G.R. No.

197676 February 4, 2014

REMMAN ENTERPRISES, INC. and CHAMBER OF REAL ESTATE AND

BUILDERS'ASSOCIATION, Petitioners,
vs.
PROFESSIONAL REGULATORY BOARD OF REAL ESTATE SERVICE and PROFESSIONAL
REGULATION COMMISSION, Respondents.

DECISION

VILLARAMA, JR., J.:

Assailed in this petition for review under Rule 45 is the Decision1 dated July 12, 2011 of the Regional
Trial Court (RTC) of Manila, Branch 42 denying the petition to declare as unconstitutional Sections
28(a), 29 and 32 of Republic Act (R.A.) No. 9646.

R.A. No. 9646, otherwise known as the "Real Estate Service Act of the Philippines" was signed into
law on June 29, 2009 by President Gloria Macapagal-Arroyo. It aims to professionalize the real
estate service sector under a regulatory scheme of licensing, registration and supervision of real
estate service practitioners (real estate brokers, appraisers, assessors, consultants and
salespersons) in the country. Prior to its enactment, real estate service practitioners were under the
supervision of the Department of Trade and Industry (DTI) through the Bureau of Trade Regulation
and Consumer Protection (BTRCP), in the exercise of its consumer regulation functions. Such
authority is now transferred to the Professional Regulation Commission (PRC) through the
Professional Regulatory Board of Real Estate Service (PRBRES) created under the new law.

The implementing rules and regulations (IRR) of R.A. No. 9646 were promulgated on July 21, 2010
by the PRC and PRBRES under Resolution No. 02, Series of 2010.

On December 7, 2010, herein petitioners Remman Enterprises, Inc. (REI) and the Chamber of Real
Estate and Builders’ Association (CREBA) instituted Civil Case No. 10-124776 in the Regional Trial
Court of Manila, Branch 42. Petitioners sought to declare as void and unconstitutional the following
provisions of R.A. No. 9646:

SEC. 28. Exemptions from the Acts Constituting the Practice of Real Estate Service. – The
provisions of this Act and its rules and regulations shall not apply to the following:

(a) Any person, natural or juridical, who shall directly perform by himself/herself the acts mentioned
in Section 3 hereof with reference to his/her or its own property, except real estate developers;

xxxx

SEC. 29. Prohibition Against the Unauthorized Practice of Real Estate Service. – No person shall
practice or offer to practice real estate service in the Philippines or offer himself/herself as real estate
service practitioner, or use the title, word, letter, figure or any sign tending to convey the impression
that one is a real estate service practitioner, or advertise or indicate in any manner whatsoever that
one is qualified to practice the profession, or be appointed as real property appraiser or assessor in
any national government entity or local government unit, unless he/she has satisfactorily passed the
licensure examination given by the Board, except as otherwise provided in this Act, a holder of a
valid certificate of registration, and professional identification card or a valid special/temporary permit
duly issued to him/her by the Board and the Commission, and in the case of real estate brokers and
private appraisers, they have paid the required bond as hereto provided.

xxxx

SEC. 32. Corporate Practice of the Real Estate Service. – (a) No partnership or corporation shall
engage in the business of real estate service unless it is duly registered with the Securities and
Exchange Commission (SEC), and the persons authorized to act for the partnership or corporation
are all duly registered and licensed real estate brokers, appraisers or consultants, as the case may
be. The partnership or corporation shall regularly submit a list of its real estate service practitioners
to the Commission and to the SEC as part of its annual reportorial requirements. There shall at least
be one (1) licensed real estate broker for every twenty (20) accredited salespersons.

(b) Divisions or departments of partnerships and corporations engaged in marketing or selling any
real estate development project in the regular course of business must be headed by full-time
registered and licensed real estate brokers.

(c) Branch offices of real estate brokers, appraisers or consultants must be manned by a duly
licensed real estate broker, appraiser or consultant as the case may be.

In case of resignation or termination from employment of a real estate service practitioner, the same
shall be reported by the employer to the Board within a period not to exceed fifteen (15) days from
the date of effectivity of the resignation or termination.

Subject to the provisions of the Labor Code, a corporation or partnership may hire the services of
registered and licensed real estate brokers, appraisers or consultants on commission basis to
perform real estate services and the latter shall be deemed independent contractors and not
employees of such corporations. (Emphasis and underscoring supplied.)

According to petitioners, the new law is constitutionally infirm because (1) it violates Article VI,
Section 26 (1) of the 1987 Philippine Constitution which mandates that "[e]very bill passed by
Congress shall embrace only one subject which shall be expressed in the title thereof"; (2) it is in
direct conflict with Executive Order (E.O.) No. 648 which transferred the exclusive jurisdiction of the
National Housing Authority (NHA) to regulate the real estate trade and business to the Human
Settlements Commission, now the Housing and Land Use Regulatory Board (HLURB), which
authority includes the issuance of license to sell of subdivision owners and developers pursuant to
Presidential Decree (P.D.) No. 957; (3) it violates the due process clause as it impinges on the real
estate developers’ most basic ownership rights, the right to use and dispose property, which is
enshrined in Article 428 of the Civil Code; and (4) Section 28(a) of R.A. No. 9646 violates the equal
protection clause as no substantial distinctions exist between real estate developers and the
exempted group mentioned since both are property owners dealing with their own property.

Additionally, petitioners contended that the lofty goal of nurturing and developing a "corps of
technically competent, reasonable and respected professional real estate service practitioners" is not
served by curtailing the right of real estate developers to conduct their business of selling properties.
On the contrary, these restrictions would have disastrous effects on the real estate industry as the
additional cost of commissions would affect the pricing and affordability of real estate packages.
When that happens, petitioners claimed that the millions of jobs and billions in revenues that the real
estate industry generates for the government will be a thing of the past.

After a summary hearing, the trial court denied the prayer for issuance of a writ of preliminary
injunction.
On July 12, 2011, the trial court rendered its Decision2 denying the petition. The trial court held that
the assailed provisions are relevant to the title of the law as they are intended to regulate the
practice of real estate service in the country by ensuring that those who engage in it shall either be a
licensed real estate broker, or under the latter’s supervision. It likewise found no real discord
between E.O. No. 648 and R.A. No. 9646 as the latter does not render nugatory the license to sell
granted by the HLURB to real estate developers, which license would still subsist. The only
difference is that by virtue of the new law, real estate developers will now be compelled to hire the
services of one licensed real estate broker for every twenty salespersons to guide and supervise the
coterie of salespersons under the employ of the real estate developers.

On the issue of due process, the trial court said that the questioned provisions do not preclude
property owners from using, enjoying, or disposing of their own property because they can still
develop and sell their properties except that they have to secure the services of a licensed real
estate broker who shall oversee the actions of the unlicensed real estate practitioners under their
employ. Since the subject provisions merely prescribe the requirements for the regulation of the
practice of real estate services, these are consistent with a valid exercise of the State’s police power.
The trial court further ruled that Section 28(a) does not violate the equal protection clause because
the exemption of real estate developers was anchored on reasonable classification aimed at
protecting the buying public from the rampant misrepresentations often committed by unlicensed real
estate practitioners, and to prevent unscrupulous and unethical real estate practices from flourishing
considering the large number of consumers in the regular course of business compared to isolated
sale transactions made by private individuals selling their own property.

Hence, this appeal on the following questions of law:

1. Whether there is a justiciable controversy for this Honorable Court to adjudicate;

2. Whether [R.A. No. 9646] is unconstitutional for violating the "one title-one subject" rule
under Article VI, Section 26 (1) of the Philippine Constitution;

3. Whether [R.A. No. 9646] is in conflict with PD 957, as amended by EO 648, with respect
to the exclusive jurisdiction of the HLURB to regulate real estate developers;

4. Whether Sections 28(a), 29, and 32 of [R.A. No. 9646], insofar as they affect the rights of
real estate developers, are unconstitutional for violating substantive due process; and

5. Whether Section 28(a), which treats real estate developers differently from other natural or
juridical persons who directly perform acts of real estate service with reference to their own
property, is unconstitutional for violating the equal protection clause.3

The Court’s Ruling

The petition has no merit.

Justiciable Controversy

The Constitution4 requires as a condition precedent for the exercise of judicial power the existence of
an actual controversy between litigants. An actual case or controversy involves a conflict of legal
rights, an assertion of opposite legal claims susceptible to judicial resolution.5 The controversy must
be justiciable – definite and concrete – touching on the legal relations of parties having adverse legal
interests, which may be resolved by a court of law through the application of a law.6 In other words,
the pleadings must show an active antagonistic assertion of a legal right, on the one hand, and a
denial thereof on the other; that is, it must concern a real and not a merely theoretical question or
issue. There ought to be an actual and substantial controversy admitting of specific relief through a
decree conclusive in nature, as distinguished from an opinion advising what the law would be upon a
hypothetical state of facts.7 An actual case is ripe for adjudication when the act being challenged has
a direct adverse effect on the individual challenging it.8

There is no question here that petitioners who are real estate developers are entities directly
affected by the prohibition on performing acts constituting practice of real estate service without first
complying with the registration and licensing requirements for brokers and agents under R.A. No.
9646. The possibility of criminal sanctions for disobeying the mandate of the new law is likewise real.
Asserting that the prohibition violates their rights as property owners to dispose of their properties,
petitioners challenged on constitutional grounds the implementation of R.A. No. 9646 which the
respondents defended as a valid legislation pursuant to the State’s police power. The Court thus
finds a justiciable controversy that calls for immediate resolution.

No Violation of One-Title One-Subject Rule

Section 26(1), Article VI of the Constitution states:

SEC. 26 (1). Every bill passed by the Congress shall embrace only one subject which shall be
expressed in the title thereof.

In Fariñas v. The Executive Secretary,9 the Court explained the provision as follows:

The proscription is aimed against the evils of the so-called omnibus bills and log-rolling legislation as
well as surreptitious and/or unconsidered encroaches. The provision merely calls for all parts of an
act relating to its subject finding expression in its title.

To determine whether there has been compliance with the constitutional requirement that the subject
of an act shall be expressed in its title, the Court laid down the rule that –

Constitutional provisions relating to the subject matter and titles of statutes should not be so
narrowly construed as to cripple or impede the power of legislation. The requirement that the subject
of an act shall be expressed in its title should receive a reasonable and not a technical construction.
It is sufficient if the title be comprehensive enough reasonably to include the general object which a
statute seeks to effect, without expressing each and every end and means necessary or convenient
for the accomplishing of that object. Mere details need not be set forth. The title need not be an
abstract or index of the Act.10 (Emphasis supplied.)

The Court has previously ruled that the one-subject requirement under the Constitution is satisfied if
all the parts of the statute are related, and are germane to the subject matter expressed in the title,
or as long as they are not inconsistent with or foreign to the general subject and title.11 An act having
a single general subject, indicated in the title, may contain any number of provisions, no matter how
diverse they may be, so long as they are not inconsistent with or foreign to the general subject, and
may be considered in furtherance of such subject by providing for the method and means of carrying
out the general object.12

It is also well-settled that the "one title-one subject" rule does not require the Congress to employ in
the title of the enactment language of such precision as to mirror, fully index or catalogue all the
contents and the minute details therein. The rule is sufficiently complied with if the title is
comprehensive enough as to include the general object which the statute seeks to effect.13 Indeed,
this Court has invariably adopted a liberal rather than technical construction of the rule "so as not to
cripple or impede legislation."14

R.A. No. 9646 is entitled "An Act Regulating the Practice of Real Estate Service in the Philippines,
Creating for the Purpose a Professional Regulatory Board of Real Estate Service, Appropriating
Funds Therefor and For Other Purposes." Aside from provisions establishing a regulatory system for
the professionalization of the real estate service sector, the new law extended its coverage to real
estate developers with respect to their own properties. Henceforth, real estate developers are
prohibited from performing acts or transactions constituting real estate service practice without first
complying with registration and licensing requirements for their business, brokers or agents,
appraisers, consultants and salespersons.

Petitioners point out that since partnerships or corporations engaged in marketing or selling any real
estate development project in the regular course of business are now required to be headed by full-
time, registered and licensed real estate brokers, this requirement constitutes limitations on the
property rights and business prerogatives of real estate developers which are not all reflected in the
title of R.A. No. 9646. Neither are real estate developers, who are already regulated under a different
law, P.D. No. 957, included in the definition of real estate service practitioners.

We hold that R.A. No. 9646 does not violate the one-title, one-subject rule.

The primary objective of R.A. No. 9646 is expressed as follows:

SEC. 2. Declaration of Policy. – The State recognizes the vital role of real estate service
practitioners in the social, political, economic development and progress of the country by promoting
the real estate market, stimulating economic activity and enhancing government income from real
property-based transactions. Hence, it shall develop and nurture through proper and effective
regulation and supervision a corps of technically competent, responsible and respected professional
real estate service practitioners whose standards of practice and service shall be globally
competitive and will promote the growth of the real estate industry.

We find that the inclusion of real estate developers is germane to the law’s primary goal of
developing "a corps of technically competent, responsible and respected professional real estate
service practitioners whose standards of practice and service shall be globally competitive and will
promote the growth of the real estate industry." Since the marketing aspect of real estate
development projects entails the performance of those acts and transactions defined as real estate
service practices under Section 3(g) of R.A. No. 9646, it is logically covered by the regulatory
scheme to professionalize the entire real estate service sector.

No Conflict Between R.A. No. 9646

and P.D. No. 957, as amended by E.O. No. 648

Petitioners argue that the assailed provisions still cannot be sustained because they conflict with
P.D. No. 957 which decreed that the NHA shall have "exclusive jurisdiction to regulate the real
estate trade and business." Such jurisdiction includes the authority to issue a license to sell to real
estate developers and to register real estate dealers, brokers or salesmen upon their fulfillment of
certain requirements under the law. By imposing limitations on real estate developers’ property
rights, petitioners contend that R.A. No. 9646 undermines the licenses to sell issued by the NHA
(now the HLURB) to real estate developers allowing them to sell subdivision lots or condominium
units directly to the public. Because the HLURB has been divested of its exclusive jurisdiction over
real estate developers, the result is an implied repeal of P.D. No. 957 as amended by E.O. No. 648,
which is not favored in law.
It is a well-settled rule of statutory construction that repeals by implication are not favored. In order to
effect a repeal by implication, the later statute must be so irreconcilably inconsistent and repugnant
with the existing law that they cannot be made to reconcile and stand together. The clearest case
possible must be made before the inference of implied repeal may be drawn, for inconsistency is
never presumed. There must be a showing of repugnance clear and convincing in character. The
language used in the later statute must be such as to render it irreconcilable with what had been
formerly enacted. An inconsistency that falls short of that standard does not suffice.15 Moreover, the
failure to add a specific repealing clause indicates that the intent was not to repeal any existing law,
unless an irreconcilable inconsistency and repugnancy exist in the terms of the new and old laws.16

There is nothing in R.A. No. 9646 that repeals any provision of P.D. No. 957, as amended by E.O.
No. 648. P.D. No. 957, otherwise known as "The Subdivision and Condominium Buyers’ Protective
Decree,"17 vested the NHA with exclusive jurisdiction to regulate the real estate trade and business in
accordance with its provisions. It empowered the NHA to register, approve and monitor real estate
development projects and issue licenses to sell to real estate owners and developers. It further
granted the NHA the authority to register and issue/revoke licenses of brokers, dealers and
salesmen engaged in the selling of subdivision lots and condominium units.

E.O. No. 648, issued on February 7, 1981, reorganized the Human Settlements Regulatory
Commission (HSRC) and transferred the regulatory functions of the NHA under P.D. 957 to the
HSRC. Among these regulatory functions were the (1) regulation of the real estate trade and
business; (2) registration of subdivision lots and condominium projects; (3) issuance of license to sell
subdivision lots and condominium units in the registered units; (4) approval of performance bond and
the suspension of license to sell; (5) registration of dealers, brokers and salesman engaged in the
business of selling subdivision lots or condominium units; and (6) revocation of registration of
dealers, brokers and salesmen.18

E.O. No. 90, issued on December 17, 1986, renamed the HSRC as the Housing and Land Use
Regulatory Board (HLURB) and was designated as the regulatory body for housing and land
development under the Housing and Urban Development Coordinating Council (HUDCC). To date,
HLURB continues to carry out its mandate to register real estate brokers and salesmen dealing in
condominium, memorial parks and subdivision projects pursuant to Section 11 of P.D. No. 957,
which reads:

SECTION 11. Registration of Dealers, Brokers and Salesmen. – No real estate dealer, broker or
salesman shall engage in the business of selling subdivision lots or condominium units unless he
has registered himself with the Authority in accordance with the provisions of this section.

If the Authority shall find that the applicant is of good repute and has complied with the applicable
rules of the Authority, including the payment of the prescribed fee, he shall register such applicant as
a dealer, broker or salesman upon filing a bond, or other security in lieu thereof, in such sum as may
be fixed by the Authority conditioned upon his faithful compliance with the provisions of this Decree:
Provided, that the registration of a salesman shall cease upon the termination of his employment
with a dealer or broker.

Every registration under this section shall expire on the thirty-first day of December of each year.
Renewal of registration for the succeeding year shall be granted upon written application therefore
made not less than thirty nor more than sixty days before the first day of the ensuing year and upon
payment of the prescribed fee, without the necessity of filing further statements or information,
unless specifically required by the Authority. All applications filed beyond said period shall be treated
as original applications.
The names and addresses of all persons registered as dealers, brokers, or salesmen shall be
recorded in a Register of Brokers, Dealers and Salesmen kept in the Authority which shall be open
to public inspection.

On the other hand, Section 29 of R.A. No. 9646 requires as a condition precedent for all persons
who will engage in acts constituting real estate service, including advertising in any manner one’s
qualifications as a real estate service practitioner, compliance with licensure examination and other
registration requirements including the filing of a bond for real estate brokers and private appraisers.
While Section 11 of P.D. No. 957 imposes registration requirements for dealers, brokers and
salespersons engaged in the selling of subdivision lots and condominium units, Section 29 of R.A.
No. 9646 regulates all real estate service practitioners whether private or government. While P.D.
No. 957 seeks to supervise brokers and dealers who are engaged in the sale of subdivision lots and
condominium units, R.A. No. 9646 aims to regulate the real estate service sector in general by
professionalizing their ranks and raising the level of ethical standards for licensed real estate
professionals.

There is no conflict of jurisdiction because the HLURB supervises only those real estate service
practitioners engaged in the sale of subdivision lots and condominium projects, specifically for
violations of the provisions of P.D. No. 957, and not the entire real estate service sector which is now
under the regulatory powers of the PRBRES. HLURB’s supervision of brokers and dealers to
effectively implement the provisions of P.D. No. 957 does not foreclose regulation of the real estate
service as a profession. Real estate developers already regulated by the HLURB are now further
required to comply with the professional licensure requirements under R.A. No. 9646, as provided in
Sections 28, 29 and 32. Plainly, there is no inconsistency or contradiction in the assailed provisions
of R.A. No. 9646 and P.D. No. 957, as amended.

The rule is that every statute must be interpreted and brought into accord with other laws in a way
that will form a uniform system of jurisprudence. The legislature is presumed to have known existing
laws on the subject and not to have enacted conflicting laws.19 Congress, therefore, could not be
presumed to have intended Sections 28, 29 and 32 of R.A. No. 9646 to run counter to P.D. No. 957.

No Violation of Due Process

Petitioners contend that the assailed provisions of R.A. No. 9646 are unduly oppressive and infringe
the constitutional rule against deprivation of property without due process of law. They stress that
real estate developers are now burdened by law to employ licensed real estate brokers to sell,
market and dispose of their properties. Despite having invested a lot of money, time and resources
in their projects, petitioners aver that real estate developers will still have less control in managing
their business and will be burdened with additional expenses.

The contention has no basis. There is no deprivation of property as no restriction on their use and
enjoyment of property is caused by the implementation of R.A. No. 9646. If petitioners as property
owners feel burdened by the new requirement of engaging the services of only licensed real estate
professionals in the sale and marketing of their properties, such is an unavoidable consequence of a
reasonable regulatory measure.

