FIRST DIVISION
— The Constitutional Convention saw to
[G.R. No. L-32096. October 24, 1970.]
ROMEO F. EDU, in his capacity as Land Transportation Commissioner, petitioner, vs. HON. VICENTE
G. ERICTA, in his capacity as Judge of the Court of First Instance of Rizal, Br. XVIII, Quezon City, and
TEDDY C. GALO, respondents.
Solicitor General Felix Q. Antonio, Acting Assistant Solicitor General Hector C. Fule and Solicitor Vicente A.
Torres for petitioner.
Teddy C. Galo in his own behalf.
Judge Vicente Ericta in his own behalf.
SYLLABUS
1. POLITICAL LAW; CONSTITUTIONAL LAW; STATUTES; DETERMINATION OF VALIDITY IN
CERTIORARI PROCEEDINGS. — There is no principle of constitutional adjudication that bars the Supreme
Court from passing upon the question of the validity of a legislative enactment in a proceeding for
certiorari before it to test the propriety of the issuance of a preliminary injunction.
2. ID.; ID.; POLICE POWER; GENERALLY. — Police power is the authority of the state to enact
legislation that may interfere with personal liberty or property in order to promote the general welfare. It
is the power to prescribe regulations to promote the health, morals, peace, education, good order or
safety, and general welfare of the people. In negative terms, it is 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 with the totality of legislative power.
3. ID.; ID.; ID.; SCOPE. — It is in the above sense the greatest and most powerful attribute of
government. 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 benefit. 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 insure communal peace, safety, good order, and welfare.
4. ID.; ID.; ID.; PROMOTION OF PUBLIC SAFETY, REFLECTOR LAW. — It would be to overturn a
host of decisions impressive for their number and unanimity were this Court to sustain the attack on the
Reflector Law (Republic Act No. 5715) ostensibly for disregarding the due process safeguard. It would be
to close one's eyes to the hazards of traffic in the evening to condemn a statute of this character. Such an
attitude betrays lack of concern for public safety. The statute assailed is not infected with arbitrariness. It
is not the product of whim or caprice. It is far from oppressive. It is a legitimate response to a felt public
need. It can stand the test of the most unsympathetic appraisal.
5. ID.; ID.; ID.; DOCTRINE OF LAISSEZ-FAIRE REJECTED.
it that the concept of laissez-faire was rejected. It entrusted to our government the responsibility of coping
with social and economic problems with the commensurate power of control over economic affairs.
Thereby it could live up to its commitment to promote the general welfare through state action. No
constitutional objection to regulatory measures adversely affecting property rights, especially so when
public safety is the aim, is likely to be heeded, unless on the clearest and most satisfactory proof of
invasion of rights guaranteed by the Constitution. On such a showing, there maybe declaration of nullity,
not because the laissez-faire principle was disregarded, but because the due process, equal protection or
non-impairment guarantees would call for vindication.
6. ID.; ID.; DELEGATION OF LEGISLATIVE POWERS; GENERALLY. — It is a fundamental principle
flowing from the doctrine of separation of powers that Congress may not delegate its legislative power to
the two other branches of the government, subject to the exception that local governments may over local
affairs participate in its exercise. 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 all its term and provision
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 enactment.
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.
7. ID.; ID.; ID.; NECESSITY OF LEGISLATIVE STANDARD AND POLICY. — 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. A standard thus 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 purpose may be carried out. Thereafter, the executive or
administrative office designated may in pursuance of the above guidelines promulgate supplemental rules
and regulations.
8. ID.; ID.; ID.; VALIDITY OF ADMINISTRATIVE ORDER IMPLEMENTING THE REFLECTOR LAW. —
Administrative Order No. 2 of the Land Transportation Commissioner, issued pursuant to the authority
granted him to promulgate rules and regulations, giving life to and translating into actuality the
fundamental purpose of the Reflector Law to promote public safety, is not invalid as an undue exercise of
legislative power.
DECISION
FERNANDO, J p:
Petitioner Romeo F. Edu, the Land Transportation Commissioner, would have us rule squarely on the
constitutionality of the Reflector Law 1 in this proceeding for certiorari and prohibition against
respondent Judge, the Honorable Vicente G. Ericta of the Court of First Instance of Rizal, Quezon City
Branch, be annul and set aside his order for the issuance of a writ of preliminary injunction directed
against Administrative Order No. 2 of petitioner for the enforcement of the aforesaid statute, in a pending
suit in his court for certiorari and prohibition, filed by the other respondent Teddy C. Galo assailing the
validity of such enactment as well as such administrative order. Respondent Judge, in his answer, would
join such a plea asking that the constitutional and legal questions raised be decided "once and for all."
Respondent Teddy C. Galo, who was quite categorical in his assertion that both the challenged legislation
and the administrative order transgress the constitutional requirements of due process and
nondelegation, is not averse either to such a definitive ruling. Considering the great public interest
involved and the reliance by respondent Galo on the allegation that the repugnancy to the fundamental law
could be discerned on the face of the statute as enacted and the executive order as promulgated, this Court
sees no obstacle to the determination in this proceeding of the constitutional questions raised. For reasons
to be hereafter stated, we sustain the validity of the Reflector Law and Administrative Order No. 2 issued
in the implementation thereof, the imputation of constitutional infirmity being at best flimsy and
insubstantial.
As noted in the answer of respondent Judge, respondent Galo on his behalf and that of other motorists
filed on May 20, 1970 a suit for certiorari and prohibition with preliminary injunction assailing the validity
of the challenged Act as an invalid exercise of the police power, for being violative of the due process
clause. This he followed on May 28, 1970 with a manifestation wherein he sought as an alternative remedy
that, in the event that respondent Judge would hold said statute constitutional, Administrative Order No, 2
of the Land Transportation Commissioner, now petitioner, implementing such legislation be nullified as an
undue exercise of legislative power. There was a healing on the plea for the issuance of a writ of
preliminary injunction held on May 27, 1970 where both parties were duly represented, but no evidence
was presented. The next day, on May 28, 1970, respondent Judge ordered the issuance of a preliminary
injunction directed against the enforcement of such administrative order. There was, the day after, a
motion for its reconsideration filed by the Solicitor General representing petitioner. In the meanwhile, the
clerk of court of respondent Judge issued on June 1, 1970 the writ of preliminary injunction upon the filing
of the required bond. The answer before the lower court was filed by petitioner Edu on June 4, 1970.
Thereafter, on June 9, 1970, respondent Judge denied the motion for reconsideration of the order of
injunction. Hence this petition for certiorari and prohibition filed with this Court on June 18, 1970.
In a resolution of June 22, 1970, this Court required respondents to file an answer to the petition for
certiorari and prohibition. Respondent Judge, the Honorable Vicente G. Ericta, did file his answer on June
30, 1970 explaining why he restrained the enforcement of Administrative Order No. 2 and, as noted at the
outset, joining the Solicitor General in seeking that the legal questions raised, namely the constitutionality
of the Reflector Law and secondly the validity of Administrative Order No. 2 alleged to be in excess of the
authority conferred on petitioner and therefore violative of the principle of non-delegation of legislative
power, be definitely decided. It was not until July 6, 1970 that respondent Galo filed his answer seeking the
dismissal of this petition concentrating on what he considered to be the patent invalidity of Administrative
Order No. 2 as it went beyond the authority granted by the Reflector Law, even assuming that it is
constitutional. In the meanwhile, on July 2, 1970, the petition was called for hearing with Solicitor Vicente
Torres appearing for petitioner and respondent Galo for himself. It was made clear during the course of
such argumentation that the matter of the constitutionality of the Reflector Law was likewise under
consideration by this Court. The case is thus ripe for decision.
We repeat that we find for petitioner and sustain the constitutionality of the Reflector Law as well as the
validity of Administrative Order No. 2.
1. The threshold question is whether on the basis of the petition, the answers, and the oral
argument, it would be proper for this Court to resolve the issue of the constitutionality of the Reflector
Law. Our answer, as indicated, is in the affirmative. It is to be noted that the main thrust of the petition
before us is to demonstrate in a rather convincing fashion that the challenged legislation does not suffer
from the alleged constitutional infirmity imputed to it by the respondent Galo. Since the special civil action
for certiorari and prohibition filed by him before respondent Judge would seek a declaration of nullity of
such enactment by the attribution of the violation on the face thereof of the due process guarantee in the
deprivation of property rights, it would follow that there is sufficient basis for us to determine which view
should prevail. Moreover, any further hearing by respondent Judge would likewise be limited to a
discussion of the constitutional issues raised, no allegations of facts having been made. This is one case
then where the question of validity is ripe for determination. If we do so, further effort need not be wasted
and time is saved. Moreover, the officials concerned as well as the public, both vitally concerned with a
final resolution of this question of validity, could know the definitive answer and could act accordingly.
There is a great public interest, as was mentioned, to be served by the final disposition of such crucial
issue, petitioner praying that respondent Galo be declared as having no cause of action with respondent
Judge being accordingly directed to dismiss his suit.
There is another reinforcement to this avenue of approach. We have done so before in a suit, Climaco v.
Macadaeg, 2 involving the legality of a presidential directive. That was a petition for the review and
reversal of a writ of preliminary injunction issued by the then Judge Macadaeg. We there announced that
we "have decided to pass upon the question of the validity of the presidential directive ourselves, believing
that by doing so we would be putting an end to a dispute, a delay in the disposition of which has caused
considerable damage and injury to the Government and to the tobacco planters themselves."
There is no principle of constitutional adjudication that bars this Court from similarly passing upon the
question of the validity of a legislative enactment in a proceeding before it to test the propriety of the
issuance of a preliminary injunction. The same felt need for resolving once and for all the vexing question
as to the constitutionality of a challenged enactment and thus serve public interest exists. What we have
done in the case of an order proceeding from one of the coordinate branches, the executive, we can very
well do in the matter before us involving the alleged nullity of a legislative act. Accordingly, there is nothing
to preclude the grant of the writs prayed for, the burden of showing the unconstitutionality of the act
having proved to be as will now be shown, too much for respondent Galo.
2. The Reflector Law reads in full: "(g) Lights and reflector when parked or disabled.—
Appropriate parking lights or flares visible one hundred meters away shall be displayed at a corner of the
vehicle whenever such vehicle is parked on highways or in places that are not well-lighted or is placed in
such manner as to endanger passing traffic. Furthermore, every motor vehicle shall be provided at all
times with built-in reflectors or other similar warning devices either pasted, painted or attached at its
front and back which shall likewise be visible at night at least one hundred meters away. No vehicle not
provided with any of the requirements mentioned in this subsection shall be registered." 3 It is thus
obvious that the challenged statute is a legislation enacted under the police power to promote public
safety.
Justice Laurel, in the first leading decision after the Constitution came into force, Calalang v. Williams, 4
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 secure the general comfort, health and prosperity of the state."
Shortly after independence in 1948, Primicias v. Fugoso, 5 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." 6 In that sense it
could be hardly distinguishable as noted by this Court in Morfe v. Mutuc 7 with the totality of legislative
power.
It is in the above sense the greatest and most powerful attribute of government. It is to quote Justice
Malcolm anew "the most essential, insistent, and at least illimitable of powers," 8 extending as Justice
Holmes aptly pointed out "to all the great public needs." 9 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." 10 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 unsure communal peace, safety, good order, and
welfare.
It would then be to overturn a host of decisions impressive for their number and unanimity were this
Court to sustain respondent Galo. 11 That we are not disposed to do, especially so as the attack on the
challenged statute ostensibly for disregarding the due process safeguard is singularly unpersuasive. It
would be to close one's eyes to the hazards of traffic in the evening to condemn a statute of this character.
Such an attitude betrays lack of concern for public safety. How can it be plausibly alleged then that there
was no observance of due process equated as it has always been with what is reachable? The statute
assailed is not infected with arbitrariness. It is not the product of whim or caprice. It is far from
oppressive. It is a legitimate response, to a felt public need. It can stand the test of the most unsympathetic
appraisal.
Respondent Galo is of a different mind, having been unable to resist the teaching of many American State
Court decisions referred to in the secondary source, American Jurisprudence, principally relied upon by
him. He ought to have been cautioned against an indiscriminate acceptance of such doctrines predicated
on what was once a fundamental postulate in American public law, laissez-faire.
It is to be admitted that there was a period when such a concept did influence American court decisions on
constitutional law. As was explicitly stated by Justice Cardozo speaking of that era: "Laissez-faire was not
only a counsel of caution which would do well to heed. It was a categorical imperative which statesmen as
well as judges, must obey." 12 For a long time, legislation tending to reduce economic inequality
foundered on the rock that was the due process clause, enshrining as it did the liberty of contract, based
on such a basic assumption.
The New Deal administration of President Roosevelt more responsive to the social and economic forces at
work changed matters greatly. By 1937, there was a greater receptivity by the American Supreme Court to
an approach not too reverential of property rights. Even earlier, in 1935, Professor Coker of Yale, speaking
as a historian, could already discern a contrary drift. He did note the expending range of governmental
activity in the United States. 13 What is undeniable is that by 1943, laissez-faire was no longer the
dominant theory. In the language of Justice Jackson in the leading case of West Virginia State Board of
Education v. Barnette: 14 "We must transplant these rights to a soil in which the laissez-faire concept or
non-interference has withered at least as to economic affairs, and social advancements are increasingly
sought through closer integration of society and through expanded and strengthened governmental
controls."
While authoritative precedents from the United States federal and state jurisdictions were deferred to
when the Philippines was still under American rule, it cannot be said that the laissez-faire principle was
invariably adhered to by us even then. As early as 1919, in the leading case of Rubi v. Provincial Board of
Mindoro, 15 Justice Malcolm already had occasion to affirm: "The doctrines of laissez-faire and of
unrestricted freedom of the individual, as axioms of economic and political theory, are of the past. The
modern period has shown a widespread belief in the amplest possible demonstration of government
activity. The Courts unfortunately have sometimes seemed to trail after the other two branches of the
Government in this progressive march." People v. Pomar, 16 a 1924 decision. which held invalid under the
due process clause a provision providing for maternity leave with pay thirty days before and thirty days
after confinement could be cited to show that such a principle did have its day. It is to be remembered
though that our Supreme Court had no other choice as the Philippines was then under the United States,
and only recently the year before, the American Supreme Court in Adkins v. Children's Hospital, 17 in line
with the laissez-faire theory, did hold that a statute providing for minimum wages was constitutionally
infirm.
What is more, to erase any doubts, the Constitutional Convention saw to it that the concept of laissez-faire
was rejected. It entrusted to our government the responsibility of coping with social and economic
problems with the commensurate power of control over economic affairs. Thereby it could live up to its
commitment to promote the general welfare through state action. No constitutional objection to
regulatory measures adversely affecting property rights, especially so when public safety is the aim, is
likely to be heeded, unless of course on the clearest and most satisfactory proof of invasion of rights
guaranteed by the Constitution. On such a showing, there may be a declaration of nullity, but not because,
the laissez-faire principle was disregarded but because the due process, equal protection, or non-
impairment guarantees would call for vindication.
To repeat, our Constitution which took effect in 1935 erased whatever doubts there might be on that score.
Its philosophy is a repudiation of laissez-faire. One of the leading members of the Constitutional
Convention. Manuel A. Roxas, later the first President of the Republic, made it clear when he disposed of
the objection of Delegate Jose Reyes of Sorsogon, who noted the "vast extensions in the sphere of
governmental functions" and the "almost unlimited power to interfere in the affairs of industry and
agriculture as well as to compete with existing business" as "reflections of the fascination exerted by [the
then] current tendencies" in other jurisdictions. 18 He spoke thus: "My answer is that this Constitution
has a definite and well defined philosophy, not only political but social and economic. . . . If in this
Constitution the gentleman will find declarations of economic policy they are there because they are
necessary to safeguard the interests and welfare of the Filipino people because we believe that the days
have come when in self-defense, a nation may provide in its constitution those safeguards, the patrimony,
the freedom to grow, the freedom to develop national aspirations and national interests, not to be
hampered by the artificial boundaries which a constitutional provision automatically imposes. 19
It was not expected then when in a concurring opinion, Justice Laurel, who likewise sat in the
Constitutional Convention and was one of its leading lights, explicitly affirmed in a concurring opinion,
later quoted with approval in the leading case of Antamok Goldfields Mining Co. v. Court of Industrial
Relations, 20 that the Constitution did away with the laissez-faire doctrine. In the course of such
concurring opinion and after noting the changes that have taken place calling for a more affirmative role
by the government and its undeniable power to curtail property rights, he categorically declared the
doctrine in People v. Pomar no longer retains "its virtuality as a living principle." 21
It is in the light of such rejection of the laissez-faire principle that during the Commonwealth era, no
constitutional infirmity was found to have attached to legislation covering such subjects as collective
bargaining, 22 security of tenure, 23 minimum wages, 24 compulsory arbitration, 25 the regulation of
tenancy 26 as well as the issuance of securities, 27 and control of public services. 28 So it is likewise
under the Republic this Court having given the seal of approval to more favorable tenancy laws, 29
nationalization of the retail trade, 30 limitation of the hours of labor, 31 imposition of price control, 32
requirement of separation pay for one month, 33 and social security scheme. 34
Respondent Galo thus could have profited by a little more diligence in the scrutiny of Philippine decisions
rendered with not unexpected regularity, during all the while our Constitution has been in force, attesting
to the demise of such a shibboleth as laissez-faire. It was one of those fighting faiths that time and
circumstances had upset, to paraphrase Holmes. Yet respondent Galo would seek to vivify and resurrect it.
That, it would appear, is a vain quest, a futile undertaking. The Reflector Law is thus immune from the
attack so recklessly hurled against it. It can survive, and quite easily too, the constitutional test.
3. The same lack of success marks the effort of respondent Galo to impugn the validity of
Administrative Order No. 2 issued by petitioner in his official capacity, duly approved by the Secretary of
Public Works and Communications, for being contrary to the principle of non-delegation of legislative
power. Such administrative order, which took effect on April 17, 1970, has a provision on reflectors in
effect reproducing what was set forth in the Act. Thus: "No motor vehicles of whatever style, kind, make,
class or denomination shall be registered if not equipped with reflectors. Such reflectors shall either be
factory built-in-reflector, commercial glass reflectors, reflectionized tape or luminous paint. The
luminosity shall have an intensity to be maintained visible and clean at all times such that if struck by a
beam of light shall be visible 100 meters away at night." 35 Then came a section on dimensions,
placement and color. As to dimensions, the following is provided for: "Glass reflectors — Not less than 3
inches in diameter or not less than 3 inches square; Reflectorized Tape — At least 3 inches wide and 12
inches long. The painted or taped area may be bigger at the discretion of the vehicle owner." 36 Provision
is then made as to how such reflectors are to be "placed, installed, pasted or painted." 37 There is the
further requirement that in addition to such reflectors there shall be installed, pasted or painted four
reflectors on each side of the motor vehicle parallel to those installed, pasted or painted in front and those
in the rear end of the body thereof. 38 The color required of each reflectors, whether built-in, commercial
glass, reflectorized tape or reflectorized paint placed in the front part of any motor vehicle shall be amber
or yellow and those placed on the sides and in the rear shall all be red. 39
Penalties resulting from a violation thereof could be imposed. Thus: "Non-compliance with the
requirements contained in this Order shall be sufficient cause to refuse registration of the motor vehicle
affected and if already registered, its registration may be suspended in pursuance of the provisions of
Section 16 of RA-4136; [Provided], However, that in the case of the violation of Section 1(a) and (b) and
paragraph (8) of Section 3 hereof, a fine of not less than ten nor more than fifty pesos shall be imposed.
40 It is not to be lost sight of that under Republic Act No. 4136, of which the Reflector Law is an
amendment, petitioner, as the Land Transportation Commissioner, may, with the approval of the Secretary
of Public Works and Communications, issue rules and regulations for its implementation as long as they do
not conflict with its provisions. 41 It is likewise an express provision of the above statute that for a
violation of any of its provisions or regulations promulgated pursuant thereto, a fine of not less than P10
nor more than P50 could be imposed. 42
It is a fundamental principle flowing from the doctrine of separation of powers that Congress may not
delegate its legislative power to the two other branches of the government, subject to the exception that
local governments may over local affairs participate in its exercise. 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 term 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 legislature 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
indeed 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.
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 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. 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 obtained as in Calalang v. Williams is "safe transit upon the roads." 43
Administrator is to act so that it may be known whether he has kept within it in compliance with the
legislative will.' (Yakus vs. United States, 88 L. ed. 848) . . . It should be noted, furthermore, that these
powers must be construed and exercised in relation to the objectives of the law creating the Central Bank,
which are, among others, 'to maintain monetary stability in the Philippines,' and 'to promote a rising level
of production, employment and real income in the Philippines.' (Section 2, Rep. Act No. 265). These
standards are sufficiently concrete and definite to vest in the delegated authority, the character of
administrative details in the enforcement of the law and to place the grant of said authority beyond the
category of a delegation of legislative powers . . ." 48
It bears repeating that the Reflector Law construed together with the Land Transportation Code. Republic
Act No. 4136, of which it is an amendment, leaves no doubt as to the stress and emphasis on public safety
which is the prime consideration in statutes of this character. There is likewise a categorical affirmation of
the power of petitioner as Land Transportation Commissioner to promulgate rules and regulations to give
life to and translate into actuality such fundamental purpose. His power is clear. There has been no abuse.
His Administrative Order No. 2 can easily survive the attack, far-from-formidable, launched against it by
respondent Galo.
WHEREFORE, the writs of certiorari and prohibition prayed for are granted, the orders of May 28, 1970 of
respondent Judge for the issuance of a writ of preliminary injunction, the writ of preliminary injunction of
June 1, 1970 and his order of June 9, 1970 denying reconsideration are annulled and set aside. Respondent
Judge is likewise directed to dismiss the petition for certiorari and prohibition filed by respondent Teddy
C. Galo, there being no cause of action as the Reflector Law and Administrative Order No. 2 of petitioner
have not been shown to be tainted by invalidity. Without pronouncement as to costs.
Reyes, J.B.L., Actg. C.J., Dizon, Makalintal, Zaldivar, Castro, Teehankee, Barredo and Makasiar, JJ., concur.

This is to adhere to the recognition given expression by Justice Laurel in a decision announced not-too- Villamor, J., took no part.
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 Concepcion, C.J., did not take part.
limits, of the principle of 'subordinate legislation' not only in the United States and England but in
practically all modern governments." 44 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." 45 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.

Our later decisions speak to the same effect. Thus from Justice J. B. L. Reyes in People vs. Exconde: 46 "It
is well established in this jurisdiction that, while the making of laws is a non-delegable activity that
corresponds exclusively to Congress, nevertheless the latter may constitutionally delegate authority to
promulgate rules and regulations to implement a given legislation and effectuate its policies, for the reason
that the legislature often finds it impracticable (if not impossible) to anticipate and provide for the
multifarious and complex situations that may be met in carrying the law into effect. All that is required is
that the regulation should be germane to the objects and purposes of the law; that the regulation be not in
contradiction with it; but conform to the standards that the law prescribes . . ." 47

An even more explicit formulation of the controlling principle comes from the pen of the then Justice, now
Chief Justice, Concepcion: "Lastly, the legality of Circular No. 21 is assailed upon the ground that the grant
of authority to issue the same constitutes an undue delegation of legislative power. It is true that, under
our system of government, said power may not be delegated except to local governments. However, one
thing is to delegate the power to determine what the law shall be, and another thing to delegate the
authority to fix the details in the execution of enforcement of a policy set out in the law itself. Briefly
stated, the rule is that the delegated powers fall under the second category, if the law authorizing the
delegation furnishes a reasonable standard which 'sufficiently marks the field within which the
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 & Associates and Asst. City Fiscal L.L. Arguelles for appellant.
Jose M . Aruego, Arsenio Tenchavez and Luis Go for appellees.
Alfreo Concepcion for intervenor.
SYLLABUS
1. CONSTITUTIONAL LAW; MUNICIPAL ORDINANCES; VALIDITY, PRESUMPTION OF. — An
ordinance, having been enacted by councilors who must, in the very nature of things, be familiar with the
necessities of their particular municipality or city and with all the facts and circumstances which surround
the subject and necessitate action, must be presumed to be valid and should not be set aside unless there
is a clear invasion of personal property rights under the guise of police regulation. Unless, therefore, the
ordinance is void on its face, the necessity for evidence to rebut its validity is unavoidable. In the case at
bar, there being no factual foundation laid for overthrowing Ord. No. 4760 of Manila as void on its face, the
presumption of constitutionality must prevail.
2. ID.; POLICE POWER; MANIFESTATION OF. — Ordinance No. 4760 of the City of Manila is a
manifestation of a police power measure specifically aimed to safeguard public morals. As such it is
immune from any 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 extending as
it does "to all the great public needs."
3. ID.; ID.; JUDICIAL INQUIRY. — On the legislative organs of the government, whether national or
local, primarily rests the exercise of the police power, which 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 certain constitutional guaranties, the exercise of such police power, however, 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.
4. ID.; ID.; LICENSES INCIDENTAL TO. — Municipal license fees can 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. Licenses for non-useful occupations are
incidental to the police power, and the right to exact a fee may be implied from the power to license and
regulate, but in taking the amount of license fees the municipal corporations are allowed a wide discretion
in this class of cases. 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. (Cu Unjieng v. Patstone [1922], 42 Phil,, 818, 828).
5. ID.; ID.; EXERCISE OF. — Much discretion is given to municipal corporations in determining the
amount of license fees to be imposed for revenue. 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. Persons licensed to pursue occupations which may in the public need and
interest be affected by the exercise of the police power embark in those occupations subject to the
disadvantages which may result from the exercise of that power.
6. ID.; DUE PROCESS; STANDARDS OF LEGAL INFIRMITY. — There is no controlling and precise
definition of due process. It furnishes though a standard to which governmental action should conform in
order that deprivation of life, liberty or property, in each appropriate case, be valid. The standard of due
process which must exist both as a procedural and as substantive requisite to free the challenged
ordinance, or any governmental action for that matter, from imputation of legal infirmity, is responsiveness
to the supremacy of reason, obedience to the dictates of justice. It would 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. What should be deemed
unreasonable and what would amount to be an abdication of the power to govern is inaction in the face of
an admitted deterioration of the state of public morals.
7. ID.; ID.; MUNICIPAL ORDINANCES; PROHIBITIONS IN. — The provision in Ordinance No. 4760
of the City of Manila making 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 any room or portion
thereof more than twice every 24 hours, with a proviso that in all cases full payment shall be charged,
cannot be viewed as transgression against the command of due process. The prohibition is neither
unreasonable nor arbitrary, because there appears a correspondence between the undeniable existence of
an undesirable situation and the legislative attempt at correction. Moreover, every regulation of conduct
amounts to curtailment of liberty, which cannot be absolute.
8. ID.; ID.; PUBLIC INTEREST; GOVERNMENT INTERFERENCE. — 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.
9. ID.; ID.; ID.; ID.; SCOPE. — If the liberty invoked 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 measures is wider.
10. ID.; DUE PROCESS REQUIREMENT; AMBIGUITY OF STATUTES AS DENIAL OF DUE PROCESS. —
What makes a statute susceptible to a charge that it is void on its face for alleged vagueness or uncertainty
is an enactment either for bidding or requiring the doing of an act that men of common intelligence must
necessarily guess at its meaning and differ as to its application.
DECISION
FERNANDO, J p:
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,
Ermita-Malate 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 persons 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 Mayor of the City of Manila. (par. 3).
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 c]ass 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 self-incrimination; 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.
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 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 City of
Manila, while the petitioner Go Chiu 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 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
his 4th Indorsement dated February 15, 1963 (Annex B);
"5. That the explanatory noted 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."
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 . . . 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 . . . 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 presumption 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, 4 extending 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 general welfare. 6 Negatively put, police power is "that inherent and plenary power in the
State which enables it to prohibit all that is hurtful 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 then 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 license 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 providing a license tax for and
regulating the maintenance or operation of public dance hall; 9 prohibiting gambling; 10 prohibiting
jueteng; 11 and monte; 12 prohibiting 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 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 of 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 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 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 as substantive requisite to free the challenged ordinance, or any government
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 reasons and result in sheer oppression. Due process is
thus hostile to any official action marred by lack of reasonableness. Correctly has it 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 both 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 enterprise 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 cases 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. Araneta 24 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 purpose, 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 would deprive them of their lawful occupation and means
of livehood 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 . . . 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 those occupations subject to
the disadvantages which may result from the legal exercise of that power." 27
Lastly, there is the attempt to impugn the ordinance on another due process ground by invoking the
principle 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 to Adderley
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
constructing laws as saying what they obviously mean." 35

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 any room or portion thereof more than twice every 24 That is all then that this case presents. As it stands, with all due allowance for the arguments pressed with
hours, with a proviso that in all cases full payment shall be charged, call for a different conclusion. Again, such vigor and determination, the attack against the validity of the challenged ordinance cannot be
such a limitation cannot be viewed as a transgression against the command of due process. It is neither considered a success. Far from it. Respect for constitutional law principles so uniformly held and so
unreasonable nor arbitrary. Precisely it was intended to curb the opportunity for the immoral or uninterruptedly adhered to by this Court compels a reversal of the appealed decision.
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 Wherefore, the judgment of the lower court is reversed and the injunction issued lifted forthwith. With
pointed out by Justice Malcolm cannot be absolute. Thus: "One thought which runs through all these costs.
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 Reyes, J .B.L., Makalintal, Bengzon, J .P., Zaldivar, Sanchez, Castro and Angeles, JJ ., concur.
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 Concepcion, C .J . and Dizon, J ., are on official leave.
subject to reasonable restraint by general law for the common good . . . 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 . . . 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

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 cannot 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 measures is wider. 32 How justify then the
allegation of a denial of due process?
EN BANC
[G.R. No. 101279. August 6, 1992.]
PHILIPPINE ASSOCIATION OF SERVICE EXPORTERS, INC. petitioner, vs. HON. RUBEN D. TORRES, as
Secretary of the Department of Labor & Employment, and JOSE N. SARMIENTO, as Administrator of
the PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION, respondents.
De Guzman, Meneses & Associates for petitioner.
SYLLABUS
1. ADMINISTRATIVE LAW; ADMINISTRATIVE BODIES; VESTURE OF QUASI LEGISLATIVE AND
QUASI JUDICIAL POWERS. — The vesture of quasi-legislative and quasi-judicial powers in administrative
bodies is not unconstitutional, unreasonable and oppressive. It has been necessitated by "the growing
complexity of the modern society" (Solid Homes, Inc. vs. Payawal, 177 SCRA 72, 79). More and more
administrative bodies are necessary to help in the regulation of society's ramified activities. "Specialized in
the particular field assigned to them, they can deal with the problems thereof with more expertise and
dispatch than can be expected from the legislature or the courts of justice."
2. LABOR LAW; OVERSEAS EMPLOYMENT; DOLE AND POEA CIRCULARS; POWER TO RESTRICT
AND REGULATE INVOLVES A GRANT OF POLICE POWER. — It is noteworthy that the assailed circulars do
not prohibit the petitioner from engaging in the recruitment and deployment of Filipino landbased
workers for overseas employment. A careful reading of the challenged administrative issuances discloses
that the same fall within the "administrative and policing powers expressly or by necessary implication
conferred" upon the respondents (People vs. Maceren, 79 SCRA 450). The power to "restrict and regulate
conferred by Article 36 of the Labor Code involves a grant of police power (City of Naga vs. Court of
Appeals, 24 SCRA 898). To "restrict" means "to confine, limit or stop" and whereas the power to "regulate"
means "the power to protect, foster, promote, preserve, and control with due regard for the interests, first
and foremost, of the public, then of the utility and of its patrons" (Philippine Communications Satellite
Corporation vs. Alcuaz, 180 SCRA 218).
3. ID.; ID.; ID.; INVALID FOR LACK OF PROPER PUBLICATION AND FILING IN THE OFFICE OF
NATIONAL ADMINISTRATIVE REGISTER. — Nevertheless, the DOLE and POEA circulars are legally invalid,
defective and unenforceable for lack of proper publication and filing in the Office of the National
Administrative Register as required in Article 2 of the Civil Code, Article 5 of the Labor Code and Sections
3(1) and 4, Chapter 2, Book VII of the Administrative Code of 1987.
DECISION
GRINÑ O-AQUINO, J p:
This petition for prohibition with temporary restraining order was filed by the Philippine Association of
Service Exporters (PASEI, for short), to prohibit and enjoin the Secretary of the Department of Labor and
Employment (DOLE) and the Administrator of the Philippine Overseas Employment Administration (or
POEA) from enforcing and implementing DOLE Department Order No. 16, Series of 1991 and POEA
Memorandum Circular Nos. 30 and 37, Series of 1991, temporarily suspending the recruitment by private
employment agencies of Filipino domestic helpers for Hong Kong and vesting in the DOLE, through the
facilities of the POEA, the task of processing and deploying such workers.
PASEI is the largest national organization of private employment and recruitment agencies duly licensed
and authorized by the POEA, to engage in the business of obtaining overseas employment for Filipino
landbased workers, including domestic helpers. LLphil
On June 1, 1991, as a result of published stories regarding the abuses suffered by Filipino housemaids
employed in Hong Kong, DOLE Secretary Ruben D. Torres issued Department Order No. 16, Series of 1991,
temporarily suspending the recruitment by private employment agencies of "Filipino domestic helpers
going to Hong Kong" (p. 30, Rollo). The DOLE itself, through the POEA took over the business of deploying
such Hong Kong-bound workers.
"In view of the need to establish mechanisms that will enhance the protection for Filipino domestic
helpers going to Hong Kong, the recruitment of the same by private employment agencies is hereby
temporarily suspended effective 1 July 1991. As such, the DOLE through the facilities of the Philippine
Overseas Employment Administration shall take over the processing and deployment of household
workers bound for Hong Kong, subject to guidelines to be issued for said purpose.
"In support of this policy, all DOLE Regional Directors and the Bureau of Local Employment's regional
offices are likewise directed to coordinate with the POEA in maintaining a manpower pool of prospective
domestic helpers to Hong Kong on a regional basis.
"For compliance." (Emphasis ours; p. 30, Rollo.)
Pursuant to the above DOLE circular, the POEA issued Memorandum Circular No. 30, Series of 1991, dated
July 10, 1991, providing GUIDELINES on the Government processing and deployment of Filipino domestic
helpers to Hong Kong and the accreditation of Hong Kong recruitment agencies intending to hire Filipino
domestic helpers.
"Subject: Guidelines on the Temporary Government Processing and Deployment of Domestic Helpers to
Hong Kong.
"Pursuant to Department Order No. 16, series of 1991 and in order to operationalize the temporary
government processing and deployment of domestic helpers (DHs) to Hong Kong resulting from the
temporary suspension of recruitment by private employment agencies for said skill and host market, the
following guidelines and mechanisms shall govern the implementation of said policy:
"I. Creation of a Joint POEA-OWWA Household Workers Placement Unit (HWPU).
"An ad hoc, one stop Household Workers Placement Unit [or HWPU] under the supervision of the POEA
shall take charge of the various operations involved in the Hong Kong-DH industry segment:
"The HWPU shall have the following functions in coordination with appropriate units and other entities
concerned:
"1. Negotiations with and Accreditation of Hong Kong Recruitment Agencies
"2. Manpower Pooling
"3. Worker Training and Briefing
"4. Processing and Deployment
"5. Welfare Programs.
"II. Documentary Requirements and Other Conditions for Accreditation of Hong Kong Recruitment
Agencies or Principals. LexLib
"Recruitment agencies in Hong Kong intending to hire Filipino DHs for their employers may negotiate with
the HWPU in Manila directly or through the Philippine Labor Attache's Office in Hong Kong.
"xxx xxx xxx
"X. Interim Arrangement
"All contracts stamped in Hong Kong as of June 30 shall continue to be processed by POEA until 31 July
1991 under the name of the Philippine agencies concerned. Thereafter, all contracts shall be processed
with the HWPU.
"Recruitment agencies in Hong Kong shall submit to the Philippine Consulate General in Hong Kong a list
of their accepted applicants in their pool within the last week of July. The last day of acceptance shall be
July 31 which shall then be the basis of HWPU in accepting contracts for processing. After the exhaustion
of their respective pools the only source of applicants will be the POEA manpower pool.
"For strict compliance of all concerned." (pp. 31-35, Rollo.)
On August 1, 1991, the POEA Administrator also issued Memorandum Circular No. 37, Series of 1991, on
the processing of employment contracts of domestic workers for Hong Kong.
"TO: All Philippine and Hong Kong Agencies engaged in the recruitment of Domestic helpers for
Hong Kong.
"Further to Memorandum Circular No. 30, series of 1991 pertaining to the government processing and
deployment of domestic helpers (DHs) to Hong Kong, processing of employment contracts which have
been attested by the Hong Kong Commissioner of Labor up to 30 June 1991 shall be processed by the
POEA Employment Contracts Processing Branch up to 15 August 1991 only.
"Effective 16 August 1991, all Hong Kong recruitment agent/s hiring DHs from the Philippines shall recruit
under the new scheme which requires prior accreditation with the POEA.
"Recruitment agencies in Hong Kong may apply for accreditation at the Office of the Labor Attache,
Philippine Consulate General where a POEA team is posted until 31 August 1991. Thereafter, those who
failed to have themselves accredited in Hong Kong may proceed to the POEA-OWWA Household Workers
Placement Unit in Manila for accreditation before their recruitment and processing of DHs shall be
allowed.
"Recruitment agencies in Hong Kong who have some accepted applicants in their pool after the cut-off
period shall submit this list of workers upon accreditation. Only those DHs in said list will be allowed
processing outside of the HWPU manpower pool.
"For strict compliance of all concerned." (Emphasis supplied, p. 36, Rollo.)
On September 2, 1991, the petitioner, PASEI, filed this petition for prohibition to annul the aforementioned
DOLE and POEA circulars and to prohibit their implementation for the following reasons:
1. that the respondents acted with grave abuse of discretion and/or in excess of their rule-making
authority in issuing said circulars;
2. that the assailed DOLE and POEA circulars are contrary to the Constitution, are unreasonable,
unfair and oppressive; and
3. that the requirements of publication and filing with the Office of the National Administrative
Register were not complied with.
There is no merit in the first and second grounds of the petition.
Article 36 of the Labor Code grants the Labor Secretary the power to restrict and regulate recruitment and
placement activities. LLpr
"Art. 36. Regulatory Power. — The Secretary of Labor shall have the power to restrict and regulate the
recruitment and placement activities of all agencies within the coverage of this title [Regulation of
Recruitment and Placement Activities] and is hereby authorized to issue orders and promulgate rules and
regulations to carry out the objectives and implement the provisions of this title." (Italics ours.)
On the other hand, the scope of the regulatory authority of the POEA, which was created by Executive
Order No. 797 on May 1, 1982 to take over the functions of the Overseas Employment Development Board,
the National Seamen Board, and the overseas employment functions of the Bureau of Employment
Services, is broad and far-ranging for:
1. Among the functions inherited by the POEA from the defunct Bureau of Employment Services
was the power and duty:
"'2. To establish and maintain a registration and/or licensing system to private sector participation
in the recruitment and placement of workers, locally and overseas, . . . .' (Art. 15, Labor Code, italics
supplied)." (p. 13, Rollo.)
2. It assumed from the defunct Overseas Employment Development Board the power and duty:
"'3. To recruit and place workers for overseas employment of Filipino contract workers, on a
government to government arrangement and in such other sectors as policy may dictate . . . .' (Art. 17,
Labor Code.)" (p. 13, Rollo.)
3. From the National Seamen Board, the POEA took over:
"2. To regulate and supervise the activities of agents or representatives of shipping companies in
the hiring of seamen for overseas employment; and secure the best possible terms of employment for
contract seamen workers and secure compliance therewith." (Art. 20, Labor Code.)
The vesture of quasi-legislative and quasi-judicial powers in administrative bodies is not unconstitutional,
unreasonable and oppressive. It has been necessitated by "the growing complexity of the modern society"
(Solid Homes, Inc. vs. Payawal, 177 SCRA 72, 79). More and more administrative bodies are necessary to
help in the regulation of society's ramified activities. "Specialized in the particular field assigned to them,
they can deal with the problems thereof with more expertise and dispatch than can be expected from the
legislature or the courts of justice" (Ibid.).
It is noteworthy that the assailed circulars do not prohibit the petitioner from engaging in the recruitment
and deployment of Filipino landbased workers for overseas employment. A careful reading of the
challenged administrative issuances discloses that the same fall within the "administrative and policing
powers expressly or by necessary implication conferred" upon the respondents (People vs. Maceren, 79
SCRA 450). The power to "restrict and regulate conferred by Article 36 of the Labor Code involves a grant
of police power (City of Naga vs. Court of Appeals, 24 SCRA 898). To "restrict" means "to confine, limit or
stop" (p. 62, Rollo) and whereas the power to "regulate" means "the power to protect, foster, promote,
preserve, and control with due regard for the interests, first and foremost, of the public, then of the utility
and of its patrons" (Philippine Communications Satellite Corporation vs. Alcuaz, 180 SCRA 218).
The Solicitor General, in his Comment, aptly observed:
" . . . Said Administrative Order [i.e., DOLE Administrative Order No. 16] merely restricted the scope or area
of petitioner's business operations by excluding therefrom recruitment and deployment of domestic
helpers for Hong Kong till after the establishment of the `mechanisms' that will enhance the protection of
Filipino domestic helpers going to Hong Kong. In fine, other than the recruitment and deployment of
Filipino domestic helpers for Hongkong, petitioner may still deploy other class of Filipino workers either
for Hongkong and other countries and all other classes of Filipino workers for other countries. Cdpr
"Said administrative issuances, intended to curtail, if not to end, rampant violations of the rule against
excessive collections of placement and documentation fees, travel fees and other charges committed by
private employment agencies recruiting and deploying domestic helpers to Hongkong. [They are]
reasonable, valid and justified under the general welfare clause of the Constitution, since the recruitment
and deployment business, as it is conducted today, is affected with public interest.
persons who may be affected by them." (Emphasis supplied, Chapter 2, Book VII of the Administrative
Code of 1987.)
Once more, we advert to our ruling in Tanñ ada vs. Tuvera, 146 SCRA 446 that:
" . . . Administrative rules and regulations must also be published if their purpose is to enforce or
implement existing law pursuant also to a valid delegation," (p. 447.).
"Interpretative regulations and those merely internal in nature, that is, regulating only the personnel of the
administrative agency and not the public, need not be published. Neither is publication required of the so-
called letters of instructions issued by administrative superiors concerning the rules or guidelines to be
followed by their subordinates in the performance of their duties." (p. 448.)

"xxx xxx xxx
"The alleged takeover [of the business of recruiting and placing Filipino domestic helpers in Hongkong] is
merely a remedial measure, and expires after its purpose shall have been attained. This is evident from the
tenor of Administrative Order No. 16 that recruitment of Filipino domestic helpers going to Hongkong by
private employment agencies are hereby 'temporarily suspended effective July 1. 1991.'
"We agree that publication must be in full or it is no publication at all since its purpose is to inform the
public of the content of the laws." (p. 448.)
For lack of proper publication, the administrative circulars in question may not be enforced and
implemented.

"The alleged takeover is limited in scope, being confined to recruitment of domestic helpers going to
Hongkong only. WHEREFORE, the writ of prohibition is GRANTED. The implementation of DOLE Department Order No. 16,
Series of 1991, and POEA Memorandum Circular Nos. 30 and 37, Series of 1991, by the public respondents
"xxx xxx xxx is hereby SUSPENDED pending compliance with the statutory requirements of publication and filing under
the aforementioned laws of the land. cdll
" . . . the justification for the takeover of the processing and deploying of domestic helpers for Hongkong
resulting from the restriction of the scope of petitioner's business is confined solely to the unscrupulous
practice of private employment agencies victimizing applicants for employment as domestic helpers for
Hongkong and not the whole recruitment business in the Philippines." (pp. 62-65. Rollo.) SO ORDERED.

The questioned circulars are therefore a valid exercise of the police power as delegated to the executive
branch of Government.
Narvasa, C . J ., Gutierrez, Jr ., Cruz, Feliciano, Padilla, Bidin, Medialdea, Regalado, Davide, Jr ., Romero,
Nevertheless, they are legally invalid, defective and unenforceable for lack of proper publication and filing Nocon and Bellosillo, JJ ., concur.
in the Office of the National Administrative Register as required in Article 2 of the Civil Code, Article 5 of
the Labor Code and Sections 3(1) and 4, Chapter 2, Book VII of the Administrative Code of 1987 which
provide:
C o p y r i g h t 1 9 9 4 - 1 9 9 9 C D T e c h n o l o g i e s A s i a, I n c.
"Art. 2. Laws shall take effect after fifteen (15) days following the completion of their publication in the
Official Gazette, unless it is otherwise provided. . . . ." (Civil Code.)

"Art. 5. Rules and Regulations. — The Department of Labor and other government agencies charged
with the administration and enforcement of this Code or any of its parts shall promulgate the necessary
implementing rules and regulations. Such rules and regulations shall become effective fifteen (15) days
after announcement of their adoption in newspapers of general circulation." (Emphasis supplied, Labor
Code, as amended.)

Section 3. Filing. — (1) Every agency shall file with the University of the Philippines Law Center, three (3)
certified copies of every rule adopted by it. Rules in force on the date of effectivity of this Code which are
not filed within three (3) months shall not thereafter be the basis of any sanction against any party or
persons." (Underscoring supplied, Chapter 2, Book VII of the Administrative Code of 1987.)

"Section 4. Effectivity. — In addition to other rule-making requirements provided by law not

