Fundamental Powers of the State - MAD

Fundamental Powers of the State 1. May not be exercised arbitrarily to the prejudice of the bill of rights.
2. Subject at all times to the limitations and requirements of the
 What are the Fundamental Powers the State? Constitution and may in proper cases be annulled by the courts when
1. Police Power there is grave abuse of discretion.
2. Power of Eminent Domain
3. Power of Taxation
POLICE POWER
 What are the Similarities of these powers?
1. They are all inherent in the State, exercised without need of express  What is Police Power?
constitutional grant. It is the power of promoting public welfare by restraining and regulating
2. They are not only necessary but also Indispensable; State cannot be the use of liberty and property.
effective without them.
3. Methods by which the state interferes with private property.  What are the characteristics of police power as compared to the powers
4. Presuppose Equivalent Compensation for the private rights interfered of taxation and eminent domain?
with. A: Police power easily outpaces the other powers. (Why? It is because it
5. They are all exercised by the legislature. regulates not only property, but also the liberty of person.)

 What are the distinctions of these powers? Police power is considered the most pervasive, the least limitable, and
Police Power Power of Power of the most demanding of the three powers. It may be exercised as long as the
Eminent Domain Taxation activity or property sought to be regulated has some relevance to the public
What does it Both LIBERTY Only PROPERTY Only PROPERTY welfare. The justification is found in the Latin Maxims: Salus Populi Est
regulate? and PROPERTY RIGHTS RIGHTS Suprema Lex
Who exercise Only by the May be exercised Only by the
it? Government by Private Government  What are the aspects of police power?
Entities
A: : Generally, police power extends to all the great public needs. However,
What is the The property Property taken is Property taken is
purpose? taken is for PUBLIC USE. for PUBLIC USE. its particular aspects are the following:
DESTROYED 1. Public health
because it is 2. Public morals
usually noxious. 3. Public safety
Compensation Intangible; Full and fair Protection given 4. Public welfare
altruistic feeling equivalent of the and/or public
that the property taken improvements
 Scope/ Characteristics of Police Power
individual has instituted by
contributed to government for  Can Police power be bargained by a treaty or a contract?
the public good the taxes paid. In Ichong vs. Hernandez, the court ruled that police power cannot be
bargained away through the medium of a treaty or a contract.

 What are the limitations of these powers?