Indeed, 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 of the State
particularly when their conduct affects the execution of legitimate governmental functions, the
preservation of the State, public health and welfare and public morals.20 In any case, where the
liberty curtailed affects at most the rights of property, the permissible scope of regulatory measures
is certainly much wider. To pretend that licensing or accreditation requirements violate the due
process clause is to ignore the settled practice, under the mantle of police power, of regulating entry
to the practice of various trades or professions.21

Here, the legislature recognized the importance of professionalizing the ranks of real estate
practitioners by increasing their competence and raising ethical standards as real property
transactions are "susceptible to manipulation and corruption, especially if they are in the hands of
unqualified persons working under an ineffective regulatory system." The new regulatory regime
aimed to fully tap the vast potential of the real estate sector for greater contribution to our gross
domestic income, and real estate practitioners "serve a vital role in spearheading the continuous flow
of capital, in boosting investor confidence, and in promoting overall national progress."22

We thus find R.A. No. 9646 a valid exercise of the State’s police power. As we said in another case
challenging the constitutionality of a law granting discounts to senior citizens:

The law is a legitimate exercise of police power which, similar to the power of eminent domain, has
general welfare for its object. Police power is not capable of an exact definition, but has been
purposely veiled in general terms to underscore its comprehensiveness to meet all exigencies and
provide enough room for an efficient and flexible response to conditions and circumstances, thus
assuring the greatest benefits. Accordingly, it has been described as "the most essential, insistent
and the least limitable of powers, extending as it does to all the great public needs." It is "[t]he power
vested in the legislature by the constitution to make, ordain, and establish all manner of wholesome
and reasonable laws, statutes, and ordinances, either with penalties or without, not repugnant to the
constitution, as they shall judge to be for the good and welfare of the commonwealth, and of the
subjects of the same."

For this reason, when the conditions so demand as determined by the legislature, property rights
must bow to the primacy of police power because property rights, though sheltered by due process,
must yield to general welfare.

Police power as an attribute to promote the common good would be diluted considerably if on the
mere plea of petitioners that they will suffer loss of earnings and capital, the questioned provision is
invalidated. Moreover, in the absence of evidence demonstrating the alleged confiscatory effect of
the provision in question, there is no basis for its nullification in view of the presumption of validity
which every law has in its favor.23 (Emphasis supplied.)

No Violation of Equal Protection Clause

Section 28 of R.A. No. 9646 exempts from its coverage natural and juridical persons dealing with
their own property, and other persons such as receivers, trustees or assignees in insolvency or
bankruptcy proceedings. However, real estate developers are specifically mentioned as an
exception from those enumerated therein. Petitioners argue that this provision violates the equal
protection clause because it unjustifiably treats real estate developers differently from those
exempted persons who also own properties and desire to sell them. They insist that no substantial
distinctions exist between ordinary property owners and real estate developers as the latter, in fact,
are more capable of entering into real estate transactions and do not need the services of licensed
real estate brokers. They assail the RTC decision in citing the reported fraudulent practices as basis
1âwphi1

for the exclusion of real estate developers from the exempted group of persons under Section 28(a).

We sustain the trial court’s ruling that R.A. No. 9646 does not violate the equal protection clause.

In Ichong v. Hernandez,24 the concept of equal protection was explained as follows:

The equal protection of the law clause is against undue favor and individual or class privilege, as
well as hostile discrimination or the oppression of inequality. It is not intended to prohibit legislation,
which is limited either in the object to which it is directed or by territory within which it is to operate. It
does not demand absolute equality among residents; it merely requires that all persons shall be
treated alike, under like circumstances and conditions both as to privileges conferred and liabilities
enforced. The equal protection clause is not infringed by legislation which applies only to those
persons falling within such class, and reasonable grounds exists for making a distinction between
those who fall within such class and those who do not. (2 Cooley, Constitutional Limitations, 824-
825).25

Although the equal protection clause of the Constitution does not forbid classification, it is imperative
that the classification should be based on real and substantial differences having a reasonable
relation to the subject of the particular legislation.26 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.27

R.A. No. 9646 was intended to provide institutionalized government support for the development of
"a corps of highly respected, technically competent, and disciplined real estate service practitioners,
knowledgeable of internationally accepted standards and practice of the profession."28 Real estate
developers at present constitute a sector that hires or employs the largest number of brokers,
salespersons, appraisers and consultants due to the sheer number of products (lots, houses and
condominium units) they advertise and sell nationwide. As early as in the ‘70s, there has been a
proliferation of errant developers, operators or sellers who have reneged on their representation and
obligations to comply with government regulations such as the provision and maintenance of
subdivision roads, drainage, sewerage, water system and other basic requirements. To protect the
interest of home and lot buyers from fraudulent acts and manipulations perpetrated by these
unscrupulous subdivision and condominium sellers and operators, P.D. No. 957 was issued to
strictly regulate housing and real estate development projects. Hence, in approving R.A. No. 9646,
the legislature rightfully recognized the necessity of imposing the new licensure requirements to all
real estate service practitioners, including and more importantly, those real estate service
practitioners working for real estate developers. Unlike individuals or entities having isolated
transactions over their own property, real estate developers sell lots, houses and condominium units
in the ordinary course of business, a business which is highly regulated by the State to ensure the
health and safety of home and lot buyers.

The foregoing shows that substantial distinctions do exist between ordinary property owners
exempted under Section 28(a) and real estate developers like petitioners, and the classification
enshrined in R.A. No. 9646 is reasonable and relevant to its legitimate purpose. The Court thus rules
that R.A. No. 9646 is valid and constitutional.

Since every law is presumed valid, the presumption of constitutionality can be overcome only by the
clearest showing that there was indeed an infraction of the Constitution, and only when such a
conclusion is reached by the required majority may the Court pronounce, in the discharge of the duty
it cannot escape, that the challenged act must be struck down.29

Indeed, "all presumptions are indulged in favor of constitutionality; one who attacks a statute,
alleging unconstitutionality must prove its invalidity beyond a reasonable doubt; that a law may work
hardship does not render it unconstitutional; that if any reasonable basis may be conceived which
supports the statute, it will be upheld, and the challenger must negate all possible bases; that the
courts are not concerned with the wisdom, justice, policy, or expediency of a statute; and that a
liberal interpretation of the constitution in favor of the constitutionality of legislation should be
adopted."30
WHEREFORE, the petition is DENIED. The Decision dated July 12, 2011 of the Regional Trial Court
of Manila, Branch 42 in Civil Case No. 10-124776 is hereby AFFIRMED and UPHELD.
G.R. No. 115455 October 30, 1995

ARTURO M. TOLENTINO, petitioner,

vs.
THE SECRETARY OF FINANCE and THE COMMISSIONER OF INTERNAL
REVENUE, respondents.

G.R. No. 115525 October 30, 1995

JUAN T. DAVID, petitioner,

vs.
TEOFISTO T. GUINGONA, JR., as Executive Secretary; ROBERTO DE OCAMPO, as Secretary
of Finance; LIWAYWAY VINZONS-CHATO, as Commissioner of Internal Revenue; and their
AUTHORIZED AGENTS OR REPRESENTATIVES, respondents.

G.R. No. 115543 October 30, 1995

RAUL S. ROCO and the INTEGRATED BAR OF THE PHILIPPINES, petitioners,

vs.
THE SECRETARY OF THE DEPARTMENT OF FINANCE; THE COMMISSIONERS OF THE
BUREAU OF INTERNAL REVENUE AND BUREAU OF CUSTOMS, respondents.

G.R. No. 115544 October 30, 1995

PHILIPPINE PRESS INSTITUTE, INC.; EGP PUBLISHING CO., INC.; KAMAHALAN PUBLISHING
CORPORATION; PHILIPPINE JOURNALISTS, INC.; JOSE L. PAVIA; and OFELIA L.
DIMALANTA, petitioners,
vs.
HON. LIWAYWAY V. CHATO, in her capacity as Commissioner of Internal Revenue; HON.
TEOFISTO T. GUINGONA, JR., in his capacity as Executive Secretary; and HON. ROBERTO B.
DE OCAMPO, in his capacity as Secretary of Finance, respondents.

G.R. No. 115754 October 30, 1995

CHAMBER OF REAL ESTATE AND BUILDERS ASSOCIATIONS, INC., (CREBA), petitioner,

vs.
THE COMMISSIONER OF INTERNAL REVENUE, respondent.

G.R. No. 115781 October 30, 1995

KILOSBAYAN, INC., JOVITO R. SALONGA, CIRILO A. RIGOS, ERME CAMBA, EMILIO C.

CAPULONG, JR., JOSE T. APOLO, EPHRAIM TENDERO, FERNANDO SANTIAGO, JOSE
ABCEDE, CHRISTINE TAN, FELIPE L. GOZON, RAFAEL G. FERNANDO, RAOUL V.
VICTORINO, JOSE CUNANAN, QUINTIN S. DOROMAL, MOVEMENT OF ATTORNEYS FOR
BROTHERHOOD, INTEGRITY AND NATIONALISM, INC. ("MABINI"), FREEDOM FROM DEBT
COALITION, INC., and PHILIPPINE BIBLE SOCIETY, INC. and WIGBERTO TAÑADA, petitioners,
vs.
THE EXECUTIVE SECRETARY, THE SECRETARY OF FINANCE, THE COMMISSIONER OF
INTERNAL REVENUE and THE COMMISSIONER OF CUSTOMS, respondents.

G.R. No. 115852 October 30, 1995

PHILIPPINE AIRLINES, INC., petitioner,
vs.
THE SECRETARY OF FINANCE and COMMISSIONER OF INTERNAL REVENUE, respondents.

G.R. No. 115873 October 30, 1995

COOPERATIVE UNION OF THE PHILIPPINES, petitioner,

vs.
HON. LIWAYWAY V. CHATO, in her capacity as the Commissioner of Internal Revenue, HON.
TEOFISTO T. GUINGONA, JR., in his capacity as Executive Secretary, and HON. ROBERTO B.
DE OCAMPO, in his capacity as Secretary of Finance, respondents.

G.R. No. 115931 October 30, 1995

PHILIPPINE EDUCATIONAL PUBLISHERS ASSOCIATION, INC. and ASSOCIATION OF

PHILIPPINE BOOK SELLERS, petitioners,
vs.
HON. ROBERTO B. DE OCAMPO, as the Secretary of Finance; HON. LIWAYWAY V. CHATO,
as the Commissioner of Internal Revenue; and HON. GUILLERMO PARAYNO, JR., in his
capacity as the Commissioner of Customs, respondents.

RESOLUTION

MENDOZA, J.:

These are motions seeking reconsideration of our decision dismissing the petitions filed in these
cases for the declaration of unconstitutionality of R.A. No. 7716, otherwise known as the Expanded
Value-Added Tax Law. The motions, of which there are 10 in all, have been filed by the several
petitioners in these cases, with the exception of the Philippine Educational Publishers Association,
Inc. and the Association of Philippine Booksellers, petitioners in G.R. No. 115931.

The Solicitor General, representing the respondents, filed a consolidated comment, to which the
Philippine Airlines, Inc., petitioner in G.R. No. 115852, and the Philippine Press Institute, Inc.,
petitioner in G.R. No. 115544, and Juan T. David, petitioner in G.R. No. 115525, each filed a reply.
In turn the Solicitor General filed on June 1, 1995 a rejoinder to the PPI's reply.

On June 27, 1995 the matter was submitted for resolution.

I. Power of the Senate to propose amendments to revenue bills. Some of the petitioners (Tolentino,
Kilosbayan, Inc., Philippine Airlines (PAL), Roco, and Chamber of Real Estate and Builders
Association (CREBA)) reiterate previous claims made by them that R.A. No. 7716 did not "originate
exclusively" in the House of Representatives as required by Art. VI, §24 of the Constitution. Although
they admit that H. No. 11197 was filed in the House of Representatives where it passed three
readings and that afterward it was sent to the Senate where after first reading it was referred to the
Senate Ways and Means Committee, they complain that the Senate did not pass it on second and
third readings. Instead what the Senate did was to pass its own version (S. No. 1630) which it
approved on May 24, 1994. Petitioner Tolentino adds that what the Senate committee should have
done was to amend H. No. 11197 by striking out the text of the bill and substituting it with the text of
S. No. 1630. That way, it is said, "the bill remains a House bill and the Senate version just becomes
the text (only the text) of the House bill."

The contention has no merit.

The enactment of S. No. 1630 is not the only instance in which the Senate proposed an amendment
to a House revenue bill by enacting its own version of a revenue bill. On at least two occasions
during the Eighth Congress, the Senate passed its own version of revenue bills, which, in
consolidation with House bills earlier passed, became the enrolled bills. These were:

R.A. No. 7369 (AN ACT TO AMEND THE OMNIBUS INVESTMENTS CODE OF 1987 BY
EXTENDING FROM FIVE (5) YEARS TO TEN YEARS THE PERIOD FOR TAX AND DUTY
EXEMPTION AND TAX CREDIT ON CAPITAL EQUIPMENT) which was approved by the President
on April 10, 1992. This Act is actually a consolidation of H. No. 34254, which was approved by the
House on January 29, 1992, and S. No. 1920, which was approved by the Senate on February 3,
1992.

R.A. No. 7549 (AN ACT GRANTING TAX EXEMPTIONS TO WHOEVER SHALL GIVE REWARD
TO ANY FILIPINO ATHLETE WINNING A MEDAL IN OLYMPIC GAMES) which was approved by
the President on May 22, 1992. This Act is a consolidation of H. No. 22232, which was approved by
the House of Representatives on August 2, 1989, and S. No. 807, which was approved by the
Senate on October 21, 1991.

On the other hand, the Ninth Congress passed revenue laws which were also the result of the
consolidation of House and Senate bills. These are the following, with indications of the dates on
which the laws were approved by the President and dates the separate bills of the two chambers of
Congress were respectively passed:

1. R.A. NO. 7642

AN ACT INCREASING THE PENALTIES FOR TAX EVASION, AMENDING FOR

THIS PURPOSE THE PERTINENT SECTIONS OF THE NATIONAL INTERNAL
REVENUE CODE (December 28, 1992).

House Bill No. 2165, October 5, 1992

Senate Bill No. 32, December 7, 1992

2. R.A. NO. 7643

AN ACT TO EMPOWER THE COMMISSIONER OF INTERNAL REVENUE TO

REQUIRE THE PAYMENT OF THE VALUE-ADDED TAX EVERY MONTH AND TO
ALLOW LOCAL GOVERNMENT UNITS TO SHARE IN VAT REVENUE,
AMENDING FOR THIS PURPOSE CERTAIN SECTIONS OF THE NATIONAL
INTERNAL REVENUE CODE (December 28, 1992)

House Bill No. 1503, September 3, 1992

Senate Bill No. 968, December 7, 1992

3. R.A. NO. 7646

AN ACT AUTHORIZING THE COMMISSIONER OF INTERNAL REVENUE TO
PRESCRIBE THE PLACE FOR PAYMENT OF INTERNAL REVENUE TAXES BY
LARGE TAXPAYERS, AMENDING FOR THIS PURPOSE CERTAIN PROVISIONS
OF THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED (February 24,
1993)

House Bill No. 1470, October 20, 1992

Senate Bill No. 35, November 19, 1992

4. R.A. NO. 7649

AN ACT REQUIRING THE GOVERNMENT OR ANY OF ITS POLITICAL

SUBDIVISIONS, INSTRUMENTALITIES OR AGENCIES INCLUDING
GOVERNMENT-OWNED OR CONTROLLED CORPORATIONS (GOCCS) TO
DEDUCT AND WITHHOLD THE VALUE-ADDED TAX DUE AT THE RATE OF
THREE PERCENT (3%) ON GROSS PAYMENT FOR THE PURCHASE OF
GOODS AND SIX PERCENT (6%) ON GROSS RECEIPTS FOR SERVICES
RENDERED BY CONTRACTORS (April 6, 1993)

House Bill No. 5260, January 26, 1993

Senate Bill No. 1141, March 30, 1993

5. R.A. NO. 7656

AN ACT REQUIRING GOVERNMENT-OWNED OR CONTROLLED

CORPORATIONS TO DECLARE DIVIDENDS UNDER CERTAIN CONDITIONS TO
THE NATIONAL GOVERNMENT, AND FOR OTHER PURPOSES (November 9,
1993)

House Bill No. 11024, November 3, 1993

Senate Bill No. 1168, November 3, 1993

6. R.A. NO. 7660

AN ACT RATIONALIZING FURTHER THE STRUCTURE AND ADMINISTRATION

OF THE DOCUMENTARY STAMP TAX, AMENDING FOR THE PURPOSE
CERTAIN PROVISIONS OF THE NATIONAL INTERNAL REVENUE CODE, AS
AMENDED, ALLOCATING FUNDS FOR SPECIFIC PROGRAMS, AND FOR
OTHER PURPOSES (December 23, 1993)

House Bill No. 7789, May 31, 1993

Senate Bill No. 1330, November 18, 1993

7. R.A. NO. 7717

AN ACT IMPOSING A TAX ON THE SALE, BARTER OR EXCHANGE OF SHARES

OF STOCK LISTED AND TRADED THROUGH THE LOCAL STOCK EXCHANGE
 OR THROUGH INITIAL PUBLIC OFFERING, AMENDING FOR THE PURPOSE
THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED, BY INSERTING A
NEW SECTION AND REPEALING CERTAIN SUBSECTIONS THEREOF (May 5,
1994)

House Bill No. 9187, November 3, 1993

Senate Bill No. 1127, March 23, 1994

Thus, the enactment of S. No. 1630 is not the only instance in which the Senate, in the exercise of
its power to propose amendments to bills required to originate in the House, passed its own version
of a House revenue measure. It is noteworthy that, in the particular case of S. No. 1630, petitioners
Tolentino and Roco, as members of the Senate, voted to approve it on second and third readings.

On the other hand, amendment by substitution, in the manner urged by petitioner Tolentino,
concerns a mere matter of form. Petitioner has not shown what substantial difference it would make
if, as the Senate actually did in this case, a separate bill like S. No. 1630 is instead enacted as a
substitute measure, "taking into Consideration . . . H.B. 11197."

Indeed, so far as pertinent, the Rules of the Senate only provide:

RULE XXIX

AMENDMENTS

xxx xxx xxx

§68. Not more than one amendment to the original amendment shall be considered.

No amendment by substitution shall be entertained unless the text thereof is

submitted in writing.

Any of said amendments may be withdrawn before a vote is taken thereon.

§69. No amendment which seeks the inclusion of a legislative provision foreign to the
subject matter of a bill (rider) shall be entertained.

xxx xxx xxx

§70-A. A bill or resolution shall not be amended by substituting it with another which
covers a subject distinct from that proposed in the original bill or resolution.
(emphasis added).

Nor is there merit in petitioners' contention that, with regard to revenue bills, the Philippine Senate
possesses less power than the U.S. Senate because of textual differences between constitutional
provisions giving them the power to propose or concur with amendments.

Art. I, §7, cl. 1 of the U.S. Constitution reads:

 All Bills for raising Revenue shall originate in the House of Representatives; but the
Senate may propose or concur with amendments as on other Bills.

Art. VI, §24 of our Constitution reads:

All appropriation, revenue or tariff bills, bills authorizing increase of the public debt,
bills of local application, and private bills shall originate exclusively in the House of
Representatives, but the Senate may propose or concur with amendments.

The addition of the word "exclusively" in the Philippine Constitution and the decision to drop the
phrase "as on other Bills" in the American version, according to petitioners, shows the intention of
the framers of our Constitution to restrict the Senate's power to propose amendments to revenue
bills. Petitioner Tolentino contends that the word "exclusively" was inserted to modify "originate" and
"the words 'as in any other bills' (sic) were eliminated so as to show that these bills were not to be
like other bills but must be treated as a special kind."

