifies the roadworthiness of a vehicle. This does not
preclude the government from prescribing which roads are accessible to certain vehicles.
WHEREFORE, we PARTLY GRANT the petition. We MODIFY the Decision dated 10 March 2003 of the
Regional Trial Court, Branch 147, Makati City and its Order dated 16 June 2003 in Civil Case No. 01-034. We
declare VOIDDepartment Order Nos. 74, 215, and 123 of the Department of Public Works and Highways, and
the Revised Rules and Regulations on Limited Access Facilities of the Toll Regulatory Board. We
declare VALID Administrative Order No. 1 of the Department of Public Works and Communications.
SO ORDERED.

Page 53 of 66
DELFIN ESPINOCILLA, JR., JOSEFINA ALCID, ROSITA
PALOMER, HENRY ASEJO, JAIME DIAZ, MARTIN BALIGUAS,
BELEN PEREZ, JOAN BONCALES, IMELDA GOGOLIN,
VICTOR RAON, LILIA GIL, NERISSA JAYUMA, SILVESTRE
AALA, NIDA URBANO, SUSANA NERI, GAVINA COLINDO,
CONSTANTINO MURALLO, JULIE GOGOLIN, RICARDO
BENABISE, CORAZON ORCOSE AND NARLITO GUTIERRES,
Petitioners,

G.R. No. 151019

DECISION

Present:
CARPIO MORALES, J.:
QUISUMBING, J., Chairperson,
CARPIO,
CARPIO MORALES,
TINGA, and
VELASCO, JR., JJ.

- versus BAGONG TANYAG HOMEOWNERS ASSOCIATION, INC.,


REMEDIOS BICO, ALFONSO IGNACIO, GLORIA MISTERIO,
SALVACION PORAS, RHOBBY ACOSTA, ADELA GIRAY,
EDMON BANSE, VIOLETA ALBA, SOFRANIO MANGAMPO,
NAVARRO ABBARIENTOS, ZACARIAS ARZAGA, RODRIGO
PICART, and LIVINO TORINO,
Respondents.

Respondent corporation, the Bagong Tanyag Homeowners Association, Inc. (BATAHAI), was in
1989 incorporated to enable the occupants of the land owned by Fortune Development Corporation, Guillermo
Tantuco, and Daniel Ignacio and located in Bagong Tanyag, Taguig to purchase the respective lots they were
occupying under the Community Mortgage Program (CMP) of the National Home Mortgage Finance
Corporation (NHMFC).
Respondents Remedios Bico, Alfonso Ignacio, Gloria Misterio, Salvacion Poras, Rhobby Acosta,
Adela Giray, Edmon Banse, Violeta Alba, Sofranio Mangampo, Navarro Abbarientos, Zacarias Arzaga, Rodrigo
Picart, and Livino Torino were, at the time material to the case, officers and directors of BATAHAI, while
petitioners were former members thereof.
Under the CMP, BATAHAI could obtain a loan from NHMFC to purchase the land from its owners
and subdivide it among its member-beneficiaries, subject to the supervision and guidance of the National
Housing Administration (NHA).[1] In turn, each member-beneficiary would pay amortizations of the loan to
BATAHAI.
The BATAHAI Code of Policies (the Code) named as first priority beneficiaries the owners of houses
or structures that were part of the census survey conducted in October 1984 in Bagong Tanyag and who were
members of BATAHAI.
The Code named as second priority beneficiaries members of BATAHAI who were part of the
census survey as lessees or rent-free occupants (nangungupahan na may bayad, nakikitira, o nakikisama) of
houses or structures in Bagong Tanyag.

Promulgated:
August 9, 2007

Under the Code, each beneficiary is entitled to only one lot, [2] that on which his or her house or
structure stands, structure and house being defined as follows:
1.
2.

ESTRAKTURA pasilidad na ginawa para sa kanlungan at tirahan ng tao,


kasama ang palikuran.
BAHAY isang parisukat na kabahayan na tinitirahan ng namamahay.[3]

Petitioners, however, wanted to claim the vacant lots adjacent to theirs on which vacant lots they
planted crops or put up fences and other improvements. [4]
On December 15, 1989, BATAHAI, in a Pahayag, required its members to submit the following
documents required by the NHMFC:
A.

Para sa mga empleyado (may pormal na hanapbuhay)


1.
Certificate of Employment and Compensation (CEC)
2.
Income Tax Returns para sa taong 1988
3.
Residence Certificate or Sedula (1990)
4.
Policy contract para sa mga miyembro ng GSIS/Certificate of
Remittances (sa loob ng 12 buwan) at xerox copy ng ID para
sa miyembro ng GSIS
5.
Marriage Contract

B.

Para sa mga self-employed (tindera, labandera, driver, negosyante,


atbp.)
1.
Affidavit of Income
2.
Residence Certificate o sedula (1990)
3.
Marriage Contract[5]

In the meantime, a geodetic engineer, assisted by respondents, conducted a structural survey of


the houses or structures in Bagong Tanyag to determine the actual lot sizes as well as the rightful owners of

Page 54 of 66
houses or structures standing thereon. Lots on which no houses or structures were built were considered open
areas available for distribution to secondary beneficiaries.

HIGC Appeals Board and the Court of Appeals thereby causing denial of due
process.[21]

Following the conduct of the structural survey, it was recommended that some houses or
structures would be relocated to make way for the construction of roads under a schematic plan selected by a
majority of the BATAHAI members.[6]

The petition fails.

Petitioners, who had laid claim on vacant lots beside those they were occupying, objected to the
reduction of the number of lots they were applying for, rejected the option of assigning the adjacent vacant lots
to their nearest relatives, and refused to submit the documents-requirements of the NHMFC.
From the March 16, 1990 Pahayag issued by the NHA, only 30% of the BATAHAI members had,
as of said date, submitted complete documents. It gave 15 days for the rest of the members to comply with the
requirements of the NHMFC, with the caveat that the NHMFC would not release the proceeds of the loan if all
requirements were not complied with.

The resolution of the petition hinges on a determination of whether petitioners were deprived of
property without due process of law.
The essence of due process is the opportunity to be heard. What the law prohibits is not the
absence of previous notice but the absolute absence thereof and the lack of opportunity to be heard. [22]

[7]

On March 15, 1991, a Pahayag was posted containing the list of BATAHAI members who had not
complied with the NHMFC requirements, and calling for compliance therewith. [8]
On November 25, 1991, respondents issued a list of prospective CMP beneficiaries. [9] The
BATAHAI members who did not comply with the requirements were delisted. To afford the delisted members a
chance to benefit from the CMP, however, respondents set new deadlines for compliance with the
requirements[10] and sent petitioners individual letters demanding compliance therewith, failing which they
would be deemed to have lacked interest to thereby forfeit their rights as beneficiaries of the CMP.[11]
NHA personnel in fact visited recalcitrant BATAHAI members, reminding them to comply with the
requirements.[12]
Respondents later issued Resolution No. 24 on April 20, 1992 declaring that the lots occupied by
the recalcitrant members would be shared among the other BATAHAI members and that the vacant lots would
be raffled off to the second priority beneficiaries.[13]
Petitioners were thus prompted to file on February 4, 1993 a complaint before the Home Insurance
and Guaranty Corporation (HIGC), docketed as HIGC Case No. HOA-93-004, for reinstatement and
declaration of nullity of actions by the defendants-herein respondents. [14]

The records of the case show that petitioners had had more than sufficient notice and opportunity to
be heard before they were delisted as prospective beneficiaries.
Before respondents issued the questioned November 25, 1991 list of prospective beneficiaries,
sufficient notices were posted informing petitioners of the need to submit the documents required by the
NHMFC.
Even after petitioners were delisted as beneficiaries, respondents set new deadlines for petitioners
to submit the requirements, sending each of them letters reminding them of the consequences of noncompliance therewith.
Petitioners argue, however, that the HIGC Hearing Officer found that they showed their consistent
interest to acquire the lots and pay the cost of acquisition to BATAHAI as soon as the re-subdivided
lots be reverted to their original sizes.[23] They add that the BATAHAI should have created an Arbitration
Committee and that the NHMFC should have organized an Adjudication Committee according to the amended
by-laws of BATAHAI and the associations Code, which bodies should have heard their grievances to afford
them due process.
Petitioners arguments fail.
First, the structural survey which triggered the controversy did not subdivide petitioners lots. By
petitioner Delfin Espinocillas admission before the HIGC Hearing Committee, the purpose of the structural
survey was to identify the actual structures owned by Bagong Tanyag settlers:

In their complaint, petitioners alleged that respondents subdivided the lots which they have been
occupying since 1978 without their knowledge and consent, reassigned the lots without observing due process
of law, omitted or deleted their names from the January 3, 1993 certified list of prospective beneficiaries, and
unlawfully replaced three BATAHAI directors.

Q [Atty. Almo]: As a member of the BATAHAI, were you aware of any activities that
the officers of the BATAHAI undertake [sic] in order that your
occupancy of the lot may be properly known?
A [Delfin Espinocilla]: Yes sir.

By Decision[15] of February 6, 1995, Hearing Officer Roberto C. Abrajano of the HIGC held that by
deleting petitioners names from the master list of beneficiaries and reassigning the lots they occupied to others,
respondents deprived them of their property without due process of law.[16]

Q: What is this action does [sic] the BATAHAI undertake?


A: The structural survey submitted in April 1990 executed by Engineer Ponciano
Miranda.
Q: When you said structural survey, what does this survey referred [sic] to?
A: Respective structural houses of the individual claimant.

On appeal, the HIGC Appeals Board reversed the hearing officers findings and declared valid the
acts of respondents.[17]

xxxx
The Court of Appeals affirmed the findings of the HIGC Appeals Board. [18] Hence, the present
Petition for Review[19] which faults the appellate court
. . . in not declaring the act of the respondents as contrary to the express mandate
of Article XIII, Section 9 and 10 of the 1987 Constitution of the Philippines and the
laws passed in relation thereto, particularly Republic Act No. 7279 [20] [and]
. . . in completely ignoring the findings of fact of the HIGC Hearing
Officer to the effect that respondents failed to create and organize the required
Arbitration Committee, as well as the Final Arbitration Committee (Adjudication
Committee) which is the final arbiter of all disputes and controversies in the
allocation of lots within the area of the CMP which issue was constantly raised by
the petitioners in all stages by the proceedings but which was avoided by the

Q: What does this structural plan refer to?