inconsistent with this Book, each rule shall become effective fifteen (15) days from the date of filing as
above provided unless a different date is fixed by law, or specified in the rule in cases of imminent danger
to public health, safety and welfare, the existence of which must be expressed in a statement
accompanying the rule. The agency shall take appropriate measures to make emergency rules known to
FIRST DIVISION
[G.R. No. 120095. August 5, 1996.]
JMM PROMOTION AND MANAGEMENT, INC., and KARY INTERNATIONAL, INC., petitioners, vs. HON.
COURT OF APPEALS, HON. MA. NIEVES CONFESSOR, then Secretary of the Department of Labor and
Employment, HON. JOSE BRILLANTES, in his capacity as acting Secretary of the Department of
Labor and Employment and HON. FELICISIMO JOSON, in his capacity as Administrator of the
Philippine Overseas Employment Administration, respondents.
Don P. Porciuncula for petitioner.
Ma. Bezen Ringpis Liban/Solicitor General for respondents.
SYLLABUS
1. POLITICAL LAW; INHERENT POWERS OF THE STATE; POLICE POWER; NATURE AND SCOPE. —
The latin maxim salus populi est suprema lex embodies the character of the entire spectrum of public laws
aimed at promoting the general welfare of the people under the State's police power. As an inherent
attribute of sovereignty which virtually "extends to all public needs," this "least limitable" of governmental
powers grants a wide panoply of instruments through which the state, as parens patriae gives effect to a
host of its regulatory powers. Describing the nature and scope of the police power, Justice Malcolm, in the
early case of Rubi v. Provincial Board of Mindoro (89 Phil. 660, 708, [1919]) wrote: "The police power of
the State," one court has said . . . 'is a power coexistensive 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." Carried onward by the
current of legislature. the judiciary rarely attempts to dam the onrushing 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."
2. ID.; ID.; ID.; EXERCISE THEREOF ENJOYS A PRESUMED VALIDITY UNLESS IT IS SHOWN THAT IT
DOES NOT ENHANCE THE PUBLIC WELFARE OR WAS EXERCISED ARBITRARILY OR UNREASONABLY. —
Thus, police power concerns government enactments which precisely interfere with personal liberty or
property in order to promote the general welfare or the common good. As the assailed Department Order
enjoys a presumed validity, it follows that the burden rests upon petitioners to demonstrate that the said
order, particularly its ARB requirement, does not enhance the public welfare or was exercised arbitrarily
or unreasonably.
3. ID.; ID.; ID.; THE PROPER REGULATION OF A PROFESSION, CALLING, BUSINESS OR TRADE IS A
VALID EXERCISE THEREOF. — Neivertheless, no right is absolute, and the proper regulation of a
profession, calling business or trade has always been upheld as a legitimate subject of a valid exercise of
the police power by the state particularly when their conduct affects either the execution of legitimate
governmental functions, the preservation of the State, the public health and welfare and public morals.
According to the maxim, sic utere tuo ut alienum non laedas, it must of course be within the legitimate
range of legislative action to define the mode and manner in which every one may so use his own property
so as not to pose injury to himself or others.
4. ID.; ID.; ID.; WHERE THE LIBERTY CURTAILED AFFECTS AT MOST THE RIGHT TO PROPERTY,
THE PERMISSIBLE SCOPE OF REGULATORY MEASURES IS MUCH WIDER. — In any case, where the liberty
curtailed aftects at most the rights of property, the permissible scope of regulatory measures is certainly
much wider. To pretend that licensing or accreditation requirements violates the due process clause is to
ignore the settled practice, under the mantle of the police power, or regulating entry to the practice of
various trades or professions. Professionals leaving for abroad are required to pass rigid written and
practical exams before they are deemed fit to practice their trade. Seamen are required to take tests
determining their seamanship. Locally, the Professional Regulation Commission has began to require
previously licensed doctors and other professionals to furnish documentary proof that they had either re-
trained or had undertaken continuing education courses as a requirement for renewal of their licenses. It
is not claimed that these requirements pose an unwarranted deprivation of a property right under the due
process clause. So long as professionals and other workers meet reasonable regulatory standards no such
deprivation exists.
5. CONSTITUTIONAL LAW; STATE POLICIES; THE STATE SHALL AFFORD FULL PROTECTION TO
LABOR; ELUCIDATED. — Protection to labor does not indicate promotion of employment alone. Under the
welfare and social justice provisions of the Constitution, the promotion of full employment, while
desirable, cannot take a backseat to the government's constitutional duty to provide mechanisms for the
protection of our work-force, local or overseas. As this Court explained in Philippine Association of
Servvice Exporters (PASEI) v. Drilon, in reference to the recurring problems faced by our overseas
workers: what concerns the Constitution more paramountly is that such an employment be above all,
decent, just, and humane. It is bad enough that the country has to send its sons and daughters to strange
lands because it cannot satisfy their employment needs at home. Under these circumstances, the
Government is duty-bound to insure that our toiling expatriates have adequate protection, personally and
economically, while away from home. A profession, trade or calling is a property right within the meaning
of our constitutional guarantees. One cannot be deprived of the right to work and the right to make a living
because these rights are property rights, the arbitrary and unwarranted deprivation of which normally
constitutes an actionable wrong.
6. ID.; BILL OF RIGHTS; NON-IMPAIRMENT OF OBLIGATIONS OF CONTRACTS; MUST YIELD TO
THE STATE'S POLICE POWER. — It is a futile gesture on the part of petitioners to invoke the non-
impairment clause of the Constitution to support their argument that the government cannot enact the
assailed regulatory measures because they abridge the freedom to contract. In Philippine Association of
Service Exporters, Inc. vs. Drilon, we held that "(t)he non-impairment clause of the Constitution . . . must
yield to the loftier purposes targeted by the government." Equally important, into every contract is read
provisions of existing law, and always, a reservation of the police power for so long as the agreement deals
with a subject impressed with the public welfare.
7. ID.; ID.; EQUAL PROTECTION CLAUSE; MERELY REQUIRES THAT ALL PERSONS BE TREATED
ALIKE UNDER LIKE CONDITIONS. — The equal protection clause is directed principally against undue
favor and individual or class privilege. It is not intended to prohibit legislation which is limited to the
object to which it is directed or by the territory in which it is to operate. It does not require absolute
equality, but merely that all persons be treated alike under like conditions both as to privileges conferred
and liabilities imposed. We have held, time and again, that the equal protection clause of the Constitution
does not forbid classification for so long as such classification is based on real and substantial differences
having a reasonable relation to the subject of the particular legislation. If classification is germane to the
purpose of the law, concerns all members of the class, and applies equally to present and future conditions,
the classification does not violate the equal protection guarantee.
DECISION
KAPUNAN, J p:
This limits of government regulation under the State's police power are once again at the vortex of the
instant controversy. Assailed is the government's power to control deployment of female entertainers to
Japan by requiring an Artist Record Book (ARB) as a precondition to the processing by the POEA of any
contract for overseas employment. By contending that the right to overseas employment is a property
right within the meaning of the Constitution, petitioners vigorously aver that deprivation thereof allegedly
through the onerous requirement of an ARB violates the due process clause and constitutes an invalid
exercise of the police power.
The factual antecedents are undisputed.
Following the much-publicized death of Maricris Sioson in 1991, former President Corazon C. Aquino
ordered a total ban against the deployment of performing artists to Japan and other foreign destinations.
The ban was, however, rescinded after leaders of the overseas employment industry promised to extend
full support for a program aimed at removing kinks in the system of deployment. In its place, the
government, through the Secretary of Labor and Employment, subsequently issued Department Order No.
28 creating the Entertainment Industry Advisory Council (EIAC). which was tasked with issuing guidelines
on the training, testing certification and deployment of performing artists abroad.
Pursuant to the EIAC's recommendations, 1 the Secretary of Labor, on January 6, 1994, issued Department
Order No. 3 establishing various procedures and requirements for screening performing artists under a
new system of training, testing, certification and deployment of the former. Performing artists successfully
hurdling the test, training and certification requirement were to be issued an Artist's Record Book (ARB), a
necessary prerequisite to processing of any contract of employment by the POEA. Upon request of the
industry, implementation of the process, originally scheduled for April 1, 1994, was moved to October 1,
1994.
Thereafter, the Department of Labor, following the EIAC's recommendation, issued a series of orders fine-
tuning and implementing the new system. Prominent among these orders were the following issuances:
1. Department Order No. 3-A, providing for additional guidelines on the training, testing,
certification and deployment of performing artists.
2. Department Order No. 3-B, pertaining to the Artist Record Book (ARB) requirement, which
could be processed only after the artist could show proof of academic and skills training and has passed
the required tests.
3. Department Order No. 3-E, providing the minimum salary a performing artist ought to receive
(not less than US$600.00 for those bound for Japan) and the authorized deductions therefrom.
4. Department Order No. 3-F, providing for the guidelines on the issuance and use of the ARB by
returning performing artists who, unlike new artists, shall only undergo a Special Orientation Program
(shorter than the basic program) although they must pass the academic test.
In Civil No. 95-72750, the Federation of Entertainment Talent Managers of the Philippines (FETMOP), on
January 27, 1995 filed a class suit assailing these department orders, principally contending that said
orders 1) violated the constitutional right to travel; 2) abridged existing contracts for employment; and 3)
deprived individual artists of their licenses without due process of law. FETMOP, likewise, averred that the
issuance of the Artist Record Book (ARB) was discriminatory and illegal and "in gross violation of the
constitutional right . . . to life liberty and property." Said Federation consequently prayed for the issuance
of a writ of preliminary injunction against the aforestated orders.
On February 2, 1992, JMM Promotion and Management, Inc. and Kary International, Inc., herein
petitioners, filed a Motion for Intervention in said civil case, which was granted by the trial court in an
Order dated 15 February, 1995.
However, on February 21, 1995, the trial court issued an Order denying petitioners' prayer for a writ of
preliminary injunction and dismissed the complaint.
On appeal from the trial court's Order, respondent court, in CA G.R. SP No. 36713 dismissed the same.
Tracing the circumstances which led to the issuance of the ARB requirement and the assailed Department
Order, respondent court concluded that the issuances constituted a valid exercise by the state of the police
power.
We agree.
The latin maxim salus populi est suprema lex embodies the character of the entire spectrum of public laws
aimed at promoting the general welfare of the people under the State's police power. As an inherent
attribute of sovereignty which virtually "extends to all public needs," 2 this "least limitable" 3 of
governmental powers grants a wide panoply of instruments through which the state, as parens patriae
gives effect to a host of its regulatory powers.
Describing the nature and scope of the police power, Justice Malcolm, in the early case of Rubi v. Provincial
Board of Mindoro 4 wrote:
"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."
Carried onward by the current of legislature, the judiciary rarely attempts to dam the onrushing 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 nod not arbitrarily interfere with the right of the individual." 5
Thus, police power concerns government enactments which precisely interfere with personal liberty or
property in order to promote the general welfare or the common good. As the assailed Department Order
enjoys a presumed validity, it follows that the burden rests upon petitioners to demonstrate that the said
order, particularly, its ARB requirement, does not enhance the public welfare or was exercised arbitrarily
or unreasonably.
A through review of the facts and circumstances leading to the issuance of the assailed orders compels us
to rule that the Artist Record Book requirement and the questioned Department Order related to its
issuance were issued by the Secretary of Labor pursuant to a valid exercise of the police power.
In 1984, the Philippines emerged as the largest labor sending country in Asia dwarfing the labor export of
countries with mammoth populations such as India and China. According to the National Statistics Office,
this diaspora was augmented annually by over 450,000 documented and clandestine or illegal
(undocumented) workers who left the country for various destinations abroad, lured by higher salaries,
better work opportunities and sometimes better living conditions.
Of the hundreds of thousands of workers who left the country for greener pastures in the last few years,
women composed slightly close to half of those deployed, constituting 47% between 1987-1991,
exceeding this proportion (58%) by the end of 1991, 6 the year former President Aquino instituted the ban
on deployment of performing artists to Japan and other countries as a result of the gruesome death of
Filipino entertainer Maricris Sioson.
It was during the same period that this Court took judicial notice not only of the trend, but also of the fact
that most of our women, a large number employed as domestic helpers and entertainers, worked under
exploitative conditions "marked by physical and personal abuse." 7 Even then, we noted that "[t]he sordid
tales of maltreatment suffered by migrant Filipina workers, even rape and various forms of torture,
confirmed by testimonies of returning workers" compelled "urgent government action." 8
Pursuant to the alarming number of reports that a significant number of Filipina performing artists ended
up as prostitutes abroad (many of whom were beaten, drugged and forced into prostitution), and following
the deaths of a number of these women, the government began instituting measures aimed at deploying
only those individuals who met set standards which would qualify them as legitimate performing artists.
In spite of these measures, however, a number of our countrymen have nonetheless fallen victim to
unscrupulous recruiters, ending up as virtual slaves controlled by foreign crime syndicates and forced into
jobs other than those indicated in their employment contracts. Worse, some of our women have been
forced into prostitution.
Thus, after a number of inadequate and failed accreditation schemes, the Secretary of Labor issued on
August 16, 1993, D.O. No. 28, establishing the Entertainment Industry Advisory Council (EIAC), the policy
advisory body of DOLE on entertainment industry matters. 9 Acting on the recommendations of the said
body, the Secretary of Labor, on January 6, 1994, issued the assailed orders. These orders embodied EIAC's
Resolution No. 1, which called for guidelines on screening, testing and accrediting performing overseas
Filipino artists. Significantly, as the respondent court noted, petitioners were duly represented in the EIAC,
10 which gave the recommendations on which the ARB and other requirements were based.
Clearly, the welfare of Filipino performing artists, particularly the women was paramount in the issuance
of Department Order No. 3. Short of a total and absolute ban against the deployment of performing artists
to "high-risk" destinations, a measure which would only drive recruitment further underground, the new
scheme at the very least rationalizes the method of screening performing artists by requiring reasonable
educational and artistic skills from them and limits deployment to only those individuals adequately
prepared for the unpredictable demands of employment as artists abroad. It cannot be gainsaid that this
scheme at least lessens the room for exploitation by unscrupulous individuals and agencies.
Moreover, here or abroad, selection of performing artists is usually accomplished by auditions, where
those deemed unfit are usually weeded out through a process which is inherently subjective and
vulnerable to bias and differences in taste. The ARB requirement goes one step further, however,
attempting to minimize the subjectivity of the process by defining minimum skills required from
entertainers and performing artists. As the Solicitor General observed, this should be easily met by
experienced artists possessing merely basic skills. The tests are aimed at segregating real artists or
performers from those passing themselves off as such, eager to accept any available job and therefore
exposing themselves to possible exploitation.
As to the other provisions of Department Order No. 3 questioned by petitioners, we see nothing wrong
with the requirement for document and booking confirmation (D.O. 3-C), a minimum salary scale (D.O. 3-
E), or the requirement for registration of returning performers. The requirement for a venue certificate or
other documents evidencing the place and nature of work allows the government closer monitoring of
foreign employers and helps keep our entertainers away from prostitution fronts and other worksites
associated with unsavory, immoral, illegal or exploitative practices. Parenthetically, none of these
issuances appear to us, by any stretch of the imagination, even remotely unreasonable or arbitrary. They
address a felt need of according greater protection for an oft-exploited segment of our OCW's. They
respond to the industry's demand for clearer and more practicable rules and guidelines. Many of these
provisions were fleshed out following recommendations by, and after consultations with, the affected
sectors and non-government organizations. On the whole, they are aimed at enhancing the safety and
security of entertainers and artists bound for Japan and other destinations, without stifling the industry's
concerns for expansion and growth.
In any event, apart from the State's police power, the Constitution itself mandates government to extend
the fullest protection to our overseas workers. The basic constitutional statement on labor, embodied in
Section 18 of Article II of the Constitution provides:
Sec. 18. The State affirms labor as a primary social economic force. It shall protect the rights of workers
and promote their welfare.
More emphatically, the social justice provision on labor of the 1987 Constitution in its first paragraph
states:
The State shall afford full protection to labor, local and overseas, organized and unorganized and promote
full employment and equality of employment opportunities for all.
Obviously, protection to labor does not indicate promotion of employment alone. Under the welfare and
social justice provisions of the Constitution, the promotion of full employment, while desirable, cannot
take a backseat to the government's constitutional duty to provide mechanisms for the protection of our
workforce, local or overseas. At this Court explained in Philippine Association of Service Exporters (PASEI)
v. Drilon, 11 in reference to the recurring problems faced by our overseas workers:
What concerns the Constitution more paramountly is that such an employment be above all, decent, just,
and humane. It is bad enough that the country has to send its sons and daughters to strange lands because
it cannot satisfy their employment needs at home. Under these circumstances, the Government is duty-
bound to insure that our toiling expatriates have adequate protection, personally and economically, while
away from home.
We now go to petitioners' assertion that the police power cannot, nevertheless, abridge the right of our
performing workers to return to work abroad after having earlier qualified under the old process, because,
having previously been accredited, their accreditation became a "property right," protected by the due
process clause. We find this contention untenable.
A profession, trade or calling is a property right within the meaning of our constitutional guarantees. One
cannot be deprived of the right to work and the right to make a living because these rights are property
rights, the arbitrary and unwarranted deprivation of which normally constitutes an actionable wrong. 12
Nevertheless, no right is absolute, and the proper regulation of a profession, calling, business or trade has
always been upheld as a legitimate subject of a valid exercise of the police power by the state particularly
when their conduct affects either the execution of legitimate governmental functions, the preservation of
the State, the public health and welfare and public morals. According to the maxim, sic utere tuo ut
alienum non laedas, it must of course be within the legitimate range of legislative action to define the
mode and manner in which every one may so use his own property so as not to pose injury to himself or
others. 13
In any case, where the liberty curtailed affects at most the rights of property, the permissible scope of
regulatory measures is certainly much wider. 14 To pretend that licensing or accreditation requirements
violates the due process clause is to ignore the settled practice, under the mantle of the police power, of
regulating entry to the practice of various trades or professions. Professionals leaving for abroad are
required to pass rigid written and practical exams before they are deemed fit to practice their trade.
Seamen are required to take tests determining their seamanship. Locally, the Professional Regulation
Commission has began to require previously licensed doctors and other professionals to furnish
documentary proof that they had either re-trained or had undertaken continuing education courses as a
requirement for renewal of their licenses. It is not claimed that these requirements pose an unwarranted
deprivation of a property right under the due process clause. So long as professionals and other workers
meet reasonable regulatory standards no such deprivation exists.
Finally, it is a futile gesture on the part of petitioners to invoke the non-impairment clause of the
Constitution to support their argument that the government cannot enact the assailed regulatory
measures because they abridge the freedom to contract. In Philippine Association of Service Exporters,
Inc. vs. Drilon, we held that "[t]he non-impairment clause of the Constitution . . . must yield to the loftier
purposes targeted by the government." 15 Equally important, into every contract is read provisions of
existing law, and always, a reservation of the police power for so long as the agreement deals with a
subject impressed with the public welfare.
A last point. Petitioners suggest that the singling out of entertainers and performing artists under the
assailed department orders constitutes class legislation which violates the equal protection clause of the
Constitution. We do not agree.
The equal protection clause is directed principally against undue favor and individual or class privilege. It
is not intended to prohibit legislation which is limited to the object to which it is directed or by the
territory in which it is to operate. It does not require absolute equality, but merely that all persons be
treated alike under like conditions both as to privileges conferred and liabilities imposed. 16 We have held,
time and again, that the equal protection clause of the Constitution does not forbid classification for so
long as such classification is based on real and substantial differences having a reasonable relation to the
subject of the particular legislation. 17 If classification is germane to the purpose of the law, concerns all
members of the class, and applies equally to present and future conditions, the classification does not
violate the equal protection guarantee.
In the case at bar, the challenged Department Order clearly applies to all performing artists and
entertainers destined for jobs abroad. These orders, we stressed hereinbefore, further the Constitutional
mandate requiring government to protect our workforce, particularly those who may be prone to abuse
and exploitation as they are beyond the physical reach of government regulatory agencies. The tragic
incidents must somehow stop, but short of absolutely curtailing the right of these performers and
entertainers to work abroad, the assailed measures enable our government to assume a measure of
control.

WHEREFORE, finding no reversible error in the decision sought to be reviewed, petition is hereby DENIED.

SO ORDERED.

Padilla, Bellosillo, Vitug and Hermosisima, Jr., JJ ., concur.

EN BANC
[G.R. No. 157036. June 9, 2004.]
FRANCISCO I. CHAVEZ, petitioner, vs. HON. ALBERTO G. ROMULO, IN HIS CAPACITY AS EXECUTIVE
SECRETARY; DIRECTOR GENERAL HERMOGENES E. EBDANE, JR., IN HIS CAPACITY AS THE CHIEF OF
THE PNP, ET. AL., respondents.
DECISION
SANDOVAL-GUTIERREZ, J p:
The right of individuals to bear arms is not absolute, but is subject to regulation. The maintenance of peace
and order 1 and the protection of the people against violence are constitutional duties of the State, and the
right to bear arms is to be construed in connection and in harmony with these constitutional duties.
Before us is a petition for prohibition and injunction seeking to enjoin the implementation of the
"Guidelines in the Implementation of the Ban on the Carrying of Firearms Outside of Residence" 2
(Guidelines) issued on January 31, 2003, by respondent Hermogenes E. Ebdane, Jr., Chief of the Philippine
National Police (PNP).
The facts are undisputed:
In January 2003, President Gloria Macapagal-Arroyo delivered a speech before the members of the PNP
stressing the need for a nationwide gun ban in all public places to avert the rising crime incidents. She
directed the then PNP Chief, respondent Ebdane, to suspend the issuance of Permits to Carry Firearms
Outside of Residence (PTCFOR), thus:
"THERE IS ALSO NEED TO FOCUS ON THE HIGH PROFILE CRIMES THAT TEND TO DISTURB THE
PSYCHOLOGICAL PERIMETERS OF THE COMMUNITY — THE LATEST BEING THE KILLING OF FORMER
NPA LEADER ROLLY KINTANAR. I UNDERSTAND WE ALREADY HAVE THE IDENTITY OF THE CULPRIT.
LET US BRING THEM TO THE BAR OF JUSTICE.
THE NPA WILL FIND IT MORE DIFFICULT TO CARRY OUT THEIR PLOTS IF OUR LAW ENFORCEMENT
AGENCIES CAN RID THEMSELVES OF RASCALS IN UNIFORM, AND ALSO IF WE ENFORCE A GUN BAN IN
PUBLIC PLACES.
THUS, I AM DIRECTING THE PNP CHIEF TO SUSPEND INDEFINITELY THE ISSUANCE OF PERMIT TO
CARRY FIREARMS IN PUBLIC PLACES. THE ISSUANCE OF PERMITS WILL NOW BE LIMITED ONLY TO
OWNERSHIP AND POSSESSION OF GUNS AND NOT TO CARRYING THEM IN PUBLIC PLACES. FROM NOW
ON, ONLY THE UNIFORMED MEN IN THE MILITARY AND AUTHORIZED LAW ENFORCEMENT OFFICERS
CAN CARRY FIREARMS IN PUBLIC PLACES, AND ONLY PURSUANT TO EXISTING LAW. CIVILIAN OWNERS
MAY NO LONGER BRING THEIR FIREARMS OUTSIDE THEIR RESIDENCES. THOSE WHO WANT TO USE
THEIR GUNS FOR TARGET PRACTICE WILL BE GIVEN SPECIAL AND TEMPORARY PERMITS FROM TIME
TO TIME ONLY FOR THAT PURPOSE. AND THEY MAY NOT LOAD THEIR GUNS WITH BULLETS UNTIL
THEY ARE IN THE PREMISES OF THE FIRING RANGE.
WE CANNOT DISREGARD THE PARAMOUNT NEED FOR LAW AND ORDER. JUST AS WE CANNOT BE
HEEDLESS OF OUR PEOPLE'S ASPIRATIONS FOR PEACE."
Acting on President Arroyo's directive, respondent Ebdane issued the assailed Guidelines quoted as
follows:
"TO : All Concerned
FROM : Chief, PNP
SUBJECT : Guidelines in the Implementation of the Ban on the Carrying of Firearms Outside of
Residence.
DATE : January 31, 2003
1. Reference: PD 1866 dated June 29, 1983 and its Implementing Rules and Regulations.
2. General:
The possession and carrying of firearms outside of residence is a privilege granted by the State to its
citizens for their individual protection against all threats of lawlessness and security.
As a rule, persons who are lawful holders of firearms (regular license, special permit, certificate of
registration or MR) are prohibited from carrying their firearms outside of residence. However, the Chief,
Philippine National Police may, in meritorious cases as determined by him and under conditions as he may
impose, authorize such person or persons to carry firearms outside of residence.
3. Purposes:
This Memorandum prescribes the guidelines in the implementation of the ban on the carrying of firearms
outside of residence as provided for in the Implementing Rules and Regulations, Presidential Decree No.
1866, dated June 29, 1983 and as directed by PGMA. It also prescribes the conditions, requirements and
procedures under which exemption from the ban may be granted.
4. Specific Instructions on the Ban on the Carrying of Firearms:
a. All PTCFOR are hereby revoked. Authorized holders of licensed firearms covered with valid
PTCFOR may re-apply for a new PTCFOR in accordance with the conditions hereinafter prescribed.
b. All holders of licensed or government firearms are hereby prohibited from carrying their
firearms outside their residence except those covered with mission/letter orders and duty detail orders
issued by competent authority pursuant to Section 5, IRR, PD 1866, provided, that the said exception shall
pertain only to organic and regular employees.
5. The following persons may be authorized to carry firearms outside of residence.
a. All persons whose application for a new PTCFOR has been approved, provided, that the persons
and security of those so authorized are under actual threat, or by the nature of their position, occupation
and profession are under imminent danger.
b. All organic and regular employees with Mission/Letter Orders granted by their respective
agencies so authorized pursuant to Section 5, IRR, PD 1866, provided, that such Mission/Letter Orders is
valid only for the duration of the official mission which in no case shall be more than ten (10) days.
c. All guards covered with Duty Detail Orders granted by their respective security agencies so
authorized pursuant to Section 4, IRR, PD 1866, provided, that such DDO shall in no case exceed 24-hour
duration.
d. Members of duly recognized Gun Clubs issued Permit to Transport (PTT) by the PNP for a. The firearm must not be displayed or exposed to public view, except those authorized in
purposes of practice and competition, provided, that such firearms while in transit must not be loaded uniform and in the performance of their official duties.
with ammunition and secured in an appropriate box or case detached from the person.
b. The firearm shall not be brought inside public drinking and amusement places, and all other
e. Authorized members of the Diplomatic Corps. commercial or public establishments."

6. Requirements for issuance of new PTCFOR: Petitioner Francisco I. Chavez, a licensed gun owner to whom a PTCFOR has been issued, requested the
Department of Interior and Local Government (DILG) to reconsider the implementation of the assailed
a. Written request by the applicant addressed to Chief, PNP stating his qualification to possess Guidelines. However, his request was denied. Thus, he filed the present petition impleading public
firearm and the reasons why he needs to carry firearm outside of residence. respondents Ebdane, as Chief of PNP; Alberto G. Romulo, as Executive Secretary; and Gerry L. Barias, as
Chief of the PNP-Firearms and Explosives Division. He anchored his petition on the following grounds:
b. Xerox copy of current firearm license duly authenticated by Records Branch, FED;
"I
c. Proof of actual threat, the details of which should be issued by the Chief of Police/Provincial or
City Directors and duly validated by C, RIID; THE PRESIDENT HAS NO POWER OR AUTHORITY — MUCH LESS BY A MERE SPEECH — TO ALTER,
MODIFY OR AMEND THE LAW ON FIREARMS BY IMPOSING A GUN BAN AND CANCELING EXISTING
d. Copy of Drug Test Clearance, duly authenticated by the Drug Testing Center, if photocopied; PERMITS FOR GUNS TO BE CARRIED OUTSIDE RESIDENCES.

e. Copy of DI/ RIID clearance, duly authenticated by ODI/RIID, if photocopied; II

f. Copy of Neuro-Psychiatric Clearance duly authenticated by NP Testing Center, if photocopied; OFFICIALLY, THERE IS NO PRESIDENTIAL ISSUANCE ON THE GUN BAN; THE PRESIDENTIAL SPEECH
NEVER INVOKED POLICE POWER TO JUSTIFY THE GUN BAN; THE PRESIDENT'S VERBAL DECLARATION
g. Copy of Certificate of Attendance to a Gun Safety Seminar, duly validated by Chief, Operations ON GUN BAN VIOLATED THE PEOPLE'S RIGHT TO PROTECT LIFE AND THEIR PROPERTY RIGHT TO
Branch, FED; CARRY FIREARMS.

h. NBI Clearance; III

i. Two (2) ID pictures (2" x 2") taken not earlier than one (1) year from date of filing of THE PNP CHIEF HAS NO POWER OR AUTHORITY TO ISSUE THE QUESTIONED GUIDELINES BECAUSE:
application; and
1) THERE IS NO LAW, STATUTE OR EXECUTIVE ORDER WHICH GRANTS THE PNP CHIEF THE
j. Proof of Payment AUTHORITY TO PROMULGATE THE PNP GUIDELINES.

7. Procedures: 2) THE IMPLEMENTING RULES AND REGULATIONS OF PD 1866 CANNOT BE THE SUBJECT OF
ANOTHER SET OF IMPLEMENTING GUIDELINES.
a. Applications may be filed directly to the Office of the PTCFOR Secretariat in Camp Crame. In the
provinces, the applications may also be submitted to the Police Regional Offices (PROs) and 3) THE PRESIDENT'S SPEECH CANNOT BE A BASIS FOR THE PROMULGATION OF IMPLEMENTING
Provincial/City Police Offices (P/CPOs) for initial processing before they are forwarded to the office of the GUIDELINES ON THE GUN BAN. IHcSCA
PTCFOR Secretariat. The processors, after ascertaining that the documentary requirements are in order,
shall issue the Order of Payment (OP) indicating the amount of fees payable by the applicant, who in turn IV
shall pay the fees to the Land Bank.
ASSUMING ARGUENDO, THAT THE PNP GUIDELINES IMPLEMENT PD 1866, AND THE AMENDMENTS
b. Applications, which are duly processed and prepared in accordance with existing rules and THERETO, THE PNP CHIEF STILL HAS NO POWER OR AUTHORITY TO ISSUE THE SAME BECAUSE —
regulations, shall be forwarded to the OCPNP for approval.
1) PER SEC 6, RA 8294, WHICH AMENDS PD 1866, THE IRR SHALL BE PROMULGATED JOINTLY BY
c. Upon approval of the application, OCPNP will issue PTCFOR valid for one (1) year from date of THE DOJ AND THE DILG.
issue.
2) SEC. 8, PD 1866 STATES THAT THE IRR SHALL BE PROMULGATED BY THE CHIEF OF THE
d. Applications for renewal of PTCFOR shall be processed in accordance with the provisions of par. PHILIPPINE CONSTABULARY.
6 above.
V
e. Application for possession and carrying of firearms by diplomats in the Philippines shall be
processed in accordance with NHQ PNP Memo dated September 25, 2000, with Subj: Possession and THE PNP GUIDELINES VIOLATE THE DUE PROCESS CLAUSE OF THE CONSTITUTION BECAUSE:
Carrying of Firearms by Diplomats in the Philippines.
1) THE RIGHT TO OWN AND CARRY A FIREARM IS NECESSARILY INTERTWINED WITH THE
8. Restrictions in the Carrying of Firearms: PEOPLE'S INHERENT RIGHT TO LIFE AND TO PROTECT LIFE. THUS, THE PNP GUIDELINES DEPRIVE
PETITIONER OF THIS RIGHT WITHOUT DUE PROCESS OF LAW FOR:
A) THE PNP GUIDELINES DEPRIVE PETITIONER OF HIS MOST POTENT, IF NOT HIS ONLY, MEANS
TO DEFEND HIMSELF.
B) THE QUESTIONED GUIDELINES STRIPPED PETITIONER OF HIS MEANS OF PROTECTION
AGAINST CRIME DESPITE THE FACT THAT THE STATE COULD NOT POSSIBLY PROTECT ITS CITIZENS
DUE TO THE INADEQUACY AND INEFFICIENCY OF THE POLICE FORCE.
2) THE OWNERSHIP AND CARRYING OF FIREARMS ARE CONSTITUTIONALLY PROTECTED
PROPERTY RIGHTS WHICH CANNOT BE TAKEN AWAY WITHOUT DUE PROCESS OF LAW AND WITHOUT
JUST CAUSE.
VI
ASSUMING ARGUENDO, THAT THE PNP GUIDELINES WERE ISSUED IN THE EXERCISE OF POLICE POWER,
THE SAME IS AN INVALID EXERCISE THEREOF SINCE THE MEANS USED THEREFOR ARE
UNREASONABLE AND UNNECESSARY FOR THE ACCOMPLISHMENT OF ITS PURPOSE — TO DETER AND
PREVENT CRIME — THEREBY BECOMING UNDULY OPPRESSIVE TO LAW-ABIDING GUN-OWNERS.
VII
THE PNP GUIDELINES ARE UNJUST, OPPRESSIVE AND CONFISCATORY SINCE IT REVOKED ALL EXISTING
PERMITS TO CARRY WITHOUT, HOWEVER, REFUNDING THE PAYMENT THE PNP RECEIVED FROM
THOSE WHO ALREADY PAID THEREFOR.
VIII
THE PNP GUIDELINES VIOLATE THE EQUAL PROTECTION CLAUSE OF THE CONSTITUTION BECAUSE
THEY ARE DIRECTED AT AND OPPRESSIVE ONLY TO LAW-ABIDING GUN OWNERS WHILE LEAVING
OTHER GUN-OWNERS — THE LAWBREAKERS (KIDNAPPERS, ROBBERS, HOLD-UPPERS, MNLF, MILF, ABU
SAYYAF COLLECTIVELY, AND NPA) — UNTOUCHED.
IX
THE PNP GUIDELINES ARE UNJUST, OPPRESSIVE AND UNFAIR BECAUSE THEY WERE IMPLEMENTED
LONG BEFORE THEY WERE PUBLISHED.
X
THE PNP GUIDELINES ARE EFFECTIVELY AN EX POST FACTO LAW SINCE THEY APPLY RETROACTIVELY
AND PUNISH ALL THOSE WHO WERE ALREADY GRANTED PERMITS TO CARRY OUTSIDE OF RESIDENCE
LONG BEFORE THEIR PROMULGATION."
Petitioner's submissions may be synthesized into five (5) major issues:
First, whether respondent Ebdane is authorized to issue the assailed Guidelines;
Second, whether the citizens' right to bear arms is a constitutional right?;
Third, whether the revocation of petitioner's PTCFOR pursuant to the assailed Guidelines is a violation of
his right to property?;
Fourth, whether the issuance of the assailed Guidelines is a valid exercise of police power?; and
Fifth, whether the assailed Guidelines constitute an ex post facto law?
The Solicitor General seeks the dismissal of the petition pursuant to the doctrine of hierarchy of courts.
Nonetheless, in refutation of petitioner's arguments, he contends that: (1) the PNP Chief is authorized to
issue the assailed Guidelines; (2) petitioner does not have a constitutional right to own and carry firearms;
(3) the assailed Guidelines do not violate the due process clause of the Constitution; and (4) the assailed
Guidelines do not constitute an ex post facto law.
Initially, we must resolve the procedural barrier.
On the alleged breach of the doctrine of hierarchy of courts, suffice it to say that the doctrine is not an iron-
clad dictum. In several instances where this Court was confronted with cases of national interest and of
serious implications, it never hesitated to set aside the rule and proceed with the judicial determination of
the cases. 3 The case at bar is of similar import as it involves the citizens' right to bear arms.
I
Authority of the PNP Chief
Relying on the principle of separation of powers, petitioner argues that only Congress can withhold his
right to bear arms. In revoking all existing PTCFOR, President Arroyo and respondent Ebdane transgressed
the settled principle and arrogated upon themselves a power they do not possess — the legislative power.
We are not persuaded.
It is true that under our constitutional system, the powers of government are distributed among three
coordinate and substantially independent departments: the legislative, the executive and the judiciary.
Each has exclusive cognizance of the matters within its jurisdiction and is supreme within its own sphere.
4
Pertinently, the power to make laws — the legislative power — is vested in Congress. 5 Congress may not
escape its duties and responsibilities by delegating that power to any other body or authority. Any attempt
to abdicate the power is unconstitutional and void, on the principle that "delegata potestas non potest
delegari" — "delegated power may not be delegated." 6
The rule which forbids the delegation of legislative power, however, is not absolute and inflexible. It admits
of exceptions. An exception sanctioned by immemorial practice permits the legislative body to delegate its
licensing power to certain persons, municipal corporations, towns, boards, councils, commissions,
commissioners, auditors, bureaus and directors. 7 Such licensing power includes the power to promulgate
necessary rules and regulations. 8
The evolution of our laws on firearms shows that since the early days of our Republic, the legislature's
tendency was always towards the delegation of power. Act No. 1780, 9 delegated upon the Governor-
General (now the President) the authority (1) to approve or disapprove applications of any person for a
license to deal in firearms or to possess the same for personal protection, hunting and other lawful
purposes; and (2) to revoke such license any time. 10 Further, it authorized him to issue regulations which
he may deem necessary for the proper enforcement of the Act. 11 With the enactment of Act No. 2711, the
"Revised Administrative Code of 1917," the laws on firearms were integrated. 12 The Act retained the
authority of the Governor General provided in Act No. 1780. Subsequently, the growing complexity in the
Office of the Governor-General resulted in the delegation of his authority to the Chief of the Constabulary.
On January 21, 1919, Acting Governor-General Charles E. Yeater issued Executive Order No. 8 13
authorizing and directing the Chief of Constabulary to act on his behalf in approving and disapproving
applications for personal, special and hunting licenses. This was followed by Executive Order No. 61 14
designating the Philippine Constabulary (PC) as the government custodian of all firearms, ammunitions
and explosives. Executive Order No. 215, 15 issued by President Diosdado Macapagal on December 3,
1965, granted the Chief of the Constabulary, not only the authority to approve or disapprove applications
for personal, special and hunting license, but also the authority to revoke the same. With the foregoing
developments, it is accurate to say that the Chief of the Constabulary had exercised the authority for a long
time. In fact, subsequent issuances such as Sections 2 and 3 of the Implementing Rules and Regulations of
Presidential Decree No. 1866 16 perpetuate such authority of the Chief of the Constabulary. Section 2
specifically provides that any person or entity desiring to possess any firearm "shall first secure the
necessary permit/license/authority from the Chief of the Constabulary." With regard to the issuance of
PTCFOR, Section 3 imparts: "The Chief of Constabulary may, in meritorious cases as determined by him
and under such conditions as he may impose, authorize lawful holders of firearms to carry them outside of
residence." These provisions are issued pursuant to the general power granted by P.D. No. 1866
empowering him to promulgate rules and regulations for the effective implementation of the decree. 17 At
this juncture, it bears emphasis that P.D. No. 1866 is the chief law governing possession of firearms in the
Philippines and that it was issued by President Ferdinand E. Marcos in the exercise of his legislative power.
18
In an attempt to evade the application of the above-mentioned laws and regulations, petitioner argues that
the "Chief of the PNP" is not the same as the "Chief of the Constabulary," the PC being a mere unit or
component of the newly established PNP. He contends further that Republic Act No. 8294 19 amended P.D.
No. 1866 such that the authority to issue rules and regulations regarding firearms is now jointly vested in
the Department of Justice and the DILG, not the Chief of the Constabulary. 20
Petitioner's submission is bereft of merit.
By virtue of Republic Act No. 6975, 21 the Philippine National Police (PNP) absorbed the Philippine
Constabulary (PC). Consequently, the PNP Chief succeeded the Chief of the Constabulary and, therefore,
assumed the latter's licensing authority. Section 24 thereof specifies, as one of PNP's powers, the issuance
of licenses for the possession of firearms and explosives in accordance with law. 22 This is in conjunction
with the PNP Chief's "power to issue detailed implementing policies and instructions" on such "matters as
may be necessary to effectively carry out the functions, powers and duties" of the PNP. 23
Contrary to petitioner's contention, R.A. No. 8294 does not divest the Chief of the Constabulary (now the
PNP Chief) of his authority to promulgate rules and regulations for the effective implementation of P.D. No.
1866. For one, R.A. No. 8294 did not repeal entirely P.D. No. 1866. It merely provides for the reduction of
penalties for illegal possession of firearms. Thus, the provision of P.D. No. 1866 granting to the Chief of the
Constabulary the authority to issue rules and regulations regarding firearms remains effective.
Correspondingly, the Implementing Rules and Regulations dated September 15, 1997 jointly issued by the
Department of Justice and the DILG pursuant to Section 6 of R.A. No. 8294 deal only with the automatic
review, by the Director of the Bureau of Corrections or the Warden of a provincial or city jail, of the records
of convicts for violations of P.D. No. 1866. The Rules seek to give effect to the beneficent provisions of R.A.
No. 8294, thereby ensuring the early release and reintegration of the convicts into the community.
Clearly, both P.D. No. 1866 and R.A. No. 6975 authorize the PNP Chief to issue the assailed guidelines.
Corollarily, petitioner disputes President Arroyo's declaration of a nationwide gun ban, arguing that "she
has no authority to alter, modify, or amend the law on firearms through a mere speech."
First, it must be emphasized that President Arroyo's speech was just an expression of her policy and a
directive to her subordinate. It cannot, therefore, be argued that President Arroyo enacted a law through a
mere speech.
Second, at the apex of the entire executive officialdom is the President. Section 17, Article VII of the
Constitution specifies his power as Chief Executive, thus: "The President shall have control of all the
executive departments, bureaus and offices. He shall ensure that the laws be faithfully executed." As Chief
Executive, President Arroyo holds the steering wheel that controls the course of her government. She lays
down policies in the execution of her plans and programs. Whatever policy she chooses, she has her
subordinates to implement them. In short, she has the power of control. Whenever a specific function is
entrusted by law or regulation to her subordinate, she may act directly or merely direct the performance of
a duty. 24 Thus, when President Arroyo directed respondent Ebdane to suspend the issuance of PTCFOR,
she was just directing a subordinate to perform an assigned duty. Such act is well within the prerogative of
her office.
II
Right to bear arms: Constitutional or Statutory?
Petitioner earnestly contends that his right to bear arms is a constitutionally-protected right. This, he
mainly anchors on various American authorities. We therefore find it imperative to determine the nature
of the right in light of American jurisprudence. SIcCTD
The bearing of arms is a tradition deeply rooted in the English and American society. It antedates not only
the American Constitution but also the discovery of firearms. 25
A provision commonly invoked by the American people to justify their possession of firearms is the Second
Amendment of the Constitution of the United States of America, which reads:
"A well regulated militia, being necessary for the security of free state, the right of the people to keep and
bear Arms, shall not be infringed."
An examination of the historical background of the foregoing provision shows that it pertains to the
citizens' "collective right" to take arms in defense of the State, not to the citizens' "individual right" to own
and possess arms. The setting under which the right was contemplated has a profound connection with
the keeping and maintenance of a militia or an armed citizenry. That this is how the right was construed is
evident in early American cases.
The first case involving the interpretation of the Second Amendment that reached the United States
Supreme Court is United States vs. Miller. 26 Here, the indictment charged the defendants with
transporting an unregistered "Stevens shotgun" without the required stamped written order, contrary to
the National Firearms Act. The defendants filed a demurrer challenging the facial validity of the indictment
on the ground that the National Firearms Act offends the inhibition of the Second Amendment. The
District Court sustained the demurrer and quashed the indictment. On appeal, the Supreme Court
interpreted the right to bear arms under the Second Amendment as referring to the collective right of
those comprising the Militia — a body of citizens enrolled for military discipline. It does not pertain to the
individual right of citizen to bear arm. Miller expresses its holding as follows:
"In the absence of any evidence tending to show that possession or use of a 'shotgun having a barrel of less
than eighteen inches in length' at this time has some reasonable relationship to the preservation or
efficiency of a well regulated militia, we cannot say that the Second Amendment guarantees the right to
keep and bear such an instrument. Certainly it is not within judicial notice that this weapon is any part of
the ordinary military equipment or that its use could contribute to the common defense.
The same doctrine was re-echoed in Cases vs. United States. 27 Here, the Circuit Court of Appeals held that
the Federal Firearms Act, as applied to appellant, does not conflict with the Second Amendment. It ruled
that:
"While [appellant's] weapon may be capable of military use, or while at least familiarity with it might be
regarded as of value in training a person to use a comparable weapon of military type and caliber, still
there is no evidence that the appellant was or ever had been a member of any military organization or that
his use of the weapon under the circumstances disclosed was in preparation for a military career. In fact,
the only inference possible is that the appellant at the time charged in the indictment was in possession of,
transporting, and using the firearm and ammunition purely and simply on a frolic of his own and without
any thought or intention of contributing to the efficiency of the well regulated militia which the Second
amendment was designed to foster as necessary to the security of a free state."
With the foregoing jurisprudence, it is erroneous to assume that the US Constitution grants upon the
American people the right to bear arms. In a more explicit language, the United States vs. Cruikshank 28
decreed: "The right of the people to keep and bear arms is not a right granted by the Constitution. Neither
is it in any way dependent upon that instrument." Likewise, in People vs. Persce, 29 the Court of Appeals
said: "Neither is there any constitutional provision securing the right to bear arms which prohibits
legislation with reference to such weapons as are specifically before us for consideration. The provision in
the Constitution of the United States that the right of the people to keep and bear arms shall not be
infringed is not designed to control legislation by the state."
With more reason, the right to bear arms cannot be classified as fundamental under the 1987 Philippine
Constitution. Our Constitution contains no provision similar to the Second Amendment, as we aptly
observed in the early case of United States vs. Villareal: 30
"The only contention of counsel which would appear to necessitate comment is the claim that the statute
penalizing the carrying of concealed weapons and prohibiting the keeping and the use of firearms without
a license, is in violation of the provisions of section 5 of the Philippine Bill of Rights.
Counsel does not expressly rely upon the prohibition in the United States Constitution against the
infringement of the right of the people of the United States to keep and bear arms (U. S. Constitution,
amendment 2), which is not included in the Philippine Bill. But it may be well, in passing, to point out that
in no event could this constitutional guaranty have any bearing on the case at bar, not only because it has
not been expressly extended to the Philippine Islands, but also because it has been uniformly held that
both this and similar provisions in State constitutions apply only to arms used in civilized warfare (see
cases cited in 40 Cyc., 853, note 18); . . .."
Evidently, possession of firearms by the citizens in the Philippines is the exception, not the rule. The right
to bear arms is a mere statutory privilege, not a constitutional right. It is a mere statutory creation. What
then are the laws that grant such right to the Filipinos? The first real firearm law is Act No. 1780 enacted
by the Philippine Commission on October 12, 1907. It was passed to regulate the importation, acquisition,
possession, use and transfer of firearms. Section 9 thereof provides:
"SECTION 9. Any person desiring to possess one or more firearms for personal protection, or for
use in hunting or other lawful purposes only, and ammunition therefor, shall make application for a license
to possess such firearm or firearms or ammunition as hereinafter provided. Upon making such application,
and before receiving the license, the applicant shall make a cash deposit in the postal savings bank in the
sum of one hundred pesos for each firearm for which the license is to be issued, or in lieu thereof he may
give a bond in such form as the Governor-General may prescribe, payable to the Government of the
Philippine Islands, in the sum of two hundred pesos for each such firearm: PROVIDED, HOWEVER, That
persons who are actually members of gun clubs, duly formed and organized at the time of the passage of
this Act, who at such time have a license to possess firearms, shall not be required to make the deposit or
give the bond prescribed by this section, and the bond duly executed by such person in accordance with
existing law shall continue to be security for the safekeeping of such arms."
The foregoing provision was restated in Section 887 31 of Act No. 2711 that integrated the firearm laws.
Thereafter, President Ferdinand E. Marcos issued P.D. No. 1866. It codified the laws on illegal possession,
manufacture, dealing in, acquisition of firearms, ammunitions or explosives and imposed stiffer penalties
for their violation. R.A. No. 8294 amended some of the provisions of P.D. No. 1866 by reducing the
imposable penalties. Being a mere statutory creation, the right to bear arms cannot be considered an
inalienable or absolute right.
III
Vested Property Right
Section 1, Article III of the Constitution provides that "no person shall be deprived of life, liberty or
property without due process of law." Petitioner invokes this provision, asserting that the revocation of his
PTCFOR pursuant to the assailed Guidelines deprived him of his "vested property right" without due
process of law and in violation of the equal protection of law.
Petitioner cannot find solace to the above-quoted Constitutional provision.
In evaluating a due process claim, the first and foremost consideration must be whether life, liberty or
property interest exists. 32 The bulk of jurisprudence is that a license authorizing a person to enjoy a
certain privilege is neither a property nor property right. In Tan vs. The Director of Forestry, 33 we ruled
that "a license is merely a permit or privilege to do what otherwise would be unlawful, and is not a
contract between the authority granting it and the person to whom it is granted; neither is it property or a
property right, nor does it create a vested right." In a more emphatic pronouncement, we held in Oposa vs.
Factoran, Jr. 34 that:
"Needless to say, all licenses may thus be revoked or rescinded by executive action. It is not a contract,
property or a property right protected by the due process clause of the Constitution."
Petitioner, in arguing that his PTCFOR is a constitutionally protected property right, relied heavily on Bell
vs. Burson 35 wherein the U.S. Supreme Court ruled that "once a license is issued, continued possession
may become essential in the pursuit of livelihood. Suspension of issued licenses thus involves state action
that adjudicates important interest of the licensees."
Petitioner's reliance on Bell is misplaced. This case involves a driver's license, not a license to bear arms.
The catena of American jurisprudence involving license to bear arms is perfectly in accord with our ruling
that a PTCFOR is neither a property nor a property right. In Erdelyi vs. O'Brien, 36 the plaintiff who was
denied a license to carry a firearm brought suit against the defendant who was the Chief of Police of the
City of Manhattan Beach, on the ground that the denial violated her constitutional rights to due process
and equal protection of the laws. The United States Court of Appeals Ninth Circuit ruled that Erdelyi did
not have a property interest in obtaining a license to carry a firearm, ratiocinating as follows:
"Property interests protected by the Due Process Clause of the Fourteenth Amendment do not arise
whenever a person has only 'an abstract need or desire for', or 'unilateral expectation of a benefit. . . .
Rather, they arise from 'legitimate claims of entitlement . . . defined by existing rules or understanding that
stem from an independent source, such as state law. . . .
Concealed weapons are closely regulated by the State of California. . . . Whether the statute creates a
property interest in concealed weapons licenses depends 'largely upon the extent to which the statute
contains mandatory language that restricts the discretion of the [issuing authority] to deny licenses to
applicants who claim to meet the minimum eligibility requirements. . . . Where state law gives the issuing
authority broad discretion to grant or deny license application in a closely regulated field, initial applicants
do not have a property right in such licenses protected by the Fourteenth Amendment. See Jacobson,
supra, 627 F.2d at 180 (gaming license under Nevada law);"
Similar doctrine was announced in Potts vs. City of Philadelphia, 37 Conway vs. King, 38 Nichols vs. County
of Sta. Clara, 39 and Gross vs. Norton. 40 These cases enunciated that the test whether the statute creates a
property right or interest depends largely on the extent of discretion granted to the issuing authority.
In our jurisdiction, the PNP Chief is granted broad discretion in the issuance of PTCFOR. This is evident
from the tenor of the Implementing Rules and Regulations of P.D. No. 1866 which state that "the Chief of
Constabulary may, in meritorious cases as determined by him and under such conditions as he may
impose, authorize lawful holders of firearms to carry them outside of residence." Following the American
doctrine, it is indeed logical to say that a PTCFOR does not constitute a property right protected under our
Constitution.
Consequently, a PTCFOR, just like ordinary licenses in other regulated fields, may be revoked any time. It
does not confer an absolute right, but only a personal privilege to be exercised under existing restrictions,
and such as may thereafter be reasonably imposed. 41 A licensee takes his license subject to such
conditions as the Legislature sees fit to impose, and one of the statutory conditions of this license is that it
might be revoked by the selectmen at their pleasure. Such a license is not a contract, and a revocation of it
does not deprive the defendant of any property, immunity, or privilege within the meaning of these words
in the Declaration of Rights. 42 The US Supreme Court, in Doyle vs. Continental Ins. Co, 43 held: "The
correlative power to revoke or recall a permission is a necessary consequence of the main power. A mere
license by the State is always revocable."
The foregoing jurisprudence has been resonating in the Philippines as early as 1908. Thus, in The
Government of the Philippine Islands vs. Amechazurra 44 we ruled:
". . . no private person is bound to keep arms. Whether he does or not is entirely optional with himself, but
if, for his own convenience or pleasure, he desires to possess arms, he must do so upon such terms as the
Government sees fit to impose, for the right to keep and bear arms is not secured to him by law. The
Government can impose upon him such terms as it pleases. If he is not satisfied with the terms imposed,
he should decline to accept them, but, if for the purpose of securing possession of the arms he does agree
to such conditions, he must fulfill them."
IV
Police Power
At any rate, assuming that petitioner's PTCFOR constitutes a property right protected by the Constitution,
the same cannot be considered as absolute as to be placed beyond the reach of the State's police power. All
property in the state is held subject to its general regulations, necessary to the common good and general
welfare.
In a number of cases, we laid down the test to determine the validity of a police measure, thus:
any community wherein the practice of carrying concealed weapons prevails, and this without being
unduly oppressive upon the individual owners of these weapons. It follows that its enactment by the
legislature is a proper and legitimate exercise of the police power of the state."
V
Ex post facto law
In Mekin vs. Wolfe, 48 an ex post facto law has been defined as one — (a) which makes an action done
before the passing of the law and which was innocent when done criminal, and punishes such action; or
(b) which aggravates a crime or makes it greater than it was when committed; or (c) which changes the
punishment and inflicts a greater punishment than the law annexed to the crime when it was committed;
or (d) which alters the legal rules of evidence and receives less or different testimony than the law
required at the time of the commission of the offense in order to convict the defendant.
We see no reason to devote much discussion on the matter. Ex post facto law prohibits retrospectivity of
penal laws. 49 The assailed Guidelines cannot be considered as an ex post facto law because it is
prospective in its application. Contrary to petitioner's argument, it would not result in the punishment of
acts previously committed.

(1) The interests of the public generally, as distinguished from those of a particular class, require
the exercise of the police power; and WHEREFORE, the petition is hereby DISMISSED.

(2) The means employed are reasonably necessary for the accomplishment of the purpose and not
unduly oppressive upon individuals.
SO ORDERED.
Deeper reflection will reveal that the test merely reiterates the essence of the constitutional guarantees of
substantive due process, equal protection, and non-impairment of property rights.

It is apparent from the assailed Guidelines that the basis for its issuance was the need for peace and order Davide, Jr., C .J ., Puno, Vitug, Panganiban, Quisumbing, Ynares-Santiago, Carpio, Austria-Martinez, Corona,
in the society. Owing to the proliferation of crimes, particularly those committed by the New People's Army Carpio Morales, Callejo, Sr., Azcuna and Tinga, JJ ., concur.
(NPA), which tends to disturb the peace of the community, President Arroyo deemed it best to impose a
nationwide gun ban. Undeniably, the motivating factor in the issuance of the assailed Guidelines is the
interest of the public in general. CDAcIT

The only question that can then arise is whether the means employed are appropriate and reasonably
necessary for the accomplishment of the purpose and are not unduly oppressive. In the instant case, the
assailed Guidelines do not entirely prohibit possession of firearms. What they proscribe is merely the
carrying of firearms outside of residence. However, those who wish to carry their firearms outside of their
residences may re-apply for a new PTCFOR. This we believe is a reasonable regulation. If the carrying of
firearms is regulated, necessarily, crime incidents will be curtailed. Criminals carry their weapon to hunt
for their victims; they do not wait in the comfort of their homes. With the revocation of all PTCFOR, it
would be difficult for criminals to roam around with their guns. On the other hand, it would be easier for
the PNP to apprehend them.

Notably, laws regulating the acquisition or possession of guns have frequently been upheld as reasonable
exercise of the police power. 45 In State vs. Reams, 46 it was held that the legislature may regulate the
right to bear arms in a manner conducive to the public peace. With the promotion of public peace as its
objective and the revocation of all PTCFOR as the means, we are convinced that the issuance of the assailed
Guidelines constitutes a reasonable exercise of police power. The ruling in United States vs. Villareal, 47 is
relevant, thus:

"We think there can be no question as to the reasonableness of a statutory regulation prohibiting the
carrying of concealed weapons as a police measure well calculated to restrict the too frequent resort to
such weapons in moments of anger and excitement. We do not doubt that the strict enforcement of such a
regulation would tend to increase the security of life and limb, and to suppress crime and lawlessness, in

EN BANC
[G.R. Nos. 84132-33. December 10, 1990.]
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.
Vicente Pascual, Jr. and Lope E. Feble for Philippine Veterans Bank.
DECISION
CRUZ, J p:
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.
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 Banñ os,
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. cdrep
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.
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."
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. Cdpr
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. llcd
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 Batasang Pambansa 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.
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. llcd

SO ORDERED.

Fernan (C.J.), Narvasa, Gutierrez, Jr., Paras, Gancayco Padilla, Bidin, Sarmiento, Grinñ o-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 Pambansa Blg. 52 was declared null and void for being unconstitutional.

Feliciano, J., is on leave.