The history of this provision does not support this contention. The supposed indicia of constitutional
intent are nothing but the relics of an unsuccessful attempt to limit the power of the Senate. It will be
recalled that the 1935 Constitution originally provided for a unicameral National Assembly. When it
was decided in 1939 to change to a bicameral legislature, it became necessary to provide for the
procedure for lawmaking by the Senate and the House of Representatives. The work of proposing
amendments to the Constitution was done by the National Assembly, acting as a constituent
assembly, some of whose members, jealous of preserving the Assembly's lawmaking powers,
sought to curtail the powers of the proposed Senate. Accordingly they proposed the following
provision:

All bills appropriating public funds, revenue or tariff bills, bills of local application, and
private bills shall originate exclusively in the Assembly, but the Senate may propose
or concur with amendments. In case of disapproval by the Senate of any such bills,
the Assembly may repass the same by a two-thirds vote of all its members, and
thereupon, the bill so repassed shall be deemed enacted and may be submitted to
the President for corresponding action. In the event that the Senate should fail to
finally act on any such bills, the Assembly may, after thirty days from the opening of
the next regular session of the same legislative term, reapprove the same with a vote
of two-thirds of all the members of the Assembly. And upon such reapproval, the bill
shall be deemed enacted and may be submitted to the President for corresponding
action.

The special committee on the revision of laws of the Second National Assembly vetoed the proposal.
It deleted everything after the first sentence. As rewritten, the proposal was approved by the National
Assembly and embodied in Resolution No. 38, as amended by Resolution No. 73. (J. ARUEGO,
KNOW YOUR CONSTITUTION 65-66 (1950)). The proposed amendment was submitted to the
people and ratified by them in the elections held on June 18, 1940.

This is the history of Art. VI, §18 (2) of the 1935 Constitution, from which Art. VI, §24 of the present
Constitution was derived. It explains why the word "exclusively" was added to the American text from
which the framers of the Philippine Constitution borrowed and why the phrase "as on other Bills" was
not copied. Considering the defeat of the proposal, the power of the Senate to propose amendments
must be understood to be full, plenary and complete "as on other Bills." Thus, because revenue bills
are required to originate exclusively in the House of Representatives, the Senate cannot enact
revenue measures of its own without such bills. After a revenue bill is passed and sent over to it by
the House, however, the Senate certainly can pass its own version on the same subject matter. This
follows from the coequality of the two chambers of Congress.

That this is also the understanding of book authors of the scope of the Senate's power to concur is
clear from the following commentaries:

The power of the Senate to propose or concur with amendments is apparently

without restriction. It would seem that by virtue of this power, the Senate can
practically re-write a bill required to come from the House and leave only a trace of
the original bill. For example, a general revenue bill passed by the lower house of the
United States Congress contained provisions for the imposition of an inheritance tax .
This was changed by the Senate into a corporation tax. The amending authority of
the Senate was declared by the United States Supreme Court to be sufficiently broad
to enable it to make the alteration. [Flint v. Stone Tracy Company, 220 U.S. 107, 55
L. ed. 389].

(L. TAÑADA AND F. CARREON, POLITICAL LAW OF THE PHILIPPINES 247

(1961))

The above-mentioned bills are supposed to be initiated by the House of

Representatives because it is more numerous in membership and therefore also
more representative of the people. Moreover, its members are presumed to be more
familiar with the needs of the country in regard to the enactment of the legislation
involved.

The Senate is, however, allowed much leeway in the exercise of its power to propose
or concur with amendments to the bills initiated by the House of Representatives.
Thus, in one case, a bill introduced in the U.S. House of Representatives was
changed by the Senate to make a proposed inheritance tax a corporation tax. It is
also accepted practice for the Senate to introduce what is known as an amendment
by substitution, which may entirely replace the bill initiated in the House of
Representatives.

(I. CRUZ, PHILIPPINE POLITICAL LAW 144-145 (1993)).

In sum, while Art. VI, §24 provides that all appropriation, revenue or tariff bills, bills authorizing
increase of the public debt, bills of local application, and private bills must "originate exclusively in
the House of Representatives," it also adds, "but the Senate may propose or concur with
amendments." In the exercise of this power, the Senate may propose an entirely new bill as a
substitute measure. As petitioner Tolentino states in a high school text, a committee to which a bill is
referred may do any of the following:

(1) to endorse the bill without changes; (2) to make changes in the bill omitting or
adding sections or altering its language; (3) to make and endorse an entirely new bill
as a substitute, in which case it will be known as a committee bill; or (4) to make no
report at all.

(A. TOLENTINO, THE GOVERNMENT OF THE PHILIPPINES 258 (1950))

To except from this procedure the amendment of bills which are required to originate in the House
by prescribing that the number of the House bill and its other parts up to the enacting clause must be
preserved although the text of the Senate amendment may be incorporated in place of the original
body of the bill is to insist on a mere technicality. At any rate there is no rule prescribing this form. S.
No. 1630, as a substitute measure, is therefore as much an amendment of H. No. 11197 as any
which the Senate could have made.

II. S. No. 1630 a mere amendment of H. No. 11197. Petitioners' basic error is that they assume that
S. No. 1630 is an independent and distinct bill. Hence their repeated references to its certification
that it was passed by the Senate "in substitution of S.B. No. 1129, taking into consideration P.S.
Res. No. 734 and H.B. No. 11197," implying that there is something substantially different between
the reference to S. No. 1129 and the reference to H. No. 11197. From this premise, they conclude
that R.A. No. 7716 originated both in the House and in the Senate and that it is the product of two
"half-baked bills because neither H. No. 11197 nor S. No. 1630 was passed by both houses of
Congress."

In point of fact, in several instances the provisions of S. No. 1630, clearly appear to be mere
amendments of the corresponding provisions of H. No. 11197. The very tabular comparison of the
provisions of H. No. 11197 and S. No. 1630 attached as Supplement A to the basic petition of
petitioner Tolentino, while showing differences between the two bills, at the same time indicates that
the provisions of the Senate bill were precisely intended to be amendments to the House bill.

Without H. No. 11197, the Senate could not have enacted S. No. 1630. Because the Senate bill was
a mere amendment of the House bill, H. No. 11197 in its original form did not have to pass the
Senate on second and three readings. It was enough that after it was passed on first reading it was
referred to the Senate Committee on Ways and Means. Neither was it required that S. No. 1630 be
passed by the House of Representatives before the two bills could be referred to the Conference
Committee.

There is legislative precedent for what was done in the case of H. No. 11197 and S. No. 1630. When
the House bill and Senate bill, which became R.A. No. 1405 (Act prohibiting the disclosure of bank
deposits), were referred to a conference committee, the question was raised whether the two bills
could be the subject of such conference, considering that the bill from one house had not been
passed by the other and vice versa. As Congressman Duran put the question:

MR. DURAN. Therefore, I raise this question of order as to procedure: If a House bill
is passed by the House but not passed by the Senate, and a Senate bill of a similar
nature is passed in the Senate but never passed in the House, can the two bills be
the subject of a conference, and can a law be enacted from these two bills? I
understand that the Senate bill in this particular instance does not refer to
investments in government securities, whereas the bill in the House, which was
introduced by the Speaker, covers two subject matters: not only investigation of
deposits in banks but also investigation of investments in government securities.
Now, since the two bills differ in their subject matter, I believe that no law can be
enacted.

Ruling on the point of order raised, the chair (Speaker Jose B. Laurel, Jr.) said:

THE SPEAKER. The report of the conference committee is in order. It is precisely in

cases like this where a conference should be had. If the House bill had been
approved by the Senate, there would have been no need of a conference; but
precisely because the Senate passed another bill on the same subject matter, the
conference committee had to be created, and we are now considering the report of
that committee.
 (2 CONG. REC. NO. 13, July 27, 1955, pp. 3841-42 (emphasis added))

III. The President's certification. The fallacy in thinking that H. No. 11197 and S. No. 1630 are distinct
and unrelated measures also accounts for the petitioners' (Kilosbayan's and PAL's) contention that
because the President separately certified to the need for the immediate enactment of these
measures, his certification was ineffectual and void. The certification had to be made of the version
of the same revenue bill which at the moment was being considered. Otherwise, to follow petitioners'
theory, it would be necessary for the President to certify as many bills as are presented in a house of
Congress even though the bills are merely versions of the bill he has already certified. It is enough
that he certifies the bill which, at the time he makes the certification, is under consideration. Since on
March 22, 1994 the Senate was considering S. No. 1630, it was that bill which had to be certified.
For that matter on June 1, 1993 the President had earlier certified H. No. 9210 for immediate
enactment because it was the one which at that time was being considered by the House. This bill
was later substituted, together with other bills, by H. No. 11197.

As to what Presidential certification can accomplish, we have already explained in the main decision
that the phrase "except when the President certifies to the necessity of its immediate enactment,
etc." in Art. VI, §26 (2) qualifies not only the requirement that "printed copies [of a bill] in its final form
[must be] distributed to the members three days before its passage" but also the requirement that
before a bill can become a law it must have passed "three readings on separate days." There is not
only textual support for such construction but historical basis as well.

Art. VI, §21 (2) of the 1935 Constitution originally provided:

(2) No bill shall be passed by either House unless it shall have been printed and
copies thereof in its final form furnished its Members at least three calendar days
prior to its passage, except when the President shall have certified to the necessity of
its immediate enactment. Upon the last reading of a bill, no amendment thereof shall
be allowed and the question upon its passage shall be taken immediately thereafter,
and the yeas and nays entered on the Journal.

When the 1973 Constitution was adopted, it was provided in Art. VIII, §19 (2):

(2) No bill shall become a law unless it has passed three readings on separate days,
and printed copies thereof in its final form have been distributed to the Members
three days before its passage, except when the Prime Minister certifies to the
necessity of its immediate enactment to meet a public calamity or emergency. Upon
the last reading of a bill, no amendment thereto shall be allowed, and the vote
thereon shall be taken immediately thereafter, and the yeas and nays entered in the
Journal.

This provision of the 1973 document, with slight modification, was adopted in Art. VI, §26 (2) of the
present Constitution, thus:

(2) No bill passed by either House shall become a law unless it has passed three
readings on separate days, and printed copies thereof in its final form have been
distributed to its Members three days before its passage, except when the President
certifies to the necessity of its immediate enactment to meet a public calamity or
emergency. Upon the last reading of a bill, no amendment thereto shall be allowed,
and the vote thereon shall be taken immediately thereafter, and
the yeas and nays entered in the Journal.
The exception is based on the prudential consideration that if in all cases three readings on separate
days are required and a bill has to be printed in final form before it can be passed, the need for a law
may be rendered academic by the occurrence of the very emergency or public calamity which it is
meant to address.

Petitioners further contend that a "growing budget deficit" is not an emergency, especially in a
country like the Philippines where budget deficit is a chronic condition. Even if this were the case, an
enormous budget deficit does not make the need for R.A. No. 7716 any less urgent or the situation
calling for its enactment any less an emergency.

Apparently, the members of the Senate (including some of the petitioners in these cases) believed
that there was an urgent need for consideration of S. No. 1630, because they responded to the call
of the President by voting on the bill on second and third readings on the same day. While the
judicial department is not bound by the Senate's acceptance of the President's certification, the
respect due coequal departments of the government in matters committed to them by the
Constitution and the absence of a clear showing of grave abuse of discretion caution a stay of the
judicial hand.

At any rate, we are satisfied that S. No. 1630 received thorough consideration in the Senate where it
was discussed for six days. Only its distribution in advance in its final printed form was actually
dispensed with by holding the voting on second and third readings on the same day (March 24,
1994). Otherwise, sufficient time between the submission of the bill on February 8, 1994 on second
reading and its approval on March 24, 1994 elapsed before it was finally voted on by the Senate on
third reading.

The purpose for which three readings on separate days is required is said to be two-fold: (1) to
inform the members of Congress of what they must vote on and (2) to give them notice that a
measure is progressing through the enacting process, thus enabling them and others interested in
the measure to prepare their positions with reference to it. (1 J. G. SUTHERLAND, STATUTES AND
STATUTORY CONSTRUCTION §10.04, p. 282 (1972)). These purposes were substantially
achieved in the case of R.A. No. 7716.

IV. Power of Conference Committee. It is contended (principally by Kilosbayan, Inc. and the
Movement of Attorneys for Brotherhood, Integrity and Nationalism, Inc. (MABINI)) that in violation of
the constitutional policy of full public disclosure and the people's right to know (Art. II, §28 and Art.
III, §7) the Conference Committee met for two days in executive session with only the conferees
present.

As pointed out in our main decision, even in the United States it was customary to hold such
sessions with only the conferees and their staffs in attendance and it was only in 1975 when a new
rule was adopted requiring open sessions. Unlike its American counterpart, the Philippine Congress
has not adopted a rule prescribing open hearings for conference committees.

It is nevertheless claimed that in the United States, before the adoption of the rule in 1975, at least
staff members were present. These were staff members of the Senators and Congressmen,
however, who may be presumed to be their confidential men, not stenographers as in this case who
on the last two days of the conference were excluded. There is no showing that the conferees
themselves did not take notes of their proceedings so as to give petitioner Kilosbayan basis for
claiming that even in secret diplomatic negotiations involving state interests, conferees keep notes of
their meetings. Above all, the public's right to know was fully served because the Conference
Committee in this case submitted a report showing the changes made on the differing versions of
the House and the Senate.
Petitioners cite the rules of both houses which provide that conference committee reports must
contain "a detailed, sufficiently explicit statement of the changes in or other amendments." These
changes are shown in the bill attached to the Conference Committee Report. The members of both
houses could thus ascertain what changes had been made in the original bills without the need of a
statement detailing the changes.

The same question now presented was raised when the bill which became R.A. No. 1400 (Land
Reform Act of 1955) was reported by the Conference Committee. Congressman Bengzon raised a
point of order. He said:

MR. BENGZON. My point of order is that it is out of order to consider the report of
the conference committee regarding House Bill No. 2557 by reason of the provision
of Section 11, Article XII, of the Rules of this House which provides specifically that
the conference report must be accompanied by a detailed statement of the effects of
the amendment on the bill of the House. This conference committee report is not
accompanied by that detailed statement, Mr. Speaker. Therefore it is out of order to
consider it.

Petitioner Tolentino, then the Majority Floor Leader, answered:

MR. TOLENTINO. Mr. Speaker, I should just like to say a few words in connection
with the point of order raised by the gentleman from Pangasinan.

There is no question about the provision of the Rule cited by the gentleman from
Pangasinan, but this provision applies to those cases where only portions of the bill
have been amended. In this case before us an entire bill is presented; therefore, it
can be easily seen from the reading of the bill what the provisions are. Besides, this
procedure has been an established practice.

After some interruption, he continued:

MR. TOLENTINO. As I was saying, Mr. Speaker, we have to look into the reason for
the provisions of the Rules, and the reason for the requirement in the provision cited
by the gentleman from Pangasinan is when there are only certain words or phrases
inserted in or deleted from the provisions of the bill included in the conference report,
and we cannot understand what those words and phrases mean and their relation to
the bill. In that case, it is necessary to make a detailed statement on how those
words and phrases will affect the bill as a whole; but when the entire bill itself is
copied verbatim in the conference report, that is not necessary. So when the reason
for the Rule does not exist, the Rule does not exist.

(2 CONG. REC. NO. 2, p. 4056. (emphasis added))

Congressman Tolentino was sustained by the chair. The record shows that when the ruling was
appealed, it was upheld by viva voce and when a division of the House was called, it was sustained
by a vote of 48 to 5. (Id.,
p. 4058)

Nor is there any doubt about the power of a conference committee to insert new provisions as long
as these are germane to the subject of the conference. As this Court held in Philippine Judges
Association v. Prado, 227 SCRA 703 (1993), in an opinion written by then Justice Cruz, the
jurisdiction of the conference committee is not limited to resolving differences between the Senate
and the House. It may propose an entirely new provision. What is important is that its report is
subsequently approved by the respective houses of Congress. This Court ruled that it would not
entertain allegations that, because new provisions had been added by the conference committee,
there was thereby a violation of the constitutional injunction that "upon the last reading of a bill, no
amendment thereto shall be allowed."

Applying these principles, we shall decline to look into the petitioners' charges that an
amendment was made upon the last reading of the bill that eventually became R.A.
No. 7354 and that copies thereof in its final form were not distributed among the
members of each House. Both the enrolled bill and the legislative journals certify that
the measure was duly enacted i.e., in accordance with Article VI, Sec. 26 (2) of the
Constitution. We are bound by such official assurances from a coordinate
department of the government, to which we owe, at the very least, a becoming
courtesy.

(Id. at 710. (emphasis added))

It is interesting to note the following description of conference committees in the Philippines in a

1979 study:

Conference committees may be of two types: free or instructed. These committees

may be given instructions by their parent bodies or they may be left without
instructions. Normally the conference committees are without instructions, and this is
why they are often critically referred to as "the little legislatures." Once bills have
been sent to them, the conferees have almost unlimited authority to change the
clauses of the bills and in fact sometimes introduce new measures that were not in
the original legislation. No minutes are kept, and members' activities on conference
committees are difficult to determine. One congressman known for his idealism put it
this way: "I killed a bill on export incentives for my interest group [copra] in the
conference committee but I could not have done so anywhere else." The conference
committee submits a report to both houses, and usually it is accepted. If the report is
not accepted, then the committee is discharged and new members are appointed.

(R. Jackson, Committees in the Philippine Congress, in COMMITTEES AND

LEGISLATURES: A COMPARATIVE ANALYSIS 163 (J. D. LEES AND M. SHAW,
eds.)).

In citing this study, we pass no judgment on the methods of conference committees. We cite it only
to say that conference committees here are no different from their counterparts in the United States
whose vast powers we noted in Philippine Judges Association v. Prado, supra. At all events, under
Art. VI, §16(3) each house has the power "to determine the rules of its proceedings," including those
of its committees. Any meaningful change in the method and procedures of Congress or its
committees must therefore be sought in that body itself.

V. The titles of S. No. 1630 and H. No. 11197. PAL maintains that R.A. No. 7716 violates Art. VI, §26
(1) of the Constitution which provides that "Every bill passed by Congress shall embrace only one
subject which shall be expressed in the title thereof." PAL contends that the amendment of its
franchise by the withdrawal of its exemption from the VAT is not expressed in the title of the law.

Pursuant to §13 of P.D. No. 1590, PAL pays a franchise tax of 2% on its gross revenue "in lieu of all
other taxes, duties, royalties, registration, license and other fees and charges of any kind, nature, or
description, imposed, levied, established, assessed or collected by any municipal, city, provincial or
national authority or government agency, now or in the future."

PAL was exempted from the payment of the VAT along with other entities by §103 of the National
Internal Revenue Code, which provides as follows:

§103. Exempt transactions. — The following shall be exempt from the value-added
tax:

xxx xxx xxx

(q) Transactions which are exempt under special laws or international agreements to
which the Philippines is a signatory.

R.A. No. 7716 seeks to withdraw certain exemptions, including that granted to PAL, by amending
§103, as follows:

§103. Exempt transactions. — The following shall be exempt from the value-added
tax:

xxx xxx xxx

(q) Transactions which are exempt under special laws, except those granted under
Presidential Decree Nos. 66, 529, 972, 1491, 1590. . . .

The amendment of §103 is expressed in the title of R.A. No. 7716 which reads:

AN ACT RESTRUCTURING THE VALUE-ADDED TAX (VAT) SYSTEM, WIDENING

ITS TAX BASE AND ENHANCING ITS ADMINISTRATION, AND FOR THESE
PURPOSES AMENDING AND REPEALING THE RELEVANT PROVISIONS OF
THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED, AND FOR OTHER
PURPOSES.

By stating that R.A. No. 7716 seeks to "[RESTRUCTURE] THE VALUE-ADDED TAX (VAT)
SYSTEM [BY] WIDENING ITS TAX BASE AND ENHANCING ITS ADMINISTRATION, AND FOR
THESE PURPOSES AMENDING AND REPEALING THE RELEVANT PROVISIONS OF THE
NATIONAL INTERNAL REVENUE CODE, AS AMENDED AND FOR OTHER PURPOSES,"
Congress thereby clearly expresses its intention to amend any provision of the NIRC which stands in
the way of accomplishing the purpose of the law.