Fundamental Powers of the State - MAD
 Can Police power be implemented through other inherent powers?
In Lutz v. Araneta, taxing power may be used as an implement of police
power.
In Association of Small Landowners v. Sec. of Agrarian Reform,
Eminent domain may be used as an implement to attain the police
objective.
 Can Laws enacted in the exercise of police power be given
retroactive effect?
In Ortigas & Co v. CA, a law enacted in the exercise of police power to
regulate or govern certain activities or transactions could be given
retroactive effect and may reasonably impair vested rights or contracts.
Police power legislation is applicable not only to future contracts,
but equally to those already in existence.
Non-impairment of contracts or vested rights clauses will have to
yield to the superior and legitimate exercise by the State of the
police power.
 Who may exercise police power?
 General rule: Police power is inherently vested in the legislature.
 Exception: By virtue of valid delegation of legislative power, it may be
exercised by the:
1. President
2. Administrative Bodies
3. Lawmaking bodies on all municipal levels including the barangar.
Municipal Governments exercise this power under the general welfare
clause.
 Requisites for Valid Delegation of Police Power
1. Express grant by law
2. Must not contrary to law
3. GR: Within territorial limits of LGUs
Except: when exercised to protect water supply.
 What are the tests to determine the validity of police power?
1. Lawful Subject – The interests of the public generally, as distinguished
from those of particular class, require the exercise of the police power.
2. Lawful Means – The means employed are reasonably necessary for
the accomplishment of the purpose and not unduly oppressive upon
individuals.
POWER OF EMINENT DOMAIN
 What is eminent domain?
 It is the right, authority or power of the State as sovereign, or of those to
whom the power has been lawfully delegated to take private property
for public use upon observance of due process of law and paying for
the owner a just compensation to be ascertained according to law.
 The conditions for the exercise of eminent domain ( T P J D )
a. Taking of private property
b. For public use
c. Just compensation
d. Observance of due process
 Who exercises the power?
 Congress. However, the following may exercise this power by virtue of
valid delegation:
a. The president
b. Various local legislative bodies
c. Certain public corporations like Land authority
d. Quasi-public corporations like Philippine National Railways
 In City of Manila v. Chinese Community of Manila, the right of
expropriation is not an inherent power in a municipal corporation, and
before it can exercise the right some law must exist conferring the
power upon it. When the courts come to determine the question they
must only find.
a. That a law or authority exists for the exercise of the right of eminent
domain but
b. Also that the right or authority is being exercised in accordance with
the law.
Fundamental Powers of the State - MAD
 Distinguish Power of expropriation as exercised by Congress and the
power of expropriation as exercised by delegates.
 When exercised by Congress, the power is pervasive and all-
encompassing but when exercised by delegates, it can only be broad as
the enabling law and the conferring authorities want it to be.
 As to the question of necessity, the same is a POLITICAL QUESTION
when the power is exercised by the Congress. On the other hand, it is
judicial when the exercised by delegates. The courts can determine
whether there is genuine necessity for its exercise, as well as the value of
the property.
 What are the requisites of valid TAKING? ( P M A P O )
 In REPUBLIC v. CASTELVI,
1. That the expropriator must enter a private property.
2. Entry must be for more than a momentary period.
3. Entry must be under warrant or color of legal authority.
4. Property must be devoted to Public use or otherwise informally
appropriated or injuriously affected.
5. Utilization of property must be in such a way as to oust the owner and
deprive him of beneficial enjoyment of the property.
 Taking
 Actual physical seizure not essential
 taking must be direct
 mere notice or intention to expropriate not sufficient
 What properties may be taken?
 All private property capable of ownership including services
 In City of Manila v. Chinese Community, Private property already
devoted to public use cannot be expropriated by a delegate of
legislature acting under general grant of authority.
 Must be of PUBLIC USE
 Public use is synonymous with public interest, public benefit, public
welfare, and public convenience.
 Does the requisite of “must be of public use” must be used by public at
large?
 In MANOSCA v. CA, it is not required that the requisite of public use
must be used by the public at large. Whatever may be beneficially
employed for the general welfare satisfies the requirement.
Moreover, that only few people benefits from the expropriation does
not diminish its public-use character because the notion of public use
now includes the broader notion of indirect public benefit or
advantage.
 In Lagcao v. Judge Labra, the Supreme Court said that 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 deprives a citizen of his
property for the convenience of a few without perceptible benefit to
the public. 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 Sec. 19, R.A. 7160.
 What is Just Compensation?
 It is the full and fair equivalent of the property taken from the
private owner (owner’s loss) by the expropriator. It is usually the FAIR
MARKET VALUE of the property and MUST INCLUDE consequential
damages (damage to other interest of the owner attributed to the
expropriation) MINUS consequential benefits (increase in the value of
other interests attributed to new use of the former property).
 The aforementioned rule, however, is modified where only a part of a
certain property is expropriated. In such a case, the owner is not
restricted to payment of the market value of the portion actually taken. In
addition to the market value of the portion taken, he is also entitled to
payment of consequential damages, if any, to the remaining part of the
property. At the same time, from the total compensation must be
deducted the value of consequential benefits, if any, provided
consequential benefits shall not exceed consequential damages ( NPC v.
Sps. Chiong)
FMV – the price fixed by the parties will but not compelled to enter into a
contract of sale.
Fundamental Powers of the State - MAD
 Who determines just compensation?
 In EPZA v. Dulay, The determination of just compensation is a judicial
function. The executive department or the legislature may make the
initial determination but when a party claims a violation of the
guarantee in the Bill of Rights that the private party may not be taken for