A: To distinguished [sic] the actual structure of the respective beneficiaries sir.
Q: Will you be able to tell this Honorable Office about the particular purpose of this
structural plan?
A: Para malaman ang structure ng mga bahay diyan sa BATAHAI at para
mabilang ang mga structure na sinasabi.
Hearing Officer:
So you mean if there is the existing house, it shall be included in the
structural plan?
A: Yes sir.
Hearing Officer:

Page 55 of 66
So if you have no structure, you will not be included in the structural
survey?
A: Yes sir. (Italics and underscoring supplied)
[24]

Second, the records of the case show that petitioners were afforded the opportunity to be heard on
the alleged subdivision of their lots. Thus they brought up their concerns to the Office of the President which,
in turn, referred the same to the NHA which passed upon them. [25]
At all events, the due process guarantee cannot be invoked when no vested right has been
acquired.[26] The period during which petitioners occupied the lots, no matter how long, [27] did not vest them
with any right to claim ownership since it is a fundamental principle of law that acts of possessory character
executed by virtue of license or tolerance of the owner, no matter how long, do not start the running of the
period of acquisitive prescription.[28] It bears recalling that BATAHAI was formed precisely to enable the
Bagong Tanyag settlers, including petitioners, to purchase the lots they were occupying.
Petitioners nevertheless invoke the following social justice provisions of the Constitution:
Article XIII.
xxxx
Section 9. The State shall, by law, and for the common good,
undertake, in cooperation with the private sector, a continuing program of urban
land reform and housing which will make available at affordable cost decent
housing and basic services to underprivileged and homeless citizens in urban
centers and resettlement areas. It shall also promote adequate employment
opportunities to such citizens. In the implementation of such programs the State
shall respect the rights of small property owners.
Section 10. Urban or rural poor dwellers shall not be evicted nor their
dwellings demolished, except in accordance with law and in a just and humane
manner.
No resettlement of urban or rural dwellers shall be undertaken without
adequate consultation with them and the communities where they are to be
relocated.
The invocation does not help their cause. Petitioners obstinancy in not complying with the BATAHAI and
NHMFC requirements had delayed the release of the loan to BATAHAI [29] to the detriment of the other
BATAHAI members who, like petitioners, are also urban poor dwellers but who complied with the requirements
and even agreed to be relocated in case the construction of roads for the common interest required the
demolition of their houses or structures. [30] To grant the petition would, instead of promoting, defeat social
justice.
WHEREFORE, the petition is DENIED and the challenged decision of the Court of Appeals
is AFFIRMED.
No pronouncement as to costs.
SO ORDERED.
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 141010
February 7, 2007
UNITED BF HOMEOWNERS ASSOCIATIONS, INC., ROMEO T. VILLAMEJOR, RAUL S. LANUEVO,
ROBERTO ARNALDO, FLORENTINO CONCEPCION, BF NORTHWEST HOMEOWNERS ASSOCIATION,
INC., KK HOMEOWNERS ASSOCIATION, INC., and BF (CRAB) HOMEOWNERS ASSOCIATION,
INC., Petitioners,
vs.
THE (MUNICIPAL) CITY MAYOR, THE (MUNICIPAL) CITY PLANNING AND DEVELOPMENT
COORDINATING OFFICER OR ZONING ADMINISTRATOR, THE (MUNICIPAL) CITY ENGINEER AND/OR

BUILDING OFFICIAL, THE CHIEF OF THE PERMITS AND LICENSES DIVISION, THE SANGGUNIANG
(BAYAN) PANGLUNGSOD, and BARANGAY BF HOMES, ALL OF PARAAQUE CITY, METRO
MANILA, Respondents,
EL GRANDE AGUIRRE COMMERCE AND TRADE ASSOCIATION (EL ACTO), Respondent-Intervenor.
DECISION
CARPIO, J.:
The Case
This is a petition for review1 of the 28 June 1999 Decision2 and the 16 November 1999 Resolution3 of the
Court of Appeals in CA-G.R. SP No. 46624. The Court of Appeals held that Municipal Ordinance No. 97-08 is
a valid exercise of police power by the Municipality of Paraaque. 4
The Facts
BF Homes Paraaque Subdivision (BF Homes Paraaque), with a land area straddling the cities of
Paraaque, Las Pias, and Muntinlupa, is the largest subdivision in the country.
On 11 November 1997, the Municipal Council of Paraaque enacted Municipal Ordinance No. 97-08 5 entitled,
"An Ordinance Prescribing the Comprehensive Land Use Plan & Zoning of the Municipality of Paraaque
Pursuant to the Local Government Code of 1991 and Other Pertinent Laws." Sections 11.5 and 11.6 of
Municipal Ordinance No. 97-08, reclassifying El Grande and Aguirre Avenues in BF Homes Paraaque from
residential to commercial areas, read:
11.5 C-1 LOW INTENSITY COMMERCIAL ZONES
xxxx
BARANGAY BF HOMES
Lot deep both side[s] along Aguirre Avenue from Governor A. Santos Street eastward to Gng. Elsie
Gatches Street
Lot deep both side[s] along El Grande Avenue from Lopez Avenue gate southward to corner
Aguirre Avenue
xxxx
11.6 C-2 MAJOR COMMERCIAL ZONES
xxxx
BARANGAY BF HOMES
Lot deep both side[s] along Aguirre Avenue from Dallas to El Grande Avenue
Lot deep both side[s] along Aguirre Avenue from El Grande Avenue to Gov. A. Santos Street
BF Paraaque Commercial Plaza
Area bounded on the
North - Pres. Quezon Street
South - A. Aguirre Avenue
East - Presidents Avenue
West - MMP, Creek along BF Homeowners Association clubhouse
Lot deep east side along Presidents Avenue from Mac Donald southward to M. Rufino Street
Area bounded on the
North - A. Aguirre Avenue
South - A. Soriano Sr. & M. Rufino Street
East - Presidents Avenue
West - Gng. Elsie Ga[t]ches Street
x x x x6
On 27 January 1998, the United BF Homeowners Associations, Inc. (UBFHAI), 7 several homeowners
associations, and residents of BF Homes Paraaque (collectively petitioners) filed with the Court of Appeals a
petition for prohibition with an application for temporary restraining order and preliminary injunction. Petitioners
questioned the constitutionality of Sections 11.5, 11.6, 15, 8 17,9 and 19.610 of Municipal Ordinance No. 97-08.
Petitioners alleged that the reclassification of certain portions of BF Homes Paraaque from residential to
commercial zone is unconstitutional because it amounts to impairment of the contracts between the developer
of BF Homes Paraaque and the lot buyers. Petitioners cited the annotation on the lot buyers titles which
provides that "the property shall be used for residential purposes only and for no other purpose."
On the other hand, public respondents alleged that the passage of Municipal Ordinance No. 97-08 is a valid
exercise of police power by the Municipal Council of Paraaque and that such ordinance can nullify or
supersede the contractual obligations entered into by the petitioners and the developer.
Meanwhile, El Grande Aguirre Commerce and Trade Organization (EL ACTO), a non-stock, non-profit
corporation, intervened as respondent. EL ACTO claimed that its members are lot owners, residents, and
operators of commercial establishments along El Grande and Aguirre Avenues in BF Homes Paraaque, who
will be affected if Municipal Ordinance No. 97-08 is declared unconstitutional. EL ACTO asserted that
Municipal Ordinance No. 97-08 is a valid exercise of police power and that petitioners are guilty of estoppel
since petitioners endorsed the opening of many of these commercial establishments in BF Homes Paraaque.
EL ACTO further alleged that the instant petition should have been initially filed with the Regional Trial Court in
accordance with the principle of hierarchy of courts.1awphi1.net

Page 56 of 66
On 28 June 1999, the Court of Appeals dismissed the petition. Petitioners moved for reconsideration, which
the Court of Appeals denied.
Hence, this petition.
The Ruling of the Court of Appeals
Citing the General Welfare Clause11 of Republic Act No. 7160 (RA 7160), the Court of Appeals held that the
enactment of Municipal Ordinance No. 97-08 which, among others, reclassified El Grande and Aguirre
Avenues in BF Homes Paraaque as commercial zones, was a valid exercise of police power by the
Municipality of Paraaque.
The Court of Appeals took judicial notice of the fact that El Grande and Aguirre Avenues are main streets of BF
Homes Paraaque which have long been commercialized, thus:
The declaration of El Grande and Aguirre Avenues as commercial zones through Municipal Ordinance No. 9708 is an exercise of police power.
Obviously, because of the rapid and tremendous increase in population, the needs of the homeowners in the
BF Paraaque Subdivision grew. The commercial zones in the area proved inadequate to service the needs of
its residents. There was therefore a need to open more commercial districts. In fact, records show that several
homeowners along El Grande and Aguirre Avenues converted their residences into business establishments.
El Actos members are among them.
Aside from the increasing number of commercial establishments therein, judicial notice may be taken of the
fact that El Grande and Aguirre Avenues are main thoroughfares of BF Homes Paraaque which have long
been commercialized. The local government therefore responded to these changes in the community by
enacting Ordinance No. 97-08 x x x. 12
The Issues
Petitioners raise the following issues:
1. Whether R.A. 7160, the Local Government Code of 1991 has repealed PD 957, the Subdivision
and Condominium Buyers Protective Decree;
2. Whether the power of local government units to enact comprehensive zoning ordinances has
legal limitations;
3. Whether Municipal Ordinance No. 97-08 is a legitimate exercise of police power;
4. Whether Municipal Ordinance No. 97-08 is constitutional considering that it impairs a contractual
obligation annotated in homeowners titles and violates the doctrine of separation of powers;
5. Whether Municipal Ordinance No. 97-08 is enforceable pending review by the MMDA, the Metro
Manila Mayors Council and the HLURB.13
The resolution of these issues turns on the validity of Municipal Ordinance No. 97-08.
The Ruling of the Court
The petition is without merit.
Power to Enact Zoning Ordinances
The Municipal Council of Paraaque enacted Municipal Ordinance No. 97-08 pursuant to the provisions of RA
7160 and Executive Order No. 72. 14
Under Section 447 of RA 7160, the Sangguniang Bayan or the Municipal Council, as the legislative body of the
municipality, has the power to enact ordinances for the general welfare of the municipality and its inhabitants.
Among the functions of the Sangguniang Bayan enumerated under Section 447 of RA 7160 are:
(2) Generate and maximize the use of resources and revenues for the development plans, program objectives
and priorities of the municipality as provided for under Section 18 of this Code with particular attention to agroindustrial development and countryside growth and progress, and relative thereto, shall:
xxxx
(vii) Adopt a comprehensive land use plan for the municipality: Provided, That the formulation,
adoption, or modification of said plan shall be in coordination with the approved provincial
comprehensive land use plan;
(viii) Reclassify land within the jurisdiction of the municipality subject to the pertinent
provision of this Code;
(ix) Enact integrated zoning ordinances in consonance with the approved comprehensive
land use plan, subject to existing laws, rules and regulations; establish fire limits or zones,
particularly in populous centers; and regulate the construction, repair or modification of buildings
within said fire limits or zones in accordance with the provisions of the Fire Code; (Emphasis
supplied)
On the other hand, Executive Order No. 72 provides:
SECTION 1. Plan formulation or updating. (a) Cities and municipalities shall continue to formulate or
update their respective comprehensive land use plans, in conformity with the land use planning and
zoning standards and guidelines prescribed by the HLURB pursuant to national policies.
As a policy recommending body of the LGU, the city or municipal development council (CDC/MDC) shall
initiate the formulation or updating of its land use plan, in consultation with the concerned sectors in the
community. For this purpose, the CDC/MDC may seek the assistance of any local official or field officer of
NGAs operation in the LGU.

