FIRST DIVISION

[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.

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.

5.
ID.; ID.; ID.; DOCTRINE OF LAISSEZ-FAIRE REJECTED.
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 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.

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.

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

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 noninterference 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 laissezfaire 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 nondelegation 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 builtin-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
This is to adhere to the recognition given expression by
Justice Laurel in a decision announced not-too-long after the
Constitution came into force and effect that the principle of
non-delegation "has been made to adapt itself to the
complexities of modern governments, giving rise to the
adoption, within certain limits, of the principle of
'subordinate legislation' not only in the United States and
England but in practically all modern governments." 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
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.
Villamor, J., took no part.

Concepcion, C.J., did not take part.

Footnotes
1.

Republic Act No. 5715 (1969).

2.

L-19440, April 18, 1962, 4 SCRA 930.

3.
Sec. 1 of Republic Act No. 5715 enacted on June 21,
1969 amends subsection (g) of Sec. 34 of Republic Act No.
4136 (1964).
4.

70 Phil. 726 (1940).

5.
80 Phil. 71. Cf. Ichong v. Hernandez, 101 Phil. 1155
(1957).
6.
Rubi v. Provincial Board, 39 Phil. 660, 708 (1919).
Earlier Philippine cases during the same era referred to
police power as the power to promote the general welfare
and public interest, U.S. v. Toribio, 15 Phil. 85, 94 (1910); to
enact such laws in relation to persons and property as may
promote public health, public morals, public safety, and the
general welfare of its inhabitants, U.S. v. Gomez Jesus, 31
Phil. 218, 225 (1915); to preserve public order and to
prevent offenses against the state and to establish, for the
intercourse of citizen with citizen, those rules of good
manners and good neighborhood calculated to prevent
conflict of rights, U.S. v. Pompeya, 31 Phil. 245, 254 (1915).
The term is of American origin, having been first referred to
by Chief Justice Marshall in Gibsons v. Ogden, 9 Wheat 7,
208 (1824) and explicitly identified as Maryland, 12 Wheat,
419, 443.
7.

L-20387, January 31, 1968, 22 SCRA 424.

8.

Smith Bell and Co. v. Natividad, 40 Phil. 136 (1919).

9.

Noble State Bank v. Haske, 219 US 112 (1911).

10.

Helvering v. Davis, 301 US 619 (1937).

11.
Cf. United States v. Toribio, 15 Phil. 85 (1910); United
States v. Villareal, 28 Phil. 390 (1914); United States v.
Gomez Jesus, 31 Phil. 218 (1915); Churchill and Tait v.
Rafferty 32 Phil. 580 (1915); Rubi v. Provincial Board, 39 Phil.
660 (1919); Smith Bell and Co. v. Natividad, 40 Phil. 136
(1919); Lorenzo v. Director of Health, 50 Phil. 595 (1927);
People v. Abad Lopez, 62 Phil. 835 (1936); People v. Lagman,
66 Phil. 13 (1938); People v. Cayat, 68 Phil. 12 (1939);
People v. Rosenthal, 68 Phil. 328 (1989); Pampanga Bus Co.
v. Pambusco Employees Union, 68 Phil. 541 (1039); Manila
Trading and Supply Co. v. Zulueta, 69 Phil. 485 (1940);
Pangasinan Trans. Co. v. Public Service Commission, 70 Phil.
221 (1940); Antamok Goldfields Mining Co. v. Court of
Industrial Relations, 70 Phil. 340 (1940); International
Hardwood and Veneer Co. v. Pangil Federation of Labor, 70
Phil. 602 (1940); Calalang v. Williams, 70 Phil. 726 (1940);
Tapang v. Court of Industrial Relations, 72 Phil. 79 (1941);
Laurel v. Misa, 76 Phil. 372 (1946); People vs. Carlos, 78 Phil.
535 (1947); Primicias v. Fugoso, 80 Phil. 71 (1948); Co
Chiong v. Cuaderno, 83 Phil. 242 (1949); People v. Isnain, 85
Phil. 648 (1950); Ongsiako v. Gamboa, 86 Phil. 50 (1950);
Tolentino v. Board of Accountancy, 90 Phil. 83 (1951); People
v. De la Cruz, 92 Phil. 906 (1953); People v. Chu Chi, 92 Phil.
977 (1953); Rutter v. Esteban, 93 Phil. 68 (1953); Ichong v.
Hernandez, 101 Phil. 1155 (1957); King v. Hernaez, L-14859,
March 31, 1962, 4 SCRA 792; De Ramas v. Court of Agrarian
Relations, L-19555, May 29, 1964, 11 SCRA 171; Vda. de
Macasaet v. Court of Agrarian Relations, L-19750, July 17,
1964, 11 SCRA 521; Uichanco v. Gutierrez, L-20275-79, May

31, 1965, 14 SCRA 231; Gamboa v. Pallarca, L-20407, March

31, 1966, 16 SCRA 490; Ilusorio v. Court of Agrarian
Relations, L-20344, May 16, 1966, 17 SCRA 25; Rafael v.
Embroidery and Apparel Control and Inspection Board, L19978, Sept. 29, 1967, 21 SCRA 336; Phil. American Life Ins.
Co. v. Auditor General, L-19255, Jan. 18, 1968, 22 SCRA 135;
Morfe v. Mutuc, L-20387, Jan. 31, 1968, 22 SCRA 424;
Alalayan v. National Power Corp., L-24396, July 29, 1968, 24
SCRA 172.
12.
Cardozo, The Nature of Judicial Process, pp. 77
(1921).
13.
2 Selected Essays on Constitutional Law, p. 27
(1938).
14.

319 US 624.

15.

39 Phil. 660, 717-718.

16.

46 Phil. 440.

17.
261 US 525. (1923). The Adkins case was itself
overruled in 1937 in West Coast Hotel v. Parrish, 300 US 379
(1937).
18.
III Proceedings of the Philippine Constitutional
Convention, Laurel ed., pp. 173-174 (1966).

22.
Pampanga Bus Co. v. Pambusco's Employees' Union,
68 Phil. 541 (1939).
23.
Manila Trading and Supply Co. v. Zulueta, 69 Phil. 485
(1940).
24.
International Hardwood and Veneer Company v. The
Pangil Federation of Labor, 70 Phil. 602 (1940).
25.
Antamok Goldfields Mining Company v. Court of
Industrial Relations, 70 Phil. 340 (1940).
26.
Tapang v. Court of Industrial Relations, 72 Phil. 79
(1941).
27.

People v. Rosenthal, 68 Phil. 328 (1989).

28.
Pangasinan Trans. Co., Inc. v. Public Service Com., 70
Phil. 221 (1940).
29.
Camacho v. Court of Industrial Relations, 80 Phil. 848
(1948); Ongsiaco v. Gamboa, 86 Phil. 50 (1950); De Ramas
v. Court of Agrarian Relations, L-19555, May 29, 1964, 11
SCRA 171; Del Rosario v. De los Santos, L-20589, March 21,
1968, 22 SCRA 1196.
30.

Ichong v. Hernandez, 101 Phil. 1155 (1957).

19.

Ibid., pp. 177-178.

31.
Phil. Air Lines Employees' Asso. v. Phil. Air Lines, Inc.,
L-18559, June 30, 1964, 11 SCRA 387.

20.

70 Phil. 340 (1940).

32.

People v. Chu Chi, 92 Phil. 977 (1953).

33.

Abe v. Foster Wheeler Corp., L-14785, Nov. 29, 1960.

21.
Ibid., p. 360. Cf. Leyte Land Trans. Co. v. Leyte
Farmers and Laborers' Union, 80 Phil. 842 (1948).

34.
Roman Catholic Archbishop of Manila v. Social
Security Com., L-15045, Jan. 20, 1961, 1 SCRA 10. Cf.

Director of Forestry v. Muoz, L-24746, June 28, 1968, 23

SCRA 1183.
35.

Sec. 2, Administrative Order No. 2.

36.

Sec. 3, par. (a), Ibid.

37.
Sec. 3, par. (b) of the order specifies the matter thus:
"(1) For two wheeled motorcycles One in front and
another at the rear which shall be installed, pasted or
painted on the lowest tip of both fenders. (2) For threewheeled motorcycles One in front to be installed, pasted or
painted on the lowest tip of the fender and, two at the rear
to be installed, pasted or painted at the outer-most side of
the rear end of the body of the vehicle. (3) For Trailers with
platform body irrespective of size, two at the rear to be
installed, pasted or painted on the outer-most side of the
rear end of the body. (4) For Trailers with Stake or Van Body
irrespective of size Two in front to be installed, pasted or
painted 5 inches below the two upper corners of the body;
and four at the rear end of the trailer, two of which shall be
installed, pasted or painted 5 inches below the upper two
corners of the rear end of the body and the other two to be
installed, pasted or painted 5 inches above the two lower
corners of the rear end of the body. (5) For Four-wheeled
motor vehicles 2 1/2 meter high or lower irrespective of
weight Two in front to be installed at the outer-most side
of the vehicle preferably at the outer-tip of the front bumper
or at the lower tip of the front fender; and two at the rear to
be installed, pasted or painted on the outer-most side of the
rear end of the body of the vehicle preferably at the outer
tip of the rear fender or bumper. (6) For four-wheeled motor
vehicles 4 meters high but not lower than 2 1/2 meters
irrespective of weight: Four in front, two of which to be
installed, pasted or painted at the outer-most front end of

the vehicle preferably on the outer tip of the front bumper or

fender and another two to be installed, pasted or painted, 5
inches below the upper two corners of the front end of the
body of the motor vehicles; and four in the rear, two of
which to be installed, pasted or painted 5 inches below the
upper two corner of the rear end of the body and the other
two to be installed, pasted or painted 5 inches above the
outer-most rear end of the body of the motor vehicle."
38.
Sec. 3, par. (a), clause 7, Ibid. The next clause reads
as follows: "Furthermore, whenever the load of any vehicle
is indivisible such that a portion thereof extends beyond the
projected width or length of the vehicle, the owner or driver
of such vehicle is hereby required to place reflectors
described in Section 3(a) hereof nailed securely on the
outer-most tip of such load extending beyond both sides of
the vehicle and/or two such reflectors likewise nailed
securely on the outer-most rear end of such load."
39.

Sec. 3, par. (c), Ibid.

40.

Sec. 4, Ibid.

41.

Sec. 4, par. 1, Republic Act No. 4136 (1964).

42.

Sec. 56, par. 1, Ibid.

43.
70 Phil. 726 (1940). This Court has considered as
sufficient standards, "public welfare," Mun. of Cardona v.
Binangonan, 36 Phil. 547 (1917); "necessary in the interest
of law and order," Rubi v. Prov. Board, 39 Phil. 660 (1919);
"public interest," People v. Rosenthal, 68 Phil. 328 (1939);
and "justice and equity and substantial merits of the case,"
Int. Hardwood v. Pagil Fed. of Labor, 70 Phil. 602 (1940).

44.
Pangasinan Transportation v. Public Service
Commission, 70 Phil. 221, 229 (1940).
45.

Ibid.

46.

101 Phil. 1125 (1957).

47.

Ibid., p. 1129.

48.

People v. Jolliffe, 105 Phil. 677. 686-688 (1959).

Copyright 1994-1999 CD Technologies

A s i a, I n c.

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 nonuseful 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 selfincrimination, 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
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 hours, with a proviso that in all cases
full payment shall be charged, call for a different conclusion.
Again, such a limitation cannot be viewed as a transgression
against the command of due process. It is neither
unreasonable nor arbitrary. Precisely it was intended to curb
the opportunity for the immoral or illegitimate use to which
such premises could be, and, according to the explanatory
note, are being devoted. How could it then be arbitrary or
oppressive when there appears a correspondence between
the undeniable existence of an undesirable situation and the

legislative attempt at correction. Moreover, petitioners

cannot be unaware that every regulation of conduct
amounts to curtailment of liberty, which as pointed out by
Justice Malcolm cannot be absolute. Thus: "One thought
which runs through all these different conceptions of liberty
is plainly apparent. It is this: 'Liberty' as understood in
democracies, is not license; it is 'liberty regulated by law.'
Implied in the term is restraint by law for the good of the
individual and for the greater good of the peace and order of
society and the general well-being. No man can do exactly
as he pleases. Every man must renounce unbridled license.
The right of the individual is necessarily subject to
reasonable restraint by general law for the common
good . . . 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?
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

That is all then that this case presents. As it stands, with all
due allowance for the arguments pressed with such vigor
and determination, the attack against the validity of the
challenged ordinance cannot be considered a success. Far
from it. Respect for constitutional law principles so uniformly
held and so uninterruptedly adhered to by this Court
compels a reversal of the appealed decision.

Wherefore, the judgment of the lower court is reversed and

the injunction issued lifted forthwith. With costs.
Reyes, J .B.L., Makalintal, Bengzon, J .P., Zaldivar, Sanchez,
Castro and Angeles, JJ ., concur.

Concepcion, C .J . and Dizon, J ., are on official leave.

Footnotes
1.
The eighteen members are Waldorf Hotel, Hotel
Monte Carlo, Golden Gate Motel, Miami Hotel, Palm Spring
Hotel, Flamingco Motel, Holiday Motel, Rainbow Motel, Palo
Alto Hotel, Paradise Hotel, Mayfair Hotel, Siesta Court, Sun
Valley Hotel, Springfield Hotel, New Palace Hotel, Hotel del
Mar, Longbeach Hotel and Ritz Motel.
2.
U.S. v. Salaveria (1918) 39 Phil. 102, at p. 111. There
was an affirmation of the presumption of validity of
municipal ordinance as announced in the leading Salaveria
decision in Eboa v. Daet, (1950) 85 Phil. 369.
3.

282 U.S. 251, 328, January 5, 1931.

4.
Cf. Ichong v. Hernandez (1957) 101 Phil. 1155, at p.
1163. Also: "To Frankfurter the police power, true to its
etymology, is the power to shape policy. It defies legal
definition; as a response to the dynamic aspects of society,
it cannot be reduced to a constitutional formula. The law
must be sensitive to life; in resolving cases, it must not fall
back upon sterile cliches; its judgments are not to derive
from an abstract dialectic between liberty and the police
power. Instead, in a world of trust and unions and largescale industry, it must meet the challenge of drastic social
change. For him as for Holmes, 'society is more than bargain
and business' and the jurist's art rises to no higher peak
than in vindicating interests not represented by the items in
a balance-sheet. In a progressive society, new interests
emerge, new attitudes appear, social consciousness
quickens. In the face of the unknown one cannot choose

with certainty. Nor as yet, has the whole truth been brought
up from its bottomless well: and how fragile in scientific
proof is the ultimate validity of any particular economic
adjustment. Social development is a process of trial and
error; in the making of policy the fullest possible opportunity
must be given for the play of human mind. If Congress or
legislature does not regulate, laissez faire not the
individual must be the regulator. (Hamilton, Preview of a
Justice (1939) 48 Yale Law Journal, 819).
5.

Noble State Bank v. Haskell, 219 US 412.

6.

U.S. v. Gomez-Jesus (1915) 31 Phil. 218.

7.

Rubi v. Provincial Board (1918) 39 Phil. 660.

8.

U.S. v. Giner Cruz (1918) 38 Phil. 677.

9.
U.S. v. Rodriguez (1918) 38 Phil. 759. See also
Sarmiento v. Belderol, 60 Off. Gaz. (2) 196; Lapera v.
Vicente, L-18102, June 30, 1962.
10.

U.S. v. Pacis (1915) 31 Phil. 524.

11.
U.S. v. Espiritu-Santo (1912) 23 Phil. 610; U.S. v.
Joson (1913) 26 Phil. 1; People v. Chan Hong (1938) 65 Phil.
625.
12.

U.S. v. Tamparong (1915) 31 Phil. 321.

13.

U.S. v. Salaveria (1918) 39 Phil. 102.

14.
Uy Ha v. The City Mayor, 108 Phil. 400; Miranda v.
City of Manila L-17252, May 31, 1961.
15.

U.S. v. Ten Yu (1912) 24 Phil. 1.

16.
There is no occasion to consider even cursorily the
alleged invasion of the right of privacy or the prohibition
against self- incrimination. Petitioners obviously are not the
proper parties to do so. Nor may such an incurable defect be
remedied by an accommodating intervenor "who has always
taken advantage of, as he exclusively relies on, the facilities,
services and accommodations" offered by petitioner-motels.
A general merchant, doing business not only in Baguio City
but in the City of Manila, has no legitimate cause for
complaint. At least, not according to the case as it has been
developed.
17.
Frankfurter, Mr. Justice Holmes and the Supreme
Court (1938) pp. 32-33.
18.
487.

Frankfurter, Hannah v. Larche (1960) 363 US 420, at

19.

Cafeteria Workers v. McElroy (1961) 367 US 1230.

20.

Bartkus v. Illinois (1959) 359 US 121.

21.

Pearson v. McGraw (1939) 308 US 313.

22.