SECOND DIVISION
[G.R. No. 130230. April 15, 2005.]
METROPOLITAN MANILA DEVELOPMENT AUTHORITY, petitioner, vs. DANTE O. GARIN, respondent.
DECISION
CHICO-NAZARIO, J p:
At issue in this case is the validity of Section 5(f) of Republic Act No. 7924 creating the Metropolitan
Manila Development Authority (MMDA), which authorizes it to confiscate and suspend or revoke driver's
licenses in the enforcement of traffic laws and regulations.
The issue arose from an incident involving the respondent Dante O. Garin, a lawyer, who was issued a
traffic violation receipt (TVR) and his driver's license confiscated for parking illegally along Gandara
Street, Binondo, Manila, on 05 August 1995. The following statements were printed on the TVR:
YOU ARE HEREBY DIRECTED TO REPORT TO THE MMDA TRAFFIC OPERATIONS CENTER PORT AREA
MANILA AFTER 48 HOURS FROM DATE OF APPREHENSION FOR DISPOSITION/APPROPRIATE ACTION
THEREON. CRIMINAL CASE SHALL BE FILED FOR FAILURE TO REDEEM LICENSE AFTER 30 DAYS.
VALID AS TEMPORARY DRIVER'S LICENSE FOR SEVEN DAYS FROM DATE OF APPREHENSION. 1
Shortly before the expiration of the TVR's validity, the respondent addressed a letter 2 to then MMDA
Chairman Prospero Oreta requesting the return of his driver's license, and expressing his preference for
his case to be filed in court.
Receiving no immediate reply, Garin filed the original complaint 3 with application for preliminary
injunction in Branch 260 of the Regional Trial Court (RTC) of Paranñ aque, on 12 September 1995,
contending that, in the absence of any implementing rules and regulations, Sec. 5(f) of Rep. Act No. 7924
grants the MMDA unbridled discretion to deprive erring motorists of their licenses, pre-empting a judicial
determination of the validity of the deprivation, thereby violating the due process clause of the
Constitution. The respondent further contended that the provision violates the constitutional prohibition
against undue delegation of legislative authority, allowing as it does the MMDA to fix and impose
unspecified — and therefore unlimited — fines and other penalties on erring motorists.
In support of his application for a writ of preliminary injunction, Garin alleged that he suffered and
continues to suffer great and irreparable damage because of the deprivation of his license and that, absent
any implementing rules from the Metro Manila Council, the TVR and the confiscation of his license have no
legal basis.
For its part, the MMDA, represented by the Office of the Solicitor General, pointed out that the powers
granted to it by Sec. 5(f) of Rep. Act No. 7924 are limited to the fixing, collection and imposition of fines
and penalties for traffic violations, which powers are legislative and executive in nature; the judiciary
retains the right to determine the validity of the penalty imposed. It further argued that the doctrine of
separation of powers does not preclude "admixture" of the three powers of government in administrative
agencies. 4
The MMDA also refuted Garin's allegation that the Metro Manila Council, the governing board and policy
making body of the petitioner, has as yet to formulate the implementing rules for Sec. 5(f) of Rep. Act No.
7924 and directed the court's attention to MMDA Memorandum Circular No. TT-95-001 dated 15 April
1995. Respondent Garin, however, questioned the validity of MMDA Memorandum Circular No. TT-95-001,
as he claims that it was passed by the Metro Manila Council in the absence of a quorum.
Judge Helen Bautista-Ricafort issued a temporary restraining order on 26 September 1995, extending the
validity of the TVR as a temporary driver's license for twenty more days. A preliminary mandatory
injunction was granted on 23 October 1995, and the MMDA was directed to return the respondent's
driver's license.
On 14 August 1997, the trial court rendered the assailed decision 5 in favor of the herein respondent and
held that:
a. There was indeed no quorum in that First Regular Meeting of the MMDA Council held on March
23, 1995, hence MMDA Memorandum Circular No. TT-95-001, authorizing confiscation of driver's licenses
upon issuance of a TVR, is void ab initio.
b. The summary confiscation of a driver's license without first giving the driver an opportunity to
be heard; depriving him of a property right (driver's license) without DUE PROCESS; not filling (sic) in
Court the complaint of supposed traffic infraction, cannot be justified by any legislation (and is) hence
unconstitutional.
WHEREFORE, the temporary writ of preliminary injunction is hereby made permanent; th(e) MMDA is
directed to return to plaintiff his driver's license; th(e) MMDA is likewise ordered to desist from
confiscating driver's license without first giving the driver the opportunity to be heard in an appropriate
proceeding.
In filing this petition, 6 the MMDA reiterates and reinforces its argument in the court below and contends
that a license to operate a motor vehicle is neither a contract nor a property right, but is a privilege subject
to reasonable regulation under the police power in the interest of the public safety and welfare. The
petitioner further argues that revocation or suspension of this privilege does not constitute a taking
without due process as long as the licensee is given the right to appeal the revocation.
To buttress its argument that a licensee may indeed appeal the taking and the judiciary retains the power
to determine the validity of the confiscation, suspension or revocation of the license, the petitioner points
out that under the terms of the confiscation, the licensee has three options:
1. To voluntarily pay the imposable fine,
2. To protest the apprehension by filing a protest with the MMDA Adjudication Committee, or
3. To request the referral of the TVR to the Public Prosecutor's Office.
The MMDA likewise argues that Memorandum Circular No. TT-95-001 was validly passed in the presence
of a quorum, and that the lower court's finding that it had not was based on a "misapprehension of facts,"
which the petitioner would have us review. Moreover, it asserts that though the circular is the basis for the
issuance of TVRs, the basis for the summary confiscation of licenses is Sec. 5(f) of Rep. Act No. 7924 itself,
and that such power is self-executory and does not require the issuance of any implementing regulation or
circular.
Meanwhile, on 12 August 2004, the MMDA, through its Chairman Bayani Fernando, implemented
Memorandum Circular No. 04, Series of 2004, outlining the procedures for the use of the Metropolitan
Traffic Ticket (MTT) scheme. Under the circular, erring motorists are issued an MTT, which can be paid at
any Metrobank branch. Traffic enforcers may no longer confiscate drivers' licenses as a matter of course in
cases of traffic violations. All motorists with unredeemed TVRs were given seven days from the date of
implementation of the new system to pay their fines and redeem their license or vehicle plates. 7
It would seem, therefore, that insofar as the absence of a prima facie case to enjoin the petitioner from
confiscating drivers' licenses is concerned, recent events have overtaken the Court's need to decide this
case, which has been rendered moot and academic by the implementation of Memorandum Circular No.
04, Series of 2004.
The petitioner, however, is not precluded from re-implementing Memorandum Circular No. TT-95-001, or
any other scheme, for that matter, that would entail confiscating drivers' licenses. For the proper
implementation, therefore, of the petitioner's future programs, this Court deems it appropriate to make
the following observations:
1. A license to operate a motor vehicle is a privilege that the state may withhold in the exercise of
its police power.
The petitioner correctly points out that a license to operate a motor vehicle is not a property right, but a
privilege granted by the state, which may be suspended or revoked by the state in the exercise of its police
power, in the interest of the public safety and welfare, subject to the procedural due process requirements.
This is consistent with our rulings in Pedro v. Provincial Board of Rizal 8 on the license to operate a
cockpit, Tan v. Director of Forestry 9 and Oposa v. Factoran 10 on timber licensing agreements, and Surigao
Electric Co., Inc. v. Municipality of Surigao 11 on a legislative franchise to operate an electric plant.
Petitioner cites a long list of American cases to prove this point, such as State ex. Rel. Sullivan, 12 which
states in part that, "the legislative power to regulate travel over the highways and thoroughfares of the
state for the general welfare is extensive. It may be exercised in any reasonable manner to conserve the
safety of travelers and pedestrians. Since motor vehicles are instruments of potential danger, their
registration and the licensing of their operators have been required almost from their first appearance.
The right to operate them in public places is not a natural and unrestrained right, but a privilege subject to
reasonable regulation, under the police power, in the interest of the public safety and welfare. The power
to license imports further power to withhold or to revoke such license upon noncompliance with
prescribed conditions."
Likewise, the petitioner quotes the Pennsylvania Supreme Court in Commonwealth v. Funk, 13 to the effect
that: "Automobiles are vehicles of great speed and power. The use of them constitutes an element of
danger to persons and property upon the highways. Carefully operated, an automobile is still a dangerous
instrumentality, but, when operated by careless or incompetent persons, it becomes an engine of
destruction. The Legislature, in the exercise of the police power of the commonwealth, not only may, but
must, prescribe how and by whom motor vehicles shall be operated on the highways. One of the primary
purposes of a system of general regulation of the subject matter, as here by the Vehicle Code, is to insure
the competency of the operator of motor vehicles. Such a general law is manifestly directed to the
promotion of public safety and is well within the police power."
The common thread running through the cited cases is that it is the legislature, in the exercise of police
power, which has the power and responsibility to regulate how and by whom motor vehicles may be
operated on the state highways.
2. The MMDA is not vested with police power.
In Metro Manila Development Authority v. Bel-Air Village Association, Inc., 14 we categorically stated that
Rep. Act No. 7924 does not grant the MMDA with police power, let alone legislative power, and that all its
functions are administrative in nature.
The said case also involved the herein petitioner MMDA which claimed that it had the authority to open a
subdivision street owned by the Bel-Air Village Association, Inc. to public traffic because it is an agent of
the state endowed with police power in the delivery of basic services in Metro Manila. From this premise,
the MMDA argued that there was no need for the City of Makati to enact an ordinance opening Neptune
Street to the public.
Tracing the legislative history of Rep. Act No. 7924 creating the MMDA, we concluded that the MMDA is not
a local government unit or a public corporation endowed with legislative power, and, unlike its
predecessor, the Metro Manila Commission, it has no power to enact ordinances for the welfare of the
community. Thus, in the absence of an ordinance from the City of Makati, its own order to open the street
was invalid.
We restate here the doctrine in the said decision as it applies to the case at bar: police power, as an
inherent attribute of sovereignty, is the power vested by the Constitution in the legislature 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 for the subjects of the same.
Having been lodged primarily in the National Legislature, it cannot be exercised by any group or body of
individuals not possessing legislative power. The National Legislature, however, may delegate this power
to the president and administrative boards as well as the lawmaking bodies of municipal corporations or
local government units (LGUs). Once delegated, the agents can exercise only such legislative powers as are
conferred on them by the national lawmaking body.
Our Congress delegated police power to the LGUs in the Local Government Code of 1991. 15 A local
government is a "political subdivision of a nation or state which is constituted by law and has substantial
control of local affairs." 16 Local government units are the provinces, cities, municipalities and barangays,
which exercise police power through their respective legislative bodies.
Metropolitan or Metro Manila is a body composed of several local government units. With the passage of
Rep. Act No. 7924 in 1995, Metropolitan Manila was declared as a "special development and
administrative region" and the administration of "metro-wide" basic services affecting the region placed
under "a development authority" referred to as the MMDA. Thus:
. . . [T]he 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 and coordinating with the
various national government agencies, people's 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:
"Sec. 2. Creation of the Metropolitan Manila Development Authority. — . . .
The MMDA shall perform planning, monitoring and coordinative functions, and in the process exercise
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."
IcHSCT
xxx xxx xxx
Clearly, the MMDA is not a political unit of government. The power delegated to the MMDA is that given to
the Metro Manila Council to promulgate administrative rules and regulations in the implementation of the
MMDA's functions. There is no grant of authority to enact ordinances and regulations for the general
welfare of the inhabitants of the metropolis. 17 (footnotes omitted, emphasis supplied)

Therefore, insofar as Sec. 5(f) of Rep. Act No. 7924 is understood by the lower court and by the petitioner
to grant the MMDA the power to confiscate and suspend or revoke drivers' licenses without need of any
other legislative enactment, such is an unauthorized exercise of police power.

3. Sec. 5(f) grants the MMDA with the duty to enforce existing traffic rules and regulations.

Section 5 of Rep. Act No. 7924 enumerates the "Functions and Powers of the Metro Manila Development
Authority." The contested clause in Sec. 5(f) states that the petitioner shall "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 nonmoving in nature, and confiscate and suspend or revoke drivers'
licenses in the enforcement of such traffic laws and regulations, the provisions of Rep. Act No. 4136 18 and
P.D. No. 1605 19 to the contrary notwithstanding," and that "(f)or this purpose, the Authority shall enforce
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."

Thus, where there is a traffic law or regulation validly enacted by the legislature or those agencies to
whom legislative powers have been delegated (the City of Manila in this case), the petitioner is not
precluded — and in fact is duty-bound — to confiscate and suspend or revoke drivers' licenses in the
exercise of its mandate of transport and traffic management, as well as the administration and
implementation of all traffic enforcement operations, traffic engineering services and traffic education
programs. 20

This is consistent with our ruling in Bel-Air that the MMDA is a development authority created for the
purpose of laying down policies and coordinating with the various national government agencies, people's
organizations, non-governmental organizations and the private sector, which may enforce, but not enact,
ordinances.

This is also consistent with the fundamental rule of statutory construction that a statute is to be read in a
manner that would breathe life into it, rather than defeat it, 21 and is supported by the criteria in cases of
this nature that all reasonable doubts should be resolved in favor of the constitutionality of a statute. 22

A last word. The MMDA was intended to coordinate services with metro-wide impact that transcend local
political boundaries or would entail huge expenditures if provided by the individual LGUs, especially with
regard to transport and traffic management, 23 and we are aware of the valiant efforts of the petitioner to
untangle the increasingly traffic-snarled roads of Metro Manila. But these laudable intentions are limited
by the MMDA's enabling law, which we can but interpret, and petitioner must be reminded that its efforts
in this respect must be authorized by a valid law, or ordinance, or regulation arising from a legitimate
source. AEDISC

WHEREFORE, the petition is dismissed.

SO ORDERED.

Puno, Austria-Martinez, Callejo, Sr. and Tinga, JJ., concur.

Republic of the Philippines
SUPREME COURT
EN BANC
G.R. No. 133640 November 25, 2005
RODOLFO S. BELTRAN, doing business under the name and style, OUR LADY OF FATIMA BLOOD
BANK, FELY G. MOSALE, doing business under the name and style, MOTHER SEATON BLOOD BANK;
PEOPLE’S BLOOD BANK, INC.; MARIA VICTORIA T. VITO, M.D., doing business under the name and
style, AVENUE BLOOD BANK; JESUS M. GARCIA, M.D., doing business under the name and style, HOLY
REDEEMER BLOOD BANK, ALBERT L. LAPITAN, doing business under the name and style, BLUE
CROSS BLOOD TRANSFUSION SERVICES; EDGARDO R. RODAS, M.D., doing business under the name
and style, RECORD BLOOD BANK, in their individual capacities and for and in behalf of PHILIPPINE
ASSOCIATION OF BLOOD BANKS, Petitioners,
vs.
THE SECRETARY OF HEALTH, Respondent.
x ------------------------------------------------ x
G.R. No. 133661
DOCTORS’ BLOOD CENTER, Petitioner,
vs.
DEPARTMENT OF HEALTH, Respondent.
x --------------------------------------------- x
G.R. No. 139147
RODOLFO S. BELTRAN, doing business under the name and style, OUR LADY OF FATIMA BLOOD
BANK, FELY G. MOSALE, doing business under the name and style, MOTHER SEATON BLOOD BANK;
PEOPLE’S BLOOD BANK, INC.; MARIA VICTORIA T. VITO, M.D., doing business under the name and
style, AVENUE BLOOD BANK; JESUS M. GARCIA, M.D., doing business under the name and style, HOLY
REDEEMER BLOOD BANK, ALBERT L. LAPITAN, doing business under the name and style, BLUE
CROSS BLOOD TRANSFUSION SERVICES; EDGARDO R. RODAS, M.D., doing business under the name
and style, RECORD BLOOD BANK, in their Individual capacities and for and in behalf of PHILIPPINE
ASSOCIATION OF BLOOD BANKS, Petitioners,
vs.
THE SECRETARY OF HEALTH, Respondent.
DECISION
AZCUNA, J.:
Before this Court are petitions assailing primarily the constitutionality of Section 7 of Republic Act No.
7719, otherwise known as the "National Blood Services Act of 1994," and the validity of Administrative
Order (A.O.) No. 9, series of 1995 or the Rules and Regulations Implementing Republic Act No. 7719.
G.R. No. 133640,1 entitled "Rodolfo S. Beltran, doing business under the name and style, Our Lady of
Fatima Blood Bank, et al., vs. The Secretary of Health" and G.R. No. 133661, 2 entitled "Doctors Blood Bank
Center vs. Department of Health" are petitions for certiorari and mandamus, respectively, seeking the
annulment of the following: (1) Section 7 of Republic Act No. 7719; and, (2) Administrative Order (A.O.)
No. 9, series of 1995. Both petitions likewise pray for the issuance of a writ of prohibitory injunction
enjoining the Secretary of Health from implementing and enforcing the aforementioned law and its
Implementing Rules and Regulations; and, for a mandatory injunction ordering and commanding the
Secretary of Health to grant, issue or renew petitioners’ license to operate free standing blood banks
(FSBB).
The above cases were consolidated in a resolution of the Court En Banc dated June 2, 1998.3
G.R. No. 139147,4 entitled "Rodolfo S. Beltran, doing business under the name and style, Our Lady of
Fatima Blood Bank, et al., vs. The Secretary of Health," on the other hand, is a petition to show cause why
respondent Secretary of Health should not be held in contempt of court.
This case was originally assigned to the Third Division of this Court and later consolidated with G.R. Nos.
133640 and 133661 in a resolution dated August 4, 1999. 5
Petitioners comprise the majority of the Board of Directors of the Philippine Association of Blood Banks, a
duly registered non-stock and non-profit association composed of free standing blood banks.
Public respondent Secretary of Health is being sued in his capacity as the public official directly involved
and charged with the enforcement and implementation of the law in question.
The facts of the case are as follows:
Republic Act No. 7719 or the National Blood Services Act of 1994 was enacted into law on April 2, 1994.
The Act seeks to provide
an adequate supply of safe blood by promoting voluntary blood donation and by regulating blood banks in
the country. It was approved by then President Fidel V. Ramos on May 15, 1994 and was subsequently
published in the Official Gazette on August 18, 1994. The law took effect on August 23, 1994.
On April 28, 1995, Administrative Order No. 9, Series of 1995, constituting the Implementing Rules and
Regulations of said law was promulgated by respondent Secretary of the Department of Health (DOH). 6
Section 7 of R.A. 7719 7 provides:
"Section 7. Phase-out of Commercial Blood Banks - All commercial blood banks shall be phased-out
over a period of two (2) years after the effectivity of this Act, extendable to a maximum period of two (2)
years by the Secretary."
Section 23 of Administrative Order No. 9 provides:
"Section 23. Process of Phasing Out. -- The Department shall effect the phasing-out of all commercial
blood banks over a period of two (2) years, extendible for a maximum period of two (2) years after the
effectivity of R.A. 7719. The decision to extend shall be based on the result of a careful study and review of
the blood supply and demand and public safety." 8
Blood banking and blood transfusion services in the country have been arranged in four (4) categories:
blood centers run by the Philippine National Red Cross (PNRC), government-run blood services, private
hospital blood banks, and commercial blood services.
Years prior to the passage of the National Blood Services Act of 1994, petitioners have already been
operating commercial blood banks under Republic Act No. 1517, entitled "An Act Regulating the Collection,
Processing and Sale of Human Blood, and the Establishment and Operation of Blood Banks and Blood
Processing Laboratories." The law, which was enacted on June 16, 1956, allowed the establishment and
operation by licensed physicians of blood banks and blood processing laboratories. The Bureau of
Research and Laboratories (BRL) was created in 1958 and was given the power to regulate clinical
laboratories in 1966 under Republic Act No. 4688. In 1971, the Licensure Section was created within the
BRL. It was given the duty to enforce the licensure requirements for blood banks as well as clinical
laboratories. Due to this development, Administrative Order No. 156, Series of 1971, was issued. The new
rules and regulations triggered a stricter enforcement of the Blood Banking Law, which was characterized
by frequent spot checks, immediate suspension and communication of such suspensions to hospitals, a
more systematic record-keeping and frequent communication with blood banks through monthly
information bulletins. Unfortunately, by the 1980’s, financial difficulties constrained the BRL to reduce the
frequency of its supervisory visits to the blood banks. 9
Meanwhile, in the international scene, concern for the safety of blood and blood products intensified when
the dreaded disease Acute Immune Deficiency Syndrome (AIDS) was first described in 1979. In 1980, the
International Society of Blood Transfusion (ISBT) formulated the Code of Ethics for Blood Donation and
Transfusion. In 1982, the first case of transfusion-associated AIDS was described in an infant. Hence, the
ISBT drafted in 1984, a model for a national blood policy outlining certain principles that should be taken
into consideration. By 1985, the ISBT had disseminated guidelines requiring AIDS testing of blood and
blood products for transfusion. 10
In 1989, another revision of the Blood Banking Guidelines was made. The DOH issued Administrative
Order No. 57, Series of 1989, which classified banks into primary, secondary and tertiary depending on the
services they provided. The standards were adjusted according to this classification. For instance, floor
area requirements varied according to classification level. The new guidelines likewise required Hepatitis
B and HIV testing, and that the blood bank be headed by a pathologist or a hematologist. 11
In 1992, the DOH issued Administrative Order No. 118-A institutionalizing the National Blood Services
Program (NBSP). The BRL was designated as the central office primarily responsible for the NBSP. The
program paved the way for the creation of a committee that will implement the policies of the program
and the formation of the Regional Blood Councils.
In August 1992, Senate Bill No. 1011, entitled "An Act Promoting Voluntary Blood Donation, Providing for
an Adequate Supply of Safe Blood, Regulating Blood Banks and Providing Penalties for Violations Thereof,
and for other Purposes" was introduced in the Senate. 12
Meanwhile, in the House of Representatives, House Bills No. 384, 546, 780 and 1978 were being
deliberated to address the issue of safety of the Philippine blood bank system. Subsequently, the Senate
and House Bills were referred to the appropriate committees and subsequently consolidated. 13
In January of 1994, the New Tropical Medicine Foundation, with the assistance of the U.S. Agency for
International Development (USAID) released its final report of a study on the Philippine blood banking
system entitled "Project to Evaluate the Safety of the Philippine Blood Banking System." It was revealed that
of the blood units collected in 1992, 64.4 % were supplied by commercial blood banks, 14.5% by the
PNRC, 13.7% by government hospital-based blood banks, and 7.4% by private hospital-based blood banks.
During the time the study was made, there were only twenty-four (24) registered or licensed free-standing
or commercial blood banks in the country. Hence, with these numbers in mind, the study deduced that
each commercial blood bank produces five times more blood than the Red Cross and fifteen times more
than the government-run blood banks. The study, therefore, showed that the Philippines heavily relied on
commercial sources of blood. The study likewise revealed that 99.6% of the donors of commercial blood
banks and 77.0% of the donors of private-hospital based blood banks are paid donors. Paid donors are
those who receive remuneration for donating their blood. Blood donors of the PNRC and government-run
hospitals, on the other hand, are mostly voluntary.14
It was further found, among other things, that blood sold by persons to blood commercial banks are three
times more likely to have any of the four (4) tested infections or blood transfusion transmissible diseases,
namely, malaria, syphilis, Hepatitis B and Acquired Immune Deficiency Syndrome (AIDS) than those
donated to PNRC.15
Commercial blood banks give paid donors varying rates around P50 to P150, and because of this
arrangement, many of these donors are poor, and often they are students, who need cash immediately.
Since they need the money, these donors are not usually honest about their medical or social history. Thus,
blood from healthy, voluntary donors who give their true medical and social history are about three times
much safer than blood from paid donors.16
What the study also found alarming is that many Filipino doctors are not yet fully trained on the specific
indications for blood component transfusion. They are not aware of the lack of blood supply and do not
feel the need to adjust their practices and use of blood and blood products. It also does not matter to them
where the blood comes from.17
On August 23, 1994, the National Blood Services Act providing for the phase out of commercial blood
banks took effect. On April 28, 1995, Administrative Order No. 9, Series of 1995, constituting the
Implementing Rules and Regulations of said law was promulgated by DOH.
The phase-out period was extended for two years by the DOH pursuant to Section 7 of Republic Act No.
7719 and Section 23 of its Implementing Rules and Regulations. Pursuant to said Act, all commercial blood
banks should have been phased out by May 28, 1998. Hence, petitioners were granted by the Secretary of
Health their licenses to open and operate a blood bank only until May 27, 1998.
On May 20, 1998, prior to the expiration of the licenses granted to petitioners, they filed a petition
for certiorari with application for the issuance of a writ of preliminary injunction or temporary restraining
order under Rule 65 of the Rules of Court assailing the constitutionality and validity of the aforementioned
Act and its Implementing Rules and Regulations. The case was entitled "Rodolfo S. Beltran, doing business
under the name and style, Our Lady of Fatima Blood Bank," docketed as G.R. No. 133640.
On June 1, 1998, petitioners filed an Amended Petition for Certiorari with Prayer for Issuance of a
Temporary Restraining Order, writ of preliminary mandatory injunction and/or status quo ante order.18
In the aforementioned petition, petitioners assail the constitutionality of the questioned legal provisions,
namely, Section 7 of Republic Act No. 7719 and Section 23 of Administrative Order No. 9, Series of 1995, on
the following grounds: 19
1. The questioned legal provisions of the National Blood Services Act and its Implementing Rules violate the
equal protection clause for irrationally discriminating against free standing blood banks in a manner
which is not germane to the purpose of the law;
2. The questioned provisions of the National Blood Services Act and its Implementing Rules represent undue
delegation if not outright abdication of the police power of the state; and,
3. The questioned provisions of the National Blood Services Act and its Implementing Rules are
unwarranted deprivation of personal liberty.
On May 22, 1998, the Doctors Blood Center filed a similar petition for mandamus with a prayer for the
issuance of a temporary restraining order, preliminary prohibitory and mandatory injunction before this
Court entitled "Doctors Blood Center vs. Department of Health," docketed as G.R. No. 133661. 20 This was
consolidated with G.R. No. 133640. 21
Similarly, the petition attacked the constitutionality of Republic Act No. 7719 and its implementing rules
and regulations, thus, praying for the issuance of a license to operate commercial blood banks beyond May
27, 1998. Specifically, with regard to Republic Act No. 7719, the petition submitted the following
questions22 for resolution:
1. Was it passed in the exercise of police power, and was it a valid exercise of such power?
2. Does it not amount to deprivation of property without due process?
3. Does it not unlawfully impair the obligation of contracts?
4. With the commercial blood banks being abolished and with no ready machinery to deliver the same
supply and services, does R.A. 7719 truly serve the public welfare?
On June 2, 1998, this Court issued a Resolution directing respondent DOH to file a consolidated comment.
In the same Resolution, the Court issued a temporary restraining order (TRO) for respondent to cease and
desist from implementing and enforcing Section 7 of Republic Act No. 7719 and its implementing rules and
regulations until further orders from the Court. 23
On August 26, 1998, respondent Secretary of Health filed a Consolidated Comment on the petitions
for certiorari and mandamus in G.R. Nos. 133640 and 133661, with opposition to the issuance of a
temporary restraining order.24
In the Consolidated Comment, respondent Secretary of Health submitted that blood from commercial
blood banks is unsafe and therefore the State, in the exercise of its police power, can close down
commercial blood banks to protect the public. He cited the record of deliberations on Senate Bill No. 1101
which later became Republic Act No. 7719, and the sponsorship speech of Senator Orlando Mercado.
The rationale for the closure of these commercial blood banks can be found in the deliberations of Senate
Bill No. 1011, excerpts of which are quoted below:
Senator Mercado: I am providing over a period of two years to phase out all commercial blood banks. So
that in the end, the new section would have a provision that states:
"ALL COMMERCIAL BLOOD BANKS SHALL BE PHASED OUT OVER A PERIOD OF TWO YEARS AFTER THE
EFFECTIVITY OF THIS ACT. BLOOD SHALL BE COLLECTED FROM VOLUNTARY DONORS ONLY AND THE
SERVICE FEE TO BE CHARGED FOR EVERY BLOOD PRODUCT ISSUED SHALL BE LIMITED TO THE
NECESSARY EXPENSES ENTAILED IN COLLECTING AND PROCESSING OF BLOOD. THE SERVICE FEE
SHALL BE MADE UNIFORM THROUGH GUIDELINES TO BE SET BY THE DEPARTMENTOF HEALTH."
I am supporting Mr. President, the finding of a study called "Project to Evaluate the Safety of the Philippine
Blood Banking System." This has been taken note of. This is a study done with the assistance of the USAID
by doctors under the New Tropical Medicine Foundation in Alabang.
Part of the long-term measures proposed by this particular study is to improve laws, outlaw buying and
selling of blood and legally define good manufacturing processes for blood. This goes to the very heart of
my amendment which seeks to put into law the principle that blood should not be subject of commerce of
man.
… protecting their profits.25
The Presiding Officer [Senator Aquino]: What does the sponsor say?
Senator Webb: Mr. President, just for clarity, I would like to find out how the Gentleman defines a
commercial blood bank. I am at a loss at times what a commercial blood bank really is.
Senator Mercado: We have a definition, I believe, in the measure, Mr. President.
The Presiding Officer [Senator Aquino]: It is a business where profit is considered.
Senator Mercado: If the Chairman of the Committee would accept it, we can put a provision on Section 3,
a definition of a commercial blood bank, which, as defined in this law, exists for profit and engages in the
buying and selling of blood or its components.
Senator Webb: That is a good description, Mr. President.
… come in for minor surgery of the hand or whatever and they leave with hepatitis B. A patient comes in for
Senator Mercado: I refer, Mr. President, to a letter written by Dr. Jaime Galvez-Tan, the Chief of Staff,
Undersecretary of Health, to the good Chairperson of the Committee on Health.
In recommendation No. 4, he says:
"The need to phase out all commercial blood banks within a two-year period will give the Department of
Health enough time to build up government’s capability to provide an adequate supply of blood for the
needs of the nation...the use of blood for transfusion is a medical service and not a sale of commodity."
Taking into consideration the experience of the National Kidney Institute, which has succeeded in making
the hospital 100 percent dependent on voluntary blood donation, here is a success story of a hospital that
does not buy blood. All those who are operated on and need blood have to convince their relatives or have
to get volunteers who would donate blood…
If we give the responsibility of the testing of blood to those commercial blood banks, they will cut corners
because it will protect their profit.
In the first place, the people who sell their blood are the people who are normally in the high-risk category.
So we should stop the system of selling and buying blood so that we can go into a national voluntary blood
program.
It has been said here in this report, and I quote:
"Why is buying and selling of blood not safe? This is not safe because a donor who expects payment for his
blood will not tell the truth about his illnesses and will deny any risky social behavior such as sexual
promiscuity which increases the risk of having syphilis or AIDS or abuse of intravenous addictive drugs.
Laboratory tests are of limited value and will not detect early infections. Laboratory tests are required only
for four diseases in the Philippines. There are other blood transmissible diseases we do not yet screen for
and there could be others where there are no tests available yet.
A blood bank owner expecting to gain profit from selling blood will also try his best to limit his expenses.
Usually he tries to increase his profit by buying cheaper reagents or test kits, hiring cheaper manpower or
skipping some tests altogether. He may also try to sell blood even though these have infections in them.
Because there is no existing system of counterchecking these, the blood bank owner can usually get away
with many unethical practices.
The experience of Germany, Mr. President is illustrative of this issue. The reason why contaminated blood
was sold was that there were corners cut by commercial blood banks in the testing process. They were
The sponsorship speech of Senator Mercado further elucidated his stand on the issue:
…
Senator Mercado: Today, across the country, hundreds of poverty-stricken, sickly and weak Filipinos,
who, unemployed, without hope and without money to buy the next meal, will walk into a commercial
blood bank, extend their arms and plead that their blood be bought. They will lie about their age, their
medical history. They will lie about when they last sold their blood. For doing this, they will receive close to
a hundred pesos. This may tide them over for the next few days. Of course, until the next bloodletting.
This same blood will travel to the posh city hospitals and urbane medical centers. This same blood will
now be bought by the rich at a price over 500% of the value for which it was sold. Between this buying and
selling, obviously, someone has made a very fast buck.
Every doctor has handled at least one transfusion-related disease in an otherwise normal patient. Patients
an appendectomy and he leaves with malaria. The worst nightmare: A patient comes in for a Caesarian
section and leaves with AIDS.
We do not expect good blood from donors who sell their blood because of poverty. The humane dimension
of blood transfusion is not in the act of receiving blood, but in the act of giving it…
For years, our people have been at the mercy of commercial blood banks that lobby their interests among
medical technologists, hospital administrators and sometimes even physicians so that a proactive system
for collection of blood from healthy donors becomes difficult, tedious and unrewarding.
The Department of Health has never institutionalized a comprehensive national program for safe blood
and for voluntary blood donation even if this is a serious public health concern and has fallen for the linen
of commercial blood bankers, hook, line and sinker because it is more convenient to tell the patient to buy
blood.
Commercial blood banks hold us hostage to their threat that if we are to close them down, there will be no
blood supply. This is true if the Government does not step in to ensure that safe supply of blood. We cannot
allow commercial interest groups to dictate policy on what is and what should be a humanitarian effort.
This cannot and will never work because their interest in blood donation is merely monetary. We cannot
expect commercial blood banks to take the lead in voluntary blood donation. Only the Government can do
it, and the Government must do it."26
On May 5, 1999, petitioners filed a Motion for Issuance of Expanded Temporary Restraining Order for the
Court to order respondent Secretary of Health to cease and desist from announcing the closure of
commercial blood banks, compelling the public to source the needed blood from voluntary donors only,
and committing similar acts "that will ultimately cause the shutdown of petitioners’ blood banks." 27
On July 8, 1999, respondent Secretary filed his Comment and/or Opposition to the above motion stating
that he has not ordered the closure of commercial blood banks on account of the Temporary Restraining
Order (TRO) issued on June 2, 1998 by the Court. In compliance with the TRO, DOH had likewise ceased to
distribute the health advisory leaflets, posters and flyers to the public which state that "blood banks are
closed or will be closed." According to respondent Secretary, the same were printed and circulated in
anticipation of the closure of the commercial blood banks in accordance with R.A. No. 7719, and were
printed and circulated prior to the issuance of the TRO. 28
On July 15, 1999, petitioners in G.R. No. 133640 filed a Petition to Show Cause Why Public Respondent
Should Not be Held in Contempt of Court, docketed as G.R. No. 139147, citing public respondent’s willful
disobedience of or resistance to the restraining order issued by the Court in the said case. Petitioners
alleged that respondent’s act constitutes circumvention of the temporary restraining order and a mockery
of the authority of the Court and the orderly administration of justice. 29 Petitioners added that despite the
issuance of the temporary restraining order in G.R. No. 133640, respondent, in his effort to strike down the
existence of commercial blood banks, disseminated misleading information under the guise of health
advisories, press releases, leaflets, brochures and flyers stating, among others, that "this year [1998] all
commercial blood banks will be closed by 27 May. Those who need blood will have to rely on government
blood banks."30 Petitioners further claimed that respondent Secretary of Health announced in a press
conference during the Blood Donor’s Week that commercial blood banks are "illegal and dangerous" and
that they "are at the moment protected by a restraining order on the basis that their commercial interest is
more important than the lives of the people." These were all posted in bulletin boards and other
conspicuous places in all government hospitals as well as other medical and health centers. 31
In respondent Secretary’s Comment to the Petition to Show Cause Why Public Respondent Should Not Be
Held in Contempt of Court, dated January 3, 2000, it was explained that nothing was issued by the
department ordering the closure of commercial blood banks. The subject health advisory leaflets
pertaining to said closure pursuant to Republic Act No. 7719 were printed and circulated prior to the
Court’s issuance of a temporary restraining order on June 21, 1998. 32
Public respondent further claimed that the primary purpose of the information campaign was "to promote
the importance and safety of voluntary blood donation and to educate the public about the hazards of
patronizing blood supplies from commercial blood banks." 33 In doing so, he was merely performing his
regular functions and duties as the Secretary of Health to protect the health and welfare of the public.
Moreover, the DOH is the main proponent of the voluntary blood donation program espoused by Republic
Act No. 7719, particularly Section 4 thereof which provides that, in order to ensure the adequate supply of
human blood, voluntary blood donation shall be promoted through public education, promotion in
schools, professional education, establishment of blood services network, and walking blood donors.
Hence, by authority of the law, respondent Secretary contends that he has the duty to promote the
program of voluntary blood donation. Certainly, his act of encouraging the public to donate blood
voluntarily and educating the people on the risks associated with blood coming from a paid donor
promotes general health and welfare and which should be given more importance than the commercial
businesses of petitioners.34
On July 29, 1999, interposing personal and substantial interest in the case as taxpayers and citizens, a
Petition-in-Intervention was filed interjecting the same arguments and issues as laid down by petitioners
in G.R. No. 133640 and 133661, namely, the unconstitutionality of the Acts, and, the issuance of a writ of
prohibitory injunction. The intervenors are the immediate relatives of individuals who had died allegedly
because of shortage of blood supply at a critical time.35
The intervenors contended that Republic Act No. 7719 constitutes undue delegation of legislative powers
and unwarranted deprivation of personal liberty.36
In a resolution, dated September 7, 1999, and without giving due course to the aforementioned petition,
the Court granted the Motion for Intervention that was filed by the above intervenors on August 9, 1999.
In his Comment to the petition-in-intervention, respondent Secretary of Health stated that the sale of
blood is contrary to the spirit and letter of the Act that "blood donation is a humanitarian act" and "blood
transfusion is a professional medical service and not a sale of commodity (Section 2[a] and [b] of Republic
Act No. 7719). The act of selling blood or charging fees other than those allowed by law is even penalized
under Section 12."37
Thus, in view of these, the Court is now tasked to pass upon the constitutionality of Section 7 of Republic
Act No. 7719 or the National Blood Services Act of 1994 and its Implementing Rules and Regulations.
In resolving the controversy, this Court deems it necessary to address the issues and/or questions raised
by petitioners concerning the constitutionality of the aforesaid Act in G.R. No. 133640 and 133661 as
summarized hereunder:
I
WHETHER OR NOT SECTION 7 OF R.A. 7719 CONSTITUTES UNDUE DELEGATION OF LEGISLATIVE
POWER;
II
WHETHER OR NOT SECTION 7 OF R.A. 7719 AND ITS IMPLEMENTING RULES AND REGULATIONS
VIOLATE THE EQUAL PROTECTION CLAUSE;
III
WHETHER OR NOT SECTION 7 OF R.A. 7719 AND ITS IMPLEMENTING RULES AND REGULATIONS
VIOLATE THE NON-IMPAIRMENT CLAUSE;
IV
WHETHER OR NOT SECTION 7 OF R.A. 7719 AND ITS IMPLEMENTING RULES AND REGULATIONS
CONSTITUTE DEPRIVATION OF PERSONAL LIBERTY AND PROPERTY;
V
WHETHER OR NOT R.A. 7719 IS A VALID EXERCISE OF POLICE POWER; and,
VI
WHETHER OR NOT SECTION 7 OF R.A. 7719 AND ITS IMPLEMENTING RULES AND REGULATIONS TRULY
SERVE PUBLIC WELFARE.
As to the first ground upon which the constitutionality of the Act is being challenged, it is the contention of
petitioners that the phase out of commercial or free standing blood banks is unconstitutional because it is
an improper and unwarranted delegation of legislative power. According to petitioners, the Act was
incomplete when it was passed by the Legislature, and the latter failed to fix a standard to which the
Secretary of Health must conform in the performance of his functions. Petitioners also contend that the
two-year extension period that may be granted by the Secretary of Health for the phasing out of
commercial blood banks pursuant to Section 7 of the Act constrained the Secretary to legislate, thus
constituting undue delegation of legislative power.
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 the administrative body or any other appointee or
delegate of the Legislature. 38 Except as to matters of detail that may be left to be filled in by rules and
regulations to be adopted or promulgated by executive officers and administrative boards, an act of the
Legislature, as a general rule, is incomplete and hence invalid if it does not lay down any rule or definite
standard by which the administrative board may be guided in the exercise of the discretionary powers
delegated to it.39
Republic Act No. 7719 or the National Blood Services Act of 1994 is complete in itself. It is clear from the
provisions of the Act that the Legislature intended primarily to safeguard the health of the people and has
mandated several measures to attain this objective. One of these is the phase out of commercial blood
banks in the country. The law has sufficiently provided a definite standard for the guidance of the
Secretary of Health in carrying out its provisions, that is, the promotion of public health by providing a safe
and adequate supply of blood through voluntary blood donation. By its provisions, it has conferred the
power and authority to the Secretary of Health as to its execution, to be exercised under and in pursuance
of the law.
Congress may validly delegate to administrative agencies the authority to promulgate rules and
regulations to implement a given legislation and effectuate its policies. 40 The Secretary of Health has been
given, under Republic Act No. 7719, broad powers to execute the provisions of said Act. Section 11 of the
Act states:
"SEC. 11. Rules and Regulations. – The implementation of the provisions of the Act shall be in accordance
with the rules and regulations to be promulgated by the Secretary, within sixty (60) days from the
approval hereof…"
This is what respondent Secretary exactly did when DOH, by virtue of the administrative body’s authority
and expertise in the matter, came out with Administrative Order No.9, series of 1995 or the Rules and
Regulations Implementing Republic Act No. 7719. Administrative Order. No. 9 effectively filled in the
details of the law for its proper implementation.
Specifically, Section 23 of Administrative Order No. 9 provides that the phase-out period for commercial
blood banks shall be extended for another two years until May 28, 1998 "based on the result of a careful
study and review of the blood supply and demand and public safety." This power to ascertain the existence
of facts and conditions upon which the Secretary may effect a period of extension for said phase-out can be
delegated by Congress. The true distinction between the power to make laws and discretion as to its
execution is illustrated by the fact that 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.41
In this regard, the Secretary did not go beyond the powers granted to him by the Act when said phase-out
period was extended in accordance with the Act as laid out in Section 2 thereof:
"SECTION 2. Declaration of Policy – In order to promote public health, it is hereby declared the policy of
the state:
a) to promote and encourage voluntary blood donation by the citizenry and to instill public consciousness
of the principle that blood donation is a humanitarian act;
b) to lay down the legal principle that the provision of blood for transfusion is a medical service and not a
sale of commodity;
c) to provide for adequate, safe, affordable and equitable distribution of blood supply and blood products;
d) to inform the public of the need for voluntary blood donation to curb the hazards caused by the
commercial sale of blood;
e) to teach the benefits and rationale of voluntary blood donation in the existing health subjects of the
formal education system in all public and private schools as well as the non-formal system;
f) to mobilize all sectors of the community to participate in mechanisms for voluntary and non-profit
collection of blood;
g) to mandate the Department of Health to establish and organize a National Blood Transfusion Service
Network in order to rationalize and improve the provision of adequate and safe supply of blood;
h) to provide for adequate assistance to institutions promoting voluntary blood donation and providing
non-profit blood services, either through a system of reimbursement for costs from patients who can
afford to pay, or donations from governmental and non-governmental entities;
i) to require all blood collection units and blood banks/centers to operate on a non-profit basis;
j) to establish scientific and professional standards for the operation of blood collection units and blood
banks/centers in the Philippines;
k) to regulate and ensure the safety of all activities related to the collection, storage and banking of blood;
and,
l) to require upgrading of blood banks/centers to include preventive services and education to control
spread of blood transfusion transmissible diseases."
Petitioners also assert that the law and its implementing rules and regulations violate the equal protection
clause enshrined in the Constitution because it unduly discriminates against commercial or free standing
blood banks in a manner that is not germane to the purpose of the law. 42
What may be regarded as a denial of the equal protection of the laws is a question not always easily
determined. No rule that will cover every case can be formulated. Class legislation, discriminating against
some and favoring others is prohibited but classification on a reasonable basis and not made arbitrarily or
capriciously is permitted. The classification, however, to be reasonable: (a) must be based on substantial
distinctions which make real differences; (b) must be germane to the purpose of the law; (c) must not be
limited to existing conditions only; and, (d) must apply equally to each member of the class. 43
Republic Act No. 7719 or The National Blood Services Act of 1994, was enacted for the promotion of public
health and welfare. In the aforementioned study conducted by the New Tropical Medicine Foundation, it
was revealed that the Philippine blood banking system is disturbingly primitive and unsafe, and with its
current condition, the spread of infectious diseases such as malaria, AIDS, Hepatitis B and syphilis chiefly
from blood transfusion is unavoidable. The situation becomes more distressing as the study showed that
almost 70% of the blood supply in the country is sourced from paid blood donors who are three times
riskier than voluntary blood donors because they are unlikely to disclose their medical or social history
during the blood screening.44
The above study led to the passage of Republic Act No. 7719, to instill public consciousness of the
importance and benefits of voluntary blood donation, safe blood supply and proper blood collection from
healthy donors. To do this, the Legislature decided to order the phase out of commercial blood banks to
improve the Philippine blood banking system, to regulate the supply and proper collection of safe blood,
and so as not to derail the implementation of the voluntary blood donation program of the government. In
lieu of commercial blood banks, non-profit blood banks or blood centers, in strict adherence to
professional and scientific standards to be established by the DOH, shall be set in place. 45
Based on the foregoing, the Legislature never intended for the law to create a situation in which
unjustifiable discrimination and inequality shall be allowed. To effectuate its policy, a classification was
made between nonprofit blood banks/centers and commercial blood banks.
We deem the classification to be valid and reasonable for the following reasons:
One, it was based on substantial distinctions. The former operates for purely humanitarian reasons and as
a medical service while the latter is motivated by profit. Also, while the former wholly encourages
voluntary blood donation, the latter treats blood as a sale of commodity.
Two, the classification, and the consequent phase out of commercial blood banks is germane to the
purpose of the law, that is, to provide the nation with an adequate supply of safe blood by promoting
voluntary blood donation and treating blood transfusion as a humanitarian or medical service rather than
a commodity. This necessarily involves the phase out of commercial blood banks based on the fact that
they operate as a business enterprise, and they source their blood supply from paid blood donors who are
considered unsafe compared to voluntary blood donors as shown by the USAID-sponsored study on the
Philippine blood banking system.
Three, the Legislature intended for the general application of the law. Its enactment was not solely to
address the peculiar circumstances of the situation nor was it intended to apply only to the existing
conditions.
Lastly, the law applies equally to all commercial blood banks without exception.
Having said that, this Court comes to the inquiry as to whether or not Republic Act No. 7719 constitutes a
valid exercise of police power.
The promotion of public health is a fundamental obligation of the State. The health of the people is a
primordial governmental concern. Basically, the National Blood Services Act was enacted in the exercise of
the State’s police power in order to promote and preserve public health and safety.
Police power of the state is validly exercised if (a) the interest of the public generally, as distinguished from
those of a particular class, requires the interference of the State; and, (b) the means employed are
reasonably necessary to the attainment of the objective sought to be accomplished and not unduly
oppressive upon individuals.46
In the earlier discussion, the Court has mentioned of the avowed policy of the law for the protection of
public health by ensuring an adequate supply of safe blood in the country through voluntary blood
donation. Attaining this objective requires the interference of the State given the disturbing condition of
the Philippine blood banking system.
In serving the interest of the public, and to give meaning to the purpose of the law, the Legislature deemed
it necessary to phase out commercial blood banks. This action may seriously affect the owners and
operators, as well as the employees, of commercial blood banks but their interests must give way to serve
a higher end for the interest of the public.
The Court finds that the National Blood Services Act is a valid exercise of the State’s police power.
Therefore, the Legislature, under the circumstances, adopted a course of action that is both necessary and
reasonable for the common good. Police power is the State authority to enact legislation that may interfere
with personal liberty or property in order to promote the general welfare. 47
It is in this regard that the Court finds the related grounds and/or issues raised by petitioners, namely,
deprivation of personal liberty and property, and violation of the non-impairment clause, to be
unmeritorious.
Petitioners are of the opinion that the Act is unconstitutional and void because it infringes on the freedom
of choice of an individual in connection to what he wants to do with his blood which should be outside the
domain of State intervention. Additionally, and in relation to the issue of classification, petitioners
asseverate that, indeed, under the Civil Code, the human body and its organs like the heart, the kidney and
the liver are outside the commerce of man but this cannot be made to apply to human blood because the
latter can be replenished by the body. To treat human blood equally as the human organs would constitute
invalid classification. 48
Petitioners likewise claim that the phase out of the commercial blood banks will be disadvantageous to
them as it will affect their businesses and existing contracts with hospitals and other health institutions,
hence Section 7 of the Act should be struck down because it violates the non-impairment clause provided
by the Constitution.
As stated above, the State, in order to promote the general welfare, may interfere with personal liberty,
with property, and with business and occupations. Thus, persons may be subjected to certain kinds of
restraints and burdens in order to secure the general welfare of the State and to this fundamental aim of
government, the rights of the individual may be subordinated. 49
Moreover, in the case of Philippine Association of Service Exporters, Inc. v. Drilon, 50 settled is the rule that
the non-impairment clause of the Constitution must yield to the loftier purposes targeted by the
government. The right granted by this provision must submit to the demands and necessities of the State’s
power of regulation. While the Court understands the grave implications of Section 7 of the law in
question, the concern of the Government in this case, however, is not necessarily to maintain profits of
business firms. In the ordinary sequence of events, it is profits that suffer as a result of government
regulation.
Furthermore, the freedom to contract is not absolute; all contracts and all rights are subject to the police
power of the State and not only may regulations which affect them be established by the State, but all such
regulations must be subject to change from time to time, as the general well-being of the community may
require, or as the circumstances may change, or as experience may demonstrate the necessity. 51 This
doctrine was reiterated in the case of Vda. de Genuino v. Court of Agrarian Relations 52 where the Court held
that individual rights to contract and to property have to give way to police power exercised for public
welfare.
As for determining whether or not the shutdown of commercial blood banks will truly serve the general
public considering the shortage of blood supply in the country as proffered by petitioners, we maintain
that the wisdom of the Legislature in the lawful exercise of its power to enact laws cannot be inquired into
by the Court. Doing so would be in derogation of the principle of separation of powers. 53
That, under the circumstances, proper regulation of all blood banks without distinction in order to achieve
the objective of the law as contended by petitioners is, of course, possible; but, this would be arguing on
what the lawmay be or should be and not what the law is. Between is and ought there is a far cry. The
wisdom and propriety of legislation is not for this Court to pass upon. 54
Finally, with regard to the petition for contempt in G.R. No. 139147, on the other hand, the Court finds
respondent Secretary of Health’s explanation satisfactory. The statements in the flyers and posters were
not aimed at influencing or threatening the Court in deciding in favor of the constitutionality of the law.
Contempt of court presupposes a contumacious attitude, a flouting or arrogant belligerence in defiance of
the court.55 There is nothing contemptuous about the statements and information contained in the health
advisory that were distributed by DOH before the TRO was issued by this Court ordering the former to
cease and desist from distributing the same.

In sum, the Court has been unable to find any constitutional infirmity in the questioned provisions of the
National Blood Services Act of 1994 and its Implementing Rules and Regulations.

The fundamental criterion is that all reasonable doubts should be resolved in favor of the constitutionality
of a statute. Every law has in its favor the presumption of constitutionality. For a law to be nullified, it must
be shown that there is a clear and unequivocal breach of the Constitution. The ground for nullity must be
clear and beyond reasonable doubt. 56 Those who petition this Court to declare a law, or parts thereof,
unconstitutional must clearly establish the basis therefor. Otherwise, the petition must fail.

Based on the grounds raised by petitioners to challenge the constitutionality of the National Blood
Services Act of 1994 and its Implementing Rules and Regulations, the Court finds that petitioners have
failed to overcome the presumption of constitutionality of the law. As to whether the Act constitutes a wise
legislation, considering the issues being raised by petitioners, is for Congress to determine. 57

WHEREFORE, premises considered, the Court renders judgment as follows:

1. In G.R. Nos. 133640 and 133661, the Court UPHOLDS THE VALIDITY of Section 7 of Republic Act No.
7719, otherwise known as the National Blood Services Act of 1994, and Administrative Order No. 9, Series
of 1995 or the Rules and Regulations Implementing Republic Act No. 7719. The petitions are DISMISSED.
Consequently, the Temporary Restraining Order issued by this Court on June 2, 1998, is LIFTED.

2. In G.R. No. 139147, the petition seeking to cite the Secretary of Health in contempt of court
is DENIED for lack of merit.

No costs.

SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 122846 January 20, 2009
WHITE LIGHT CORPORATION, TITANIUM CORPORATION and STA. MESA TOURIST & DEVELOPMENT
CORPORATION, Petitioners,
vs.
CITY OF MANILA, represented by DE CASTRO, MAYOR ALFREDO S. LIM, Respondent.
DECISION
Tinga, J.:
With another city ordinance of Manila also principally involving the tourist district as subject, the Court is
confronted anew with the incessant clash between government power and individual liberty in tandem
with the archetypal tension between law and morality.
In City of Manila v. Laguio, Jr.,1 the Court affirmed the nullification of a city ordinance barring the operation
of motels and inns, among other establishments, within the Ermita-Malate area. The petition at bar assails
a similarly-motivated city ordinance that prohibits those same establishments from offering short-time
admission, as well as pro-rated or "wash up" rates for such abbreviated stays. Our earlier decision tested
the city ordinance against our sacred constitutional rights to liberty, due process and equal protection of
law. The same parameters apply to the present petition.
This Petition2 under Rule 45 of the Revised Rules on Civil Procedure, which seeks the reversal of the
Decision 3 in C.A.-G.R. S.P. No. 33316 of the Court of Appeals, challenges the validity of Manila City
Ordinance No. 7774 entitled, "An Ordinance Prohibiting Short-Time Admission, Short-Time Admission
Rates, and Wash-Up Rate Schemes in Hotels, Motels, Inns, Lodging Houses, Pension Houses, and Similar
Establishments in the City of Manila" (the Ordinance).
I.
The facts are as follows:
On December 3, 1992, City Mayor Alfredo S. Lim (Mayor Lim) signed into law the Ordinance. 4 The
Ordinance is reproduced in full, hereunder:
SECTION 1. Declaration of Policy. It is hereby the declared policy of the City Government to protect the best
interest, health and welfare, and the morality of its constituents in general and the youth in particular.
SEC. 2. Title. This ordinance shall be known as "An Ordinance" prohibiting short time admission in hotels,
motels, lodging houses, pension houses and similar establishments in the City of Manila.
SEC. 3. Pursuant to the above policy, short-time admission and rate [sic], wash-up rate or other similarly
concocted terms, are hereby prohibited in hotels, motels, inns, lodging houses, pension houses and similar
establishments in the City of Manila.
SEC. 4. Definition of Term[s]. Short-time admission shall mean admittance and charging of room rate for
less than twelve (12) hours at any given time or the renting out of rooms more than twice a day or any
other term that may be concocted by owners or managers of said establishments but would mean the
same or would bear the same meaning.
SEC. 5. Penalty Clause. Any person or corporation who shall violate any provision of this ordinance shall
upon conviction thereof be punished by a fine of Five Thousand (P5,000.00) Pesos or imprisonment for a
period of not exceeding one (1) year or both such fine and imprisonment at the discretion of the court;
Provided, That in case of [a] juridical person, the president, the manager, or the persons in charge of the
operation thereof shall be liable: Provided, further, That in case of subsequent conviction for the same
offense, the business license of the guilty party shall automatically be cancelled.
SEC. 6. Repealing Clause. Any or all provisions of City ordinances not consistent with or contrary to this
measure or any portion hereof are hereby deemed repealed.
SEC. 7. Effectivity. This ordinance shall take effect immediately upon approval.
Enacted by the city Council of Manila at its regular session today, November 10, 1992.
Approved by His Honor, the Mayor on December 3, 1992.
On December 15, 1992, the Malate Tourist and Development Corporation (MTDC) filed a complaint for
declaratory relief with prayer for a writ of preliminary injunction and/or temporary restraining order
( TRO)5 with the Regional Trial Court (RTC) of Manila, Branch 9 impleading as defendant, herein
respondent City of Manila (the City) represented by Mayor Lim.6 MTDC prayed that the Ordinance, insofar
as it includes motels and inns as among its prohibited establishments, be declared invalid and
unconstitutional. MTDC claimed that as owner and operator of the Victoria Court in Malate, Manila it was
authorized by Presidential Decree (P.D.) No. 259 to admit customers on a short time basis as well as to
charge customers wash up rates for stays of only three hours.
On December 21, 1992, petitioners White Light Corporation (WLC), Titanium Corporation (TC) and Sta.
Mesa Tourist and Development Corporation (STDC) filed a motion to intervene and to admit attached
complaint-in-intervention7 on the ground that the Ordinance directly affects their business interests as
operators of drive-in-hotels and motels in Manila.8 The three companies are components of the Anito
Group of Companies which owns and operates several hotels and motels in Metro Manila. 9
On December 23, 1992, the RTC granted the motion to intervene. 10 The RTC also notified the Solicitor
General of the proceedings pursuant to then Rule 64, Section 4 of the Rules of Court. On the same date,
MTDC moved to withdraw as plaintiff.11
On December 28, 1992, the RTC granted MTDC's motion to withdraw. 12 The RTC issued a TRO on January
14, 1993, directing the City to cease and desist from enforcing the Ordinance. 13 The City filed an Answer
dated January 22, 1993 alleging that the Ordinance is a legitimate exercise of police power. 14
On February 8, 1993, the RTC issued a writ of preliminary injunction ordering the city to desist from the
enforcement of the Ordinance. 15 A month later, on March 8, 1993, the Solicitor General filed his Comment
arguing that the Ordinance is constitutional.
During the pre-trial conference, the WLC, TC and STDC agreed to submit the case for decision without trial
as the case involved a purely legal question.16 On October 20, 1993, the RTC rendered a decision declaring
the Ordinance null and void. The dispositive portion of the decision reads:
WHEREFORE, in view of all the foregoing, [O]rdinance No. 7774 of the City of Manila is hereby declared
null and void.
Accordingly, the preliminary injunction heretofor issued is hereby made permanent.
SO ORDERED.17
The RTC noted that the ordinance "strikes at the personal liberty of the individual guaranteed and
jealously guarded by the Constitution." 18 Reference was made to the provisions of the Constitution
encouraging private enterprises and the incentive to needed investment, as well as the right to operate
economic enterprises. Finally, from the observation that the illicit relationships the Ordinance sought to
dissuade could nonetheless be consummated by simply paying for a 12-hour stay, the RTC likened the law
to the ordinance annulled in Ynot v. Intermediate Appellate Court,19 where the legitimate purpose of
preventing indiscriminate slaughter of carabaos was sought to be effected through an inter-province ban
on the transport of carabaos and carabeef.
The City later filed a petition for review on certiorari with the Supreme Court. 20 The petition was docketed
as G.R. No. 112471. However in a resolution dated January 26, 1994, the Court treated the petition as a
petition forcertiorari and referred the petition to the Court of Appeals. 21
Before the Court of Appeals, the City asserted that the Ordinance is a valid exercise of police power
pursuant to Section 458 (4)(iv) of the Local Government Code which confers on cities, among other local
government units, the power:
[To] regulate the establishment, operation and maintenance of cafes, restaurants, beerhouses, hotels,
motels, inns, pension houses, lodging houses and other similar establishments, including tourist guides
and transports.22
The Ordinance, it is argued, is also a valid exercise of the power of the City under Article III, Section 18(kk)
of the Revised Manila Charter, thus:
"to enact all ordinances it may deem necessary and proper for the sanitation and safety, the furtherance of
the prosperity and the promotion of the morality, peace, good order, comfort, convenience and general
welfare of the city and its inhabitants, and such others as be necessary to carry into effect and discharge
the powers and duties conferred by this Chapter; and to fix penalties for the violation of ordinances which
shall not exceed two hundred pesos fine or six months imprisonment, or both such fine and imprisonment
for a single offense.23
Petitioners argued that the Ordinance is unconstitutional and void since it violates the right to privacy and
the freedom of movement; it is an invalid exercise of police power; and it is an unreasonable and
oppressive interference in their business.
The Court of Appeals reversed the decision of the RTC and affirmed the constitutionality of the
Ordinance.24First, it held that the Ordinance did not violate the right to privacy or the freedom of
movement, as it only penalizes the owners or operators of establishments that admit individuals for short
time stays. Second, the virtually limitless reach of police power is only constrained by having a lawful
object obtained through a lawful method. The lawful objective of the Ordinance is satisfied since it aims to
curb immoral activities. There is a lawful method since the establishments are still allowed to operate.
Third, the adverse effect on the establishments is justified by the well-being of its constituents in general.
Finally, as held in Ermita-Malate Motel Operators Association v. City Mayor of Manila, liberty is regulated by
law.
TC, WLC and STDC come to this Court via petition for review on certiorari. 25 In their petition and
Memorandum, petitioners in essence repeat the assertions they made before the Court of Appeals. They
contend that the assailed Ordinance is an invalid exercise of police power.
II.
We must address the threshold issue of petitioners’ standing. Petitioners allege that as owners of
establishments offering "wash-up" rates, their business is being unlawfully interfered with by the
Ordinance. However, petitioners also allege that the equal protection rights of their clients are also being
interfered with. Thus, the crux of the matter is whether or not these establishments have the requisite
standing to plead for protection of their patrons' equal protection rights.
Standing or locus standi is the ability of a party to demonstrate to the court sufficient connection to and
harm from the law or action challenged to support that party's participation in the case. More importantly,
the doctrine of standing is built on the principle of separation of powers, 26 sparing as it does unnecessary
interference or invalidation by the judicial branch of the actions rendered by its co-equal branches of
government.
The requirement of standing is a core component of the judicial system derived directly from the
Constitution.27The constitutional component of standing doctrine incorporates concepts which concededly
are not susceptible of precise definition. 28 In this jurisdiction, the extancy of "a direct and personal
interest" presents the most obvious cause, as well as the standard test for a petitioner's standing. 29 In a
similar vein, the United States Supreme Court reviewed and elaborated on the meaning of the three
constitutional standing requirements of injury, causation, and redressability in Allen v. Wright.30
Nonetheless, the general rules on standing admit of several exceptions such as the overbreadth doctrine,
taxpayer suits, third party standing and, especially in the Philippines, the doctrine of transcendental
importance.31
For this particular set of facts, the concept of third party standing as an exception and the overbreadth
doctrine are appropriate. In Powers v. Ohio,32 the United States Supreme Court wrote that: "We have
recognized the right of litigants to bring actions on behalf of third parties, provided three important
criteria are satisfied: the litigant must have suffered an ‘injury-in-fact,’ thus giving him or her a "sufficiently
concrete interest" in the outcome of the issue in dispute; the litigant must have a close relation to the third
party; and there must exist some hindrance to the third party's ability to protect his or her own
interests."33 Herein, it is clear that the business interests of the petitioners are likewise injured by the
Ordinance. They rely on the patronage of their customers for their continued viability which appears to be
threatened by the enforcement of the Ordinance. The relative silence in constitutional litigation of such
special interest groups in our nation such as the American Civil Liberties Union in the United States may
also be construed as a hindrance for customers to bring suit. 34
American jurisprudence is replete with examples where parties-in-interest were allowed standing to
advocate or invoke the fundamental due process or equal protection claims of other persons or classes of
persons injured by state action. In Griswold v. Connecticut,35 the United States Supreme Court held that
physicians had standing to challenge a reproductive health statute that would penalize them as accessories
as well as to plead the constitutional protections available to their patients. The Court held that:
"The rights of husband and wife, pressed here, are likely to be diluted or adversely affected unless those
rights are considered in a suit involving those who have this kind of confidential relation to them." 36
An even more analogous example may be found in Craig v. Boren,37 wherein the United States Supreme
Court held that a licensed beverage vendor has standing to raise the equal protection claim of a male
customer challenging a statutory scheme prohibiting the sale of beer to males under the age of 21 and to
females under the age of 18. The United States High Court explained that the vendors had standing "by
acting as advocates of the rights of third parties who seek access to their market or function." 38
Assuming arguendo that petitioners do not have a relationship with their patrons for the former to assert
the rights of the latter, the overbreadth doctrine comes into play. In overbreadth analysis, challengers to
government actionare in effect permitted to raise the rights of third parties. Generally applied to statutes
infringing on the freedom of speech, the overbreadth doctrine applies when a statute needlessly restrains
even constitutionally guaranteed rights.39 In this case, the petitioners claim that the Ordinance makes a
sweeping intrusion into the right to liberty of their clients. We can see that based on the allegations in the
petition, the Ordinance suffers from overbreadth.
We thus recognize that the petitioners have a right to assert the constitutional rights of their clients to
patronize their establishments for a "wash-rate" time frame.
III.
To students of jurisprudence, the facts of this case will recall to mind not only the recent City of
Manila ruling, but our 1967 decision in Ermita-Malate Hotel and Motel Operations Association, Inc., v. Hon.
City Mayor of Manila.40Ermita-Malate concerned the City ordinance requiring patrons to fill up a
prescribed form stating personal information such as name, gender, nationality, age, address and
occupation before they could be admitted to a motel, hotel or lodging house. This earlier ordinance was
precisely enacted to minimize certain practices deemed harmful to public morals. A purpose similar to the
annulled ordinance in City of Manila which sought a blanket ban on motels, inns and similar
establishments in the Ermita-Malate area. However, the constitutionality of the ordinance in Ermita-
Malate was sustained by the Court.
The common thread that runs through those decisions and the case at bar goes beyond the singularity of
the localities covered under the respective ordinances. All three ordinances were enacted with a view of
regulating public morals including particular illicit activity in transient lodging establishments. This could
be described as the middle case, wherein there is no wholesale ban on motels and hotels but the services
offered by these establishments have been severely restricted. At its core, this is another case about the
extent to which the State can intrude into and regulate the lives of its citizens.
The test of a valid ordinance is well established. A long line of decisions including City of Manila has held
that for an ordinance to be valid, it must not only be within the corporate powers of the local government
unit to enact and pass according to the procedure prescribed by law, it must also conform to the following
substantive requirements: (1) must not contravene the Constitution or any statute; (2) must not be unfair
or oppressive; (3) must not be partial or discriminatory; (4) must not prohibit but may regulate trade; (5)
must be general and consistent with public policy; and (6) must not be unreasonable. 41
The Ordinance prohibits two specific and distinct business practices, namely wash rate admissions and
renting out a room more than twice a day. The ban is evidently sought to be rooted in the police power as
conferred on local government units by the Local Government Code through such implements as the
general welfare clause.
A.
Police power, while incapable of an exact definition, 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 as the conditions warrant.42 Police power is based upon the concept of necessity of the
State and its corresponding right to protect itself and its people.43 Police power has been used as
justification for numerous and varied actions by the State. These range from the regulation of dance
halls,44 movie theaters,45 gas stations46 and cockpits.47 The awesome scope of police power is best
demonstrated by the fact that in its hundred or so years of presence in our nation’s legal system, its use
has rarely been denied.
The apparent goal of the Ordinance is to minimize if not eliminate the use of the covered establishments
for illicit sex, prostitution, drug use and alike. These goals, by themselves, are unimpeachable and certainly
fall within the ambit of the police power of the State. Yet the desirability of these ends do not sanctify any
and all means for their achievement. Those means must align with the Constitution, and our emerging
sophisticated analysis of its guarantees to the people. The Bill of Rights stands as a rebuke to the seductive
theory of Macchiavelli, and, sometimes even, the political majorities animated by his cynicism.
Even as we design the precedents that establish the framework for analysis of due process or equal
protection questions, the courts are naturally inhibited by a due deference to the co-equal branches of
government as they exercise their political functions. But when we are compelled to nullify executive or
legislative actions, yet another form of caution emerges. If the Court were animated by the same passing
fancies or turbulent emotions that motivate many political decisions, judicial integrity is compromised by
any perception that the judiciary is merely the third political branch of government. We derive our respect
and good standing in the annals of history by acting as judicious and neutral arbiters of the rule of law, and
there is no surer way to that end than through the development of rigorous and sophisticated legal
standards through which the courts analyze the most fundamental and far-reaching constitutional
questions of the day.
B.
The primary constitutional question that confronts us is one of due process, as guaranteed under Section
1, Article III of the Constitution. Due process evades a precise definition. 48 The purpose of the guaranty is
to prevent arbitrary governmental encroachment against the life, liberty and property of individuals. The
due process guaranty serves as a protection against arbitrary regulation or seizure. Even corporations and
partnerships are protected by the guaranty insofar as their property is concerned.
The due process guaranty has traditionally been interpreted as imposing two related but distinct
restrictions on government, "procedural due process" and "substantive due process." Procedural due
process refers to the procedures that the government must follow before it deprives a person of life,
liberty, or property. 49 Procedural due process concerns itself with government action adhering to the
established process when it makes an intrusion into the private sphere. Examples range from the form of
notice given to the level of formality of a hearing.
If due process were confined solely to its procedural aspects, there would arise absurd situation of
arbitrary government action, provided the proper formalities are followed. Substantive due process
completes the protection envisioned by the due process clause. It inquires whether the government has
sufficient justification for depriving a person of life, liberty, or property. 50
The question of substantive due process, moreso than most other fields of law, has reflected dynamism in
progressive legal thought tied with the expanded acceptance of fundamental freedoms. Police power,
traditionally awesome as it may be, is now confronted with a more rigorous level of analysis before it can
be upheld. The vitality though of constitutional due process has not been predicated on the frequency with
which it has been utilized to achieve a liberal result for, after all, the libertarian ends should sometimes
yield to the prerogatives of the State. Instead, the due process clause has acquired potency because of the
sophisticated methodology that has emerged to determine the proper metes and bounds for its
application.
C.
The general test of the validity of an ordinance on substantive due process grounds is best tested when
assessed with the evolved footnote 4 test laid down by the U.S. Supreme Court in U.S. v. Carolene
Products.51 Footnote 4 of the Carolene Products case acknowledged that the judiciary would defer to the
legislature unless there is a discrimination against a "discrete and insular" minority or infringement of a
"fundamental right."52 Consequently, two standards of judicial review were established: strict scrutiny for
laws dealing with freedom of the mind or restricting the political process, and the rational basis standard
of review for economic legislation.
A third standard, denominated as heightened or immediate scrutiny, was later adopted by the U.S.
Supreme Court for evaluating classifications based on gender 53 and legitimacy.54 Immediate scrutiny was
adopted by the U.S. Supreme Court in Craig,55 after the Court declined to do so in Reed v. Reed.56 While the
test may have first been articulated in equal protection analysis, it has in the United States since been
applied in all substantive due process cases as well.
We ourselves have often applied the rational basis test mainly in analysis of equal protection
challenges.57 Using the rational basis examination, laws or ordinances are upheld if they rationally further
a legitimate governmental interest. 58 Under intermediate review, governmental interest is extensively
examined and the availability of less restrictive measures is considered. 59 Applying strict scrutiny, the
focus is on the presence of compelling, rather than substantial, governmental interest and on the absence
of less restrictive means for achieving that interest.
In terms of judicial review of statutes or ordinances, strict scrutiny refers to the standard for determining
the quality and the amount of governmental interest brought to justify the regulation of fundamental
freedoms.60 Strict scrutiny is used today to test the validity of laws dealing with the regulation of speech,
gender, or race as well as other fundamental rights as expansion from its earlier applications to equal
protection.61 The United States Supreme Court has expanded the scope of strict scrutiny to protect
fundamental rights such as suffrage, 62 judicial access63 and interstate travel.64
If we were to take the myopic view that an Ordinance should be analyzed strictly as to its effect only on the
petitioners at bar, then it would seem that the only restraint imposed by the law which we are capacitated
to act upon is the injury to property sustained by the petitioners, an injury that would warrant the
application of the most deferential standard – the rational basis test. Yet as earlier stated, we recognize the
capacity of the petitioners to invoke as well the constitutional rights of their patrons – those persons who
would be deprived of availing short time access or wash-up rates to the lodging establishments in
question.
Viewed cynically, one might say that the infringed rights of these customers were are trivial since they
seem shorn of political consequence. Concededly, these are not the sort of cherished rights that, when
proscribed, would impel the people to tear up their cedulas. Still, the Bill of Rights does not shelter gravitas
alone. Indeed, it is those "trivial" yet fundamental freedoms – which the people reflexively exercise any day
without the impairing awareness of their constitutional consequence – that accurately reflect the degree of
liberty enjoyed by the people. Liberty, as integrally incorporated as a fundamental right in the
Constitution, is not a Ten Commandments-style enumeration of what may or what may not be done; but
rather an atmosphere of freedom where the people do not feel labored under a Big Brother presence as
they interact with each other, their society and nature, in a manner innately understood by them as
inherent, without doing harm or injury to others.
D.
The rights at stake herein fall within the same fundamental rights to liberty which we upheld in City of
Manila v. Hon. Laguio, Jr. We expounded on that most primordial of rights, thus:
Liberty as guaranteed by the Constitution was defined by Justice Malcolm to include "the right to exist and
the right to be free from arbitrary 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
facilities with which he has been endowed by his Creator, subject only to such restraint as are necessary
for the common welfare."[65] In accordance with this case, the rights of the citizen to be free to use his
faculties in all lawful ways; to live and work where he will; to earn his livelihood by any lawful calling; and
to pursue any avocation are all deemed embraced in the concept of liberty.[ 66]
The U.S. Supreme Court in the case of Roth v. Board of Regents, sought to clarify the meaning of "liberty." It
said:
While the Court has not attempted to define with exactness the liberty . . . guaranteed [by the Fifth and
Fourteenth Amendments], the term denotes not merely freedom from bodily restraint but also the right of
the individual to contract, to engage in any of the common occupations of life, to acquire useful knowledge,
to marry, establish a home and bring up children, to worship God according to the dictates of his own
conscience, and generally to enjoy those privileges long recognized . . . as essential to the orderly pursuit of
happiness by free men. In a Constitution for a free people, there can be no doubt that the meaning of
"liberty" must be broad indeed.67 [Citations omitted]
It cannot be denied that the primary animus behind the ordinance is the curtailment of sexual behavior.
The City asserts before this Court that the subject establishments "have gained notoriety as venue of
‘prostitution, adultery and fornications’ in Manila since they ‘provide the necessary atmosphere for
clandestine entry, presence and exit and thus became the ‘ideal haven for prostitutes and thrill-
seekers.’"68 Whether or not this depiction of a mise-en-scene of vice is accurate, it cannot be denied that
legitimate sexual behavior among willing married or consenting single adults which is constitutionally
protected69 will be curtailed as well, as it was in the City of Manila case. Our holding therein retains
significance for our purposes:
The concept of liberty compels respect for the individual whose claim to privacy and interference demands
respect. As the case of Morfe v. Mutuc, borrowing the words of Laski, so very aptly stated:
Man is one among many, obstinately refusing reduction to unity. His separateness, his isolation, are
indefeasible; indeed, they are so fundamental that they are the basis on which his civic obligations are
built. He cannot abandon the consequences of his isolation, which are, broadly speaking, that his
experience is private, and the will built out of that experience personal to himself. If he surrenders his will
to others, he surrenders himself. If his will is set by the will of others, he ceases to be a master of himself. I
cannot believe that a man no longer a master of himself is in any real sense free.
Indeed, the right to privacy as a constitutional right was recognized in Morfe, the invasion of which should
be justified by a compelling state interest. Morfe accorded recognition to the right to privacy
independently of its identification with liberty; in itself it is fully deserving of constitutional protection.
Governmental powers should stop short of certain intrusions into the personal life of the citizen. 70
We cannot discount other legitimate activities which the Ordinance would proscribe or impair. There are
very legitimate uses for a wash rate or renting the room out for more than twice a day. Entire families are
known to choose pass the time in a motel or hotel whilst the power is momentarily out in their homes. In
transit passengers who wish to wash up and rest between trips have a legitimate purpose for abbreviated
stays in motels or hotels. Indeed any person or groups of persons in need of comfortable private spaces for
a span of a few hours with purposes other than having sex or using illegal drugs can legitimately look to
staying in a motel or hotel as a convenient alternative.
E.
That the Ordinance prevents the lawful uses of a wash rate depriving patrons of a product and the
petitioners of lucrative business ties in with another constitutional requisite for the legitimacy of the
Ordinance as a police power measure. It must appear that the interests of the public generally, as
distinguished from those of a particular class, require an interference with private rights and the means
must be reasonably necessary for the accomplishment of the purpose and not unduly oppressive of private
rights.71 It must also be evident that no other alternative for the accomplishment of the purpose less
intrusive of private rights can work. More importantly, a reasonable relation must exist between the
purposes of the measure and the means employed for its accomplishment, for even under the guise of
protecting the public interest, personal rights and those pertaining to private property will not be
permitted to be arbitrarily invaded.72
Lacking a concurrence of these requisites, the police measure shall be struck down as an arbitrary
intrusion into private rights. As held in Morfe v. Mutuc, the exercise of police power is subject to judicial
review when life, liberty or property is affected. 73 However, this is not in any way meant to take it away
from the vastness of State police power whose exercise enjoys the presumption of validity. 74
Similar to the Comelec resolution requiring newspapers to donate advertising space to candidates, this
Ordinance is a blunt and heavy instrument.75 The Ordinance makes no distinction between places
frequented by patrons engaged in illicit activities and patrons engaged in legitimate actions. Thus it
prevents legitimate use of places where illicit activities are rare or even unheard of. A plain reading of
section 3 of the Ordinance shows it makes no classification of places of lodging, thus deems them all
susceptible to illicit patronage and subject them without exception to the unjustified prohibition.
The Court has professed its deep sentiment and tenderness of the Ermita-Malate area, its longtime
home,76 and it is skeptical of those who wish to depict our capital city – the Pearl of the Orient – as a
modern-day Sodom or Gomorrah for the Third World set. Those still steeped in Nick Joaquin-dreams of the
grandeur of Old Manila will have to accept that Manila like all evolving big cities, will have its problems.
Urban decay is a fact of mega cities such as Manila, and vice is a common problem confronted by the
modern metropolis wherever in the world. The solution to such perceived decay is not to prevent
legitimate businesses from offering a legitimate product. Rather, cities revive themselves by offering
incentives for new businesses to sprout up thus attracting the dynamism of individuals that would bring a
new grandeur to Manila.
The behavior which the Ordinance seeks to curtail is in fact already prohibited and could in fact be
diminished simply by applying existing laws. Less intrusive measures such as curbing the proliferation of
prostitutes and drug dealers through active police work would be more effective in easing the situation. So
would the strict enforcement of existing laws and regulations penalizing prostitution and drug use. These
measures would have minimal intrusion on the businesses of the petitioners and other legitimate
merchants. Further, it is apparent that the Ordinance can easily be circumvented by merely paying the
whole day rate without any hindrance to those engaged in illicit activities. Moreover, drug dealers and
prostitutes can in fact collect "wash rates" from their clientele by charging their customers a portion of the
rent for motel rooms and even apartments.

IV.

We reiterate that individual rights may be adversely affected only to the extent that may fairly be required
by the legitimate demands of public interest or public welfare. The State is a leviathan that must be
restrained from needlessly intruding into the lives of its citizens. However well-intentioned the Ordinance
may be, it is in effect an arbitrary and whimsical intrusion into the rights of the establishments as well as
their patrons. The Ordinance needlessly restrains the operation of the businesses of the petitioners as well
as restricting the rights of their patrons without sufficient justification. The Ordinance rashly equates wash
rates and renting out a room more than twice a day with immorality without accommodating innocuous
intentions.

The promotion of public welfare and a sense of morality among citizens deserves the full endorsement of
the judiciary provided that such measures do not trample rights this Court is sworn to protect. 77 The
notion that the promotion of public morality is a function of the State is as old as Aristotle. 78 The
advancement of moral relativism as a school of philosophy does not de-legitimize the role of morality in
law, even if it may foster wider debate on which particular behavior to penalize. It is conceivable that a
society with relatively little shared morality among its citizens could be functional so long as the pursuit of
sharply variant moral perspectives yields an adequate accommodation of different interests. 79

To be candid about it, the oft-quoted American maxim that "you cannot legislate morality" is ultimately
illegitimate as a matter of law, since as explained by Calabresi, that phrase is more accurately interpreted
as meaning that efforts to legislate morality will fail if they are widely at variance with public attitudes
about right and wrong.80 Our penal laws, for one, are founded on age-old moral traditions, and as long as
there are widely accepted distinctions between right and wrong, they will remain so oriented.

Yet the continuing progression of the human story has seen not only the acceptance of the right-wrong
distinction, but also the advent of fundamental liberties as the key to the enjoyment of life to the fullest.
Our democracy is distinguished from non-free societies not with any more extensive elaboration on our
part of what is moral and immoral, but from our recognition that the individual liberty to make the choices
in our lives is innate, and protected by the State. Independent and fair-minded judges themselves are
under a moral duty to uphold the Constitution as the embodiment of the rule of law, by reason of their
expression of consent to do so when they take the oath of office, and because they are entrusted by the
people to uphold the law. 81

Even as the implementation of moral norms remains an indispensable complement to governance, that
prerogative is hardly absolute, especially in the face of the norms of due process of liberty. And while the
tension may often be left to the courts to relieve, it is possible for the government to avoid the
constitutional conflict by employing more judicious, less drastic means to promote morality.

WHEREFORE, the Petition is GRANTED. The Decision of the Court of Appeals is REVERSED, and the
Decision of the Regional Trial Court of Manila, Branch 9, is REINSTATED. Ordinance No. 7774 is hereby
declared UNCONSTITUTIONAL. No pronouncement as to costs.

SO ORDERED.