PAL asserts that the amendment of its franchise must be reflected in the title of the law by specific
reference to P.D. No. 1590. It is unnecessary to do this in order to comply with the constitutional
requirement, since it is already stated in the title that the law seeks to amend the pertinent provisions
of the NIRC, among which is §103(q), in order to widen the base of the VAT. Actually, it is the bill
which becomes a law that is required to express in its title the subject of legislation. The titles of H.
No. 11197 and S. No. 1630 in fact specifically referred to §103 of the NIRC as among the provisions
sought to be amended. We are satisfied that sufficient notice had been given of the pendency of
these bills in Congress before they were enacted into what is now R.A.
No. 7716.
In Philippine Judges Association v. Prado, supra, a similar argument as that now made by PAL was
rejected. R.A. No. 7354 is entitled AN ACT CREATING THE PHILIPPINE POSTAL CORPORATION,
DEFINING ITS POWERS, FUNCTIONS AND RESPONSIBILITIES, PROVIDING FOR
REGULATION OF THE INDUSTRY AND FOR OTHER PURPOSES CONNECTED THEREWITH. It
contained a provision repealing all franking privileges. It was contended that the withdrawal of
franking privileges was not expressed in the title of the law. In holding that there was sufficient
description of the subject of the law in its title, including the repeal of franking privileges, this Court
held:

To require every end and means necessary for the accomplishment of the general
objectives of the statute to be expressed in its title would not only be unreasonable
but would actually render legislation impossible. [Cooley, Constitutional Limitations,
8th Ed., p. 297] As has been correctly explained:

The details of a legislative act need not be specifically stated in its

title, but matter germane to the subject as expressed in the title, and
adopted to the accomplishment of the object in view, may properly be
included in the act. Thus, it is proper to create in the same act the
machinery by which the act is to be enforced, to prescribe the
penalties for its infraction, and to remove obstacles in the way of its
execution. If such matters are properly connected with the subject as
expressed in the title, it is unnecessary that they should also have
special mention in the title. (Southern Pac. Co. v. Bartine, 170 Fed.
725)

(227 SCRA at 707-708)

VI. Claims of press freedom and religious liberty. We have held that, as a general proposition, the
press is not exempt from the taxing power of the State and that what the constitutional guarantee of
free press prohibits are laws which single out the press or target a group belonging to the press for
special treatment or which in any way discriminate against the press on the basis of the content of
the publication, and R.A. No. 7716 is none of these.

Now it is contended by the PPI that by removing the exemption of the press from the VAT while
maintaining those granted to others, the law discriminates against the press. At any rate, it is
averred, "even nondiscriminatory taxation of constitutionally guaranteed freedom is unconstitutional."

With respect to the first contention, it would suffice to say that since the law granted the press a
privilege, the law could take back the privilege anytime without offense to the Constitution. The
reason is simple: by granting exemptions, the State does not forever waive the exercise of its
sovereign prerogative.

Indeed, in withdrawing the exemption, the law merely subjects the press to the same tax burden to
which other businesses have long ago been subject. It is thus different from the tax involved in the
cases invoked by the PPI. The license tax in Grosjean v. American Press Co., 297 U.S. 233, 80 L.
Ed. 660 (1936) was found to be discriminatory because it was laid on the gross advertising receipts
only of newspapers whose weekly circulation was over 20,000, with the result that the tax applied
only to 13 out of 124 publishers in Louisiana. These large papers were critical of Senator Huey Long
who controlled the state legislature which enacted the license tax. The censorial motivation for the
law was thus evident.
On the other hand, in Minneapolis Star & Tribune Co. v. Minnesota Comm'r of Revenue, 460 U.S.
575, 75 L. Ed. 2d 295 (1983), the tax was found to be discriminatory because although it could have
been made liable for the sales tax or, in lieu thereof, for the use tax on the privilege of using, storing
or consuming tangible goods, the press was not. Instead, the press was exempted from both taxes.
It was, however, later made to pay a special use tax on the cost of paper and ink which made these
items "the only items subject to the use tax that were component of goods to be sold at retail." The
U.S. Supreme Court held that the differential treatment of the press "suggests that the goal of
regulation is not related to suppression of expression, and such goal is presumptively
unconstitutional." It would therefore appear that even a law that favors the press is constitutionally
suspect. (See the dissent of Rehnquist, J. in that case)

Nor is it true that only two exemptions previously granted by E.O. No. 273 are withdrawn "absolutely
and unqualifiedly" by R.A. No. 7716. Other exemptions from the VAT, such as those previously
granted to PAL, petroleum concessionaires, enterprises registered with the Export Processing Zone
Authority, and many more are likewise totally withdrawn, in addition to exemptions which are partially
withdrawn, in an effort to broaden the base of the tax.

The PPI says that the discriminatory treatment of the press is highlighted by the fact that
transactions, which are profit oriented, continue to enjoy exemption under R.A. No. 7716. An
enumeration of some of these transactions will suffice to show that by and large this is not so and
that the exemptions are granted for a purpose. As the Solicitor General says, such exemptions are
granted, in some cases, to encourage agricultural production and, in other cases, for the personal
benefit of the end-user rather than for profit. The exempt transactions are:

(a) Goods for consumption or use which are in their original state (agricultural,
marine and forest products, cotton seeds in their original state, fertilizers, seeds,
seedlings, fingerlings, fish, prawn livestock and poultry feeds) and goods or services
to enhance agriculture (milling of palay, corn, sugar cane and raw sugar, livestock,
poultry feeds, fertilizer, ingredients used for the manufacture of feeds).

(b) Goods used for personal consumption or use (household and personal effects of
citizens returning to the Philippines) or for professional use, like professional
instruments and implements, by persons coming to the Philippines to settle here.

(c) Goods subject to excise tax such as petroleum products or to be used for
manufacture of petroleum products subject to excise tax and services subject to
percentage tax.

(d) Educational services, medical, dental, hospital and veterinary services, and
services rendered under employer-employee relationship.

(e) Works of art and similar creations sold by the artist himself.

(f) Transactions exempted under special laws, or international agreements.

(g) Export-sales by persons not VAT-registered.

(h) Goods or services with gross annual sale or receipt not exceeding P500,000.00.

(Respondents' Consolidated Comment on the Motions for Reconsideration, pp. 58-

60)
The PPI asserts that it does not really matter that the law does not discriminate against the press
because "even nondiscriminatory taxation on constitutionally guaranteed freedom is
unconstitutional." PPI cites in support of this assertion the following statement in Murdock
v. Pennsylvania, 319 U.S. 105, 87 L. Ed. 1292 (1943):

The fact that the ordinance is "nondiscriminatory" is immaterial. The protection

afforded by the First Amendment is not so restricted. A license tax certainly does not
acquire constitutional validity because it classifies the privileges protected by the
First Amendment along with the wares and merchandise of hucksters and peddlers
and treats them all alike. Such equality in treatment does not save the ordinance.
Freedom of press, freedom of speech, freedom of religion are in preferred position.

The Court was speaking in that case of a license tax, which, unlike an ordinary tax, is mainly for
regulation. Its imposition on the press is unconstitutional because it lays a prior restraint on the
exercise of its right. Hence, although its application to others, such those selling goods, is valid, its
application to the press or to religious groups, such as the Jehovah's Witnesses, in connection with
the latter's sale of religious books and pamphlets, is unconstitutional. As the U.S. Supreme Court put
it, "it is one thing to impose a tax on income or property of a preacher. It is quite another thing to
exact a tax on him for delivering a sermon."

A similar ruling was made by this Court in American Bible Society v. City of Manila, 101 Phil. 386
(1957) which invalidated a city ordinance requiring a business license fee on those engaged in the
sale of general merchandise. It was held that the tax could not be imposed on the sale of bibles by
the American Bible Society without restraining the free exercise of its right to propagate.

The VAT is, however, different. It is not a license tax. It is not a tax on the exercise of a privilege,
much less a constitutional right. It is imposed on the sale, barter, lease or exchange of goods or
properties or the sale or exchange of services and the lease of properties purely for revenue
purposes. To subject the press to its payment is not to burden the exercise of its right any more than
to make the press pay income tax or subject it to general regulation is not to violate its freedom
under the Constitution.

Additionally, the Philippine Bible Society, Inc. claims that although it sells bibles, the proceeds
derived from the sales are used to subsidize the cost of printing copies which are given free to those
who cannot afford to pay so that to tax the sales would be to increase the price, while reducing the
volume of sale. Granting that to be the case, the resulting burden on the exercise of religious
freedom is so incidental as to make it difficult to differentiate it from any other economic imposition
that might make the right to disseminate religious doctrines costly. Otherwise, to follow the
petitioner's argument, to increase the tax on the sale of vestments would be to lay an impermissible
burden on the right of the preacher to make a sermon.

On the other hand the registration fee of P1,000.00 imposed by §107 of the NIRC, as amended by
§7 of R.A. No. 7716, although fixed in amount, is really just to pay for the expenses of registration
and enforcement of provisions such as those relating to accounting in §108 of the NIRC. That the
PBS distributes free bibles and therefore is not liable to pay the VAT does not excuse it from the
payment of this fee because it also sells some copies. At any rate whether the PBS is liable for the
VAT must be decided in concrete cases, in the event it is assessed this tax by the Commissioner of
Internal Revenue.

VII. Alleged violations of the due process, equal protection and contract clauses and the rule on
taxation. CREBA asserts that R.A. No. 7716 (1) impairs the obligations of contracts, (2) classifies
transactions as covered or exempt without reasonable basis and (3) violates the rule that taxes
should be uniform and equitable and that Congress shall "evolve a progressive system of taxation."

With respect to the first contention, it is claimed that the application of the tax to existing contracts of
the sale of real property by installment or on deferred payment basis would result in substantial
increases in the monthly amortizations to be paid because of the 10% VAT. The additional amount, it
is pointed out, is something that the buyer did not anticipate at the time he entered into the contract.

The short answer to this is the one given by this Court in an early case: "Authorities from numerous
sources are cited by the plaintiffs, but none of them show that a lawful tax on a new subject, or an
increased tax on an old one, interferes with a contract or impairs its obligation, within the meaning of
the Constitution. Even though such taxation may affect particular contracts, as it may increase the
debt of one person and lessen the security of another, or may impose additional burdens upon one
class and release the burdens of another, still the tax must be paid unless prohibited by the
Constitution, nor can it be said that it impairs the obligation of any existing contract in its true legal
sense." (La Insular v. Machuca Go-Tauco and Nubla Co-Siong, 39 Phil. 567, 574 (1919)). Indeed not
only existing laws but also "the reservation of the essential attributes of sovereignty, is . . . read into
contracts as a postulate of the legal order." (Philippine-American Life Ins. Co. v. Auditor General, 22
SCRA 135, 147 (1968)) Contracts must be understood as having been made in reference to the
possible exercise of the rightful authority of the government and no obligation of contract can extend
to the defeat of that authority. (Norman v. Baltimore and Ohio R.R., 79 L. Ed. 885 (1935)).

It is next pointed out that while §4 of R.A. No. 7716 exempts such transactions as the sale of
agricultural products, food items, petroleum, and medical and veterinary services, it grants no
exemption on the sale of real property which is equally essential. The sale of real property for
socialized and low-cost housing is exempted from the tax, but CREBA claims that real estate
transactions of "the less poor," i.e., the middle class, who are equally homeless, should likewise be
exempted.

The sale of food items, petroleum, medical and veterinary services, etc., which are essential goods
and services was already exempt under §103, pars. (b) (d) (1) of the NIRC before the enactment of
R.A. No. 7716. Petitioner is in error in claiming that R.A. No. 7716 granted exemption to these
transactions, while subjecting those of petitioner to the payment of the VAT. Moreover, there is a
difference between the "homeless poor" and the "homeless less poor" in the example given by
petitioner, because the second group or middle class can afford to rent houses in the meantime that
they cannot yet buy their own homes. The two social classes are thus differently situated in life. "It is
inherent in the power to tax that the 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.'" (Lutz v. Araneta, 98 Phil. 148, 153 (1955). Accord,
City of Baguio v. De Leon, 134 Phil. 912 (1968); Sison, Jr. v. Ancheta, 130 SCRA 654, 663 (1984);
Kapatiran ng mga Naglilingkod sa Pamahalaan ng Pilipinas, Inc. v. Tan, 163 SCRA 371 (1988)).

Finally, it is contended, for the reasons already noted, that R.A. No. 7716 also violates Art. VI, §28(1)
which provides that "The rule of taxation shall be uniform and equitable. The Congress shall evolve a
progressive system of taxation."

Equality and uniformity of taxation means that all taxable articles or kinds of property of the same
class be taxed at the same rate. The taxing power has the authority to make reasonable and natural
classifications for purposes of taxation. To satisfy this requirement it is enough that the statute or
ordinance applies equally to all persons, forms and corporations placed in similar situation. (City of
Baguio v. De Leon, supra; Sison, Jr. v. Ancheta, supra)
Indeed, the VAT was already provided in E.O. No. 273 long before R.A. No. 7716 was enacted. R.A.
No. 7716 merely expands the base of the tax. The validity of the original VAT Law was questioned
in Kapatiran ng Naglilingkod sa Pamahalaan ng Pilipinas, Inc. v. Tan, 163 SCRA 383 (1988) on
grounds similar to those made in these cases, namely, that the law was "oppressive, discriminatory,
unjust and regressive in violation of Art. VI, §28(1) of the Constitution." (At 382) Rejecting the
challenge to the law, this Court held:

As the Court sees it, EO 273 satisfies all the requirements of a valid tax. It is uniform.
...

The sales tax adopted in EO 273 is applied similarly on all goods and services sold
to the public, which are not exempt, at the constant rate of 0% or 10%.

The disputed sales tax is also equitable. It is imposed only on sales of goods or
services by persons engaged in business with an aggregate gross annual sales
exceeding P200,000.00. Small corner sari-sari stores are consequently exempt from
its application. Likewise exempt from the tax are sales of farm and marine products,
so that the costs of basic food and other necessities, spared as they are from the
incidence of the VAT, are expected to be relatively lower and within the reach of the
general public.

(At 382-383)

The CREBA claims that the VAT is regressive. A similar claim is made by the Cooperative Union of
the Philippines, Inc. (CUP), while petitioner Juan T. David argues that the law contravenes the
mandate of Congress to provide for a progressive system of taxation because the law imposes a flat
rate of 10% and thus places the tax burden on all taxpayers without regard to their ability to pay.

The Constitution does not really prohibit the imposition of indirect taxes which, like the VAT, are
regressive. What it simply provides is that Congress shall "evolve a progressive system of taxation."
The constitutional provision has been interpreted to mean simply that "direct taxes are . . . to be
preferred [and] as much as possible, indirect taxes should be minimized." (E. FERNANDO, THE
CONSTITUTION OF THE PHILIPPINES 221 (Second ed. (1977)). Indeed, the mandate to Congress
is not to prescribe, but to evolve, a progressive tax system. Otherwise, sales taxes, which perhaps
are the oldest form of indirect taxes, would have been prohibited with the proclamation of Art. VIII,
§17(1) of the 1973 Constitution from which the present Art. VI, §28(1) was taken. Sales taxes are
also regressive.

Resort to indirect taxes should be minimized but not avoided entirely because it is difficult, if not
impossible, to avoid them by imposing such taxes according to the taxpayers' ability to pay. In the
case of the VAT, the law minimizes the regressive effects of this imposition by providing for zero
rating of certain transactions (R.A. No. 7716, §3, amending §102 (b) of the NIRC), while
granting exemptions to other transactions. (R.A. No. 7716, §4, amending §103 of the NIRC).

Thus, the following transactions involving basic and essential goods and services are exempted from
the VAT:

(a) Goods for consumption or use which are in their original state (agricultural,
marine and forest products, cotton seeds in their original state, fertilizers, seeds,
seedlings, fingerlings, fish, prawn livestock and poultry feeds) and goods or services
to enhance agriculture (milling of palay, corn sugar cane and raw sugar, livestock,
poultry feeds, fertilizer, ingredients used for the manufacture of feeds).
 (b) Goods used for personal consumption or use (household and personal effects of
citizens returning to the Philippines) and or professional use, like professional
instruments and implements, by persons coming to the Philippines to settle here.

(c) Goods subject to excise tax such as petroleum products or to be used for
manufacture of petroleum products subject to excise tax and services subject to
percentage tax.

(d) Educational services, medical, dental, hospital and veterinary services, and
services rendered under employer-employee relationship.

(e) Works of art and similar creations sold by the artist himself.

(f) Transactions exempted under special laws, or international agreements.

(g) Export-sales by persons not VAT-registered.

(h) Goods or services with gross annual sale or receipt not exceeding P500,000.00.

(Respondents' Consolidated Comment on the Motions for Reconsideration, pp. 58-

60)

On the other hand, the transactions which are subject to the VAT are those which involve goods and
services which are used or availed of mainly by higher income groups. These include real properties
held primarily for sale to customers or for lease in the ordinary course of trade or business, the right
or privilege to use patent, copyright, and other similar property or right, the right or privilege to use
industrial, commercial or scientific equipment, motion picture films, tapes and discs, radio, television,
satellite transmission and cable television time, hotels, restaurants and similar places, securities,
lending investments, taxicabs, utility cars for rent, tourist buses, and other common carriers, services
of franchise grantees of telephone and telegraph.

The problem with CREBA's petition is that it presents broad claims of constitutional violations by
tendering issues not at retail but at wholesale and in the abstract. There is no fully developed record
which can impart to adjudication the impact of actuality. There is no factual foundation to show in
the concrete the application of the law to actual contracts and exemplify its effect on property rights.
For the fact is that petitioner's members have not even been assessed the VAT. Petitioner's case is
not made concrete by a series of hypothetical questions asked which are no different from those
dealt with in advisory opinions.

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.

(Sison, Jr. v. Ancheta, 130 SCRA at 661)

Adjudication of these broad claims must await the development of a concrete case. It may be that
postponement of adjudication would result in a multiplicity of suits. This need not be the case,
however. Enforcement of the law may give rise to such a case. A test case, provided it is an actual
case and not an abstract or hypothetical one, may thus be presented.

Nor is hardship to taxpayers alone an adequate justification for adjudicating abstract issues.
Otherwise, adjudication would be no different from the giving of advisory opinion that does not really
settle legal issues.

We are told that it is our duty under Art. VIII, §1, ¶2 to decide whenever a claim is made that "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." This duty can only arise if an actual case or
controversy is before us. Under Art . VIII, §5 our jurisdiction is defined in terms of "cases" and all that
Art. VIII, §1, ¶2 can plausibly mean is that in the exercise of that jurisdiction we have the judicial
power to determine questions of grave abuse of discretion by any branch or instrumentality of the
government.

Put in another way, what is granted in Art. VIII, §1, ¶2 is "judicial power," which is "the power of a
court to hear and decide cases pending between parties who have the right to sue and be sued in
the courts of law and equity" (Lamb v. Phipps, 22 Phil. 456, 559 (1912)), as distinguished from
legislative and executive power. This power cannot be directly appropriated until it is apportioned
among several courts either by the Constitution, as in the case of Art. VIII, §5, or by statute, as in the
case of the Judiciary Act of 1948 (R.A. No. 296) and the Judiciary Reorganization Act of 1980 (B.P.
Blg. 129). The power thus apportioned constitutes the court's "jurisdiction," defined as "the power
conferred by law upon a court or judge to take cognizance of a case, to the exclusion of all others."
(United States v. Arceo, 6 Phil. 29 (1906)) Without an actual case coming within its jurisdiction, this
Court cannot inquire into any allegation of grave abuse of discretion by the other departments of the
government.