The city or municipal planning and development coordinator (CPDC/MPDC) and/or the city or municipal
agriculturist, if there is any, shall provide the technical support services and such other assistance as may be
required by the CDC/MDC to effectively carry out this function.
The comprehensive land use plan prepared by the CDC/MDC shall be submitted to the sangguniang
panglungsod or sangguniang bayan, as the case may be, for enactment into a zoning ordinance. Such
ordinance shall be enacted and approved in accordance with Articles 107 and 108 of the Implementing Rules
and Regulations (IRR) of the LGC.
(b) The comprehensive land use plans of component cities and municipalities shall be formulated, adopted, or
modified in accordance with the approved provincial comprehensive land use plans.
(c) Cities and municipalities of metropolitan Manila shall continue to formulate or update their respective
comprehensive land use plans, in accordance with the land use planning and zoning standards and guidelines
prescribed by the HLURB pursuant to EO 392, S. of 1990, and other pertinent national policies.
x x x x (Emphasis supplied)
Under Section 3(m), Rule 131 of the Rules of Court, there is a presumption that official duty has been regularly
performed. Thus, in the absence of evidence to the contrary, there is a presumption that public officers
performed their official duties regularly and legally and in compliance with applicable laws, in good faith, and in
the exercise of sound judgment.15
We find no sufficient evidence disputing the regularity of the enactment of Municipal Ordinance No. 97-08.
Before the Municipal Council of Paraaque passed Municipal Ordinance No. 97-08, 16 it has been the subject
of barangay consultations and committee hearings in accordance with Executive Order No. 72.
Reclassification of El Grande and Aguirre Avenues
Contrary to petitioners allegations, we find Municipal Ordinance No. 97-08 reasonable and not discriminating
or oppressive with respect to BF Homes Paraaque. As held by the Court of Appeals, the increasing number
of homeowners in BF Homes Paraaque necessitated the addition of commercial areas in the subdivision to
service the needs of the homeowners. In fact, several homeowners along El Grande and Aguirre Avenues
already converted their residences into business establishments. Furthermore, as found by the Court of
Appeals, El Grande and Aguirre Avenues are main thoroughfares in BF Homes Paraaque which have long
been commercialized.
Even petitioner UBFHAI, the recognized umbrella organization of all homeowners associations in BF Homes
Paraaque, acknowledged the need for additional commercial area. Records reveal that as early as 30 July
1989, UBFHAI recommended for approval an "Amended Integrated Zoning Policies and Guidelines for BF
Homes Paraaque."17 UBFHAI proposed another commercial zone in BF Homes Paraaque to accommodate
the growing needs of the residents, thus:
Subject to the approval of BF Homes, Inc., the Local Zoning Official/Planning Officer of Paraaque and the
Metro Manila Commission and in recognition of the fact that the subdivision has tremendously grown in
size and population since 1983 when the above-mentioned guidelines of the MMC [Ordinance 81-01]
were promulgated, such that one commercial zone for the entire subdivision is now inadequate vis-avis the needs of the residents, the UBFHAI is proposing another commercial zone in Phase III of the
Subdivision, in the vicinity of the Parish of the Presentation of the Child Jesus as follows:
One lot deep along Aguirre Avenue from Gov. Santos St., to the end of Aguirre Avenue and two lots
deep along El Grande from where it intersects Aguirre Avenue.
Pending approval of the aforesaid proposal, commercial buildings constructed and existing in the
aforesaid area will be given temporary-use permits good for five (5) years from December 31, 1986 or
until December 31, 1991, after which, the same must revert to residential status, unless, in the meantime the
proposal is approved, provided all such buildings must comply with the set-back and parking provision of the
Metro Manila Commission Ordinance 81-01; I.M. 09-83.
xxxx
The term for temporary use permits of the designated commercial area shall be considered extended
for 8 years from December 31, 1991 to December 31, 1998; without prejudice to the official conversion
of the area under existing MMA/LGC guidelines to commercial. 18 (Emphasis supplied)
Thus, UBFHAIs proposed new commercial area, encompassing El Grande and Aguirre Avenues, is
substantially the same area, which Municipal Ordinance No. 97-08 later reclassified as a commercial zone.
Furthermore, in the subsequent years, UBFHAI and its member homeowners associations endorsed the
issuance of municipal and barangay permits for commercial establishments along El Grande and Aguirre
Avenues. Contrary to petitioners allegations, the commercial establishments endorsed by UBFHAI were not
mere convenience stores, which Metro Manila Commission Ordinance No. 81-01 19 and Municipal Ordinance
No. 97-08 allow in residential areas. Among the commercial establishments which UBFHAI endorsed were a
trading business,20electronics repair shop,21 mini-grocery store,22 beauty salon,23 school,24 dress shop,25 and
consultancy or management services business.26
Clearly, the reclassification of El Grande and Aguirre Avenues in BF Homes Paraaque as commercial area
was reasonable and justified under the circumstances.
Non-Impairment of Contract

Page 57 of 66
Petitioners invoke Presidential Decree No. 957 (PD 957), 27 otherwise known as the Subdivision and
Condominium Buyers Protective Decree. Petitioners maintain that PD 957 is intended primarily to protect the
buyers and to ensure that subdivision developers keep their promises and representations. Petitioners allege
that one of the promises of the developer of BF Homes Paraaque is that the property shall be used for
residential purposes only. Petitioners assert that the reclassification of certain portions of BF Homes
Paraaque from residential to commercial zone is unconstitutional because it impairs the contracts between
the developer of BF Homes Paraaque and the lot buyers.
The Court has upheld in several cases the superiority of police power over the non-impairment clause. 28 The
constitutional guaranty of non-impairment of contracts is limited by the exercise of the police power of the
State, in the interest of public health, safety, morals and general welfare. 29
In Ortigas & Co., Limited Partnership v. Feati Bank and Trust Co.,30 the Court held that contractual restrictions
on the use of property could not prevail over the reasonable exercise of police power through zoning
regulations. The Court held:
With regard to the contention that said resolution cannot nullify the contractual obligations assumed by the
defendant-appelleereferring to the restrictions incorporated in the deeds of sale and later in the
corresponding Transfer Certificates of Title issued to defendant-appelleeit should be stressed, that while
non-impairment of contracts is constitutionally guaranteed, the rule is not absolute, since it has to be
reconciled with the legitimate exercise of police power, i.e., "the power to prescribe regulations to
promote the health, morals, peace, education, good order or safety and general welfare of the people."
Invariably described as "the most essential, insistent, and illimitable of powers" and "in a sense, the
greatest and most powerful attribute of government," the exercise of the power may be judicially
inquired into and corrected only if it is capricious, whimsical, unjust or unreasonable, there having
been a denial of due process or a violation of any other applicable constitutional guarantee. As this
Court held through Justice Jose P. Bengzon in Philippine Long Distance Company v. City of Davao, et al.,
police power "is elastic and must be responsive to various social conditions; it is not confined within narrow
circumscriptions of precedents resting on past conditions; it must follow the legal progress of a democratic way
of life." We were even more emphatic in Vda. De Genuino v. The Court of Agrarian Relations, et al., when We
declared: "We do not see why the public welfare when clashing with the individual right to property
should not be made to prevail through the states exercise of its police power."
Resolution No. 27. s-1960 declaring the western part of Highway 54, now E. de los Santos Avenue (EDSA, for
short) from Shaw Boulevard to the Pasig River as an industrial and commercial zone, was obviously passed
by the Municipal Council of Mandaluyong, Rizal in the exercise of police power to safeguard or promote the
health, safety, peace, good order and general welfare of the people in the locality. Judicial notice may be taken
of the conditions prevailing in the area, especially where Lots Nos. 5 and 6 are located. The lots themselves
not only front the highway; industrial and commercial complexes have flourished about the place. EDSA, a
main traffic artery which runs through several cities and municipalities in the Metro Manila area, supports an
endless stream of traffic and the resulting activity, noise and pollution are hardly conducive to the health,
safety or welfare of the residents in its route. Having been expressly granted the power to adopt zoning and
subdivision ordinances or regulations, the municipality of Mandaluyong, through its Municipal Council, was
reasonably, if not perfectly, justified under the circumstances, in passing the subject resolution. 31 (Emphasis
supplied)
Likewise, in Sangalang v. Intermediate Appellate Court,32 the Court upheld Metro Manila Commission
Ordinance No. 81-01, which reclassified Jupiter Street in Makati into a high-density commercial zone, as a
legitimate exercise of police power. The Court held that the power of the Metro Manila Commission and the
Makati Municipal Council to enact zoning ordinances for the general welfare prevails over the deed restrictions
on the lot owners in Bel-Air Village which restricted the use of the lots for residential purposes only. The Court
held:
It is not that we are saying that restrictive easements, especially the easements herein in question, are invalid
or ineffective. As far as the Bel-Air subdivision itself is concerned, certainly, they are valid and enforceable. But
they are, like all contracts, subject to the overriding demands, needs, and interests of the greater number as
the State may determine in the legitimate exercise of police power. Our jurisdiction guarantees sanctity of
contract and is said to be the "law between the contracting parties," but while it is so, it cannot
contravene "law, morals, good customs, public order, or public policy." Above all, it cannot be raised
as a deterrent to police power, designed precisely to promote health, safety, peace, and enhance the
common good, at the expense of contractual rights, whenever necessary. x x x33 (Emphasis supplied)
Similarly, in this case, Municipal Ordinance No. 97-08 is a legitimate exercise of police power and the
reclassification of El Grande and Aguirre Avenues in BF Homes Paraaque is not arbitrary or unreasonable.
WHEREFORE, we AFFIRM the Decision dated 28 June 1999 and the Resolution dated 16 November 1999 of
the Court of Appeals in CA-G.R. SP No. 46624.
SO ORDERED.
EN BANC
CARLOS SUPERDRUG CORP., G.R. No. 166494

doing business under the name


and style Carlos Superdrug, Present:
ELSIE M. CANO, doing business
under the name and style Advance PUNO, C.J.,
Drug, Dr. SIMPLICIO L. YAP, JR., QUISUMBING,*
doing business under the name and YNARES-SANTIAGO,
style City Pharmacy, MELVIN S. SANDOVAL-GUTIERREZ,**
DELA SERNA, doing business under CARPIO,
the name and style Botica dela Serna, AUSTRIA-MARTINEZ,
and LEYTE SERV-WELL CORP., CORONA,
doing business under the name and CARPIO MORALES,
style Leyte Serv-Well Drugstore, AZCUNA,
Petitioners, TINGA,
CHICO-NAZARIO,
- versus - GARCIA,
VELASCO, JR., and
DEPARTMENT OF SOCIAL NACHURA, JJ.
WELFARE and DEVELOPMENT
(DSWD), DEPARTMENT OF Promulgated:
HEALTH (DOH), DEPARTMENT
OF FINANCE (DOF), DEPARTMENT June 29, 2007
OF JUSTICE (DOJ), and
DEPARTMENT OF INTERIOR and
LOCAL GOVERNMENT (DILG),
Respondents.
x ---------------------------------------------------------------------------------------- x
DECISION
AZCUNA, J.:
This is a petition[1] for Prohibition with Prayer for Preliminary Injunction assailing the
constitutionality of Section 4(a) of Republic Act (R.A.) No. 9257, [2]otherwise known as the Expanded Senior
Citizens Act of 2003.
Petitioners are domestic corporations and proprietors operating drugstores in the Philippines.
Public respondents, on the other hand, include the Department of Social Welfare and Development (DSWD),
the Department of Health (DOH), the Department of Finance (DOF), the Department of Justice (DOJ), and the
Department of Interior and Local Government (DILG) which have been specifically tasked to monitor the
drugstores compliance with the law; promulgate the implementing rules and regulations for the effective
implementation of the law; and prosecute and revoke the licenses of erring drugstore establishments.
The antecedents are as follows:
On February 26, 2004, R.A. No. 9257, amending R.A. No. 7432, [3] was signed into law by
President Gloria Macapagal-Arroyo and it became effective on March 21, 2004. Section 4(a) of the Act states:
SEC. 4. Privileges for the Senior Citizens. The senior citizens shall be entitled to the
following:
(a) the grant of twenty percent (20%) discount from all establishments
relative to the utilization of services in hotels and similar lodging establishments,
restaurants and recreation centers, and purchase of medicines in all establishments for
the exclusive use or enjoyment of senior citizens, including funeral and burial services
for the death of senior citizens;
...
The establishment may claim the discounts granted under (a), (f), (g) and
(h) as tax deduction based on the net cost of the goods sold or services
rendered: Provided, That the cost of the discount shall be allowed as deduction from
gross income for the same taxable year that the discount is granted. Provided,

Page 58 of 66
further, That the total amount of the claimed tax deduction net of value added tax if
applicable, shall be included in their gross sales receipts for tax purposes and shall be
subject to proper documentation and to the provisions of the National Internal Revenue
Code, as amended.[4]

It may be necessary to note that while the burden on [the]


government is slightly diminished in terms of its percentage share on the
discounts granted to senior citizens, the number of potential establishments
that may claim tax deductions, have however, been broadened. Aside from
the establishments that may claim tax credits under the old law, more
establishments were added under the new law such as: establishments
providing medical and dental services, diagnostic and laboratory services,
including professional fees of attending doctors in all private hospitals and
medical facilities, operators of domestic air and sea transport services,
public railways and skyways and bus transport services.