Cu Unjieng v. Patstone, (1922) 42 Phil. 818, 828.

23.
Citing Swarth v. People, 109 Ill. 621; Dennehy v. City
of Chicago, 120 Ill. 627; 12 N.E., 227; United States Distilling
Co. v. City of Chicago, 112 Ill., 19; Drew County v. Bennet,
43 Ark., 364; Merced County v. Fleming, 111 Cal., 46; 43
Pac., 392; Williams v. City Council of West Point, 68 Ga., 816;
Cheny v. Shellbyville, 19 Ind., 84; Wiley v. Owens, 39 Ind.,
429; Sweet v. City of Wabash, 41 Ind., 7; Jones v. Grady, 25
La. Ann., 586; Goldsmith v. City of New Orlean, 31 La. Ann.,
646; People exrel., Cramer v. Medberry, 39 N.Y.S., 207; 17
Misc. Rep., 8; McGuigan v. Town of Belmont, 89 Wis. 637; 62

N.W., 421; Ex parte Burnett, 30 Ala., 461; Craig v. Burnett,

32 Ala., 728, and Muhlenbinck v. Long Branch
Commissioners, 42 N.J.L., 364; 36 Am. Rep. 518. At pp. 829830.
24.
98 Phil. 148 (1955) citing Great Atl. & Pac. Tea Co. v.
Grosjean, 301 U.S. 412, 81 L. Ed. 1193; U.S. v. Butler, 297
U.S. 1, 80 L. Ed. 477; M'Culloch v. Maryland, 4 Wheat, 316, 4
L. Ed. 579. The Lutz decision was followed in Republic v.
Bacolod-Murcia Milling, L-19824, July 9, 1966.
25.
Ormoc Sugar Co. v. Municipal Board of Ormoc City,
65 Off. Gaz. (12) 2861.
26.
Physical Therapy Organization v. Municipal Board
(1957) 101 Phil. 1142.
27.
Co Kian & Lee Ban v. City of Manila (1955) 96 Phil.
649, 654, citing City of New Orleans v. Stafford, 27 L. Ann.
417.
28.
Rubi v. Provincial Board (1919) 39 Phil. 660, at 706,
citing Hall v. Geiger-Jones (1916), 242 U.S., 539; HardieTynes Manufacturing Co. v. Cruz (1914), 189 Al., 66.
29.

Calalang v. Williams (1940) 70 Phil. 726, at 733-734.

30.
46 Phil. 440 (1924). The Philippines was then under
American sovereignty, American Supreme Court decisions
having thus an obligatory effect. No alternative was left to
this Court except to follow the then controlling decision in
Adkins v. Children's Hospital (1924) 261 US 525, which
subsequently was overruled in West Coast Hotel v. Parrish
(1937) 300 US 379.

31.
Antamok Goldfields Mining Co. v. Court (1940) 70
Phil. 340, at 360, quoting a concurring opinion of Justice
Laurel in Ang Tibay v. Court, G.R. No. 46496.
32.
Cf.
"In weighing arguments of the parties it is
important to distinguish between the due process clause of
the Fourteenth Amendment as an instrument for
transmitting the principles of the First Amendment and
those cases in which it is applied for its own sake. The test
of legislation which collides with the Fourteenth
Amendment, because it also collides with the principles of
the First, is much more definite than the test when only the
fourteenth is involved. Much of the vagueness of the due
process clause disappears when the specific prohibitions of
the First become its standard. The right of a State to
regulate, for example, a public utility may well include, so
far as the due process test is concerned, power to impose all
of the restrictions which a legislature may have a 'rational
basis' for adopting. But freedoms of speech and of press, of
assembly, and of worship may not be infringed on such
slender grounds. They are susceptible of restriction only to
prevent grave and immediate danger to interests which the
state may lawfully protect." (West Virginia State Bd. of Edu
v. Barnette, (1942) 319 US 624, at 639).

EN BANC

33.

269 US 385 (1926).

34.

17 L. Ed. 2d 149, Nov. 14, 1966.

35.

Roschen v. Ward (1929) 279 US 337, 339.

1.
ADMINISTRATIVE LAW; ADMINISTRATIVE BODIES;
VESTURE OF QUASI LEGISLATIVE AND QUASI JUDICIAL
POWERS. The vesture of quasi-legislative and quasijudicial 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

[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

the problems thereof with more expertise and dispatch than

can be expected from the legislature or the courts of
justice."

DECISION

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).

GRIO-AQUINO, J p:

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.

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.

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

"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.

"I.
Creation of a Joint POEA-OWWA Household Workers
Placement Unit (HWPU).

"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.

"The HWPU shall have the following functions in

coordination with appropriate units and other entities
concerned:

"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:

"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:

"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
"X.

xxx

xxx

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.

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:

"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.

1.
that the respondents acted with grave abuse of
discretion and/or in excess of their rule-making authority in
issuing said circulars;

"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.

3.
that the requirements of publication and filing with
the Office of the National Administrative Register were not
complied with.

"Recruitment agencies in Hong Kong may apply for

accreditation at the Office of the Labor Attache, Philippine

2.
that the assailed DOLE and POEA circulars are
contrary to the Constitution, are unreasonable, unfair and
oppressive; and

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.
over:

From the National Seamen Board, the POEA took

"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.
"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.'
"The alleged takeover is limited in scope, being confined to
recruitment of domestic helpers going to Hongkong only.
"xxx

xxx

xxx

" . . . 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.)
The questioned circulars are therefore a valid exercise of the
police power as delegated to the executive branch of
Government.
Nevertheless, they 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 which provide:
"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 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 Taada 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.)
"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.

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 is hereby
SUSPENDED pending compliance with the statutory
requirements of publication and filing under the
aforementioned laws of the land. cdll

SO ORDERED.

Narvasa, C . J ., Gutierrez, Jr ., Cruz, Feliciano, Padilla, Bidin,

Medialdea, Regalado, Davide, Jr ., Romero, Nocon and
Bellosillo, JJ ., concur.

Copyright 1994-1999 CD Technologies

A s i a, I n c.

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

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

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 selfprotection, 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. 3C), 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 nongovernment 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 nonimpairment 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.
Footnotes
1.

EIAC, Res. No. 1.

2.

Noble State Bank v. Haskel, 219 US 112 (1911).

3.

Smith, Bell and Co v. Natividad, 40 Phil 136 (1919).

4.

39 Phil 660, 708 (1919).

5.

Id, at 708-709.

6.

Source: National Statistics Office, 1992.

7.
Philippine Association of Service Exporters, Inc. v.
Drilon 163 SCRA 386, 392 (1988).
8.

Id.

9.
Department Order No. 28 vests the EIAC with the
following principal functions:
a)
recommend to the DOLE policies, plans
and programs for the development of the entertainment
industry, local and overseas, including but not limited to
talent training and upgrading, employment standards and
other internationally acceptable trade practices;
b)
promote ethical business standards
and dignified workplaces;
c)
act as the coordinating body for all
training programs and technical assistance to the
entertainment industry;
d)
advise the DOLE on the
institutionalization of an internationally acceptable system
of manpower development, talent protection and welfare;
e)
assist the appropriate agencies,
private or public in the implementation of a trainors training
and upgrading program;
f)
review existing issuances on the
industry including the system of training, testing and
accreditation of performing artists/talents and recommend
to the Secretary such measures or schemes as are deemed
necessary for its proper compliance . . .
10.
The EIAC is chaired by an Undersecretary of Labor
and is composed of 3 representatives from the government,

2 representatives from the employers' sector, one

representative from the talent developers, 2 representatives
from the workers' sector and one representative from the
Non-government Organizations.
11.

Id.

12.
Phil. Movie Workers' Assn. v. Premier Productions,
Inc., 92 Phil 8423 (1953); National Labor Union vs. Court of
Industrial Relations, 68 Phil 732 (1939).
13.

DECISION

Case vs. Board of Health, 24 Phil 250, 280 (1913).

14.
Ermita Malate Hotel and Motel Operators vs. City of
Manila, 20 SCRA 849 (1967).
15.

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.

Supra, note 6, at 397.

16.
Itchong, etc., et al, vs. Hernandez, 101 Phil 1155
(1957).
17.
Villegas vs. Hiu Chiong Tsai Pao Hao, 86 SCRA 272
(1978).

Copyright 1994-1999 CD Technologies

A s i a, I n c.

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:

EN BANC
[G.R. No. 157036. June 9, 2004.]

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:

Acting on President Arroyo's directive, respondent Ebdane

issued the assailed Guidelines quoted as follows:

"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.

"TO

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."

FROM :

All Concerned
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.

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 purposes of practice and
competition, provided, that such firearms while in transit
must not be loaded with ammunition and secured in an
appropriate box or case detached from the person.

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.

e.

Authorized members of the Diplomatic Corps.

6.

Requirements for issuance of new PTCFOR:

5.
The following persons may be authorized to carry
firearms outside of residence.

b.
Xerox copy of current firearm license duly
authenticated by Records Branch, FED;

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.

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;

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.

a.
Written request by the applicant addressed to Chief,
PNP stating his qualification to possess firearm and the
reasons why he needs to carry firearm outside of residence.

d.
Copy of Drug Test Clearance, duly authenticated by
the Drug Testing Center, if photocopied;
e.
Copy of DI/ RIID clearance, duly authenticated by
ODI/RIID, if photocopied;
f.
Copy of Neuro-Psychiatric Clearance duly
authenticated by NP Testing Center, if photocopied;
g.
Copy of Certificate of Attendance to a Gun Safety
Seminar, duly validated by Chief, Operations Branch, FED;

h.

NBI Clearance;

i.
Two (2) ID pictures (2" x 2") taken not earlier than
one (1) year from date of filing of application; and
j.

Proof of Payment

7.

Procedures:

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 Provincial/City Police Offices (P/CPOs) for
initial processing before they are forwarded to the office of
the 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 shall pay the fees to
the Land Bank.
b.
Applications, which are duly processed and prepared
in accordance with existing rules and regulations, shall be
forwarded to the OCPNP for approval.
c.
Upon approval of the application, OCPNP will issue
PTCFOR valid for one (1) year from date of issue.
d.
Applications for renewal of PTCFOR shall be
processed in accordance with the provisions of par. 6 above.
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 Carrying of Firearms by Diplomats
in the Philippines.
8.

Restrictions in the Carrying of Firearms:

a.
The firearm must not be displayed or exposed to
public view, except those authorized in uniform and in the
performance of their official duties.
b.
The firearm shall not be brought inside public
drinking and amusement places, and all other commercial or
public establishments."
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 Guidelines.
However, his request was denied. Thus, he filed the present
petition impleading public 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:
"I
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 PERMITS FOR GUNS TO BE CARRIED
OUTSIDE RESIDENCES.
II
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 ON GUN BAN VIOLATED THE
PEOPLE'S RIGHT TO PROTECT LIFE AND THEIR PROPERTY
RIGHT TO CARRY FIREARMS.
III

THE PNP CHIEF HAS NO POWER OR AUTHORITY TO ISSUE

THE QUESTIONED GUIDELINES BECAUSE:
1)
THERE IS NO LAW, STATUTE OR EXECUTIVE ORDER
WHICH GRANTS THE PNP CHIEF THE AUTHORITY TO
PROMULGATE THE PNP GUIDELINES.
2)
THE IMPLEMENTING RULES AND REGULATIONS OF PD
1866 CANNOT BE THE SUBJECT OF ANOTHER SET OF
IMPLEMENTING GUIDELINES.
3)
THE PRESIDENT'S SPEECH CANNOT BE A BASIS FOR
THE PROMULGATION OF IMPLEMENTING GUIDELINES ON THE
GUN BAN. IHcSCA
IV
ASSUMING ARGUENDO, THAT THE PNP GUIDELINES
IMPLEMENT PD 1866, AND THE AMENDMENTS THERETO,
THE PNP CHIEF STILL HAS NO POWER OR AUTHORITY TO
ISSUE THE SAME BECAUSE
1)
PER SEC 6, RA 8294, WHICH AMENDS PD 1866, THE
IRR SHALL BE PROMULGATED JOINTLY BY THE DOJ AND THE
DILG.
2)
SEC. 8, PD 1866 STATES THAT THE IRR SHALL BE
PROMULGATED BY THE CHIEF OF THE PHILIPPINE
CONSTABULARY.
V
THE PNP GUIDELINES VIOLATE THE DUE PROCESS CLAUSE
OF THE CONSTITUTION BECAUSE:
1)
THE RIGHT TO OWN AND CARRY A FIREARM IS
NECESSARILY INTERTWINED WITH THE 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 GovernorGeneral 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 abovementioned 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.

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."

Vested Property Right

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."

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,

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

III

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. . . .

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.

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);"

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."

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

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:
(1)
The interests of the public generally, as distinguished
from those of a particular class, require the exercise of the
police power; and
(2)
The means employed are reasonably necessary for
the accomplishment of the purpose and not unduly
oppressive upon individuals.
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 in the society.
Owing to the proliferation of crimes, particularly those
committed by the New People's Army (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 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."

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.

WHEREFORE, the petition is hereby DISMISSED.

SO ORDERED.

Davide, Jr., C .J ., Puno, Vitug, Panganiban, Quisumbing,

Ynares-Santiago, Carpio, Austria-Martinez, Corona, Carpio
Morales, Callejo, Sr., Azcuna and Tinga, JJ ., concur.

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.

Footnotes
1.
Section 5, Article II of the 1987 Philippine
Constitution.
2.

Annex "A" of the Petition, Rollo at 6062.

3.
See Buklod ng Kawaning EIIB vs. Zamora, G.R. Nos.
142801802, July 10, 2001, 360 SCRA 718; Fortich vs.
Corona, G.R. No. 131457, April 24, 1998, 289 SCRA 624;
Dario vs. Mison, G.R. No. 81954, August 8, 1989, 176 SCRA
84.
4.

People vs. Vera, 65 Phil. 56 (1937).

5.

Section 1, Article VI of the 1987 Constitution.

6.
Freund, Sutherland, Howe, Brown, Constitutional Law
Cases and Other Problems, Fourth Edition, 1977, at 653.
7.

51 Am. Jur. 2d 51.

8.

51 Am Jur 2d 52.

9.
"AN ACT TO REGULATE THE IMPORTATION,
ACQUISITION, POSSESSION, USE, AND TRANSFER OF
FIREARMS, AND TO PROHIBIT THE POSSESSION OF SAME
EXCEPT IN COMPLIANCE WITH THE PROVISIONS OF THIS
ACT."
10.
SECTION 11. An application for a personal license to
possess firearms and ammunition, as herein provided for,
made by a resident of the city of Manila, shall be directed to
the chief of police of said city, and it shall be the duty of the
chief of the police to forward the application to the
Governor-General with his recommendations. Any such
application made by a resident of a province shall be
directed to the governor of the province who shall make his
recommendations thereon and forward the application to
the senior inspector of the Constabulary of the province,
who in turn shall make his recommendations thereon and
forward the application, through official channels, to the
Governor-General. The Governor-General may approve or
disapprove any such application, and, in the event of the
approval, the papers shall be transmitted to the Director of
Constabulary with instructions to issue the license as
hereinbefore provided. The Director of Constabulary, upon
receiving and approving the bond, or receiving the
certificate of deposit duly endorsed to the order of the
Insular Treasurer, shall issue the license for the time fixed
for such license as hereinafter provided, and the Director of

Constabulary shall transmit the license direct to the

applicant, and shall notify the chief of police of the city of
Manila if the applicant resides in Manila, otherwise the
senior inspector of Constabulary of the province in which the
applicant resides. The Director of Constabulary shall file the
certificate of deposit in his office. It shall be the duty of all
officers through whom applications for licenses to possess
firearms are transmitted to expedite the same.
11.
SECTION 30. The Governor-General is hereby
authorized to issue executive orders prescribing the forms
and regulations which he may deem necessary for the
proper enforcement of the provisions of this Act.
12.
SEC. 882.
Issuance of special hunting permits.
The Department Head may authorize the Chief of
Constabulary to issue special hunting permits to persons
temporarily visiting the Philippine Islands, without requiring
a bond or deposit as a guarantee of security for their arms
and ammunition. Such special hunting permit shall be valid
only during the temporary sojourn of the holder in the
Islands, shall be nontransferable, and shall be revocable at
the pleasure of the Department Head.
SEC. 887.
License required for individual
keeping arms for personal use. Security to be given.
Any person desiring to possess one or more firearms for
personal protection or for use in hunting or other lawful
purposes only, and ammunition thereof, 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, for the purpose of security, 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, and shall

indorse the certificated of deposit therefor to the Insular

Treasurer; or in lieu thereof he may give a bond in such form
as the Governor-General may prescribed, payable to the
Government of the Philippine Islands, in the sum of two
hundred pesos for each such firearms.
SEC. 888.
Mode of making application and
acting upon the same. An application for a personal
license to possess firearms and ammunition, as herein
provided, made by a resident of the City of Manila, shall be
directed to the Mayor of said city, whose duty it shall be to
forward the application to the Governor-General, with his
recommendation. Applications made by residents of a
province shall be directed to the governor of the same, who
shall make his recommendation thereon and forward them
to the Governor-General, who may approve or disapprove
any such application.
SEC. 889.
Duration of personal license.
A personal firearms license shall continue in force until the
death or legal disability of the licensee, unless, prior thereto,
the license shall be surrendered by him or revoked by
authority of the Governor-General.
SEC. 899.
Revocation of firearms license
by Governor-General. Any firearms license may be
revoked at any time by order of the Governor-General.
SEC. 905.
Forms and regulations to be
prescribed by Governor-General. The Governor-General
shall prescribe such forms and promulgate such regulations
as he shall deem necessary for the proper enforcement of
this law.
13.
"(Delegating the CPC to Approve/Disapprove
Applications)

15.
In carrying out the provisions of
Sections eight hundred and eighty-one, eight hundred and
eighty-two, eight hundred and eighty-eight, as amended by
Section two of Act two thousand seven hundred and
seventy-four, eight hundred and ninety-one and eight
hundred and ninety-two of the Administrative Code,
empowering the Governor-General to approve and
disapprove applications for personal, special, and hunting
licenses to possess firearms and ammunition, the Chief of
Constabulary is authorized and directed to act for the
Governor-General."
14.
Issued on December 5, 1924 by Governor-General
Leonard Wood.
15.
"Pursuant to the provisions of Section 905,
Administrative Code, as amended, empowering the
President of the Philippines to prescribe regulations for the
enforcement of the provisions of the law relating to the
possession, use of firearms, etc., the following regulations
are hereby promulgated.
SECTION 1.
In carrying out the provision of
Sections 881, 882 and 888 of the Revised Administrative
Code, empowering the President of the Philippines to
approve or disapprove applications for personal, special and
hunting license to possess firearms and ammunition, the
Chief of Constabulary or his representative is authorized and
directed to act for the President.
SECTION 2.
In carrying out the provisions of
Section 899 of the Revised Administrative Code,
empowering the President of the Philippines to revoke any
firearm license anytime, the Chief of Constabulary is
authorized and directed to act for the President."