DANTE O. TINGA
Associate Justice
EN BANC
[G.R. No. 78742. July 14, 1989.]
ASSOCIATION OF SMALL LANDOWNERS IN THE PHILIPPINES, INC., JUANITO D. GOMEZ, GERARDO B.
ALARCIO, FELIFE A. GUICO, JR., BERNARDO M. ALMONTE, CANUTO RAMIR B. CABRITO, ISIDRO T.
GUICO, FELISA I. LLAMIDO, FAUSTO J. SALVA, REYNALDO G. ESTRADA, FELISA C. BAUTISTA, ESMENIA
J. CABE, TEODORO B. MADRIAGA, AUREA J. PRESTOSA, EMERENCIANA J. ISLA, FELICISIMA C.
APRESTO, CONSUELO M. MORALES, BENJAMIN R. SEGISMUNDO, CIRILA A. JOSE & NAPOLEON S.
FERRER, petitioners, vs. HONORABLE SECRETARY OF AGRARIAN REFORM, respondent.
[G.R. No. 79310. July 14, 1989.]
ARSENIO AL. ACUNÑ A, NEWTON JISON, VICTORINO FERRARIS, DENNIS JEREZA, HERMINIGILDO GUSTILO,
PAULINO D. TOLENTINO and PLANTERS' COMMITTEE, INC., Victorias Mill District, Victorias, Negros
Occidental, petitioners, vs. JOKER ARROYO, PHILIP E. JUICO and PRESIDENTIAL AGRARIAN REFORM
COUNCIL, respondents.
[G.R. No. 79744. July 14, 1989.]
INOCENTES PABICO, petitioner, vs. HON. PHILIP E. JUICO, SECRETARY OF THE DEPARTMENT OF
AGRARIAN REFORM, HON. JOKER ARROYO, EXECUTIVE SECRETARY OF THE OFFICE OF THE PRESIDENT,
and Messrs. SALVADOR TALENTO, JAIME ABOGADO, CONRADO AVANCENÑ A, and ROBERTO TAAY,
respondents.
[G.R. No. 79777. July 14, 1989.]
NICOLAS S. MANAAY and AGUSTIN HERMANO, JR., petitioners, vs. HON. PHILIP ELLA JUICO, as Secretary
of Agrarian Reform, and LAND BANK OF THE PHILIPPINES, respondents.
SYLLABUS
1. CONSTITUTIONAL LAW; SUPREME COURT; ROLE. — Although holding neither purse nor sword
and so regarded as the weakest of the three departments of the government, the judiciary is nonetheless
vested with the power to annul the acts of either the legislative or the executive or of both when not
conformable to the fundamental law. This is the reason for what some quarters call the doctrine of judicial
supremacy.
2. ID.; SEPARATION OF POWERS; CONSTRUED. — The doctrine of separation of powers imposes
upon the courts a proper restraint, born of the nature of their functions and of their respect for the other
departments, in striking down the acts of the legislative and the executive as unconstitutional. The policy,
indeed, is a blend of courtesy and caution. To doubt is to sustain. The theory is that before the act was done
or the law was enacted, earnest studies were made by Congress or the President, or both, to insure that the
Constitution would not be breached.
3. ID.; SUPREME COURT; POWER TO DECLARE AN ACT OR LAW UNCONSTITUTIONAL;
CONSTITUTIONS. — The Constitution itself lays down stringent conditions for a declaration of
unconstitutionality, requiring therefor the concurrence of a majority of the members of the Supreme Court
who took part in the deliberations and voted on the issue during their session en banc.
4. ID.; ID.; ID.; JUDICIAL INQUIRY; REQUISITES. — The Court will assume jurisdiction over a
constitutional question only if it is shown that the essential requisites of a judicial inquiry into such a
question are first satisfied. Thus, there must be an actual case or controversy involving a conflict of legal
rights susceptible of judicial determination, the constitutional question must have been opportunely
raised by the proper party, and the resolution of the question is unavoidably necessary to the decision of
the case itself.
5. REMEDIAL LAW; ACTIONS; PROPER PARTY; CASE AT BAR. — With particular regard to the
requirement of proper party as applied in the cases before us, we hold that the same is satisfied by the
petitioners and intervenors because each of them has sustained or is in danger of sustaining an immediate
injury as a result of the acts or measures complained of.
6. CONSTITUTIONAL LAW; SUPREME COURT; POWER TO DECLARE AN ACT OR LAW
UNCONSTITUTIONAL; TRIBUNAL WITH WIDE DISCRETION TO WAIVE REQUIREMENT. — Even if, strictly
speaking, they are not covered by the definition, it is still within the wide discretion of the Court to waive
the requirement and so remove the impediment to its addressing and resolving the serious constitutional
questions raised.
7. ID.; ID.; JUDICIAL SUPREMACY. — . . . When the judiciary mediates to allocate constitutional
boundaries, it does not assert any superiority over the other departments; it does not in reality nullify or
invalidate an act of the Legislature, but only asserts the solemn and sacred obligation assigned to it by the
Constitution to determine conflicting claims of authority under the Constitution and to establish for the
parties in an actual controversy the rights which that instrument secures and guarantees to them. This is
in truth all that is involved in what is termed "judicial supremacy" which properly is the power of judicial
review under the Constitution.
8. ID.; 1973 CONSTITUTION; PRESIDENT; EXERCISE OF LEGISLATIVE POWER DURING MARTIAL
LAW, SUSTAINED. — The promulgation of P.D. No. 27 by President Marcos in the exercise of his powers
under martial law has already been sustained in Gonzales v. Estrella and we find no reason to modify or
reverse it on that issue.
9. ID.; 1987 CONSTITUTION; PRESIDENT; LEGISLATIVE POWER, AUTHORIZED. — As for the
power of President Aquino to promulgate Proc. No. 131 and E.O. Nos. 228 and 229, the same was
authorized under Section 6 of the Transitory Provisions of the 1987 Constitution, quoted above. The said
measures were issued by President Aquino before July 27, 1987, when the Congress of the Philippines was
formally convened and took over legislative power from her. They are not "midnight" enactments intended
to pre-empt the legislature because E.O. No. 228 was issued on July 17, 1987, and the other measures, i.e.,
Proc. No. 131 and E.O. No. 229, were both issued on July 22, 1987.
10. ID.; ID.; ID.; MEASURES PROMULGATED REMAINS VALID EVEN AFTER LOST OF LEGISLATIVE
POWER; RATIONALE. — Neither is it correct to say that these measures ceased to be valid when she lost
her legislative power for, like any statute, they continue to be in force unless modified or repealed by
subsequent law or declared invalid by the courts. A statute does not ipso facto become inoperative simply
because of the dissolution of the legislature that enacted it. By the same token, President Aquino's loss of
legislative power did not have the effect of invalidating all the measures enacted by her when and as long
as she possessed it.
11. ID.; STATUTES; PROCLAMATION REMAINS VALID EVEN AFTER LOST OF LEGISLATIVE POWER;
RATIONALE. — Proc. No. 131 is not an appropriation measure even if it does provide for the creation of
said fund, for that is not its principal purpose. An appropriation law is one the primary and specific
purpose of which is to authorize the release of public funds from the treasury. The creation of the fund is
only incidental to the main objective of the proclamation, which is agrarian reform.
12. ID.; ID.; PROCLAMATION NO. 131 AND EXECUTIVE ORDER NO. 229; ABSENCE OF RETENTION
LIMIT PROVIDED FOR IN REPUBLIC ACT NO. 6657. — The argument of some of the petitioners that Proc.
No. 131 and E.O. No. 229 should be invalidated because they do not provide for retention limits as
required by Article XIII, Section 4 of the Constitution is no longer tenable. R.A. No. 6657 does provide that
in no case shall retention by the landowner exceed five (5) hectares. three (3) hectares may be awarded to
each child of the landowner, subject to two (2) qualification which is now in Section 6 of the law.
13. ID.; ID.; TITLE OF A BILL NEED NOT BE CATALOGUED. — The title of the bill does not have to be
a catalogue of its contents and will suffice if the matters embodied in the text are relevant to each other
and may be inferred from the title.
14. CIVIL LAW; EFFECT AND APPLICATION OF LAWS; ISSUANCES FROM THE PRESIDENT REQUIRE
PUBLICATION FOR EFFECTIVITY. — But for all their peremptoriness, these issuances from the President
Marcos still had to comply with the requirement for publication as this Court held in Tanñ ada v. Tuvera.
Hence, unless published in the Official Gazette in accordance with Article 2 of the Civil Code, they could not
have any force and effect if they were among those enactments successfully challenged in that case. (LOI
474 was published, though, in the Official Gazette dated November 29, 1976.)
15. REMEDIAL LAW; SPECIAL CIVIL ACTION; MANDAMUS; OFFICE. — Mandamus will lie to compel
the discharge of the discretionary duty itself but not to control the discretion to be exercised. In other
words, mandamus can issue to require action only but not specific action.
16. ID.; ID.; ID.; GENERALLY NOT AVAILABLE WHERE THERE IS A PLAIN, SPEEDY REMEDY;
EXCEPTION. — While it is true that as a rule the writ will not be proper as long as there is still a plain,
speedy and adequate remedy available from the administrative authorities, resort to the courts may still
be permitted if the issue raised is a question of law.
17. POLITICAL LAW; POLICE POWER AND EMINENT DOMAIN; TRADITIONAL DISTINCTIONS. —
There are traditional distinctions between the police power and the power of eminent domain that
logically preclude the application of both powers at the same time on the same subject. The cases before
us present no knotty complication insofar as the question of compensable taking is concerned. To the
extent that the measures under challenge merely prescribe retention limits for landowners, there is an
exercise of the police power for the regulation of private property in accordance with the Constitution. But
where, to carry out such regulation, it becomes necessary to deprive such owners of whatever lands they
may own in excess of the maximum area allowed, there is definitely a taking under the power of eminent
domain for which payment of just compensation is imperative. The taking contemplated is not a mere
limitation of the use of the land. What is required is the surrender of the title to and the physical
possession of the said excess and all beneficial rights accruing to the owner in favor of the farmer-
beneficiary. This is definitely an exercise not of the police power but of the power of eminent domain.
18. BILL OF RIGHTS; EQUAL PROTECTION CLAUSE; CLASSIFICATION; DEFINED. — Classification
has been defined as the grouping of persons or things similar to each other in certain particulars and
different from each other in these same particulars.
19. ID.; ID.; ID.; REQUISITES.; EQUAL PROTECTION CLAUSE; CLASSIFICATION; DEFINED. — To be
valid, it must conform to the following requirements: (1) it must be based on substantial distinctions; (2) it
must be germane to the purposes of the law; (3) it must not be limited to existing conditions only; and (4)
it must apply equally to all the members of the class.
20. ID.; ID.; ID.; MEANING. — Equal protection simply means that all persons or things similarly
situated must be treated alike both as to the rights conferred and the liabilities imposed.
21. POLITICAL LAW; EMINENT DOMAIN; NATURE. — Eminent domain is an inherent power of the
State that enables it to forcibly acquire private lands intended for public use upon payment of just
compensation to the owner.
22. ID.; ID.; WHEN AVAILED OF. — Obviously, there is no need to expropriate where the owner is
willing to sell under terms also acceptable to the purchaser, in which case an ordinary deed of sale may be
agreed upon by the parties. It is only where the owner is unwilling to sell, or cannot accept the price or
other conditions offered by the vendee, that the power of eminent domain will come into play to assert the
paramount authority of the State over the interests of the property owner. Private rights must then yield to
the irresistible demands of the public interest on the time-honored justification, as in the case of the police
power, that the welfare of the people is the supreme law.
23. ID.; ID.; REQUIREMENTS. — Basically, the requirements for a proper exercise of the power are:
(1) public use and (2) just compensation.
24. ID.; POLITICAL QUESTION; DEFINED. — The term "political question" connotes what it means
in ordinary parlance, namely, a question of policy. It refers to "those questions which, under the
Constitution, are to be decided by the people in their sovereign capacity; or in regard to which full
discretionary authority has been delegated to the legislative or executive branch of the government." It is
concerned with issues dependent upon the wisdom, not legality, of a particular measure. (Tanñ ada vs.
Cuenco, 100 Phil. 1101)
25. ID.; EMINENT DOMAIN JUST COMPENSATION; DEFINED. — Just compensation is defined as the
full and fair equivalent of the property taken from its owner by the expropriator.
26. ID.; ID.; ID.; WORD "JUST", EXPLAINED. — It has been repeatedly stressed by this Court that the
measure is not the taker's gain but the owner's loss. The word "just" is used to intensify the meaning of the
word "compensation" to convey the idea that the equivalent to be rendered for the property to be taken
shall be real, substantial, full, ample.
27. ID.; ID.; ID.; COMPENSABLE TAKING; CONDITIONS. — There is compensable taking when the
following conditions concur: (1) the expropriator must enter a private property; (2) the entry must be for
more than a momentary period; (3) the entry must be under warrant or color of legal authority; (4) the
property must be devoted to public use or otherwise informally appropriated or injuriously affected; and
(5) the utilization of the property for public use must be in such a way as to oust the owner and deprive
him of beneficial enjoyment of the property.
28. ID.; ID.; ID.; DEPOSIT NOT NECESSARY WHERE THE EXPROPRIATOR IS THE ESTATE. — Where
the State itself is the expropriator, it is not necessary for it to make a deposit upon its taking possession of
the condemned property, as "the compensation is a public charge, the good faith of the public is pledged
for its payment, and all the resources of taxation may be employed in raising the amount."
29. ID.; ID.; ID.; DETERMINATION THEREOF, ADDRESSED TO THE COURTS OF JUSTICE. — The
determination of just compensation is a function addressed to the courts of justice and may not be
usurped by any other branch or official of the government.
30. ID.; ID.; ID.; EMINENT DOMAIN UNDER THE COMPREHENSIVE AGRARIAN REFORM LAW;
DETERMINATION MADE BY THE DEPARTMENT OF AGRARIAN RELATIONS, ONLY PRELIMINARY. — The
determination of the just compensation by the DAR is not by any means final and conclusive upon the
landowner or any other interested party, for Section 16 (f) clearly provides: Any party who disagrees with
the decision may bring the matter to the court of proper jurisdiction for final determination of just
compensation. The determination made by the DAR is only preliminary unless accepted by all parties
concerned. Otherwise, the courts of justice will still have the right to review with finality the said
determination in the exercise of what is admittedly a judicial function. —
31. ID.; ID.; ID.; PAYMENT IN MONEY ONLY NOT APPLICABLE IN REVOLUTIONARY KIND OF
EXPROPRIATION. — We do not deal here with the traditional exercise of the power of eminent domain.
This is not an ordinary expropriation where only a specific property of relatively limited area is sought to
be taken by the State from its owner for a specific and perhaps local purpose. What we deal with here is a
revolutionary kind of expropriation. The expropriation before us affects all private agricultural lands
whenever found and of whatever kind as long as they are in excess of the maximum retention limits
allowed their owners. Such a program will involve not mere millions of pesos. The cost will be
tremendous. Considering the vast areas of land subject to expropriation under the laws before us, we
estimate that hundreds of billions of pesos will be needed, far more indeed than the amount of P50 billion
initially appropriated, which is already staggering as it is by our present standards. The Court has not
found in the records of the Constitutional Commission any categorial agreement among the members
regarding the meaning to be given the concept of just compensation as applied to the comprehensive
agrarian reform program being contemplated. On the other hand, there is nothing in the records either
that militates against the assumptions we are making of the general sentiments and intention of the
members on the content and manner of the payment to be made to the landowner in the light of the
magnitude of the expenditure and the limitations of the expropriator. Therefore, payment of the just
compensation is not always required to be made fully in money.
32. ID.; ID.; ID.; PRINCIPLE THAT TITLE SHALL PASS ONLY UPON FULL PAYMENT OF JUST
COMPENSATION, NOT APPLICABLE. — Title to the property expropriated shall pass from the owner to the
expropriator only upon full payment of the just compensation. The CARP Law, for its part, conditions the
transfer of possession and ownership of the land to the government on receipt by the landowner of the
corresponding payment or the deposit by the DAR of the compensation in cash or LBP bonds with an
accessible bank. Until then, title also remains with the landowner. No outright change of ownership is
contemplated either. Hence, that the assailed measures violate due process by arbitrarily transferring title
before the land is fully paid for must also be rejected.
33. ADMINISTRATIVE LAW; EXHAUSTION OF ADMINISTRATIVE REMEDIES; CASE AT BAR. — It
does not appear in G.R. No. 78742 that the appeal filed by the petitioners with the Office of the President
has already been resolved. Although we have said that the doctrine of exhaustion of administrative
remedies need not preclude immediate resort to judicial action, there are factual issues that have yet to be
examined on the administrative level, especially the claim that the petitioners are not covered by LOI 474
because they do not own other agricultural lands than the subjects of their petition. Obviously, the Court
cannot resolve these issues.
DECISION
CRUZ, J p:
In ancient mythology, Antaeus was a terrible giant who blocked and challenged Hercules for his life on his
way to Mycenae after performing his eleventh labor. The two wrestled mightily and Hercules flung his
adversary to the ground thinking him dead, but Antaeus rose even stronger to resume their struggle. This
happened several times to Hercules' increasing amazement. Finally, as they continued grappling, it dawned
on Hercules that Antaeus was the son of Gaea and could never die as long as any part of his body was
touching his Mother Earth. Thus forewarned, Hercules then held Antaeus up in the air, beyond the reach of
the sustaining soil, and crushed him to death.
Mother Earth. The sustaining soil. The giver of life, without whose invigorating touch even the powerful
Antaeus weakened and died.
The cases before us are not as fanciful as the foregoing tale. But they also tell of the elemental forces of life
and death, of men and women who, like Antaeus, need the sustaining strength of the precious earth to stay
alive.
"Land for the Landless" is a slogan that underscores the acute imbalance in the distribution of this
precious resource among our people. But it is more than a slogan. Through the brooding centuries, it has
become a battlecry dramatizing the increasingly urgent demand of the dispossessed among us for a plot of
earth as their place in the sun. cdasia
Recognizing this need, the Constitution in 1935 mandated the policy of social justice to "insure the well-
being and economic security of all the people,"1 especially the less privileged. In 1973, the new
Constitution affirmed this goal, adding specifically that "the State shall regulate the acquisition, ownership,
use, enjoyment and disposition of private property and equitably diffuse property ownership and profits.'
2 Significantly, there was also the specific injunction to "formulate and implement an agrarian reform
program aimed at emancipating the tenant from the bondage of the soil." 3
The Constitution of 1987 was not to be outdone. Besides echoing these sentiments, it also adopted one
whole and separate Article XIII on Social Justice and Human Rights, containing grandiose but undoubtedly
sincere provisions for the uplift of the common people. These include a call in the following words for the
adoption by the State of an agrarian reform program:
SEC. 4. The State shall, by law, undertake an agrarian reform program founded on the right of farmers
and regular farmworkers, who are landless, to own directly or collectively the lands they till or, in the case
of other farmworkers, to receive a just share of the fruits thereof. To this end, the State shall encourage and
undertake the just distribution of all agricultural lands, subject to such priorities and reasonable retention
limits as the Congress may prescribe, taking into account ecological, developmental, or equity
considerations and subject to the payment of just compensation. In determining retention limits, the State
shall respect the right of small landowners. The State shall further provide incentives for voluntary land-
sharing.
Earlier, in fact, R.A. No. 3844, otherwise known as the Agricultural Land Reform Code, had already been
enacted by the Congress of the Philippines on August 8, 1963, in line with the above-stated principles. This
was substantially superseded almost a decade later by P.D. No. 27, which was promulgated on October 21,
1972, along with martial law, to provide for the compulsory acquisition of private lands for distribution
among tenant-farmers and to specify maximum retention limits for landowners.
The people power revolution of 1986 did not change and indeed even energized the thrust for agrarian
reform. Thus, on July 17, 1987, President Corazon C. Aquino issued E.O. No. 228, declaring full land
ownership in favor of the beneficiaries of P.D. No. 27 and providing for the valuation of still unvalued lands
covered by the decree as well as the manner of their payment. This was followed on July 22, 1987 by
Presidential Proclamation No. 131, instituting a comprehensive agrarian reform program (CARP), and E.O.
No. 229, providing the mechanics for its implementation.
Subsequently, with its formal organization, the revived Congress of the Philippines took over legislative
power from the President and started its own deliberations, including extensive public hearings, on the
improvement of the interests of farmers. The result, after almost a year of spirited debate, was the
enactment of R.A. No. 6657, otherwise known as the Comprehensive Agrarian Reform Law of 1988, which
President Aquino signed on June 10, 1988. This law, while considerably changing the earlier mentioned
enactments, nevertheless gives them suppletory effect insofar as they are not inconsistent with its
provisions. 4
The above-captioned cases have been consolidated because they involve common legal questions,
including serious challenges to the constitutionality of the several measures mentioned above. They will
be the subject of one common discussion and resolution. The different antecedents of each case will
require separate treatment, however, and will must be explained hereunder.
G.R. No. 79777
Squarely raised in this petition is the constitutionality of P.D. No. 27, E.O. Nos. 228 and 229, and R.A. No.
6657.
The subjects of this petition are a 9-hectare riceland worked by four tenants and owned by petitioner
Nicolas Manaay and his wife and a 5-hectare riceland worked by four tenants and owned by petitioner
Augustin Hermano, Jr. The tenants were declared full owners of these lands by E.O. No. 228 as qualified
farmers under P.D. No. 27.
The petitioners are questioning P.D. No. 27 and E.O. Nos. 228 and 229 on grounds inter alia of separation of
powers, due process, equal protection and the constitutional limitation that no private property shall be
taken for public use without just compensation.
They contend that President Aquino usurped legislative power when she promulgated E.O. No. 228. The
said measure is invalid also for violation of Article XIII, Section 4, of the Constitution, for failure to provide
for retention limits for small landowners. Moreover, it does not conform to Article VI, Section 25(4) and
the other requisites of a valid appropriation.
In connection with the determination of just compensation, the petitioners argue that the same may be
made only by a court of justice and not by the President of the Philippines. They invoke the recent cases of
EPZA v. Dulay 5 and Manotok v. National Food Authority. 6 Moreover, the just compensation contemplated
by the Bill of Rights is payable in money or in cash and not in the form of bonds or other things of value.
In considering the rentals as advance payment on the land, the executive order also deprives the
petitioners of their property rights as protected by due process. The equal protection clause is also
violated because the order places the burden of solving the agrarian problems on the owners only of
agricultural lands. No similar obligation is imposed on the owners of other properties.
The petitioners also maintain that in declaring the beneficiaries under P.D. No. 27 to be the owners of the
lands occupied by them, E.O. No. 228 ignored judicial prerogatives and so violated due process. Worse, the
measure would not solve the agrarian problem because even the small farmers are deprived of their lands
and the retention rights guaranteed by the Constitution.
In his Comment, the Solicitor General stresses that P.D. No. 27 has already been upheld in the earlier cases
of Chavez v. Zobel, 7 Gonzales v. Estrella, 8 and Association of Rice and Corn Producers of the Philippines,
Inc. v. the National Land Reform council 9 The determination of just compensation by the executive
authorities conformably to the formula prescribed under the questioned order is at best initial or
preliminary only. It does not foreclose judicial intervention whenever sought or warranted. At any rate, the
challenge to the order is premature because no valuation of their property has as yet been made by the
Department of Agrarian Reform. The petitioners are also not proper parties because the lands owned by
them do not exceed the maximum retention limit of 7 hectares.
Replying, the petitioners insist they are proper parties because P.D. No. 27 does not provide for retention
limits on tenanted lands and that in any event their petition is a class suit brought in behalf of landowners
with landholdings below 24 hectares. They maintain that the determination of just compensation by the
administrative authorities is a final ascertainment. As for the cases invoked by the public respondent, the
constitutionality of P.D. No. 27 was merely assumed in Chavez, while what was decided in Gonzales was the
validity of the imposition of martial law.
In the amended petition dated November 22, 1988, it is contended that P.D. No. 27, E.O. Nos. 228 and 229
(except Sections 20 and 21) have been impliedly repealed by R.A. No. 6657. Nevertheless, this statute
should itself also be declared unconstitutional because it suffers from substantially the same infirmities as
the earlier measures.
A petition for intervention was filed with leave of court on June 1, 1988 by Vicente Cruz, owner of a 1.83-
hectare land, who complained that the DAR was insisting on the implementation of P.D. No. 27 and E.O. No.
228 despite a compromise agreement he had reached with his tenant on the payment of rentals. In a
subsequent motion dated April 10, 1989, he adopted the allegations in the basic amended petition that the
above-mentioned enactments have been impliedly repealed by R.A. No. 6657.
G.R. No. 79310
The petitioners herein are landowners and sugar planters in the Victorias Mill District, Victorias, Negros
Occidental. Co-petitioner Planters' Committee, Inc. is an organization composed of 1,400 planter-
members. This petition seeks to prohibit the implementation of Proc. No. 131 and E.O. No. 229.
The petitioners claim that the power to provide for a Comprehensive Agrarian Reform Program as decreed
by the Constitution belongs to Congress and not the President. Although they agree that the President
could exercise legislative power until the Congress was convened, she could do so only to enact emergency
measures during the transition period. At that, even assuming that the interim legislative power of the
President was properly exercised, Proc. No. 131 and E.O. No. 229 would still have to be annulled for
violating the constitutional provisions on just compensation, due process, and equal protection.
They also argue that under Section 2 of Proc. No. 131 which provides:
Agrarian Reform Fund. — There is hereby created a special fund, to be known as the Agrarian Reform
Fund, an initial amount of FIFTY BILLION PESOS (P50,000,000,000.00) to cover the estimated cost of the
Comprehensive Agrarian Reform Program from 1987 to 1992 which shall be sourced from the receipts of
the sale of the assets of the Asset Privatization Trust and Receipts of sale of ill-gotten wealth received
through the Presidential Commission on Good Government and such other sources as government may
deem appropriate. The amounts collected and accruing to this special fund shall be considered
automatically appropriated for the purpose authorized in this Proclamation.
the amount appropriated is in futuro, not in esse. The money needed to cover the cost of the contemplated
expropriation has yet to be raised and cannot be appropriated at this time.
Furthermore, they contend that taking must be simultaneous with payment of just compensation as it is
traditionally understood, i.e., with money and in full, but no such payment is contemplated in Section 5 of
the E.O. No. 229. On the contrary, Section 6, thereof provides that the Land Bank of the Philippines "shall
compensate the landowner in an amount to be established by the government, which shall be based on the
owner's declaration of current fair market value as provided in Section 4 hereof, but subject to certain
controls to be defined and promulgated by the Presidential Agrarian Reform Council." This compensation
may not be paid fully in money but in any of several modes that may consist of part cash and part bond,
with interest, maturing periodically, or direct payment in cash or bond as may be mutually agreed upon by
the beneficiary and the landowner or as may be prescribed or approved by the PARC.
The petitioners also argue that in the issuance of the two measures, no effort was made to make a careful
study of the sugar planters' situation. There is no tenancy problem in the sugar areas that can justify the
application of the CARP to them. To the extent that the sugar planters have been lumped in the same
legislation with other farmers, although they are a separate group with problems exclusively their own,
their right to equal protection has been violated.
A motion for intervention was filed on August 27, 1987 by the National Federation of Sugarcane Planters
(NASP) which claims a membership of at least 20,000 individual sugar planters all over the country. On
September 10, 1987, another motion for intervention was filed, this time by Manuel Barcelona, et al.,
representing coconut and riceland owners. Both motions were granted by the Court.
NASP alleges that President Aquino had no authority to fund the Agrarian Reform Program and that, in any
event, the appropriation is invalid because of uncertainty in the amount appropriated. Section 2 of Proc.
No. 131 and Sections 20 and 21 of E.O. No. 229 provide for an initial appropriation of fifty billion pesos and
thus specifies the minimum rather than the maximum authorized amount. This is not allowed.
Furthermore, the stated initial amount has not been certified to by the National Treasurer as actually
available.
Two additional arguments are made by Barcelona, to wit, the failure to establish by clear and convincing
evidence the necessity for the exercise of the powers of eminent domain, and the violation of the
fundamental right to own property.
The petitioners also decry the penalty for non-registration of the lands, which is the expropriation of the
said land for an amount equal to the government assessor's valuation of the land for tax purposes. On the
other hand, if the landowner declares his own valuation, he is unjustly required to immediately pay the
corresponding taxes on the land, in violation of the uniformity rule.
In his consolidated Comment, the Solicitor General first invokes the presumption of constitutionality in
favor of Proc. No. 131 and E.O. No. 229. He also justifies the necessity for the expropriation as explained in
the "whereas" clauses of the Proclamation and submits that, contrary to the petitioner's contention, a pilot
project to determine the feasibility of CARP and a general survey on the people's opinion thereon are not
indispensable prerequisites to its promulgation.
On the alleged violation of the equal protection clause, the sugar planters have failed to show that they
belong to a different class and should be differently treated. The Comment also suggests the possibility of
Congress first distributing public agricultural lands and scheduling the expropriation of private
agricultural lands later. From this viewpoint, the petition for prohibition would be premature.
The public respondent also points out that the constitutional prohibition is against the payment of public
money without the corresponding appropriation. There is no rule that only money already in existence can
be the subject of an appropriation law. Finally, the earmarking of fifty billion pesos as Agrarian Reform
Fund, although denominated as an initial amount, is actually the maximum sum appropriated. The word
"initial" simply means that additional amounts may be appropriated later when necessary.
On April 11, 1988, Prudencio Serrano, a coconut planter, filed a petition on his own behalf, assailing the
constitutionality of E.O. No. 229. In addition to the arguments already raised, Serrano contends that the
measure is unconstitutional because:
(1) Only public lands should be included in the CARP;
(2) E.O. No. 229 embraces more than one subject which is not expressed in the title;
(3) The power of the President to legislate was terminated on July 2, 1987; and
(4) The appropriation of a P50 billion special fund from the National Treasury did not originate
from the House of Representatives.
G.R. No. 79744
The petitioner alleges that the then Secretary of Department of Agrarian Reform, in violation of due
process and the requirement for just compensation, placed his landholding under the coverage of
Operation Land Transfer. Certificates of Land Transfer were subsequently issued to the private
respondents, who then refused payment of lease rentals to him.
On September 3, 1986, the petitioner protested the erroneous inclusion of his small landholding under
Operation Land Transfer and asked for the recall and cancellation of the Certificates of Land Transfer in
the name of the private respondents. He claims that on December 24, 1986, his petition was denied
without hearing. On February 17, 1987, he filed a motion for reconsideration, which had not been acted
upon when E.O. Nos. 228 and 229 were issued. These orders rendered his motion moot and academic
because they directly effected the transfer of his land to the private respondents.
The petitioner now argues that:
(1) E.O. Nos. 228 and 229 were invalidly issued by the President of the Philippines.
(2) The said executive orders are violative of the constitutional provision that no private property
shall be taken without due process or just compensation.
(3) The petitioner is denied the right of maximum retention provided for under the 1987
Constitution.
The petitioner contends that the issuance of E.O Nos. 228 and 229 shortly before Congress convened is
anomalous and arbitrary, besides violating the doctrine of separation of powers. The legislative power
granted to the President under the Transitory Provisions refers only to emergency measures that may be
promulgated in the proper exercise of the police power.
The petitioner also invokes his rights not to be deprived of his property without due process of law and to
the retention of his small parcels of riceholding as guaranteed under Article XIII, Section 4 of the
Constitution. He likewise argues that, besides denying him just compensation for his land, the provisions
of E.O. No. 228 declaring that:
Lease rentals paid to the landowner by the farmer-beneficiary after October 21, 1972 shall be considered
as advance payment for the land.
is an unconstitutional taking of a vested property right. It is also his contention that the inclusion of even
small landowners in the program along with other landowners with lands consisting of seven hectares or
more is undemocratic.
In his Comment, the Solicitor General submits that the petition is premature because the motion for
reconsideration filed with the Minister of Agrarian Reform is still unresolved. As for the validity of the
issuance of E.O. Nos. 228 and 229, he argues that they were enacted pursuant to Section 6, Article XVIII of
the Transitory Provisions of the 1987 Constitution which reads:
The incumbent president shall continue to exercise legislative powers until the first Congress is convened.
On the issue of just compensation, his position is that when P.D. No. 27 was promulgated on October 21,
1972, the tenant-farmer of agricultural land was deemed the owner of the land he was tilling. The
leasehold rentals paid after that date should therefore be considered amortization payments.
In his Reply to the public respondents, the petitioner maintains that the motion he filed was resolved on
December 14, 1987. An appeal to the Office of the President would be useless with the promulgation of
E.O. Nos. 228 and 229, which in effect sanctioned the validity of the public respondent's acts.
G.R. No. 78742
The petitioners in this case invoke the right of retention granted by P.D. No. 27 to owners of rice and corn
lands not exceeding seven hectares as long as they are cultivating or intend to cultivate the same. Their
respective lands do not exceed the statutory limit but are occupied by tenants who are actually cultivating
such lands.
According to P.D. No. 316, which was promulgated in implementation of P.D. No. 27:
No tenant-farmer in agricultural lands primarily devoted to rice and corn shall be ejected or removed from
his farmholding until such time as the respective rights of the tenant-farmers and the landowner shall
have been determined in accordance with the rules and regulations implementing P.D. No. 27.
The petitioners claim they cannot eject their tenants and so are unable to enjoy their right of retention
because the Department of Agrarian Reform has so far not issued the implementing rules required under
the above-quoted decree. They therefore ask the Court for a writ of mandamus to compel the respondent
to issue the said rules.
In his Comment, the public respondent argues that P.D. No. 27 has been amended by LOI 474 removing any
right of retention from persons who own other agricultural lands of more than 7 hectares in aggregate
area or lands used for residential, commercial, industrial or other purposes from which they derive
adequate income for their family. And even assuming that the petitioners do not fall under its terms, the
regulations implementing P.D. No. 27 have already been issued, to wit, the Memorandum dated July 10,
1975 (Interim Guidelines on Retention by Small Landowners, with an accompanying Retention Guide
Table), Memorandum Circular No. 11 dated April 21, 1978, (Implementation Guidelines of LOI No. 474),
Memorandum Circular No. 18-81 dated December 29, 1981 (Clarificatory Guidelines on Coverage of P.D.
No. 27 and Retention by Small Landowners), and DAR Administrative Order No. 1, series of 1985
(Providing for a Cut-off Date for Landowners to Apply for Retention and/or to Protest the Coverage of their
Landholdings under Operation Land Transfer pursuant to P.D. No. 27). For failure to file the corresponding
applications for retention under these measures, the petitioners are now barred from invoking this right.
The public respondent also stresses that the petitioners have prematurely initiated this case
notwithstanding the pendency of their appeal to the President of the Philippines. Moreover, the issuance of
the implementing rules, assuming this has not yet been done, involves the exercise of discretion which
cannot be controlled through the writ of mandamus. This is especially true if this function is entrusted, as
in this case, to a separate department of the government.
In their Reply, the petitioners insist that the above-cited measures are not applicable to them because they
do not own more than seven hectares of agricultural land. Moreover, assuming arguendo that the rules
were intended to cover them also, the said measures are nevertheless not in force because they have not
been published as required by law and the ruling of this Court in Tanñ ada v. Tuvera. 10 As for LOI 474, the
same is ineffective for the additional reason that a mere letter of instruction could not have repealed the
presidential decree.
I The cases before us categorically raise constitutional questions that this Court must categorically resolve.
Although holding neither purse nor sword and so regarded as the weakest of the three departments of the
government, the judiciary is nonetheless vested with the power to annul the acts of either the legislative or
the executive or of both when not conformable to the fundamental law. This is the reason for what some
quarters call the doctrine of judicial supremacy. Even so, this power is not lightly assumed or readily
exercised. The doctrine of separation of powers imposes upon the courts a proper restraint, born of the
nature of their functions and of their respect for the other departments, in striking down the acts of the
legislative and the executive as unconstitutional. The policy, indeed, is a blend of courtesy and caution. To
doubt is to sustain. The theory is that before the act was done or the law was enacted, earnest studies were
made by Congress or the President, or both, to insure that the Constitution would not be breached.
In addition, the Constitution itself lays down stringent conditions for a declaration of unconstitutionality,
requiring therefor the concurrence of a majority of the members of the Supreme Court who took part in
the deliberations and voted on the issue during their session en banc. 11 And as established by judge-
made doctrine, the Court will assume jurisdiction over a constitutional question only if it is shown that the
essential requisites of a judicial inquiry into such a question are first satisfied. Thus, there must be an
actual case or controversy involving a conflict of legal rights susceptible of judicial determination, the
constitutional question must have been opportunely raised by the proper party, and the resolution of the
question is unavoidably necessary to the decision of the case itself. 12
With particular regard to the requirement of proper party as applied in the cases before us, we hold that
the same is satisfied by the petitioners and intervenors because each of them has sustained or is in danger
of sustaining an immediate injury as a result of the acts or measures complained of. 13 And even if, strictly
speaking, they are not covered by the definition, it is still within the wide discretion of the Court to waive
the requirement and so remove the impediment to its addressing and resolving the serious constitutional
questions raised.
In the first Emergency Powers Cases, 14 ordinary citizens and taxpayers were allowed to question the
constitutionality of several executive orders issued by President Quirino although they were invoking only
an indirect and general interest shared in common with the public. The Court dismissed the objection that
they were not proper parties and ruled that "the transcendental importance to the public of these cases
demands that they be settled promptly and definitely, brushing aside, if we must, technicalities of
procedure." We have since then applied this exception in many other cases. 15
The other above-mentioned requisites have also been met in the present petitions.
In must be stressed that despite the inhibitions pressing upon the Court when confronted with
constitutional issues like the ones now before it, it will not hesitate to declare a law or act invalid when it is
convinced that this must be done. In arriving at this conclusion, its only criterion will be the Constitution
as God and its conscience give it the light to probe its meaning and discover its purpose. Personal motives
and political considerations are irrelevancies that cannot influence its decision. Blandishment is as
ineffectual as intimidation.
For all the awesome power of the Congress and the Executive, the Court will not hesitate to "make the
hammer fall, and heavily," to use Justice Laurel's pithy language, where the acts of these departments, or of
any public official, betray the people's will as expressed in the Constitution.
It need only be added, to borrow again the words of Justice Laurel, that —
. . . when the judiciary mediates to allocate constitutional boundaries, it does not assert any superiority
over the other departments; it does not in reality nullify or invalidate an act of the Legislature, but only
asserts the solemn and sacred obligation assigned to it by the Constitution to determine conflicting claims
of authority under the Constitution and to establish for the parties in an actual controversy the rights
which that instrument secures and guarantees to them. This is in truth all that is involved in what is
termed "judicial supremacy" which properly is the power of judicial review under the Constitution. 16
And so we shall.
II
We proceed first to the examination of the preliminary issues before resolving the more serious challenges
to the constitutionality of the several measures involved in these petitions. cdtai
The promulgation of P.D. No. 27 by President Marcos in the exercise of his powers under martial law has
already been sustained in Gonzales v. Estrella and we find no reason to modify or reverse it on that issue.
As for the power of President Aquino to promulgate Proc. No. 131 and E.O. Nos. 228 and 229, the same was
authorized under Section 6 of the Transitory Provisions of the 1987 Constitution, quoted above.
The said measures were issued by President Aquino before July 27, 1987, when the Congress of the
Philippines was formally convened and took over legislative power from her. They are not "midnight"
enactments intended to pre-empt the legislature because E.O. No. 228 was issued on July 17, 1987, and the
other measures, i.e., Proc. No. 131 and E.O. No. 229, were both issued on July 22, 1987. Neither is it correct
to say that these measures ceased to be valid when she lost her legislative power for, like any statute, they
continue to be in force unless modified or repealed by subsequent law or declared invalid by the courts. A
statute does not ipso facto become inoperative simply because of the dissolution of the legislature that
enacted it. By the same token, President Aquino's loss of legislative power did not have the effect of
invalidating all the measures enacted by her when and as long as she possessed it.
Significantly, the Congress she is alleged to have undercut has not rejected but in fact substantially
affirmed the challenged measures and has specifically provided that they shall be suppletory to R.A. No.
6657 whenever not inconsistent with its provisions. 17 Indeed, some portions of the said measures, like
the creation of the P50 billion fund in Section 2 of Proc. No. 131, and Sections 20 and 21 of E.O. No. 229,
have been incorporated by reference in the CARP Law. 18
That fund, as earlier noted, is itself being questioned on the ground that it does not conform to the
requirements of a valid appropriation as specified in the Constitution. Clearly, however, Proc. No. 131 is
not an appropriation measure even if it does provide for the creation of said fund, for that is not its
principal purpose. An appropriation law is one the primary and specific purpose of which is to authorize
the release of public funds from the treasury. 19 The creation of the fund is only incidental to the main
objective of the proclamation, which is agrarian reform.
It should follow that the specific constitutional provisions invoked, to wit, Section 24 and Section 25(4) of
Article VI, are not applicable. With particular reference to Section 24, this obviously could not have been
complied with for the simple reason that the House of Representatives, which now has the exclusive power
to initiate appropriation measures, had not yet been convened when the proclamation was issued. The
legislative power was then solely vested in the President of the Philippines, who embodied, as it were, both
houses of Congress.
The argument of some of the petitioners that Proc. No. 131 and E.O. No. 229 should be invalidated because
they do not provide for retention limits as required by Article XIII, Section 4 of the Constitution is no
longer tenable. R.A. No. 6657 does provide for such limits now in Section 6 of the law, which in fact is one
of its most controversial provisions. This section declares:
Retention Limits. — Except as otherwise provided in this Act, no person may own or retain, directly or
indirectly, any public or private agricultural land, the size of which shall vary according to factors
governing a viable family-sized farm, such as commodity produced, terrain, infrastructure, and soil fertility
as determined by the Presidential Agrarian Reform Council (PARC) created hereunder, but in no case shall
retention by the landowner exceed five (5) hectares. Three (3) hectares may be awarded to each child of
the landowner, subject to the following qualifications: (1) that he is at least fifteen (15) years of age; and
(2) that he is actually tilling the land or directly managing the farm; Provided, That landowners whose
lands have been covered by Presidential Decree No. 27 shall be allowed to keep the area originally retained
by them thereunder, further, That original homestead grantees or direct compulsory heirs who still own
the original homestead at the time of the approval of this Act shall retain the same areas as long as they
continue to cultivate said homestead.
The argument that E.O. No. 229 violates the constitutional requirement that a bill shall have only one
subject, to be expressed in its title, deserves only short attention. It is settled that the title of the bill does
not have to be a catalogue of its contents and will suffice if the matters embodied in the text are relevant to
each other and may be inferred from the title. 20
The Court wryly observes that during the past dictatorship, every presidential issuance, by whatever name
it was called, had the force and effect of law because it came from President Marcos. Such are the ways of
despots. Hence, it is futile to argue, as the petitioners do in G.R. No. 79744, that LOI 474 could not have
repealed P.D. No. 27 because the former was only a letter of instruction. The important thing is that it was
issued by President Marcos, whose word was law during that time. LexLib
But for all their peremptoriness, these issuances from the President Marcos still had to comply with the
requirement for publication as this Court held in Tanñ ada v. Tuvera. 21 Hence, unless published in the
Official Gazette in accordance with Article 2 of the Civil Code, they could not have any force and effect if
they were among those enactments successfully challenged in that case. (LOI 474 was published, though,
in the Official Gazette dated November 29, 1976.)
Finally, there is the contention of the public respondent in G.R. No. 78742 that the writ of mandamus
cannot issue to compel the performance of a discretionary act, especially by a specific department of the
government. That is true as a general proposition but is subject to one important qualification. Correctly
and categorically stated, the rule is that mandamus will lie to compel the discharge of the discretionary
duty itself but not to control the discretion to be exercised. In other words, mandamus can issue to require
action only but not specific action.
Whenever a duty is imposed upon a public official and an unnecessary and unreasonable delay in the
exercise of such duty occurs, if it is a clear duty imposed by law, the courts will intervene by the
extraordinary legal remedy of mandamus to compel action. If the duty is purely ministerial, the courts will
require specific action. If the duty is purely discretionary, the courts by mandamus will require action only.
For example, if an inferior court, public official, or board should, for an unreasonable length of time, fail to
decide a particular question to the great detriment of all parties concerned, or a court should refuse to
take jurisdiction of a cause when the law clearly gave it jurisdiction, mandamus will issue, in the first case
to require a decision, and in the second to require that jurisdiction be taken of the cause. 22
And while it is true that as a rule the writ will not be proper as long as there is still a plain, speedy and
adequate remedy available from the administrative authorities, resort to the courts may still be permitted
if the issue raised is a question of law. 23
III
There are traditional distinctions between the police power and the power of eminent domain that
logically preclude the application of both powers at the same time on the same subject. In the case of City
of Baguio v. NAWASA, 24 for example, where a law required the transfer of all municipal waterworks
systems to the NAWASA in exchange for its assets of equivalent value, the Court held that the power being
exercised was eminent domain because the property involved was wholesome and intended for a public
use. Property condemned under the police power is noxious or intended for a noxious purpose, such as a
building on the verge of collapse, which should be demolished for the public safety, or obscene materials,
which should be destroyed in the interest of public morals. The confiscation of such property is not
compensable, unlike the taking of property under the power of expropriation, which requires the payment
of just compensation to the owner.
In the case of Pennsylvania Coal Co. v. Mahon, 25 Justice Holmes laid down the limits of the police power in
a famous aphorism: "The general rule at least is that while property may be regulated to a certain extent, if
regulation goes too far it will be recognized as a taking." The regulation that went "too far" was a law
prohibiting mining which might cause the subsidence of structures for human habitation constructed on
the land surface. This was resisted by a coal company which had earlier granted a deed to the land over its
mine but reserved all mining rights thereunder, with the grantee assuming all risks and waiving any
damage claim. The Court held the law could not be sustained without compensating the grantor. Justice
Brandeis filed a lone dissent in which he argued that there was a valid exercise of the police power. He
said:
Every restriction upon the use of property imposed in the exercise of the police power deprives the owner
of some right theretofore enjoyed, and is, in that sense, an abridgment by the State of rights in property
without making compensation. But restriction imposed to protect the public health, safety or morals from
dangers threatened is not a taking. The restriction here in question is merely the prohibition of a noxious
use. The property so restricted remains in the possession of its owner. The state does not appropriate it or
make any use of it. The state merely prevents the owner from making a use which interferes with
paramount rights of the public. Whenever the use prohibited ceases to be noxious — as it may because of
further changes in local or social conditions — the restriction will have to be removed and the owner will
again be free to enjoy his property as heretofore.
Recent trends, however, would indicate not a polarization but a mingling of the police power and the
power of eminent domain, with the latter being used as an implement of the former like the power of
taxation. The employment of the taxing power to achieve a police purpose has long been accepted. 26 As
for the power of expropriation, Prof. John J. Costonis of the University of Illinois College of Law (referring
to the earlier case of Euclid v. Ambler Realty Co., 272 US 365, which sustained a zoning law under the
police power) makes the following significant remarks:
Euclid, moreover, was decided in an era when judges located the police and eminent domain powers on
different planets. Generally speaking, they viewed eminent domain as encompassing public acquisition of
private property for improvements that would be available for "public use," literally construed. To the
police power, on the other hand, they assigned the less intrusive task of preventing harmful externalities, a
point reflected in the Euclid opinion's reliance on an analogy to nuisance law to bolster its support of
zoning. So long as suppression of a privately authored harm bore a plausible relation to some legitimate
"public purpose," the pertinent measure need have afforded no compensation whatever. With the
progressive growth of government's involvement in land use, the distance between the two powers has
contracted considerably. Today government often employs eminent domain interchangeably with or as a
useful complement to the police power — a trend expressly approved in the Supreme Court's 1954
decision in Berman v. Parker, which broadened the reach of eminent domain's "public use" test to match
that of the police power's standard of "public purpose." 27
The Berman case sustained a redevelopment project and the improvement of blighted areas in the District
of Columbia as a proper exercise of the police power. On the role of eminent domain in the attainment of
this purpose, Justice Douglas declared:
If those who govern the District of Columbia decide that the Nation's Capital should be beautiful as well as
sanitary, there is nothing in the Fifth Amendment that stands in the way.
Once the object is within the authority of Congress, the right to realize it through the exercise of eminent
domain is clear.
For the power of eminent domain is merely the means to the end. 28
In Penn Central Transportation Co. v. New York City, 29 decided by a 6-3 vote in 1978, the U.S. Supreme
Court sustained the respondent's Landmarks Preservation Law under which the owners of the Grand
Central Terminal had not been allowed to construct a multi-story office building over the Terminal, which
had been designated a historic landmark. Preservation of the landmark was held to be a valid objective of
the police power. The problem, however, was that the owners of the Terminal would be deprived of the
right to use the airspace above it although other landowners in the area could do so over their respective
properties. While insisting that there was here no taking, the Court nonetheless recognized certain
compensatory rights accruing to Grand Central Terminal which it said would "undoubtedly mitigate" the
loss caused by the regulation. This "fair compensation," as he called it, was explained by Prof. Costonis in
this wise:
In return for retaining the Terminal site in its pristine landmark status, Penn Central was authorized to
transfer to neighboring properties the authorized but unused rights accruing to the site prior to the
Terminal's designation as a landmark — the rights which would have been exhausted by the 59-story
building that the city refused to countenance atop the Terminal. Prevailing bulk restrictions on
neighboring sites were proportionately relaxed, theoretically enabling Penn Central to recoup its losses at
the Terminal site by constructing or selling to others the right to construct larger, hence more profitable
buildings on the transferee sites. 30
The cases before us present no knotty complication insofar as the question of compensable taking is
concerned. To the extent that the measures under challenge merely prescribe retention limits for
landowners, there is an exercise of the police power for the regulation of private property in accordance
with the Constitution. But where, to carry out such regulation, it becomes necessary to deprive such
owners of whatever lands they may own in excess of the maximum area allowed, there is definitely a
taking under the power of eminent domain for which payment of just compensation is imperative. The
taking contemplated is not a mere limitation of the use of the land. What is required is the surrender of the
title to and the physical possession of the said excess and all beneficial rights accruing to the owner in
favor of the farmer-beneficiary. This is definitely an exercise not of the police power but of the power of
eminent domain.
Whether as an exercise of the police power or of the power of eminent domain, the several measures
before us are challenged as violative of the due process and equal protection clauses.
The challenge to Proc. No. 131 and E.O. Nos. 228 and 299 on the ground that no retention limits are
prescribed has already been discussed and dismissed. It is noted that although they excited many bitter
exchanges during the deliberation of the CARP Law in Congress, the retention limits finally agreed upon
are, curiously enough, not being questioned in these petitions. We therefore do not discuss them here. The
Court will come to the other claimed violations of due process in connection with our examination of the
adequacy of just compensation as required under the power of expropriation.
The argument of the small farmers that they have been denied equal protection because of the absence of
retention limits has also become academic under Section 6 of R.A. No. 6657. Significantly, they too have not
questioned the area of such limits. There is also the complaint that they should not be made to share the
burden of agrarian reform, an objection also made by the sugar planters on the ground that they belong to
a particular class with particular interests of their own. However, no evidence has been submitted to the
Court that the requisites of a valid classification have been violated.
Classification has been defined as the grouping of persons or things similar to each other in certain
particulars and different from each other in these same particulars. 31 To be valid, it must conform to the
following requirements: (1) it must be based on substantial distinctions; (2) it must be germane to the
purposes of the law; (3) it must not be limited to existing conditions only; and (4) it must apply equally to
all the members of the class. 32 The Court finds that all these requisites have been met by the measures
here challenged as arbitrary and discriminatory.
Equal protection simply means that all persons or things similarly situated must be treated alike both as to
the rights conferred and the liabilities imposed.33 The petitioners have not shown that they belong to a
different class and entitled to a different treatment. The argument that not only landowners but also
owners of other properties must be made to share the burden of implementing land reform must be
rejected. There is a substantial distinction between these two classes of owners that is clearly visible
except to those who will not see. There is no need to elaborate on this matter. In any event, the Congress is
allowed a wide leeway in providing for a valid classification. Its decision is accorded recognition and
respect by the courts of justice except only where its discretion is abused to the detriment of the Bill of
Rights.
It is worth remarking at this juncture that a statute may be sustained under the police power only if there
is a concurrence of the lawful subject and the lawful method. Put otherwise, the interests of the public
generally as distinguished from those of a particular class require the interference of the State and, no less
important, the means employed are reasonably necessary for the attainment of the purpose sought to be
achieved and not unduly oppressive upon individuals. 34 As the subject and purpose of agrarian reform
have been laid down by the Constitution itself, we may say that the first requirement has been satisfied.
What remains to be examined is the validity of the method employed to achieve the constitutional goal.
LLphil
One of the basic principles of the democratic system is that where the rights of the individual are
concerned, the end does not justify the means. It is not enough that there be a valid objective; it is also
necessary that the means employed to pursue it be in keeping with the Constitution. Mere expediency will
not excuse constitutional shortcuts. There is no question that not even the strongest moral conviction or
the most urgent public need, subject only to a few notable exceptions, will excuse the bypassing of an
individual's rights. It is no exaggeration to say that a person invoking a right guaranteed under Article III of
the Constitution is a majority of one even as against the rest of the nation who would deny him that right.
That right covers the person's life, his liberty and his property under Section 1 of Article III of the
Constitution. With regard to his property, the owner enjoys the added protection of Section 9, which
reaffirms the familiar rule that private property shall not be taken for public use without just
compensation.
This brings us now to the power of eminent domain.
IV
Eminent domain is an inherent power of the State that enables it to forcibly acquire private lands intended
for public use upon payment of just compensation to the owner. Obviously, there is no need to expropriate
where the owner is willing to sell under terms also acceptable to the purchaser, in which case an ordinary
deed of sale may be agreed upon by the parties. 35 It is only where the owner is unwilling to sell, or cannot
accept the price or other conditions offered by the vendee, that the power of eminent domain will come
into play to assert the paramount authority of the State over the interests of the property owner. Private
rights must then yield to the irresistible demands of the public interest on the time-honored justification,
as in the case of the police power, that the welfare of the people is the supreme law.
But for all its primacy and urgency, the power of expropriation is by no means absolute (as indeed no
power is absolute). The limitation is found in the constitutional injunction that "private property shall not
be taken for public use without just compensation" and in the abundant jurisprudence that has evolved
from the interpretation of this principle. Basically, the requirements for a proper exercise of the power are:
(1) public use and (2) just compensation.
Let us dispose first of the argument raised by the petitioners in G.R. No. 79310 that the State should first
distribute public agricultural lands in the pursuit of agrarian reform instead of immediately disturbing
property rights by forcibly acquiring private agricultural lands. Parenthetically, it is not correct to say that
only public agricultural lands may be covered by the CARP as the Constitution calls for "the just
distribution of all agricultural lands." In any event, the decision to redistribute private agricultural lands in
the manner prescribed by the CARP was made by the legislative and executive departments in the exercise
of their discretion. We are not justified in reviewing that discretion in the absence of a clear showing that it
has been abused.
A becoming courtesy admonishes us to respect the decisions of the political departments when they
decide what is known as the political question. As explained by Chief Justice Concepcion in the case of
Tanñ ada v. Cuenco: 36
The term "political question" connotes what it means in ordinary parlance, namely, a question of policy. It
refers to "those questions which, under the Constitution, are to be decided by the people in their sovereign
capacity; or in regard to which full discretionary authority has been delegated to the legislative or
executive branch of the government." It is concerned with issues dependent upon the wisdom, not legality,
of a particular measure.
It is true that the concept of the political question has been constricted with the enlargement of judicial
power, which now includes the authority of the courts "to determine whether or not there has been a
grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government." 37 Even so, this should not be construed as a license for us to reverse
the other departments simply because their views may not coincide with ours.
The legislature and the executive have been seen fit, in their wisdom, to include in the CARP the
redistribution of private landholdings (even as the distribution of public agricultural lands is first provided
for, while also continuing space under the Public Land Act and other cognate laws). The Court sees no
justification to interpose its authority, which we may assert only if we believe that the political decision is
not unwise, but illegal. We do not find it to be so.
In U.S. v. Chandler-Dunbar Water Power Company, 38 it was held:
Congress having determined, as it did by the Act of March 3, 1909 that the entire St. Mary's river between
the American bank and the international line, as well as all of the upland north of the present ship canal,
throughout its entire length, was "necessary for the purpose of navigation of said waters, and the waters
connected therewith," that determination is conclusive in condemnation proceedings instituted by the
United States under that Act, and there is no room for judicial review of the judgment of Congress . . .
As earlier observed, the requirement for public use has already been settled for us by the Constitution
itself. No less than the 1987 Charter calls for agrarian reform, which is the reason why private agricultural
lands are to be taken from their owners, subject to the prescribed maximum retention limits. The
purposes specified in P.D. No. 27, Proc. No. 131 and R.A. No. 6657 are only an elaboration of the
constitutional injunction that the State adopt the necessary measures "to encourage and undertake the
just distribution of all agricultural lands to enable farmers who are landless to own directly or collectively
the lands they till." That public use, as pronounced by the fundamental law itself, must be binding on us.
The second requirement, i.e., the payment of just compensation, needs a longer and more thoughtful
examination.
Just compensation is defined as the full and fair equivalent of the property taken from its owner by the
expropriator. 39 It has been repeatedly stressed by this Court that the measure is not the taker's gain but
the owner's loss. 40 The word "just" is used to intensify the meaning of the word "compensation" to
convey the idea that the equivalent to be rendered for the property to be taken shall be real, substantial,
full, ample. 41
It bears repeating that the measures challenged in these petitions contemplate more than a mere
regulation of the use of private lands under the police power. We deal here with an actual taking of private
agricultural lands that has dispossessed the owners of their property and deprived them of all its
beneficial use and enjoyment, to entitle them to the just compensation mandated by the Constitution.
As held in Republic of the Philippines v. Castellvi, 42 there is compensable taking when the following
conditions concur: (1) the expropriator must enter a private property; (2) the entry must be for more than
a momentary period; (3) the entry must be under warrant or color of legal authority; (4) the property
must be devoted to public use or otherwise informally appropriated or injuriously affected; and (5) the
utilization of the property for public use must be in such a way as to oust the owner and deprive him of
beneficial enjoyment of the property. All these requisites are envisioned in the measures before us.
Where the State itself is the expropriator, it is not necessary for it to make a deposit upon its taking
possession of the condemned property, as "the compensation is a public charge, the good faith of the
public is pledged for its payment, and all the resources of taxation may be employed in raising the
amount." 43 Nevertheless, Section 16(e) of the CARP Law provides that:
Upon receipt by the landowner of the corresponding payment or, in case of rejection or no response from
the landowner, upon the deposit with an accessible bank designated by the DAR of the compensation in
cash or in LBP bonds in accordance with this Act, the DAR shall take immediate possession of the land and
shall request the proper Register of Deeds to issue a Transfer Certificate of Title (TCT) in the name of the
Republic of the Philippines. The DAR shall thereafter proceed with the redistribution of the land to the
qualified beneficiaries.
Objection is raised, however, to the manner of fixing the just compensation, which it is claimed is entrusted
to the administrative authorities in violation of judicial prerogatives. Specific reference is made to Section
16(d), which provides that in case of the rejection or disregard by the owner of the offer of the government
to buy his land —
. . . the DAR shall conduct summary administrative proceedings to determine the compensation for the
land by requiring the landowner, the LBP and other interested parties to submit evidence as to the just
compensation for the land, within fifteen (15) days from the receipt of the notice. After the expiration of
the above period, the matter is deemed submitted for decision. The DAR shall decide the case within thirty
(30) days after it is submitted for decision.
To be sure, the determination of just compensation is a function addressed to the courts of justice and may
not be usurped by any other branch or official of the government. EPZA v. Dulay 44 resolved a challenge to
several decrees promulgated by President Marcos providing that the just compensation for property under
expropriation should be either the assessment of the property by the government or the sworn valuation
thereof by the owner, whichever was lower. In declaring these decrees unconstitutional, the Court held
through Mr. Justice Hugo E. Gutierrez, Jr.:
The method of ascertaining just compensation under the aforecited decrees constitutes impermissible
encroachment on judicial prerogatives. It tends to render this Court inutile in a matter which under this
Constitution is reserved to it for final determination.
Thus, although in an expropriation proceeding the court technically would still have the power to
determine the just compensation for the property, following the applicable decrees, its task would be
relegated to simply stating the lower value of the property as declared either by the owner or the assessor.
As a necessary consequence, it would be useless for the court to appoint commissioners under Rule 67 of
the Rules of Court. Moreover, the need to satisfy the due process clause in the taking of private property is
seemingly fulfilled since it cannot be said that a judicial proceeding was not had before the actual taking.
However, the strict application of the decrees during the proceedings would be nothing short of a mere
formality or charade as the court has only to choose between the valuation of the owner and that of the
assessor, and its choice is always limited to the lower of the two. The court cannot exercise its discretion or
independence in determining what is just or fair. Even a grade school pupil could substitute for the judge
insofar as the determination of constitutional just compensation is concerned.
xxx xxx xxx
In the present petition, we are once again confronted with the same question of whether the courts under
P.D. No. 1533, which contains the same provision on just compensation as its predecessor decrees, still
have the power and authority to determine just compensation, independent of what is stated by the decree
and to this effect, to appoint commissioners for such purpose.
This time, we answer in the affirmative.
xxx xxx xxx
It is violative of due process to deny the owner the opportunity to prove that the valuation in the tax
documents is unfair or wrong. And it is repulsive to the basic concepts of justice and fairness to allow the
haphazard work of a minor bureaucrat or clerk to absolutely prevail over the judgment of a court
promulgated only after expert commissioners have actually viewed the property, after evidence and
arguments pro and con have been presented, and after all factors and considerations essential to a fair and
just determination have been judiciously evaluated.
A reading of the aforecited Section 16(d) will readily show that it does not suffer from the arbitrariness
that rendered the challenged decrees constitutionally objectionable. Although the proceedings are
described as summary, the landowner and other interested parties are nevertheless allowed an
opportunity to submit evidence on the real value of the property. But more importantly, the determination
of the just compensation by the DAR is not by any means final and conclusive upon the landowner or any
other interested party, for Section 16(f) clearly provides:
Any party who disagrees with the decision may bring the matter to the court of proper jurisdiction for
final determination of just compensation.
The determination made by the DAR is only preliminary unless accepted by all parties concerned.
Otherwise, the courts of justice will still have the right to review with finality the said determination in the
exercise of what is admittedly a judicial function.
The second and more serious objection to the provisions on just compensation is not as easily resolved.
This refers to Section 18 of the CARP Law providing in full as follows:
SEC. 18. Valuation and Mode of Compensation. — The LBP shall compensate the landowner in such
amount as may be agreed upon by the landowner and the DAR and the LBP, in accordance with the criteria
provided for in Sections 16 and 17, and other pertinent provisions hereof, or as may be finally determined
by the court, as the just compensation for the land.
The compensation shall be paid in one of the following modes, at the option of the landowner:
(1) Cash payment, under the following terms and conditions:
(a) For lands above fifty (50) hectares, insofar as the excess hectarage is concerned — Twenty-five
percent (25%) cash, the balance to be paid in government financial instruments negotiable at any time.
(b) For lands above twenty-four (24) hectares and up to fifty (50) hectares — Thirty percent (30%)
cash, the balance to be paid in government financial instruments negotiable at any time.
(c) For lands twenty-four (24) hectares and below — Thirty-five percent (35%) cash, the balance to
be paid in government financial instruments negotiable at any time.
(2) Shares of stock in government-owned or controlled corporations, LBP preferred shares,
physical assets or other qualified investments in accordance with guidelines set by the PARC;
(3) Tax credits which can be used against any tax liability;
(4) LBP bonds, which shall have the following features:
(a) Market interest rates aligned with 91-day treasury bill rates. Ten percent (10%) of the face
value of the bonds shall mature every year from the date of issuance until the tenth (10th) year: Provided,
That should the landowner choose to forego the cash portion, whether in full or in part, he shall be paid
correspondingly in LBP bonds;
(b) Transferability and negotiability. Such LBP bonds may be used by the landowner, his successors-
in-interest or his assigns, up to the amount of their face value, for any of the following:
(i) Acquisition of land or other real properties of the government, including assets under the Asset
Privatization Program and other assets foreclosed by government financial institutions in the same
province or region where the lands for which the bonds were paid are situated;
(ii) Acquisition of shares of stock of government owned or controlled corporations or shares of
stock owned by the government in private corporations;
(iii) Substitution for surety or bail bonds for the provisional release of accused persons, or for
performance bonds;
(iv) Security for loans with any government financial institution, provided the proceeds of the loans
shall be invested in an economic enterprise, preferably in a small and medium-scale industry, in the same
province or region as the land for which the bonds are paid;
(v) Payment for various taxes and fees to government: Provided, That the use of these bonds for
these purposes will be limited to a certain percentage of the outstanding balance of the financial
instruments; Provided, further, That the PARC shall determine the percentages mentioned above;
(vi) Payment for tuition fees of the immediate family of the original bondholder in government
universities, colleges, trade schools, and other institutions;
(vii) Payment for fees of the immediate family of the original bondholder in government hospital;
and
(viii) Such other uses as the PARC may from time to time allow.
The contention of the petitioners in G.R. No. 79777 is that the above provision is unconstitutional insofar
as it requires the owners of the expropriated properties to accept just compensation therefor in less than
money, which is the only medium of payment allowed. In support of this contention, they cite
jurisprudence holding that:
The fundamental rule in expropriation matters is that the owner of the property expropriated is entitled to
a just compensation, which should be neither more nor less, whenever it is possible to make the
assessment, than the money equivalent of said property. Just compensation has always been understood to
be the just and complete equivalent of the loss which the owner of the thing expropriated has to suffer by
reason of the expropriation. 45 (Emphasis supplied.)
In J.M. Tuazon Co. v. Land Tenure Administration, 46 this Court held:
It is well-settled that just compensation means the equivalent for the value of the property at the time of
its taking. Anything beyond that is more, and anything short of that is less, than just compensation. It
means a fair and full equivalent for the loss sustained, which is the measure of the indemnity, not whatever
gain would accrue to the expropriating entity. The market value of the land taken is the just compensation
to which the owner of condemned property is entitled, the market value being that sum of money which a
person desirous, but not compelled to buy, and an owner, willing, but not compelled to sell, would agree on
as a price to be given and received for such property. (Emphasis supplied.)
In the United States, where much of our jurisprudence on the subject has been derived, the weight of
authority is also to the effect that just compensation for property expropriated is payable only in money
and not otherwise. Thus —
The medium of payment of compensation is ready money or cash. The condemnor cannot compel the
owner to accept anything but money, nor can the owner compel or require the condemnor to pay him on
any other basis than the value of the property in money at the time and in the manner prescribed by the
Constitution and the statutes. When the power of eminent domain is resorted to, there must be a standard
medium of payment, binding upon both parties, and the law has fixed that standard as money in cash. 47
(Emphasis supplied.)
Part cash and deferred payments are not and cannot, in the nature of things, be regarded as a reliable and
constant standard of compensation. 48
"Just compensation" for property taken by condemnation means a fair equivalent in money, which must be
paid at least within a reasonable time after the taking, and it is not within the power of the Legislature to
substitute for such payment future obligations, bonds, or other valuable advantage. 49 (Emphasis
supplied.)
It cannot be denied from these cases that the traditional medium for the payment of just compensation is
money and no other. And so, conformably, has just compensation been paid in the past solely in that
medium. However, we do not deal here with the traditional exercise of the power of eminent domain. This
is not an ordinary expropriation where only a specific property of relatively limited area is sought to be
taken by the State from its owner for a specific and perhaps local purpose. What we deal with here is a
revolutionary kind of expropriation.
The expropriation before us affects all private agricultural lands whenever found and of whatever kind as
long as they are in excess of the maximum retention limits allowed their owners. This kind of
expropriation is intended for the benefit not only of a particular community or of a small segment of the
population but of the entire Filipino nation, from all levels of our society, from the impoverished farmer to
the land-glutted owner. Its purpose does not cover only the whole territory of this country but goes
beyond in time to the foreseeable future, which it hopes to secure and edify with the vision and the
sacrifice of the present generation of Filipinos. Generations yet to come are as involved in this program as
we are today, although hopefully only as beneficiaries of a richer and more fulfilling life we will guarantee
to them tomorrow through our thoughtfulness today. And, finally, let it not be forgotten that it is no less
than the Constitution itself that has ordained this revolution in the farms, calling for "a just distribution"
among the farmers of lands that have heretofore been the prison of their dreams but can now become the
key at least to their deliverance.
Such a program will involve not mere millions of pesos. The cost will be tremendous. Considering the vast
areas of land subject to expropriation under the laws before us, we estimate that hundreds of billions of
pesos will be needed, far more indeed than the amount of P50 billion initially appropriated, which is
already staggering as it is by our present standards. Such amount is in fact not even fully available at this
time.
We assume that the framers of the Constitution were aware of this difficulty when they called for agrarian
reform as a top priority project of the government. It is a part of this assumption that when they
envisioned the expropriation that would be needed, they also intended that the just compensation would
have to be paid not in the orthodox way but a less conventional if more practical method. There can be no
doubt that they were aware of the financial limitations of the government and had no illusions that there
would be enough money to pay in cash and in full for the lands they wanted to be distributed among the
farmers. We may therefore assume that their intention was to allow such manner of payment as is now
provided for by the CARP Law, particularly the payment of the balance (if the owner cannot be paid fully
with money), or indeed of the entire amount of the just compensation, with other things of value. We may
also suppose that what they had in mind was a similar scheme of payment as that prescribed in P.D. No. 27,
which was the law in force at the time they deliberated on the new Charter and with which they
presumably agreed in principle.
The Court has not found in the records of the Constitutional Commission any categorial agreement among
the members regarding the meaning to be given the concept of just compensation as applied to the
comprehensive agrarian reform program being contemplated. There was the suggestion to "fine tune" the
requirement to suit the demands of the project even as it was also felt that they should "leave it to
Congress" to determine how payment should be made to the landowner and reimbursement required
from the farmer-beneficiaries. Such innovations as "progressive compensation" and "State-subsidized
compensation" were also proposed. In the end, however, no special definition of the just compensation for
the lands to be expropriated was reached by the Commission. 50
On the other hand, there is nothing in the records either that militates against the assumptions we are
making of the general sentiments and intention of the members on the content and manner of the
payment to be made to the landowner in the light of the magnitude of the expenditure and the limitations
of the expropriator.
With these assumptions, the Court hereby declares that the content and manner of the just compensation
provided for in the afore-quoted Section 18 of the CARP Law is not violative of the Constitution. We do not
mind admitting that a certain degree of pragmatism has influenced our decision on this issue, but after all
this Court is not a cloistered institution removed from the realities and demands of society or oblivious to
the need for its enhancement. The Court is as acutely anxious as the rest of our people to see the goal of
agrarian reform achieved at last after the frustrations and deprivations of our peasant masses during all
these disappointing decades. We are aware that invalidation of the said section will result in the
nullification of the entire program, killing the farmer's hopes even as they approach realization and
resurrecting the spectre of discontent and dissent in the restless countryside. That is not in our view the
intention of the Constitution, and that is not what we shall decree today.
Accepting the theory that payment of the just compensation is not always required to be made fully in
money, we find further that the proportion of cash payment to the other things of value constituting the
total payment, as determined on the basis of the areas of the lands expropriated, is not unduly oppressive
upon the landowner. It is noted that the smaller the land, the bigger the payment in money, primarily
because the small landowner will be needing it more than the big landowners, who can afford a bigger
balance in bonds and other things of value. No less importantly, the government financial instruments
making up the balance of the payment are "negotiable at any time." The other modes, which are likewise
available to the landowner at his option, are also not unreasonable because payment is made in shares of
stock, LBP bonds, other properties or assets, tax credits, and other things of value equivalent to the
amount of just compensation.
Admittedly, the compensation contemplated in the law will cause the landowners, big and small, not a little
inconvenience. As already remarked, this cannot be avoided. Nevertheless, it is devoutly hoped that these
countrymen of ours, conscious as we know they are of the need for their forebearance and even sacrifice,
will not begrudge us their indispensable share in the attainment of the ideal of agrarian reform. Otherwise,
our pursuit of this elusive goal will be like the quest for the Holy Grail.
The complaint against the effects of non-registration of the land under E.O. No. 229 does not seem to be
viable any more as it appears that Section 4 of the said Order has been superseded by Section 14 of the
CARP Law. This repeats the requisites of registration as embodied in the earlier measure but does not
provide, as the latter did, that in case of failure or refusal to register the land, the valuation thereof shall be
that given by the provincial or city assessor for tax purposes. On the contrary, the CARP Law says that the
just compensation shall be ascertained on the basis of the factors mentioned in its Section 17 and in the
manner provided for in Section 16. dctai
The last major challenge to CARP is that the landowner is divested of his property even before actual
payment to him in full of just compensation, in contravention of a well-accepted principle of eminent
domain.
The recognized rule, indeed, is that title to the property expropriated shall pass from the owner to the
expropriator only upon full payment of the just compensation. Jurisprudence on this settled principle is
consistent both here and in other democratic jurisdictions. Thus:
Title to property which is the subject of condemnation proceedings does not vest the condemnor until the
judgment fixing just compensation is entered and paid, but the condemnor's title relates back to the date
on which the petition under the Eminent Domain Act, or the commissioner's report under the Local
Improvement Act, is filed. 51
. . . although the right to appropriate and use land taken for a canal is complete at the time of entry, title to
the property taken remains in the owner until payment is actually made. 52 (Emphasis supplied.)
In Kennedy v. Indianapolis, 53 the US Supreme Court cited several cases holding that title to property does
not pass to the condemnor until just compensation had actually been made. In fact, the decisions appear to
be uniformly to this effect. As early as 1838, in Rubottom v. McLure, 54 it was held that "actual payment to
the owner of the condemned property was a condition precedent to the investment of the title to the
property in the State" albeit "not to the appropriation of it to public use." In Rexford v. Knight, 55 the Court
of Appeals of New York said that the construction upon the statutes was that the fee did not vest in the
State until the payment of the compensation although the authority to enter upon and appropriate the
land was complete prior to the payment. Kennedy further said that "both on principle and authority the
rule is . . . that the right to enter on and use the property is complete, as soon as the property is actually
appropriated under the authority of law for a public use, but that the title does not pass from the owner
without his consent, until just compensation has been made to him."
Our own Supreme Court has held in Visayan Refining Co. v. Camus and Paredes, 56 that:
If the laws which we have exhibited or cited in the preceding discussion are attentively examined it will be
apparent that the method of expropriation adopted in this jurisdiction is such as to afford absolute
reassurance that no piece of land can be finally and irrevocably taken from an unwilling owner until
compensation is paid . . . (Emphasis supplied.)
It is true that P.D. No. 27 expressly ordered the emancipation of tenant-farmer as October 21, 1972 and
declared that he shall "be deemed the owner" of a portion of land consisting of a family-sized farm except
that "no title to the land owned by him was to be actually issued to him unless and until he had become a
full-fledged member of a duly recognized farmers' cooperative." It was understood, however, that full
payment of the just compensation also had to be made first, conformably to the constitutional
requirement.
When E.O. No. 228, categorically stated in its Section 1 that:
All qualified farmer-beneficiaries are now deemed full owners as of October 21, 1972 of the land they
acquired by virtue of Presidential Decree No. 27. (Emphasis supplied.)
it was obviously referring to lands already validly acquired under the said decree, after proof of full-
fledged membership in the farmers' cooperatives and full payment of just compensation. Hence, it was
also perfectly proper for the Order to also provide in its Section 2 that the "lease rentals paid to the
landowner by the farmer-beneficiary after October 21, 1972 (pending transfer of ownership after full
payment of just compensation), shall be considered as advance payment for the land."
The CARP Law, for its part, conditions the transfer of possession and ownership of the land to the
government on receipt by the landowner of the corresponding payment or the deposit by the DAR of the
compensation in cash or LBP bonds with an accessible bank. Until then, title also remains with the
landowner. 57 No outright change of ownership is contemplated either.
Hence, the argument that the assailed measures violate due process by arbitrarily transferring title before
the land is fully paid for must also be rejected.
It is worth stressing at this point that all rights acquired by the tenant-farmer under P.D. No. 27, as
recognized under E.O. No. 228, are retained by him even now under R.A. No. 6657. This should
counterbalance the express provision in Section 6 of the said law that "the landowners whose lands have
been covered by Presidential Decree No. 27 shall be allowed to keep the area originally retained by them
thereunder, further, That original homestead grantees or direct compulsory heirs who still own the
original homestead at the time of the approval of this Act shall retain the same areas as long as they
continue to cultivate said homestead."
In connection with these retained rights, it does not appear in G.R. No. 78742 that the appeal filed by the
petitioners with the Office of the President has already been resolved. Although we have said that the
doctrine of exhaustion of administrative remedies need not preclude immediate resort to judicial action,
there are factual issues that have yet to be examined on the administrative level, especially the claim that
the petitioners are not covered by LOI 474 because they do not own other agricultural lands than the
subjects of their petition.
Obviously, the Court cannot resolve these issues. In any event, assuming that the petitioners have not yet
exercised their retention rights, if any, under P.D. No. 27, the Court holds that they are entitled to the new
retention rights provided for by R.A. No. 6657, which in fact are on the whole more liberal than those
granted by the decree.
V
The CARP Law and the other enactments also involved in these cases have been the subject of bitter attack
from those who point to the shortcomings of these measures and ask that they be scrapped entirely. To be
sure, these enactments are less than perfect; indeed, they should be continuously re-examined and
rehoned, that they may be sharper instruments for the better protection of the farmer's rights. But we
have to start somewhere. In the pursuit of agrarian reform, we do not tread on familiar ground but grope
on terrain fraught with pitfalls and expected difficulties. This is inevitable. The CARP Law is not a tried and
tested project. On the contrary, to use Justice Holmes's words, "it is an experiment, as all life is an
experiment," and so we learn as we venture forward, and, if necessary, by our own mistakes. We cannot
expect perfection although we should strive for it by all means. Meantime, we struggle as best we can in
freeing the farmer from the iron shackles that have unconscionably, and for so long, fettered his soul to the
soil. LexLib
By the decision we reach today, all major legal obstacles to the comprehensive agrarian reform program
are removed, to clear the way for the true freedom of the farmer. We may now glimpse the day he will be
released not only from want but also from the exploitation and disdain of the past and from his own
feelings of inadequacy and helplessness. At last his servitude will be ended forever. At last the farm on
which he toils will be his farm. It will be his portion of the Mother Earth that will give him not only the staff
of life but also the joy of living. And where once it bred for him only deep despair, now can he see in it the
fruition of his hopes for a more fulfilling future. Now at last can he banish from his small plot of earth his
insecurities and dark resentments and "rebuild in it the music and the dream."
WHEREFORE, the Court holds as follows:
1. R.A. No. 6657, P.D. No. 27, Proc. No. 131, and E.O. Nos. 228 and 229 are SUSTAINED against all
the constitutional objections raised in the herein petitions.
2. Title to all expropriated properties shall be transferred to the State only upon full payment of
compensation to their respective owners.
3. All rights previously acquired by the tenant-farmers under P.D. No. 27 are retained and
recognized.
4. Landowners who were unable to exercise their rights of retention under P.D. No. 27 shall enjoy
the retention rights granted by R.A. No. 6657 under the conditions therein prescribed.