public use without just compensation, no statute, decree, or executive
order can mandate that its own determination shall prevail over the
court’s findings.
 When should assessment of the value of the property be determined?
 In EPZA v. Dulay, The value of the property must be determined either
at the time of taking or filing of the complaint, whichever comes first.
 The Court is not bound by the Commissioners to be appointed by the
court for the determination of just compensation. The court may
substitute its own estimate of the value of the property only for valid
reasons.
a. The commissioners applied illegal principles to the evidence
submitted to them.
b. They have disregarded a clear preponderance of evidence
c. Where the amount allowed is either grossly inadequate or excessive.
However, trial by commissioners is not mdatory in agrarian reform cases.
 Does the compensation to be paid in money?
 General Rule: Yes.
 Exception: In Association of Small Landowners v. Secretary of
Agrarian Reform, supra., 175 SCRA 343, it was held that in agrarian
reform, payment is allowed to be made partly in bonds. It 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. It is rather a revolutionary kind of
expropriation
 When does just compensation be determined?
 In Nepomuceno v. City of Surigao, G.R. No. 146091, July 28, 2008, it
was held that the value of the property shall be ascertained as of the
date it was actually taken, because it is as of that time that the real
measure of the owner’s loss may be fairly adjudged
 Who else may be entitled to just compensation?
 Entitlement to the payment of just compensation is not, however,
limited to the “owner”, but includes all those who have lawful
interest in the property to be condemned.
 When does title to the property passes?
 After payment. Therefore, the owner may still dispose of the same
before payment.
 Does non‐payment of just compensation entitle the private owner to
recover possession of the expropriated property?
 GR: Non‐payment by the government does not entitle private
owners to recover possession of the property because
expropriation is an in rem proceeding, not an ordinary sale,
but only entitle them to demand payment of the fair market
value of the property.
XPNS: ( R F )
1. When there is deliberate refusal to pay just compensation
2. Government’s failure to pay compensation within 5 years
from the finality of the judgment in the expropriation
proceedings. This is in connection with the principle that the
government cannot keep the property and dishonor the judgment.
(Republic v. Lim, G.R. No. 161656, June 29, 2005)
 Is the owner entitled to the payment of interest? How about
reimbursement of taxes paid on the property?
 Yes, the owner is entitled to the payment of interest from the time
of taking until just compensation is actually paid to him. Taxes paid
by him from the time of the taking until the transfer of title (which
can only be done after actual payment of just compensation),
during which he did not enjoy any beneficial use of the property,
are reimbursable by the expropriator.
POWER OF TAXATION
 What are taxes and what is taxation?
 Taxes are: ( P L S P )
1. Enforced proportional contributions from persons and property
2. Levied by the State by virtue of its sovereignty
3. For the support of the government
4. For public needs
Fundamental Powers of the State - MAD
 Taxation is the method by which these contributions are exacted.
(Gorospe, Constitutional Law: Notes and Readings on the Bill of Rights,
Citizenship and Suffrage, Vol. 2)
 Who may exercise power of taxation?
 Primarily, the legislature; also: local legislative bodies[Sec. 5, Art. X,
Constitution]; and to a limited extent, the President when granted
delegated tariff powers [Sec. 28 (2), Art. VI]
 Local Government Units (LGU) shall have the power to create its own
sources of revenues and 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 loca governments. ( Sec. 5, Art X)
 Limitations in General of Power of Taxation
1. Inherent
2. Constitutional
 Inherent Limitations
1. Public Purpose
o In Pascual vs. Sec. of Works and Communications, the
taxing power must be exercised for public purposes only;
money raised by taxation can be expanded only for public
purposes and not for the advantage of private individuals.
2. Non-delegability of Power
3. Territoriality or situs of taxation
4. Exemption of government from taxation
5. International comity
 Constitutional Limitations
1. Due process of law (Art. III, Sec.1)
o Tax should not be confiscatory.
o With legislature primarily lies the discretion to determine the
nature, subject, coverage and situs of taxation. But where a tax
measure becomes so unconscionable and unjust as to amount to
confiscation of property, courts will not hesitate to strike it
down, for despite all its plenitude, the power to ax cannot
override constitutional prescriptions.
2. Equal protection clause (Art. III, Sec.1)
o Taxes should be uniform and equitable.
o UNIFORMITY OF TAXATION – refers to geographical
uniformity, meaning it operates with the same force and effect in
every place where the subject of it is found.
3. Uniformity, equitability and progressive system of taxation (Art. VI, Sec
28)
o PROGRESSIVE SYSTEM OF TAXATION – means that the tax rate
increases as the tax base increases.
4. Non‐impairment of contracts (Art. III, Sec. 10)
5. Non‐imprisonment for non‐payment of poll tax (Art. III, Sec. 20)
6. Revenue and tariff bills must originate in the House of Representatives
(Art I, Sec. 7)
7. Non‐infringement of religious freedom (Art. III, Sec.4)
8. Delegation of legislative authority to the President to fix tariff rates,
import and export quotas, tonnage and wharfage dues
9. Tax exemption of properties actually, directly and exclusively used for
religious, charitable and educational purposes (NIRC, Sec 30)
10. Majority vote of all the members of Congress required in case of
legislative grant of tax exemptions
11. Non‐impairment of SC’s jurisdiction in tax cases
12. Tax exemption of revenues and assets of, including grants,
endowments, donations or contributions to educational institutions.
 What is double taxation? ( S A T P )
1. Taxes are laid on the same subject
2. By the same authority
o In Punsalan v. Municipal board of manila, The argument
against double taxation may not be invoked where one tax is
imposed by the state and the other is imposed by the city
3. During the same taxing period
4. For the same purpose
NOTE: There is no provision in the Constitution specifically prohibiting
double taxation, but it will no tbe allowed if it violates equal protection.
 Tax Exemptions
 Requisite: No law granting any tax exemption shall be passed without
concurrence of a majority of all the Members of the Congress (Sec. 28
(4), Art. VI, Consti)
Fundamental Powers of the State - MAD