VIII. Alleged violation of policy towards cooperatives. On the other hand, the Cooperative Union of
the Philippines (CUP), after briefly surveying the course of legislation, argues that it was to adopt a
definite policy of granting tax exemption to cooperatives that the present Constitution embodies
provisions on cooperatives. To subject cooperatives to the VAT would therefore be to infringe a
constitutional policy. Petitioner claims that in 1973, P.D. No. 175 was promulgated exempting
cooperatives from the payment of income taxes and sales taxes but in 1984, because of the crisis
which menaced the national economy, this exemption was withdrawn by P.D. No. 1955; that in 1986,
P.D. No. 2008 again granted cooperatives exemption from income and sales taxes until December
31, 1991, but, in the same year, E.O. No. 93 revoked the exemption; and that finally in 1987 the
framers of the Constitution "repudiated the previous actions of the government adverse to the
interests of the cooperatives, that is, the repeated revocation of the tax exemption to
cooperatives and instead upheld the policy of strengthening the cooperatives by way of the grant of
tax exemptions," by providing the following in Art. XII:

§1. The goals of the national economy are a more equitable distribution of
opportunities, income, and wealth; a sustained increase in the amount of goods and
services produced by the nation for the benefit of the people; and an expanding
productivity as the key to raising the quality of life for all, especially the
underprivileged.

The State shall promote industrialization and full employment based on sound
agricultural development and agrarian reform, through industries that make full and
efficient use of human and natural resources, and which are competitive in both
 domestic and foreign markets. However, the State shall protect Filipino enterprises
against unfair foreign competition and trade practices.

In the pursuit of these goals, all sectors of the economy and all regions of the country
shall be given optimum opportunity to develop. Private enterprises, including
corporations, cooperatives, and similar collective organizations, shall be encouraged
to broaden the base of their ownership.

§15. The Congress shall create an agency to promote the viability and growth of
cooperatives as instruments for social justice and economic development.

Petitioner's contention has no merit. In the first place, it is not true that P.D. No. 1955 singled out
cooperatives by withdrawing their exemption from income and sales taxes under P.D. No. 175, §5.
What P.D. No. 1955, §1 did was to withdraw the exemptions and preferential treatments theretofore
granted to private business enterprises in general, in view of the economic crisis which then beset
the nation. It is true that after P.D. No. 2008, §2 had restored the tax exemptions of cooperatives in
1986, the exemption was again repealed by E.O. No. 93, §1, but then again cooperatives were not
the only ones whose exemptions were withdrawn. The withdrawal of tax incentives applied to all,
including government and private entities. In the second place, the Constitution does not really
require that cooperatives be granted tax exemptions in order to promote their growth and viability.
Hence, there is no basis for petitioner's assertion that the government's policy toward cooperatives
had been one of vacillation, as far as the grant of tax privileges was concerned, and that it was to put
an end to this indecision that the constitutional provisions cited were adopted. Perhaps as a matter
of policy cooperatives should be granted tax exemptions, but that is left to the discretion of
Congress. If Congress does not grant exemption and there is no discrimination to cooperatives, no
violation of any constitutional policy can be charged.

Indeed, petitioner's theory amounts to saying that under the Constitution cooperatives are exempt
from taxation. Such theory is contrary to the Constitution under which only the following are exempt
from taxation: charitable institutions, churches and parsonages, by reason of Art. VI, §28 (3), and
non-stock, non-profit educational institutions by reason of Art. XIV, §4 (3).

CUP's further ground for seeking the invalidation of R.A. No. 7716 is that it denies cooperatives the
equal protection of the law because electric cooperatives are exempted from the VAT. The
classification between electric and other cooperatives (farmers cooperatives, producers
cooperatives, marketing cooperatives, etc.) apparently rests on a congressional determination that
there is greater need to provide cheaper electric power to as many people as possible, especially
those living in the rural areas, than there is to provide them with other necessities in life. We cannot
say that such classification is unreasonable.

We have carefully read the various arguments raised against the constitutional validity of R.A. No.
7716. We have in fact taken the extraordinary step of enjoining its enforcement pending resolution of
these cases. We have now come to the conclusion that the law suffers from none of the infirmities
attributed to it by petitioners and that its enactment by the other branches of the government does
not constitute a grave abuse of discretion. Any question as to its necessity, desirability or expediency
must be addressed to Congress as the body which is electorally responsible, remembering that, as
Justice Holmes has said, "legislators are the ultimate guardians of the liberties and welfare of the
people in quite as great a degree as are the courts." (Missouri, Kansas & Texas Ry. Co. v. May, 194
U.S. 267, 270, 48 L. Ed. 971, 973 (1904)). It is not right, as petitioner in G.R. No. 115543 does in
arguing that we should enforce the public accountability of legislators, that those who took part in
passing the law in question by voting for it in Congress should later thrust to the courts the burden of
reviewing measures in the flush of enactment. This Court does not sit as a third branch of the
legislature, much less exercise a veto power over legislation.
G.R. No. 178551 October 11, 2010

ATCI OVERSEAS CORPORATION, AMALIA G. IKDAL and MINISTRY OF PUBLIC HEALTH-

KUWAIT Petitioners,
vs.
MA. JOSEFA ECHIN, Respondent.

DECISION

CARPIO MORALES, J.:

Josefina Echin (respondent) was hired by petitioner ATCI Overseas Corporation in behalf of its
principal-co-petitioner, the Ministry of Public Health of Kuwait (the Ministry), for the position of
medical technologist under a two-year contract, denominated as a Memorandum of Agreement
(MOA), with a monthly salary of US$1,200.00.

Under the MOA,1 all newly-hired employees undergo a probationary period of one (1) year and are
covered by Kuwait’s Civil Service Board Employment Contract No. 2.

Respondent was deployed on February 17, 2000 but was terminated from employment on February
11, 2001, she not having allegedly passed the probationary period.

As the Ministry denied respondent’s request for reconsideration, she returned to the Philippines on
March 17, 2001, shouldering her own air fare.

On July 27, 2001, respondent filed with the National Labor Relations Commission (NLRC) a
complaint2 for illegal dismissal against petitioner ATCI as the local recruitment agency, represented
by petitioner, Amalia Ikdal (Ikdal), and the Ministry, as the foreign principal.

By Decision3 of November 29, 2002, the Labor Arbiter, finding that petitioners neither showed that
there was just cause to warrant respondent’s dismissal nor that she failed to qualify as a regular
employee, held that respondent was illegally dismissed and accordingly ordered petitioners to pay
her US$3,600.00, representing her salary for the three months unexpired portion of her contract.

On appeal of petitioners ATCI and Ikdal, the NLRC affirmed the Labor Arbiter’s decision by
Resolution4 of January 26, 2004. Petitioners’ motion for reconsideration having been denied by
Resolution5 of April 22, 2004, they appealed to the Court of Appeals, contending that their principal,
the Ministry, being a foreign government agency, is immune from suit and, as such, the immunity
extended to them; and that respondent was validly dismissed for her failure to meet the performance
rating within the one-year period as required under Kuwait’s Civil Service Laws. Petitioners further
contended that Ikdal should not be liable as an officer of petitioner ATCI.

By Decision6 of March 30, 2007, the appellate court affirmed the NLRC Resolution.

In brushing aside petitioners’ contention that they only acted as agent of the Ministry and that they
cannot be held jointly and solidarily liable with it, the appellate court noted that under the law, a
private employment agency shall assume all responsibilities for the implementation of the contract of
employment of an overseas worker, hence, it can be sued jointly and severally with the foreign
principal for any violation of the recruitment agreement or contract of employment.
As to Ikdal’s liability, the appellate court held that under Sec. 10 of Republic Act No. 8042, the
"Migrant and Overseas Filipinos’ Act of 1995," corporate officers, directors and partners of a
recruitment agency may themselves be jointly and solidarily liable with the recruitment agency for
money claims and damages awarded to overseas workers.

Petitioners’ motion for reconsideration having been denied by the appellate court by Resolution7 of
June 27, 2007, the present petition for review on certiorari was filed.

Petitioners maintain that they should not be held liable because respondent’s employment contract
specifically stipulates that her employment shall be governed by the Civil Service Law and
Regulations of Kuwait. They thus conclude that it was patent error for the labor tribunals and the
appellate court to apply the Labor Code provisions governing probationary employment in deciding
the present case.

Further, petitioners argue that even the Philippine Overseas Employment Act (POEA) Rules relative
to master employment contracts (Part III, Sec. 2 of the POEA Rules and Regulations) accord respect
to the "customs, practices, company policies and labor laws and legislation of the host country."

Finally, petitioners posit that assuming arguendo that Philippine labor laws are applicable, given that
the foreign principal is a government agency which is immune from suit, as in fact it did not sign any
document agreeing to be held jointly and solidarily liable, petitioner ATCI cannot likewise be held
liable, more so since the Ministry’s liability had not been judicially determined as jurisdiction was not
acquired over it.

The petition fails.

Petitioner ATCI, as a private recruitment agency, cannot evade responsibility for the money claims of
Overseas Filipino workers (OFWs) which it deploys abroad by the mere expediency of claiming that
its foreign principal is a government agency clothed with immunity from suit, or that such foreign
principal’s liability must first be established before it, as agent, can be held jointly and solidarily
liable.

In providing for the joint and solidary liability of private recruitment agencies with their foreign
principals, Republic Act No. 8042 precisely affords the OFWs with a recourse and assures them of
immediate and sufficient payment of what is due them. Skippers United Pacific v. Maguad8 explains:

. . . [T]he obligations covenanted in the recruitment agreement entered into by and between
the local agent and its foreign principal are not coterminous with the term of such
agreement so that if either or both of the parties decide to end the agreement, the responsibilities of
such parties towards the contracted employees under the agreement do not at all end, but the same
extends up to and until the expiration of the employment contracts of the employees recruited and
employed pursuant to the said recruitment agreement. Otherwise, this will render nugatory the
very purpose for which the law governing the employment of workers for foreign jobs abroad
was enacted. (emphasis supplied)

The imposition of joint and solidary liability is in line with the policy of the state to protect and
alleviate the plight of the working class.9 Verily, to allow petitioners to simply invoke the immunity
from suit of its foreign principal or to wait for the judicial determination of the foreign principal’s
liability before petitioner can be held liable renders the law on joint and solidary liability inutile.

As to petitioners’ contentions that Philippine labor laws on probationary employment are not
applicable since it was expressly provided in respondent’s employment contract, which she
voluntarily entered into, that the terms of her engagement shall be governed by prevailing Kuwaiti
Civil Service Laws and Regulations as in fact POEA Rules accord respect to such rules, customs
and practices of the host country, the same was not substantiated.

Indeed, a contract freely entered into is considered the law between the parties who can establish
stipulations, clauses, terms and conditions as they may deem convenient, including the laws which
they wish to govern their respective obligations, as long as they are not contrary to law, morals, good
customs, public order or public policy.

It is hornbook principle, however, that the party invoking the application of a foreign law has the
burden of proving the law, under the doctrine of processual presumption which, in this case,
petitioners failed to discharge. The Court’s ruling in EDI-Staffbuilders Int’l., v. NLRC10 illuminates:

In the present case, the employment contract signed by Gran specifically states that Saudi Labor
Laws will govern matters not provided for in the contract (e.g. specific causes for termination,
termination procedures, etc.). Being the law intended by the parties (lex loci intentiones) to apply to
the contract, Saudi Labor Laws should govern all matters relating to the termination of the
employment of Gran.

In international law, the party who wants to have a foreign law applied to a dispute or case has the
burden of proving the foreign law. The foreign law is treated as a question of fact to be properly
pleaded and proved as the judge or labor arbiter cannot take judicial notice of a foreign law. He is
presumed to know only domestic or forum law.

Unfortunately for petitioner, it did not prove the pertinent Saudi laws on the matter; thus, the
International Law doctrine of presumed-identity approach or processual presumption comes into
play. Where a foreign law is not pleaded or, even if pleaded, is not proved, the presumption is that
foreign law is the same as ours. Thus, we apply Philippine labor laws in determining the issues
presented before us. (emphasis and underscoring supplied)

The Philippines does not take judicial notice of foreign laws, hence, they must not only be alleged;
they must be proven. To prove a foreign law, the party invoking it must present a copy thereof and
comply with Sections 24 and 25 of Rule 132 of the Revised Rules of Court which reads:

SEC. 24. Proof of official record. — The record of public documents referred to in paragraph (a) of
Section 19, when admissible for any purpose, may be evidenced by an official publication thereof or
by a copy attested by the officer having the legal custody of the record, or by his deputy, and
accompanied, if the record is not kept in the Philippines, with a certificate that such officer has the
custody. If the office in which the record is kept is in a foreign country, the certificate may be made
by a secretary of the embassy or legation, consul general, consul, vice consul, or consular agent or
by any officer in the foreign service of the Philippines stationed in the foreign country in which the
record is kept, and authenticated by the seal of his office. (emphasis supplied)

SEC. 25. What attestation of copy must state. — Whenever a copy of a document or record is
attested for the purpose of the evidence, the attestation must state, in substance, that the copy is a
correct copy of the original, or a specific part thereof, as the case may be. The attestation must be
under the official seal of the attesting officer, if there be any, or if he be the clerk of a court having a
seal, under the seal of such court.

To prove the Kuwaiti law, petitioners submitted the following: MOA between respondent and the
Ministry, as represented by ATCI, which provides that the employee is subject to a probationary
period of one (1) year and that the host country’s Civil Service Laws and Regulations apply; a
translated copy11 (Arabic to English) of the termination letter to respondent stating that she did not
pass the probation terms, without specifying the grounds therefor, and a translated copy of the
certificate of termination,12 both of which documents were certified by Mr. Mustapha Alawi, Head of
the Department of Foreign Affairs-Office of Consular Affairs Inslamic Certification and Translation
Unit; and respondent’s letter13 of reconsideration to the Ministry, wherein she noted that in her first
eight (8) months of employment, she was given a rating of "Excellent" albeit it changed due to
changes in her shift of work schedule.

These documents, whether taken singly or as a whole, do not sufficiently prove that respondent was
validly terminated as a probationary employee under Kuwaiti civil service laws. Instead of
submitting a copy of the pertinent Kuwaiti labor laws duly authenticated and translated by
Embassy officials thereat, as required under the Rules, what petitioners submitted were mere
certifications attesting only to the correctness of the translations of the MOA and the
termination letter which does not prove at all that Kuwaiti civil service laws differ from
Philippine laws and that under such Kuwaiti laws, respondent was validly terminated. Thus
the subject certifications read:

xxxx

This is to certify that the herein attached translation/s from Arabic to English/Tagalog and or vice
versa was/were presented to this Office for review and certification and the same was/were found to
be in order. This Office, however, assumes no responsibility as to the contents of the
document/s.

This certification is being issued upon request of the interested party for whatever legal purpose it
may serve. (emphasis supplied) 1avvphi1

Respecting Ikdal’s joint and solidary liability as a corporate officer, the same is in order too following
the express provision of R.A. 8042 on money claims, viz:

SEC. 10. Money Claims.—Notwithstanding any provision of law to the contrary, the Labor Arbiters of
the National Labor Relations Commission (NLRC) shall have the original and exclusive jurisdiction to
hear and decide, within ninety (90) calendar days after the filing of the complaint, the claims arising
out of an employer-employee relationship or by virtue of any law or contract involving Filipino
workers for overseas deployment including claims for actual moral, exemplary and other forms of
damages.

The liability of the principal/employer and the recruitment/placement agency for any and all claims
under this section shall be joint and several. This provision shall be incorporated in the contract for
overseas employment and shall be a condition precedent for its approval. The performance bond to
be filed by the recruitment/placement agency, as provided by law, shall be answerable for all money
claims or damages that may be awarded to the workers. If the recruitment/placement agency is a
juridical being, the corporate officers and directors and partners as the case may be, shall
themselves be jointly and solidarily liable with the corporation or partnership for the aforesaid claims
and damages. (emphasis and underscoring supplied)

WHEREFORE, the petition is DENIED.

G.R. No. 138810 September 29, 2004

BATANGAS CATV, INC., petitioner,

vs.
THE COURT OF APPEALS, THE BATANGAS CITY SANGGUNIANG PANLUNGSOD and
BATANGAS CITY MAYOR, respondents.

DECISION

SANDOVAL-GUTIERREZ, J.:

In the late 1940s, John Walson, an appliance dealer in Pennsylvania, suffered a decline in the sale
of television (tv) sets because of poor reception of signals in his community. Troubled, he built an
antenna on top of a nearby mountain. Using coaxial cable lines, he distributed the tv signals from the
antenna to the homes of his customers. Walson’s innovative idea improved his sales and at the
same time gave birth to a new telecommunication system -- the Community Antenna Television
(CATV) or Cable Television.1

This technological breakthrough found its way in our shores and, like in its country of origin, it
spawned legal controversies, especially in the field of regulation. The case at bar is just another
occasion to clarify a shady area. Here, we are tasked to resolve the inquiry -- may a local
government unit (LGU) regulate the subscriber rates charged by CATV operators within its territorial
jurisdiction?

This is a petition for review on certiorari filed by Batangas CATV, Inc. (petitioner herein) against
the Sangguniang Panlungsod and the Mayor of Batangas City (respondents herein) assailing the
Court of Appeals (1) Decision2 dated February 12, 1999 and (2) Resolution3 dated May 26, 1999, in
CA-G.R. CV No. 52361.4 The Appellate Court reversed and set aside the Judgment5 dated October
29, 1995 of the Regional Trial Court (RTC), Branch 7, Batangas City in Civil Case No. 4254,6 holding
that neither of the respondents has the power to fix the subscriber rates of CATV operators, such
being outside the scope of the LGU’s power.

The antecedent facts are as follows:

On July 28, 1986, respondent Sangguniang Panlungsod enacted Resolution No.

2107 granting petitioner a permit to construct, install, and operate a CATV system in
Batangas City. Section 8 of the Resolution provides that petitioner is authorized to charge its
subscribers the maximum rates specified therein, "provided, however, that any increase of
rates shall be subject to the approval of the Sangguniang Panlungsod."8

Sometime in November 1993, petitioner increased its subscriber rates from ₱88.00 to ₱180.00 per
month. As a result, respondent Mayor wrote petitioner a letter9 threatening to cancel its permit unless
it secures the approval of respondent Sangguniang Panlungsod, pursuant to Resolution No. 210.

Petitioner then filed with the RTC, Branch 7, Batangas City, a petition for injunction docketed as Civil
Case No. 4254. It alleged that respondent Sangguniang Panlungsod has no authority to regulate the
subscriber rates charged by CATV operators because under Executive Order No. 205, the National
Telecommunications Commission (NTC) has the sole authority to regulate the CATV operation in the
Philippines.

On October 29, 1995, the trial court decided in favor of petitioner, thus:
 "WHEREFORE, as prayed for, the defendants, their representatives, agents, deputies or
other persons acting on their behalf or under their instructions, are hereby enjoined from
canceling plaintiff’s permit to operate a Cable Antenna Television (CATV) system in
the City of Batangas or its environs or in any manner, from interfering with the
authority and power of the National Telecommunications Commission to grant
franchises to operate CATV systems to qualified applicants, and the right of plaintiff in
fixing its service rates which needs no prior approval of the Sangguniang
Panlungsod of Batangas City.

The counterclaim of the plaintiff is hereby dismissed. No pronouncement as to costs.

IT IS SO ORDERED."10

The trial court held that the enactment of Resolution No. 210 by respondent violates the State’s
deregulation policy as set forth by then NTC Commissioner Jose Luis A. Alcuaz in his Memorandum
dated August 25, 1989. Also, it pointed out that the sole agency of the government which can
regulate CATV operation is the NTC, and that the LGUs cannot exercise regulatory power over it
without appropriate legislation.

Unsatisfied, respondents elevated the case to the Court of Appeals, docketed as CA-G.R. CV No.
52361.