On May 28, 2004, the DSWD approved and adopted the Implementing Rules and Regulations of
R.A. No. 9257, Rule VI, Article 8 of which states:
Article 8. Tax Deduction of Establishments. The establishment may claim
the discounts granted under Rule V, Section 4 Discounts for Establishments;[5] Section
9, Medical and Dental Services in Private Facilities[,] [6] and Sections 10[7] and 11[8] Air,
Sea and Land Transportation as tax deduction based on the net cost of the goods sold
or services rendered. Provided, That the cost of the discount shall be allowed as
deduction from gross income for the same taxable year that the discount is
granted; Provided, further, That the total amount of the claimed tax deduction net of
value added tax if applicable, shall be included in their gross sales receipts for tax
purposes and shall be subject to proper documentation and to the provisions of the
National Internal Revenue Code, as amended; Provided, finally, that the
implementation of the tax deduction shall be subject to the Revenue Regulations to be
issued by the Bureau of Internal Revenue (BIR) and approved by the Department of
Finance (DOF).[9]
On July 10, 2004, in reference to the query of the Drug Stores Association of the Philippines
(DSAP) concerning the meaning of a tax deduction under the Expanded Senior Citizens Act, the DOF, through
Director IV Ma. Lourdes B. Recente, clarified as follows:
1) The difference between the Tax Credit (under the Old Senior Citizens
Act) and Tax Deduction (under the Expanded Senior Citizens Act).
1.1. The provision of Section 4 of R.A. No. 7432 (the old Senior
Citizens Act) grants twenty percent (20%) discount from all establishments
relative to the utilization of transportation services, hotels and similar
lodging establishment, restaurants and recreation centers and purchase of
medicines anywhere in the country, the costs of which may be claimed by
the private establishments concerned as tax credit.
Effectively, a tax credit is a peso-for-peso deduction from a
taxpayers tax liability due to the government of the amount of discounts
such establishment has granted to a senior citizen. The establishment
recovers the full amount of discount given to a senior citizen and hence, the
government shoulders 100% of the discounts granted.
It must be noted, however, that conceptually, a tax
credit scheme under the Philippine tax system, necessitates that prior
payments of taxes have been made and the taxpayer is attempting to
recover this tax payment from his/her income tax due. The tax credit
scheme under R.A. No. 7432 is, therefore, inapplicable since no tax
payments have previously occurred.
1.2.
The provision under R.A. No. 9257, on the other
hand, provides that the establishment concerned may claim the discounts
under Section 4(a), (f), (g) and (h) astax deduction from gross income,
based on the net cost of goods sold or services rendered.
Under this scheme, the establishment concerned is allowed to
deduct from gross income, in computing for its tax liability, the amount of
discounts granted to senior citizens. Effectively, the government loses in
terms of foregone revenues an amount equivalent to the marginal tax rate
the said establishment is liable to pay the government. This will be an
amount equivalent to 32% of the twenty percent (20%) discounts so
granted. The establishment shoulders the remaining portion of the granted
discounts.

A simple illustration might help amplify the points discussed


above, as follows:
Tax Deduction Tax Credit
Gross Sales x x x x x x x x x x x x
Less : Cost of goods sold x x x x x x x x x x
Net Sales x x x x x x x x x x x x
Less: Operating Expenses:
Tax Deduction on Discounts x x x x -Other deductions: x x x x x x x x
Net Taxable Income x x x x x x x x x x
Tax Due x x x x x x
Less: Tax Credit -- ______x x
Net Tax Due -- x x
As shown above, under a tax deduction scheme, the tax deduction on
discounts was subtracted from Net Sales together with other deductions which are
considered as operating expenses before the Tax Due was computed based on the Net
Taxable Income. On the other hand, under a tax credit scheme, the amount of
discounts which is the tax credit item, was deducted directly from the tax due amount.
[10]

Meanwhile, on October 1, 2004, Administrative Order (A.O.) No. 171 or the Policies and
Guidelines to Implement the Relevant Provisions of Republic Act 9257, otherwise known as the Expanded
Senior Citizens Act of 2003[11] was issued by the DOH, providing the grant of twenty percent (20%) discount in
the purchase of unbranded generic medicines from all establishments dispensing medicines for the exclusive
use of the senior citizens.
On November 12, 2004, the DOH issued Administrative Order No 177 [12] amending A.O. No. 171. Under A.O.
No. 177, the twenty percent discount shall not be limited to the purchase of unbranded generic medicines only,
but shall extend to both prescription and non-prescription medicines whether branded or generic. Thus, it
stated that [t]he grant of twenty percent (20%) discount shall be provided in the purchase of medicines from all
establishments dispensing medicines for the exclusive use of the senior citizens.
Petitioners assail the constitutionality of Section 4(a) of the Expanded Senior Citizens Act based on the
following grounds:[13]
1)

The law is confiscatory because it infringes Art. III, Sec. 9 of the


Constitution which provides that private property shall not be taken for
public use without just compensation;

2)

It violates the equal protection clause (Art. III, Sec. 1) enshrined in our
Constitution which states that no person shall be deprived of life, liberty or
property without due process of law, nor shall any person be denied of the
equal protection of the laws; and

3)

The 20% discount on medicines violates the constitutional guarantee in


Article XIII, Section 11 that makes essential goods, health and other social
services available to all people at affordable cost.[14]

Petitioners assert that Section 4(a) of the law is unconstitutional because it constitutes deprivation of private
property. Compelling drugstore owners and establishments to grant the discount will result in a loss of profit

Page 59 of 66
and capital because 1) drugstores impose a mark-up of only 5% to 10% on branded medicines; and 2) the law
failed to provide a scheme whereby drugstores will be justly compensated for the discount.
Examining petitioners arguments, it is apparent that what petitioners are ultimately questioning is
the validity of the tax deduction scheme as a reimbursement mechanism for the twenty percent (20%) discount
that they extend to senior citizens.
Based on the afore-stated DOF Opinion, the tax deduction scheme does not fully reimburse
petitioners for the discount privilege accorded to senior citizens. This is because the discount is treated as a
deduction, a tax-deductible expense that is subtracted from the gross income and results in a lower taxable
income. Stated otherwise, it is an amount that is allowed by law [15] to reduce the income prior to the application
of the tax rate to compute the amount of tax which is due. [16] Being a tax deduction, the discount does not
reduce taxes owed on a peso for peso basis but merely offers a fractional reduction in taxes owed.
Theoretically, the treatment of the discount as a deduction reduces the net income of the private
establishments concerned. The discounts given would have entered the coffers and formed part of the gross
sales of the private establishments, were it not for R.A. No. 9257.

Page 60 of 66
The permanent reduction in their total revenues is a forced subsidy corresponding to the taking of
private property for public use or benefit. [17] This constitutes compensable taking for which petitioners would
ordinarily become entitled to a just compensation.
Just compensation is defined as the full and fair equivalent of the property taken from its owner by
the expropriator. The measure is not the takers gain but the owners loss. The word just is used to intensify the
meaning of the word compensation, and to convey the idea that the equivalent to be rendered for the
property to be taken shall be real, substantial, full and ample. [18]
A tax deduction does not offer full reimbursement of the senior citizen discount. As such, it would
not meet the definition of just compensation. [19]
Having said that, this raises the question of whether the State, in promoting the health and welfare
of a special group of citizens, can impose upon private establishments the burden of partly subsidizing a
government program.
The Court believes so.
The Senior Citizens Act was enacted primarily to maximize the contribution of senior citizens to
nation-building, and to grant benefits and privileges to them for their improvement and well-being as the State
considers them an integral part of our society.[20]
The priority given to senior citizens finds its basis in the Constitution as set forth in the law itself.
Thus, the Act provides:
SEC. 2. Republic Act No. 7432 is hereby amended to read as follows:
SECTION 1. Declaration of Policies and Objectives. Pursuant to Article XV,
Section 4 of the Constitution, it is the duty of the family to take care of its elderly
members while the State may design programs of social security for them. In addition
to this, Section 10 in the Declaration of Principles and State Policies provides: The
State shall provide social justice in all phases of national development. Further, Article
XIII, Section 11, provides: The State shall adopt an integrated and comprehensive
approach to health development which shall endeavor to make essential goods, health
and other social services available to all the people at affordable cost. There shall be
priority for the needs of the underprivileged sick, elderly, disabled, women and children.
Consonant with these constitutional principles the following are the declared policies of
this Act:
...
(f) To recognize the important role of the private sector in the
improvement of the welfare of senior citizens and to actively seek their
partnership.[21]
To implement the above policy, the law grants a twenty percent discount to senior citizens for medical and
dental services, and diagnostic and laboratory fees; admission fees charged by theaters, concert halls,
circuses, carnivals, and other similar places of culture, leisure and amusement; fares for domestic land, air
and sea travel; utilization of services in hotels and similar lodging establishments, restaurants and recreation
centers; and purchases of medicines for the exclusive use or enjoyment of senior citizens. As a form of
reimbursement, the law provides that business establishments extending the twenty percent discount to senior
citizens may claim the discount as a tax deduction.
The law is a legitimate exercise of police power which, similar to the power of eminent domain, has general
welfare for its object. Police power is not capable of an exact definition, but has been purposely veiled in
general terms to underscore its comprehensiveness to meet all exigencies and provide enough room for an
efficient and flexible response to conditions and circumstances, thus assuring the greatest
benefits. [22] Accordingly, it has been described as the most essential, insistent and the least limitable of
powers, extending as it does to all the great public needs. [23] It is [t]he power vested in the legislature by the
constitution to make, ordain, and establish all manner of wholesome and reasonable laws, statutes, and
ordinances, either with penalties or without, not repugnant to the constitution, as they shall judge to be for the
good and welfare of the commonwealth, and of the subjects of the same. [24]