5. Subject to the above-mentioned rulings, all the petitions are DISMISSED, without
pronouncement as to costs.

SO ORDERED.
THIRD DIVISION
[G.R. No. 147511. January 20, 2003.]
MARINA Z. REYES; ALFREDO A. FRANCISCO; ANGELITA Z. GARCIA; ALFREDO Z. FRANCISCO, JR;
ARMANDO Z. FRANCISCO; ALMA C. FRANCISCO; EUGENIA Z. LUNA; CLARITA Z. ZABALLERO,
LEONARDO Z. ZABALLERO, JR, and TEODORO Z. ZABALLERO, in substitution of LEONARDO M.
ZABALLERO; AUGUSTO M. ZABALLERO; FRINE A. ZABALLERO; ELENA FRONDA ZABALLERO; VICTOR
GREGORIO F. ZABALLERO; MARIA ELENA F. ZABALLERO; LOURDES ZABALLERO-LAVA; SOCORRO
EMILIA ZABALLERO-YAP; and TERESITA F. ZABALLERO, petitioners, vs. NATIONAL HOUSING
AUTHORITY, respondent.
DECISION
PUNO, J p:
This is an appeal by certiorari from the decision of the Court of Appeals in CA-GR CV No. 51641, dated
September 29, 2000 1 affirming the judgment of the Regional Trial Court of Quezon City, Branch 79 which
dismissed the complaint for forfeiture of rights filed by herein petitioners, as well as the Resolution dated
March 13, 2001 denying petitioners' motion for reconsideration.
Records show that in 1977, respondent National Housing Authority (NHA) filed separate complaints for
the expropriation of sugarcane lands, particularly Lot Nos. 6450, 6448-E, 6198-A and 6199 of the cadastral
survey of Dasmarinñ as, Cavite belonging to the petitioners, before the then Court of First Instance of Cavite,
and docketed as Civil Case Nos. T.G.-392, T.G.-396 and T.G.-417. The stated public purpose of the
expropriation was the expansion of the Dasmarinñ as Resettlement Project to accommodate the squatters
who were relocated from the Metropolitan Manila area. The trial court rendered judgment ordering the
expropriation of these lots and the payment of just compensation. This was affirmed by the Supreme Court
in a decision rendered on October 29, 1987 in the case of NHA vs. Zaballero 2 and which became final on
November 26, 1987. 3
On February 24, 1989, the expropriation court (now Branch 18, Regional Trial Court of Tagaytay City)
issued an Order 4 the dispositive portion of which reads: HEDCAS
"WHEREFORE, and resolving thus, let an Alias Writ of Execution be immediately issued and that:
(1) The Register of Deeds of the Province of Cavite is hereby ordered to transfer, in the name of the
plaintiff National Housing Authority, the following:
(a) Transfer Certificate No. RT-638 containing an area of 79,167 square meters situated in Barrio
Bangkal, Dasmarinñ as, Cavite;
(b) Transfer Certificate of Title No. T-55702 containing an area of 20,872 square meters situated in
Barrio Bangkal, Dasmarinñ as, Cavite;
(c) Transfer Certificate of Title No. RT-639 and RT-4641 covering Lot Nos. 6198-A and 6199 with an
aggregate area of 159,985 square meters also situated in Barrio Bangkal, Dasmarinñ as, Cavite.
(2) Plaintiff National Housing Authority is likewise hereby ordered, under pain of contempt, to
immediately pay the defendants, the amounts stated in the Writ of Execution as the adjudicated
compensation of their expropriated properties, which process was received by it according to the records,
on September 26, 1988, segregating therefrom, and in separate check, the lawyer's fees in favor of Atty.
Bobby P. Yuseco, in the amount of P322,123.05, as sustained by their contract as gleaned from the records,
with no other deduction, paying on its own (NHA) account, the necessary legal expenses incident to the
registration or issuance of new certificates of title, pursuant to the provisions of the Property Registration
Law (PD 1529);
(3) Defendants, however, are directed to pay the corresponding capital gains tax on the subject
properties, directing them additionally, to coordinate with the plaintiff NHA in this regard, in order to
facilitate the termination of this case, put an end to this controversy and consign the same to its final rest."
For the alleged failure of respondent NHA to comply with the above order, petitioners filed on April 28,
1992 a complaint 5 for forfeiture of rights before the Regional Trial Court of Quezon City, Branch 79, in
Civil Case No. Q-92-12093. They alleged that respondent NHA had not relocated squatters. from the
Metropolitan Manila area on the expropriated lands in violation of the stated public purpose for
expropriation and had not paid the just compensation fixed by the court. They prayed that respondent
NHA be enjoined from disposing and alienating the expropriated properties and that judgment be
rendered forfeiting all its rights and interests under the expropriation judgment. In its Answer, 6
respondent NHA averred that it had already paid a substantial amount to herein petitioners and that the
expropriation judgment could not be executed in view of several issues raised by respondent NHA before
the expropriation court (now Branch 18, RTC, Tagaytay City) concerning capital gains tax, registration fees
and other expenses for the transfer of title to respondent NHA, as well as the claims for attorney's fees of
Atty. Joaquin Yuseco, Jr., collaborating counsel for petitioners.
Ocular inspections 7 conducted by the trial court on the subject properties show that:
"1. 80% of Lot No. 6198-A with an area of 120,146 square meters is already occupied by relocatees
whose houses are made of light materials with very few houses partly made of hollow blocks. The
relocatees were relocated only on (sic) March of 1994;
2. Most of the area covered by Lot No. 2075 is almost occupied by houses and structures, most of
which are made of concrete materials. These houses are not being occupied by squatters relocated to the
said lot by the defendant NHA;
3. Lot No. 6199 is also occupied by concrete houses and structures but likewise there are no
relocatees in said lot. A large area of the same is still unoccupied." DcTAIH
On September 29, 1995, the trial court rendered judgment dismissing the complaint. Finding that the
failure of respondent NHA to pay just compensation and of petitioners to pay capital gains tax are both
unjustified and unreasonable, the trial court held that: (1) respondent NHA is not deemed to have
abandoned the public purpose for which the subject properties were expropriated because the relocation
of squatters involves a long and tedious process. It ruled that respondent NHA actually pursued the public
purpose of the expropriation when it entered into a contract with Arceo C. Cruz involving the construction
of low cost housing on the expropriated lots to be sold to qualified low income beneficiaries; (2) there is
no condition imposed in the expropriation judgment that the subject properties shall revert back to its
original owners in case the purpose of expropriation is terminated or abandoned; (3) the payment of just
compensation is independent of the obligation of herein petitioners to pay capital gains tax; and (4) in the
payment of just compensation, the basis should be the value at the time the property was taken. On appeal,
the Court of Appeals affirmed .the decision of the trial court.
Petitioners are now before us raising the following assignment of errors:
"1. The Honorable Court of Appeals had decided a question of substance not in accord with justice
and equity when it ruled that, as the judgment of the expropriation court did not contain a condition that
should the expropriated property be not used for the intended purpose it would revert to the condemnee,
the action to declare the forfeiture of rights under the expropriation judgment can not prosper;
2. The Honorable Court of Appeals decided a question of substance not in accord with
jurisprudence, justice and equity when it ruled that the non-payment is not a ground for forfeiture;
3. The Honorable Court of Appeals erred in not declaring the judgment of expropriation forfeited
in light of the failure of respondent to use the expropriated property for the intended purpose but for a
totally different purpose."
The petition is not impressed with merit.
Petitioners contend that respondent NHA violated the stated public purpose for the expansion of the
Dasmarinñ as Resettlement Project when it failed to relocate the squatters from the Metro Manila area, as
borne out by the ocular inspection conducted by the trial court which showed that most of the
expropriated properties remain unoccupied. Petitioners likewise question the public nature of the use by
respondent NHA when it entered into a contract for the construction of low cost housing units, which is
allegedly different from the stated public purpose in the expropriation proceedings. Hence, it is claimed
that respondent NHA has forfeited its rights and interests by virtue of the expropriation judgment and the
expropriated properties should now be returned to herein petitioners. We are not persuaded.
The 1987 Constitution explicitly provides for the exercise of the power of eminent domain over private
properties upon payment of just compensation. More specifically, section 9, Article III states that private
property shall not be taken for public use without just compensation. The constitutional restraints are
public use and just compensation.
Petitioners cannot insist on a restrictive view of the eminent domain provision of the Constitution by
contending that the contract for low cost housing is a deviation from the stated public use. It is now settled
doctrine that the concept of public use is no longer limited to traditional purposes. Here, as elsewhere, the
idea that "public use" is strictly limited to clear cases of "use by the public" has been abandoned. The term
"public use" has now been held to be synonymous with "public interest," "public benefit," "public welfare,"
and "public convenience." 8 The rationale for this new approach is well explained in the case of Heirs of
Juancho Ardona, et al. vs. Reyes, et a1., 9 to wit:
"The restrictive view of public use may be appropriate for a nation which circumscribes the scope of
government activities and public concerns and which possesses big and correctly located public lands that
obviate the need to take private property for public purposes. Neither circumstance applies to the
Philippines. We have never been a laissez faire State. And the necessities which impel the exertion of
sovereign power are all too often found in areas of scarce public land or limited government resources.
xxx xxx xxx
The taking to be valid must be for public use. There was a time when it was felt that a literal meaning
should be attached to such a requirement. Whatever project is undertaken must be for the public to enjoy,
as in the case of streets or parks. Otherwise, expropriation is not allowable. It is not anymore. As long as
the purpose of the taking is public, then the power of eminent domain comes into play. As just noted, the
constitution in at least two cases, to remove any doubt, determines what is public use. One is the
expropriation of lands to be subdivided into small lots for resale at cost to individuals. The other is in the
transfer, through the exercise of this power, of utilities and other private enterprise to the government. It is
accurate to state then that at present whatever may be beneficially employed for the general welfare
satisfies the requirement of public use." (emphasis supplied) cASIED
The act of respondent NHA in entering into a contract with a real estate developer for the construction of
low cost housing on the expropriated lots to be sold to qualified low income beneficiaries cannot be taken
to mean as a deviation from the stated public purpose of their taking. Jurisprudence has it that the
expropriation of private land for slum clearance and urban development is for a public purpose even if the
developed area is later sold to private homeowners, commercials firms, entertainment and service
companies, and other private concerns. 10
Moreover, the Constitution itself allows the State to undertake, for the common good and in cooperation
with the private sector, a continuing program of urban land reform and housing which will make at
affordable cost decent housing and basic services to underprivileged and homeless citizens in urban
centers and resettlement areas. 11 The expropriation of private property for the purpose of socialized
housing for the marginalized sector is in furtherance of the social justice provision under Section 1, Article
XIII of the Constitution which provides that:
"SECTION 1. The Congress shall give highest priority to the enactment of measures that protect
and enhance the right of all the people to human dignity, reduce social, economic, and political
inequalities, and remove cultural inequities by equitably diffusing wealth and political power for the
common good.
To this end, the State shall require the acquisition, ownership, use and disposition of property and its
increments."
It follows that the low cost housing project of respondent NHA on the expropriated lots is compliant with
the "public use" requirement.
We likewise do not subscribe to petitioners' contention that the stated public purpose was abandoned
when respondent NHA failed to occupy the expropriated lots by relocating squatters from the Metro
Manila area. The expropriation judgment declared that respondent NHA has a lawful right to take
petitioners properties "for the public use or purpose of expanding the Dasmarinñ as Resettlement Project."
The taking here is absolute, without any condition, restriction or qualification. Contrary to petitioners'
submission, the ruling enunciated in the early case of Fery vs. Municipality of Cabanatuan, 12 is still good
and sound doctrine, viz.:
". . . If, for example, land is expropriated for a particular purpose, with the condition that when that
purpose is ended or abandoned the property shall return to its former owner, then, of course, when the
purpose is terminated or abandoned the former owner reacquires the property so expropriated. . . . If,
upon the contrary, however, the decree of expropriation gives to the entity a fee simple title, then, of
course, the land becomes the absolute property of the expropriator . . . .
When land has been acquired for public use in fee simple unconditionally, either by the exercise of eminent
domain or by purchase, the former owner retains no rights in the land, and the public use may be
abandoned, or the land may be devoted to a different use, without any impairment of the estate or title
acquired, or any reversion to the former owner."
Petitioners further aver that the continued failure of respondent NHA to pay just compensation for a long
period of time justifies the forfeiture of its rights and interests over the expropriated lots. They demand
the return of the expropriated lots. Respondent NHA justifies the delay to pay just compensation by reason
of the failure of petitioners to pay the capital gains tax and to surrender the owners' duplicate certificates
of title.
In the recent case of Republic of the Philippines vs. Court of Appeals, et al., 13 the Court ruled that non-
payment of just compensation does not entitle the private landowners to recover possession of their
expropriated lots. Thus:
"Thus, in Valdehueza vs. Republic where the private landowners had remained unpaid ten years after the
termination of the expropriation proceedings, this Court ruled —
'The points in dispute are whether such payment can still be made and, if so, in what amount. Said lots
have been the subject of expropriation proceedings. By final and executory judgment in said proceedings,
they were condemned for public use, as part of an airport, and ordered sold to the government. . . . . It
follows that both by virtue of the judgment, long final, in the expropriation suit, as well as the annotations
upon their title certificates, plaintiffs are not entitled to recover possession of their expropriated lots —
which are still devoted to the public use for which they were expropriated — but only to demand the
market value of the same.
Said relief may be granted under plaintiffs' prayer for such other remedies, which may be deemed just and
equitable under the premises.'
The Court proceeded to reiterate its pronouncement in Alfonso vs. Pasay City where the recovery of
possession of property taken for public use prayed for by the unpaid landowner was denied even while no
requisite expropriation proceedings were first instituted. The landowner was merely given the relief of
recovering compensation for his property computed at its market value at the time it was taken and
appropriated by the State.
The judgment rendered by the Bulacan RTC in 1979 on the expropriation proceedings provides not only
for the payment of just compensation to herein respondents but likewise adjudges the property
condemned in favor of petitioner over which parties, as well as their privies, are bound. Petitioner has
occupied, utilized and, for all intents and purposes, exercised dominion over the property pursuant to the
judgment. The exercise of such rights vested to it as the condemnee indeed has amounted to at least a
partial compliance or satisfaction of the 1979 judgment, thereby preempting any claim of bar by
prescription on grounds of non-execution. In arguing for the return of their property on the basis of non-
payment, respondents ignore the fact that the right of the expropriating authority is far from that of an
unpaid seller in ordinary sales, to which the remedy of rescission might perhaps apply. An in rem
proceeding, condemnation acts upon the property. After condemnation, the paramount title is in the public
under a new and independent title; thus, by giving notice to all claimants to a disputed title, condemnation
proceedings provide a judicial process for securing better title against all the world than may be obtained
by voluntary conveyance." (emphasis supplied)
We, however, likewise find the refusal of respondent NHA to pay just compensation, allegedly for failure of
petitioners to pay capital gains tax and surrender the owners' duplicate certificates of title, to be
unfounded and unjustified.
First, under the expropriation judgment the payment of just compensation is not subject to any condition.
Second, it is a recognized rule that although the right to enter upon and appropriate the land to public use
is completed prior to payment, title to the property expropriated shall pass from the owner to the
expropriator only upon full payment of the just compensation. In the case of Association of Small
Landowners in the Phils., Inc., et al. vs. Secretary of Agrarian Reform, 14 it was held that:
"Title to property which is the subject of condemnation proceedings does not vest the condemnor until the
judgment fixing just compensation is entered and paid, but the condemnor's title relates back to the date
on which the petition under the Eminent Domain Act, or the commissioner's report under the Local
Improvement Act, is filed.
. . . Although the right to appropriate and use land taken for a canal is complete at the time of entry, title to
the property taken remains in the owner until payment is actually made. HDTSIE
In Kennedy v. Indianapolis, the US Supreme Court cited several cases holding that title to property does
not pass to the condemnor until just compensation had actually been made. In fact, the decisions appear to
be uniformly to this effect. As early as 1838, in Rubottom v. McLure, it was held that 'actual payment to the
owner of the condemned property was a condition precedent to the investment of the title to the property
in the State' albeit 'not to the appropriation of it to public use.' In Rexford v. Knight, the Court of Appeals of
New York said that the construction upon the statutes was that the fee did not vest in the State until the
payment of the compensation although the authority to enter upon and appropriate the land was complete
prior to the payment. Kennedy further said that 'both on principle and authority the rule is . . . that the
right to enter on and use the property is complete, as soon as the property is actually appropriated under
the authority of law for a public use, but that the title does not pass from the owner without his consent,
until just compensation has been made to him.'"
Our own Supreme Court has held in Visayan Refining Co. v. Camus and Paredes, that:
If the laws which we have exhibited or cited in the preceding discussion are attentively examined it will be
apparent that the method of expropriation adopted in this jurisdiction is such as to afford absolute
reassurance that no piece of land can be finally and irrevocably taken from an unwilling owner until
compensation is paid. . . . ." (emphasis supplied)
With respect to the amount of the just compensation still due and demandable from respondent NHA, the
lower courts erred in not awarding interest computed from the time the property is actually taken to the
time when compensation is actually paid or deposited in court. In Republic, et al. vs. Court of Appeals, et
al., 15 the Court imposed interest at 12% per annum in order to help eliminate the issue of the constant
fluctuation and inflation of the value of the currency over time, thus:
"The constitutional limitation of 'just compensation' is considered to be the sum equivalent to the market
value of the property, broadly described to be the price fixed by the seller in open market in the usual and
ordinary course of legal action and competition or the fair value of the property as between one who
receives, and one who desires to sell, it being fixed at the time of the actual taking by the government.
Thus, if property is taken for public use before compensation is deposited with the court having
jurisdiction over the case, the final compensation must include interests on its just value to be computed
from the time the property is taken to the time when compensation is actually paid or deposited with the
court. In fine, between the taking of the property and the actual payment, legal interests accrue in order to
place the owner in a position as good as (but not better than) the position he was in before the taking
occurred.
. . . This allowance of interest on the amount found to be the value of the property as of the time of the
taking computed, being an effective forbearance, at 12% per annum should help eliminate the issue of the
constant fluctuation and inflation of the value of the currency over time. Article 1250 of the Civil Code,
providing that, in case of extraordinary inflation or deflation, the value of the currency at the time of the
establishment of the obligation shall be the basis for the payment when no agreement to the contrary is
stipulated, has strict application only to contractual, obligations. In other words, a contractual agreement
is needed for the effects of extraordinary inflation to be taken into account to alter the value of the
currency."
Records show that there is an outstanding balance of P1,218,574.35 that ought to be paid to petitioners.
16 It is not disputed that respondent NHA took actual possession of the expropriated properties in 1977.
17 Perforce, while petitioners are not entitled to the return of the expropriated property, they are entitled
to be paid the balance of P1,218,574.35 with legal interest thereon at 12% per annum computed from the
taking of the property in 1977 until the due amount shall have been fully paid. HEacAS
WHEREFORE, the appealed judgment is modified as follows:
1. Ordering respondent National Housing Authority to pay petitioners the amount of
P1,218,574.35 with legal interest thereon at 12% per annum computed from the taking of the
expropriated properties in 1997 until the amount due shall have been fully paid;
2. Ordering petitioners to pay the capital gains tax; and
3. Ordering petitioners to surrender to respondent National Housing Authority the owners'
duplicate certificates of title of the expropriated properties upon full payment of just compensation.
SO ORDERED.
Panganiban, Sandoval-Gutierrez, Corona and Carpio-Morales, JJ ., concur.
FIRST DIVISION
[G.R. No. 137152. January 29, 2001.]
CITY OF MANDALUYONG, petitioner, vs. ANTONIO N., FRANCISCO N., THELMA N., EUSEBIO N.,
RODOLFO N., all surnamed AGUILAR, respondents.
DECISION
PUNO, J p:
This is a petition for review under Rule 45 of the Rules of Court of the Orders dated September 17, 1998
and December 29, 1998 of the Regional Trial Court, Branch 168, Pasig City 1 dismissing the petitioner's
Amended Complaint in SCA No. 1427 for expropriation of two (2) parcels of land in Mandaluyong City.
The antecedent facts are as follows:
On August 4, 1997, petitioner filed with the Regional Trial Court, Branch 168, Pasig City a complaint for
expropriation entitled "City of Mandaluyong, plaintiff v. Antonio N., Francisco N., Thelma N., Eusebio N.,
Rodolfo N., all surnamed Aguilar, defendants." Petitioner sought to expropriate three (3) adjoining parcels
of land with an aggregate area of 1,847 square meters registered under Transfer Certificates of Title Nos.
59780, 63766 and 63767 in the names of the defendants, herein respondents, located at 9 de Febrero
Street, Barangay Mauwag, City of Mandaluyong; on a portion of the 3 lots, respondents constructed
residential houses several decades ago which they had since leased out to tenants until the present; on the
vacant portion of the lots, other families constructed residential structures which they likewise occupied;
in 1983, the lots were classified by Resolution No. 125 of the Board of the Housing and Urban
Development Coordinating Council as an Area for Priority Development for urban land reform under
Proclamation Nos. 1967 and 2284 of then President Marcos; as a result of this classification, the tenants
and occupants of the lots offered to purchase the land from respondents, but the latter refused to sell; on
November 7, 1996, the Sangguniang Panlungsod of petitioner, upon petition of the Kapitbisig, an
association of tenants and occupants of the subject land, adopted Resolution No. 516, Series of 1996
authorizing Mayor Benjamin Abalos of the City of Mandaluyong to initiate action for the expropriation of
the subject lots and construction of a medium-rise condominium for qualified occupants of the land; on
January 10, 1996, Mayor Abalos sent a letter to respondents offering to purchase the said property at
P3,000.00 per square meter; respondents did not answer the letter. Petitioner thus prayed for the
expropriation of the said lots and the fixing of just compensation at the fair market value of P3,000.00 per
square meter. 2
In their answer, respondents, except Eusebio N. Aguilar who died in 1995, denied having received a copy of
Mayor Abalos' offer to purchase their lots. They alleged that the expropriation of their land is arbitrary and
capricious, and is not for a public purpose; the subject lots are their only real property and are too small
for expropriation, while petitioner has several properties inventoried for socialized housing; the fair
market value of P3,000.00 per square meter is arbitrary because the zonal valuation set by the Bureau of
Internal Revenue is P7,000.00 per square meter. As counterclaim, respondents prayed for damages of P21
million. 3
Respondents filed a "Motion for Preliminary Hearing" claiming that the defenses alleged in their Answer
are valid grounds for dismissal of the complaint for lack of jurisdiction over the person of the defendants
and lack of cause of action. Respondents prayed that the affirmative defenses be set for preliminary
hearing and that the complaint be dismissed. 4 Petitioner replied.
On November 5, 1997, petitioner filed an Amended Complaint and named as an additional defendant
Virginia N. Aguilar and, at the same time, substituted Eusebio Aguilar with his heirs. Petitioner also
excluded from expropriation TCT No. 59870 and thereby reduced the area sought to be expropriated from
three (3) parcels of land to two (2) parcels totalling 1,636 square meters under TCT Nos. 63766 and
63767. 5
The Amended Complaint was admitted by the trial court on December 18, 1997. Respondents, who, with
the exception of Virginia Aguilar and the Heirs of Eusebio Aguilar had yet to be served with summons and
copies of the Amended Complaint, filed a "Manifestation and Motion" adopting their "Answer with
Counterclaim" and "Motion for Preliminary Hearing" as their answer to the Amended Complaint. 6
The motion was granted. At the hearing of February 25, 1998, respondents presented Antonio Aguilar who
testified and identified several documentary evidence. Petitioner did not present any evidence. Thereafter,
both parties filed their respective memoranda. 7
On September 17, 1998, the trial court issued an order dismissing the Amended Complaint after declaring
respondents as "small property owners" whose land is exempt from expropriation under Republic Act No.
7279. The court also found that the expropriation was not for a public purpose for petitioner's failure to
present any evidence that the intended beneficiaries of the expropriation are landless and homeless
residents of Mandaluyong. The court thus disposed of as follows:
"WHEREFORE, the Amended Complaint is hereby ordered dismissed without pronouncement as to cost.
SO ORDERED." 8
Petitioner moved for reconsideration. On December 29, 1998, the court denied the motion. Hence this
petition.
Petitioner claims that the trial court erred
"IN UPHOLDING RESPONDENT'S CONTENTION THAT THEY QUALIFY AS SMALL PROPERTY OWNERS
AND ARE THUS EXEMPT FROM EXPROPRIATION." 9
Petitioner mainly claims that the size of the lots in litigation does not exempt the same from expropriation
in view of the fact that the said lots have been declared to be within the Area for Priority Development
(APD) No. 5 of Mandaluyong by virtue of Proclamation No. 1967, as amended by Proclamation No. 2284 in
relation to Presidential Decree No. 1517. 10 This declaration allegedly authorizes petitioner to expropriate
the property, ipso facto, regardless of the area of the land.
Presidential Decree (P.D.) No. 1517, the Urban Land Reform Act, was issued by then President Marcos in
1978. The decree adopted as a State policy the liberation of human communities from blight, congestion
and hazard, and promotion of their development and modernization, the optimum use of land as a
national resource for public welfare. 11 Pursuant to this law, Proclamation No. 1893 was issued in 1979
declaring the entire Metro Manila as Urban Land Reform Zone for purposes of urban land reform. This was
amended in 1980 by Proclamation No. 1967 and in 1983 by Proclamation No. 2284 which identified and
specified 245 sites in Metro Manila as Areas for Priority Development and Urban Land Reform Zones.
In 1992, the Congress of the Philippines passed Republic Act No. 7279, the "Urban Development and
Housing Act of 1992." The law lays down as a policy that the state, in cooperation with the private sector,
undertake a comprehensive and continuing Urban Development and Housing Program; uplift the
conditions of the underprivileged and homeless citizens in urban areas and resettlement areas by making
available to them decent housing at affordable cost, basic services and employment opportunities and
provide for the rational use and development of urban land to bring about, among others, equitable
utilization of residential lands; encourage more effective people's participation in the urban development
process and improve the capability of local government units in undertaking urban development and
housing programs and projects. 12 Towards this end, all city and municipal governments are mandated to
conduct an inventory of all lands and improvements within their respective localities, and in coordination
with the National Housing Authority, the Housing and Land Use Regulatory Board, the National Mapping
Resource Information Authority, and the Land Management Bureau, identify lands for socialized housing
and resettlement areas for the immediate and future needs of the underprivileged and homeless in the
urban areas, acquire the lands, and dispose of said lands to the beneficiaries of the program. 13
The acquisition of lands for socialized housing is governed by several provisions in the law. Section 9 of
R.A. 7279 provides:
"SECTION 9. Priorities in the Acquisition of Land. — Lands for socialized housing shall be acquired
in the following order:
(a) Those owned by the Government or any of its subdivisions, instrumentalities, or agencies,
including government-owned or controlled corporations and their subsidiaries;
(b) Alienable lands of the public domain;
(c) Unregistered or abandoned and idle lands;
(d) Those within the declared Areas for Priority Development, Zonal Improvement Program sites,
and Slum Improvement and Resettlement Program sites which have not yet been acquired;
(e) Bagong Lipunan Improvement of Sites and Services or BLISS Sites which have not yet been
acquired;
(f) Privately-owned lands.
Where on-site development is found more practicable and advantageous to the beneficiaries, the priorities
mentioned in this section shall not apply. The local government units shall give budgetary priority to on-
site development of government lands."
Lands for socialized housing are to be acquired in the following order: (1) government lands; (2) alienable
lands of the public domain; (3) unregistered or abandoned or idle lands; (4) lands within the declared
Areas for Priority Development (APD), Zonal Improvement Program (ZIP) sites, Slum Improvement and
Resettlement (SIR) sites which have not yet been acquired; (5) BLISS sites which have not yet been
acquired; and (6) privately-owned lands.
There is no dispute that the two lots in litigation are privately-owned and therefore last in the order of
priority acquisition. However, the law also provides that lands within the declared APD's which have not
yet been acquired by the government are fourth in the order of priority. According to petitioner, since the
subject lots lie within the declared APD, this fact mandates that the lots be given priority in acquisition. 14
Section 9, however, is not a single provision that can be read separate from the other provisions of the law.
It must be read together with Section 10 of R.A. 7279 which also provides:
"SECTION 10. Modes of Land Acquisition. — The modes of acquiring lands for purposes of this Act
shall include, among others, community mortgage, land swapping, land assembly or consolidation, land
banking, donation to the Government, joint-venture agreement, negotiated purchase, and expropriation:
Provided, however, That expropriation shall be resorted to only when other modes of acquisition have
been exhausted: Provided, further, That where expropriation is resorted to, parcels of land owned by small
property owners shall be exempted for purposes of this Act: Provided, finally, That abandoned property, as
herein defined, shall be reverted and escheated to the State in a proceeding analogous to the procedure
laid down in Rule 91 of the Rules of Court. 15
For the purposes of socialized housing, government-owned and foreclosed properties shall be acquired by
the local government units, or by the National Housing Authority primarily through negotiated purchase:
Provided, That qualified beneficiaries who are actual occupants of the land shall be given the right of first
refusal."
Lands for socialized housing under R.A. 7279 are to be acquired in several modes. Among these modes are
the following: (1) community mortgage; (2) land swapping, (3) land assembly or consolidation; (4) land
banking; (5) donation to the government; (6) joint venture agreement; (7) negotiated purchase; and (8)
expropriation. The mode of expropriation is subject to two conditions: (a) it shall be resorted to only when
the other modes of acquisition have been exhausted; and (b) parcels of land owned by small property
owners are exempt from such acquisition.
Section 9 of R.A. 7279 speaks of priorities in the acquisition of lands. It enumerates the type of lands to be
acquired and the hierarchy in their acquisition. Section 10 deals with the modes of land acquisition or the
process of acquiring lands for socialized housing. These are two different things. They mean that the type
of lands that may be acquired in the order of priority in Section 9 are to be acquired only in the modes
authorized under Section 10. The acquisition of the lands in the priority list must be made subject to the
modes and conditions set forth in the next provision. In other words, land that lies within the APD, such as
in the instant case, may be acquired only in the modes under, and subject to the conditions of, Section 10.
IcaHCS
Petitioner claims that it had faithfully observed the different modes of land acquisition for socialized
housing under R.A. 7279 and adhered to the priorities in the acquisition for socialized housing under said
law. 16 It, however, did not state with particularity whether it exhausted the other modes of acquisition in
Section 9 of the law before it decided to expropriate the subject lots. The law states "expropriation shall be
resorted to when other modes of acquisition have been exhausted." Petitioner alleged only one mode of
acquisition, i.e., by negotiated purchase. Petitioner, through the City Mayor, tried to purchase the lots from
respondents but the latter refused to sell. 17 As to the other modes of acquisition, no mention has been
made. Not even Resolution No. 516, Series of 1996 of the Sangguniang Panlungsod authorizing the Mayor
of Mandaluyong to effect the expropriation of the subject property states whether the city government
tried to acquire the same by community mortgage, land swapping, land assembly or consolidation, land
banking, donation to the government, or joint venture agreement under Section 9 of the law.
Section 9 also exempts from expropriation parcels of land owned by small property owners. 18 Petitioner
argues that the exercise of the power of eminent domain is not anymore conditioned on the size of the
land sought to be expropriated. 19 By the expanded notion of public use, present jurisprudence has
established the concept that expropriation is not anymore confined to the vast tracts of land and landed
estates, but also covers small parcels of land. 20 That only a few could actually benefit from the
expropriation of the property does not diminish its public use character. 21 It simply is not possible to
provide, in one instance, land and shelter for all who need them. 22
While we adhere to the expanded notion of public use, the passage of R.A. No. 7279, the "Urban
Development and Housing Act of 1992" introduced a limitation on the size of the land sought to be
expropriated for socialized housing. The law expressly exempted "small property owners" from
expropriation of their land for urban land reform. R.A. No. 7279 originated as Senate Bill No. 234 authored
by Senator Joey Lina 23 and House Bill No. 34310. Senate Bill No. 234 then provided that one of those
lands not covered by the urban land reform and housing program was "land actually used by small
property owners within the just and equitable retention limit as provided under this Act." 24 Small
property owners" were defined in Senate Bill No. 234 as:
"4. Small Property Owners — are those whose rights are protected under Section 9, Article XIII of
the Constitution of the Philippines, who own small parcels of land within the fair and just retention limit
provided under this Act and which are adequate to meet the reasonable needs of the small property
owner's family and their means of livelihood." 25
The exemption from expropriation of lands of small-property owners was never questioned on the Senate
floor. 26 This exemption, although with a modified definition, was actually retained in the consolidation of
Senate Bill No. 234 and House Bill No. 34310 which became R.A. No. 7279. 27
The question now is whether respondents qualify as "small property owners" as defined in Section 3 (q) of
R.A. 7279. Section 3 (q) provides:
"SECTION 3 . . . (q). "Small property owners" refers to those whose only real property consists of
residential lands not exceeding three hundred square meters (300 sq.m.) in highly urbanized cities and
eight hundred square meters (800 sq.m.) in other urban areas."
"Small-property owners" are defined by two elements: (1) those owners of real property whose property
consists of residential lands with an area of not more than 300 square meters in highly urbanized cities
and 800 square meters in other urban areas; and (2) that they do not own real property other than the
same.
The case at bar involves two (2) residential lots in Mandaluyong City, a highly urbanized city. The lot under
TCT No. 63766 is 687 square meters in area and the second under TCT No. 63767 is 949 square meters,
both totalling 1,636 square meters in area. TCT No. 63766 was issued in the names of herein five (5)
respondents, viz:
"FRANCISCO N. AGUILAR, widower; THELMA N. AGUILAR, single; EUSEBIO N. AGUILAR, JR., widower;
RODOLFO N. AGUILAR, single and ANTONIO N. AGUILAR, married to Teresita Puig; all of legal age,
Filipinos." 28
TCT No. 63767 was issued in the names of the five (5) respondents plus Virginia Aguilar, thus:
"FRANCISCO N. AGUILAR, widower; THELMA N. AGUILAR, single; EUSEBIO N. AGUILAR, JR., widower;
RODOLFO N. AGUILAR, single and ANTONIO N. AGUILAR, married to Teresita Puig; and VIRGINIA N.
AGUILAR, single, all of legal age, Filipinos." 29
Respondent Antonio Aguilar testified that he and the other registered owners are all siblings who
inherited the subject property by intestate succession from their parents. 30 Their father died in 1945 and
their mother in 1976. 31 Both TCT's were issued in the siblings' names on September 2, 1987. 32 In 1986,
however, the siblings agreed to extrajudicially partition the lots among themselves, but no action was
taken by them to this end. It was only eleven (11) years later, on November 28, 1997 that a survey of the
two lots was made 33 and on February 10, 1998, a consolidation subdivision plan was approved by the
Lands Management Service of the Department of Environment and Natural Resources. 34 The co-owners
signed a Partition Agreement on February 24, 1998 35 and on May 21, 1998, TCT Nos. 63766 and 63767
were cancelled and new titles issued in the names of the individual owners pursuant to the Partition
Agreement.
Petitioner argues that the consolidation of the subject lots and their partition was made more than six (6)
months after the complaint for expropriation was filed on August 4, 1997, hence, the partition was made
in bad faith, for the purpose of circumventing the provisions of R.A. 7279. 36
At the time of filing of the complaint for expropriation, the lots subject of this case were owned in common
by respondents. Under a co-ownership, the ownership of an undivided thing or right belongs to different
persons. 37 During the existence of the co-ownership, no individual can claim title to any definite portion
of the community property until the partition thereof; and prior to the partition, all that the co-owner has
is an ideal or abstract quota or proportionate share in the entire land or thing. 38 Article 493 of the Civil
Code however provides that:
"ARTICLE 493. Each co-owner shall have the full ownership of his part and of the fruits and benefits
pertaining thereto, and he may therefore alienate, assign or mortgage it, and even substitute another
person in its enjoyment, except when personal rights are involved. But the effect of the alienation or the
mortgage, with respect to the co-owners shall be limited to the portion which may be allotted to him in the
division upon termination of the co-ownership." 39
Before partition in a co-ownership, every co-owner has the absolute ownership of his undivided interest in
the common property. The co-owner is free to alienate, assign or mortgage his interest, except as to purely
personal rights. 40 He may also validly lease his undivided interest to a third party independently of the
other co-owners. 41 The effect of any such transfer is limited to the portion which may be awarded to him
upon the partition of the property. 42
Article 493 therefore gives the owner of an undivided interest in the property the right to freely sell and
dispose of his undivided interest. 43 The co-owner, however, has no right to sell or alienate a concrete
specific or determinate part of the thing owned in common, because his right over the thing is represented
by a quota or ideal portion without any physical adjudication. 44 If the co-owner sells a concrete portion,
this, nonetheless, does not render the sale void. Such a sale affects only his own share, subject to the
results of the partition but not those of the other co-owners who did not consent to the sale. 45
In the instant case, the titles to the subject lots were issued in respondents' names as co-owners in 1987—
ten (10) years before the expropriation case was filed in 1997. As co-owners, all that the respondents had
was an ideal or abstract quota or proportionate share in the lots. This, however, did not mean that they
could not separately exercise any rights over the lots. Each respondent had the full ownership of his
undivided interest in the property. He could freely sell or dispose of his interest independently of the other
co-owners. And this interest could have even been attached by his creditors. 46 The partition in 1998, six
(6) months after the filing of the expropriation case, terminated the co-ownership by converting into
certain and definite parts the respective undivided shares of the co-owners. 47 The subject property is not
a thing essentially indivisible. The rights of the co-owners to have the property partitioned and their share
in the same delivered to them cannot be questioned for "[n]o co-owner shall be obliged to remain in the
co-ownership." 48 The partition was merely a necessary incident of the co-ownership; 49 and absent any
evidence to the contrary, this partition is presumed to have been done in good faith.
Upon partition, four (4) co-owners, namely, Francisco, Thelma, Rodolfo and Antonio Aguilar each had a
share of 300 square meters under TCT Nos. 13849, 13852, 13850, 13851. 50 Eusebio Aguilar's share was
347 square meters under TCT No. 13853 51 while Virginia Aguilar's was 89 square meters under TCT No.
13854. 52
It is noted that Virginia Aguilar, although granted 89 square meters only of the subject lots, is, at the same
time, the sole registered owner of TCT No. 59780, one of the three (3) titles initially sought to be
expropriated in the original complaint. TCT No. 59780, with a land area of 211 square meters, was
dropped in the amended complaint. Eusebio Aguilar was granted 347 square meters, which is 47 square
meters more than the maximum of 300 square meters set by R.A. 7279 for small property owners. In TCT
No. 13853, Eusebio's title, however, appears the following annotation:
". . . subject to . . ., and to the prov. of Sec. 4 Rule 74 of the Rules of Court with respect to the inheritance left
by the deceased Eusebio N. Aguilar." 53
Eusebio died on March 23, 1995, 54 and, according to Antonio's testimony, the former was survived by five
(5) children. 55 Where there are several co-owners, and some of them die, the heirs of those who die, with
respect to that part belonging to the deceased, become also co-owners of the property together with those
who survive. 56 After Eusebio died, his five heirs became co-owners of his 347 square-meter portion.
Dividing the 347 square meters among the five entitled each heir to 69.4 square meters of the land subject
of litigation.
Consequently, the share of each co-owner did not exceed the 300 square meter limit set in R.A. 7279. The
second question, however, is whether the subject property is the only real property of respondents for
them to comply with the second requisite for small property owners.
Antonio Aguilar testified that he and most of the original co-owners do not reside on the subject property
but in their ancestral home in Paco, Manila. 57 Respondents therefore appear to own real property other
than the lots in litigation. Nonetheless, the records do not show that the ancestral home in Paco, Manila
and the land on which it stands are owned by respondents or any one of them. Petitioner did not present
any title or proof of this fact despite Antonio Aguilar's testimony.
On the other hand, respondents claim that the subject lots are their only real property 58 and that they,
particularly two of the five heirs of Eusebio Aguilar, are merely renting their houses and therefore do not
own any other real property in Metro Manila. 59 To prove this, they submitted certifications from the
offices of the City and Municipal Assessors in Metro Manila attesting to the fact that they have no
registered real property declared for taxation purposes in the respective cities. Respondents were certified
by the City Assessor of Manila; 60 Quezon City; 61 Makati City; 62 Pasay City; 63 Paranñ aque; 64 Caloocan
City; 65 Pasig City; 66 Muntinlupa; 67 Marikina; 68 and the then municipality of Las Pinñ as 69 and the
municipality of San Juan del Monte 70 as having no real property registered for taxation in their individual
names.

Finally, this court notes that the subject lots are now in the possession of respondents. Antonio Aguilar
testified that he and the other co-owners filed ejectment cases against the occupants of the land before the
Metropolitan Trial Court, Mandaluyong, Branches 59 and 60. Orders of eviction were issued and executed
on September 17, 1997 which resulted in the eviction of the tenants and other occupants from the land in
question. 71

IN VIEW WHEREOF, the petition is DENIED and the orders dated September 17, 1998 and December 29,
1998 of the Regional Trial Court, Branch 168, Pasig City in SCA No. 1427 are AFFIRMED.

SO ORDERED.

Davide, Jr., C .J ., Kapunan, Pardo and Ynares-Santiago, JJ ., concur.

EN BANC
[G.R. No. 155746. October 13, 2004.]
DIOSDADO LAGCAO, DOROTEO LAGCAO and URSULA LAGCAO, petitioners, vs. JUDGE GENEROSA G.
LABRA, Branch 23, Regional Trial Court, Cebu, and the CITY OF CEBU, respondent.
DECISION
CORONA, J p:
Before us is a petition for review of the decision dated July 1, 2002 of the Regional Trial Court, Branch 23,
Cebu City 1 upholding the validity of the City of Cebu's Ordinance No. 1843, as well as the lower court's
order dated August 26, 2002 denying petitioner's motion for reconsideration.
In 1964, the Province of Cebu donated 210 lots to the City of Cebu. One of these lots was Lot 1029, situated
in Capitol Hills, Cebu City, with an area of 4,048 square meters. In 1965, petitioners purchased Lot 1029 on
installment basis. But then, in late 1965, the 210 lots, including Lot 1029, reverted to the Province of Cebu.
2 Consequently, the province tried to annul the sale of Lot 1029 by the City of Cebu to the petitioners. This
prompted the latter to sue the province for specific performance and damages in the then Court of First
Instance.
On July 9, 1986, the court a quo ruled in favor of petitioners and ordered the Province of Cebu to execute
the final deed of sale in favor of petitioners. On June 11, 1992, the Court of Appeals affirmed the decision of
the trial court. Pursuant to the ruling of the appellate court, the Province of Cebu executed on June 17,
1994 a deed of absolute sale over Lot 1029 in favor of petitioners. Thereafter, Transfer Certificate of Title
(TCT) No. 129306 was issued in the name of petitioners and Crispina Lagcao. 3
After acquiring title, petitioners tried to take possession of the lot only to discover that it was already
occupied by squatters. Thus, on June 15, 1997, petitioners instituted ejectment proceedings against the
squatters. The Municipal Trial Court in Cities (MTCC), Branch 1, Cebu City, rendered a decision on April 1,
1998, ordering the squatters to vacate the lot. On appeal, the RTC affirmed the MTCC's decision and issued
a writ of execution and order of demolition.
However, when the demolition order was about to be implemented, Cebu City Mayor Alvin Garcia wrote
two letters 4 to the MTCC, requesting the deferment of the demolition on the ground that the City was still
looking for a relocation site for the squatters. Acting on the mayor's request, the MTCC issued two orders
suspending the demolition for a period of 120 days from February 22, 1999. Unfortunately for petitioners,
during the suspension period, the Sangguniang Panlungsod (SP) of Cebu City passed a resolution which
identified Lot 1029 as a socialized housing site pursuant to RA 7279. 5 Then, on June 30, 1999, the SP of
Cebu City passed Ordinance No. 1772 6 which included Lot 1029 among the identified sites for socialized
housing. On July, 19, 2000, Ordinance No. 1843 7 was enacted by the SP of Cebu City authorizing the mayor
of Cebu City to initiate expropriation proceedings for the acquisition of Lot 1029 which was registered in
the name of petitioners. The intended acquisition was to be used for the benefit of the homeless after its
subdivision and sale to the actual occupants thereof. For this purpose, the ordinance appropriated the
amount of P6,881,600 for the payment of the subject lot. This ordinance was approved by Mayor Garcia on
August 2, 2000.
On August 29, 2000, petitioners filed with the RTC an action for declaration of nullity of Ordinance No.
1843 for being unconstitutional. The trial court rendered its decision on July 1, 2002 dismissing the
complaint filed by petitioners whose subsequent motion for reconsideration was likewise denied on
August 26, 2002.
In this appeal, petitioners argue that Ordinance No. 1843 is unconstitutional as it sanctions the
expropriation of their property for the purpose of selling it to the squatters, an endeavor contrary to the
concept of "public use" contemplated in the Constitution. 8 They allege that it will benefit only a handful of
people. The ordinance, according to petitioners, was obviously passed for politicking, the squatters
undeniably being a big source of votes.
In sum, this Court is being asked to resolve whether or not the intended expropriation by the City of Cebu
of a 4,048-square-meter parcel of land owned by petitioners contravenes the Constitution and applicable
laws.
Under Section 48 of RA 7160, 9 otherwise known as the Local Government Code of 1991, 10 local
legislative power shall be exercised by the Sangguniang Panlungsod of the city. The legislative acts of the
Sangguniang Panlungsod in the exercise of its lawmaking authority are denominated ordinances.
Local government units have no inherent power of eminent domain and can exercise it only when
expressly authorized by the legislature. 11 By virtue of RA 7160, Congress conferred upon local
government units the power to expropriate. Ordinance No. 1843 was enacted pursuant to Section 19 of RA
7160:
SEC. 19. Eminent Domain. — A local government unit may, through its chief executive and acting
pursuant to an ordinance, exercise the power of eminent domain for public use, or purpose, or welfare for
the benefit of the poor and the landless, upon payment of just compensation, pursuant to the provisions of
the Constitution and pertinent laws . . .. (italics supplied).
Ordinance No. 1843 which authorized the expropriation of petitioners' lot was enacted by the SP of Cebu
City to provide socialized housing for the homeless and low-income residents of the City.
However, while we recognize that housing is one of the most serious social problems of the country, local
government units do not possess unbridled authority to exercise their power of eminent domain in
seeking solutions to this problem.
There are two legal provisions which limit the exercise of this power: (1) no 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; 12 and (2) private property shall not be taken for public use without just compensation. 13 Thus,
the exercise by local government units of the power of eminent domain is not absolute. In fact, Section 19
of RA 7160 itself explicitly states that such exercise must comply with the provisions of the Constitution
and pertinent laws. HcACTE
The exercise of the power of eminent domain drastically affects a landowner's right to private property,
which is as much a constitutionally-protected right necessary for the preservation and enhancement of
personal dignity and intimately connected with the rights to life and liberty. 14 Whether directly exercised
by the State or by its authorized agents, the exercise of eminent domain is necessarily in derogation of
private rights. 15 For this reason, the need for a painstaking scrutiny cannot be overemphasized.
The due process clause cannot be trampled upon each time an ordinance orders the expropriation of a
private individual's property. The courts cannot even adopt hands-off policy simply because public use or
public purpose is invoked by an ordinance, or just compensation has been fixed and determined. In De
Knecht vs. Bautista, 16 we said:
It is obvious then that a land-owner is covered by the mantle of protection due process affords. It is a
mandate of reason. It frowns on arbitrariness, it is the antithesis of any governmental act that smacks of
whim or caprice. It negates state power to act in an oppressive manner. It is, as had been stressed so often,
the embodiment of the sporting idea of fair play. In that sense, it stands as a guaranty of justice. That is the
standard that must be met by any governmental agency in the exercise of whatever competence is
entrusted to it. As was so emphatically stressed by the present Chief Justice, "Acts of Congress, as well as
those of the Executive, can deny due process only under pain of nullity. . . ..
The foundation of the right to exercise eminent domain is genuine necessity and that necessity must be of
public character. 17 Government may not capriciously or arbitrarily choose which private property should
be expropriated. In this case, there was no showing at all why petitioners' property was singled out for
expropriation by the city ordinance or what necessity impelled the particular choice or selection.
Ordinance No. 1843 stated no reason for the choice of petitioners' property as the site of a socialized
housing project. HTDAac
Condemnation of private lands in an irrational or piecemeal fashion or the random expropriation of small
lots to accommodate no more than a few tenants or squatters is certainly not the condemnation for public
use contemplated by the Constitution. This is depriving a citizen of his property for the convenience of a
few without perceptible benefit to the public. 18
RA 7279 is the law that governs the local expropriation of property for purposes of. urban land reform and
housing. Sections 9 and 10 thereof provide:
SEC 9. Priorities in the Acquisition of Land. — Lands for socialized housing shall be acquired in the
following order:
(a) Those owned by the Government or any of its subdivisions, instrumentalities, or agencies,
including government-owned or controlled corporations and their subsidiaries;
(b) Alienable lands of the public domain;
(c) Unregistered or abandoned and idle lands;
(d) Those within the declared Areas or Priority Development, Zonal Improvement Program sites,
and Slum Improvement and Resettlement Program sites which have not yet been acquired;
(e) Bagong Lipunan Improvement of Sites and Services or BLISS which have not yet been acquired;
and
(f) Privately-owned lands. aTEACS
Where on-site development is found more practicable and advantageous to the beneficiaries, the priorities
mentioned in this section shall not apply. The local government units shall give budgetary priority to on-
site development of government lands. (Emphasis supplied).
SEC. 10. Modes of Land Acquisition. — The modes of acquiring lands for purposes of this Act shall
include, among others, community mortgage, land swapping, land assembly or consolidation, land
banking, donation to the Government, joint venture agreement, negotiated purchase, and expropriation:
Provided, however, That expropriation shall be resorted to only when other modes of acquisition have
been exhausted: Provided further, That where expropriation is resorted to, parcels of land owned by small
property owners shall be exempted for purposes of this Act: . . . (Emphasis supplied).
In the recent case of Estate or Heirs of the Late Ex-Justice Jose B.L. Reyes et al. vs. City of Manila, 19 we
ruled that the above-quoted provisions are strict limitations on the exercise of the power of eminent
domain by local government units, especially with respect to (1) the order of priority in acquiring land for
socialized housing and (2) the resort to expropriation proceedings as a means to acquiring it. Private lands
rank last in the order of priority for purposes of socialized housing. In the same vein, expropriation
proceedings may be resorted to only after the other modes of acquisition are exhausted. Compliance with
these conditions is mandatory because these are the only safeguards of oftentimes helpless owners of
private property against what may be a tyrannical violation of due process when their property is forcibly
taken from them allegedly for public use. SacTCA
We have found nothing in the records indicating that the City of Cebu complied strictly with Sections 9 and
10 of RA 7279. Ordinance No. 1843 sought to expropriate petitioners' property without any attempt to
first acquire the lands listed in (a) to (e) of Section 9 of RA 7279. Likewise, Cebu City failed to establish
that the other modes of acquisition in Section 10 of RA 7279 were first exhausted. Moreover, prior to the
passage of Ordinance No. 1843, there was no evidence of a valid and definite offer to buy petitioners'
property as required by Section 19 of RA 7160. 20 We therefore find Ordinance No. 1843 to be
constitutionally infirm for being violative of the petitioners' right to due process.
It should also be noted that, as early as 1998, petitioners had already obtained a favorable judgment of
eviction against the illegal occupants of their property. The judgment in this ejectment case had, in fact,
already attained finality, with a writ of execution and an order of demolition. But Mayor Garcia requested
the trial court to suspend the demolition on the pretext that the City was still searching for a relocation site
for the squatters. However, instead of looking for a relocation site during the suspension period, the city
council suddenly enacted Ordinance No. 1843 for the expropriation of petitioners' lot. It was trickery and
bad faith, pure and simple. The unconscionable manner in which the questioned ordinance was passed
clearly indicated that respondent City transgressed the Constitution, RA 7160 and RA 7279.
For an ordinance to be valid, it must not only be within the corporate powers of the city or municipality to
enact but must also be passed according to the procedure prescribed by law. It must be in accordance with
certain well-established basic principles of a substantive nature. These principles require that an
ordinance (1) must not contravene the Constitution or any statute (2) must not be unfair or oppressive (3)
must not be partial or discriminatory (4) must not prohibit but may regulate trade (5) must be general and
consistent with public policy, and (6) must not be unreasonable. 21
Ordinance No. 1843 failed to comply with the foregoing substantive requirements. A clear case of
constitutional infirmity having been thus established, this Court is constrained to nullify the subject
ordinance. We recapitulate:
first, as earlier discussed, the questioned ordinance is repugnant to the pertinent provisions of the
Constitution, RA 7279 and RA 7160;
second, the precipitate manner in which it was enacted was plain oppression masquerading as a pro-poor
ordinance;
third, the fact that petitioners' small property was singled out for expropriation for the purpose of
awarding it to no more than a few squatters indicated manifest partiality against petitioners, and
fourth, the ordinance failed to show that there was a reasonable relation between the end sought and the
means adopted. While the objective of the City of Cebu was to provide adequate housing to slum dwellers,
the means it employed in pursuit of such objective fell short of what was legal, sensible and called for by
the circumstances.
Indeed, experience has shown that the disregard of basic liberties and the use of short-sighted methods in
expropriation proceedings have not achieved the desired results. Over the years, the government, has tried
to remedy the worsening squatter problem. Far from solving it, however, government's kid-glove approach
has only resulted in the multiplication and proliferation of squatter colonies and blighted areas. A pro-
poor program that is well-studied, adequately funded, genuinely sincere and truly respectful of everyone's
basic rights is what this problem calls for, not the improvident enactment of politics-based ordinances
targeting small private lots in no rational fashion.
WHEREFORE, the petition is hereby GRANTED. The July 1, 2002 decision of Branch 23 of the Regional Trial
Court of Cebu City is RESERVED and SET ASIDE.
SO ORDERED.
EN BANC
[G.R. No. L-59431. July 25, 1984.]
ANTERO M. SISON, JR., petitioner, vs. RUBEN B. ANCHETA, Acting Commissioner, Bureau of Internal
Revenue; ROMULO VILLA, Deputy Commissioner, Bureau of Internal Revenue; TOMAS TOLEDO,
Deputy Commissioner, Bureau of Internal Revenue; MANUEL ALBA, Minister of Budget, FRANCISCO
TANTUICO, Chairman, Commissioner on Audit, and CESAR E. A. VIRATA, Minister of Finance,
respondents.
Antero M. Sison for petitioner and for his own behalf.
The Solicitor General for respondents.
SYLLABUS
1. CONSTITUTIONAL LAW; POWER OF THE STATE TO TAX; EXERCISE THEREOF NECESSARY FOR
THE PERFORMANCE OF ITS VITAL FUNCTIONS. — It is manifest that the field of state activity has assumed
a much wider scope. Hence the need for more revenues. The power to tax, an inherent prerogative, has to
be availed of to assure the performance of vital state functions. It is the source of the bulk of public funds.
To paraphrase a recent decision, taxes being the lifeblood of the government, their prompt and certain
availability is of the essence. (Cf. Vera v. Fernandez, L-31364, March 30, 1979, 89 SCRA 199)
2. ID., ID.; ID.; POWER TO TAX NOT WITHOUT RESTRICTIONS. — The power to tax, to borrow
from Justice Malcolm, "is an attribute of sovereignty. It is the strongest of all the powers of government."
(Sarasola v. Trinidad, 40 Phil. 252, 262 [1919]) It is, of course, to be admitted that for all its plenitude, the
power to tax is not unconfined. There are restrictions. The Constitution sets forth such limits. .Adversely
affecting as it does property rights, both the due process and equal protection clauses may properly be
invoked, as petitioner does, to invalidate in appropriate cases a revenue measure. If it were otherwise,
there would be truth to the 1803 dictum of Chief Justice Marshall that "the power to tax involves the
power to destroy." (McCulloch vs. Maryland, 4 Wheaton 316)
3. ID.; ID.; SECTION 1 BATAS PAMBANSA BLG. 135; NOT A TRANSGRESSION OF THE DUE PROCESS
IN THE ABSENCE OF A SHOWING OF ARBITRARINESS. — Petitioner alleges arbitrariness. A mere
allegation does not suffice. There must be a factual foundation of such unconstitutional taint. Considering
that petitioner would condemn the provision as void on its face, he has not made out a case. This is merely
to adhere to the authoritative doctrine 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.
4. ID.; ID.; ID.; INEQUALITY RESULTING FROM THE CLASSIFICATION MADE, NOT A
TRANSGRESSION OF THE EQUAL PROTECTION CLAUSE AND THE RULE ON UNIFORMITY. —
Classification, if rational in character, is allowable. In a leading case, Lutz v. Araneta, 98 Phil. 143 (1955),
the Court went so far as to hold "at any rate, it is inherent in the power to tax that a state be free to select
the subject of taxation, and it has been repeatedly held that 'inequalities which result from a singling out of
one particular class for taxation, or exemption infringe no constitutional limitation.' " Petitioner likewise
invoked the kindred concept of uniformity. According to the Constitution: "The rule of taxation shall be
uniform and equitable." (Art. VIII, Sec. 17, par. 1) This requirement is met according to Justice Laurel in
Philippine Trust Company v: Yatco, 69 Phil. 420 (1940) when the tax "operates with the same force and
effect in every place where the subject may be found. The rule of uniformity does not call for perfect
uniformity or perfect equality, because this is hardly attainable."
5. ID.; ID., ID., AMPLE JUSTIFICATION EXISTS FOR THE ADOPTION OF THE GROSS SYSTEM OF
INCOME TAXATION TO COMPENSATION INCOME. — In the case of the gross income taxation embodied in
Batas Pambansa Blg. 135, the discernible basis of classification is the susceptibility of the income to the
application of generalized rules removing all deductible items for all taxpayers within the class and fixing a
set of reduced tax rates to be applied to all of them. Taxpayers who are recipients of compensation income
are set apart as a class. As there is practically no overhead expense, these taxpayers are not entitled to
make deductions for income tax purposes because they are in the same situation more or less. On the
other hand, in the case of professionals in the practice of their calling and businessmen, there is no
uniformity in the costs or expenses necessary to produce their income. It would not be just then to
disregard the disparities by giving all of them zero deduction and indiscriminately impose on all alike the
same tax rates on the basis of gross income. There is ample justification for the Batasang Pambansa to
adopt the gross system of income taxation to compensation income, while continuing the system of net
income taxation as regards professional and business income.
DECISION
FERNANDO, C .J p:
The success of the challenge posed in this suit for declaratory relief or prohibition proceeding 1 on the
validity of Section 1 of Batas Pambansa Blg. 135 depends upon a showing of its constitutional infirmity.
The assailed provision further amends Section 21 of the National Internal Revenue Code of 1977, which
provides for rates of tax on citizens or residents on (a) taxable compensation income, (b) taxable net
income, (c) royalties, prizes, and other winnings, (d) interest from bank deposits and yield or any other
monetary benefit from deposit substitutes and from trust fund and similar arrangements, (e) dividends
and share of individual partner in the net profits of taxable partnership, (f) adjusted gross income. 2
Petitioner 3 as taxpayer alleges that by virtue thereof, "he would be unduly discriminated against by the
imposition of higher rates of tax upon his income arising from the exercise of his profession vis-a-vis those
which are imposed upon fixed income or salaried individual taxpayers." 4 He characterizes the above
section as arbitrary amounting to class legislation, oppressive and capricious in character. 5 For petitioner,
therefore, there is a transgression of both the equal protection and due process clauses 6 of the
Constitution as well as of the rule requiring uniformity in taxation. 7
The Court, in a resolution of January 26, 1982, required respondents to file an answer within 10 days from
notice. Such an answer, after two extensions were granted the Office of the Solicitor General, was filed on
May 28, 1982. 8 The facts as alleged were admitted but not the allegations which to their mind are "mere
arguments, opinions or conclusions on the part of the petitioner, the truth [for them] being those stated [in
their] Special and Affirmative Defenses." 9 The answer then affirmed: "Batas Pambansa Blg. 135 is a valid
exercise of the State's power to tax. The authorities and cases cited, while correctly quoted or paraphrased,
do not support petitioner's stand." 10 The prayer is for the dismissal of the petition for lack of merit.
This Court finds such a plea more than justified. The petition must be dismissed.
1. It is manifest that the field of state activity has assumed a much wider scope. The reason was so
clearly set forth by retired Chief Justice Makalintal thus:
"The areas which used to be left to private enterprise and initiative and which the government was called
upon to enter optionally, and only 'because it was better equipped to administer for the public welfare
than is any private individual or group of individuals,' continue to lose their well-defined boundaries and
to be absorbed within activities that the government must undertake in its sovereign capacity if it is to
meet the increasing social challenges of the times."11 Hence the need for more revenues. The power to tax,
an inherent prerogative, has to be availed of to assure the performance of vital state functions. It is the
source of the bulk of public funds. To paraphrase a recent decision, taxes being the lifeblood of the
government, their prompt and certain availability is of the essence. 12
2. The power to tax moreover, to borrow from Justice Malcolm, "is an attribute of sovereignty. It is
the strongest of all the powers of government." 13 It is, of course, to be admitted that for all its plenitude,
the power to tax is not unconfined. There are restrictions. The Constitution sets forth such limits.
Adversely affecting as it does property rights, both the due process and equal protection clauses may
properly be invoked, as petitioner does, to invalidate in appropriate cases a revenue measure. If it were
otherwise, there would be truth to the 1803 dictum of Chief Justice Marshall that "the power to tax
involves the power to destroy." 14 In a separate opinion in Graves v. New York, 15 Justice Frankfurter, after
referring to it as an "unfortunate remark," characterized it as "a flourish of rhetoric [attributable to] the
intellectual fashion of the times [allowing] a free use of absolutes." 16 This is merely to emphasize that it is
not and there cannot be such a constitutional mandate. Justice Frankfurter could rightfully conclude: "The
web of unreality spun from Marshall's famous dictum was brushed away by one stroke of Mr. Justice
Holmes's pen: 'The power to tax is not the power to destroy while this Court sits.'" 17 So it is in the
Philippines.
3. This Court then is left with no choice. The Constitution as the fundamental law overrides any
legislative or executive act that runs counter to it. In any case therefore where it can be demonstrated that
the challenged statutory provision — as petitioner here alleges — fails to abide by its command, then this
Court must so declared and adjudge it null. The inquiry thus is centered on the question of whether the
imposition of a higher tax rate on taxable net income derived from business or profession than on
compensation is constitutionally infirm.
4. The difficulty confronting petitioner is thus apparent. He alleges arbitrariness. A mere
allegation, as here, does not suffice. There must be a factual foundation of such unconstitutional taint.
Considering that petitioner here would condemn such a provision as void on its face, he has not made out
a case. This is merely to adhere to the authoritative doctrine 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. 18
5. It is undoubted that the due process clause may be invoked where a taxing statute is so
arbitrary that it finds no support in the Constitution. An obvious example is where it can be shown to
amount to the confiscation of property. That would be a clear abuse of power. It then becomes the duty of
this Court to say that such an arbitrary act amounted to the exercise of an authority not conferred. That
properly calls for the application of the Holmes dictum. It has also been held that where the assailed tax
measure is beyond the jurisdiction of the state, or is not for a public purpose, or, in case of a retroactive
statute is so harsh and unreasonable, it is subject to attack on due process grounds. 19
6. Now for equal protection. The applicable standard to avoid the charge that there is a denial of
this constitutional mandate whether the assailed act is in the exercise of the police power or the power of
eminent domain is to demonstrate "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 to 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 are analogous. If law be looks 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 on the rest." 20 That same formulation applies as well to taxation
measures. The equal protection clause is, of course, inspired by the noble concept of approximating the
ideal of the laws's benefits being available to all and the affairs of men being governed by that serene and
impartial uniformity, which is of the very essence of the idea of law. There is, however, wisdom, as well as
realism, in these words of Justice Frankfurter: "The equality at which the 'equal protection' clause aims is
not a disembodied equality. The Fourteenth Amendment enjoins 'the equal protection of the laws,' and
laws are not abstract propositions. They do not relate to abstract units A, B and C, but are expressions of
policy arising out of specific difficulties, addressed to the attainment of specific ends by the use of specific
remedies. The Constitution does not require things which are different in fact or opinion to be treated in
law as though they were the same." 21 Hence the constant reiteration of the view that classification if
rational in character is allowable. As a matter of fact, in a leading case of Lutz V. Araneta, 22 this Court,
through Justice J.B.L. Reyes, went so far as to hold "at any rate, it is inherent in the power to tax that a state
be free to select the subjects of taxation, and it has been repeatedly held that 'inequalities which result
from a singling out of one particular class for taxation, or exemption infringe no constitutional limitation.'"
23
7. Petitioner likewise invoked the kindred concept of uniformity. According to the Constitution:
"The rule of taxation shall be uniform and equitable." 24 This requirement is met according to Justice
Laurel in Philippine Trust Company v. Yatco, 25 decided in 1940, when the tax "operates with the same
force and effect in every place where the subject may be found." 26 He likewise added: "The rule of
uniformity does not call for perfect uniformity or perfect equality, because this is hardly attainable." 27
The problem of classification did not present itself in that case. It did not arise until nine years later, when
the Supreme Court held: "Equality and uniformity in taxation means that all taxable articles or kinds of
property of the same class shall be taxed at the same rate. The taxing power has the authority to make
reasonable and natural classifications for purposes of taxation, . . . 28 As clarified by Justice Tuason, where
"the differentiation" complained of "conforms to the practical dictates of justice and equity" it "is not
discriminatory within the meaning of this clause and is therefore uniform." 29 There is quite a similarity
then to the standard of equal protection for all that is required is that the tax "applies equally to all
persons, firms and corporations placed in similar situation." 30
8. Further on this point. Apparently, what misled petitioner is his failure to take into consideration
the distinction between a tax rate and a tax base. There is no legal objection to a broader tax base or
taxable income by eliminating all deductible items and at the same time reducing the applicable tax rate.
Taxpayers may be classified into different categories. To repeat, it is enough that the classification must
rest upon substantial distinctions that make real differences. In the case of the gross income taxation
embodied in Batas Pambansa Blg. 135, the discernible basis of classification is the susceptibility of the
income to the application of generalized rules removing all deductible items for all taxpayers within the
class and fixing a set of reduced tax rates to be applied to all of them. Taxpayers who are recipients of
compensation income are set apart as a class. As there is practically no overhead expense, these taxpayers
are not entitled to make deductions for income tax purposes because they are in the same situation more
or less. On the other hand, in the case of professionals in the practice of their calling and businessmen,
there is no uniformity in the costs or expenses necessary to produce their income. It would not be just
then to disregard the disparities by giving all of them zero deduction and indiscriminately impose on all
alike the same tax rates on the basis of gross income. There is ample justification then for the Batasang
Pambansa to adopt the gross system of income taxation to compensation income, while continuing the
system of net income taxation as regards professional and business income.
9. Nothing can be clearer, therefore, than that the petition is without merit, considering the (1)
lack of factual foundation to show the arbitrary character of the assailed provision; 31 (2) the force of
controlling doctrines on due process, equal protection, and uniformity in taxation and (3) the
reasonableness of the distinction between compensation and taxable net income of professionals and
businessmen certainly not a suspect classification.
WHEREFORE, the petition is dismissed. Costs against petitioner.
Makasiar, Concepcion, Jr., Guerrero, Melencio-Herrera, Escolin, Relova, Gutierrez, Jr., De la Fuente and
Cuevas, JJ ., concur.
Teehankee, J ., concurs in the result.
Aquino, J ., concurs in the result. The petitioner has no cause of action for prohibition.
EN BANC
[G.R. Nos. 49839-46. April 26, 1991.]
JOSE B.L. REYES and EDMUNDO A. REYES, petitioners, vs. PEDRO ALMANZOR, VICENTE ABAD
SANTOS, JOSE ROÑO, in their capacities as appointed and Acting Members of the CENTRAL BOARD
OF ASSESSMENT APPEALS; TERESITA H. NOBLEJAS, ROMULO M. DEL ROSARIO, RAUL C. FLORES, in
their capacities as appointed and Acting Members of the BOARD OF ASSESSMENT APPEALS of
Manila; and NICOLAS CATIIL, in his capacity as City Assessor of Manila, respondents.
Barcelona, Perlas, Joven & Academia Law Offices for petitioners.
DECISION
PARAS, J p:
This is a petition for review on certiorari to reverse the June 10, 1977 decision of the Central Board of
Assessment Appeals 1 in CBAA Cases Nos. 72-79 entitled "J.B.L. Reyes, Edmundo Reyes, et al. v. Board of
Assessment Appeals of Manila and City Assessor of Manila" which affirmed the March 29, 1976 decision of
the Board of Tax Assessment Appeals 2 in BTAA Cases Nos. 614, 614-A-J, 615, 615-A, B, E, "Jose Reyes, et
al. v. City Assessor of Manila" and "Edmundo Reyes and Milagros Reyes v. City Assessor of Manila"
upholding the classification and assessments made by the City Assessor of Manila.
The facts of the case are as follows:
Petitioners J.B.L. Reyes, Edmundo and Milagros Reyes are owners of parcels of land situated in Tondo and
Sta. Cruz Districts, City of Manila, which are leased and entirely occupied as dwelling sites by tenants. Said
tenants were paying monthly rentals not exceeding three hundred pesos (P300.00) in July, 1971. On July
14, 1971, the National Legislature enacted Republic Act No. 6359 prohibiting for one year from its
effectivity, an increase in monthly rentals of dwelling units or of lands on which another's dwelling is
located, where such rentals do not exceed three hundred pesos (P300.00) a month but allowing an
increase in rent by not more than 10% thereafter. The said Act also suspended paragraph (1) of Article
1673 of the Civil Code for two years from its effectivity thereby disallowing the ejectment of lessees upon
the expiration of the usual legal period of lease. On October 12, 1972, Presidential Decree No. 20 amended
R.A. No. 6359 by making absolute the prohibition to increase monthly rentals below P300.00 and by
indefinitely suspending the aforementioned provision of the Civil Code, excepting leases with a definite
period. Consequently, the Reyeses, petitioners herein, were precluded from raising the rentals and from
ejecting the tenants. In 1973, respondent City Assessor of Manila re-classified and reassessed the value of
the subject properties based on the schedule of market values duly reviewed by the Secretary of Finance.
The revision, as expected, entailed an increase in the corresponding tax rates prompting petitioners to file
a Memorandum of Disagreement with the Board of Tax Assessment Appeals. They averred that the
reassessments made were "excessive, unwarranted, inequitable, confiscatory and unconstitutional"
considering that the taxes imposed upon them greatly exceeded the annual income derived from their
properties. They argued that the income approach should have been used in determining the land values
instead of the comparable sales approach which the City Assessor adopted (Rollo, pp. 9-10-A). The Board
of Tax Assessment Appeals, however, considered the assessments valid, holding thus: cdll
"WHEREFORE, and considering that the appellants have failed to submit concrete evidence which could
overcome the presumptive regularity of the classification and assessments appear to be in accordance
with the base schedule of market values and of the base schedule of building unit values, as approved by
the Secretary of Finance, the cases should be, as they are hereby, upheld.
"SO ORDERED." (Decision of the Board of Tax Assessment Appeals, Rollo, p. 22).
The Reyeses appealed to the Central Board of Assessment Appeals. They submitted, among others, the
summary of the yearly rentals to show the income derived from the properties. Respondent City Assessor,
on the other hand, submitted three (3) deeds of sale showing the different market values of the real
property situated in the same vicinity where the subject properties of petitioners are located. To better
appreciate the locational and physical features of the land, the Board of Hearing Commissioners conducted
an ocular inspection with the presence of two representatives of the City Assessor prior to the hearing of
the case. Neither the owners nor their authorized representatives were present during the said ocular
inspection despite proper notices served them. It was found that certain parcels of land were below street
level and were affected by the tides (Rollo, pp. 24-25).
On June 10, 1977, the Central Board of Assessment Appeals rendered its decision, the dispositive portion
of which reads:
"WHEREFORE, the appealed decision insofar as the valuation and assessment of the lots covered by Tax
Declaration Nos. (5835) PD-5847, (5839), (5831) PD-5844 and PD-3824 is affirmed.
"For the lots covered by Tax Declaration Nos. (1430) PD-1432, PD-1509, 146 and (1) PD-266, the appealed
Decision is modified by allowing a 20% reduction in their respective market values and applying therein
the assessment level of 30% to arrive at the corresponding assessed value.
"SO ORDERED." (Decision of the Central Board of Assessment Appeals, Rollo, p. 27)
Petitioner's subsequent motion for reconsideration was denied, hence, this petition.
The Reyeses assigned the following error:
THE HONORABLE BOARD ERRED IN ADOPTING THE "COMPARABLE SALES APPROACH" METHOD IN
FIXING THE ASSESSED VALUE OF APPELLANTS' PROPERTIES.
The petition is impressed with merit.
The crux of the controversy is in the method used in tax assessment of the properties in question.
Petitioners maintain that the "Income Approach" method would have been more realistic for in
disregarding the effect of the restrictions imposed by P.D. 20 on the market value of the properties
affected, respondent Assessor of the City of Manila unlawfully and unjustifiably set increased new assessed
values at levels so high and successive that the resulting annual real estate taxes would admittedly exceed
the sum total of the yearly rentals paid or payable by the dweller tenants under P.D. 20. Hence, petitioners
protested against the levels of the values assigned to their properties as revised and increased on the
ground that they were arbitrarily excessive, unwarranted, inequitable, confiscatory and unconstitutional
(Rollo, p. 10-A).
On the other hand, while respondent Board of Tax Assessment Appeals admits in its decision that the
income approach is used in determining land values in some vicinities, it maintains that when income is
affected by some sort of price control, the same is rejected in the consideration and study of land values as
in the case of properties affected by the Rent Control Law for they do not project the true market value in
the open market (Rollo, p. 21). Thus, respondents opted instead for the "Comparable Sales Approach" on
the ground that the value estimate of the properties predicated upon prices paid in actual, market
transactions would be a uniform and a more credible standards to use especially in case of mass appraisal
of properties (Ibid.). otherwise stated, public respondents would have this Court completely ignore the
effects of the restrictions of P.D. No. 20 on the market value of properties within its coverage. In any event,
it is unquestionable that both the "Comparable Sales Approach" and the "Income Approach" are generally
acceptable methods of appraisal for taxation purposes (The Law on Transfer and Business Taxation by
Hector S. De Leon, 1988 Edition). However, it is conceded that the propriety of one as against the other
would of course depend on several factors. Hence, as early as 1923 in the case of Army & Navy Club,
Manila v. Wenceslao Trinidad, G.R. No. 19297 (44 Phil. 383), it has been stressed that the assessors, in
fixing the value of the property, have to consider all the circumstances and elements of value and must
exercise a prudent discretion in reaching conclusions. LibLex
Under Art. VIII, Sec. 17 (1) of the 1973 Constitution, then enforced, the rule of taxation must not only be
uniform, but must also be equitable and progressive.
Uniformity has been defined as that principle by which all taxable articles or kinds of property of the same justice should not now be penalized by the same government by the imposition of excessive taxes
class shall be taxed at the same rate (Churchill v. Concepcion, 34 Phil. 969 [1916]). petitioners can ill afford and eventually result in the forfeiture of their properties.