a) Sec. 28 (31 Art. VI: Charitable institutions, churches and parsonages License Fee Tax
or convents appurtenant thereto, mosques, non-profit cemeteries, and Police measure Revenue measure
all lands, buildings and improvements, actually, directly and exclusively Amount collected is limited to the cost Amount of tax may be unlimited
used for religious, charitable or educational purposes shall be exempt of permit and reasonable police provided it is not confiscatory
from taxation. regulation except when the license
fee is imposed on a non-useful
b) Sec. 4 (3) Art. XIV: All revenues and assets of non-stock, non-profit occupation
educational institutions used actually, directly and exclusively for It is paid for the privilege of doing Imposed on persons or property for
educational purposes shall be exempt from taxes and duties, x x x something, and may be revoked when revenue.
Proprietary educational institutions, including those co-operatively public interest so requires
owned, may likewise be entitled to such exemptions subject to the
limitations provided by law including restrictions on dividends and
provisions for reinvestment.

c) Sec. 4 (41 Art. XIV: Subject to conditions prescribed by law, ail grants,
endowments, donations, or contributions used actually, directly and
exclusively for educational purposes shall be exempt from tax.

 In Lladoc v. CIR, as well observed by the learned respondent Court,

the phrase "exempt from taxation," as employed in the Constitution
(supra) should not be interpreted to mean exemption from all kinds of
taxes.
 In Abra Valley College v. Aquino, reasonable emphasis has always
been made that the exemption extends to facilities which are
incidental to and reasonably necessary for the accomplishment of
the main purposes. The use of the school building or lot for
commercial purposes is neither contemplated by law, nor by
jurisprudence. In the case at bar, the lease of the first floor of the
building to the Northern Marketing Corporation cannot by any stretch
of the imagination be considered incidental to the purpose of
education. The test of exemption from taxation is the use of the
property for purposes mentioned in the Constitution.

 Once an exception is granted by the legislature, may such exemption

be revoked at will?
 If exemption is granted GRATUITOUSLY – revocable
 If exemption granted for VALUABLE CONSIDERATION – irrevocable
(non-impairment of contracts)