On February 12, 1999, the Appellate Court reversed and set aside the trial court’s Decision,
ratiocinating as follows:

"Although the Certificate of Authority to operate a Cable Antenna Television (CATV)

System is granted by the National Telecommunications Commission pursuant to
Executive Order No. 205, this does not preclude the Sangguniang Panlungsod from
regulating the operation of the CATV in their locality under the powers vested upon it
by Batas Pambansa Bilang 337, otherwise known as the Local Government Code of
1983. Section 177 (now Section 457 paragraph 3 (ii) of Republic Act 7160) provides:

‘Section 177. Powers and Duties – The Sangguniang Panlungsod shall:

a) Enact such ordinances as may be necessary to carry into effect and

discharge the responsibilities conferred upon it by law, and such as shall be
necessary and proper to provide for health and safety, comfort and
convenience, maintain peace and order, improve the morals, and promote
the prosperity and general welfare of the community and the inhabitants
thereof, and the protection of property therein;

xxx

d) Regulate, fix the license fee for, and tax any business or profession being
carried on and exercised within the territorial jurisdiction of the city, except
travel agencies, tourist guides, tourist transports, hotels, resorts, de luxe
restaurants, and tourist inns of international standards which shall remain
under the licensing and regulatory power of the Ministry of Tourism which
shall exercise such authority without infringement on the taxing and
regulatory powers of the city government;’
 Under cover of the General Welfare Clause as provided in this section, Local Government
Units can perform just about any power that will benefit their constituencies. Thus, local
government units can exercise powers that are: (1) expressly granted; (2) necessarily
implied from the power that is expressly granted; (3) necessary, appropriate or incidental for
its efficient and effective governance; and (4) essential to the promotion of the general
welfare of their inhabitants. (Pimentel, The Local Government Code of 1991, p. 46)

Verily, the regulation of businesses in the locality is expressly provided in the Local
Government Code. The fixing of service rates is lawful under the General Welfare
Clause.

Resolution No. 210 granting appellee a permit to construct, install and operate a community
antenna television (CATV) system in Batangas City as quoted earlier in this decision,
authorized the grantee to impose charges which cannot be increased except upon approval
of the Sangguniang Bayan. It further provided that in case of violation by the grantee of the
terms and conditions/requirements specifically provided therein, the City shall have the right
to withdraw the franchise.

Appellee increased the service rates from EIGHTY EIGHT PESOS (₱88.00) to ONE
HUNDRED EIGHTY PESOS (₱180.00) (Records, p. 25) without the approval of
appellant. Such act breached Resolution No. 210 which gives appellant the right to
withdraw the permit granted to appellee."11

Petitioner filed a motion for reconsideration but was denied.12

Hence, the instant petition for review on certiorari anchored on the following assignments of error:

"I

THE COURT OF APPEALS ERRED IN HOLDING THAT THE GENERAL WELFARE

CLAUSE of the LOCAL GOVERNMENT CODE AUTHORIZES RESPONDENT
SANGGUNIANG PANLUNGSOD TO EXERCISE THE REGULATORY FUNCTION
SOLELY LODGED WITH THE NATIONAL TELECOMMUNICATIONS COMMISSION
UNDER EXECUTIVE ORDER NO. 205, INCLUDING THE AUTHORITY TO FIX AND/OR
APPROVE THE SERVICE RATES OF CATV OPERATORS; AND

II

THE COURT OF APPEALS ERRED IN REVERSING THE DECISION APPEALED FROM

AND DISMISSING PETITIONER’S COMPLAINT."13

Petitioner contends that while Republic Act No. 7160, the Local Government Code of 1991, extends
to the LGUs the general power to perform any act that will benefit their constituents, nonetheless, it
does not authorize them to regulate the CATV operation. Pursuant to E.O. No. 205, only the NTC
has the authority to regulate the CATV operation, including the fixing of subscriber rates.

Respondents counter that the Appellate Court did not commit any reversible error in rendering the
assailed Decision. First, Resolution No. 210 was enacted pursuant to Section 177(c) and (d)
of Batas Pambansa Bilang 337, the Local Government Code of 1983, which authorizes LGUs to
regulate businesses. The term "businesses" necessarily includes the CATV industry. And second,
Resolution No. 210 is in the nature of a contract between petitioner and respondents, it being a grant
to the former of a franchise to operate a CATV system. To hold that E.O. No. 205 amended its terms
would violate the constitutional prohibition against impairment of contracts.14

The petition is impressed with merit.

Earlier, we posed the question -- may a local government unit (LGU) regulate the subscriber rates
charged by CATV operators within its territorial jurisdiction? A review of pertinent laws and
jurisprudence yields a negative answer.

President Ferdinand E. Marcos was the first one to place the CATV industry under the regulatory
power of the national government.15 On June 11, 1978, he issued Presidential Decree (P.D.) No.
151216 establishing a monopoly of the industry by granting Sining Makulay, Inc., an exclusive
franchise to operate CATV system in any place within the Philippines. Accordingly, it terminated all
franchises, permits or certificates for the operation of CATV system previously granted by local
governments or by any instrumentality or agency of the national government.17 Likewise, it
prescribed the subscriber rates to be charged by Sining Makulay, Inc. to its customers.18

On July 21, 1979, President Marcos issued Letter of Instruction (LOI) No. 894 vesting upon the
Chairman of the Board of Communications direct supervision over the operations of Sining Makulay,
Inc. Three days after, he issued E.O. No. 54619 integrating the Board of Communications20 and the
Telecommunications Control Bureau21 to form a single entity to be known as the "National
Telecommunications Commission." Two of its assigned functions are:

"a. Issue Certificate of Public Convenience for the operation of communications utilities and
services, radio communications systems, wire or wireless telephone or telegraph systems,
radio and television broadcasting system and other similar public utilities;

b. Establish, prescribe and regulate areas of operation of particular operators of public

service communications; and determine and prescribe charges or rates pertinent to the
operation of such public utility facilities and services except in cases where charges or rates
are established by international bodies or associations of which the Philippines is a
participating member or by bodies recognized by the Philippine Government as the proper
arbiter of such charges or rates;"

Although Sining Makulay Inc.’s exclusive franchise had a life term of 25 years, it was cut short by the
advent of the 1986 Revolution. Upon President Corazon C. Aquino’s assumption of power, she
issued E.O. No. 20522 opening the CATV industry to all citizens of the Philippines. It mandated the
NTC to grant Certificates of Authority to CATV operators and to issue the necessary
implementing rules and regulations.

On September 9, 1997, President Fidel V. Ramos issued E.O. No. 43623 prescribing policy
guidelines to govern CATV operation in the Philippines. Cast in more definitive terms, it restated the
NTC’s regulatory powers over CATV operations, thus:

"SECTION 2. The regulation and supervision of the cable television industry in the
Philippines shall remain vested solely with the National Telecommunications
Commission (NTC).

SECTION 3. Only persons, associations, partnerships, corporations or cooperatives, granted

a Provisional Authority or Certificate of Authority by the Commission may install, operate and
maintain a cable television system or render cable television service within a service area."
Clearly, it has been more than two decades now since our national government, through the NTC,
assumed regulatory power over the CATV industry. Changes in the political arena did not alter the
trend. Instead, subsequent presidential issuances further reinforced the NTC’s power. Significantly,
President Marcos and President Aquino, in the exercise of their legislative power, issued P.D. No.
1512, E.O. No. 546 and E.O. No. 205. Hence, they have the force and effect of statutes or laws
passed by Congress.24 That the regulatory power stays with the NTC is also clear from President
Ramos’ E.O. No. 436 mandating that the regulation and supervision of the CATV industry shall
remain vested "solely" in the NTC. Black’s Law Dictionary defines "sole" as "without another or
others."25 The logical conclusion, therefore, is that in light of the above laws and E.O. No. 436,
the NTC exercises regulatory power over CATV operators to the exclusion of other bodies.

But, lest we be misunderstood, nothing herein should be interpreted as to strip LGUs of their general
power to prescribe regulations under the general welfare clause of the Local Government Code. It
must be emphasized that when E.O. No. 436 decrees that the "regulatory power" shall be vested
"solely" in the NTC, it pertains to the "regulatory power" over those matters which are peculiarly
within the NTC’s competence, such as, the: (1) determination of rates, (2) issuance of "certificates of
authority, (3) establishment of areas of operation, (4) examination and assessment of the legal,
technical and financial qualifications of applicant operators, (5) granting of permits for the use of
frequencies, (6) regulation of ownership and operation, (7) adjudication of issues arising from its
functions, and (8) other similar matters.26 Within these areas, the NTC reigns supreme as it
possesses the exclusive power to regulate -- a power comprising varied acts, such as "to fix,
establish, or control; to adjust by rule, method or established mode; to direct by rule or restriction; or
to subject to governing principles or laws."27

Coincidentally, respondents justify their exercise of regulatory power over petitioner’s CATV
operation under the general welfare clause of the Local Government Code of 1983. The Court of
Appeals sustained their stance.

There is no dispute that respondent Sangguniang Panlungsod, like other local legislative bodies, has
been empowered to enact ordinances and approve resolutions under the general welfare clause of
B.P. Blg. 337, the Local Government Code of 1983. That it continues to posses such power is clear
under the new law, R.A. No. 7160 (the Local Government Code of 1991). Section 16 thereof
provides:

"SECTION 16. 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 others, 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."

In addition, Section 458 of the same Code specifically mandates:

"SECTION 458. Powers, Duties, Functions and Compensation. — (a) The Sangguniang
Panlungsod, as the legislative body of the city, shall enact ordinances, approve resolutions
and appropriate funds for the general welfare of the city and its inhabitants pursuant to
Section 16 of this Code and in the proper exercise of the corporate powers of the city as
provided for under Section 22 of this Code, x x x:"
The general welfare clause is the delegation in statutory form of the police power of the State
to LGUs.28 Through this, LGUs may prescribe regulations to protect the lives, health, and property of
their constituents and maintain peace and order within their respective territorial jurisdictions.
Accordingly, we have upheld enactments providing, for instance, the regulation of gambling,29 the
occupation of rig drivers,30 the installation and operation of pinball machines,31 the maintenance and
operation of cockpits,32 the exhumation and transfer of corpses from public burial grounds,33 and the
operation of hotels, motels, and lodging houses34 as valid exercises by local legislatures of the police
power under the general welfare clause.

Like any other enterprise, CATV operation maybe regulated by LGUs under the general welfare
clause. This is primarily because the CATV system commits the indiscretion of crossing public
properties. (It uses public properties in order to reach subscribers.) The physical realities of
constructing CATV system – the use of public streets, rights of ways, the founding of structures, and
the parceling of large regions – allow an LGU a certain degree of regulation over CATV
operators.35 This is the same regulation that it exercises over all private enterprises within its
territory.

But, while we recognize the LGUs’ power under the general welfare clause, we cannot sustain
Resolution No. 210. We are convinced that respondents strayed from the well recognized limits of its
power. The flaws in Resolution No. 210 are: (1) it violates the mandate of existing laws and (2) it
violates the State’s deregulation policy over the CATV industry.

I.

Resolution No. 210 is an enactment of an LGU acting only as agent of the national legislature.
Necessarily, its act must reflect and conform to the will of its principal. To test its validity, we must
apply the particular requisites of a valid ordinance as laid down by the accepted principles governing
municipal corporations.36

Speaking for the Court in the leading case of United States vs. Abendan,37 Justice Moreland said:
"An ordinance enacted by virtue of the general welfare clause is valid, unless it contravenes the
fundamental law of the Philippine Islands, or an Act of the Philippine Legislature, or unless it is
against public policy, or is unreasonable, oppressive, partial, discriminating, or in derogation of
common right." In De la Cruz vs. Paraz,38 we laid the general rule "that ordinances passed by virtue
of the implied power found in the general welfare clause must be reasonable, consonant with the
general powers and purposes of the corporation, and not inconsistent with the laws or policy of the
State."

The apparent defect in Resolution No. 210 is that it contravenes E.O. No. 205 and E.O. No. 436
insofar as it permits respondent Sangguniang Panlungsod to usurp a power exclusively vested in the
NTC, i.e., the power to fix the subscriber rates charged by CATV operators. As earlier discussed, the
fixing of subscriber rates is definitely one of the matters within the NTC’s exclusive domain.

In this regard, it is appropriate to stress that where the state legislature has made provision for the
regulation of conduct, it has manifested its intention that the subject matter shall be fully covered by
the statute, and that a municipality, under its general powers, cannot regulate the same
conduct.39 In Keller vs. State,40 it was held that: "Where there is no express power in the charter of a
municipality authorizing it to adopt ordinances regulating certain matters which are specifically
covered by a general statute, a municipal ordinance, insofar as it attempts to regulate the subject
which is completely covered by a general statute of the legislature, may be rendered invalid. x x x
Where the subject is of statewide concern, and the legislature has appropriated the field and
declared the rule, its declaration is binding throughout the State." A reason advanced for this view is
that such ordinances are in excess of the powers granted to the municipal corporation.41

Since E.O. No. 205, a general law, mandates that the regulation of CATV operations shall be
exercised by the NTC, an LGU cannot enact an ordinance or approve a resolution in violation of the
said law.

It is a fundamental principle that municipal ordinances are inferior in status and subordinate to the
laws of the state. An ordinance in conflict with a state law of general character and statewide
application is universally held to be invalid.42 The principle is frequently expressed in the declaration
that municipal authorities, under a general grant of power, cannot adopt ordinances which infringe
the spirit of a state law or repugnant to the general policy of the state.43 In every power to pass
ordinances given to a municipality, there is an implied restriction that the ordinances shall be
consistent with the general law.44 In the language of Justice Isagani Cruz (ret.), this Court,
in Magtajas vs. Pryce Properties Corp., Inc.,45 ruled that:

"The rationale of the requirement that the ordinances should not contravene a statute is
obvious. Municipal governments are only agents of the national government. Local councils
exercise only delegated legislative powers conferred on them by Congress as the national
lawmaking body. The delegate cannot be superior to the principal or exercise powers higher
than those of the latter. It is a heresy to suggest that the local government units can undo the
acts of Congress, from which they have derived their power in the first place, and negate by
mere ordinance the mandate of the statute.

‘Municipal corporations owe their origin to, and derive their powers and rights wholly
from the legislature. It breathes into them the breath of life, without which they cannot
exist. As it creates, so it may destroy. As it may destroy, it may abridge and control.
Unless there is some constitutional limitation on the right, the legislature might, by a
single act, and if we can suppose it capable of so great a folly and so great a wrong,
sweep from existence all of the municipal corporations in the State, and the
corporation could not prevent it. We know of no limitation on the right so far as to the
corporation themselves are concerned. They are, so to phrase it, the mere tenants at
will of the legislature.’

This basic relationship between the national legislature and the local government units has
not been enfeebled by the new provisions in the Constitution strengthening the policy of local
autonomy. Without meaning to detract from that policy, we here confirm that Congress
retains control of the local government units although in significantly reduced degree now
than under our previous Constitutions. The power to create still includes the power to
destroy. The power to grant still includes the power to withhold or recall. True, there are
certain notable innovations in the Constitution, like the direct conferment on the local
government units of the power to tax, which cannot now be withdrawn by mere statute. By
and large, however, the national legislature is still the principal of the local
government units, which cannot defy its will or modify or violate it."

Respondents have an ingenious retort against the above disquisition. Their theory is that the
regulatory power of the LGUs is granted by R.A. No. 7160 (the Local Government Code of 1991), a
handiwork of the national lawmaking authority. They contend that R.A. No. 7160 repealed E.O. No.
205 (issued by President Aquino). Respondents’ argument espouses a bad precedent. To say that
LGUs exercise the same regulatory power over matters which are peculiarly within the NTC’s
competence is to promote a scenario of LGUs and the NTC locked in constant clash over the
appropriate regulatory measure on the same subject matter. LGUs must recognize that technical
matters concerning CATV operation are within the exclusive regulatory power of the NTC.

At any rate, we find no basis to conclude that R.A. No. 7160 repealed E.O. No. 205, either expressly
or impliedly. It is noteworthy that R.A. No. 7160 repealing clause, which painstakingly mentions the
specific laws or the parts thereof which are repealed, does not include E.O. No. 205, thus:

"SECTION 534. Repealing Clause. — (a) Batas Pambansa Blg. 337, otherwise known as the
Local Government Code." Executive Order No. 112 (1987), and Executive Order No. 319
(1988) are hereby repealed.

(b) Presidential Decree Nos. 684, 1191, 1508 and such other decrees, orders, instructions,
memoranda and issuances related to or concerning the barangay are hereby repealed.

(c) The provisions of Sections 2, 3, and 4 of Republic Act No. 1939 regarding hospital fund;
Section 3, a (3) and b (2) of Republic Act. No. 5447 regarding the Special Education Fund;
Presidential Decree No. 144 as amended by Presidential Decree Nos. 559 and 1741;
Presidential Decree No. 231 as amended; Presidential Decree No. 436 as amended by
Presidential Decree No. 558; and Presidential Decree Nos. 381, 436, 464, 477, 526, 632,
752, and 1136 are hereby repealed and rendered of no force and effect.

(d) Presidential Decree No. 1594 is hereby repealed insofar as it governs locally-funded
projects.

(e) The following provisions are hereby repealed or amended insofar as they are inconsistent
with the provisions of this Code: Sections 2, 16, and 29 of Presidential Decree No. 704;
Section 12 of Presidential Decree No. 87, as amended; Sections 52, 53, 66, 67, 68, 69, 70,
71, 72, 73, and 74 of Presidential Decree No. 463, as amended; and Section 16 of
Presidential Decree No. 972, as amended, and

(f) All general and special laws, acts, city charters, decrees, executive orders, proclamations
and administrative regulations, or part or parts thereof which are inconsistent with any of the
provisions of this Code are hereby repealed or modified accordingly."

Neither is there an indication that E.O. No. 205 was impliedly repealed by R.A. No. 7160. It is a
settled rule that implied repeals are not lightly presumed in the absence of a clear and unmistakable
showing of such intentions. In Mecano vs. Commission on Audit,46 we ruled:

"Repeal by implication proceeds on the premise that where a statute of later date clearly
reveals an intention on the part of the legislature to abrogate a prior act on the subject, that
intention must be given effect. Hence, before there can be a repeal, there must be a clear
showing on the part of the lawmaker that the intent in enacting the new law was to abrogate
the old one. The intention to repeal must be clear and manifest; otherwise, at least, as a
general rule, the later act is to be construed as a continuation of, and not a substitute for, the
first act and will continue so far as the two acts are the same from the time of the first
enactment."

As previously stated, E.O. No. 436 (issued by President Ramos) vests upon the NTC the power to
regulate the CATV operation in this country. So also Memorandum Circular No. 8-9-95, the
Implementing Rules and Regulations of R.A. No. 7925 (the "Public Telecommunications Policy Act
of the Philippines"). This shows that the NTC’s regulatory power over CATV operation is
continuously recognized.
It is a canon of legal hermeneutics that instead of pitting one statute against another in an inevitably
destructive confrontation, courts must exert every effort to reconcile them, remembering that both
laws deserve a becoming respect as the handiwork of coordinate branches of the government.47 On
the assumption of a conflict between E.O. No. 205 and R.A. No. 7160, the proper action is not to
uphold one and annul the other but to give effect to both by harmonizing them if possible. This
recourse finds application here. Thus, we hold that the NTC, under E.O. No. 205, has exclusive
jurisdiction over matters affecting CATV operation, including specifically the fixing of subscriber
rates, but nothing herein precludes LGUs from exercising its general power, under R.A. No. 7160, to
prescribe regulations to promote the health, morals, peace, education, good order or safety and
general welfare of their constituents. In effect, both laws become equally effective and mutually
complementary.

The grant of regulatory power to the NTC is easily understandable. CATV system is not a mere local
concern. The complexities that characterize this new technology demand that it be regulated by a
specialized agency. This is particularly true in the area of rate-fixing. Rate fixing involves a series of
technical operations.48 Consequently, on the hands of the regulatory body lies the ample discretion in
the choice of such rational processes as might be appropriate to the solution of its highly
complicated and technical problems. Considering that the CATV industry is so technical a field, we
believe that the NTC, a specialized agency, is in a better position than the LGU, to regulate it.
Notably, in United States vs. Southwestern Cable Co.,49 the US Supreme Court affirmed the Federal
Communications Commission’s (FCC’s) jurisdiction over CATV operation. The Court held that the
FCC’s authority over cable systems assures the preservation of the local broadcast service and an
equitable distribution of broadcast services among the various regions of the country.

II.

Resolution No. 210 violated the State’s deregulation policy.