16.
"CODIFYING THE LAWS ON ILLEGAL/UNLAWFUL
POSSESSION, MANUFACTURE, DEALING IN, ACQUISITION OR
DISPOSITION, OF FIREARMS, AMMUNITION OR EXPLOSIVES
OR INSTRUMENTS USED IN THE MANUFACTURE OF
FIREARMS, AMMUNITION OR EXPLOSIVES, AND IMPOSING
STIFFER PENALTIES FOR CERTAIN VIOLATIONS THEREOF AND
FOR RELEVANT PURPOSES."
17.

Section 8 of P.D. No. 1866.

18.
Baylosis vs. Chavez, Jr., G.R. No. 95136, October 3,
1991, 202 SCRA 405.
19.
"AN ACT AMENDING THE PROVISIONS OF
PRESIDENTIAL DECREE NO. 1866, AS AMENDED, ENTITLED
"CODIFYING THE LAWS ON ILLEGAL/UNLAWFUL
POSSESSION, MANUFACTURE, DEALING IN, ACQUISITION OR
DISPOSITION OF FIREARMS, AMMUNITION OR EXPLOSIVES
OR INSTRUMENTS USED IN THE MANUFACTURE OF
FIREARMS, AMMUNITION OR EXPLOSIVES, AND IMPOSING
STIFFER PENALTIES FOR EXPLOSIVES, AND IMPOSING
STIFFER PENALTIES FOR CERTAIN VIOLATIONS THEREOF,
AND FOR RELEVANT PURPOSES." Issued on June 29, 1983.
20.

Section 6 of R.A. No. 8294 provides:

"SECTION 6. Rules and Regulations. The

Department of Justice and the Department of the Interior
and Local Government shall jointly issue, within ninety (90)
days after the approval of this Act, the necessary rules and
regulations pertaining to the administrative aspect of the
provisions hereof, furnishing the Committee on Public Order
and Security and the Committee on Justice and Human
Rights of both Houses of Congress copies of such rules and
regulations within thirty (30) days from the promulgation
hereof.

21.
"AN ACT ESTABLISHING THE PHILIPPINE NATIONAL
POLICE UNDER A REORGANIZED DEPARTMENT OF THE
INTERIOR AND LOCAL GOVERNMENT, AND FOR OTHER
PURPOSES." Approved December 13, 1990.
22.
Under Section 2 (11), Chapter 1, Book 7 of Executive
Order No. 292, the "Administrative Code of 1987," the term
licensing includes agency process involving the "grant,
renewal, denial, revocation, suspension, annulment,
withdrawal, limitation, amendment, modification or
conditioning of a license."
23.

Section 26 of R.A. No. 6975.

24.

Chapter 7, Book IV of E.O. No. 292.

25.
Under the laws of Alfred the Great, whose reign
began in 872 A.D., all English citizens, from the nobility to
the peasants, were obliged to privately purchase weapons
and be available for military duty 25 This body of armed
citizens was known as the fyrd."
Following the Norman conquest, many of the
Saxon rights were abridged, however, the right and duty of
arms possession was retained. Under the Assize of Arms of
1181, "the whole community of freemen" is required to
possess arms and to demonstrate to the Royal officials that
each of them is appropriately armed.
The Tudor monarchs continued the system of
arm ownership and Queen Elizabeth added to it by creating
what came to be known as "train bands" that is, the
selected portions of the citizenry chosen for special training.
These "trained bands" were distinguished from the "militia"
which term was first used during the Spanish Armada crisis
to designate the entire of the armed citizenry.

The militia played a pivotal role in the English

political system. When civil war broke out in 1642, the
critical issue was whether the King or Parliament had the
right to control the militia. After the war, England, which was
then under the control of a military government, ordered its
officers to "search for and seize all arms" owned by
Catholics, "opponents of the government," or "any other
person whom the commissioners had judged dangerous to
the peace of the Commonwealth."
The restoration of Charles II ended the
military government. Charles II opened his reign with a
variety of repressive legislation. In 1662, a Militia Act was
enacted empowering officials to "search and to seize all
arms in the custody or possession of any person or persons
whom the said lieutenants or any two or more of their
deputies shall judge dangerous to the peace of the
kingdom." Such seizures of arms continued under James I,
who directed them particularly against the Irish population.
In 1668, the government of James was
overturned in a peaceful uprising which came to be known
as "The Glorious Revolution." Parliament promulgated a
Declaration of Rights, later enacted as the Bill of Rights.
Before coronation, James' successor, William of Orange, was
required to swear to respect these rights. The Bill of Rights,
as drafted in the House of Commons, simply provided that
"the acts concerning the militia are grievous to the subject"
and "it is necessary for the public safety that the subjects,
which are protestants, should provide and keep arms for the
common defense; And that the arms which have been
seized, and taken from them, be restored." The House of
Lords changed this to a more concise statement: "That the
subjects which are Protestant may have arms for their
defense suitable to their conditions and as allowed by law."

In the colonies, the prevalence of hunting as

means of livelihood and the need for defense led to
armament statutes comparable to those of the early Saxon
times. When the British government began to increase its
military presence therein in the mid-eighteenth century,
Massachusetts responded by calling upon its citizens to arm
themselves in defense. In September 1774, an incorrect
rumor that British troops killed colonists prompted 60,000
citizens to take arms. A few months later, when Patrick
Henry delivered his famed "Give me liberty or give me
death" speech, he spoke in support of a proposition "that a
well regulated militia, composed of gentlemen and freemen,
is the natural strength and only security of a free
government . . ."
When the first Congress convened for the
purpose of drafting a Bill of Rights, it delegated the task to
James Madison. Madison did not write upon a blank tablet.
Instead, he obtained a pamphlet listing the States' proposals
for a Bill of Rights and sought to produce a briefer version
incorporating all the vital proposals of such States. Madison
proposed among other rights: "The right of the people to
keep and bear arms shall not be infringed; a well armed and
regulated militia being the best security of a free country;
but no person religiously scrupulous of bearing arms shall be
compelled to render military service." In the House, this was
initially modified so that the militia clause came before the
proposal recognizing the right. The proposal finally passed
the House in its present form: "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." In
this form it was submitted to the Senate, which passed it the
following day.
26.

307 U.S. 174 (1939).

27.

131 Federal Reporter, 2d Series, 916.

43.

94 U.S. 535, 540 24 L.Ed.148.

28.

92 U.S. 542, 23 L. Ed. 588.

44.

10 Phil. 637 (1908).

29.

204 N.Y. 397, 97 N.E. 877.

30.

28 Phil. 390 (1914).

31.

Supra.

45.
Calvan vs. Superior Court of San Francisco, 70 Cal 2d
851, 76 Cal Rptr 642, 452 P2d 930; State vs. Robinson (Del
Sup) 251 A2d 552; People vs. Brown, 253 Mich 537, 235 NW
245, 82 ALR 341.

32.
Bzdzuich vs. U.S. Drug Enforcement Admin., 76 F 3d
738, 1996 FED App. 59P (6th Cir. 1996).
33.
G.R. No. L-24548, October 27, 1983, 125 SCRA 302.
See also Pedro vs. Provincial Board of Rizal, 56 Phil. 123
(1931).
34.
G.R. No. 101083, July 30, 1993, 224 SCRA 792,
penned by Chief Justice Hilario G. Davide, Jr.
35.

402 U.S. 535 (1971).

36.

680 F 2d 61 (1982).

37.

01-CV-3247, August 2002.

38.

718 F. Supp. 1059 (1989).

39.

223 Cal. App. 3d 1236, 273 Cal. Rptr. 84 (1990).

40.

120 F. 3d 877 (1997).

41.
Stone vs. Fritts, 82 NE 792 (1907) citing Calder vs.
Kurby, 5 Gray [Mass.] 597; Freleigh vs. State, 8 Mo. 606;
People vs. New York Tax, etc., Com'rs, 47 N.Y. 501; State vs.
Burgoyne, 75 Tenn. 173, 40 Am. Rep. 60.
42.

Commonwealth vs. Kinsley, 133 Mass. 578.

46.

121 N.C. 556, 557, 27 S.E. 1004, 1005 (1897).

47.

28 Phil. 390 (1914).

48.

2 Phil. 74 (1903).

49.
Lacson vs. The Executive Secretary, G.R. No. 128096,
January 20, 1999, 301 SCRA 298.

Copyright 2004
nc

CD Technologies Asia I

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.

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.

The particular enactment in question is Pres. Decree No.

1717, which ordered the rehabilitation of the Agrix Group of
Companies to be administered mainly by the National
Development Company. The law outlined the procedure for
filing claims against the Agrix companies and created a
Claims Committee to process these claims. Especially
relevant to this case, and noted at the outset, is Sec. 4(1)
thereof providing that "all mortgages and other liens
presently attaching to any of the assets of the dissolved
corporations are hereby extinguished."
Earlier, the Agrix Marketing, Inc. (AGRIX) had executed in
favor of private respondent Philippine Veterans Bank a real
estate mortgage dated July 7, 1978, over three (3) parcels of
land situated in Los Baos, Laguna. During the existence of
the mortgage, AGRIX went bankrupt. It was for the
expressed purpose of salvaging this and the other Agrix

companies that the aforementioned decree was issued by

President Marcos.
Pursuant thereto, the private respondent filed a claim with
the AGRIX Claims Committee for the payment of its loan
credit. In the meantime, the New Agrix, Inc. and the National
Development Company, petitioners herein, invoking Sec. 4
(1) of the decree, filed a petition with the Regional Trial
Court of Calamba, Laguna, for the cancellation of the
mortgage lien in favor of the private respondent. For its
part, the private respondent took steps to extrajudicially
foreclose the mortgage, prompting the petitioners to file a
second case with the same court to stop the foreclosure.
The two cases were consolidated.

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.

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 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 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

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

Footnotes
1.

G.R. No. 62259, April 19, 1989.

2.
U.S. v. Toribio, 15 Phil. 85; Fabie v. City of Manila, 21
Phil. 486; Case v. Board of Health, 24 Phil. 256; Bautista v.
Juinio, 127 SCRA 329; Ynot v. IAC, 148 SCRA 659.
3.

Yick Wo v. Hopkins, 118 U.S. 356.

4.

Reworded in Art. XII, Sec. 16, 1987 Constitution.

5.

Stone v. Mississippi, 101 U.S. 814.

6.

G.R. Nos. 82763-64, March 19, 1990.

Copyright 1994-1999 CD Technologies

A s i a, I n c.

SO ORDERED.

Fernan (C.J.), Narvasa, Gutierrez, Jr., Paras, Gancayco Padilla,

Bidin, Sarmiento, Grio-Aquino, Medialdea and Regalado, JJ.,
concur.
Melencio-Herrera, J., In the result. In Dumlao v. COMELEC, 95
SCRA 392 (1980), a portion of the second paragraph of
section 4 of Batas 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 Paraaque,
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-95001 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 reimplementing 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, nongovernmental 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 trafficsnarled 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.
Footnotes
1.

Records, p. 10.

2.

Id., p. 11.

3.

Id., p. 1.

4.

Memorandum for Defendants, Records, pp. 178-185.

5.
Id., pp. 187-190, penned by Hon. Helen BautistaRicafort.
6.

Records, pp. 197-225.

7.

Sec. 7, Mem. Circ. No. 04, Series of 2004.

8.

56 Phil 123 (1931).

9.

G.R. No. L-24548, 27 October 1983, 125 SCRA 302.

10.

G.R. No. 101083, 30 July 1993, 224 SCRA 792.

11.

G.R. No. L-22766, 30 August 1968, 24 SCRA 898.

12.

63 P. 2d 653, 108 ALR 1156, 1159.

13.

323 Pa. 390, 186 A. 65 (108 ALR 1161).

14.
G.R. No. 135962, 27 March 2000, 328 SCRA 836,
penned by Justice Reynato S. Puno.
15.
Sec. 16 of Book I of the Local Government Code of
1991 states:
General Welfare. Every local government
unit shall exercise the powers expressly granted, those
necessarily implied therefrom, as well as powers necessary,
appropriate, or incidental for its efficient and effective
governance, and those which are essential to the promotion
of the general welfare. Within their respective territorial
jurisdictions, local government units shall ensure and
support, among other things, the preservation and
enrichment of culture, promote health and safety, enhance
the right of the people to a balanced ecology, encourage
and support the development of appropriate and self-reliant
scientific and technological capabilities, improve public
morals, enhance economic prosperity and social justice,
promote full employment among their residents, maintain
peace and order, and preserve the comfort and convenience
of their inhabitants.
16.
Supra, Note 18, p. 844, citing Bernas, The 1987
Constitution of the Philippines, A Commentary, pp. 95-98

[1996], citing UP Law Center Revision Project, Part II, 712

[1970] citing Sady, "Improvement of Local Government
Administration for Development Purpose," Journal of Local
Administration Overseas 135 [July 1962].
17.

Ibid., pp. 849-860.

18.
Entitled "An Act to Compile the Laws Relative to Land
Transportation and Traffic Rules, to Create a Land
Transportation Commission and for Other Purposes,"
approved on 20 June 1964. Sec. 29 thereof states:
Confiscation of driver's license. Law
enforcement and peace officers duly designated by the
Commissioner shall, in apprehending any driver for
violations of this Act or of any regulations issued pursuant
thereto, or of local traffic rules and regulations, confiscate
the license of the driver concerned and issue a receipt
prescribed and issued by the Commission therefore which
shall authorize the driver to operate a motor vehicle for a
period not exceeding seventy-two hours from the time and
date of issue of said receipt. The period so fixed in the
receipt shall not be extended, and shall become invalid
thereafter. Failure of the driver to settle his case within
fifteen days from the date of apprehension will cause
suspension and revocation of his license. (emphasis
supplied)
19.
Entitled "Granting the Metropolitan Manila
Commission Certain Powers Related to Traffic Management
and Control in Metropolitan Manila, Providing Penalties, and
for Other Purposes," dated 21 November 1978.
SEC. 5.In case of traffic violations, the driver's
license shall not be confiscated but the erring driver shall be
immediately issued a traffic citation ticket prescribed by the

Metropolitan Manila Commission which shall state the

violation committed, the amount of fine imposed for the
violation and an advice that he can make payment to the
city or municipal treasurer where the violation was
committed or to the Philippine National Bank or Philippine
Veteran's Bank or their branches within seven days from the
date of issuance of the citation ticket. (emphasis supplied)
20.

Section 3(b), Rep. Act No. 7924.