For this reason, when the conditions so demand as determined by the legislature, property rights
must bow to the primacy of police power because property rights, though sheltered by due process, must yield
to general welfare.[25]
Police power as an attribute to promote the common good would be diluted considerably if on the
mere plea of petitioners that they will suffer loss of earnings and capital, the questioned provision is
invalidated. Moreover, in the absence of evidence demonstrating the alleged confiscatory effect of the
provision in question, there is no basis for its nullification in view of the presumption of validity which every law
has in its favor.[26]
Given these, it is incorrect for petitioners to insist that the grant of the senior citizen discount is
unduly oppressive to their business, because petitioners have not taken time to calculate correctly and come
up with a financial report, so that they have not been able to show properly whether or not the tax deduction
scheme really works greatly to their disadvantage. [27]
In treating the discount as a tax deduction, petitioners insist that they will incur losses because,
referring to the DOF Opinion, for every P1.00 senior citizen discount that petitioners would give, P0.68 will be
shouldered by them as only P0.32 will be refunded by the government by way of a tax deduction.
To illustrate this point, petitioner Carlos Super Drug cited the anti-hypertensive maintenance
drug Norvasc as an example. According to the latter, it acquiresNorvasc from the distributors at P37.57 per
tablet, and retails it at P39.60 (or at a margin of 5%). If it grants a 20% discount to senior citizens or an amount
equivalent toP7.92, then it would have to sell Norvasc at P31.68 which translates to a loss from capital
of P5.89 per tablet. Even if the government will allow a tax deduction, onlyP2.53 per tablet will be refunded
and not the full amount of the discount which is P7.92. In short, only 32% of the 20% discount will be
reimbursed to the drugstores.[28]
Petitioners computation is flawed. For purposes of reimbursement, the law states that the cost of
the discount shall be deducted from gross income, [29] the amount of income derived from all sources before
deducting allowable expenses, which will result in net income. Here, petitioners tried to show a loss on a per
transaction basis, which should not be the case. An income statement, showing an accounting of petitioners
sales, expenses, and net profit (or loss) for a given period could have accurately reflected the effect of the
discount on their income. Absent any financial statement, petitioners cannot substantiate their claim that they
will be operating at a loss should they give the discount. In addition, the computation was erroneously based
on the assumption that their customers consisted wholly of senior citizens. Lastly, the 32% tax rate is to be
imposed on income, not on the amount of the discount.
Furthermore, it is unfair for petitioners to criticize the law because they cannot raise the prices of
their medicines given the cutthroat nature of the players in the industry. It is a business decision on the part of
petitioners to peg the mark-up at 5%. Selling the medicines below acquisition cost, as alleged by petitioners, is
merely a result of this decision. Inasmuch as pricing is a property right, petitioners cannot reproach the law for
being oppressive, simply because they cannot afford to raise their prices for fear of losing their customers to
competition.
The Court is not oblivious of the retail side of the pharmaceutical industry and the competitive
pricing component of the business. While the Constitution protects property rights, petitioners must accept the
realities of business and the State, in the exercise of police power, can intervene in the operations of a
business which may result in an impairment of property rights in the process.
Moreover, the right to property has a social dimension. While Article XIII of the Constitution
provides the precept for the protection of property, various laws and jurisprudence, particularly on agrarian
reform and the regulation of contracts and public utilities, continuously serve as a reminder that the right to
property can be relinquished upon the command of the State for the promotion of public good. [30]
Undeniably, the success of the senior citizens program rests largely on the support imparted by
petitioners and the other private establishments concerned. This being the case, the means employed in
invoking the active participation of the private sector, in order to achieve the purpose or objective of the law, is
reasonably and directly related. Without sufficient proof that Section 4(a) of R.A. No. 9257 is arbitrary, and that
the continued implementation of the same would be unconscionably detrimental to petitioners, the Court will
refrain from quashing a legislative act.[31]
WHEREFORE, the petition is DISMISSED for lack of merit.

Page 61 of 66
No costs.
SO ORDERED.
SECOND DIVISION
THE HONORABLE SECRETARY VINCENT S. PEREZ, in his
capacity as the Secretary of the Department of Energy,
Petitioner,
- versus -

G.R. No. 159149

Present:

LPG REFILLERS ASSOCIATION OF THE PHILIPPINES, INC.,


Respondent.

QUISUMBING, J., Chairperson,


CARPIO,
CARPIO MORALES,
TINGA, and
VELASCO, JR., JJ.
Promulgated:
August 28, 2007

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
RESOLUTION
QUISUMBING, J.:
In its Motion for Reconsideration, [1] respondent LPG Refillers Association of the Philippines, Inc.
seeks the reversal of this Courts Decision [2] dated June 26, 2006, which upheld the validity of the assailed
Department of Energy (DOE) Circular No. 2000-06-10.
In assailing the validity of the Circular, respondent argues that:
I.
Circular No. 2000-06-010 (the assailed Circular) listed prohibited acts
and punishable offenses which are brand-new or which were not provided
for by B.P. Blg. 33, as amended; and that B.P. Blg. 33 enumerated and
specifically defined the prohibited/punishable acts under the law and that
the punishable offenses in the assailed Circular are not included in the law.
II.
The petitioner-appellant admitted that the assailed Circular listed
prohibited acts and punishable offenses which are brand-new or which
were not provided for by B.P. Blg. 33, as amended.
III.
B.P. Blg. 33, as amended, is in the form of a penal statute that should be
construed strictly against the State.
IV.
The assailed Circular not only prescribed penalties for acts not
prohibited/penalized under B.P. Blg. 33, as amended, but also prescribed
penalties exceeding the ceiling prescribed by B.P. Blg. 33, as amended.
V.
The Honorable Court failed to consider that the imposition by the assailed
Circular of penalty on per cylinder basis made the imposable penalty under
the assailed Circular exceed the limits prescribed by B.P. Blg. 33, as
amended.
VI.
The Honorable Court failed to rule on the position of the respondentappellee that the amount of imposable fine prescribed under the assailed
Circular is excessive to the extent of being confiscatory and thus offends
the Bill of Rights of the 1987 Constitution.
VII.
The noble and laudable aim of the Government to protect the general
consuming public against the nefarious practices of some [un]scrupulous
individuals in the LPG industry should be achieved through means in
accord with existing law.[3]
The assigned errors, being closely allied, will be discussed jointly.
On the first, second and third grounds, respondent argues that the Circular prohibited new acts not
specified in Batas Pambansa Bilang 33, as amended.Respondent insists that since B.P. Blg. 33, as amended
is a penal statute, it already criminalizes the specific acts involving petroleum products. Respondent invokes
the void for vagueness doctrine in assailing our decision, quoted in this wise:
The Circular satisfies the first requirement. B.P. Blg. 33, as amended,
criminalizes illegal trading, adulteration, underfilling, hoarding, and overpricing of

petroleum products.Under this general description of what constitutes criminal


acts involving petroleum products, the Circular merely lists the various modes
by which the said criminal acts may be perpetrated, namely: no price display
board, no weighing scale, no tare weight or incorrect tare weight markings, no
authorized LPG seal, no trade name, unbranded LPG cylinders, no serial number, no
distinguishing color, no embossed identifying markings on cylinder, underfilling LPG
cylinders, tampering LPG cylinders, and unauthorized decanting of LPG
cylinders[4] (Emphasis supplied.)
Respondent misconstrues our decision. A criminal statute is not rendered uncertain and void
because general terms are used therein. The lawmakers have no positive constitutional or statutory duty to
define each and every word in an enactment, as long as the legislative will is clear, or at least, can be
gathered from the whole act, which is distinctly expressed in B.P. Blg. 33, as amended. [5] Thus, respondents
reliance on the void for vagueness doctrine is misplaced.
Demonstrably, the specific acts and omissions cited in the Circular are within the contemplation of
the B.P. Blg. 33, as amended. The DOE, in issuing the Circular, merely filled up the details and the manner
through which B.P. Blg. 33, as amended may be carried out. Nothing extraneous was provided in the Circular
that could result in its invalidity.
On the fourth, fifth and sixth grounds, respondent avers that the penalties imposed in the Circular
exceeded the ceiling prescribed by B.P. Blg. 33, as amended.Respondent contends that the Circular, in
providing penalties on a per cylinder basis, is no longer regulatory, but already confiscatory in nature.
Respondents position is untenable. The Circular is not confiscatory in providing penalties on a per
cylinder basis. Those penalties do not exceed the ceiling prescribed in Section 4 of B.P. Blg. 33, as amended,
which penalizes any person who commits any act [t]herein prohibited. Thus, violation on a per cylinder basis
falls within the phrase any act as mandated in Section 4. To provide the same penalty for one who violates a
prohibited act in B.P. Blg. 33, as amended, regardless of the number of cylinders involved would result in an
indiscriminate, oppressive and impractical operation of B.P. Blg. 33, as amended. The equal protection clause
demands that all persons subject to such legislation shall be treated alike, under like circumstances and
conditions, both in the privileges conferred and in the liabilities imposed.
All other arguments of respondent having been passed upon in our June 26, 2006 Decision, we
uphold the validity of DOE Circular No. 2000-06-010 sought to implement B.P. Blg. 33, as amended.
WHEREFORE, the Motion for Reconsideration by respondent is hereby DENIED with definite
finality. No further pleadings will be entertained.
SO ORDERED.

LEONARDO A. QUISUMBING
Associate Justice
WE CONCUR:

ANTONIO T. CARPIO
Associate Justice
CONCHITA CARPIO MORALES
Associate Justice

DANTE O. TINGA
Associate Justice
PRESBITERO J. VELASCO, JR.
Associate Justice

ATTESTATION
I attest that the conclusions in the above Resolution had been reached in consultation before the case was
assigned to the writer of the opinion of the Courts Division.