Deregulation is the reduction of government regulation of business to permit freer markets and
competition.50 Oftentimes, the State, through its regulatory agencies, carries out a policy of
deregulation to attain certain objectives or to address certain problems. In the field of
telecommunications, it is recognized that many areas in the Philippines are still "unserved" or
"underserved." Thus, to encourage private sectors to venture in this field and be partners of the
government in stimulating the growth and development of telecommunications, the State promoted
the policy of deregulation.

In the United States, the country where CATV originated, the Congress observed, when it adopted
the Telecommunications Act of 1996, that there was a need to provide a pro-competitive,
deregulatory national policy framework designed to accelerate rapidly private sector deployment of
advanced telecommunications and information technologies and services to all Americans by
opening all telecommunications markets to competition. The FCC has adopted regulations to
implement the requirements of the 1996 Act and the intent of the Congress.

Our country follows the same policy. The fifth Whereas Clause of E.O. No. 436 states:

"WHEREAS, professionalism and self-regulation among existing operators, through a

nationally recognized cable television operator’s association, have enhanced the growth of
the cable television industry and must therefore be maintained along with minimal
reasonable government regulations;"

This policy reaffirms the NTC’s mandate set forth in the Memorandum dated August 25, 1989 of
Commissioner Jose Luis A. Alcuaz, to wit:
 "In line with the purpose and objective of MC 4-08-88, Cable Television System or
Community Antenna Television (CATV) is made part of the broadcast media to promote the
orderly growth of the Cable Television Industry it being in its developing stage. Being part of
the Broadcast Media, the service rates of CATV are likewise considered deregulated in
accordance with MC 06-2-81 dated 25 February 1981, the implementing guidelines for the
authorization and operation of Radio and Television Broadcasting stations/systems.

Further, the Commission will issue Provisional Authority to existing CATV operators to
authorize their operations for a period of ninety (90) days until such time that the
Commission can issue the regular Certificate of Authority."

When the State declared a policy of deregulation, the LGUs are bound to follow. To rule otherwise is
to render the State’s policy ineffective. Being mere creatures of the State, LGUs cannot defeat
national policies through enactments of contrary measures. Verily, in the case at bar, petitioner may
increase its subscriber rates without respondents’ approval.

At this juncture, it bears emphasizing that municipal corporations are bodies politic and corporate,
created not only as local units of local self-government, but as governmental agencies of the
state.51 The legislature, by establishing a municipal corporation, does not divest the State of any of
its sovereignty; absolve itself from its right and duty to administer the public affairs of the entire state;
or divest itself of any power over the inhabitants of the district which it possesses before the charter
was granted.52

Respondents likewise argue that E.O. No. 205 violates the constitutional prohibition against
impairment of contracts, Resolution No. 210 of Batangas City Sangguniang Panlungsod being a
grant of franchise to petitioner.

We are not convinced.

There is no law specifically authorizing the LGUs to grant franchises to operate CATV system.
Whatever authority the LGUs had before, the same had been withdrawn when President Marcos
issued P.D. No. 1512 "terminating all franchises, permits or certificates for the operation of CATV
system previously granted by local governments." Today, pursuant to Section 3 of E.O. No. 436,
"only persons, associations, partnerships, corporations or cooperatives granted a Provisional
Authority or Certificate of Authority by the NTC may install, operate and maintain a cable television
system or render cable television service within a service area." It is clear that in the absence of
constitutional or legislative authorization, municipalities have no power to grant
franchises.53 Consequently, the protection of the constitutional provision as to impairment of the
obligation of a contract does not extend to privileges, franchises and grants given by a municipality
in excess of its powers, or ultra vires.54

One last word. The devolution of powers to the LGUs, pursuant to the Constitutional mandate of
ensuring their autonomy, has bred jurisdictional tension between said LGUs and the State. LGUs
must be reminded that they merely form part of the whole. Thus, when the Drafters of the 1987
Constitution enunciated the policy of ensuring the autonomy of local governments,55 it was never
their intention to create an imperium in imperio and install an intra-sovereign political subdivision
independent of a single sovereign state.

WHEREFORE, the petition is GRANTED. The assailed Decision of the Court of Appeals dated
February 12, 1999 as well as its Resolution dated May 26, 1999 in CA-G.R. CV No. 52461, are
hereby REVERSED. The RTC Decision in Civil Case No. 4254 is AFFIRMED.
No pronouncement as to costs.

G.R. No. 118127 April 12, 2005

CITY OF MANILA, HON. ALFREDO S. LIM as the Mayor of the City of Manila, HON. JOSELITO
L. ATIENZA, in his capacity as Vice-Mayor of the City of Manila and Presiding Officer of the
City Council of Manila, HON. ERNESTO A. NIEVA, HON. GONZALO P. GONZALES, HON.
AVELINO S. CAILIAN, HON. ROBERTO C. OCAMPO, HON. ALBERTO DOMINGO, HON.
HONORIO U. LOPEZ, HON. FRANCISCO G. VARONA, JR., HON. ROMUALDO S. MARANAN,
HON. NESTOR C. PONCE, JR., HON. HUMBERTO B. BASCO, HON. FLAVIANO F.
CONCEPCION, JR., HON. ROMEO G. RIVERA, HON. MANUEL M. ZARCAL, HON. PEDRO S. DE
JESUS, HON. BERNARDITO C. ANG, HON. MANUEL L. QUIN, HON. JHOSEP Y. LOPEZ, HON.
CHIKA G. GO, HON. VICTORIANO A. MELENDEZ, HON. ERNESTO V.P. MACEDA, JR., HON.
ROLANDO P. NIETO, HON. DANILO V. ROLEDA, HON. GERINO A. TOLENTINO, JR., HON. MA.
PAZ E. HERRERA, HON. JOEY D. HIZON, HON. FELIXBERTO D. ESPIRITU, HON. KARLO Q.
BUTIONG, HON. ROGELIO P. DELA PAZ, HON. BERNARDO D. RAGAZA, HON. MA. CORAZON
R. CABALLES, HON. CASIMIRO C. SISON, HON. BIENVINIDO M. ABANTE, JR., HON. MA.
LOURDES M. ISIP, HON. ALEXANDER S. RICAFORT, HON. ERNESTO F. RIVERA, HON.
LEONARDO L. ANGAT, and HON. JOCELYN B. DAWIS, in their capacity as councilors of the
City of Manila, Petitioner,
vs.
HON. PERFECTO A.S. LAGUIO, JR., as Presiding Judge, RTC, Manila and MALATE TOURIST
DEVELOPMENT CORPORATION, Respondents.

DECISION

TINGA, J.:

I know only that what is moral is what you feel good after and what is immoral is what you
feel bad after.

Ernest Hermingway
Death in the Afternoon, Ch. 1

It is a moral and political axiom that any dishonorable act, if performed by oneself, is less
immoral than if performed by someone else, who would be well-intentioned in his dishonesty.

J. Christopher Gerald
Bonaparte in Egypt, Ch. I

The Court's commitment to the protection of morals is secondary to its fealty to the fundamental law
of the land. It is foremost a guardian of the Constitution but not the conscience of individuals. And if it
need be, the Court will not hesitate to "make the hammer fall, and heavily" in the words of Justice
Laurel, and uphold the constitutional guarantees when faced with laws that, though not lacking in
zeal to promote morality, nevertheless fail to pass the test of constitutionality.

The pivotal issue in this Petition1 under Rule 45 (then Rule 42) of the Revised Rules on Civil
Procedure seeking the reversal of the Decision2 in Civil Case No. 93-66511 of the Regional Trial
Court (RTC) of Manila, Branch 18 (lower court),3 is the validity of Ordinance No. 7783
(the Ordinance) of the City of Manila.4
The antecedents are as follows:

Private respondent Malate Tourist Development Corporation (MTDC) is a corporation engaged in the
business of operating hotels, motels, hostels and lodging houses.5 It built and opened Victoria Court
in Malate which was licensed as a motel although duly accredited with the Department of Tourism as
a hotel.6 On 28 June 1993, MTDC filed a Petition for Declaratory Relief with Prayer for a Writ of
Preliminary Injunction and/or Temporary Restraining Order7 (RTC Petition) with the lower court
impleading as defendants, herein petitioners City of Manila, Hon. Alfredo S. Lim (Lim), Hon. Joselito
L. Atienza, and the members of the City Council of Manila (City Council). MTDC prayed that
the Ordinance, insofar as it includes motels and inns as among its prohibited establishments, be
declared invalid and unconstitutional.8

Enacted by the City Council9 on 9 March 1993 and approved by petitioner City Mayor on 30 March
1993, the said Ordinance is entitled–

AN ORDINANCE PROHIBITING THE ESTABLISHMENT OR OPERATION OF

BUSINESSES PROVIDING CERTAIN FORMS OF AMUSEMENT, ENTERTAINMENT,
SERVICES AND FACILITIES IN THE ERMITA-MALATE AREA, PRESCRIBING
PENALTIES FOR VIOLATION THEREOF, AND FOR OTHER PURPOSES.10

The Ordinance is reproduced in full, hereunder:

SECTION 1. Any provision of existing laws and ordinances to the contrary

notwithstanding, no person, partnership, corporation or entity shall, in the Ermita-
Malate area bounded by Teodoro M. Kalaw Sr. Street in the North, Taft Avenue in the East,
Vito Cruz Street in the South and Roxas Boulevard in the West, pursuant to P.D. 499 be
allowed or authorized to contract and engage in, any business providing certain forms
of amusement, entertainment, services and facilities where women are used as tools
in entertainment and which tend to disturb the community, annoy the inhabitants, and
adversely affect the social and moral welfare of the community, such as but not limited
to:

1. Sauna Parlors

2. Massage Parlors

3. Karaoke Bars

4. Beerhouses

5. Night Clubs

6. Day Clubs

7. Super Clubs

8. Discotheques

9. Cabarets

10. Dance Halls

 11. Motels

12. Inns

SEC. 2 The City Mayor, the City Treasurer or any person acting in behalf of the said
officials are prohibited from issuing permits, temporary or otherwise, or from granting
licenses and accepting payments for the operation of business enumerated in the
preceding section.

SEC. 3. Owners and/or operator of establishments engaged in, or devoted to, the
businesses enumerated in Section 1 hereof are hereby given three (3) months from the
date of approval of this ordinance within which to wind up business operations or to
transfer to any place outside of the Ermita-Malate area or convert said businesses to
other kinds of business allowable within the area, such as but not limited to:

1. Curio or antique shop

2. Souvenir Shops

3. Handicrafts display centers

4. Art galleries

5. Records and music shops

6. Restaurants

7. Coffee shops

8. Flower shops

9. Music lounge and sing-along restaurants, with well-defined activities for

wholesome family entertainment that cater to both local and foreign clientele.

10. Theaters engaged in the exhibition, not only of motion pictures but also of cultural
shows, stage and theatrical plays, art exhibitions, concerts and the like.

11. Businesses allowable within the law and medium intensity districts as provided
for in the zoning ordinances for Metropolitan Manila, except new warehouse or open-
storage depot, dock or yard, motor repair shop, gasoline service station, light industry
with any machinery, or funeral establishments.

SEC. 4. Any person violating any provisions of this ordinance, shall upon conviction,
be punished by imprisonment of one (1) year or fine of FIVE THOUSAND (P5,000.00)
PESOS, or both, at the discretion of the Court, PROVIDED, that in case of juridical person,
the President, the General Manager, or person-in-charge of operation shall be liable thereof;
PROVIDED FURTHER, that in case of subsequent violation and conviction, the
premises of the erring establishment shall be closed and padlocked permanently.

SEC. 5. This ordinance shall take effect upon approval.

 Enacted by the City Council of Manila at its regular session today, March 9, 1993.

Approved by His Honor, the Mayor on March 30, 1993. (Emphasis supplied)

In the RTC Petition, MTDC argued that the Ordinance erroneously and improperly included in its
enumeration of prohibited establishments, motels and inns such as MTDC's Victoria Court
considering that these were not establishments for "amusement" or "entertainment" and they were
not "services or facilities for entertainment," nor did they use women as "tools for entertainment," and
neither did they "disturb the community," "annoy the inhabitants" or "adversely affect the social and
moral welfare of the community."11

MTDC further advanced that the Ordinance was invalid and unconstitutional for the following
reasons: (1) The City Council has no power to prohibit the operation of motels as Section 458 (a) 4
(iv)12 of the Local Government Code of 1991 (the Code) grants to the City Council only the power to
regulate the establishment, operation and maintenance of hotels, motels, inns, pension houses,
lodging houses and other similar establishments; (2) The Ordinance is void as it is violative of
Presidential Decree (P.D.) No. 49913 which specifically declared portions of the Ermita-Malate area as
a commercial zone with certain restrictions; (3) The Ordinance does not constitute a proper exercise
of police power as the compulsory closure of the motel business has no reasonable relation to the
legitimate municipal interests sought to be protected; (4) The Ordinance constitutes an ex post
facto law by punishing the operation of Victoria Court which was a legitimate business prior to its
enactment; (5) The Ordinance violates MTDC's constitutional rights in that: (a) it is confiscatory and
constitutes an invasion of plaintiff's property rights; (b) the City Council has no power to find as a fact
that a particular thing is a nuisance per se nor does it have the power to extrajudicially destroy it; and
(6) The Ordinance constitutes a denial of equal protection under the law as no reasonable basis
exists for prohibiting the operation of motels and inns, but not pension houses, hotels, lodging
houses or other similar establishments, and for prohibiting said business in the Ermita-Malate area
but not outside of this area.14

In their Answer15 dated 23 July 1993, petitioners City of Manila and Lim maintained that the City
Council had the power to "prohibit certain forms of entertainment in order to protect the social and
moral welfare of the community" as provided for in Section 458 (a) 4 (vii) of the Local Government
Code,16 which reads, thus:

Section 458. Powers, Duties, Functions and Compensation. (a) The sangguniang
panlungsod, as the legislative body of the city, shall enact ordinances, approve resolutions
and appropriate funds for the general welfare of the city and its inhabitants pursuant to
Section 16 of this Code and in the proper exercise of the corporate powers of the city as
provided for under Section 22 of this Code, and shall:

....

(4) Regulate activities relative to the use of land, buildings and structures within the city in
order to promote the general welfare and for said purpose shall:

....

(vii) Regulate the establishment, operation, and maintenance of any entertainment or

amusement facilities, including theatrical performances, circuses, billiard pools,
public dancing schools, public dance halls, sauna baths, massage parlors, and other
places for entertainment or amusement; regulate such other events or activities for
amusement or entertainment, particularly those which tend to disturb the community
 or annoy the inhabitants, or require the suspension or suppression of the same; or,
prohibit certain forms of amusement or entertainment in order to protect the social
and moral welfare of the community.

Citing Kwong Sing v. City of Manila,17 petitioners insisted that the power of regulation spoken of in the
above-quoted provision included the power to control, to govern and to restrain places of exhibition
and amusement.18

Petitioners likewise asserted that the Ordinance was enacted by the City Council of Manila to protect
the social and moral welfare of the community in conjunction with its police power as found in Article
III, Section 18(kk) of Republic Act No. 409,19 otherwise known as the Revised Charter of the City of
Manila (Revised Charter of Manila)20 which reads, thus:

ARTICLE III

THE MUNICIPAL BOARD

. . .

Section 18. Legislative powers. – The Municipal Board shall have the following legislative
powers:

. . .

(kk) 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
may 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.

Further, the petitioners noted, the Ordinance had the presumption of validity; hence, private
respondent had the burden to prove its illegality or unconstitutionality.21

Petitioners also maintained that there was no inconsistency between P.D. 499 and the Ordinance as
the latter simply disauthorized certain forms of businesses and allowed the Ermita-Malate area to
remain a commercial zone.22 The Ordinance, the petitioners likewise claimed, cannot be assailed
as ex post facto as it was prospective in operation.23 The Ordinance also did not infringe the equal
protection clause and cannot be denounced as class legislation as there existed substantial and real
differences between the Ermita-Malate area and other places in the City of Manila.24

On 28 June 1993, respondent Judge Perfecto A.S. Laguio, Jr. (Judge Laguio) issued an ex-parte
temporary restraining order against the enforcement of the Ordinance.25 And on 16 July 1993, again
in an intrepid gesture, he granted the writ of preliminary injunction prayed for by MTDC.26

After trial, on 25 November 1994, Judge Laguio rendered the assailed Decision, enjoining the
petitioners from implementing the Ordinance. The dispositive portion of said Decision reads:27
 WHEREFORE, judgment is hereby rendered declaring Ordinance No. 778[3], Series of
1993, of the City of Manila null and void, and making permanent the writ of preliminary
injunction that had been issued by this Court against the defendant. No costs.

SO ORDERED.28

Petitioners filed with the lower court a Notice of Appeal29 on 12 December 1994, manifesting that they
are elevating the case to this Court under then Rule 42 on pure questions of law.30

On 11 January 1995, petitioners filed the present Petition, alleging that the following errors were
committed by the lower court in its ruling: (1) It erred in concluding that the subject ordinance is ultra
vires, or otherwise, unfair, unreasonable and oppressive exercise of police power; (2) It erred in
holding that the questioned Ordinance contravenes P.D. 49931 which allows operators of all kinds of
commercial establishments, except those specified therein; and (3) It erred in declaring
the Ordinance void and unconstitutional.32

In the Petition and in its Memorandum,33 petitioners in essence repeat the assertions they made
before the lower court. They contend that the assailed Ordinance was enacted in the exercise of the
inherent and plenary power of the State and the general welfare clause exercised by local
government units provided for in Art. 3, Sec. 18 (kk) of the Revised Charter of Manila and
conjunctively, Section 458 (a) 4 (vii) of the Code.34 They allege that the Ordinance is a valid exercise
of police power; it does not contravene P.D. 499; and that it enjoys the presumption of validity.35

In its Memorandum36 dated 27 May 1996, private respondent maintains that the Ordinance is ultra
vires and that it is void for being repugnant to the general law. It reiterates that the
questioned Ordinance is not a valid exercise of police power; that it is violative of due process,
confiscatory and amounts to an arbitrary interference with its lawful business; that it is violative of the
equal protection clause; and that it confers on petitioner City Mayor or any officer unregulated
discretion in the execution of the Ordinance absent rules to guide and control his actions.

This is an opportune time to express the Court's deep sentiment and tenderness for the Ermita-
Malate area being its home for several decades. A long-time resident, the Court witnessed the area's
many turn of events. It relished its glory days and endured its days of infamy. Much as the Court
harks back to the resplendent era of the Old Manila and yearns to restore its lost grandeur, it
believes that the Ordinance is not the fitting means to that end. The Court is of the opinion, and so
holds, that the lower court did not err in declaring the Ordinance, as it did, ultra vires and therefore
null and void.

The Ordinance is so replete with constitutional infirmities that almost every sentence thereof violates
a constitutional provision. The prohibitions and sanctions therein transgress the cardinal rights of
persons enshrined by the Constitution. The Court is called upon to shelter these rights from attempts
at rendering them worthless.

The tests of a valid ordinance are well established. A long line of decisions 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 must be passed 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.37
Anent the first criterion, ordinances shall only be valid when they are not contrary to the Constitution
and to the laws.38 The Ordinance must satisfy two requirements: it must pass muster under the test of
constitutionality and the test of consistency with the prevailing laws. That ordinances should be
constitutional uphold the principle of the supremacy of the Constitution. The requirement that the
enactment must not violate existing law gives stress to the precept that local government units are
able to legislate only by virtue of their derivative legislative power, a delegation of legislative power
from the national legislature. The delegate cannot be superior to the principal or exercise powers
higher than those of the latter.39

This relationship between the national legislature and the local government units has not been
enfeebled by the new provisions in the Constitution strengthening the policy of local autonomy. The
national legislature is still the principal of the local government units, which cannot defy its will or
modify or violate it.40

The Ordinance was passed by the City Council in the exercise of its police power, an enactment of
the City Council acting as agent of Congress. Local government units, as agencies of the State, are
endowed with police power in order to effectively accomplish and carry out the declared objects of
their creation.41 This delegated police power is found in Section 16 of the Code, known as the general
welfare clause, viz:

SECTION 16. 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.