21.
Thus, in Briad Agro Development Corporation v. dela
Serna, (G.R. No. 82805, 29 June 1989, 174 SCRA 524) we
upheld the grant of concurrent jurisdiction between the
Secretary of Labor or its Regional Directors and the Labor
Arbiters to pass upon money claims, among other cases,
"the provisions of Article 217 of this Code to the contrary
notwithstanding," as enunciated in Executive Order No. 111.
Holding that E.O. 111 was a curative law intended to widen
worker's access to the Government for redress of
grievances, we held, ". . . the Executive Order vests in
Regional Directors jurisdiction, '[t]he provisions of Article
217 of this Code to the contrary notwithstanding,' it would
have rendered such a proviso and the amendment itself
useless to say that they (Regional Directors) retained the
self-same restricted powers, despite such an amendment. It
is fundamental that a statute is to be read in a manner that
would breathe life into it, rather than defeat it." (See also
Philtread Workers Union v. Confessor, G.R. No. 117169, 12
March 1997, 269 SCRA 393.)
22.
In Heirs of Ardona v. Reyes, (G.R. No. 60549, 26
October 1983, 125 SCRA 221) we upheld the
constitutionality of Presidential Decree No. 564, the Revised
Charter of the Philippine Tourism Authority, and
Proclamation No. 2052 declaring certain municipalities in

the province of Cebu as tourist zones. The law granted the

Philippine Tourism authority the right to expropriate 282
hectares of land to establish a resort complex
notwithstanding the claim that certificates of land transfer
and emancipation patents had already been issued to them
thereby making the lands expropriated within the coverage
of the land reform area under Presidential Decree No. 2, and
that the agrarian reform program occupies a higher level in
the order of priorities than other State policies like those
relating to the health and physical well-being of the people,
and that property already taken for public use may not be
taken for another public use. We held that, "(t)he petitioners
have failed to overcome the burden of anyone trying to
strike down a statute or decree whose avowed purpose is
the legislative perception of the public good. A statute has
in its favor the presumption of validity. All reasonable doubts
should be resolved in favor of the constitutionality of a law.
The courts will not set aside a law as violative of the
Constitution except in a clear case (People v. Vera, 65 Phil.
56). And in the absence of factual findings or evidence to
rebut the presumption of validity, the presumption prevails
(Ermita-Malate Hotel, etc. v. Mayor of Manila, 20 SCRA 849;
Morfe v. Mutuc, 22 SCRA 424)."
In the same manner, we upheld in Dumlao v.
COMELEC (G.R. No. L-52245, 22 January 1980, 95 SCRA 392)
the first paragraph of Section 4 of Batas Pambansa Bilang
52 providing that any retired elective provincial, city or
municipal official, who has received payment of the
retirement benefits and who shall have been 65 years of age
at the commencement of the term of office to which he
seeks to be elected is disqualified to run for the same
elective local office from which he has retired. Invoking the
need for the emergence of younger blood in local politics,
we affirmed that the constitutional guarantee is not violated

by a reasonable classification based upon substantial

distinctions, where the classification is germane to the
purpose of the law and applies to all those belonging to the
same class. (See also Tropical Homes, Inc, v. National
Housing Authority, G.R. No. L-48672, 31 July 1987 152 SCRA
540; Peralta v. COMELEC, G.R. No. L-47791, 11 March 1978,
82 SCRA 55; People v. Vera, GR No. 45685, 65 Phil 56
[1937].)
23.

Section 3(b), Republic Act No. 7924.

Copyright 2005
n c.

C D T e c h n o l o g i e s A s i a, I

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; PEOPLES
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; PEOPLES

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

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), governmentrun 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 1980s,
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. Was it passed in the exercise of police power, and was it a

valid exercise of such power?

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;

3. Does it not unlawfully impair the obligation of contracts?

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:

2. Does it not amount to deprivation of property without due

process?

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.

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.

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 governments 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 protecting their profits.25

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 come in for
minor surgery of the hand or whatever and they leave with
hepatitis B. A patient comes in for 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 respondents willful disobedience of or
resistance to the restraining order issued by the Court in the
said case. Petitioners alleged that respondents 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 Donors 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 Secretarys 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 Courts issuance of a temporary restraining order on
June 21, 1998.32

On July 29, 1999, interposing personal and substantial

interest in the case as taxpayers and citizens, a Petition-inIntervention 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

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.

The intervenors contended that Republic Act No. 7719

constitutes undue delegation of legislative powers and
unwarranted deprivation of personal liberty.36

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

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.

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

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:

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:

"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 bodys 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

"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 States
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 States 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 nonimpairment 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 nonimpairment 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 nonimpairment 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 States 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 wellbeing 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
Relations52 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 Healths 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.
ADOLFO S. AZCUNA
Associate Justice

WE CONCUR:

were reached in consultation before the cases were

assigned to the writer of the opinion of the Court.

HILARIO G. DAVIDE JR.

HILARIO G. DAVIDE JR.

Chief Justice
REYNATO S. PUNO

Chief Justice
ARTEMIO V. PANGANIBAN

Associate Justice

Associate Justice

LEONARDO A. QUISUMBING

CONSUELO YNARES-SANTIAGO
Footnotes

Associate Justice

Associate Justice
1
Petition for Certiorari with Prayer for the Issuance of Writ of
Preliminary Prohibitory Injunction or Temporary Restraining
ANTONIO T. CARPIO
Order, dated May 20, 1998, and later an Amended Petition,
dated June 1, 1998 under Rule 65 of the Rules of Court.
Associate Justice

ANGELINA SANDOVAL-GUTIERREZ
Associate Justice
MA. ALICIA AUSTRIA-MARTINEZ
Associate Justice
CONCHITA CARPIO MORALES

2
Petition for Mandamus with Prayer for the Issuance of
RENATO C. CORONA
Temporary Restraining Order, Preliminary Prohibitory and
Associate Justice
Mandatory Injunction, dated May 22, 1998.

Associate Justice

3
ROMEO J. CALLEJO,
SR. No. 133640), p. 106; Rollo (G.R. No. 133661), p.
Rollo (G.R.
69.
Associate Justice

DANTE O. TINGA

(On Leave)

Associate Justice

5
Rollo (G.R. No. 139147), p. 34.
MINITA V. CHICO-NAZARIO

Petition, dated July 15, 1999.

6
Rollo (G.R. No. 133640), pp. 7-8.
Associate Justice
7

Annex "G" of Petition, Rollo (G.R. No. 133640), p. 79.

Annex "H" of Petition, Rollo (G.R. No. 133640), p. 86.

Rollo (G.R. No. 133640), pp. 42-43.

CANCIO C. GARCIA
Associate Justice
CERTIFICATION

10

Pursuant to Section 13, Article VIII of the Constitution, it is

hereby certified that the conclusions in the above Decision

Id. at 46-47.

11

Id. at 43.

12

Rollo (G.R. No. 133661), p. 99.

13

Id. at 100.

14

Id. at 49-51.

15

Rollo (G.R. No. 133640), p. 59.

16

Id.

17

18

30

Rollo (G.R. No. 139147), pp. 5-6; Annexes "A" to "C-3," pp.
14-33.
31

Rollo (G.R. No. 139147), p. 6.

32

Id. at 49-50.

33

Id. at 50.

34

Id. at 50-51.

35

Id. at 435-495.

36

Rollo (G.R. No. 133640), pp. 467-468.

37

Rollo (G.R. No. 133640), pp. 685-686.

38

See United States v. Ang Tang Ho, 43 Phil. 1 (1922).

39

People v. Vera, 65 Phil 56 (1937).

Id.
Rollo (G.R. No. 133640), p. 112.

19

Rollo (G.R. No. 133640), p. 120.

20

Rollo (G.R. No.133661), p. 3

21

Rollo (G.R. No. 133640), p. 106.

22

Rollo (G.R. No.133661), pp. 7-8.

23

Rollo (G.R. No. 133640), pp. 107-108.

24

Rollo (G.R. No. 133661), p. 98.

40

25

Record of the Senate, Vol. IV, No. 59, pp. 286-287; rollo
(G.R. No 133661), pp.115-120.
26

Record of the Senate, Volume 1, No. 13, pp. 434-436; rollo

(G.R. No. 133661), pp. 121-123.
27

Rollo (G.R. No. 133640), pp. 227-232.

28

Id. at pp. 406-408.

29

Rollo (G.R. No. 139147), p. 9.

Vda. de Pineda v. Pea, G.R. No. 57665, July 2, 1990, 187

SCRA 22.
41

Id. citing Cincinnati, W. & Z.R. Co. v. Clinton County

Comrs, 1 Ohio St., 77, 88 (1852).; Cruz v. Youngberg, 56 Phil.
234 (1931).
42

Rollo (G.R. No. 133640), p. 120; Rollo (G.R. No.133661), p.

105.
43

44

People v. Vera, supra.

A Final Report on the Project to Evaluate the Safety of the

Philippine Blood Banking System conducted on September
28, 1993 January 15, 1994, Rollo (G.R. No. 133640), Annex
"A," p. 41.

45

Rollo (G.R. No.133661), pp. 115-124.

46

Department of Education, Culture and Sports (DECS) and

Director of Center for Educational Measurement v. Roberto
Rey C. San Diego and Judge Teresita Dizon-Capulong, G.R.
No. 89572, December 21, 1989, 180 SCRA 533.
47

Pita v. Court of Appeals, G.R. No. 80806, October 5, 1989,

178 SCRA 362.
48

Rollo (G.R. No.133661), p. 12.

49

Patalinghug v. Court of Appeals, G.R. No. 104786, January

27, 1994, 229 SCRA 554.
50

No. L-81958, June 30, 1988, 163 SCRA 386.

51

Ongsiako v. Gamboa, 86 Phil. 50 (1950).

52

No. L-25035, February 26, 1968, 22 SCRA 792.

53

Misolas v. Panga, G.R. No. 83341, January 30, 1990, 181

SCRA 648.
54

People v. Vera, supra.

55

People v. Maceda, G.R. Nos. 89591-96, August 13, 1990,

188 SCRA 532.
56

Basco v. Philippine Amusements and Gaming Corporation

(PAGCOR), G.R. No. 91649, May 14, 1991, 197 SCRA
52, citing Peralta v. Comelec, 82 SCRA 30.; Yu Cong Eng v.
Trinidad, 47 Phil 387.
57

Basco v. PAGCOR, supra.

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 similarlymotivated 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 Decision3 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

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:

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

"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

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

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.40ErmitaMalate 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 nations 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 gender53 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 thrillseekers."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.

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.

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 Joaquindreams 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.

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 wellintentioned 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 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

IV.

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
WE CONCUR:
REYNATO S. PUNO
Chief Justice
LEONARDO A.
QUISUMBING
Associate Justice

CONSUELO YNARESSANTIAGO
Associate Justice

(On Official Leave)

ANTONIO T. CARPIO
Associate Justice

MA. ALICIA AUSTRIAMARTINEZ

Associate Justice

RENATO C. CORONA
Associate Justice

CONCHITA CARPIO
MORALES
Associate Justice

ADOLFO S. AZCUNA
Associate Justice

PRESBITERO J.
VELASCO, JR.
Associate Justice

MINITA V. CHICONAZARIO
Associate Justice

ANTONIO EDUARDO
B. NACHUR
Associate Justice

Id. at 45-46.

Id. at 70-77.

Id. at 47.

TERESITA LEONARDO
DE CASTRO
Associate Justice

(On Sick Leave)

ARTURO D. BRION
Associate Justice

(On Official Leave)

DIOSDADO M. PERALTA
Associate Justice
CERTIFICATION
Pursuant to Article VIII, Section 13 of the Constitution, it is
hereby certified that the conclusions in the above Decision
were reached in consultation before the case was assigned
to the writer of the opinion of the Court.
REYNATO S. PUNO
Chief Justice
Footnotes
1

G.R. 118127, 12 April 2005, 455 SCRA 308.

See rollo, pp. 4-41.

Id. at 42-59. Penned by Associate Justice Jaime M. Lantin,

concurred in by Associate Justices Ricardo P. Galvez (later,
Solicitor-General) and Antonio P. Solano.

Id.

10

Id.

11

Id. at 48.

12

Id. at 81.

13

Id. at 82-83.

14

Id. at 84-99.

15

Id. at 104-105.

16

Id. at 49.

17

Id. at 52.

18

Id. at 120.

19

No. L-74457, 20 March 1987, 148 SCRA 659.

20

Rollo, pp. 129-145.

21

Id. at 158.

22

Id. at 53.

23

Id.

24

Id. at 43-59.

25

Id. at 4-40.

26

Allen v. Wright, 468 U.S. 737 (1984).

27
4

Id. at 46.

Id. at 62-69.

Const., Art. VIII , Sec. 5, Sanlakas v. Executive

Secretary Reyes, 466 Phil. 482 (2004).

28

Gladstone, Realtors v. Village of Bellwood, 441 U.S. 91,

100, 99 S.Ct. 1601, 1608, 60 L.Ed.2d 66 (1979).

837, 845; Magtajas v. Pryce Properties Corp., Inc., G.R. No.

111097, 20 July 1994, 234 SCRA 255, 268-267.

29

42

See Domingo v. Carague, G.R. No. 161065, 15 April 2005,

456 SCRA 450. See also Macasiano v. National Housing
Authority, G.R. No. 107921, 1 July 1993, 224 SCRA 236.
30

31

468 U.S. 737 (1984).

Supra note 29.

32

499 U.S. 400 (1991).

33

Id. at p 410-411.

Ermita-Malate Hotel and Motel Operators Association, Inc.

v. City Mayor of Manila, 127 Phil. 306 (1967).
43

JMM Promotion and Management Inc. v. Court of Appeals,

329 Phil. 87, 94 (1996) citing Rubi v. Provincial Board of
Mindoro, 39 Phil. 660 (1919).
44

U.S. v. Rodriguez, 38 Phil. 759.

45

People v. Chan, 65 Phil. 611 (1938).

46

Javier v. Earnshaw, 64 Phil. 626 (1937).

47

Pedro v. Provincial Board of Rizal, 56 Phil. 123 (1931).

34

See Kelsey McCowan Heilman, The Rights of Others:

Protection and Advocacy Organizations Associational
Standing to Sue, 157 U. Pa. L. Rev. 237, for a general
discussion on advocacy groups.
35

36

381 U.S. 479(1965).

Id. at 481.

37

429 U.S. 190 (1976).

38

Id. at 194.

48

See U.S. v. Ling Su Fan, 10 Phil. 104 (1908); Insular

Government v. Ling Su Fan, 15 Phil. 58 (1910).
49

50

See City of Manila v. Hon. Laguio, Jr., supra note 1 at 330

citing CHEMERINSKY, ERWIN, CONSTITUTIONAL LAW
PRINCIPLES AND POLICIES, 2nd Ed. 523 (2002).
51

304 U.S. 144 (1938).

52

Id, at 152.

53

Craig v. Boren, 429 U.S. 190 (1976).

54

Clark v. Jeter, 486 U.S. 456 (1988).

55

429 U.S. 190 (1976).

56

404 U.S. 71 (1971).

39

Chavez v. Comelec, G.R. No. 162777, 31 August 2004, 437

SCRA 415; Adiong v. Comelec, G.R. No. 103956, 31 March
1992, 207 SCRA 712.
40

127 Phil. 306 (1967).

Lopez v. Director of Lands, 47 Phil. 23, 32 (1924).

41

City of Manila v. Laguio, Jr., supra note 1; Tatel v.

Municipality of Virac, G.R. No. 40243, 11 March 1992, 207
SCRA 157, 161; Solicitor General v. Metropolitan Manila
Authority, G.R. No. 102782, 11 December 1991, 204 SCRA

57

Central Bank Employees Association v. Bangko Sentral ng

Pilipinas, 487 Phil. 531 (2004); Association of Small
Landowners in the Philippines v. Secretary of Agrarian
Reform, G.R. Nos. 78742, 79310, 79744, and 79777, July 14,
1989, 175 SCRA 343; In Ermita-Malate, supra note 1 at 324,
the Court in fact noted: "if the liberty involved were freedom
of the mind or the person, the standard for the validity of
government acts is much more rigorous and exacting, but
where the liberty curtailed affects what are at the most
rights of property, the permissible scope of regulatory
measures is wider."
58

Central Bank Employees Association v. Bangko Sentral ng

Pilipinas, supra note 57.
59

Id.

60

Mendoza, J., Concurring Opinion in Estrada v.

Sandiganbayan, G.R. No. 148560, 19 November 2001, 369
SCRA 394.
61

Id.

62

Bush v. Gore, 531 U.S. 98 (2000).

63

Boddie v. Connecticut, 401 U.S. 371 (1971).

64

Shapiro v. Thompson, 394 U.S. 618 (1969). It has been

opined by Chemerinsky that the use of the equal protection
clause was to avoid the use of substantive due process since
the latter fell into disfavor in the United States. See Erwin
Chemerinsky, Constitutional Law, Principles and Policies
(2nd ed. 2002).
65

66

Morfe v. Mutuc, 130 Phil. 415 (1968).

Id. at 440.

67

City of Manila v. Laguio, Jr., supra note 1 at 336-337.

68

Rollo, p. 258.