Notably in the 1935 Constitution, there was no mention of the equitable or progressive aspects of taxation By the public respondents' own computation the assessment by income approach would amount to only
required in the 1973 Charter (Fernando "The Constitution of the Philippines", p. 221, Second Edition). P10.00 per sq. meter at the time in question.
Thus, the need to examine closely and determine the specific mandate of the Constitution.

Taxation is said to be equitable when its burden falls on those better able to pay. Taxation is progressive
when its rate goes up depending on the resources of the person affected (Ibid.). PREMISES CONSIDERED, (a) the petition is GRANTED; (b) the assailed decisions of public respondents are
REVERSED and SET ASIDE; and (c) the respondent Board of Assessment Appeals of Manila and the City
The power to tax "is an attribute of sovereignty". In fact, it is the strongest of all the powers of government. Assessor of Manila are ordered to make a new assessment by the income approach method to guarantee a
But for all its plenitude, the power to tax is not unconfined as there are restrictions. Adversely effecting as fairer and more realistic basis of computation (Rollo, p. 71).
it does property rights, both the due process and equal protection clauses of the Constitution may properly
be invoked to invalidate in appropriate cases a revenue measure. If it were otherwise, there would be truth SO ORDERED.
to the 1903 dictum of Chief Justice Marshall that "the power to tax involves the power to destroy." The web
or unreality spun from Marshall's famous dictum was brushed away by one stroke of Mr. Justice Holmes' Fernan, C.J., Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Feliciano, Gancayco, Padilla, Bidin, Sarmiento,
pen, thus: "The power to tax is not the power to destroy while this Court sits." "So it is in the Philippines." Grinñ o-Aquino, Medialdea, Regalado and Davide, Jr., JJ., concur.
(Sison, Jr. v. Ancheta, 130 SCRA 655 [1984]; Obillos, Jr. v. Commissioner of Internal Revenue, 139 SCRA 439
[1985]).

In the same vein, the due process clause may be invoked where a taxing statute is so arbitrary that it finds
no support in the Constitution. An obvious example is where it can be shown to amount to confiscation of
property. That would be a clear abuse of power (Sison v. Ancheta, supra). cdll

The taxing power has the authority to make a reasonable and natural classification for purposes of
taxation but the government's act must not be prompted by a 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 (Ibid., p. 662).

Finally under the Real Property Tax Code (P.D. 464 as amended), it is declared that the first Fundamental
Principle to guide the appraisal and assessment of real property for taxation purposes is that the property
must be "appraised at its current and fair market value."

By no stretch of the imagination can the market value of properties covered by P.D. No. 20 be equated with
the market value of properties not so covered. The former has naturally a much lesser market value in new
of the rental restrictions.

Ironically, in the case at bar, not even the factors determinant of the assessed value of subject properties
under the "comparable sales approach" were presented by the public respondents, namely: (1) that the
sale must represent a bonafide arm's length transaction between a willing seller and a willing buyer and
(2) the property must be comparable property (Rollo, p. 27). Nothing can justify or support their view as it
is of judicial notice that for properties covered by P.D. 20 especially during the time in question, there were
hardly any willing buyers. As a general rule, there were no takers so that there can be no reasonable basis
for the conclusion that these properties were comparable with other residential properties not burdened
by P.D. 20. Neither can the given circumstances be nonchalantly dismissed by public respondents as
imposed under distressed conditions clearly implying that the same were merely temporary in character.
At this point in time, the falsity of such premises cannot be more convincingly demonstrated by the fact
that the law has existed for around twenty (20) years with no end to it in sight.

Verily, taxes are the lifeblood of the government and so should be collected without unnecessary
hindrance. However, such collection should be made in accordance with law as any arbitrariness will
negate the very reason for government itself. It is therefore necessary to reconcile the apparently
conflicting interests of the authorities and the taxpayers so that the real purpose of taxations, which is the
promotion of the common good, may be achieved (Commissioner of Internal Revenue v. Algue, Inc., et al.,
158 SCRA 9 [1988]). Consequently, it stands to reason that petitioners who are burdened by the
government by its Rental Freezing Laws (then R.A. No. 6359 and P.D. 20) under the principle of social
FIRST DIVISION Total P 1,474,691,693.44 P 73,734,584.60

[G.R. No. 148191. November 25, 2003.] ============= ============

COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. SOLIDBANK CORPORATION, respondent. "[Respondent] alleges that the total gross receipts in the amount of P1,474,691,693.44 included the sum of
P350,807,875.15 representing gross receipts from passive income which was already subjected to 20%
DECISION final withholding tax.

PANGANIBAN, J p:

Under the Tax Code, the earnings of banks from "passive" income are subject to a twenty percent final
withholding tax (20% FWT). This tax is withheld at source and is thus not actually and physically received
by the banks, because it is paid directly to the government by the entities from which the banks derived
the income. Apart from the 20% FWT, banks are also subject to a five percent gross receipts tax (5% GRT)
which is imposed by the Tax Code on their gross receipts, including the "passive" income.
"On January 30, 1996, [the Court of Tax Appeals] rendered a decision in CTA Case No. 4720 entitled Asian
Bank Corporation vs. Commissioner of Internal Revenue[,] wherein it was held that the 20% final
withholding tax on [a] bank's interest income should not form part of its taxable gross receipts for
purposes of computing the gross receipts tax.

Since the 20% FWT is constructively received by the banks and forms part of their gross receipts or
earnings, it follows that it is subject to the 5% GRT. After all, the amount withheld is paid to the "On June 19, 1997, on the strength of the aforementioned decision, [respondent] filed with the Bureau of
government on their behalf, in satisfaction of their withholding taxes. That they do not actually receive the Internal Revenue [BIR] a letter-request for the refund or issuance of [a] tax credit certificate in the
amount does not alter the fact that it is remitted for their benefit in satisfaction of their tax obligations. aggregate amount of P3,508,078.75, representing, allegedly overpaid gross receipts tax for the year 1995,
computed as follows:
Stated otherwise, the fact is that if there were no withholding tax system in place in this country, this 20
percent portion of the "passive" income of banks would actually be paid to the banks and then remitted by
them to the government in payment of their income tax. The institution of the withholding tax system does
not alter the fact that the 20 percent portion of their "passive" income constitutes part of their actual Gross Receipts Subjected to the Final Tax
earnings, except that it is paid directly to the government on their behalf in satisfaction of the 20 percent
final income tax due on their "passive" incomes. Derived from Passive [Income] P350,807,875.15

The Case Multiply by Final Tax rate 20%

Before us is a Petition for Review 1 under Rule 45 of the Rules of Court, seeking to annul the July 18, 2000 ----------
Decision 2 and the May 8, 2001 Resolution 3 of the Court of Appeals 4 (CA) in CA-GR SP No. 54599. The
decretal portion of the assailed Decision reads as follows: 20% Final Tax Withheld at Source P 70,161,575.03

"WHEREFORE, we AFFIRM in toto the assailed decision and resolution of the Court of Tax Appeals." 5 Multiply by [Gross Receipts Tax] rate 5%

The challenged Resolution denied petitioner's Motion for Reconsideration. ----------

The Facts Overpaid [Gross Receipts Tax] P 3,508,078.75

Quoting petitioner, the CA 6 summarized the facts of this case as follows: ============

"For the calendar year 1995, [respondent] seasonably filed its Quarterly Percentage Tax Returns reflecting "Without waiting for an action from the [petitioner], [respondent] on the same day filed [a] petition for
gross receipts (pertaining to 5% [Gross Receipts Tax] rate) in the total amount of P1,474,691,693.44 with review [with the Court of Tax Appeals] in order to toll the running of the two-year prescriptive period to
corresponding gross receipts tax payments in the sum of P73,734,584.60, broken down as follows: judicially claim for the refund of [any] overpaid internal revenue tax[,] pursuant to Section 230 [now 229]
of the Tax Code, [also 'National Internal Revenue Code'] . . ..
Period Covered Gross Receipts Gross Receipts Tax
xxx xxx xxx
January to March 1994 P 188,406,061.95 P 9,420,303.10
"After trial on the merits, the [Court of Tax Appeals], on August 6, 1999, rendered its decision ordering . . .
April to June 1994 370,913,832.70 18,545,691.63 petitioner to refund in favor of . . . respondent the reduced amount of P1,555,749.65 as overpaid [gross
receipts tax] for the year 1995. The legal issue . . . was resolved by the [Court of Tax Appeals], with Hon.
July to September 1994 481,501,838.98 24,075,091.95 Amancio Q. Saga dissenting, on the strength of its earlier pronouncement in . . . Asian Bank Corporation vs.
Commissioner of Internal Revenue . . ., wherein it was held that the 20% [final withholding tax] on [a]
October to December 1994 433,869,959.81 21,693,497.98 bank's interest income should not form part of its taxable gross receipts for purposes of computing the
[gross receipts tax]." 7
------------ -----------
Ruling of the CA
The CA held that the 20% FWT on a bank's interest income did not form part of the taxable gross receipts
in computing the 5% GRT, because the FWT was not actually received by the bank but was directly
remitted to the government. The appellate court curtly said that while the Tax Code "does not specifically
state any exemption, . . . the statute must receive a sensible construction such as will give effect to the
legislative intention, and so as to avoid an unjust or absurd conclusion." 8
Hence, this appeal. 9
Issue
Petitioner raises this lone issue for our consideration:
"Whether or not the 20% final withholding tax on [a] bank's interest income forms part of the taxable
gross receipts in computing the 5% gross receipts tax." 10
The Court's Ruling
The Petition is meritorious.
Sole Issue:
Whether the 20% FWT Forms Part
of the Taxable Gross Receipts
Petitioner claims that although the 20% FWT on respondent's interest income was not actually received
by respondent because it was remitted directly to the government, the fact that the amount redounded to
the bank's benefit makes it part of the taxable gross receipts in computing the 5% GRT. Respondent, on the
other hand, maintains that the CA correctly ruled otherwise.
We agree with petitioner. In fact, the same issue has been raised recently in China Banking Corporation v.
CA, 11 where this Court held that the amount of interest income withheld in payment of the 20% FWT
forms part of gross receipts in computing for the GRT on banks.
The FWT and the GRT :
Two Different Taxes
The 5% GRT is imposed by Section 119 12 of the Tax Code, 13 which provides:
"SEC. 119. Tax on banks and non-bank financial intermediaries. — There shall be collected a tax on gross
receipts derived from sources within the Philippines by all banks and non-bank financial intermediaries in
accordance with the following schedule:
"(a) On interest, commissions and discounts from lending activities as well as income from financial
leasing, on the basis of remaining maturities of instruments from which such receipts are derived.
Short-term maturity not in excess of two (2) years 5%
Medium-term maturity — over two (2) years
but not exceeding four (4) years 3%
Long-term maturity:
(i) Over four (4) years but not exceeding
seven (7) years 1%
(ii) Over seven (7) years 0%
"(b) On dividends 0%
"(c) On royalties, rentals of property, real or personal, profits from exchange and all other items
treated as gross income under Section 28 14 of this Code 5%
Provided, however, That in case the maturity period referred to in paragraph (a) is shortened thru
pretermination, then the maturity period shall be reckoned to end as of the date of pretermination for
purposes of classifying the transaction as short, medium or long term and the correct rate of tax shall be
applied accordingly.
"Nothing in this Code shall preclude the Commissioner from imposing the same tax herein provided on
persons performing similar banking activities."
The 5% GRT 15 is included under "Title V. Other Percentage Taxes" of the Tax Code and is not subject to
withholding. The banks and non-bank financial intermediaries liable therefor shall, under Section 125(a)
(1), 16 file quarterly returns on the amount of gross receipts and pay the taxes due thereon within twenty
(20) 17 days after the end of each taxable quarter.
The 20% FWT, 18 on the other hand, falls under Section 24(e)(1) 19 of "Title II. Tax on Income." It is a tax
on passive income, deducted and withheld at source by the payor-corporation and/or person as
withholding agent pursuant to Section 50, 20 and paid in the same manner and subject to the same
conditions as provided for in Section 51. 21
A perusal of these provisions clearly shows that two types of taxes are involved in the present controversy:
(1) the GRT, which is a percentage tax; and (2) the FWT, which is an income tax. As a bank, petitioner is
covered by both taxes.
A percentage tax is a national tax measured by a certain percentage of the gross selling price or gross value
in money of goods sold, bartered or imported; or of the gross receipts or earnings derived by any person
engaged in the sale of services. 22 It is not subject to withholding.
An income tax, on the other hand, is a national tax imposed on the net or the gross income realized in a
taxable year. 23 It is subject to withholding.
In a withholding tax system, the payee is the taxpayer, the person on whom the tax is imposed; the payor, a
separate entity, acts as no more than an agent of the government for the collection of the tax in order to
ensure its payment. Obviously, this amount that is used to settle the tax liability is deemed sourced from
the proceeds constitutive of the tax base. 24 These proceeds are either actual or constructive. Both parties
herein agree that there is no actual receipt by the bank of the amount withheld. What needs to be
determined is if there is constructive receipt thereof. Since the payee — not the payor — is the real
taxpayer, the rule on constructive receipt can be easily rationalized, if not made clearly manifest. 25
Constructive Receipt
Versus Actual Receipt
Applying Section 7 of Revenue Regulations (RR) No. 17-84, 26 petitioner contends that there is
constructive receipt of the interest on deposits and yield on deposit substitutes. 27 Respondent, however,
claims that even if there is, it is Section 4(e) of RR 12-80 28 that nevertheless governs the situation.
Section 7 of RR 17-84 states:
"SEC. 7. Nature and Treatment of Interest on Deposits and Yield on Deposit Substitutes. —
'(a) The interest earned on Philippine Currency bank deposits and yield from deposit substitutes
subjected to the withholding taxes in accordance with these regulations need not be included in the gross
income in computing the depositor's/investor's income tax liability in accordance with the provision of
Section 29(b), 29 (c) 30 and (d) of the National Internal Revenue Code, as amended.
'(b) Only interest paid or accrued on bank deposits, or yield from deposit substitutes declared for
purposes of imposing the withholding taxes in accordance with these regulations shall be allowed as
interest expense deductible for purposes of computing taxable net income of the payor.
'(c) If the recipient of the above-mentioned items of income are financial institutions, the same shall
be included as part of the tax base upon which the gross receipt[s] tax is imposed.'"
Section 4(e) of RR 12-80, on the other hand, states that the tax rates to be imposed on the gross receipts of
banks, non-bank financial intermediaries; financing companies, and other non-bank financial
intermediaries not performing quasi-banking activities shall be based on all items of income actually
received. This provision reads:
"SEC. 4. ...
"(e) Gross receipts tax on banks, non-bank financial intermediaries, financing companies, and other
non-bank financial intermediaries not performing quasi-banking activities. — The rates of tax to be
imposed on the gross receipts of such financial institutions shall be based on all items of income actually
received. Mere accrual shall not be considered, but once payment is received on such accrual or in cases of
prepayment, then the amount actually received shall be included in the tax base of such financial
institutions, as provided hereunder . . .."
Respondent argues that the above-quoted provision is plain and clear: since there is no actual receipt, the
FWT is not to be included in the tax base for computing the GRT. There is supposedly no pecuniary benefit
or advantage accruing to the bank from the FWT, because the income is subjected to a tax burden
immediately upon receipt through the withholding process. Moreover, the earlier RR 12-80 covered
matters not falling under the later RR 17-84. 31
We are not persuaded.
By analogy, we apply to the receipt of income the rules on actual and constructive possession provided in
Articles 531 and 532 of our Civil Code.
Under Article 531: 32
"Possession is acquired by the material occupation of a thing or the exercise of a right, or by the fact that it
is subject to the action of our will, or by the proper acts and legal formalities established for acquiring such
right."
Article 532 states:
"Possession may be acquired by the same person who is to enjoy it, by his legal representative, by his
agent, or by any person without any power whatever; but in the last case, the possession shall not be
considered as acquired until the person in whose name the act of possession was executed has ratified the
same, without prejudice to the juridical consequences of negotiorum gestio in a proper case." 33
The last means of acquiring possession under Article 531 refers to juridical acts — the acquisition of
possession by sufficient title — to which the law gives the force of acts of possession. 34 Respondent
argues that only items of income actually received should be included in its gross receipts. It claims that
since the amount had already been withheld at source, it did not have actual receipt thereof.
We clarify. Article 531 of the Civil Code clearly provides that the acquisition of the right of possession is
through the proper acts and legal formalities established therefor. The withholding process is one such act.
There may not be actual receipt of the income withheld; however, as provided for in Article 532,
possession by any person without any power whatsoever shall be considered as acquired when ratified by
the person in whose name the act of possession is executed.
In our withholding tax system, possession is acquired by the payor as the withholding agent of the
government, because the taxpayer ratifies the very act of possession for the government. There is thus
constructive receipt. The processes of bookkeeping and accounting for interest on deposits and yield on
deposit substitutes that are subjected to FWT are indeed — for legal purposes — tantamount to delivery,
receipt or remittance. 35 Besides, respondent itself admits that its income is subjected to a tax burden
immediately upon "receipt," although it claims that it derives no pecuniary benefit or advantage through
the withholding process. There being constructive receipt of such income — part of which is withheld —
RR 17-84 applies, and that income is included as part of the tax base upon which the GRT is imposed.
RR 12-80 Superseded by RR 17-84
We now come to the effect of the revenue regulations on interest income constructively received.
In general, rules and regulations issued by administrative or executive officers pursuant to the procedure
or authority conferred by law upon the administrative agency have the force and effect, or partake of the
nature, of a statute. 36 The reason is that statutes express the policies, purposes, objectives, remedies and
sanctions intended by the legislature in general terms. The details and manner of carrying them out are
oftentimes left to the administrative agency entrusted with their enforcement.
In the present case, it is the finance secretary who promulgates the revenue regulations, upon
recommendation of the BIR commissioner. These regulations are the consequences of a delegated power
to issue legal provisions that have the effect of law. 37
A revenue regulation is binding on the courts as long as the procedure fixed for its promulgation is
followed. Even if the courts may not be in agreement with its stated policy or innate wisdom, it is
nonetheless valid, provided that its scope is within the statutory authority or standard granted by the
legislature. 38 Specifically, the regulation must (1) be germane to the object and purpose of the law; 39 (2)
not contradict, but conform to, the standards the law prescribes; 40 and (3) be issued for the sole purpose
of carrying into effect the general provisions of our tax laws. 41
In the present case, there is no question about the regularity in the performance of official duty. What
needs to be determined is whether RR 12-80 has been repealed by RR 17-84. IEaCDH
A repeal may be express or implied. It is express when there is a declaration in a regulation — usually in
its repealing clause — that another regulation, identified by its number or title, is repealed. All others are
implied repeals. 42 An example of the latter is a general provision that predicates the intended repeal on a
substantial conflict between the existing and the prior regulations. 43
As stated in Section 11 of RR 17-84, all regulations, rules, orders or portions thereof that are inconsistent
with the provisions of the said RR are thereby repealed. This declaration proceeds on the premise that RR
17-84 clearly reveals such an intention on the part of the Department of Finance. Otherwise, later RRs are
to be construed as a continuation of, and not a substitute for, earlier RRs; and will continue to speak, so far
as the subject matter is the same, from the time of the first promulgation. 44
There are two well-settled categories of implied repeals: (1) in case the provisions are in irreconcilable
conflict, the later regulation, to the extent of the conflict, constitutes an implied repeal of an earlier one;
and (2) if the later regulation covers the whole subject of an earlier one and is clearly intended as a
substitute, it will similarly operate as a repeal of the earlier one. 45 There is no implied repeal of an earlier
RR by the mere fact that its subject matter is related to a later RR, which may simply be a cumulation or
continuation of the earlier one. 46
Where a part of an earlier regulation embracing the same subject as a later one may not be enforced
without nullifying the pertinent provision of the latter, the earlier regulation is deemed impliedly amended
or modified to the extent of the repugnancy. 47 The unaffected provisions or portions of the earlier
regulation remain in force, while its omitted portions are deemed repealed. 48 An exception therein that is
amended by its subsequent elimination shall now cease to be so and instead be included within the scope
of the general rule. 49
Section 4(e) of the earlier RR 12-80 provides that only items of income actually received shall be included
in the tax base for computing the GRT, but Section 7(c) of the later RR 17-84 makes no such distinction and
provides that all interests earned shall be included. The exception having been eliminated, the clear intent
is that the later RR 17-84 includes the exception within the scope of the general rule.
Repeals by implication are not favored and will not be indulged, unless it is manifest that the
administrative agency intended them. As a regulation is presumed to have been made with deliberation
and full knowledge of all existing rules on the subject, it may reasonably be concluded that its
promulgation was not intended to interfere with or abrogate any earlier rule relating to the same subject,
unless it is either repugnant to or fully inclusive of the subject matter of an earlier one, or unless the
reason for the earlier one is "beyond peradventure removed." 50 Every effort must be exerted to make all
regulations stand — and a later rule will not operate as a repeal of an earlier one, if by any reasonable
construction, the two can be reconciled. 51
RR 12-80 imposes the GRT only on all items of income actually received, as opposed to their mere accrual,
while RR 17-84 includes all interest income in computing the GRT. RR 12-80 is superseded by the later
rule, because Section 4(e) thereof is not restated in RR 17-84. Clearly therefore, as petitioner correctly
states, this particular provision was impliedly repealed when the later regulations took effect. 52
Reconciling the Two Regulations
Granting that the two regulations can be reconciled, respondent's reliance on Section 4(e) of RR 12-80 is
misplaced and deceptive. The "accrual" referred to therein should not be equated with the determination
of the amount to be used as tax base in computing the GRT. Such accrual merely refers to an accounting
method that recognizes income as earned although not received, and expenses as incurred although not
yet paid. aEcTDI
Accrual should not be confused with the concept of constructive possession or receipt as earlier discussed.
Petitioner correctly points out that income that is merely accrued — earned, but not yet received — does
not form part of the taxable gross receipts; income that has been received, albeit constructively, does. 53
The word "actually," used confusingly in Section 4(e), will be clearer if removed entirely. Besides, if actually
is that important, accrual should have been eliminated for being a mere surplusage. The inclusion of
accrual stresses the fact that Section 4(e) does not distinguish between actual and constructive receipt. It
merely focuses on the method of accounting known as the accrual system.
Under this system, income is accrued or earned in the year in which the taxpayer's right thereto becomes
fixed and definite, even though it may not be actually received until a later year; while a deduction for a
liability is to be accrued or incurred and taken when the liability becomes fixed and certain, even though it
may not be actually paid until later. 54
Under any system of accounting, no duty or liability to pay an income tax upon a transaction arises until
the taxable year in which the event constituting the condition precedent occurs. 55 The liability to pay a
tax may thus arise at a certain time and the tax paid within another given time. 56
In reconciling these two regulations, the earlier one includes in the tax base for GRT all income, whether
actually or constructively received, while the later one includes specifically interest income. In computing
the income tax liability, the only exception cited in the later regulations is the exclusion from gross income
of interest income, which is already subjected to withholding. This exception, however, refers to a different
tax altogether. To extend mischievously such exception to the GRT will certainly lead to results not
contemplated by the legislators and the administrative body promulgating the regulations.
Manila Jockey Club
Inapplicable
In Commissioner of Internal Revenue v. Manila Jockey Club, 57 we held that the term "gross receipts" shall
not include money which, although delivered, has been especially earmarked by law or regulation for some
person other than the taxpayer. 58
To begin, we have to nuance the definition of gross receipts 59 to determine what it is exactly. In this
regard, we note that US cases have persuasive effect in our jurisdiction, because Philippine income tax law
is patterned after its US counterpart. 60
"'[G]ross receipts' with respect to any period means the sum of: (a) The total amount received or accrued
during such period from the sale, exchange, or other disposition of . . . other property of a kind which
would properly be included in the inventory of the taxpayer if on hand at the close of the taxable year, or
property held by the taxpayer primarily for sale to customers in the ordinary course of its trade or
business, and (b) The gross income, attributable to a trade or business, regularly carried on by the
taxpayer, received or accrued during such period . . .." 61
". . . [B]y gross earnings from operations . . . was intended all operations . . . including incidental,
subordinate, and subsidiary operations, as well as principal operations." 62
"When we speak of the 'gross earnings' of a person or corporation, we mean the entire earnings or
receipts of such person or corporation from the business or operations to which we refer." 63
From these cases, "gross receipts" 64 refer to the total, as opposed to the net, income. 65 These are
therefore the total receipts before any deduction 66 for the expenses of management. 67 Webster's New
International Dictionary, in fact, defines gross as "whole or entire." EDcICT
Statutes taxing the gross "receipts," "earnings," or "income" of particular corporations are found in many
jurisdictions. 68 Tax thereon is generally held to be within the power of a state to impose; or
constitutional, unless it interferes with interstate commerce or violates the requirement as to uniformity
of taxation. 69
Moreover, we have emphasized that the BIR has consistently ruled that "gross receipts" does not admit of
any deduction. 70 Following the principle of legislative approval by reenactment, 71 this interpretation
has been adopted by the legislature throughout the various reenactments of then Section 119 of the Tax
Code. 72
Given that a tax is imposed upon total receipts and not upon net earnings, 73 shall the income withheld be
included in the tax base upon which such tax is imposed? In other words, shall interest income
constructively received still be included in the tax base for computing the GRT?
We rule in the affirmative.
Manila Jockey Club does not apply to this case. Earmarking is not the same as withholding. Amounts
earmarked do not form part of gross receipts, because, although delivered or received, these are by law or
regulation reserved for some person other than the taxpayer. On the contrary, amounts withheld form part
of gross receipts, because these are in constructive possession and not subject to any reservation, the
withholding agent being merely a conduit in the collection process.
The Manila Jockey Club had to deliver to the Board on Races, horse owners and jockeys amounts that
never became the property of the race track. 74 Unlike these amounts, the interest income that had been
withheld for the government became property of the financial institutions upon constructive possession
thereof. Possession was indeed acquired, since it was ratified by the financial institutions in whose name
the act of possession had been executed. The money indeed belonged to the taxpayers; merely holding it in
trust was not enough. 75
The government subsequently becomes the owner of the money when the financial institutions pay the
FWT to extinguish their obligation to the government. As this Court has held before, this is the
consideration for the transfer of ownership of the FWT from these institutions to the government. 76 It is
ownership that determines whether interest income forms part of taxable gross receipts. 77 Being
originally owned by these financial institutions as part of their interest income, the FWT should form part
of their taxable gross receipts.
Besides, these amounts withheld are in payment of an income tax liability, which is different from a
percentage tax liability. Commissioner of Internal Revenue v. Tours Specialists, Inc. aptly held thus: 78
". . . [G]ross receipts subject to tax under the Tax Code do not include monies or receipts entrusted to the
taxpayer which do not belong to them and do not redound to the taxpayer's benefit; and it is not necessary
that there must be a law or regulation which would exempt such monies and receipts within the meaning
of gross receipts under the Tax Code." 79
In the construction and interpretation of tax statutes and of statutes in general, the primary consideration
is to ascertain and give effect to the intention of the legislature. 80 We ought to impute to the lawmaking
body the intent to obey the constitutional mandate, as long as its enactments fairly admit of such
construction. 81 In fact, ". . . no tax can be levied without express authority of law, but the statutes are to
receive a reasonable construction with a view to carrying out their purpose and intent." 82
Looking again into Sections 24(e)(1) and 119 of the Tax Code, we find that the first imposes an income tax;
the second, a percentage tax. The legislature clearly intended two different taxes. The FWT is a tax on
passive income, while the GRT is on business. 83 The withholding of one is not equivalent to the payment
of the other.
Non-Exemption of FWT from GRT :
Neither Unjust nor Absurd
Taxing the people and their property is essential to the very existence of government. Certainly, one of the
highest attributes of sovereignty is the power of taxation, 84 which may legitimately be exercised on the
objects to which it is applicable to the utmost extent as the government may choose. 85 Being an incident
of sovereignty, such power is coextensive with that to which it is an incident. 86 The interest on deposits
and yield on deposit substitutes of financial institutions, on the one hand, and their business as such, on
the other, are the two objects over which the State has chosen to extend its sovereign power. Those not so
chosen are, upon the soundest principles, exempt from taxation. 87
While courts will not enlarge by construction the government's power of taxation, 88 neither will they
place upon tax laws so loose a construction as to permit evasions, merely on the basis of fanciful and
insubstantial distinctions. 89 When the legislature imposes a tax on income and another on business, the
imposition must be respected. The Tax Code should be so construed, if need be, as to avoid empty
declarations or possibilities of crafty tax evasion schemes. We have consistently ruled thus: TAaIDH
". . . [I]t is upon taxation that the [g]overnment chiefly relies to obtain the means to carry on its operations,
and it is of the utmost importance that the modes adopted to enforce the collection of the taxes levied
should be summary and interfered with as little as possible. . . .." 90
"Any delay in the proceedings of the officers, upon whom the duty is devolved of collecting the taxes, may
derange the operations of government, and thereby cause serious detriment to the public." 91
"No government could exist if all litigants were permitted to delay the collection of its taxes." 92
A taxing act will be construed, and the intent and meaning of the legislature ascertained, from its language.
93 Its clarity and implied intent must exist to uphold the taxes as against a taxpayer in whose favor doubts
will be resolved. 94 No such doubts exist with respect to the Tax Code, because the income and percentage
taxes we have cited earlier have been imposed in clear and express language for that purpose. 95
This Court has steadfastly adhered to the doctrine that its first and fundamental duty is the application of
the law according to its express terms — construction and interpretation being called for only when such
literal application is impossible or inadequate without them. 96 In Quijano v. Development Bank of the
Philippines, 97 we stressed as follows:
"No process of interpretation or construction need be resorted to where a provision of law peremptorily
calls for application." 98
A literal application of any part of a statute is to be rejected if it will operate unjustly, lead to absurd
results, or contradict the evident meaning of the statute taken as a whole. 99 Unlike the CA, we find that
the literal application of the aforesaid sections of the Tax Code and its implementing regulations does not
operate unjustly or contradict the evident meaning of the statute taken as a whole. Neither does it lead to
absurd results. Indeed, our courts are not to give words meanings that would lead to absurd or
unreasonable consequences. 100 We have repeatedly held thus:
". . . [S]tatutes should receive a sensible construction, such as will give effect to the legislative intention and
so as to avoid an unjust or an absurd conclusion." 101
"While it is true that the contemporaneous construction placed upon a statute by executive officers whose
duty is to enforce it should be given great weight by the courts, still if such construction is so erroneous, . . .
the same must be declared as null and void." 102
It does not even matter that the CTA, like in China Banking Corporation, 103 relied erroneously on Manila
Jockey Club. Under our tax system, the CTA acts as a highly specialized body specifically created for the
purpose of reviewing tax cases. 104 Because of its recognized expertise, its findings of fact will ordinarily
not be reviewed, absent any showing of gross error or abuse on its part. 105 Such findings are binding on
the Court and, absent strong reasons for us to delve into facts, only questions of law are open for
determination. 106
Respondent claims that it is entitled to a refund on the basis of excess GRT payments. We disagree.
Tax refunds are in the nature of tax exemptions. 107 Such exemptions are strictly construed against the
taxpayer, being highly disfavored 108 and almost said "to be odious to the law." Hence, those who claim to
be exempt from the payment of a particular tax must do so under clear and unmistakable terms found in
the statute. They must be able to point to some positive provision, not merely a vague implication, 109 of
the law creating that right. 110
The right of taxation will not be surrendered, except in words too plain to be mistaken. The reason is that
the State cannot strip itself of this highest attribute of sovereignty — its most essential power of taxation
— by vague or ambiguous language. Since tax refunds are in the nature of tax exemptions, these are
deemed to be "in derogation of sovereign authority and to be construed strictissimi juris against the
person or entity claiming the exemption." 111
No less than our 1987 Constitution provides for the mechanism for granting tax exemptions. 112 They
certainly cannot be granted by implication or mere administrative regulation. Thus, when an exemption is
claimed, it must indubitably be shown to exist, for every presumption is against it, 113 and a well-founded
doubt is fatal to the claim. 114 In the instant case, respondent has not been able to satisfactorily show that
its FWT on interest income is exempt from the GRT. Like China Banking Corporation, its argument creates
a tax exemption where none exists. 115
No exemptions are normally allowed when a GRT is imposed. It is precisely designed to maintain
simplicity in the tax collection effort of the government and to assure its steady source of revenue even
during an economic slump. 116

No Double Taxation

We have repeatedly said that the two taxes, subject of this litigation, are different from each other. The
basis of their imposition may be the same, but their natures are different, thus leading us to a final point. Is
there double taxation? TaDIHc

The Court finds none.

Double taxation means taxing the same property twice when it should be taxed only once; that is, ". . .
taxing the same person twice by the same jurisdiction for the same thing." 117 It is obnoxious when the
taxpayer is taxed twice, when it should be but once. 118 Otherwise described as "direct duplicate
taxation," 119 the two taxes must be imposed on the same subject matter, for the same purpose, by the
same taxing authority, within the same jurisdiction, during the same taxing period; and they must be of the
same kind or character. 120

First, the taxes herein are imposed on two different subject matters. The subject matter of the FWT is the
passive income generated in the form of interest on deposits and yield on deposit substitutes, while the
subject matter of the GRT is the privilege of engaging in the business of banking.

A tax based on receipts is a tax on business rather than on the property; hence, it is an excise 121 rather
than a property tax. 122 It is not an income tax, unlike the FWT. In fact, we have already held that one can
be taxed for engaging in business and further taxed differently for the income derived therefrom. 123 Akin
to our ruling in Velilla v. Posadas, 124 these two taxes are entirely distinct and are assessed under different
provisions.

Second, although both taxes are national in scope because they are imposed by the same taxing authority
— the national government under the Tax Code — and operate within the same Philippine jurisdiction for
the same purpose of raising revenues, the taxing periods they affect are different. The FWT is deducted
and withheld as soon as the income is earned, and is paid after every calendar quarter in which it is
earned. On the other hand, the GRT is neither deducted nor withheld, but is paid only after every taxable
quarter in which it is earned.

Third, these two taxes are of different kinds or characters. The FWT is an income tax subject to
withholding, while the GRT is a percentage tax not subject to withholding.

In short, there is no double taxation, because there is no taxing twice, by the same taxing authority, within
the same jurisdiction, for the same purpose, in different taxing periods, some of the property in the
territory. 125 Subjecting interest income to a 20% FWT and including it in the computation of the 5% GRT
is clearly not double taxation. SHIETa

WHEREFORE, the Petition is GRANTED. The assailed Decision and Resolution of the Court of Appeals are
hereby REVERSED and SET ASIDE. No costs.

SO ORDERED.

Davide, Jr., C .J ., Ynares-Santiago, Carpio and Azcuna, JJ ., concur.