Page 62 of 66
LEONARDO A. QUISUMBING
Associate Justice
Chairperson
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons Attestation, I certify that
the conclusions in the above Resolution had been reached in consultation before the case was assigned to
the writer of the opinion of the Courts Division.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 170656
August 15, 2007
THE METROPOLITAN MANILA DEVELOPMENT AUTHORITY and BAYANI FERNANDO as Chairman of
the Metropolitan Manila Development Authority, petitioners,
vs.
VIRON TRANSPORTATION CO., INC., respondent.
x --------------------------------------------- x
G.R. No. 170657
August 15, 2007
HON. ALBERTO G. ROMULO, Executive Secretary, the METROPOLITAN MANILA DEVELOPMENT
AUTHORITY and BAYANI FERNANDO as Chairman of the Metropolitan Manila Development
Authority,petitioners,
vs.
MENCORP TRANSPORTATION SYSTEM, INC., respondent.
DECISION
CARPIO MORALES, J.:
The following conditions in 1969, as observed by this Court:
Vehicles have increased in number. Traffic congestion has moved from bad to worse, from
tolerable to critical. The number of people who use the thoroughfares has multiplied x x x, 1
have remained unchecked and have reverberated to this day. Traffic jams continue to clog the streets of Metro
Manila, bringing vehicles to a standstill at main road arteries during rush hour traffic and sapping peoples
energies and patience in the process.
The present petition for review on certiorari, rooted in the traffic congestion problem, questions the authority of
the Metropolitan Manila Development Authority (MMDA) to order the closure of provincial bus terminals along
Epifanio de los Santos Avenue (EDSA) and major thoroughfares of Metro Manila.
Specifically challenged are two Orders issued by Judge Silvino T. Pampilo, Jr. of the Regional Trial Court
(RTC) of Manila, Branch 26 in Civil Case Nos. 03-105850 and 03-106224.
The first assailed Order of September 8, 2005, 2 which resolved a motion for reconsideration filed by herein
respondents, declared Executive Order (E.O.) No. 179, hereafter referred to as the E.O., "unconstitutional as it
constitutes an unreasonable exercise of police power." The second assailed Order of November 23,
20053 denied petitioners motion for reconsideration.
The following facts are not disputed:
President Gloria Macapagal Arroyo issued the E.O. on February 10, 2003, "Providing for the Establishment of
Greater Manila Mass Transport System," the pertinent portions of which read:
WHEREAS, Metro Manila continues to be the center of employment opportunities,
trade and commerce of the Greater Metro Manila area;
WHEREAS, the traffic situation in Metro Manila has affected the adjacent provinces of
Bulacan, Cavite, Laguna, and Rizal, owing to the continued movement of residents and
industries to more affordable and economically viable locations in these provinces;
WHEREAS, the Metropolitan Manila Development Authority (MMDA) is tasked to
undertake measures to ease traffic congestion in Metro Manila and ensure the
convenient and efficient travel of commuters within its jurisdiction;
WHEREAS, a primary cause of traffic congestion in Metro Manila has been the
numerous buses plying the streets that impedes [sic] the flow of vehicles and
commuters due to the inefficient connectivity of the different transport modes;
WHEREAS, the MMDA has recommended a plan to decongest traffic by eliminating
the bus terminals now located along major Metro Manila thoroughfares and providing
more convenient access to the mass transport system to the commuting public through
the provision of mass transport terminal facilities that would integrate the existing
transport modes, namely the buses, the rail-based systems of the LRT, MRT and PNR

and to facilitate and ensure efficient travel through the improved connectivity of the
different transport modes;
WHEREAS, the national government must provide the necessary funding requirements
to immediately implement and render operational these projects; and extent to MMDA
such other assistance as may be warranted to ensure their expeditious prosecution.
NOW, THEREFORE, I, GLORIA MACAPAGAL-ARROYO, President of the
Philippines, by virtue of the powers vested in me by law, do hereby order:
Section 1. THE PROJECT. The project shall be identified as GREATER MANILA
TRANSPORT SYSTEM Project.
Section 2. PROJECT OBJECTIVES. In accordance with the plan proposed by
MMDA, the project aims to develop four (4) interim intermodal mass transport terminals
to integrate the different transport modes, as well as those that shall hereafter be
developed, to serve the commuting public in the northwest, north, east, south, and
southwest of Metro Manila. Initially, the project shall concentrate on immediately
establishing the mass transport terminals for the north and south Metro Manila
commuters as hereinafter described.
Section 3. PROJECT IMPLEMENTING AGENCY. The Metropolitan Manila
Development Authority (MMDA), is hereby designated as the implementing Agency
for the project. For this purpose, MMDA is directed to undertake such infrastructure
development work as may be necessary and, thereafter, manage the project until it
may be turned-over to more appropriate agencies, if found suitable and convenient.
Specifically, MMDA shall have the following functions and responsibilities:
a) Cause the preparation of the Master Plan for the projects,
including the designs and costing;
b) Coordinate the use of the land and/or properties needed for
the project with the respective agencies and/or entities owning
them;
c) Supervise and manage the construction of the necessary
structures and facilities;
d) Execute such contracts or agreements as may be necessary,
with the appropriate government agencies, entities, and/or
private persons, in accordance with existing laws and pertinent
regulations, to facilitate the implementation of the project;
e) Accept, manage and disburse such funds as may be
necessary for the construction and/or implementation of the
projects, in accordance with prevailing accounting and audit
polices and practice in government.
f) Enlist the assistance of any national government agency,
office or department, including local government units,
government-owned or controlled corporations, as may be
necessary;
g) Assign or hire the necessary personnel for the above
purposes; and
h) Perform such other related functions as may be necessary to
enable it to accomplish the objectives and purposes of this
Executive Order.4 (Emphasis in the original; underscoring
supplied)
As the above-quoted portions of the E.O. noted, the primary cause of traffic congestion in Metro Manila has
been the numerous buses plying the streets and the inefficient connectivity of the different transport
modes;5 and the MMDA had "recommended a plan to decongest traffic by eliminating the bus terminals now
located along major Metro Manila thoroughfares and providing more and convenient access to the mass
transport system to the commuting public through the provision of mass transport terminal facilities" 6 which
plan is referred to under the E.O. as the Greater Manila Mass Transport System Project (the Project).
The E.O. thus designated the MMDA as the implementing agency for the Project.
Pursuant to the E.O., the Metro Manila Council (MMC), the governing board and policymaking body of the
MMDA, issued Resolution No. 03-07 series of 20037 expressing full support of the Project. Recognizing the
imperative to integrate the different transport modes via the establishment of common bus parking terminal
areas, the MMC cited the need to remove the bus terminals located along major thoroughfares of Metro
Manila.8
On February 24, 2003, Viron Transport Co., Inc. (Viron), a domestic corporation engaged in the business of
public transportation with a provincial bus operation,9 filed a petition for declaratory relief 10 before the RTC11 of
Manila.

Page 63 of 66
In its petition which was docketed as Civil Case No. 03-105850, Viron alleged that the MMDA, through
Chairman Fernando, was "poised to issue a Circular, Memorandum or Order closing, or tantamount to closing,
all provincial bus terminals along EDSA and in the whole of the Metropolis under the pretext of traffic
regulation."12 This impending move, it stressed, would mean the closure of its bus terminal in Sampaloc,
Manila and two others in Quezon City.
Alleging that the MMDAs authority does not include the power to direct provincial bus operators to abandon
their existing bus terminals to thus deprive them of the use of their property, Viron asked the court to construe
the scope, extent and limitation of the power of the MMDA to regulate traffic under R.A. No. 7924, "An Act
Creating the Metropolitan Manila Development Authority, Defining its Powers and Functions, Providing Funds
Therefor and For Other Purposes."
Viron also asked for a ruling on whether the planned closure of provincial bus terminals would contravene the
Public Service Act and related laws which mandate public utilities to provide and maintain their own terminals
as a requisite for the privilege of operating as common carriers. 13
Mencorp Transportation System, Inc. (Mencorp), another provincial bus operator, later filed a similar petition
for declaratory relief14 against Executive Secretary Alberto G. Romulo and MMDA Chairman Fernando.
Mencorp asked the court to declare the E.O. unconstitutional and illegal for transgressing the possessory
rights of owners and operators of public land transportation units over their respective terminals.
Averring that MMDA Chairman Fernando had begun to implement a plan to close and eliminate all provincial
bus terminals along EDSA and in the whole of the metropolis and to transfer their operations to common bus
terminals,15 Mencorp prayed for the issuance of a temporary restraining order (TRO) and/or writ of preliminary
injunction to restrain the impending closure of its bus terminals which it was leasing at the corner of EDSA and
New York Street in Cubao and at the intersection of Blumentritt, Laon Laan and Halcon Streets in Quezon City.
The petition was docketed as Civil Case No. 03-106224 and was raffled to Branch 47 of the RTC of Manila.
Mencorps petition was consolidated on June 19, 2003 with Virons petition which was raffled to Branch 26 of
the RTC, Manila.
Mencorps prayer for a TRO and/or writ of injunction was denied as was its application for the issuance of a
preliminary injunction.16
In the Pre-Trial Order17 issued by the trial court, the issues were narrowed down to whether 1) the MMDAs
power to regulate traffic in Metro Manila included the power to direct provincial bus operators to abandon and
close their duly established and existing bus terminals in order to conduct business in a common terminal; (2)
the E.O. is consistent with the Public Service Act and the Constitution; and (3) provincial bus operators would
be deprived of their real properties without due process of law should they be required to use the common bus
terminals.
Upon the agreement of the parties, they filed their respective position papers in lieu of hearings.
By Decision18 of January 24, 2005, the trial court sustained the constitutionality and legality of the E.O.
pursuant to R.A. No. 7924, which empowered the MMDA to administer Metro Manilas basic services including
those of transport and traffic management.
The trial court held that the E.O. was a valid exercise of the police power of the State as it satisfied the two
tests of lawful subject matter and lawful means, hence, Virons and Mencorps property rights must yield to
police power.
On the separate motions for reconsideration of Viron and Mencorp, the trial court, by Order of September 8,
2005, reversed its Decision, this time holding that the E.O. was "an unreasonable exercise of police power";
that the authority of the MMDA under Section (5)(e) of R.A. No. 7924 does not include the power to order the
closure of Virons and Mencorps existing bus terminals; and that the E.O. is inconsistent with the provisions of
the Public Service Act.
Petitioners motion for reconsideration was denied by Resolution of November 23, 2005.
Hence, this petition, which faults the trial court for failing to rule that: (1) the requisites of declaratory relief are
not present, there being no justiciable controversy in Civil Case Nos. 03-105850 and 03-106224; and (2) the
President has the authority to undertake or cause the implementation of the Project. 19
Petitioners contend that there is no justiciable controversy in the cases for declaratory relief as nothing in the
body of the E.O. mentions or orders the closure and elimination of bus terminals along the major
thoroughfares of Metro Manila. Viron and Mencorp, they argue, failed to produce any letter or communication
from the Executive Department apprising them of an immediate plan to close down their bus terminals.
And petitioners maintain that the E.O. is only an administrative directive to government agencies to coordinate
with the MMDA and to make available for use government property along EDSA and South Expressway
corridors. They add that the only relation created by the E.O. is that between the Chief Executive and the
implementing officials, but not between third persons.
The petition fails.
It is true, as respondents have pointed out, that the alleged deficiency of the consolidated petitions to meet the
requirement of justiciability was not among the issues defined for resolution in the Pre-Trial Order of January
12, 2004. It is equally true, however, that the question was repeatedly raised by petitioners in their Answer to
Virons petition,20 their Comment of April 29, 2003 opposing Mencorps prayer for the issuance of a TRO, 21 and
their Position Paper of August 23, 2004.22