69

"Motel patrons who are single and unmarried may invoke

this right to autonomy to consummate their bonds in
intimate sexual conduct within the motel's premises be it
stressed that their consensual sexual behavior does not
contravene any fundamental state policy as contained in the
Constitution. (See Concerned Employee v. Glenda Espiritu
Mayor, A.M. No. P-02-1564, 23 November 2004) Adults have
a right to choose to forge such relationships with others in
the confines of their own private lives and still retain their
dignity as free persons. The liberty protected by the
Constitution allows persons the right to make this choice.
Their right to liberty under the due process clause gives
them the full right to engage in their conduct without
intervention of the government, as long as they do not run
afoul of the law. Liberty should be the rule and restraint the
exception.
Liberty in the constitutional sense not only means freedom
from unlawful government restraint; it must include privacy
as well, if it is to be a repository of freedom. The right to be
let alone is the beginning of all freedom it is the most
comprehensive of rights and the right most valued by
civilized men." City of Manila v. Hon. Laguio, Jr. supra note 1
at 337-338.
70

City of Manila v. Laguio, Jr., supra note 1 at 338-339.

71

Metro Manila Development Authority v. Viron

Transportation Co., G.R. Nos. 170656 and 170657, 15 August
2007, 530 SCRA 341.
72

U.S. v. Toribio, 15 Phil. 85 (1910).

73

130 Phil. 415 (1968).

74

Carlos Superdrug v. DSWD, G.R. No. 166494, June 29,

2007, Alalayan v. National Power Corporation, 24 Phil. 172
(1968); U.S. v. Salaveria, 39 Phil. 102 (1918).
75

Philippine Press Institute v. Comelec, 314 Phil. 131 (1995).

76

Supra note 1.

77

City of Manila v. Hon. Laguio, Jr., supra note 1; De La Cruz,

et al. v. Hon. Paras, et al., 208 Phil. 490 (1983); ErmitaMalate Hotel and Motel Operations Association, Inc. v. City
Mayor of Manila, supra note 42.
78

"The end of the state is not mere life; it is, rather, a good
quality of life." Therefore any state "which is truly so called,
and is not merely one in name, must devote itself to the end
of encouraging goodness. Otherwise, a political association
sinks into a mere alliance" The law "should be a rule of life
such as will make the members of a [state] good and just."
Otherwise it "becomes a mere covenant or (in the phrase
of the Sophist Lycophron) a guarantor of mens rights
against one another." Politics II.9.6-8.1280 31-1280bii; cited
in Hamburger, M., Morals and Law: The Growth of Aristotles
Legal Theory (1951 ed.), p. 178.
79

Greenwalt, K., Conflicts of Law and Morality (1989 ed.), at

38.
80

Steven G., Render Unto Caesar that which is Caesars, and

unto God that which is Gods, 31 Harv. J.L. & Pub. Pol'y 495.
He cites the example of the failed Twentieth (?) Amendment
to the U.S. Constitution, which prohibited the sale and
consumption of liquor, where it was clear that the State
cannot justly and successfully regulate consumption of

alcohol, when huge portions of the population engage in its

consumption.
See also Posner, Richard H., The Problematics of Moral And
Legal Theory, The Belknap Press of Harvard University Press
(2002). He writes:
. . . Holmes warned long ago of the pitfalls of
misunderstanding law by taking its moral vocabulary too
seriously. A big part of legal education consists of showing
students how to skirt those pitfalls. The law uses moral
terms in part because of its origin, in part to be impressive,
in part to speak a language that the laity, to whom the
commands of the law are addressed, is more likely to
understand and in part, because there is a considerable
overlap between law and morality. The overlap, however, is
too limited to justify trying to align these two systems of
social control (the sort of project that Islamic nations such as
Iran, Pakistan, and Afghanistan have been engaged in of
late). It is not a scandal when the law to pronounce it out of
phase with current moral feeling. If often is, and for good
practical reasons (in particular, the law is a flywheel, limiting
the effects of wide swings in public opinion). When people
make that criticismas many do of the laws, still found on
the statute books of many states, punishing homosexual
relationswhat they mean is that the law neither is
supported by public opinion nor serves any temporal
purpose, even that of stability, that it is merely a vestige, an
empty symbol.
81

See Burton, S., Judging in Good Faith, (1992 ed.), at 218.

EN BANC

OFFICE OF THE PRESIDENT, and Messrs. SALVADOR

TALENTO, JAIME ABOGADO, CONRADO AVANCEA, and
ROBERTO TAAY, respondents.

[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. ACUA, 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

[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 preempt 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.

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.

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.

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.

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

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 Taada
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 timehonored 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. (Taada 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.

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.

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

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

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:

then held Antaeus up in the air, beyond the reach of the

sustaining soil, and crushed him to death.

following words for the adoption by the State of an agrarian

reform program:

Mother Earth. The sustaining soil. The giver of life, without

whose invigorating touch even the powerful Antaeus
weakened and died.

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.

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

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. Copetitioner 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 farmerbeneficiary 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 Taada 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
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
The cases before us categorically raise constitutional
questions that this Court must categorically resolve. 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 Taada 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:

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.

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 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 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 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.

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.

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 Taada 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.

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.

This time, we answer in the affirmative.

The second and more serious objection to the provisions on

just compensation is not as easily resolved.

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.

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.

(iii)
Substitution for surety or bail bonds for the
provisional release of accused persons, or for performance
bonds;

(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;

(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;

(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;

(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 wellaccepted 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

can be finally and irrevocably taken from an unwilling owner

until compensation is paid . . . (Emphasis supplied.)

. . . 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.)

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.

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

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.

2.

1973 Constitution, Art. II, Sec. 6.

3.

Ibid., Art. XIV, Sec. 12.

4.

R.A No. 6657, Sec. 15.

5.

149 SCRA 305.

6.

150 SCRA 89.

7.

55 SCRA 26.

8.

91 SCRA 294.

9.

113 SCRA 798.

10.

136 SCRA 27; 146 SCRA 446.

11.

Art. VIII, Sec. 4(2).

12.

Dumlao v. COMELEC, 95 SCRA 392.

13.

Ex Parte Levitt, 303 US 633.

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

14.

Araneta v. Dinglasan, 84 Phil. 368.

SO ORDERED.

16.

Angara v. Electoral Commission, 63 Phil. 139.

Fernan, C .J ., Narvasa, Melencio-Herrera, Gutierrez, Jr.,

Paras, Feliciano, Gancayco, Padilla, Bidin, Sarmiento, Cortes,
Grio-Aquino, Medialdea and Regalado, JJ ., concur.

17.

R.A. No. 6657, Sec. 75.

18.

Ibid., Sec. 63.

19.

Bengzon v. Secretary of Justice, 299 US 410.

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.

Footnotes
1.

Art. II, Sec. 5.

15.
Pascual v. Secretary of Public Works, 110 Phil. 331;
PHILCONSA v. Gimenez, 15 SCRA 479; Sanidad v. COMELEC,
73 SCRA 333.

20.
Alalayan v. NPC, 24 SCRA 172; Sumulong v.
COMELEC, 73 Phil. 288; Tio v. Videogram Regulatory Board,
151 SCRA 208.

35.

Noble v. City of Manila, 67 Phil. 1.

36.

100 Phil. 1101.

21.

Supra.

37.

1987 Constitution, Art. VIII, Sec. 1.

22.

Lamb v. Phipps, 22 Phil. 456.

38.

57 L ed. 1063.

39.

Manila Railroad Co. v. Velasques, 32 Phil. 286.

23.
Malabanan v. Ramento, 129 SCRA 359; Espaol v.
Chairman, Philippine Veterans Administration, 137 SCRA
314.
24.

106 Phil. 144.

25.

260 US 393.

26.
Powell v. Pennsylvania, 127 US 678; Lutz v. Araneta,
98 Phil. 148; Tio v. Videogram Regulatory Board, supra.
27.
John J. Costonis, "The Disparity Issue: A Context for
the Grand Central Terminal Decision, "Harvard Law Review,
Vol. 91:40, 1977, p. 404.

40.
Province of Tayabas v. Perez, 66 Phil. 467; J.M. Tuazon
& Co., Inc. v. Land Tenure Administration, 31 SCRA 413;
Municipality of Daet v. Court of Appeals, 93 SCRA 503;
Manotok v. National Housing Authority, 150 SCRA 89.
41.

City of Manila v. Estrada, 25 Phil. 208.

42.

58 SCRA 336.

43.
Lewis, Law of Eminent Domain, 3rd Edition, pp. 11661167.
44.

149 SCRA 305.

28.

348 US 1954.

29.

438 US 104.

45.
Manila Railroad Co. v. Velasquez, 32 Phil. 286;
Province of Tayabas v. Perez, supra, at note 40.

30.

See note 27.

46.

31 SCRA 413.

31.

International Harvester Co. v. Missouri, 234 US 199.

47.

Mandl v. City of Phoenix, 18 p 2d 273.

32.

People v. Cayat, 68 Phil. 12.

48.
Sacremento Southern R. Co. v. Heilbron, 156 Cal.
408, 104 pp. 979, 980.

33.

Ichong v. Hernandez, 101 Phil. 1155.

34.
US v. Toribio, 15 Phil. 85; Fabie v. City of Manila, 21
Phil. 486; Case v. Board of Health, 24 Phil. 256.

49.
City of Waterbury v. Platt Bros. & Co., 56 A 856, 76
Conn, 435 citing Butler v. Ravine Road Sewer Com'rs, 39
N.J.L. 665; Bloodgood v. Mohawk v. H.R.R. Co., N.Y. 18 Wend.
9 35, 31 Am. Dec. 313; Sanborn v. Helden, 51 Cal 266;

Burlington & C.R. Co. v. Schweikart, 14 p. 329, 10 Colo, 178;

23 Words and Phrases, pl. 460.

DECISION

50.
Record of the Constitutional Commission, Vol. 2, pp.
647, 704; Vol. 3, pp. 16-20, 243-247.
51.

Chicago Park Dist. v. Downey Coal Co., 1 Ill. 2d 54.

PUNO, J p:

52.

Kennedy v. Indianapolis, 103 US 599, 26 L ed 550.

53.

Ibid.

54.

4 Blkf., 508.

55.

11 NY 314.

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.

56.

40 Phil. 550.

57.

Sec. 16 (d).

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.

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
Dasmarias, 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
Dasmarias 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,
Dasmarias, Cavite;
(b)
Transfer Certificate of Title No. T-55702 containing an
area of 20,872 square meters situated in Barrio Bangkal,
Dasmarias, 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,
Dasmarias, 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 Dasmarias
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 Dasmarias 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 CarpioMorales, JJ ., concur.
Footnotes
1.
Penned by Associate Justice Remedios A. SalazarFernando, with Quirino D. Abad Santos, Jr. and Salvador J.
Valdez, Jr, JJ., concurring; Annex A, Petition; Rollo, pp. 4966.

2.

155 SCRA 224 (1987).

3.

Exhibit B; Original Records, Volume 2, p. 305.

4.

Exhibit I; ibid., pp. 318322.

5.

Original Records, Volume 1, pp. 15.

6.

Ibid., pp. 1014.

7.
Commissioner's Report issued in compliance with the
Order dated July 13, 1994; Original Records, Volume 2, p.
407; Commissioner's Report issued in compliance with the
Order dated November 11, 1994; ibid., p. 653.
8.
Heirs of Juancho Ardona, et al. vs. Reyes, et al., 125
SCRA 220 (1983).
9.

Supra.

10.

Supra.

11.

Section 9, Article XIII, 1987 Constitution.

12.

42 Phil 28 (1921).

13.

G.R. No. 146587, July 2, 2002.

14.

175 SCRA 343 (1989).

15.

G.R. No. 146587, July 2, 2002.

16.

Original Records, Volume 3, pp. 731732.

17.
227.

See Zaballero, et al. vs. NHA, et al., supra, pp. 226

Copyright 2003
nc

CD Technologies Asia I

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

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

"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

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:

Respondent Antonio Aguilar testified that he and the other

registered owners are all siblings who inherited the subject

"ARTICLE 493. Each co-owner shall have the full ownership of

his part and of the fruits and benefits pertaining thereto,

TCT No. 63767 was issued in the names of the five (5)
respondents plus Virginia Aguilar, thus:

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 1987ten (10) years
before the expropriation case was filed in 1997. As coowners, 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 coowners 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 Paraaque; 64 Caloocan City; 65
Pasig City; 66 Muntinlupa; 67 Marikina; 68 and the then
municipality of Las Pias 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.

Footnotes

1.

Penned by Judge Benjamin V. Pelayo.

2.

Complaint, Records, pp. 2-6.

3.

Answer with Counterclaim, Records, pp. 73-84.

4.

Records, pp. 97-109.

5.

Amended Complaint, Records, pp. 117-121.

6.

Records, p. 134.

7.

Records, pp. 257-283, 285-291.

8.

Records, p. 297.

9.

Petition, p. 3, Rollo, p. 5.

"Sec. 11.
Expropriation of idle lands. All idle lands in
urban lands in urban and urbanizable areas, as defined and
identified in accordance with this Act, shall be expropriated
and shall form part of the public domain. These lands shall
be disposed of or utilized by the Government for such
purposes that conform with their land use plans.
Expropriation proceedings shall be instituted if, after the
lapse of one (1) year following receipt of notice of
acquisition, the owner fails to introduce improvements as
defined in Section 3 (f) hereof, except in the case of force
majeure and other fortuitous events. Exempted from this
provision, however, are residential lands owned by small
property owners or those the ownership of which is subject
of a pending litigation."
19.

Petition, pp. 8-10, Rollo, pp. 10-12.

10.

Petition, pp. 4, 6, Rollo, pp. 6, 8.

11.

Section 2, P.D. 1517.

12.

Section 2, R.A. 7279.

13.

R.A. No. 7279, Secs. 7 and 8, 9 and 12.

21.
Phil. Columbian Association v. Panis, supra, at 673;
Sumulong v. Guerrero, 154 SCRA 461 [1987].

14.

Petition, p. 6, Rollo, p. 8.

22.

15.

Emphasis supplied.

16.

Petition, p. 6, Rollo, p. 8.

23.
Co-authored by Senators Estrada, Saguisag, Taada,
Herrera and Romulo.

17.

Petition, p. 4, Rollo, p. 6.

18.
Likewise exempt are idle residential lands also owned
by small property owners under Section 11 of the law which
reads:

20.
Phil. Columbian Association v. Panis, 228 SCRA 668,
673 [1993]; J. M. Tuason & Co., Inc. v. Land Tenure
Administration, 31 SCRA 413, 427-428 [1970].

Ibid.

24.
Sec. 4 (5), Senate Bill No. 234, Record of the Senate,
Sept. 2, 1991, Vol. I, No. 20, p. 740-741.
25.
741.

Record of the Senate, Sept. 2, 1991, Vol. I, No. 20, p.

26.
See Interpellations, Record of the Senate, Oct. 22,
1991, Vol. II, No. 47, pp. 374-376; Oct. 23, 1991, Vol. II, No.

47, pp. 409-412; Nov. 26, 1991, Vol. II, No. 55, pp. 689-693;
Nov. 28, 1991, Vol. II, No. 57, pp. 764-768; Feb. 3, 1992, Vol.
IV, No. 60, pp. 79,81.
27.
See Conference Committee Report, Record of the
Senate, Feb. 3, 1992, Vol. IV, No. 60, pp. 84, 85-86.
28.

Exhibit "1," Records, p. 123.

29.

Exhibit "2," Records, p. 124.

30.

TSN of February 25, 1998, pp. 10-12.

31.

TSN of June 17, 1998, pp. 7-8, 10.

32.

Exhibits "1" and "2," Records, pp. 123-124.

33.

Exhibit "3," Records, p. 164.

34.

Ibid.

35.

Exhibit "4," Records, pp. 171-175.

36.

Petition, p. 5, Rollo, p. 7.

37.
Article 484, Civil Code; Alejandrino v. Court of
Appeals, 295 SCRA 536, 548 [1998].
38.
Oliveras v. Lopez, 168 SCRA 431, 437 [1988];
Diversified Credit Corp. v. Rosado, 135 Phil. 491,495 [1968];
see also cases in Aquino, Civil Code, vol. I, p. 508 [1990].
39.

Article 493 Civil Code.

40.
The term "personal rights" refers to the personal
relations of one co-owner to the others, as when the family
residence is used by the children as co-ownersPadilla, Civil
Code, vol. II, pp. 300 & 301 [1972]; Tolentino, Civil Code, Bk.
II, p. 203 [1992].
41.

Vda. De Castro v. Atienza, 53 SCRA 264, 268 [1973].