EN BANC
[G.R. No. 144104. June 29, 2004.]
LUNG CENTER OF THE PHILIPPINES, petitioner, vs. QUEZON CITY and CONSTANTINO P. ROSAS, in his
capacity as City Assessor of Quezon City, respondents.
DECISION
CALLEJO, SR., J p:
This is a petition for review on certiorari under Rule 45 of the Rules of Court, as amended, of the Decision
1 dated July 17, 2000 of the Court of Appeals in CA-G.R. SP No. 57014 which affirmed the decision of the
Central Board of Assessment Appeals holding that the lot owned by the petitioner and its hospital building
constructed thereon are subject to assessment for purposes of real property tax.
The Antecedents
The petitioner Lung Center of the Philippines is a non-stock and non-profit entity established on January
16, 1981 by virtue of Presidential Decree No. 1823. 2 It is the registered owner of a parcel of land,
particularly described as Lot No. RP-3-B-3A-1-B-1, SWO-04-000495, located at Quezon Avenue corner
Elliptical Road, Central District, Quezon City. The lot has an area of 121,463 square meters and is covered
by Transfer Certificate of Title (TCT) No. 261320 of the Registry of Deeds of Quezon City. Erected in the
middle of the aforesaid lot is a hospital known as the Lung Center of the Philippines. A big space at the
ground floor is being leased to private parties, for canteen and small store spaces, and to medical or
professional practitioners who use the same as their private clinics for their patients whom they charge for
their professional services. Almost one-half of the entire area on the left side of the building along Quezon
Avenue is vacant and idle, while a big portion on the right side, at the corner of Quezon Avenue and
Elliptical Road, is being leased for commercial purposes to a private enterprise known as the Elliptical
Orchids and Garden Center.
The petitioner accepts paying and non-paying patients. It also renders medical services to out-patients,
both paying and non-paying. Aside from its income from paying patients, the petitioner receives annual
subsidies from the government.
On June 7, 1993, both the land and the hospital building of the petitioner were assessed for real property
taxes in the amount of P4,554,860 by the City Assessor of Quezon City. 3 Accordingly, Tax Declaration Nos.
C-021-01226 (16-2518) and C-021-01231 (15-2518-A) were issued for the land and the hospital building,
respectively. 4 On August 25, 1993, the petitioner filed a Claim for Exemption 5 from real property taxes
with the City Assessor, predicated on its claim that it is a charitable institution. The petitioner's request
was denied, and a petition was, thereafter, filed before the Local Board of Assessment Appeals of Quezon
City (QC-LBAA, for brevity) for the reversal of the resolution of the City Assessor. The petitioner alleged
that under Section 28, paragraph 3 of the 1987 Constitution, the property is exempt from real property
taxes. It averred that a minimum of 60% of its hospital beds are exclusively used for charity patients and
that the major thrust of its hospital operation is to serve charity patients. The petitioner contends that it is
a charitable institution and, as such, is exempt from real property taxes. The QC-LBAA rendered judgment
dismissing the petition and holding the petitioner liable for real property taxes. 6
The QC-LBAA's decision was, likewise, affirmed on appeal by the Central Board of Assessment Appeals of
Quezon City (CBAA, for brevity) 7 which ruled that the petitioner was not a charitable institution and that
its real properties were not actually, directly and exclusively used for charitable purposes; hence, it was
not entitled to real property tax exemption under the constitution and the law. The petitioner sought relief
from the Court of Appeals, which rendered judgment affirming the decision of the CBAA. 8
Undaunted, the petitioner filed its petition in this Court contending that:
A. THE COURT A QUO ERRED IN DECLARING PETITIONER AS NOT ENTITLED TO REALTY TAX
EXEMPTIONS ON THE GROUND THAT ITS LAND, BUILDING AND IMPROVEMENTS, SUBJECT OF
ASSESSMENT, ARE NOT ACTUALLY, DIRECTLY AND EXCLUSIVELY DEVOTED FOR CHARITABLE PURPOSES.
B. WHILE PETITIONER IS NOT DECLARED AS REAL PROPERTY TAX EXEMPT UNDER ITS
CHARTER, PD 1823, SAID EXEMPTION MAY NEVERTHELESS BE EXTENDED UPON PROPER APPLICATION.
The petitioner avers that it is a charitable institution within the context of Section 28(3), Article VI of the
1987 Constitution. It asserts that its character as a charitable institution is not altered by the fact that it
admits paying patients and renders medical services to them, leases portions of the land to private parties,
and rents out portions of the hospital to private medical practitioners from which it derives income to be
used for operational expenses. The petitioner points out that for the years 1995 to 1999, 100% of its out-
patients were charity patients and of the hospital's 282-bed capacity, 60% thereof, or 170 beds, is allotted
to charity patients. It asserts that the fact that it receives subsidies from the government attests to its
character as a charitable institution. It contends that the "exclusivity" required in the Constitution does not
necessarily mean "solely." Hence, even if a portion of its real estate is leased out to private individuals from
whom it derives income, it does not lose its character as a charitable institution, and its exemption from
the payment of real estate taxes on its real property. The petitioner cited our ruling in Herrera v. QC-BAA 9
to bolster its pose. The petitioner further contends that even if P.D. No. 1823 does not exempt it from the
payment of real estate taxes, it is not precluded from seeking tax exemption under the 1987 Constitution.
In their comment on the petition, the respondents aver that the petitioner is not a charitable entity. The
petitioner's real property is not exempt from the payment of real estate taxes under P.D. No. 1823 and even
under the 1987 Constitution because it failed to prove that it is a charitable institution and that the said
property is actually, directly and exclusively used for charitable purposes. The respondents noted that in a
newspaper report, it appears that graft charges were filed with the Sandiganbayan against the director of
the petitioner, its administrative officer, and Zenaida Rivera, the proprietress of the Elliptical Orchids and
Garden Center, for entering into a lease contract over 7,663.13 square meters of the property in 1990 for
only P20,000 a month, when the monthly rental should be P357,000 a month as determined by the
Commission on Audit; and that instead of complying with the directive of the COA for the cancellation of
the contract for being grossly prejudicial to the government, the petitioner renewed the same on March 13,
1995 for a monthly rental of only P24,000. They assert that the petitioner uses the subsidies granted by
the government for charity patients and uses the rest of its income from the property for the benefit of
paying patients, among other purposes. They aver that the petitioner failed to adduce substantial evidence
that 100% of its out-patients and 170 beds in the hospital are reserved for indigent patients. The
respondents further assert, thus:
13. That the claims/allegations of the Petitioner LCP do not speak well of its record of service. That
before a patient is admitted for treatment in the Center, first impression is that it is pay-patient and
required to pay a certain amount as deposit. That even if a patient is living below the poverty line, he is
charged with high hospital bills. And, without these bills being first settled, the poor patient cannot be
allowed to leave the hospital or be discharged without first paying the hospital bills or issue a promissory
note guaranteed and indorsed by an influential agency or person known only to the Center; that even the
remains of deceased poor patients suffered the same fate. Moreover, before a patient is admitted for
treatment as free or charity patient, one must undergo a series of interviews and must submit all the
requirements needed by the Center, usually accompanied by endorsement by an influential agency or
person known only to the Center. These facts were heard and admitted by the Petitioner LCP during the
hearings before the Honorable QC-BAA and Honorable CBAA. These are the reasons of indigent patients,
instead of seeking treatment with the Center, they prefer to be treated at the Quezon Institute. Can such
practice by the Center be called charitable? 10
The Issues
The issues for resolution are the following: (a) whether the petitioner is a charitable institution within the
context of Presidential Decree No. 1823 and the 1973 and 1987 Constitutions and Section 234(b) of
Republic Act No. 7160; and (b) whether the real properties of the petitioner are exempt from real property
taxes.
The Court's Ruling
The petition is partially granted.
On the first issue, we hold that the petitioner is a charitable institution within the context of the 1973 and
1987 Constitutions. To determine whether an enterprise is a charitable institution/entity or not, the
elements which should be considered include the statute creating the enterprise, its corporate purposes,
its constitution and by-laws, the methods of administration, the nature of the actual work performed, the
character of the services rendered, the indefiniteness of the beneficiaries, and the use and occupation of
the properties. 11
In the legal sense, a charity may be fully defined as a gift, to be applied consistently with existing laws, for
the benefit of an indefinite number of persons, either by bringing their minds and hearts under the
influence of education or religion, by assisting them to establish themselves in life or otherwise lessening
the burden of government. 12 It may be applied to almost anything that tend to promote the well-doing
and well-being of social man. It embraces the improvement and promotion of the happiness of man. 13
The word "charitable" is not restricted to relief of the poor or sick. 14 The test of a charity and a charitable
organization are in law the same. The test whether an enterprise is charitable or not is whether it exists to
carry out a purpose reorganized in law as charitable or whether it is maintained for gain, profit, or private
advantage.
Under P.D. No. 1823, the petitioner is a non-profit and non-stock corporation which, subject to the
provisions of the decree, is to be administered by the Office of the President of the Philippines with the
Ministry of Health and the Ministry of Human Settlements. It was organized for the welfare and benefit of
the Filipino people principally to help combat the high incidence of lung and pulmonary diseases in the
Philippines. The raison d'etre for the creation of the petitioner is stated in the decree, viz:
Whereas, for decades, respiratory diseases have been a priority concern, having been the leading cause of
illness and death in the Philippines, comprising more than 45% of the total annual deaths from all causes,
thus, exacting a tremendous toll on human resources, which ailments are likely to increase and degenerate
into serious lung diseases on account of unabated pollution, industrialization and unchecked cigarette
smoking in the country;
Whereas, the more common lung diseases are, to a great extent, preventable, and curable with early and
adequate medical care, immunization and through prompt and intensive prevention and health education
programs;
Whereas, there is an urgent need to consolidate and reinforce existing programs, strategies and efforts at
preventing, treating and rehabilitating people affected by lung diseases, and to undertake research and
training on the cure and prevention of lung diseases, through a Lung Center which will house and nurture
the above and related activities and provide tertiary-level care for more difficult and problematical cases;
Whereas, to achieve this purpose, the Government intends to provide material and financial support
towards the establishment and maintenance of a Lung Center for the welfare and benefit of the Filipino
people. 15
The purposes for which the petitioner was created are spelled out in its Articles of Incorporation, thus:
SECOND: That the purposes for which such corporation is formed are as follows:
1. To construct, establish, equip, maintain, administer and conduct an integrated medical
institution which shall specialize in the treatment, care, rehabilitation and/or relief of lung and allied
diseases in line with the concern of the government to assist and provide material and financial support in
the establishment and maintenance of a lung center primarily to benefit the people of the Philippines and
in pursuance of the policy of the State to secure the well-being of the people by providing them specialized
health and medical services and by minimizing the incidence of lung diseases in the country and
elsewhere.
2. To promote the noble undertaking of scientific research related to the prevention of lung or
pulmonary ailments and the care of lung patients, including the holding of a series of relevant congresses,
conventions, seminars and conferences;
3. To stimulate and, whenever possible, underwrite scientific researches on the biological,
demographic, social, economic, eugenic and physiological aspects of lung or pulmonary diseases and their
control; and to collect and publish the findings of such research for public consumption;
4. To facilitate the dissemination of ideas and public acceptance of information on lung
consciousness or awareness, and the development of fact-finding, information and reporting facilities for
and in aid of the general purposes or objects aforesaid, especially in human lung requirements, general
health and physical fitness, and other relevant or related fields;
5. To encourage the training of physicians, nurses, health officers, social workers and medical and
technical personnel in the practical and scientific implementation of services to lung patients;
6. To assist universities and research institutions in their studies about lung diseases, to
encourage advanced training in matters of the lung and related fields and to support educational programs
of value to general health;
7. To encourage the formation of other organizations on the national, provincial and/or city and
local levels; and to coordinate their various efforts and activities for the purpose of achieving a more
effective programmatic approach on the common problems relative to the objectives enumerated herein;
8. To seek and obtain assistance in any form from both international and local foundations and
organizations; and to administer grants and funds that may be given to the organization;
9. To extend, whenever possible and expedient, medical services to the public and, in general, to
promote and protect the health of the masses of our people, which has long been recognized as an
economic asset and a social blessing;
10. To help prevent, relieve and alleviate the lung or pulmonary afflictions and maladies of the
people in any and all walks of life, including those who are poor and needy, all without regard to or
discrimination, because of race, creed, color or political belief of the persons helped; and to enable them to
obtain treatment when such disorders occur;
11. To participate, as circumstances may warrant, in any activity designed and carried on to
promote the general health of the community;
12. To acquire and/or borrow funds and to own all funds or equipment, educational materials and
supplies by purchase, donation, or otherwise and to dispose of and distribute the same in such manner,
and, on such basis as the Center shall, from time to time, deem proper and best, under the particular
circumstances, to serve its general and non-profit purposes and objectives;
13. To buy, purchase, acquire, own, lease, hold, sell, exchange, transfer and dispose of properties,
whether real or personal, for purposes herein mentioned; and
14. To do everything necessary, proper, advisable or convenient for the accomplishment of any of
the powers herein set forth and to do every other act and thing incidental thereto or connected therewith.
16
Hence, the medical services of the petitioner are to be rendered to the public in general in any and all
walks of life including those who are poor and the needy without discrimination. After all, any person, the
rich as well as the poor, may fall sick or be injured or wounded and become a subject of charity. 17
As a general principle, a charitable institution does not lose its character as such and its exemption from
taxes simply because it derives income from paying patients, whether out-patient, or confined in the
hospital, or receives subsidies from the government, so long as the money received is devoted or used
altogether to the charitable object which it is intended to achieve; and no money inures to the private
benefit of the persons managing or operating the institution. 18 In Congregational Sunday School, etc. v.
Board of Review, 19 the State Supreme Court of Illinois held, thus:
. . . [A]n institution does not lose its charitable character, and consequent exemption from taxation, by
reason of the fact that those recipients of its benefits who are able to pay are required to do so, where no
profit is made by the institution and the amounts so received are applied in furthering its charitable
purposes, and those benefits are refused to none on account of inability to pay therefor. The fundamental
ground upon which all exemptions in favor of charitable institutions are based is the benefit conferred
upon the public by them, and a consequent relief, to some extent, of the burden upon the state to care for
and advance the interests of its citizens. 20
As aptly stated by the State Supreme Court of South Dakota in Lutheran Hospital Association of South
Dakota v. Baker: 21
. . . [T]he fact that paying patients are taken, the profits derived from attendance upon these patients being
exclusively devoted to the maintenance of the charity, seems rather to enhance the usefulness of the
institution to the poor; for it is a matter of common observation amongst those who have gone about at all
amongst the suffering classes, that the deserving poor can with difficulty be persuaded to enter an asylum
of any kind confined to the reception of objects of charity; and that their honest pride is much less
wounded by being placed in an institution in which paying patients are also received. The fact of receiving
money from some of the patients does not, we think, at all impair the character of the charity, so long as
the money thus received is devoted altogether to the charitable object which the institution is intended to
further. 22
The money received by the petitioner becomes a part of the trust fund and must be devoted to public trust
purposes and cannot be diverted to private profit or benefit. 23
Under P.D. No. 1823, the petitioner is entitled to receive donations. The petitioner does not lose its
character as a charitable institution simply because the gift or donation is in the form of subsidies granted
by the government. As held by the State Supreme Court of Utah in Yorgason v. County Board of
Equalization of Salt Lake County: 24
Second, the . . . government subsidy payments are provided to the project. Thus, those payments are like a
gift or donation of any other kind except they come from the government. In both Intermountain Health
Care and the present case, the crux is the presence or absence of material reciprocity. It is entirely
irrelevant to this analysis that the government, rather than a private benefactor, chose to make up the
deficit resulting from the exchange between St. Mark's Tower and the tenants by making a contribution to
the landlord, just as it would have been irrelevant in Intermountain Health Care if the patients' income
supplements had come from private individuals rather than the government.
Therefore, the fact that subsidization of part of the cost of furnishing such housing is by the government
rather than private charitable contributions does not dictate the denial of a charitable exemption if the
facts otherwise support such an exemption, as they do here. 25
In this case, the petitioner adduced substantial evidence that it spent its income, including the subsidies
from the government for 1991 and 1992 for its patients and for the operation of the hospital. It even
incurred a net loss in 1991 and 1992 from its operations.
Even as we find that the petitioner is a charitable institution, we hold, anent the second issue, that those
portions of its real property that are leased to private entities are not exempt from real property taxes as
these are not actually, directly and exclusively used for charitable purposes.
The settled rule in this jurisdiction is that laws granting exemption from tax are construed strictissimi
juris against the taxpayer and liberally in favor of the taxing power. Taxation is the rule and exemption is
the exception. The effect of an exemption is equivalent to an appropriation. Hence, a claim for exemption
from tax payments must be clearly shown and based on language in the law too plain to be mistaken. 26 As
held in Salvation Army v. Hoehn: 27
An intention on the part of the legislature to grant an exemption from the taxing power of the state will
never be implied from language which will admit of any other reasonable construction. Such an intention
must be expressed in clear and unmistakable terms, or must appear by necessary implication from the
language used, for it is a well settled principle that, when a special privilege or exemption is claimed under
a statute, charter or act of incorporation, it is to be construed strictly against the property owner and in
favor of the public. This principle applies with peculiar force to a claim of exemption from taxation. . . . 28
Section 2 of Presidential Decree No. 1823, relied upon by the petitioner, specifically provides that the
petitioner shall enjoy the tax exemptions and privileges:
SEC. 2. TAX EXEMPTIONS AND PRIVILEGES. — Being a non-profit, non-stock corporation organized
primarily to help combat the high incidence of lung and pulmonary diseases in the Philippines, all
donations, contributions, endowments and equipment and supplies to be imported by authorized entities
or persons and by the Board of Trustees of the Lung Center of the Philippines, Inc., for the actual use and
benefit of the Lung Center, shall be exempt from income and gift taxes, the same further deductible in full
for the purpose of determining the maximum deductible amount under Section 30, paragraph (h), of the
National Internal Revenue Code, as amended.
The Lung Center of the Philippines shall be exempt from the payment of taxes, charges and fees imposed
by the Government or any political subdivision or instrumentality thereof with respect to equipment
purchases made by, or for the Lung Center. 29
It is plain as day that under the decree, the petitioner does not enjoy any property tax exemption
privileges for its real properties as well as the building constructed thereon. If the intentions were
otherwise, the same should have been among the enumeration of tax exempt privileges under Section 2:
It is a settled rule of statutory construction that the express mention of one person, thing, or consequence
implies the exclusion of all others. The rule is expressed in the familiar maxim, expressio unius est exclusio
alterius.
The rule of expressio unius est exclusio alterius is formulated in a number of ways. One variation of the
rule is the principle that what is expressed puts an end to that which is implied. Expressium facit cessare
tacitum. Thus, where a statute, by its terms, is expressly limited to certain matters, it may not, by
interpretation or construction, be extended to other matters.
xxx xxx xxx
The rule of expressio unius est exclusio alterius and its variations are canons of restrictive interpretation.
They are based on the rules of logic and the natural workings of the human mind. They are predicated
upon one's own voluntary act and not upon that of others. They proceed from the premise that the
legislature would not have made specified enumeration in a statute had the intention been not to restrict
its meaning and confine its terms to those expressly mentioned. 30
The exemption must not be so enlarged by construction since the reasonable presumption is that the State
has granted in express terms all it intended to grant at all, and that unless the privilege is limited to the
very terms of the statute the favor would be intended beyond what was meant. 31
Section 28(3), Article VI of the 1987 Philippine Constitution provides, thus:
real property is used for one or more commercial purposes, it is not exclusively used for the exempted
purposes but is subject to taxation. 41 The words "dominant use" or "principal use" cannot be substituted
for the words "used exclusively" without doing violence to the Constitutions and the law. 42 Solely is
synonymous with exclusively. 43
What is meant by actual, direct and exclusive use of the property for charitable purposes is the direct and
immediate and actual application of the property itself to the purposes for which the charitable institution
is organized. It is not the use of the income from the real property that is determinative of whether the
property is used for tax-exempt purposes. 44

(3) Charitable institutions, churches and parsonages or convents appurtenant thereto, mosques,
non-profit cemeteries, and all lands, buildings, and improvements, actually, directly and exclusively used
for religious, charitable or educational purposes shall be exempt from taxation. 32
The tax exemption under this constitutional provision covers property taxes only. 33 As Chief Justice
Hilario G. Davide, Jr., then a member of the 1986 Constitutional Commission, explained: ". . . what is
exempted is not the institution itself . . .; those exempted from real estate taxes are lands, buildings and
improvements actually, directly and exclusively used for religious, charitable or educational purposes." 34
The petitioner failed to discharge its burden to prove that the entirety of its real property is actually,
directly and exclusively used for charitable purposes. While portions of the hospital are used for the
treatment of patients and the dispensation of medical services to them, whether paying or non-paying,
other portions thereof are being leased to private individuals for their clinics and a canteen. Further, a
portion of the land is being leased to a private individual for her business enterprise under the business
name "Elliptical Orchids and Garden Center." Indeed, the petitioner's evidence shows that it collected
P1,136,483.45 as rentals in 1991 and P1,679,999.28 for 1992 from the said lessees.

Consequently, the constitutional provision is implemented by Section 234(b) of Republic Act No. 7160
(otherwise known as the Local Government Code of 1991) as follows:
SECTION 234. Exemptions from Real Property Tax. — The following are exempted from payment of
the real property tax:
Accordingly, we hold that the portions of the land leased to private entities as well as those parts of the
hospital leased to private individuals are not exempt from such taxes. 45 On the other hand, the portions of
the land occupied by the hospital and portions of the hospital used for its patients, whether paying or non-
paying, are exempt from real property taxes.

xxx xxx xxx

(b) Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, non- IN LIGHT OF ALL THE FOREGOING, the petition is PARTIALLY GRANTED. The respondent Quezon City
profit or religious cemeteries and all lands, buildings, and improvements actually, directly, and exclusively Assessor is hereby DIRECTED to determine, after due hearing, the precise portions of the land and the area
used for religious, charitable or educational purposes. 35 thereof which are leased to private persons, and to compute the real property taxes due thereon as
provided for by law.
We note that under the 1935 Constitution, ". . . all lands, buildings, and improvements used 'exclusively' for
… charitable . . . purposes shall be exempt from taxation." 36 However, under the 1973 and the present
Constitutions, for "lands, buildings, and improvements" of the charitable institution to be considered
exempt, the same should not only be "exclusively" used for charitable purposes; it is required that such SO ORDERED.
property be used "actually" and "directly" for such purposes. 37
Davide, Jr., C .J ., Puno, Panganiban, Quisumbing, Sandoval-Gutierrez, Carpio, Corona, Carpio-Morales,
In light of the foregoing substantial changes in the Constitution, the petitioner cannot rely on our ruling in Azcuna and Tinga, JJ ., concur.
Herrera v. Quezon City Board of Assessment Appeals which was promulgated on September 30, 1961
before the 1973 and 1987 Constitutions took effect. 38 As this Court held in Province of Abra v. Hernando: Vitug, J ., is on official leave.
39
Ynares-Santiago and Austria-Martinez, JJ ., are on leave.
. . . Under the 1935 Constitution: "Cemeteries, churches, and parsonages or convents appurtenant thereto,
and all lands, buildings, and improvements used exclusively for religious, charitable, or educational
purposes shall be exempt from taxation." The present Constitution added "charitable institutions,
mosques, and non-profit cemeteries" and required that for the exemption of "lands, buildings, and
improvements," they should not only be "exclusively" but also "actually" and "directly" used for religious or
charitable purposes. The Constitution is worded differently. The change should not be ignored. It must be
duly taken into consideration. Reliance on past decisions would have sufficed were the words "actually" as
well as "directly" not added. There must be proof therefore of the actual and direct use of the lands,
buildings, and improvements for religious or charitable purposes to be exempt from taxation . . .

Under the 1973 and 1987 Constitutions and Rep. Act No. 7160 in order to be entitled to the exemption, the
petitioner is burdened to prove, by clear and unequivocal proof, that (a) it is a charitable institution; and
(b) its real properties are ACTUALLY, DIRECTLY and EXCLUSIVELY used for charitable purposes.
"Exclusive" is defined as possessed and enjoyed to the exclusion of others; debarred from participation or
enjoyment; and "exclusively" is defined, "in a manner to exclude; as enjoying a privilege exclusively." 40 If
THIRD DIVISION
[G.R. No. 149110. April 9, 2003.]
NATIONAL POWER CORPORATION, petitioner, vs. CITY OF CABANATUAN, respondent.
DECISION
PUNO, J p:
This is a petition for review 1 of the Decision 2 and the Resolution 3 of the Court of Appeals dated March
12, 2001 and July 10, 2001, respectively, finding petitioner National Power Corporation (NPC) liable to pay
franchise tax to respondent City of Cabanatuan. CEDScA
Petitioner is a government-owned and controlled corporation created under Commonwealth Act No. 120,
as amended. 4 It is tasked to undertake the "development of hydroelectric generations of power and the
production of electricity from nuclear, geothermal and other sources, as well as, the transmission of
electric power on a nationwide basis." 5 Concomitant to its mandated duty, petitioner has, among others,
the power to construct, operate and maintain power plants, auxiliary plants, power stations and
substations for the purpose of developing hydraulic power and supplying such power to the inhabitants. 6
For many years now, petitioner sells electric power to the residents of Cabanatuan City, posting a gross
income of P107,814,187.96 in 1992. 7 Pursuant to section 37 of Ordinance No. 165-92, 8 the respondent
assessed the petitioner a franchise tax amounting to P808,606.41, representing 75% of 1% of the latter's
gross receipts for the preceding year. 9
Petitioner, whose capital stock was subscribed and paid wholly by the Philippine Government, 10 refused
to pay the tax assessment. It argued that the respondent has no authority to impose tax on government
entities. Petitioner also contended that as a non-profit organization, it is exempted from the payment of all
forms of taxes, charges, duties or fees 11 in accordance with sec. 13 of Rep. Act No. 6395, as amended, viz:
Sec. 13. Non-profit Character of the Corporation; Exemption from all Taxes, Duties, Fees, Imposts and
Other Charges by Government and Governmental Instrumentalities. — The Corporation shall be non-profit
and shall devote all its return from its capital investment, as well as excess revenues from its operation, for
expansion. To enable the Corporation to pay its indebtedness and obligations and in furtherance and
effective implementation of the policy enunciated in Section one of this Act, the Corporation is hereby
exempt:
(a) From the payment of all taxes, duties, fees, imposts, charges, costs and service fees in any court
or administrative proceedings in which it may be a party, restrictions and duties to the Republic of the
Philippines, its provinces, cities, municipalities and other government agencies and instrumentalities;
(b) From all income taxes, franchise taxes and realty taxes to be paid to the National Government,
its provinces, cities, municipalities and other government agencies and instrumentalities;
(c) From all import duties, compensating taxes and advanced sales tax, and wharfage fees on
import of foreign goods required for its operations and projects; and
(d) From all taxes, duties, fees, imposts, and all other charges imposed by the Republic of the
Philippines, its provinces, cities, municipalities and other government agencies and instrumentalities, on
all petroleum products used by the Corporation in the generation, transmission, utilization, and sale of
electric power." 12
The respondent filed a collection suit in the Regional Trial Court of Cabanatuan City, demanding that
petitioner pay the assessed tax due, plus a surcharge equivalent to 25% of the amount of tax, and 2%
monthly interest. 13 Respondent alleged that petitioner's exemption from local taxes has been repealed by
section 193 of Rep. Act No. 7160, 14 which reads as follows:
"Sec. 193. Withdrawal of Tax Exemption Privileges. — Unless otherwise provided in this Code, tax
exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or juridical,
including government owned or controlled corporations, except local water districts, cooperatives duly
registered under R.A. No. 6938, non-stock and non-profit hospitals and educational institutions, are
hereby withdrawn upon the effectivity of this Code."
On January 25, 1996, the trial court issued an Order 15 dismissing the case. It ruled that the tax exemption
privileges granted to petitioner subsist despite the passage of Rep. Act No. 7160 for the following reasons:
(1) Rep. Act No. 6395 is a particular law and it may not be repealed by Rep. Act No. 7160 which is a general
law; (2) section 193 of Rep. Act No. 7160 is in the nature of an implied repeal which is not favored; and (3)
local governments have no power to tax instrumentalities of the national government. Pertinent portion of
the Order reads:
"The question of whether a particular law has been repealed or not by a subsequent law is a matter of
legislative intent. The lawmakers may expressly repeal a law by incorporating therein repealing provisions
which expressly and specifically cite(s) the particular law or laws, and portions thereof, that are intended
to be repealed. A declaration in a statute, usually in its repealing clause, that a particular and specific law,
identified by its number or title is repealed is an express repeal; all others are implied repeal. Sec. 193 of
R.A. No. 7160 is an implied repealing clause because it fails to identify the act or acts that are intended to
be repealed. It is a well-settled rule of statutory construction that repeals of statutes by implication are not
favored. The presumption is against inconsistency and repugnancy for the legislative is presumed to know
the existing laws on the subject and not to have enacted inconsistent or conflicting statutes. It is also a
well-settled rule that, generally, general law does not repeal a special law unless it clearly appears that the
legislative has intended by the latter general act to modify or repeal the earlier special law. Thus, despite
the passage of R.A. No. 7160 from which the questioned Ordinance No. 165-92 was based, the tax
exemption privileges of defendant NPC remain.
Another point going against plaintiff in this case is the ruling of the Supreme Court in the case of Basco vs.
Philippine Amusement and Gaming Corporation, 197 SCRA 52, where it was held that:
'Local governments have no power to tax instrumentalities of the National Government. PAGCOR is a
government owned or controlled corporation with an original charter, PD 1869. All of its shares of stocks
are owned by the National Government. . . . Being an instrumentality of the government, PAGCOR should
be and actually is exempt from local taxes. Otherwise, its operation might be burdened, impeded or
subjected to control by mere local government.'
Like PAGCOR, NPC, being a government owned and controlled corporation with an original charter and its
shares of stocks owned by the National Government, is beyond the taxing power of the Local Government.
Corollary to this, it should be noted here that in the NPC Charter's declaration of Policy, Congress declared
that: '. . . (2) the total electrification of the Philippines through the development of power from all services
to meet the needs of industrial development and dispersal and needs of rural electrification are primary
objectives of the nations which shall be pursued coordinately and supported by all instrumentalities and
agencies of the government, including its financial institutions.' (emphasis supplied). To allow plaintiff to
subject defendant to its tax-ordinance would be to impede the avowed goal of this government
instrumentality.
Unlike the State, a city or municipality has no inherent power of taxation. Its taxing power is limited to that
which is provided for in its charter or other statute. Any grant of taxing power is to be construed strictly,
with doubts resolved against its existence.
From the existing law and the rulings of the Supreme Court itself, it is very clear that the plaintiff could not
impose the subject tax on the defendant." 16
On appeal, the Court of Appeals reversed the trial court's Order 17 on the ground that section 193, in
relation to sections 137 and 151 of the LGC, expressly withdrew the exemptions granted to the petitioner.
18 It ordered the petitioner to pay the respondent city government the following: (a) the sum of
P808,606.41 representing the franchise tax due based on gross receipts for the year 1992, (b) the tax due
every year thereafter based in the gross receipts earned by NPC, (c) in all cases, to pay a surcharge of 25%
of the tax due and unpaid, and (d) the sum of P10,000.00 as litigation expense. 19
On April 4, 2001, the petitioner filed a Motion for Reconsideration on the Court of Appeal's Decision. This
was denied by the appellate court, viz:
"The Court finds no merit in NPC's motion for reconsideration. Its arguments reiterated therein that the
taxing power of the province under Art. 137 (sic) of the Local Government Code refers merely to private
persons or corporations in which category it (NPC) does not belong, and that the LGC (RA 7160) which is a
general law may not impliedly repeal the NPC Charter which is a special law — finds the answer in Section
193 of the LGC to the effect that 'tax exemptions or incentives granted to, or presently enjoyed by all
persons, whether natural or juridical, including government-owned or controlled corporations except
local water districts . . . are hereby withdrawn.' The repeal is direct and unequivocal, not implied.
IN VIEW WHEREOF, the motion for reconsideration is hereby DENIED.
SO ORDERED." 20
In this petition for review, petitioner raises the following issues:
"A. THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT NPC, A PUBLIC NON-PROFIT
CORPORATION, IS LIABLE TO PAY A FRANCHISE TAX AS IT FAILED TO CONSIDER THAT SECTION 137 OF
THE LOCAL GOVERNMENT CODE IN RELATION TO SECTION 131 APPLIES ONLY TO PRIVATE PERSONS OR
CORPORATIONS ENJOYING A FRANCHISE.
B. THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT NPC'S EXEMPTION FROM ALL
FORMS OF TAXES HAS BEEN REPEALED BY THE PROVISION OF THE LOCAL GOVERNMENT CODE AS THE
ENACTMENT OF A LATER LEGISLATION, WHICH IS A GENERAL LAW, CANNOT BE CONSTRUED TO HAVE
REPEALED A SPECIAL LAW.
C. THE COURT OF APPEALS GRAVELY ERRED IN NOT CONSIDERING THAT AN EXERCISE OF
POLICE POWER THROUGH TAX EXEMPTION SHOULD PREVAIL OVER THE LOCAL GOVERNMENT CODE."
21
It is beyond dispute that the respondent city government has the authority to issue Ordinance No. 165-92
and impose an annual tax on "businesses enjoying a franchise," pursuant to section 151 in relation to
section 137 of the LGC, viz:
"Sec. 137. Franchise Tax. — Notwithstanding any exemption granted by any law or other special law, the
province may impose a tax on businesses enjoying a franchise, at a rate not exceeding fifty percent (50%)
of one percent (1%) of the gross annual receipts for the preceding calendar year based on the incoming
receipt, or realized, within its territorial jurisdiction.
In the case of a newly started business, the tax shall not exceed one-twentieth (1/20) of one percent (1%)
of the capital investment. In the succeeding calendar year, regardless of when the business started to
operate, the tax shall be based on the gross receipts for the preceding calendar year, or any fraction
thereof, as provided herein." (emphasis supplied)
xxx xxx xxx
Sec. 151. Scope of Taxing Powers. — Except as otherwise provided in this Code, the city, may levy the
taxes, fees, and charges which the province or municipality may impose: Provided, however, That the taxes,
fees and charges levied and collected by highly urbanized and independent component cities shall accrue
to them and distributed in accordance with the provisions of this Code.
The rates of taxes that the city may levy may exceed the maximum rates allowed for the province or
municipality by not more than fifty percent (50%) except the rates of professional and amusement taxes."
Petitioner, however, submits that it is not liable to pay an annual franchise tax to the respondent city
government. It contends that sections 137 and 151 of the LGC in relation to section 131, limit the taxing
power of the respondent city government to private entities that are engaged in trade or occupation for
profit. 22
Section 131 (m) of the LGC defines a "franchise" as "a right or privilege, affected with public interest which
is conferred upon private persons or corporations, under such terms and conditions as the government
and its political subdivisions may impose in the interest of the public welfare, security and safety." From
the phraseology of this provision, the petitioner claims that the word "private" modifies the terms
"persons" and "corporations." Hence, when the LGC uses the term "franchise," petitioner submits that it
should refer specifically to franchises granted to private natural persons and to private corporations. 23
Ergo, its charter should not be considered a "franchise" for the purpose of imposing the franchise tax in
question. IHSTDE
On the other hand, section 131 (d) of the LGC defines "business" as "trade or commercial activity regularly
engaged in as means of livelihood or with a view to profit." Petitioner claims that it is not engaged in an
activity for profit, in as much as its charter specifically provides that it is a "non-profit organization." In any
case, petitioner argues that the accumulation of profit is merely incidental to its operation; all these profits
are required by law to be channeled for expansion and improvement of its facilities and services. 24
Petitioner also alleges that it is an instrumentality of the National Government, 25 and as such, may not be
taxed by the respondent city government. It cites the doctrine in Basco vs. Philippine Amusement and
Gaming Corporation 26 where this Court held that local governments have no power to tax
instrumentalities of the National Government, viz:
"Local governments have no power to tax instrumentalities of the National Government.
PAGCOR has a dual role, to operate and regulate gambling casinos. The latter role is governmental, which
places it in the category of an agency or instrumentality of the Government. Being an instrumentality of
the Government, PAGCOR should be and actually is exempt from local taxes. Otherwise, its operation might
be burdened, impeded or subjected to control by a mere local government.
'The states have no power by taxation or otherwise, to retard, impede, burden or in any manner control
the operation of constitutional laws enacted by Congress to carry into execution the powers vested in the
federal government. (MC Culloch v. Maryland, 4 Wheat 316, 4 L Ed. 579)'
This doctrine emanates from the 'supremacy' of the National Government over local governments.
'Justice Holmes, speaking for the Supreme Court, made reference to the entire absence of power on the
part of the States to touch, in that way (taxation) at least, the instrumentalities of the United States
(Johnson v. Maryland, 254 US 51) and it can be agreed that no state or political subdivision can regulate a
federal instrumentality in such a way as to prevent it from consummating its federal responsibilities, or
even seriously burden it from accomplishment of them.' (Antieau, Modern Constitutional Law, Vol. 2, p.
140, italics supplied)
Otherwise, mere creatures of the State can defeat National policies thru extermination of what local
authorities may perceive to be undesirable activities or enterprise using the power to tax as 'a tool
regulation' (U.S. v. Sanchez, 340 US 42).
The power to tax which was called by Justice Marshall as the 'power to destroy' (Mc Culloch v. Maryland,
supra) cannot be allowed to defeat an instrumentality or creation of the very entity which has the inherent
power to wield it." 27
Petitioner contends that section 193 of Rep. Act No. 7160, withdrawing the tax privileges of government-
owned or controlled corporations, is in the nature of an implied repeal. A special law, its charter cannot be
amended or modified impliedly by the local government code which is a general law. Consequently,
petitioner claims that its exemption from all taxes, fees or charges under its charter subsists despite the
passage of the LGC, viz:
"It is a well-settled rule of statutory construction that repeals of statutes by implication are not favored
and as much as possible, effect must be given to all enactments of the legislature. Moreover, it has to be
conceded that the charter of the NPC constitutes a special law. Republic Act No. 7160, is a general law. It is
a basic rule in statutory construction that the enactment of a later legislation which is a general law cannot
be construed to have repealed a special law. Where there is a conflict between a general law and a special
statute, the special statute should prevail since it evinces the legislative intent more clearly than the
general statute. 28
Finally, petitioner submits that the charter of the NPC, being a valid exercise of police power, should prevail
over the LGC. It alleges that the power of the local government to impose franchise tax is subordinate to
petitioner's exemption from taxation; "police power being the most pervasive, the least limitable and most
demanding of all powers, including the power of taxation." 29
The petition is without merit.
Taxes are the lifeblood of the government, 30 for without taxes, the government can neither exist nor
endure. A principal attribute of sovereignty, 31 the exercise of taxing power derives its source from the
very existence of the state whose social contract with its citizens obliges it to promote public interest and
common good. The theory behind the exercise of the power to tax emanates from necessity; 32 without
taxes, government cannot fulfill its mandate of promoting the general welfare and well-being of the people.
In recent years, the increasing social challenges of the times expanded the scope of state activity, and
taxation has become a tool to realize social justice and the equitable distribution of wealth, economic
progress and the protection of local industries as well as public welfare and similar objectives. 33 Taxation
assumes even greater significance with the ratification of the 1987 Constitution. Thenceforth, the power to
tax is no longer vested exclusively on Congress; local legislative bodies are now given direct authority to
levy taxes, fees and other charges 34 pursuant to Article X, section 5 of the 1987 Constitution, viz:
"Section 5. Each Local Government unit shall have the power to create its own sources of
revenue, to levy taxes, fees and charges subject to such guidelines and limitations as the Congress may
provide, consistent with the basic policy of local autonomy. Such taxes, fees and charges shall accrue
exclusively to the Local Governments."
This paradigm shift results from the realization that genuine development can be achieved only by
strengthening local autonomy and promoting decentralization of governance. For a long time, the
country's highly centralized government structure has bred a culture of dependence among local
government leaders upon the national leadership. It has also "dampened the spirit of initiative, innovation
and imaginative resilience in matters of local development on the part of local government leaders." 35
The only way to shatter this culture of dependence is to give the LGUs a wider role in the delivery of basic
services, and confer them sufficient powers to generate their own sources for the purpose. To achieve this
goal, section 3 of Article X of the 1987 Constitution mandates Congress to enact a local government code
that will, consistent with the basic policy of local autonomy, set the guidelines and limitations to this grant
of taxing powers, viz:
"Section 3. The Congress shall enact a local government code which shall provide for a more
responsive and accountable local government structure instituted through a system of decentralization
with effective mechanisms of recall, initiative, and referendum, allocate among the different local
government units their powers, responsibilities, and resources, and provide for the qualifications, election,
appointment and removal, term, salaries, powers and functions and duties of local officials, and all other
matters relating to the organization and operation of the local units."
To recall, prior to the enactment of the Rep. Act No. 7160, 36 also known as the Local Government Code of
1991 (LGC), various measures have been enacted to promote local autonomy. These include the Barrio
Charter of 1959, 37 the Local Autonomy Act of 1959, 38 the Decentralization Act of 1967 39 and the Local
Government Code of 1983. 40 Despite these initiatives, however, the shackles of dependence on the
national government remained. Local government units were faced with the same problems that hamper
their capabilities to participate effectively in the national development efforts, among which are: (a)
inadequate tax base, (b) lack of fiscal control over external sources of income, (c) limited authority to
prioritize and approve development projects, (d) heavy dependence on external sources of income, and (e)
limited supervisory control over personnel of national line agencies. 41
Considered as the most revolutionary piece of legislation on local autonomy, 42 the LGC effectively deals
with the fiscal constraints faced by LGUs. It widens the tax base of LGUs to include taxes which were
prohibited by previous laws such as the imposition of taxes on forest products, forest concessionaires,
mineral products, mining operations, and the like. The LGC likewise provides enough flexibility to impose
tax rates in accordance with their needs and capabilities. It does not prescribe graduated fixed rates but
merely specifies the minimum and maximum tax rates and leaves the determination of the actual rates to
the respective sanggunian. 43
One of the most significant provisions of the LGC is the removal of the blanket exclusion of
instrumentalities and agencies of the national government from the coverage of local taxation. Although as
a general rule, LGUs cannot impose taxes, fees or charges of any kind on the National Government, its
agencies and instrumentalities, this rule now admits an exception, i.e., when specific provisions of the LGC
authorize the LGUs to impose taxes, fees or charges on the aforementioned entities, viz:
"Section 133. Common Limitations on the Taxing Powers of the Local Government Units. — Unless
otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and
barangays shall not extend to the levy of the following:
xxx xxx xxx
(o) Taxes, fees, or charges of any kind on the National Government, its agencies and
instrumentalities, and local government units." (emphasis supplied)
In view of the afore-quoted provision of the LGC, the doctrine in Basco vs. Philippine Amusement and
Gaming Corporation 44 relied upon by the petitioner to support its claim no longer applies. To emphasize,
the Basco case was decided prior to the effectivity of the LGC, when no law empowering the local
government units to tax instrumentalities of the National Government was in effect. However, as this Court
ruled in the case of Mactan Cebu International Airport Authority (MCIAA) vs. Marcos, 45 nothing prevents
Congress from decreeing that even instrumentalities or agencies of the government performing
governmental functions may be subject to tax. 46 In enacting the LGC, Congress exercised its prerogative to
tax instrumentalities and agencies of government as it sees fit. Thus, after reviewing the specific
provisions of the LGC, this Court held that MCIAA, although an instrumentality of the national government,
was subject to real property tax, viz:
"Thus, reading together sections 133, 232, and 234 of the LGC, we conclude that as a general rule, as laid
down in section 133, the taxing power of local governments cannot extend to the levy of inter alia, 'taxes,
fees and charges of any kind on the national government, its agencies and instrumentalities, and local
government units'; however, pursuant to section 232, provinces, cities and municipalities in the
Metropolitan Manila Area may impose the real property tax except on, inter alia, 'real property owned by
the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof
has been granted for consideration or otherwise, to a taxable person as provided in the item (a) of the first
paragraph of section 12.'" 47
In the case at bar, section 151 in relation to section 137 of the LGC clearly authorizes the respondent city
government to impose on the petitioner the franchise tax in question. STIEHc
In its general signification, a franchise is a privilege conferred by government authority, which does not
belong to citizens of the country generally as a matter of common right. 48 In its specific sense, a franchise
may refer to a general or primary franchise, or to a special or secondary franchise. The former relates to
the right to exist as a corporation, by virtue of duly approved articles of incorporation, or a charter
pursuant to a special law creating the corporation. 49 The right under a primary or general franchise is
vested in the individuals who compose the corporation and not in the corporation itself. 50 On the other
hand, the latter refers to the right or privileges conferred upon an existing corporation such as the right to
use the streets of a municipality to lay pipes of tracks, erect poles or string wires. 51 The rights under a
secondary or special franchise are vested in the corporation and may ordinarily be conveyed or mortgaged
under a general power granted to a corporation to dispose of its property, except such special or
secondary franchises as are charged with a public use. 52
In section 131 (m) of the LGC, Congress unmistakably defined a franchise in the sense of a secondary or
special franchise. This is to avoid any confusion when the word franchise is used in the context of taxation.
As commonly used, a franchise tax is "a tax on the privilege of transacting business in the state and
exercising corporate franchises granted by the state." 53 It is not levied on the corporation simply for
existing as a corporation, upon its property 54 or its income, 55 but on its exercise of the rights or
privileges granted to it by the government. Hence, a corporation need not pay franchise tax from the time
it ceased to do business and exercise its franchise. 56 It is within this context that the phrase "tax on
businesses enjoying a franchise" in section 137 of the LGC should be interpreted and understood. Verily, to
determine whether the petitioner is covered by the franchise tax in question, the following requisites
should concur: (1) that petitioner has a "franchise" in the sense of a secondary or special franchise; and (2)
that it is exercising its rights or privileges under this franchise within the territory of the respondent city
government. HcDaAI
Petitioner fulfills the first requisite. Commonwealth Act No. 120, as amended by Rep. Act No. 7395,
constitutes petitioner's primary and secondary franchises. It serves as the petitioner's charter, defining its
composition, capitalization, the appointment and the specific duties of its corporate officers, and its
corporate life span. 57 As its secondary franchise, Commonwealth Act No. 120, as amended, vests the
petitioner the following powers which are not available to ordinary corporations, viz:
"xxx xxx xxx
(e) To conduct investigations and surveys for the development of water power in any part of the
Philippines;
(f) To take water from any public stream, river, creek, lake, spring or waterfall in the Philippines,
for the purposes specified in this Act; to intercept and divert the flow of waters from lands of riparian
owners and from persons owning or interested in waters which are or may be necessary for said purposes,
upon payment of just compensation therefor; to alter, straighten, obstruct or increase the flow of water in
streams or water channels intersecting or connecting therewith or contiguous to its works or any part
thereof. Provided, That just compensation shall be paid to any person or persons whose property is,
directly or indirectly, adversely affected or damaged thereby;
(g) To construct, operate and maintain power plants, auxiliary plants, dams, reservoirs, pipes,
mains, transmission lines, power stations and substations, and other works for the purpose of developing
hydraulic power from any river, creek, lake, spring and waterfall in the Philippines and supplying such
power to the inhabitants thereof, to acquire, construct, install, maintain, operate, and improve gas, oil, or
steam engines, and/or other prime movers, generators and machinery in plants and/or auxiliary plants for
the production of electric power; to establish, develop, operate, maintain and administer power and
lighting systems for the transmission and utilization of its power generation; to sell electric power in bulk
to (1) industrial enterprises, (2) city, municipal or provincial systems and other government institutions,
(3) electric cooperatives, (4) franchise holders, and (5) real estate subdivisions . . .;
(h) To acquire, promote, hold, transfer, sell, lease, rent, mortgage, encumber and otherwise dispose
of property incident to, or necessary, convenient or proper to carry out the purposes for which the
Corporation was created: Provided, That in case a right of way is necessary for its transmission lines,
easement of right of way shall only be sought: Provided, however, That in case the property itself shall be
acquired by purchase, the cost thereof shall be the fair market value at the time of the taking of such
property;
(i) To construct works across, or otherwise, any stream, watercourse, canal, ditch, flume, street,
avenue, highway or railway of private and public ownership, as the location of said works may require . . .;
(j) To exercise the right of eminent domain for the purpose of this Act in the manner provided by
law for instituting condemnation proceedings by the national, provincial and municipal governments;
xxx xxx xxx
(m) To cooperate with, and to coordinate its operations with those of the National Electrification
Administration and public service entities;
(n) To exercise complete jurisdiction and control over watersheds surrounding the reservoirs of
plants and/or projects constructed or proposed to be constructed by the Corporation. Upon determination
by the Corporation of the areas required for watersheds for a specific project, the Bureau of Forestry, the
Reforestation Administration and the Bureau of Lands shall, upon written advice by the Corporation,
forthwith surrender jurisdiction to the Corporation of all areas embraced within the watersheds, subject
to existing private rights, the needs of waterworks systems, and the requirements of domestic water
supply;
(o) In the prosecution and maintenance of its projects, the Corporation shall adopt measures to
prevent environmental pollution and promote the conservation, development and maximum utilization of
natural resources . . ." 58
With these powers, petitioner eventually had the monopoly in the generation and distribution of
electricity. This monopoly was strengthened with the issuance of Pres. Decree No. 40, 59 nationalizing the
electric power industry. Although Exec. Order No. 215 60 thereafter allowed private sector participation in
the generation of electricity, the transmission of electricity remains the monopoly of the petitioner.
Petitioner also fulfills the second requisite. It is operating within the respondent city government's
territorial jurisdiction pursuant to the powers granted to it by Commonwealth Act No. 120, as amended.
From its operations in the City of Cabanatuan, petitioner realized a gross income of P107,814,187.96 in
1992. Fulfilling both requisites, petitioner is, and ought to be, subject of the franchise tax in question.
Petitioner, however, insists that it is excluded from the coverage of the franchise tax simply because its
stocks are wholly owned by the National Government, and its charter characterized it as a "non-profit"
organization.
These contentions must necessarily fail.
To stress, a franchise tax is imposed based not on the ownership but on the exercise by the corporation of
a privilege to do business. The taxable entity is the corporation which exercises the franchise, and not the
individual stockholders. By virtue of its charter, petitioner was created as a separate and distinct entity
from the National Government. It can sue and be sued under its own name, 61 and can exercise all the
powers of a corporation under the Corporation Code. 62
To be sure, the ownership by the National Government of its entire capital stock does not necessarily imply
that petitioner is not engaged in business. Section 2 of Pres. Decree No. 2029 63 classifies government-
owned or controlled corporations (GOCCs) into those performing governmental functions and those
performing proprietary functions, viz:
"A government-owned or controlled corporation is a stock or a non-stock corporation, whether performing
governmental or proprietary functions, which is directly chartered by special law or if organized under the
general corporation law is owned or controlled by the government directly, or indirectly through a parent
corporation or subsidiary corporation, to the extent of at least a majority of its outstanding voting capital
stock . . . ." (emphases supplied)
Governmental functions are those pertaining to the administration of government, and as such, are treated
as absolute obligation on the part of the state to perform while proprietary functions are those that are
undertaken only by way of advancing the general interest of society, and are merely optional on the
government. 64 Included in the class of GOCCs performing proprietary functions are "business-like"
entities such as the National Steel Corporation (NSC), the National Development Corporation (NDC), the
Social Security System (SSS), the Government Service Insurance System (GSIS), and the National Water
Sewerage Authority (NAWASA), 65 among others. caHCSD
Petitioner was created to "undertake the development of hydroelectric generation of power and the
production of electricity from nuclear, geothermal and other sources, as well as the transmission of
electric power on a nationwide basis." 66 Pursuant to this mandate, petitioner generates power and sells
electricity in bulk. Certainly, these activities do not partake of the sovereign functions of the government.
They are purely private and commercial undertakings, albeit imbued with public interest. The public
interest involved in its activities, however, does not distract from the true nature of the petitioner as a
commercial enterprise, in the same league with similar public utilities like telephone and telegraph
companies, railroad companies, water supply and irrigation companies, gas, coal or light companies,
power plants, ice plant among others; all of which are declared by this Court as ministrant or proprietary
functions of government aimed at advancing the general interest of society. 67
A closer reading of its charter reveals that even the legislature treats the character of the petitioner's
enterprise as a "business," although it limits petitioner's profits to twelve percent (12%), viz: 68
"(n) When essential to the proper administration of its corporate affairs or necessary for the proper
transaction of its business or to carry out the purposes for which it was organized, to contract
indebtedness and issue bonds subject to approval of the President upon recommendation of the Secretary
of Finance;
(o) To exercise such powers and do such things as may be reasonably necessary to carry out the
business and purposes for which it was organized, or which, from time to time, may be declared by the
Board to be necessary, useful, incidental or auxiliary to accomplish the said purpose . . . ."(emphases
supplied)
It is worthy to note that all other private franchise holders receiving at least sixty percent (60%) of its
electricity requirement from the petitioner are likewise imposed the cap of twelve percent (12%) on
profits. 69 The main difference is that the petitioner is mandated to devote "all its returns from its capital
investment, as well as excess revenues from its operation, for expansion" 70 while other franchise holders
have the option to distribute their profits to its stockholders by declaring dividends. We do not see why
this fact can be a source of difference in tax treatment. In both instances, the taxable entity is the
corporation, which exercises the franchise, and not the individual stockholders.
We also do not find merit in the petitioner's contention that its tax exemptions under its charter subsist
despite the passage of the LGC.
As a rule, tax exemptions are construed strongly against the claimant. Exemptions must be shown to exist
clearly and categorically, and supported by clear legal provisions. 71 In the case at bar, the petitioner's sole
refuge is section 13 of Rep. Act No. 6395 exempting from, among others, "all income taxes, franchise taxes
and realty taxes to be paid to the National Government, its provinces, cities, municipalities and other
government agencies and instrumentalities." However, section 193 of the LGC withdrew, subject to limited
exceptions, the sweeping tax privileges previously enjoyed by private and public corporations. Contrary to
the contention of petitioner, section 193 of the LGC is an express, albeit general, repeal of all statutes
granting tax exemptions from local taxes. 72 It reads:
"Sec. 193. Withdrawal of Tax Exemption Privileges. — Unless otherwise provided in this Code, tax
exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or juridical,
including government-owned or controlled corporations, except local water districts, cooperatives duly
registered under R.A. No. 6938, non-stock and non-profit hospitals and educational institutions, are
hereby withdrawn upon the effectivity of this Code." (emphases supplied)
It is a basic precept of statutory construction that the express mention of one person, thing, act, or
consequence excludes all others as expressed in the familiar maxim expressio unius est exclusio alterius.
73 Not being a local water district, a cooperative registered under R.A. No. 6938, or a non-stock and non-
profit hospital or educational institution, petitioner clearly does not belong to the exception. It is therefore
incumbent upon the petitioner to point to some provisions of the LGC that expressly grant it exemption
from local taxes.
But this would be an exercise in futility. Section 137 of the LGC clearly states that the LGUs can impose
franchise tax "notwithstanding any exemption granted by any law or other special law." This particular
provision of the LGC does not admit any exception. In City Government of San Pablo, Laguna v. Reyes, 74
MERALCO's exemption from the payment of franchise taxes was brought as an issue before this Court. The
same issue was involved in the subsequent case of Manila Electric Company v. Province of Laguna. 75
Ruling in favor of the local government in both instances, we ruled that the franchise tax in question is
imposable despite any exemption enjoyed by MERALCO under special laws, viz:
"It is our view that petitioners correctly rely on provisions of Sections 137 and 193 of the LGC to support
their position that MERALCO's tax exemption has been withdrawn. The explicit language of section 137
which authorizes the province to impose franchise tax 'notwithstanding any exemption granted by any law
or other special law' is all-encompassing and clear. The franchise tax is imposable despite any exemption
enjoyed under special laws.
Section 193 buttresses the withdrawal of extant tax exemption privileges. By stating that unless otherwise
provided in this Code, tax exemptions or incentives granted to or presently enjoyed by all persons,
whether natural or juridical, including government-owned or controlled corporations except (1) local
water districts, (2) cooperatives duly registered under R.A. 6938, (3) non-stock and non-profit hospitals
and educational institutions, are withdrawn upon the effectivity of this code, the obvious import is to limit
the exemptions to the three enumerated entities. It is a basic precept of statutory construction that the
express mention of one person, thing, act, or consequence excludes all others as expressed in the familiar
maxim expressio unius est exclusio alterius. In the absence of any provision of the Code to the contrary,
and we find no other provision in point, any existing tax exemption or incentive enjoyed by MERALCO
under existing law was clearly intended to be withdrawn.
Reading together sections 137 and 193 of the LGC, we conclude that under the LGC the local government
unit may now impose a local tax at a rate not exceeding 50% of 1% of the gross annual receipts for the
preceding calendar based on the incoming receipts realized within its territorial jurisdiction. The
legislative purpose to withdraw tax privileges enjoyed under existing law or charter is clearly manifested
by the language used on (sic) Sections 137 and 193 categorically withdrawing such exemption subject only
to the exceptions enumerated. Since it would be not only tedious and impractical to attempt to enumerate
all the existing statutes providing for special tax exemptions or privileges, the LGC provided for an express,
albeit general, withdrawal of such exemptions or privileges. No more unequivocal language could have
been used." 76 (emphases supplied).
It is worth mentioning that section 192 of the LGC empowers the LGUs, through ordinances duly approved,
to grant tax exemptions, initiatives or reliefs. 77 But in enacting section 37 of Ordinance No. 165-92 which
imposes an annual franchise tax "notwithstanding any exemption granted by law or other special law," the
respondent city government clearly did not intend to exempt the petitioner from the coverage thereof.
Doubtless, the power to tax is the most effective instrument to raise needed revenues to finance and
support myriad activities of the local government units for the delivery of basic services essential to the
promotion of the general welfare and the enhancement of peace, progress, and prosperity of the people. As
this Court observed in the Mactan case, "the original reasons for the withdrawal of tax exemption
privileges granted to government-owned or controlled corporations and all other units of government
were that such privilege resulted in serious tax base erosion and distortions in the tax treatment of
similarly situated enterprises." 78 With the added burden of devolution, it is even more imperative for
government entities to share in the requirements of development, fiscal or otherwise, by paying taxes or
other charges due from them.

IN VIEW WHEREOF, the instant petition is DENIED and the assailed Decision and Resolution of the Court
of Appeals dated March 12, 2001 and July 10, 2001, respectively, are hereby AFFIRMED. TDcEaH

SO ORDERED.

Panganiban, Sandoval-Gutierrez, Corona and Carpio-Morales, JJ ., concur.