In bringing their petitions before the trial court, both respondents pleaded the existence of the essential
requisites for their respective petitions for declaratory relief, 23 and refuted petitioners contention that a
justiciable controversy was lacking. 24 There can be no denying, therefore, that the issue was raised and
discussed by the parties before the trial court.
The following are the essential requisites for a declaratory relief petition: (a) there must be a justiciable
controversy; (b) the controversy must be between persons whose interests are adverse; (c) the party seeking
declaratory relief must have a legal interest in the controversy; and (d) the issue invoked must be ripe for
judicial determination.25
The requirement of the presence of a justiciable controversy is satisfied when an actual controversy or
the ripening seeds thereof exist between the parties, all of whom are sui juris and before the court, and the
declaration sought will help in ending the controversy.26 A question becomes justiciable when it is translated
into a claim of right which is actually contested.27
In the present cases, respondents resort to court was prompted by the issuance of the E.O. The 4th Whereas
clause of the E.O. sets out in clear strokes the MMDAs plan to "decongest traffic by eliminating the bus
terminals now located along major Metro Manila thoroughfares and providing more convenient access to the
mass transport system to the commuting public through the provision of mass transport terminal facilities x x
x." (Emphasis supplied)
Section 2 of the E.O. thereafter lays down the immediate establishment of common bus terminals for northand south-bound commuters. For this purpose, Section 8 directs the Department of Budget and Management
to allocate funds of not more than one hundred million pesos (P100,000,000) to cover the cost of the
construction of the north and south terminals. And the E.O. was made effective immediately.
The MMDAs resolve to immediately implement the Project, its denials to the contrary notwithstanding, is also
evident from telltale circumstances, foremost of which was the passage by the MMC of Resolution No. 03-07,
Series of 2003 expressing its full support of the immediate implementation of the Project.
Notable from the 5th Whereas clause of the MMC Resolution is the plan to "remove the bus terminals located
along major thoroughfares of Metro Manila and an urgent need to integrate the different transport modes." The
7th Whereas clause proceeds to mention the establishment of the North and South terminals.
As alleged in Virons petition, a diagram of the GMA-MTS North Bus/Rail Terminal had been drawn up, and
construction of the terminal is already in progress. The MMDA, in its Answer 28 and Position Paper,29 in fact
affirmed that the government had begun to implement the Project.
It thus appears that the issue has already transcended the boundaries of what is merely conjectural or
anticipatory.lawphil
Under the circumstances, for respondents to wait for the actual issuance by the MMDA of an order for the
closure of respondents bus terminals would be foolhardy for, by then, the proper action to bring would no
longer be for declaratory relief which, under Section 1, Rule 63 30 of the Rules of Court, must be
brought before there is a breach or violation of rights.
As for petitioners contention that the E.O. is a mere administrative issuance which creates no relation with
third persons, it does not persuade. Suffice it to stress that to ensure the success of the Project for which the
concerned government agencies are directed to coordinate their activities and resources, the existing bus
terminals owned, operated or leased by third persons like respondents would have to be eliminated; and
respondents would be forced to operate from the common bus terminals.
It cannot be gainsaid that the E.O. would have an adverse effect on respondents. The closure of their bus
terminals would mean, among other things, the loss of income from the operation and/or rentals of stalls
thereat. Precisely, respondents claim a deprivation of their constitutional right to property without due process
of law.
Respondents have thus amply demonstrated a "personal and substantial interest in the case such that [they
have] sustained, or will sustain, direct injury as a result of [the E.O.s] enforcement." 31 Consequently, the
established rule that the constitutionality of a law or administrative issuance can be challenged by one who will
sustain a direct injury as a result of its enforcement has been satisfied by respondents.
On to the merits of the case.
Respondents posit that the MMDA is devoid of authority to order the elimination of their bus terminals under
the E.O. which, they argue, is unconstitutional because it violates both the Constitution and the Public Service
Act; and that neither is the MMDA clothed with such authority under R.A. No. 7924.
Petitioners submit, however, that the real issue concerns the Presidents authority to undertake or to cause the
implementation of the Project. They assert that the authority of the President is derived from E.O. No. 125,
"Reorganizing the Ministry of Transportation and Communications Defining its Powers and Functions and for
Other Purposes," her residual power and/or E.O. No. 292, otherwise known as the Administrative Code of
1987. They add that the E.O. is also a valid exercise of the police power.
E.O. No. 125,32 which former President Corazon Aquino issued in the exercise of legislative powers,
reorganized the then Ministry (now Department) of Transportation and Communications. Sections 4, 5, 6 and
22 of E.O. 125, as amended by E.O. 125-A,33 read:
SECTION 4. Mandate. The Ministry shall be the primary policy, planning, programming,
coordinating, implementing, regulating and administrative entity of the Executive Branch of

Page 64 of 66
the government in the promotion, development and regulation of dependable and
coordinated networks of transportation and communication systems as well as in the fast, safe,
efficient and reliable postal, transportation and communications services.
To accomplish such mandate, the Ministry shall have the following objectives:
(a) Promote the development of dependable and coordinated networks of
transportation and communications systems;
(b) Guide government and private investment in the development of
the countrys intermodal transportation and communications
systems in a most practical, expeditious, and orderly fashion for maximum
safety, service, and cost effectiveness; (Emphasis and underscoring
supplied)
xxxx
SECTION 5. Powers and Functions. To accomplish its mandate, the Ministry shall have the
following powers and functions:
(a) Formulate and recommend national policies and guidelines for the
preparation and implementation of integrated and comprehensive
transportation and communications systems at the national, regional and
local levels;
(b) Establish and administer comprehensive and integrated programs
for transportation and communications, and for this purpose, may call
on any agency, corporation, or organization, whether public or private,
whose development programs include transportation and communications
as an integral part thereof, to participate and assist in the preparation and
implementation of such program;
(c) Assess, review and provide direction to transportation and
communications research and development programs of the government in
coordination with other institutions concerned;
(d) Administer all laws, rules and regulations in the field of
transportation and communications; (Emphasis and underscoring
supplied)
xxxx
SECTION 6. Authority and Responsibility. The authority and responsibility for the exercise
of the mandate of the Ministry and for the discharge of its powers and functions shall
be vested in the Minister of Transportation and Communications, hereinafter referred to as
the Minister, who shall have supervision and control over the Ministry and shall be appointed by
the President. (Emphasis and underscoring supplied)
SECTION 22. Implementing Authority of Minister. The Minister shall issue such orders,
rules, regulations and other issuances as may be necessary to ensure the effective
implementation of the provisions of this Executive Order. (Emphasis and underscoring
supplied)
It is readily apparent from the abovequoted provisions of E.O. No. 125, as amended, that the President, then
possessed of and exercising legislative powers, mandated the DOTC to be the primary policy, planning,
programming, coordinating, implementing, regulating and administrative entity to promote, develop and
regulate networks of transportation and communications. The grant of authority to the DOTC includes the
power toestablish and administer comprehensive and integrated programs for transportation and
communications.
As may be seen further, the Minister (now Secretary) of the DOTC is vested with the authority and
responsibility to exercise the mandate given to the department. Accordingly, the DOTC Secretary is authorized
to issue such orders, rules, regulations and other issuances as may be necessary to ensure the effective
implementation of the law.
Since, under the law, the DOTC is authorized to establish and administer programs and projects for
transportation, it follows that the President may exercise the same power and authority to order the
implementation of the Project, which admittedly is one for transportation.
Such authority springs from the Presidents power of control over all executive departments as well as the
obligation for the faithful execution of the laws under Article VII, Section 17 of the Constitution which provides:
SECTION 17. The President shall have control of all the executive departments, bureaus and
offices. He shall ensure that the laws be faithfully executed.
This constitutional provision is echoed in Section 1, Book III of the Administrative Code of 1987. Notably,
Section 38, Chapter 37, Book IV of the same Code defines the Presidents power of supervision and control
over the executive departments, viz:
SECTION 38. Definition of Administrative Relationships. Unless otherwise expressly stated in
the Code or in other laws defining the special relationships of particular agencies, administrative
relationships shall be categorized and defined as follows:

(1) Supervision and Control. Supervision and control shall include authority to
act directly whenever a specific function is entrusted by law or regulation to a subordinate;
direct the performance of duty; restrain the commission of acts; review, approve, reverse or modify
acts and decisions of subordinate officials or units; determine priorities in the execution of plans
and programs. Unless a different meaning is explicitly provided in the specific law governing the
relationship of particular agencies the word "control" shall encompass supervision and control as
defined in this paragraph. x x x (Emphasis and underscoring supplied)
Thus, whenever a specific function is entrusted by law or regulation to a subordinate, the President may act
directly or merely direct the performance of a duty.34
Respecting the Presidents authority to order the implementation of the Project in the exercise of the police
power of the State, suffice it to stress that the powers vested in the DOTC Secretary to establish and
administer comprehensive and integrated programs for transportation and communications and to issue
orders, rules and regulations to implement such mandate (which, as previously discussed, may also be
exercised by the President) have been so delegated for the good and welfare of the people. Hence, these
powers partake of the nature of police power.
Police power is the plenary power vested in the legislature to make, ordain, and establish wholesome and
reasonable laws, statutes and ordinances, not repugnant to the Constitution, for the good and welfare of the
people.35 This power to prescribe regulations to promote the health, morals, education, good order or safety,
and general welfare of the people flows from the recognition that salus populi est suprema lex the welfare of
the people is the supreme law.
While police power rests primarily with the legislature, such power may be delegated, as it is in fact
increasingly being delegated.36 By virtue of a valid delegation, the power may be exercised by the President
and administrative boards37 as well as by the lawmaking bodies of municipal corporations or local
governments under an express delegation by the Local Government Code of 1991. 38
The authority of the President to order the implementation of the Project notwithstanding, the designation of
the MMDA as the implementing agency for the Project may not be sustained. It is ultra vires, there being no
legal basis therefor.
It bears stressing that under the provisions of E.O. No. 125, as amended, it is the DOTC, and not the MMDA,
which is authorized to establish and implement a project such as the one subject of the cases at bar. Thus, the
President, although authorized to establish or cause the implementation of the Project, must exercise the
authority through the instrumentality of the DOTC which, by law, is the primary implementing and
administrative entity in the promotion, development and regulation of networks of transportation, and the one
so authorized to establish and implement a project such as the Project in question.
By designating the MMDA as the implementing agency of the Project, the President clearly overstepped the
limits of the authority conferred by law, rendering E.O. No. 179 ultra vires.
In another vein, the validity of the designation of MMDA flies in the absence of a specific grant of authority to it
under R.A. No. 7924.
To recall, R.A. No. 7924 declared the Metropolitan Manila area 39 as a "special development and administrative
region" and placed the administration of "metro-wide" basic services affecting the region under the MMDA.
Section 2 of R.A. No. 7924 specifically authorizes the MMDA to perform "planning, monitoring and
coordinative functions, and in the process exercise regulatory and supervisory authority over the delivery of
metro-wide services," including transport and traffic management. 40 Section 5 of the same law enumerates the
powers and functions of the MMDA as follows:
(a) Formulate, coordinate and regulate the implementation of medium and long-term
plans and programs for the delivery of metro-wide services, land use and physical
development within Metropolitan Manila, consistent with national development
objectives and priorities;
(b) Prepare, coordinate and regulate the implementation of medium-term investment
programs for metro-wide services which shall indicate sources and uses of funds for
priority programs and projects, and which shall include the packaging of projects and
presentation to funding institutions;
(c) Undertake and manage on its own metro-wide programs and projects for the
delivery of specific services under its jurisdiction, subject to the approval of the Council.
For this purpose, MMDA can create appropriate project management offices;
(d) Coordinate and monitor the implementation of such plans, programs and projects in
Metro Manila; identify bottlenecks and adopt solutions to problems of implementation;
(e) The MMDA shall set the policies concerning traffic in Metro Manila, and shall
coordinate and regulate the implementation of all programs and projects
concerning traffic management, specifically pertaining to enforcement,
engineering and education. Upon request, it shall be extended assistance and
cooperation, including but not limited to, assignment of personnel, by all other
government agencies and offices concerned;