42.
Ramirez v. Bautista, 14 Phil. 528, 532-533 [1909];
also cited in Padilla, Civil Code, vol. II, p. 302 [1972] and
Aquino, Civil Code, vol. I, p. 510 [1990].
43.
Acebedo v. Abesamis, 217 SCRA 186, 194-195
[1993]; Tolentino, Civil Code, vol. II, p. 201 [1992].
44.
Abad v. Court of Appeals, 179 SCRA 817, 826 [1989];
Bailon-Casilao v. Court of Appeals, 160 SCRA 738, 745
[1988]; Santos v. Buenconsejo, 14 SCRA 407, 409 [1965];
Ramirez v. Bautista, supra.
45.
Bailon-Casilao v. Court of Appeals, 160 SCRA 738,
745 [1988]; Lopez v. Gonzaga Vda. de Cuaycong, 74 Phil.
601, 607 [1944]; Punsalan v. Boon Liat, 44 Phil. 320, 324
[1923].
46.
Gotauco & Co. v. Register of Deeds, 59 Phil. 756, 757
[1934]; see also Tolentino, supra, at 201, citing Cadag v.
Trinanes, (C.A.), 40 O.G., No. 8, 4th Suppl. 324 [1939].
47.

Tolentino, supra, at 204, citing 3 Manresa 508.

48.
Article 494, Civil Code; see also Ferrer v. Rilloraza, 55
O.G., No. 9, 1575, 1580 [1959].
49.
Ferrer v. Rilloraza, (C.A.) 55 O.G. 1575, 1580 [1959];
also cited in Tolentino, supra, at 204-205.

50.

Exhibits "12" to "15," Records, pp. 242-245.

68.

Exhibit "8-ss," Records, pp. 224.

51.

Exhibit "16," Records, p. 246.

69.

Exhibits "8-11" to "8-qq," Records, pp. 217-222.

52.

Exhibit "17," Records, p. 247.

70.

Exhibits "8-tt" to "8-yy," Records, pp. 225-230.

53.

Exhibit "16," Records, p. 246.

54.

Exhibit "7," Records, p. 178.

71.
TSN of February 25, 1998, pp. 20-21; Exhibits "5" and
"6," Delivery Receipts of subject property, Records, pp. 176177.

55.
TSN of February 25, 1998, p. 22; TSN of June 17,
1998, pp. 6-7.
56.
Cid v. Peralta, 24 Phil. 142, 147-148 [1913]; also
cited in Tolentino, Civil Code, Bk. II, pp. 162-163 [1992].
57.

TSN of February 25, 1998, pp. 35-36.

58.
185.

Exhibits "8," "8-e," and "8-f," Records, pp. 179, 184-

59

Exhibits "8-ddd" and "8-eee," Records, pp. 235, 236.

60.
Exhibits "8-g," "8-h," ""8-i" to "8-r," "8-fff," Records,
pp. 186-196, 237.
61.

Exhibits "8-r" to "8-x," Records, pp. 197-203.

62.

Exhibit "8-y, Records, p. 204.

63.

Exhibits "8-z," "8-aa" to "8-ee," Records, pp. 205-210.

64.

Exhibit ''8-zz," Records, p. 231.

65.

Exhibits "8-ff" to "8-kk," Records, pp. 211-216.

66.

Exhibit "8-b," Records, p. 181.

67.

Exhibit "8-rr," Records, p. 223.

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.
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

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 4,048square-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 handsoff 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 wellestablished 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 wellstudied, 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.

Davide, Jr., C. J. , Puno, Panganiban, Quisumbing, YnaresSantiago, Sandoval-Gutierrez, Carpio, Austria-Martinez,

Callejo, Sr. and Tinga, JJ., concur.
Carpio Morales, Azcuna and Chico-Nazario, JJ., on leave.

Footnotes
1.

Presided by Judge Generosa G. Labra.

2.
The records of the case do not state why and how
the lots reverted to the Province of Cebu.
3.

Now deceased.

4.

Dated February 22, 1999 and May 20, 1999.

5.
The Urban Development and Housing Act of 1992
(Lina Law).
6.
Entitled, "AN ORDINANCE FURTHER AMENDING
ORDINANCE NO. 1656 AS AMENDED BY ORDINANCE NO.
1684 OTHERWISE KNOWN AS THE 1966 REVISED ZONING
ORDINANCE OF THE CITY OF CEBU, BY INCORPORATING

THEREIN A NEW DISTRICT CALLED SOCIALIZED HOUSING

SITES."
7.
Entitled "AN ORDINANCE AUTHORIZING THE CITY
MAYOR OF CEBU CITY TO INSTITUTE EXPROPRIATION
PROCEEDINGS AGAINST MRS. CRISPINA VDA. DE LAGCAO,
OWNER OF LOT NO. 1029 LOCATED AT GREEN VALLEY,
CAPITOL SITE, CEBU CITY, TO ACQUIRE THE SAME FOR
PUBLIC USE OR PURPOSE."
8.
Article IV, Section 9 "Private property shall not be
taken for public use without just compensation."
9.
Section 48. Local Legislative Power Local
legislative power shall be exercised by the sangguniang
panlalawigan for the province; the sangguniang panlungsod
for the city; the sangguniang bayan for the municipality; and
the sangguniang barangay for the barangay.
10.
The law was approved on October 10, 1991 and it
became effective on January 1, 1992.
11.
City of Cincinnati vs. Vester, 281 US 439, 74 L. ed
950, 50 S Ct. 360.
12.

Article 3, Section 1, 1987 Constitution.

13.

Article 3, Section 9, 1987 Constitution.

14.
Joaquin G. Bernas, The Constitution of the Republic of
the Philippines: A Commentary, vol. 1. p. 43, 1987.
15.
City of Manila vs. Chinese Community of Manila, 40
Phil. 349, 1919.
16.

G.R. No. L-51078, 30 October 1980, 100 SCRA 660.

17.
City of Manila vs. Chinese Community of Manila,
supra.
18.

Urban Estates, Inc. vs. Montesa, 88 Phil. 348 (1951).

19.

G.R. Nos. 132431 and 137146, February 13, 2004.

20.
Sec 19. Eminent Domain ". . . Provided however,
that the power of eminent domain may not be exercised
unless a valid and definite offer has been previously made
to the owner, and such offer was not accepted: . . ."
21.
Tatel vs. Municipality of Virac, G.R. No. 40243, 11
March 1992, 207 SCRA 157.

Copyright 2004
nc

CD Technologies Asia I

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.

Plana, J ., took no part.

Abad Santos, J ., This is a frivolous suit. While the tax rates
for compensation income are lower than those for net
income such circumstance does not necessarily result in
lower tax payments for those receiving compensation
income. In fact, the reverse will most likely be the case;
those who file returns on the basis of net income will pay
less taxes because they can claim all sorts of deductions
justified or not. I vote for dismissal.

4.
Petition, Parties, par. 1. The challenge is thus aimed
at paragraphs (a) and (b) of Section 1 further Amending
Section 21 of the National Internal Revenue Code of 1977.
Par. (a) reads: "(a) On taxable compensation income. A
tax is hereby imposed upon the taxable compensation
income as determined in Section 28 (a) received during
each taxable year from all sources by every individual,
whether a citizen of the Philippines, determined in
accordance with the following schedule:
Not over P2,500

Footnotes
1.
Petitioner must have realized that a suit for
declaratory relief must be filed with Regional Trial Courts.
2.

Batas Pambansa Blg. 135, Section 21 (1981).

3.
The respondents are 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.

0%

Over P 2,500 but not over 5,000

1%

Over P 5,000 but not over 10,000

excess over P 5,000

25 + 3% of

Over P 10,000 but not over 20,000 P

excess over P 10,000

175 + 7% of

Over P 20,000 but not over 40,000 P

excess over P 20,000

875 + 11% of

Over P 40,000 but not over 60,000 P

excess over P 40,000

3,075 + 15% of

Over P 60,000 but not over 100,000

19% of excess over P 60,000

6,075 +

Over P 100,000 but not over 250,000

24% of excess over P100,000

13,675 +

Over P 250,000 but not over 500,000

29% of excess over P250,000

49,675 +

Over P 500,000
P500,000

P122,175 + 35% of excess over

Par. (b) reads: "(b) On taxable net income. A tax is

hereby imposed upon the taxable net income as determined
in Section 29 (a) received during each taxable year from all
sources by every individual, whether a citizen of the
Philippines, or an alien residing in the Philippines
determined in accordance with the following schedule:
Not over P10,000

05%

9.
10.

Answer, pars. 1-6.

Ibid, par. 6.

11.
Agricultural Credit and Cooperative Financing
Administration v. Confederation of Unions in Government
Corporation and Offices, L-21484, November 29, 1969, 30
SCRA 649, 662.

Over P10,000 but not over P30,000 P 500 + 15% of excess

over P 10,000

12.
Cf. Vera v. Fernandez, L-31364, March 30, 1979, 89
SCRA 199, per Castro, J.

Over P30,000 but not over P150,000

excess over P 30,000

P 3,500 + 30% of

13.

Sarasola v. Trinidad, 40 Phil. 252, 262 (1919).

14.

McCulloch v. Maryland, 4 Wheaton 316.

Over P150,000 but not over P500,000

of excess over P150,000

P39,500 + 45%

15.

306 US 466 (1938).

16.

Ibid, 489.

17.

Ibid, 490.

Over P500,000
P500,000
5.

P197,000 + 60% of excess over

Ibid, Statement, par. 4.

6.
Article IV, Section 1 of the Constitution reads: "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."
7.
Article VII, Section 7, par. (1) of the Constitution
reads: "The rule of taxation shall be uniform and equitable.
The Batasang Pambansa shall evolve a progressive system
of taxation."
8.
It was filed by Solicitor General Estelito P. Mendoza.
He was assisted by Assistant Solicitor General Eduardo D.
Montenegro and Solicitor Erlinda B. Masakayan.

18.
Cf. Ermita-Malate Hotel and Motel Operators
Association v. Hon. City Mayor, 127 Phil. 306, 315 (1967);
U.S. v. Salaveria, 39 Phil. 102, 111 (1918) and Eboa v.
Daet, 85 Phil. 369 (1950). Likewise referred to is O'Gorman
and Young v. Hartford Fire Insurance Co., 282 US 251, 328
(1931).
19.
Cf. Manila Gas Co. v. Collector of Internal Revenue, 62
Phil. 895 (1936); Wells Fargo Bank and Union Trust Co. v.
Collector, 70 Phil. 325 (1940); Republic v. Oasan Vda. de
Fernandez, 99 Phil. 934 (1956).
20.
The excerpt is from the opinion in J.M. Tuason and Co.
v. The Land Tenure Administration, L-21064, February 18,
1970, 31 SCRA 413, 435 and reiterated in Bautista v. Juinio,

G.R. No. 50908, January 31, 1984, 127 SCRA 329, 339. The
former deals with an eminent domain proceeding and the
latter with a suit contesting the validity of a police power
measure.
21.

Tigner v. Texas, 310 US 141,147 (1940).

22.

98 Phil. 148 (1955).

23.

Ibid, 153.

Copyright 1994-1999 CD Technologies

A s i a, I n c.

24.
Article VIII, Section 17, par. 1, first sentence of the
Constitution.
25.

69 Phil. 420 (1940).

26.

Ibid, 426.

27.

Ibid, 424.

28.
Eastern Theatrical Co. v. Alfonso, 83 Phil. 852, 862
(1949).
29.
Manila Race Horse Trainers Asso. v. De la Fuente, 88
Phil. 60, 65 (1951).
30.

Uy Matias v. City of Cebu, 93 Phil. 300 (1953).

31.
While petitioner cited figures to sustain his assertion,
public respondents refuted with other figures that argue
against his submission. One reason for requiring declaratory
relief proceedings to start in regional trial courts is precisely
to enable petitioner to prove his allegation, absent an
admission in the answer.

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
ROO, 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 reclassified 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. 9-10A). 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) PD1432, 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 class shall
be taxed at the same rate (Churchill v. Concepcion, 34 Phil.
969 [1916]).
Notably in the 1935 Constitution, there was no mention of
the equitable or progressive aspects of taxation required in
the 1973 Charter (Fernando "The Constitution of the
Philippines", p. 221, Second Edition). 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.).
The power to tax "is an attribute of sovereignty". In fact, it is
the strongest of all the powers of government. But for all its
plenitude, the power to tax is not unconfined as there are
restrictions. Adversely effecting as 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 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' pen, thus: "The power to tax is not the power to
destroy while this Court sits." "So it is in the Philippines."
(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 justice should not now be penalized by
the same government by the imposition of excessive taxes
petitioners can ill afford and eventually result in the
forfeiture of their properties.
By the public respondents' own computation the assessment
by income approach would amount to only P10.00 per sq.
meter at the time in question.

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 Assessor of Manila are
ordered to make a new assessment by the income approach
method to guarantee a fairer and more realistic basis of
computation (Rollo, p. 71).

FIRST DIVISION
[G.R. No. 148191. November 25, 2003.]
COMMISSIONER OF INTERNAL REVENUE, petitioner,
vs. SOLIDBANK CORPORATION, respondent.

SO ORDERED.

DECISION

Fernan, C.J., Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz,

Feliciano, Gancayco, Padilla, Bidin, Sarmiento, Grio-Aquino,
Medialdea, Regalado and Davide, Jr., JJ., concur.

PANGANIBAN, J p:

Footnotes
1.
Penned by former Chairman and Acting Minister
Pedro Almanzor and concurred in by the then Minister of
Justice Vicente Abad Santos and Minister of Local
Government and Community Development Jose Roo.
2.
Rendered by then Acting Register of Deeds of Manila
Teresita H. Noblejas and concurred in by former City
Engineer of Manila Romulo M. del Rosario and OIC of the
Office of the City of Auditor Raul C. Flores.

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.
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 government on their behalf, in
satisfaction of their withholding taxes. That they do not
actually receive the amount does not alter the fact that it is
remitted for their benefit in satisfaction of their tax
obligations.
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 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.
The Case
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:
"WHEREFORE, we AFFIRM in toto the assailed decision and
resolution of the Court of Tax Appeals." 5
The challenged Resolution denied petitioner's Motion for
Reconsideration.
The Facts
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 gross
receipts (pertaining to 5% [Gross Receipts Tax] rate) in the
total amount of P1,474,691,693.44 with corresponding gross
receipts tax payments in the sum of P73,734,584.60, broken
down as follows:
Period Covered
Receipts Tax

Gross Receipts

January to March 1994

9,420,303.10
April to June 1994

P 188,406,061.95

370,913,832.70

July to September 1994

24,075,091.95

18,545,691.63

481,501,838.98

October to December 1994 433,869,959.81

21,693,497.98
-----------Total

-----------

P 1,474,691,693.44 P 73,734,584.60

=============

============

"[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% final
withholding tax.

"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.

Gross
"On June 19, 1997, on the strength of the aforementioned
decision, [respondent] filed with the Bureau of Internal

Revenue [BIR] a letter-request for the refund or issuance of

[a] tax credit certificate in the aggregate amount of
P3,508,078.75, representing, allegedly overpaid gross
receipts tax for the year 1995, computed as follows:

Gross Receipts Subjected to the Final Tax

Derived from Passive [Income]
Multiply by Final Tax rate

P350,807,875.15

Ruling of the CA

20%

---------20% Final Tax Withheld at Source

P 70,161,575.03

Multiply by [Gross Receipts Tax] rate

5%

---------Overpaid [Gross Receipts Tax]

P 3,508,078.75

============

xxx

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

"Without waiting for an action from the [petitioner],

[respondent] on the same day filed [a] petition for review
[with the Court of Tax Appeals] in order to toll the running of
the two-year prescriptive period to 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'] . . ..
xxx

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. 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] bank's interest income should not form part of its taxable
gross receipts for purposes of computing the [gross receipts
tax]." 7

xxx

"After trial on the merits, the [Court of Tax Appeals], on

August 6, 1999, rendered its decision ordering . . . petitioner
to refund in favor of . . . respondent the reduced amount of

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

Short-term maturity not in excess of two (2) years5%

of the Taxable Gross Receipts

Medium-term maturity over two (2) years

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.

but not exceeding four (4) years

Long-term maturity:
(i)

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.

Over four (4) years but not exceeding

seven (7) years

(ii)

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.

3%

"(b)

1%

Over seven (7) years

0%

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.

on constructive receipt can be easily rationalized, if not

made clearly manifest. 25

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 payorcorporation 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

Constructive Receipt

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

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, nonbank 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:

"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."

"SEC. 4.

"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

...

"(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

Article 532 states:

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 1784 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.

money which, although delivered, has been especially

earmarked by law or regulation for some person other than
the taxpayer. 58

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

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

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

"'[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

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

". . . [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

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

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.

". . . [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

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

"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.

9.
This case was deemed submitted for decision on
January 24, 2002, upon receipt by this Court of petitioner's
Memorandum, signed by Attys. Pablo M. Bastes Jr. and
Rhodora J. Corcuera-Menzon. Respondent's Memorandum,
signed by Atty. P. Winston G. Conlu, was received by this
Court on January 10, 2002.
10.
Petitioner's Memorandum, p. 3; rollo, p. 120. Original
in upper case.

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

concur.

Footnotes
1.

Rollo, pp. 819.

2.

Id., pp. 2129.

3.