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(f) Install and administer a single ticketing system, fix, impose and collect fines
and penalties for all kinds of violations of traffic rules and regulations , whether
moving or non-moving in nature, and confiscate and suspend or revoke drivers
licenses in the enforcement of such traffic laws and regulations, the provisions of RA
4136 and PD 1605 to the contrary notwithstanding. For this purpose, the Authority shall
impose all traffic laws and regulations in Metro Manila, through its traffic operation
center, and may deputize members of the PNP, traffic enforcers of local government
units, duly licensed security guards, or members of non-governmental organizations to
whom may be delegated certain authority, subject to such conditions and requirements
as the Authority may impose; and
(g) Perform other related functions required to achieve the objectives of the MMDA,
including the undertaking of delivery of basic services to the local government units,
when deemed necessary subject to prior coordination with and consent of the local
government unit concerned." (Emphasis and underscoring supplied)
The scope of the function of MMDA as an administrative, coordinating and policy-setting body has been
settled inMetropolitan Manila Development Authority (MMDA) v. Bel-Air Village Association, Inc.41 In that case,
the Court stressed:
Clearly, the scope of the MMDAs function is limited to the delivery of the seven (7) basic services.
One of these is transport and traffic management which includes the formulation and monitoring
of policies, standards and projects to rationalize the existing transport operations, infrastructure
requirements, the use of thoroughfares and promotion of the safe movement of persons and
goods. It also covers the mass transport system and the institution of a system of road
regulation, the administration of all traffic enforcement operations, traffic engineering services and
traffic education programs, including the institution of a single ticketing system in Metro Manila for
traffic violations. Under this service, the MMDA is expressly authorized to "to set the policies
concerning traffic" and "coordinate and regulate the implementation of all traffic management
programs." In addition, the MMDA may install and administer a single ticketing system," fix, impose
and collect fines and penalties for all traffic violations.
It will be noted that the powers of the MMDA are limited to the following acts: formulation,
coordination, regulation, implementation, preparation, management, monitoring, setting of policies,
installation of a system and administration. There is no syllable in R.A. No. 7924 that grants the
MMDA police power, let alone legislative power. Even the Metro Manila Council has not been
delegated any legislative power. Unlike the legislative bodies of the local government
units, there is no provision in R.A. No. 7924 that empowers the MMDA or its Council to
enact ordinances, approve resolutions and appropriate funds for the general welfare of the
inhabitants of Metro Manila. The MMDA is, as termed in the charter itself, a development
authority. It is an agency created for the purpose of laying down
policies andcoordinating with the various national government agencies, peoples
organizations, non-governmental organizations and the private sector for the efficient and
expeditious delivery of basic services in the vast metropolitan area. All its functions are
administrative in nature and these are actually summed up in the charter itself, viz:
SECTION 2. Creation of the Metropolitan Manila Development Authority. . . .
The MMDA shall perform planning, monitoring and coordinative functions, and in
the processexercise regulatory and supervisory authority over the delivery of
metro-wide services within Metro Manila, without diminution of the autonomy of the
local government units concerning purely local matters. 42 (Emphasis and underscoring
supplied)
In light of the administrative nature of its powers and functions, the MMDA is devoid of authority to implement
the Project as envisioned by the E.O; hence, it could not have been validly designated by the President to
undertake the Project. It follows that the MMDA cannot validly order the elimination of respondents terminals.
Even the MMDAs claimed authority under the police power must necessarily fail in consonance with the
above-quoted ruling in MMDA v. Bel-Air Village Association, Inc. and this Courts subsequent ruling
in Metropolitan Manila Development Authority v. Garin 43 that the MMDA is not vested with police power.
Even assuming arguendo that police power was delegated to the MMDA, its exercise of such power does not
satisfy the two tests of a valid police power measure, viz: (1) the interest of the public generally, as
distinguished from that of a particular class, requires its exercise; and (2) the means employed are reasonably
necessary for the accomplishment of the purpose and not unduly oppressive upon individuals. 44 Stated
differently, the police power legislation must be firmly grounded on public interest and welfare and a
reasonable relation must exist between the purposes and the means.
As early as Calalang v. Williams,45 this Court recognized that traffic congestion is a public, not merely a
private, concern. The Court therein held that public welfare underlies the contested statute authorizing the
Director of Public Works to promulgate rules and regulations to regulate and control traffic on national roads.

Likewise, in Luque v. Villegas,46 this Court emphasized that public welfare lies at the bottom of any regulatory
measure designed "to relieve congestion of traffic, which is, to say the least, a menace to public safety." 47 As
such, measures calculated to promote the safety and convenience of the people using the thoroughfares by
the regulation of vehicular traffic present a proper subject for the exercise of police power.
Notably, the parties herein concede that traffic congestion is a public concern that needs to be addressed
immediately. Indeed, the E.O. was issued due to the felt need to address the worsening traffic congestion in
Metro Manila which, the MMDA so determined, is caused by the increasing volume of buses plying the major
thoroughfares and the inefficient connectivity of existing transport systems. It is thus beyond cavil that the
motivating force behind the issuance of the E.O. is the interest of the public in general.
Are the means employed appropriate and reasonably necessary for the accomplishment of the purpose. Are
they not duly oppressive?
With the avowed objective of decongesting traffic in Metro Manila, the E.O. seeks to "eliminate[e] the bus
terminals now located along major Metro Manila thoroughfares and provid[e] more convenient access to the
mass transport system to the commuting public through the provision of mass transport terminal facilities x x
x."48 Common carriers with terminals along the major thoroughfares of Metro Manila would thus be compelled
to close down their existing bus terminals and use the MMDA-designated common parking areas.
In Lucena Grand Central Terminal, Inc. v. JAC Liner, Inc.,49 two city ordinances were passed by
the Sangguniang Panlungsod of Lucena, directing public utility vehicles to unload and load passengers at the
Lucena Grand Central Terminal, which was given the exclusive franchise to operate a single common terminal.
Declaring that no other terminals shall be situated, constructed, maintained or established inside or within the
city of Lucena, thesanggunian declared as inoperable all temporary terminals therein.
The ordinances were challenged before this Court for being unconstitutional on the ground that, inter alia, the
measures constituted an invalid exercise of police power, an undue taking of private property, and a violation
of the constitutional prohibition against monopolies.
Citing De la Cruz v. Paras50 and Lupangco v. Court of Appeals,51 this Court held that the assailed ordinances
were characterized by overbreadth, as they went beyond what was reasonably necessary to solve the traffic
problem in the city. And it found that the compulsory use of the Lucena Grand Terminal was unduly oppressive
because it would subject its users to fees, rentals and charges.
The true role of Constitutional Law is to effect an equilibrium between authority and liberty so that
rights are exercised within the framework of the law and the laws are enacted with due deference
to rights.
A due deference to the rights of the individual thus requires a more careful formulation of solutions
to societal problems.
From the memorandum filed before this Court by petitioner, it is gathered that the Sangguniang
Panlungsod had identified the cause of traffic congestion to be the indiscriminate loading and
unloading of passengers by buses on the streets of the city proper, hence, the conclusion that the
terminals contributed to the proliferation of buses obstructing traffic on the city streets.
Bus terminals per se do not, however, impede or help impede the flow of traffic. How the outright
proscription against the existence of all terminals, apart from that franchised to petitioner,
can be considered as reasonably necessary to solve the traffic problem, this Court has not
been enlightened. If terminals lack adequate space such that bus drivers are compelled to load
and unload passengers on the streets instead of inside the terminals, then reasonable
specifications for the size of terminals could be instituted, with permits to operate the same denied
those which are unable to meet the specifications.
In the subject ordinances, however, the scope of the proscription against the maintenance
of terminals is so broad that even entities which might be able to provide facilities better
than the franchised terminal are barred from operating at all. (Emphasis and underscoring
supplied)
As in Lucena, this Court fails to see how the prohibition against the existence of respondents terminals can be
considered a reasonable necessity to ease traffic congestion in the metropolis. On the contrary, the elimination
of respondents bus terminals brings forth the distinct possibility and the equally harrowing reality of traffic
congestion in the common parking areas, a case of transference from one site to another.
Less intrusive measures such as curbing the proliferation of "colorum" buses, vans and taxis entering Metro
Manila and using the streets for parking and passenger pick-up points, as respondents suggest, might even be
more effective in easing the traffic situation. So would the strict enforcement of traffic rules and the removal of
obstructions from major thoroughfares.
As to the alleged confiscatory character of the E.O., it need only to be stated that respondents certificates of
public convenience confer no property right, and are mere licenses or privileges. 52 As such, these must yield to
legislation safeguarding the interest of the people.
Even then, for reasons which bear reiteration, the MMDA cannot order the closure of respondents terminals
not only because no authority to implement the Project has been granted nor legislative or police power been
delegated to it, but also because the elimination of the terminals does not satisfy the standards of a valid
police power measure.

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Finally, an order for the closure of respondents terminals is not in line with the provisions of the Public Service
Act.
Paragraph (a), Section 13 of Chapter II of the Public Service Act (now Section 5 of Executive Order No. 202,
creating the Land Transportation Franchising and Regulatory Board or LFTRB) vested the Public Service
Commission (PSC, now the LTFRB) with "x x x jurisdiction, supervision and control over all public services and
their franchises, equipment and other properties x x x."
Consonant with such grant of authority, the PSC was empowered to "impose such conditions as to
construction, equipment, maintenance, service, or operation as the public interests and convenience may
reasonably require"53 in approving any franchise or privilege.
Further, Section 16 (g) and (h) of the Public Service Act 54 provided that the Commission shall have the power,
upon proper notice and hearing in accordance with the rules and provisions of this Act, subject to the
limitations and exceptions mentioned and saving provisions to the contrary:
(g) To compel any public service to furnish safe, adequate, and proper service as regards the
manner of furnishing the same as well as the maintenance of the necessary material and
equipment.
(h) To require any public service to establish, construct, maintain, and operate any reasonable
extension of its existing facilities, where in the judgment of said Commission, such extension is
reasonable and practicable and will furnish sufficient business to justify the construction and
maintenance of the same and when the financial condition of the said public service reasonably
warrants the original expenditure required in making and operating such extension.(Emphasis and
underscoring supplied)

The establishment, as well as the maintenance of vehicle parking areas or passenger terminals, is generally
considered a necessary service to be provided by provincial bus operators like respondents, hence, the
investments they have poured into the acquisition or lease of suitable terminal sites. Eliminating the terminals
would thus run counter to the provisions of the Public Service Act.
This Court commiserates with the MMDA for the roadblocks thrown in the way of its efforts at solving the
pestering problem of traffic congestion in Metro Manila. These efforts are commendable, to say the least, in
the face of the abominable traffic situation of our roads day in and day out. This Court can only interpret, not
change, the law, however. It needs only to be reiterated that it is the DOTC as the primary policy, planning,
programming, coordinating, implementing, regulating and administrative entity to promote, develop and
regulate networks of transportation and communications which has the power to establish and
administer a transportation project like the Project subject of the case at bar.
No matter how noble the intentions of the MMDA may be then, any plan, strategy or project which it is not
authorized to implement cannot pass muster.
WHEREFORE, the Petition is, in light of the foregoing disquisition, DENIED. E.O. No. 179 is declared NULL
and VOID for being ultra vires.
SO ORDERED.
Puno, C.J., Quisumbing, Ynares-Santiago, Sandoval-Gutierrez, Carpio, Austria-Martinez, Corona, Azcuna,
Tinga, Chico-Nazario, Garcia, Velasco, Jr., Nachura, Reyes, JJ., concur.