Id., p. 31.

4.
Sixth Division. Penned by Justice Ma. Alicia AustriaMartinez (Division chairman and now a member of this
Court) and concurred in by Justices Portia AlioHormachuelos and Elvi John S. Asuncion (members).
5.

Assailed Decision, p. 8; rollo, p. 28.

6.
Words in brackets [ ] supplied. In its Memorandum,
respondent likewise cites this narration of facts by the CA.
7.

Assailed Decision, pp. 13; rollo, pp. 21-23.

8.

Id., pp. 5 & 25.

11.

GR No. 146749, p. 10, June 10, 2003, per Carpio, J .

12.

Now 121.

13.
Now RA 8424, approved on December 11, 1997, and
effective January 1, 1998.
14.

Now 32.

15.
On October 1, 1946, RA 39 amended 249 of the
1939 Tax Code by imposing a GRT on banks. Their taxable
gross receipts included interest income on their own
deposits with other banks, without deduction or any
withholding tax until June 1977. (China Banking Corp. v. CA,
supra, p. 11)
16.

Now 128(A)(1).

17.

Now twenty-five (25) days.

18.
On June 3, 1977, PD 1156 required the withholding of
a 15% tax on the interest income from bank deposits. This
was a creditable tax not a FWT and the entire interest
income still formed part of taxable gross receipts. On
September 17, 1980, however, PD 1739 made this a FWT of
15% on savings accounts and 20% on time deposits. (China
Banking Corp. v. CA, supra, pp. 1112)

19.

Now 27(D)(1).

30.

Now 32(B).

20.

Now 57(A).

31.

Respondent's Memorandum, p. 10; rollo, p. 83.

21.

Now 58.

32.
The possession by a sheriff by virtue of a court order
is one of the ways of constructive possession. (Paras, Civil
Code of the Philippines, Vol. II [10th ed.], 1981, p. 359;
Muyco v. Montilla, 7 Phil. 498, February 18, 1907)

22.
De Leon, The Fundamentals of Taxation (12th ed.),
1998, p. 136.
23.

Id., p. 92.

24.
The withholding tax concept obviously and
necessarily implies that the amount withheld comes from
the income earned by a taxpayer. (China Banking Corp. v.
CA, supra, p. 31)
25.
Bank of America NT & SA v. Court of Appeals, 234
SCRA 302, July 21, 1994.
26.
Dated October 12, 1984, these regulations cover the
"Income Taxation of Interest Income Derived from Deposits
and Yield from Deposit Substitutes" as provided for by PD
No. 1959.
27.
"Interest" is the amount paid by a borrower to a
lender in consideration for the use of the lender's money. It
is an expense item to the borrower and an income item to
the lender. Hence, the total interest expense paid by a
depository bank forms part of the gross income of a lending
bank. (China Banking Corp. v. CA, supra, p. 28)
28.
Respondent's Memorandum, p. 8; rollo, p. 81. Dated
November 7, 1980, these regulations cover the "Taxation of
Certain Income Derived from Banking Activities."
29.

Now 32(A).

And so is the inscription of informacin

posesoria or possessory information titles. (Bishop of Nueva
Segovia v. Municipality of Bantay, 28 Phil. 347, November 7,
1914. See Alcala v. Alcala, 35 Phil. 679, December 11, 1916)
33.
"The most usual form of the authority to acquire
possession for another is that of agency, whether it be a
special power or a general authority. Where there is such
authorization, the principal acquires the possession from the
moment the agent holds the thing for the former." Tolentino,
Commentaries and Jurisprudence on the Civil Code of the
Philippines, Vol. II (1992 ed.), p. 263.
34.

Id., p. 262.

35.
Commissioner of Internal Revenue v. Royal
Interocean Lines, 34 SCRA 9, 15, July 30, 1970.
36.
Victorias Milling Co., Inc. v. Social Security
Commission, 114 Phil. 555, 558, March 17, 1962.
37.
Kenneth Culp Davis, Administrative Law Treatise, Vol.
I (1958 ed.), p. 299.
38.
Victorias Milling Co., Inc. v. Social Security
Commission, supra.

39.
Director of Forestry v. Muoz, 23 SCRA 1183, 1198,
June 28, 1968.
40.
People v. Exconde, 101 Phil. 1125, 1129, August 30,
1957.
"The delegated power, if at all, therefore, is
not the determination of what the law shall be, but merely
the ascertainment of the facts and circumstances upon
which the application of said law is to be predicated."
Calalang v. Williams, 70 Phil. 726, 731, December 2, 1940,
per Laurel, J .
"Delegata potestas non potest delegare . . .
has been made to adapt itself to the complexities of modern
governments, giving rise to the adoption, within certain
limits, of the principle of 'subordinate legislation' . . .. The
difficulty lies in the fixing of the limit and extent of the
authority. While courts have undertaken to lay down general
principles, the safest is to decide each case according to its
peculiar environment, having in mind the wholesome
legislative purpose intended to be achieved." People v.
Rosenthal, 68 Phil. 328, 343, June 12, 1939, per Laurel, J .
"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." Pangasinan Transportation Co., Inc. v. Public Service
Commission, 70 Phil. 221, 229, June 26, 1940, per Laurel, J .
"Discretion . . . may be committed by the
Legislature to an executive department or official. The
Legislature may make decisions of executive departments or

subordinate officials thereof, to whom it has committed the

execution of certain acts, final on questions of fact." Rubi v.
Provincial Board of Mindoro, 39 Phil. 660, 701, March 7,
1919, per Malcolm, J .
41.
The true distinction is between the delegation of
power to make the law, which necessarily involves a
discretion as to what it shall be, and the conferment of 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. (Calalang v.
Williams, supra, 730. See also Rubi v. Provincial Board of
Mindoro, supra, pp. 700701; State v. Fields, 35 NE 2d 744,
750, July 15, 1938; and Matz v. J . L. Curtis Cartage Co., 7 NE
2d 220, 226, March 17, 1937)
42.
Mecano v. Commission on Audit, 216 SCRA 500, 504,
December 11, 1992.
43.

Id., p. 505.

44.
Posadas Jr. v. National City Bank of New York, 296 US
497, 503, 80 L. Ed. 351, 355, January 6, 1936.
45.

Ibid.

A subsequent regulation, which revises the

whole subject matter of a previous one and is evidently
intended as a substitute for it, operates to repeal it. (People
v. Almuete, 69 SCRA 410, 414, February 27, 1976)
When both intent and scope clearly evince the
idea of a repeal, then all parts and provisions of the previous
regulation that are omitted from the revised one are
deemed repealed. (People v. Binuya, 61 Phil. 208, 210,
February 27, 1935)

46.

Valera v. Tuason Jr., 80 Phil. 823, 827, April 30, 1948.

57.

47.
279.

Agpalo, Statutory Construction (2nd ed.), 1990, p.

58.
See Visayan Cebu Terminal Co., Inc. v. Commissioner
of Internal Revenue, 121 Phil. 337, February 27, 1965.

48.
Parras v. Land Registration Commission, 108 Phil.
1142, 1146, July 26, 1960.
49.
Victorias Milling Co., Inc. v. Social Security
Commission, supra.
50.
Smith, Bell & Co. v. Estate of Maronilla, 41 Phil. 557,
562, February 5, 1916, per Carson, J .
51.

Ibid.

52.
Petitioner's Memorandum, p. 7; rollo, p. 124. Indeed,
RR 17-84 supplanted RR 12-80; 4(e) of the earlier
regulation was not readopted by the later one. (China
Banking Corp. v. CA, supra, pp. 3334)
53.
Id., pp. 9 & 126. In fact, we ruled in China Banking
Corp. v. CA that Section 4(e) did not exclude accrued
interest income from taxable gross receipts, but merely
postponed its inclusion until actual payment, physically or
constructively, to a lending bank, pp. 3031.
54.
Commissioner of Internal Revenue v. Blaine, Mackay,
Lee Co., 141 F. 2d 201, 203, March 6, 1944. See Brown v.
Helvering, 291 US 193, 199, 78 L. Ed. 725, 730, January 15,
1934.
55.
Utah-Idaho Sugar Co. v. State Tax Commission, 73 P.
2d 974, 977978, December 2, 1937.
56.

Lorenzo v. Posadas, 64 Phil. 353, 368, June 18, 1937.

108 Phil. 821, 825826, June 30, 1960.

59.
From RA 39 to the present Tax Code, there has been
no statutory definition of "gross receipts" as applied to taxes
on banks. (China Banking Corp. v. CA, supra, p. 14)
60.
Limpan Investment Corp. v. Commissioner of Internal
Revenue, 17 SCRA 703, 709, July 26, 1966. See also
Consolidated Mines, Inc. v. Court of Tax Appeals, 58 SCRA
618, August 29, 1974.
61.
Lucky Lager Brewing Co. v. Commissioner of Internal
Revenue, 246 F. 2d, 621, 622, June 24, 1957, per Denman,
CJ .
62.
State v. United Electric Light & Eater Co., 97 A. 857,
859, June 2, 1916, per Thayer, J .
63.

Ibid.

64.
"Gross receipts," absent a statutory definition, is to
be understood in its plain and ordinary meaning. The words
are to be taken in their usual and familiar signification, with
due regard to their general and popular use. This principle
applies to all statutes, including tax statutes. (China Banking
Corp. v. CA, supra, p. 17)
65.
Ibid. See Taylor v. Rosenthal, 213 SW 2d 437, April
23, 1948. The Taylor case, however, is not a tax case. It
refers to a lease contract covering the rental of a motion
picture theater.
66.
Deducting any amount from gross receipts changes
the meaning to net receipts. (China Banking Corp. v. CA,

supra, p. 16, citing Commonwealth v. Koppers Co., Inc., 156

A. 2d 328, 332, Nov. 24, 1959, and Laclede Gas Co. v. City of
St. Louis, 253 SW 2d 832, 835, January 9, 1953)

76.

Ibid., p. 26.

77.

Ibid., p. 27.

67.
Cooley, The Law on Taxation, Vol. II (1924), pp. 17891790; State v. Illinois Cent. R. Co., 92 NE 848, Oct. 28, 1910.

78.

183 SCRA 402, March 21, 1990.

79.

Id., p. 412, per Gutierrez Jr., J .

68.

Ibid., pp. 17861787.

69.

Id., p. 1788.

The rule of taxation shall be uniform and

equitable. 28(1), Art. VI, 1987 Constitution.
70.

China Banking Corp. v. CA, supra, p. 19.

71.
"When a statute is susceptible of the meaning placed
upon it by a ruling of the government agency charged with
its enforcement and the [l]egislature thereafter [reenacts]
the provisions with substantial change, such action is to
some extent confirmatory that the ruling carries out the
legislative purpose." Alexander Howden & Co., Ltd. v.
Collector (now Commissioner) of Internal Revenue, 121 Phil.
579, 587, April 14, 1965, per Bengzon J.P., J .
72.

China Banking Corp. v. CA, supra.

73.
State v. Illinois Cent. R. Co., 92 NE 847, Oct. 28,
1910.
74.
Manila Jockey Club merely held that these amounts
were held in trust and did not form part of gross receipts.
75.
A trustee does not own money received in trust. It is
a basic concept in taxation that such money does not
constitute taxable income to the trustee. (China Banking
Corp. v. CA, supra, p. 27)

In an earlier case Philippine Long Distance

Telephone Co. v. Collector of Internal Revenue, 90 Phil. 674,
January 21, 1952 cited in the Dissenting Opinion of CTA
Associate Judge Amancio Q. Saga, receipts means amounts
actually received; otherwise, they will not be receipts. A
careful reading of this case, however, reveals that receipts
are equated with earnings, the latter word having been used
in the legislative acts referred to therein; and dealing with
collection, not accrual. In fact, these acts have been
construed so as not to be rendered unconstitutional.
80.

Hart v. Smith, 64 NE 661, 662, June 27, 1902.

81.

Ibid.

82.
Scottish Union & National Insurance Co. v. Bowland,
196 US 611, 629, 49 L. Ed. 619, 627, February 20, 1905, per
Day, J .
83.

China Banking Corp. v. CA, supra, p. 40.

84.

Hart v. Smith, supra.

85.
Kirtland v. Hotchkiss, 100 US 491, 497, 25 L. Ed. 558,
561562, November 17, 1879.
86.
M'Culloch v. Maryland, 4 Wheaton 316, 429, 4 L. Ed.
579, 607, February 1819.
87.

Kirtland v. Hotchkiss, supra, p. 562.

88.
Bromley v. McCaughn, 280 US 124, 137, 74 L. Ed.
226, 230, November 25, 1929.
89.
"It is a general rule in the interpretation of all
statutes levying taxes or duties upon subjects or citizens,
not to extend their provisions by implication beyond the
clear import of the language used, or to enlarge their
operation so as to embrace matters not specifically pointed
out, although standing on a close analogy. In every case,
therefore, of doubt, such statutes are construed most
strongly against the government, and in favor of the
subjects or citizens, because burdens are not to be imposed,
nor presumed to be imposed, beyond what the statutes
expressly and clearly import. Revenue statutes are in no just
sense either remedial laws, or laws founded upon any
permanent public policy, and therefore are not to be
liberally construed." Froelich & Kuttner v. Collector of
Customs, 18 Phil. 461, 481482, March 2, 1911, per
Moreland, J .
90.
Churchill and Tait v. Rafferty, 32 Phil. 580, 585,
December 21, 1915, per Trent, J .
91.

Lorenzo v. Posadas Jr., supra, p. 371, per Laurel, J .

92.
Republic v. Lim Tian Teng Sons & Co., Inc., 16 SCRA
584, 590, March 31, 1966, per Bengzon, J.P., J . See also
Churchill and Tait v. Raferty, supra.
93.
A. Magnano Co. v. Hamilton, 292 US 40, 46, 78 L. Ed.
1109, 1115, April 2, 1934.
94.
Moran v. Leccony Smokeless Coal Co., 10 SE 2d 581,
June 22, 1940.

Tax laws are to be strictly construed against

the taxing power. (Miller v. Illinois Cent. R. Co. 111 So. 559,
February 28, 1927)
95.
"If there is any doubt whether the language of an act
was intended to authorize the taxation of certain property,
the language of the act will not be extended beyond its clear
import in order to make the property subject to the tax. In
case of doubt such statutes are construed most strongly
against the government and in favor of the citizen." People
ex rel. Chicago v. Barrett, 139 NE 903, 906, June 20, 1923,
per Carter, J .
"Before one is liable for taxes he must come
within the express provisions of the taxing statute." Miller v.
Illinois Cent. R. Co., supra.
96.
Lizarraga Hermanos v. Yap Tico, 24 Phil. 504, 513,
March 27, 1913. See Pacific Oxygen & Acetylene Co. v.
Central Bank of the Philippines, 22 SCRA 917, 921, March 1,
1968.
"Where language is plain, subtle refinements
which tinge words so as to give them the color of a
particular judicial theory are not only unnecessary but
decidedly harmful. That which has caused so much
confusion in the law, which has made it so difficult for the
public to understand and know what the law is with respect
to a given matter, is in considerable measure the
unwarranted interference by judicial tribunals with the
English language as found in statutes and contracts, cutting
out words here and inserting them there, making them fit
personal ideas of what the legislature ought to have done or
what parties should have agreed upon, giving them
meanings which they do not ordinarily have, cutting,
trimming, fitting, changing and coloring until lawyers

themselves are unable to advise their clients as to the

meaning of a given statute or contract until it has been
submitted to some court for its interpretation and
construction." Nery v. Lorenzo, 44 SCRA 431, 437, April
27,1972, per Fernando, J . See Yangco v. Court of First
Instance of Manila, 29 Phil. 183, 188, January 6, 1915.
97.

35 SCRA 270, October 16, 1970.

98.

Id., p. 277, per Barredo, J .

99.

In Re Allen, 2 Phil. 630, 643, October 29, 1903.

100. Commissioner of Internal Revenue v. Esso Standard

Eastern, Inc., 172 SCRA 364, 370, April 18, 1989.
101. People v. Rivera, 59 Phil. 236, 242, December 22,
1933, per Imperial, J .
102. Insular Bank of Asia and America Employees' Union v.
Inciong, 132 SCRA 663, 673, October 23, 1984, per
Makasiar, J . (later CJ ). See Chartered Bank Employees
Association v. Ople, 138 SCRA 273, 280, August 28, 1985,
per Gutierrez, J .
103.

China Banking Corp. v. CA, supra, p. 24.

104. It was created by Congress pursuant to Republic Act

No. 1125, effective June 16, 1954.
105. The Coca-Cola Export Corp. v. Commissioner of
Internal Revenue, 56 SCRA 5, 14, March 15, 1974. See
Commissioner of Internal Revenue v. Court of Appeals, 242
SCRA 289, 304, March 10, 1995.
106. Commissioner of Internal Revenue v. Tours
Specialists, Inc., 183 SCRA 402, 407, March 21, 1990. See

Philippine Refining Co. v. CA, 256 SCRA 667, 675676, May

8, 1996.
107. Commissioner of Internal Revenue v. SC Johnson &
Son, Inc., 368 Phil. 388, 411, June 25, 1999; Magsaysay
Lines, Inc., v. Court of Appeals, 329 Phil. 310, 324, August
12, 1996; Commissioner of Internal Revenue v. Tokyo
Shipping Co., Ltd., 314 Phil. 220, 228, May 26, 1995.
108. Whoever claims an exemption must justify it by the
clearest grant of organic or statute law. (China Banking
Corp. v. CA, supra, p. 37)
109. Ibid. See Davao Light & Power Co., Inc. v.
Commissioner of Customs, 44 SCRA 122, 130, March 29,
1972.
110. Asiatic Petroleum Co., Ltd. v. Llanes, 49 Phil. 466,
471, October 20, 1926.
111. Commissioner of Internal Revenue v. SC Johnson and
Son, Inc., supra, p. 411, per Gonzaga-Reyes, J .
112.

28(4) of Art. VI states:

"No law granting any tax exemption

shall be passed without the concurrence of a majority of all
the Members of the Congress."
113. Davao Light & Power Co., Inc. v. Commissioner of
Customs, supra.
114. Manila Electric Co. v. Vera, 67 SCRA 351, 357358,
October 22, 1975. See Asiatic Petroleum Co., Ltd. v. Llanes,
supra.
115.

China Banking Corp. v. CA, supra, p. 22.

116.

Ibid., p. 23.

124.

62 Phil. 624, 632, December 19, 1935.

117. Afisco Insurance Corp. v. Court of Appeals, 361 Phil.

671, January 25, 1999, per Panganiban, J .

125. Afisco Insurance Corp. v. Court of Appeals, supra. De

Leon, The Fundamentals of Taxation (12th ed.) 1998, p. 51.

118. San Miguel Brewery, Inc. v. City of Cebu, 43 SCRA

275, 280, February 26, 1972. See also Villanueva v. City of
Iloilo, 135 Phil. 572, 588, December 28, 1968, and
Commissioner of Internal Revenue v. Lednicky, 120 Phil.
586, 593, July 31, 1964.

Copyright 2003
nc

119. Victorias Milling, Co., Inc. v. Municipality of Victorias,

Province of Negros Occidental, 134 Phil. 180, 198,
September 27, 1968.
120.

Villanueva v. City of Iloilo, supra.

121. Generally stated, an excise tax is one that is imposed

on the performance of an act, the engagement in an
occupation, or the enjoyment of a privilege; and the word
has come to have a broader meaning that includes every
form of taxation not a burden laid directly on persons or
property. (Manila Electric Company v. Vera, 67 SCRA 352,
October 22, 1975. See also State ex rel. Janes v. Brown, 148
NE 95, 96, May 19, 1925; Buckstaff Bath House Co. v.
McKinley, 127 SW 2d 802, 806, April 10, 1939; and State v.
Fields, 35 NE 2d 744, 749, July 15, 1938)
122.

Cooley, The Law on Taxation, Vol. II, 1924, p. 1785.

123. We have also ruled that there is no double taxation

when the law imposes two different taxes on the same
income, business or property. (China Banking Corp. v. CA,
supra, p. 40. See also Sanchez v. Collector of Internal
Revenue, 97 Phil. 687, 690, Oct. 18, 1955, and People v.
Mendaros, 97 Phil. 958, 959, May 27, 1955)

CD Technologies Asia I

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 bylaws, 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 welldoing 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 nonstock 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 wellbeing 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 nonprofit, 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

SECTION 234. Exemptions from Real Property Tax. The

following are exempted from payment of the real property
tax:

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

(b)
Charitable institutions, churches, parsonages or
convents appurtenant thereto, mosques, non-profit or
religious cemeteries and all lands, buildings, and
improvements actually, directly, and exclusively used for
religious, charitable or educational purposes. 35

Section 28(3), Article VI of the 1987 Philippine Constitution

provides, thus:
(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
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:

xxx

xxx

xxx

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 property be used "actually" and "directly"
for such purposes. 37
In light of the foregoing substantial changes in the
Constitution, the petitioner cannot rely on our ruling in
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: 39
. . . 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 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 taxexempt purposes. 44

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.

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.

IN LIGHT OF ALL THE FOREGOING, the petition is PARTIALLY

GRANTED. The respondent Quezon City Assessor is hereby
DIRECTED to determine, after due hearing, the precise
portions of the land and the area thereof which are leased to
private persons, and to compute the real property taxes due
thereon as provided for by law.

SO ORDERED.

Davide, Jr., C .J ., Puno, Panganiban, Quisumbing, SandovalGutierrez, Carpio, Corona, Carpio-Morales, Azcuna and
Tinga, JJ ., concur.

9.
10.

3 SCRA 187 (1961).

Rollo, pp. 8384.

Ynares-Santiago and Austria-Martinez, JJ ., are on leave.

11.
See Workmen's Circle Educational Center of
Springfield v. Board of Assessors of City of Springfield, 51
N.E.2d 313 (1943).

Footnotes

12.
Congregational Sunday School & Publishing Society v.
Board of Review, 125 N.E. 7 (1919), citing Jackson v.
Philipps, 14 Allen (Mass.) 539.

Vitug, J ., is on official leave.

1.
Penned by Associate Justice Remedios A. SalazarFernando, with Associate Justices Fermin A. Martin, Jr. and
Salvador J. Valdez, Jr. concurring.
2.
SECTION 1. CREATION OF THE LUNG CENTER OF
THE PHILIPPINES. There is hereby created a trust, under the
name and style of Lung Center of the Philippines, which,
subject to the provisions of this Decree, shall be
administered, according to the Articles of Incorporation, ByLaws and Objectives of the Lung Center of the Philippines,
Inc., duly registered (reg. No. 85886) with the Securities and
Exchange Commission of the Republic of the Philippines, by
the Office of the President, in coordination with the Ministry
of Human Settlements and the Ministry of Health.

13.
Bader Realty & Investment Co. v. St. Louis Housing
Authority, 217 S.W.2d 489 (1949).
14.
Board of Assessors of Boston v. Garland School of
Homemaking, 6 N.E.2d 379.
15.

Rollo, pp. 119120.

16.

Id. at 123125.

17.
Scripps Memorial Hospital v. California Employment
Commission, 24 Cal.2d 669, 151 P.2d 109 (1944).
18.
Sisters of Third Order of St. Frances v. Board of
Review of Peoria County, 83 N.E. 272.

3.

Annex "C," Rollo, p. 49.

19.

See note 12.

4.

Annexes "2" & "2-A," id. at 9394.

20.

Id. at 10.

5.

Annex "D," id. at 5052.

6.

Annex "E," id. at 5355.

21.
167 N.W. 148 (1918), citing State v. Powers, 10 Mo.
App. 263, 74 Mo. 476.

7.

Annexes "4" & "5," id. at 100109.

8.

Annex "A," id. at 3341.

22.

Id. at 149.

23.
See O'brien v. Physicians' Hospital Association, 116
N.E. 975 (1917).
24.

714 P.2d 653 (1986).

25.

Id. at 660661.

26.
Commissioner of Internal Revenue v. Court of
Appeals, 298 SCRA 83 (1998).
27.

188 S.W.2d. 826 (1945).

28.

Id. at 829.

29.

Rollo, p. 120. (Emphasis supplied.)

30.

Malinias v. COMELEC, 390 SCRA 480 (2002).

31.
St. Louis Young Men's Christian Association v.
Gehner, 47 S.W.2d 776 (1932).
32.

Emphasis supplied.

33.
Commissioner of Internal Revenue v. Court of
Appeals, supra.
34.
Ibid. Citing II RECORDS OF THE CONSTITUTIONAL
COMMISSION 90.
35.

Emphasis supplied.

36.
Article VI, Section 22, par. (3) of the 1935
Constitution provides that, "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."

37.
Article VIII, Section 17, par. (3) of the 1973
Constitution provides that, "Charitable institutions,
churches, parsonages or convents appurtenant thereto,
mosques, and non-profit cemeteries, and all lands,
buildings, and improvements actually, directly, and
exclusively used for religious or charitable purposes shall be
exempt from taxation."
38.

3 SCRA 186 (1961).

39.

107 SCRA 105 (1981).

40.
Young Men's Christian Association of Omaha v.
Douglas County, 83 N.W. 924 (1900).
41.
St. Louis Young Men's Christian Association v.
Gehner, supra.
42.
See State ex rel Koeln v. St. Louis Y.M.C.A., 168 S.W.
589 (1914).
43.

Lodge v. Nashville, 154 S.W. 141.

44.
553.

Christian Business College v. Kalamanzoo, 131 N.W.

45.
See Young Men's Christian Association of Omaha v.
Douglas County, supra; Martin v. City of New Orleans, 58
Am. 194 (1886).

Copyright 2004
nc

CD Technologies Asia I

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 "businesslike" 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 allencompassing 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 CarpioMorales, JJ ., concur.

Footnotes
1.
Petition for Review on Certiorari under Rule 45 of the
Rules of Civil Procedure. See Petition, Rollo, pp. 828.
2.
CA-G.R. CV No. 53297, penned by Assoc. Justice
Rodrigo Cosico. See Annex "A" of the Petition, Rollo, pp. 30
38.
3.

Id., Annex "B" of the Petition, Rollo, p. 39.

4.
Among the amendments to Comm. Act No. 120 are
Rep. Act No. 6395 (1971) and Pres. Decree No. 938 (1976).
5.

Rep. Act No. 6395, sec. 2.

6.

Id., sec. 3.

7.

Rollo, p. 41.

8.
"Section 37. Imposition of Tax Notwithstanding
any exemption granted by law or other special law, there is
hereby imposed an annual tax on a business enjoying
franchise at a rate of 75% of 1% of the gross receipts for the
preceding year realized within the territorial jurisdiction of
Cabanatuan City."
9.

Rollo, p. 41.

10.
Rollo, p. 48. Rep. Act No. 6395, sec. 5. "Capital Stock
of the Corporation. The authorized capital stock of the
Corporation is three hundred million pesos divided into three
million shares having a par value of one hundred pesos
each, which shares are not to be transferred, negotiated,
pledged, mortgaged, or otherwise given as a security for the
payment of any obligation. The said capital stock has been
subscribed and paid wholly by the Government of the
Philippines in accordance with the provisions of Republic Act
Numbered Four Thousand Eight Hundred Ninety-Seven."
11.

Rollo, pp. 5253.

12.
938.

Rep. Act No. 6395, sec. 13, as amended by P.D. No.

13.
Complaint, Records, pp. 13. The case was docketed
as Civil Case No. 1659-AF and was raffled to Branch 30
presided by Judge Federico B. Fajardo, Jr.
14.
"The Local Government Code of 1991." The law took
effect on January 1, 1992.
15.

Records, pp. 4554.

16.

Records, pp. 5254.

17.

Supra note 2.

18.

Id. at 3637.

19.

Id. at 38.

20.

Rollo, p. 39.

21.

Petition, pp. 910; Rollo, pp. 1617.

22.

Rollo, p. 18.

23.

Petition, p. 11; Rollo, p. 18.

24.

Ibid.

25.
Citing the case of Maceda v. Macaraig, 197 SCRA
771, 800 (1991).
26.

197 SCRA 52 (1991).

27.

Id. at 6465.

28.

Rollo, p. 21.

29.

Id. at 2122.

30.
Commissioner vs. Pineda, 21 SCRA 105, 110 (1967)
citing Bull vs. United States, 295 U.S. 247, 15 AFTR 1069,
1073; Surigao Electric Co., Inc. vs. Court of Tax Appeals, 57
SCRA 523 (1974).
31.
Hong Kong & Shanghai Banking Corp. vs. Rafferty, 19
Phil. 145 (1918); Wee Poco vs. Posadas, 64 Phil. 640 (1937);
Reyes vs. Almanzor, 196 SCRA 322, 327 (1991).
32.
Phil. Guaranty Co., Inc. vs. CIR, 13 SCRA 775, 780
(1965).

33.
Vitug and Acosta, Tax Law and Jurisprudence, 2nd ed.
(2000) at 1.
34.
Mactan Cebu International Airport Authority vs.
Marcos, 261 SCRA 667, 680 (1996) citing Cruz, Isagani A.,
Constitutional Law (1991) at 84.
35.
Pimentel, The Local Government Code of 1991: The
Key to National Development (1993) at 24.
36.

Supra note 14.

37.

Rep. Act No. 2370 (1959).

38.

Rep. Act No. 2264 (1959).

39.

Rep. Act No. 5185 (1967).

40.

B.P. Blg. 337 (1983).

41.
Sponsorship Remarks of Cong. Hilario De Pedro III,
Records of the House of Representatives, 3rd Regular
Session (19891990), vol. 8, p. 757.
42.
Pimentel, supra note 20; "Brilliantes, Issues and
Trends in Local Governance in the Philippines," The Local
Government Code: An Assessment" (1999) at 3.
43.

Supra note 41.

44.

Supra note 26.

45.

Supra note 34.

46.

Id. at 692.

47.

Id. at 686.

48.
J.R. S. Business Corp., et al. vs. Ofilada, et al., 120
Phil. 618, 628 (1964).
49.

J. Campos, Jr., I Corporation Code (1990) at 2.

62.
Rep. Act No. 6395, sec. 4 (p) authorizes NAPOCOR to
"exercise all the powers of a corporation under the
Corporation Law insofar as they are not inconsistent with
the provisions of this Act."

50.

Supra note 48.

63.

51.

Ibid.

52.

Ibid.

64.
Social Security System Employees Association vs.
Soriano, 7 SCRA 1016, 1020 (1963).

Approved on February 4, 1986.

53.
People v. Knight, 67 N.E. 65, 66, 174 N.Y. 475, 63
L.R.A. 87.

65.
See Boy Scouts of the Philippines vs. NLRC, 196 SCRA
176, 185 (1991); Shipside Incorporated vs. CA, 352 SCRA
334, 350 (2001).

54.
Tremont & Sufflok Mills v. City of Lowell, 59 N.E.
1007, 178 Mass. 469.

66.

55.
United North & South Development Co. v. Health,
Tex. Civ. App., 78 S.W.2d 650, 652.
56.
In re Commercial Safe Deposit Co. of Buffalo, 266
N.Y.S. 626, 148 Misc. 527.
57.
Rep. Act No. 6395, sec. 2 extends NAPOCOR's
corporate existence "for fifty years from and after the
expiration of its present corporate existence."
58.

Rep. Act No. 6395, sec. 3.

59.
"Establishing Basic Policies for the Electric Power
Industry." Issued by former President Ferdinand E. Marcos on
November 7, 1972.
60.
"Amending Presidential Decree No. 40 and Allowing
the Private Sector to Generate Electricity." Issued by former
President Corazon C. Aquino on July 10, 1987.
61.

Rep. Act No. 6395, sec. 3 (d).

Rep. Act No. 6395, Sec. 2.

67.
National Waterworks & Sewerage Authority vs. NWSA
Consolidated Unions, 11 SCRA 766, 774 (1964).
68.
Rep. Act No. 7648, sec. 4. The law, also known as
"Electric Power Crisis Act," was signed on April 5, 1993.
69.
Rep. Act No. 6395, sec. 14 reads: "Contract with
Franchise Holders, Conditions of. The Corporation shall, in
any contract for the supply of electric power to a franchise
holder, require as a condition that the franchise holder, if it
receives at least sixty per cent of its electric power and
energy from the Corporation, shall not realize a rate of
return of more than twelve per cent annually on a rate base
composed of the sum of its net assets in operation revalued
from time to time, plus two-month operating capital, subject
to the non-impairment-of-obligations-of-contracts provision
of the Constitution: Provided, That in determining the rate of
return, interest on loans, bonds and other debts shall not be
included as expenses. It shall likewise be a condition in the
contract that the Corporation shall cancel or revoke the

contract upon judgment of the Public Service Commission

after due hearing and upon a showing by customers of the
franchise holder that household electrical appliances, have
been damaged resulting from deliberate overloading by, or
power deficiency of, the franchise holder. The Corporation
shall renew all existing contracts with franchise holders for
the supply of electric power and energy in order to give
effect to the provisions hereof."
70.

Rep. Act No. 6395, sec. 13.

75.

306 SCRA 750 (1999).

76.

Supra note 72 at 361362.

77.
"Sec. 192. Authority to Grant Tax Exemption
Privileges. Local government units may, through
ordinances duly approved, grant tax exemptions, incentives
or reliefs under such terms and conditions as they may
deem necessary."
78.

Supra note 34 at 690.

71.
Commissioner of Internal Revenue v. Guerrero, 21
SCRA 180 (1967).
72.
City Government of San Pablo, Laguna v. Reyes, 305
SCRA 353 (1999).
73.
Commissioner of Customs vs. Court of Tax Appeals,
251 SCRA 42, 56 (1995).
74.

Supra note 72.

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