Local government units exercise police power through their respective legislative bodies; in this
case, the sangguniang panlungsod or the city council. The Code empowers the legislative bodies to
"enact ordinances, approve resolutions and appropriate funds for the general welfare of the
province/city/municipality and its inhabitants pursuant to Section 16 of the Code and in the proper
exercise of the corporate powers of the province/city/ municipality provided under the Code.42 The
inquiry in this Petition is concerned with the validity of the exercise of such delegated power.

The Ordinance contravenes

the Constitution

The police power of the City Council, however broad and far-reaching, is subordinate to the
constitutional limitations thereon; and is subject to the limitation that its exercise must be reasonable
and for the public good.43 In the case at bar, the enactment of the Ordinance was an invalid exercise
of delegated power as it is unconstitutional and repugnant to general laws.

The relevant constitutional provisions are the following:

SEC. 5. The maintenance of peace and order, the protection of life, liberty, and property, and
the promotion of the general welfare are essential for the enjoyment by all the people of the
blessings of democracy.44
 SEC. 14. The State recognizes the role of women in nation-building, and shall ensure the
fundamental equality before the law of women and men.45

SEC. 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 laws.46

Sec. 9. Private property shall not be taken for public use without just compensation.47

A. The Ordinance infringes

the Due Process Clause

The constitutional safeguard of due process is embodied in the fiat "(N)o person shall be deprived of
life, liberty or property without due process of law. . . ."48

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. This standard is aptly described as a responsiveness to the supremacy
of reason, obedience to the dictates of justice,49 and as such it is a limitation upon the exercise of the
police power.50

The purpose of the guaranty is to prevent governmental encroachment against the life, liberty and
property of individuals; to secure the individual from the arbitrary exercise of the powers of the
government, unrestrained by the established principles of private rights and distributive justice; to
protect property from confiscation by legislative enactments, from seizure, forfeiture, and destruction
without a trial and conviction by the ordinary mode of judicial procedure; and to secure to all persons
equal and impartial justice and the benefit of the general law.51

The guaranty serves as a protection against arbitrary regulation, and private corporations and
partnerships are "persons" within the scope of the guaranty insofar as their property is concerned.52

This clause has been interpreted as imposing two separate limits on government, usually called
"procedural due process" and "substantive due process."

Procedural due process, as the phrase implies, refers to the procedures that the government must
follow before it deprives a person of life, liberty, or property. Classic procedural due process issues
are concerned with what kind of notice and what form of hearing the government must provide when
it takes a particular action.53

Substantive due process, as that phrase connotes, asks whether the government has an adequate
reason for taking away a person's life, liberty, or property. In other words, substantive due process
looks to whether there is a sufficient justification for the government's action.54 Case law in the United
States (U.S.) tells us that whether there is such a justification depends very much on the level of
scrutiny used.55 For example, if a law is in an area where only rational basis review is applied,
substantive due process is met so long as the law is rationally related to a legitimate government
purpose. But if it is an area where strict scrutiny is used, such as for protecting fundamental rights,
then the government will meet substantive due process only if it can prove that the law is necessary
to achieve a compelling government purpose.56

The police power granted to local government units must always be exercised with utmost
observance of the rights of the people to due process and equal protection of the law. Such power
cannot be exercised whimsically, arbitrarily or despotically57 as its exercise is subject to a
qualification, limitation or restriction demanded by the respect and regard due to the prescription of
the fundamental law, particularly those forming part of the Bill of Rights. Individual rights, it bears
emphasis, may be adversely affected only to the extent that may fairly be required by the legitimate
demands of public interest or public welfare.58 Due process requires the intrinsic validity of the law in
interfering with the rights of the person to his life, liberty and property.59

Requisites for the valid exercise

of Police Power are not met

To successfully invoke the exercise of police power as the rationale for the enactment of
the Ordinance, and to free it from the imputation of constitutional infirmity, not only must it appear
that the interests of the public generally, as distinguished from those of a particular class, require an
interference with private rights, but the means adopted must be reasonably necessary for the
accomplishment of the purpose and not unduly oppressive upon individuals.60 It must be evident that
no other alternative for the accomplishment of the purpose less intrusive of private rights can
work. A reasonable relation must exist between the purposes of the police 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.61

Lacking a concurrence of these two requisites, the police measure shall be struck down as an
arbitrary intrusion into private rights62 a violation of the due process clause.

The Ordinance was enacted to address and arrest the social ills purportedly spawned by the
establishments in the Ermita-Malate area which are allegedly operated under the deceptive veneer
of legitimate, licensed and tax-paying nightclubs, bars, karaoke bars, girlie houses, cocktail lounges,
hotels and motels. Petitioners insist that even the Court in the case of Ermita-Malate Hotel and
Motel Operators Association, Inc. v. City Mayor of Manila63 had already taken judicial notice of the
"alarming increase in the rate of prostitution, adultery and fornication in Manila traceable in great part
to 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."64

The object of the Ordinance was, accordingly, the promotion and protection of the social and moral
values of the community. Granting for the sake of argument that the objectives of the Ordinance are
within the scope of the City Council's police powers, the means employed for the accomplishment
thereof were unreasonable and unduly oppressive.

It is undoubtedly one of the fundamental duties of the City of Manila to make all reasonable
regulations looking to the promotion of the moral and social values of the community. However, the
worthy aim of fostering public morals and the eradication of the community's social ills can be
achieved through means less restrictive of private rights; it can be attained by reasonable restrictions
rather than by an absolute prohibition. The closing down and transfer of businesses or their
conversion into businesses "allowed" under the Ordinance have no reasonable relation to the
accomplishment of its purposes. Otherwise stated, the prohibition of the enumerated establishments
will not per se protect and promote the social and moral welfare of the community; it will not in itself
eradicate the alluded social ills of prostitution, adultery, fornication nor will it arrest the spread of
sexual disease in Manila.

Conceding for the nonce that the Ermita-Malate area teems with houses of ill-repute and
establishments of the like which the City Council may lawfully prohibit,65 it is baseless and
insupportable to bring within that classification sauna parlors, massage parlors, karaoke bars, night
clubs, day clubs, super clubs, discotheques, cabarets, dance halls, motels and inns. This is not
warranted under the accepted definitions of these terms. The enumerated establishments are lawful
pursuits which are not per se offensive to the moral welfare of the community.

That these are used as arenas to consummate illicit sexual affairs and as venues to further the
illegal prostitution is of no moment. We lay stress on the acrid truth that sexual immorality, being a
human frailty, may take place in the most innocent of places that it may even take place in the
substitute establishments enumerated under Section 3 of the Ordinance. If the flawed logic of
the Ordinance were to be followed, in the remote instance that an immoral sexual act transpires in a
church cloister or a court chamber, we would behold the spectacle of the City of Manila ordering the
closure of the church or court concerned. Every house, building, park, curb, street or even vehicles
for that matter will not be exempt from the prohibition. Simply because there are no "pure" places
where there are impure men. Indeed, even the Scripture and the Tradition of Christians churches
continually recall the presence and universality of sin in man's history.66

The problem, it needs to be pointed out, is not the establishment, which by its nature cannot be said
to be injurious to the health or comfort of the community and which in itself is amoral, but the
deplorable human activity that may occur within its premises. While a motel may be used as a venue
for immoral sexual activity, it cannot for that reason alone be punished. It cannot be classified as a
house of ill-repute or as a nuisance per se on a mere likelihood or a naked assumption. If that were
so and if that were allowed, then the Ermita-Malate area would not only be purged of its supposed
social ills, it would be extinguished of its soul as well as every human activity, reprehensible or not,
in its every nook and cranny would be laid bare to the estimation of the authorities.

The Ordinance seeks to legislate morality but fails to address the core issues of morality. Try as
the Ordinance may to shape morality, it should not foster the illusion that it can make a moral man
out of it because immorality is not a thing, a building or establishment; it is in the hearts of men. The
City Council instead should regulate human conduct that occurs inside the establishments, but not to
the detriment of liberty and privacy which are covenants, premiums and blessings of democracy.

While petitioners' earnestness at curbing clearly objectionable social ills is commendable, they
unwittingly punish even the proprietors and operators of "wholesome," "innocent" establishments. In
the instant case, there is a clear invasion of personal or property rights, personal in the case of those
individuals desirous of owning, operating and patronizing those motels and property in terms of the
investments made and the salaries to be paid to those therein employed. If the City of Manila so
desires to put an end to prostitution, fornication and other social ills, it can instead impose
reasonable regulations such as daily inspections of the establishments for any violation of the
conditions of their licenses or permits; it may exercise its authority to suspend or revoke their
licenses for these violations;67 and it may even impose increased license fees. In other words, there
are other means to reasonably accomplish the desired end.

Means employed are

constitutionally infirm

The Ordinance disallows the operation of sauna parlors, massage parlors, karaoke bars,
beerhouses, night clubs, day clubs, super clubs, discotheques, cabarets, dance halls, motels and
inns in the Ermita-Malate area. In Section 3 thereof, owners and/or operators of the enumerated
establishments are given three (3) months from the date of approval of the Ordinance within which
"to wind up business operations or to transfer to any place outside the Ermita-Malate area or convert
said businesses to other kinds of business allowable within the area." Further, it states in Section 4
that in cases of subsequent violations of the provisions of the Ordinance, the "premises of the erring
establishment shall be closed and padlocked permanently."
It is readily apparent that the means employed by the Ordinance for the achievement of its purposes,
the governmental interference itself, infringes on the constitutional guarantees of a person's
fundamental right to liberty and property.

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."68 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.69

The U.S. Supreme Court in the case of Roth v. Board of Regents,70 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.

In another case, it also confirmed that liberty protected by the due process clause includes personal
decisions relating to marriage, procreation, contraception, family relationships, child rearing, and
education. In explaining the respect the Constitution demands for the autonomy of the person in
making these choices, the U.S. Supreme Court explained:

These matters, involving the most intimate and personal choices a person may make in a
lifetime, choices central to personal dignity and autonomy, are central to the liberty protected
by the Fourteenth Amendment. At the heart of liberty is the right to define one's own concept
of existence, of meaning, of universe, and of the mystery of human life. Beliefs about these
matters could not define the attributes of personhood where they formed under compulsion
of the State.71

Persons desirous to own, operate and patronize the enumerated establishments under Section 1 of
the Ordinance may seek autonomy for these purposes.

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.72 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.73 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.74

The concept of liberty compels respect for the individual whose claim to privacy and interference
demands respect. As the case of Morfe v. Mutuc,75 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.76

There is a great temptation to have an extended discussion on these civil liberties but the Court
chooses to exercise restraint and restrict itself to the issues presented when it should. The previous
pronouncements of the Court are not to be interpreted as a license for adults to engage in criminal
conduct. The reprehensibility of such conduct is not diminished. The Court only reaffirms and
guarantees their right to make this choice. Should they be prosecuted for their illegal conduct, they
should suffer the consequences of the choice they have made. That, ultimately, is their choice.

Modality employed is
unlawful taking

In addition, the Ordinance is unreasonable and oppressive as it substantially divests the respondent
of the beneficial use of its property.77 The Ordinance in Section 1 thereof forbids the running of the
enumerated businesses in the Ermita-Malate area and in Section 3 instructs its owners/operators to
wind up business operations or to transfer outside the area or convert said businesses into allowed
businesses. An ordinance which permanently restricts the use of property that it can not be used for
any reasonable purpose goes beyond regulation and must be recognized as a taking of the property
without just compensation.78 It is intrusive and violative of the private property rights of individuals.

The Constitution expressly provides in Article III, Section 9, that "private property shall not be taken
for public use without just compensation." The provision is the most important protection of property
rights in the Constitution. This is a restriction on the general power of the government to take
property. The constitutional provision is about ensuring that the government does not confiscate the
property of some to give it to others. In part too, it is about loss spreading. If the government takes
away a person's property to benefit society, then society should pay. The principal purpose of the
guarantee is "to bar the Government from forcing some people alone to bear public burdens which,
in all fairness and justice, should be borne by the public as a whole.79

There are two different types of taking that can be identified. A "possessory" taking occurs when the
government confiscates or physically occupies property. A "regulatory" taking occurs when the
government's regulation leaves no reasonable economically viable use of the property.80

In the landmark case of Pennsylvania Coal v. Mahon,81 it was held that a taking also could be found if
government regulation of the use of property went "too far." When regulation reaches a certain
magnitude, in most if not in all cases there must be an exercise of eminent domain and
compensation to support the act. While property may be regulated to a certain extent, if regulation
goes too far it will be recognized as a taking.82

No formula or rule can be devised to answer the questions of what is too far and when regulation
becomes a taking. In Mahon, Justice Holmes recognized that it was "a question of degree and
therefore cannot be disposed of by general propositions." On many other occasions as well, the U.S.
Supreme Court has said that the issue of when regulation constitutes a taking is a matter of
considering the facts in each case. The Court asks whether justice and fairness require that the
economic loss caused by public action must be compensated by the government and thus borne by
the public as a whole, or whether the loss should remain concentrated on those few persons subject
to the public action.83

What is crucial in judicial consideration of regulatory takings is that government regulation is a taking
if it leaves no reasonable economically viable use of property in a manner that interferes with
reasonable expectations for use.84 A regulation that permanently denies all economically beneficial or
productive use of land is, from the owner's point of view, equivalent to a "taking" unless principles of
nuisance or property law that existed when the owner acquired the land make the use
prohibitable.85 When the owner of real property has been called upon to sacrifice all economically
beneficial uses in the name of the common good, that is, to leave his property economically idle, he
has suffered a taking.86

A regulation which denies all economically beneficial or productive use of land will require
compensation under the takings clause. Where a regulation places limitations on land that fall short
of eliminating all economically beneficial use, a taking nonetheless may have occurred, depending
on a complex of factors including the regulation's economic effect on the landowner, the extent to
which the regulation interferes with reasonable investment-backed expectations and the character of
government action. These inquiries are informed by the purpose of the takings clause which is to
prevent the government from forcing some people alone to bear public burdens which, in all fairness
and justice, should be borne by the public as a whole.87

A restriction on use of property may also constitute a "taking" if not reasonably necessary to the
effectuation of a substantial public purpose or if it has an unduly harsh impact on the distinct
investment-backed expectations of the owner.88

The Ordinance gives the owners and operators of the "prohibited" establishments three (3) months
from its approval within which to "wind up business operations or to transfer to any place outside of
the Ermita-Malate area or convert said businesses to other kinds of business allowable within the
area." The directive to "wind up business operations" amounts to a closure of the establishment, a
permanent deprivation of property, and is practically confiscatory. Unless the owner converts his
establishment to accommodate an "allowed" business, the structure which housed the previous
business will be left empty and gathering dust. Suppose he transfers it to another area, he will
likewise leave the entire establishment idle. Consideration must be given to the substantial amount
of money invested to build the edifices which the owner reasonably expects to be returned within a
period of time. It is apparent that the Ordinance leaves no reasonable economically viable use of
property in a manner that interferes with reasonable expectations for use.

The second and third options to transfer to any place outside of the Ermita-Malate area or to
convert into allowed businessesare confiscatory as well. The penalty of permanent closure in
cases of subsequent violations found in Section 4 of the Ordinance is also equivalent to a "taking" of
private property.
The second option instructs the owners to abandon their property and build another one outside the
Ermita-Malate area. In every sense, it qualifies as a taking without just compensation with an
additional burden imposed on the owner to build another establishment solely from his coffers. The
proffered solution does not put an end to the "problem," it merely relocates it. Not only is this
impractical, it is unreasonable, onerous and oppressive. The conversion into allowed enterprises is
just as ridiculous. How may the respondent convert a motel into a restaurant or a coffee shop, art
gallery or music lounge without essentially destroying its property? This is a taking of private
property without due process of law, nay, even without compensation.

The penalty of closure likewise constitutes unlawful taking that should be compensated by the
government. The burden on the owner to convert or transfer his business, otherwise it will be closed
permanently after a subsequent violation should be borne by the public as this end benefits them as
a whole.

Petitioners cannot take refuge in classifying the measure as a zoning ordinance. A zoning ordinance,
although a valid exercise of police power, which limits a "wholesome" property to a use which can
not reasonably be made of it constitutes the taking of such property without just
compensation. Private property which is not noxious nor intended for noxious purposes may not, by
zoning, be destroyed without compensation. Such principle finds no support in the principles of
justice as we know them. The police powers of local government units which have always received
broad and liberal interpretation cannot be stretched to cover this particular taking.

Distinction should be made between destruction from necessity and eminent domain. It needs
restating that the property taken in the exercise of police power is destroyed because it is noxious or
intended for a noxious purpose while the property taken under the power of eminent domain is
intended for a public use or purpose and is therefore "wholesome."89 If it be of public benefit that a
"wholesome" property remain unused or relegated to a particular purpose, then certainly the public
should bear the cost of reasonable compensation for the condemnation of private property for public
use.90

Further, the Ordinance fails to set up any standard to guide or limit the petitioners' actions. It in no
way controls or guides the discretion vested in them. It provides no definition of the establishments
covered by it and it fails to set forth the conditions when the establishments come within its ambit of
prohibition. The Ordinance confers upon the mayor arbitrary and unrestricted power to close down
establishments. Ordinances such as this, which make possible abuses in its execution, depending
upon no conditions or qualifications whatsoever other than the unregulated arbitrary will of the city
authorities as the touchstone by which its validity is to be tested, are unreasonable and invalid.
The Ordinance should have established a rule by which its impartial enforcement could be secured.91

Ordinances placing restrictions upon the lawful use of property must, in order to be valid and
constitutional, specify the rules and conditions to be observed and conduct to avoid; and must not
admit of the exercise, or of an opportunity for the exercise, of unbridled discretion by the law
enforcers in carrying out its provisions.92

Thus, in Coates v. City of Cincinnati,93 as cited in People v. Nazario,94 the U.S. Supreme Court
struck down an ordinance that had made it illegal for "three or more persons to assemble on any
sidewalk and there conduct themselves in a manner annoying to persons passing by." The
ordinance was nullified as it imposed no standard at all "because one may never know in advance
what 'annoys some people but does not annoy others.' "

Similarly, the Ordinance does not specify the standards to ascertain which establishments "tend to
disturb the community," "annoy the inhabitants," and "adversely affect the social and moral welfare
of the community." The cited case supports the nullification of the Ordinance for lack of
comprehensible standards to guide the law enforcers in carrying out its provisions.

Petitioners cannot therefore order the closure of the enumerated establishments without infringing
the due process clause. These lawful establishments may be regulated, but not prevented from
carrying on their business. This is a sweeping exercise of police power that is a result of a lack of
imagination on the part of the City Council and which amounts to an interference into personal and
private rights which the Court will not countenance. In this regard, we take a resolute stand to uphold
the constitutional guarantee of the right to liberty and property.

Worthy of note is an example derived from the U.S. of a reasonable regulation which is a far cry from
the ill-considered Ordinance enacted by the City Council.

In FW/PBS, INC. v. Dallas,95 the city of Dallas adopted a comprehensive ordinance regulating
"sexually oriented businesses," which are defined to include adult arcades, bookstores, video stores,
cabarets, motels, and theaters as well as escort agencies, nude model studio and sexual encounter
centers. Among other things, the ordinance required that such businesses be licensed. A group of
motel owners were among the three groups of businesses that filed separate suits challenging the
ordinance. The motel owners asserted that the city violated the due process clause by failing to
produce adequate support for its supposition that renting room for fewer than ten (10) hours resulted
in increased crime and other secondary effects. They likewise argued than the ten (10)-hour
limitation on the rental of motel rooms placed an unconstitutional burden on the right to freedom of
association. Anent the first contention, the U.S. Supreme Court held that the reasonableness of the
legislative judgment combined with a study which the city considered, was adequate to support the
city's determination that motels permitting room rentals for fewer than ten (10 ) hours should be
included within the licensing scheme. As regards the second point, the Court held that limiting motel
room rentals to ten (10) hours will have no discernible effect on personal bonds as those bonds that
are formed from the use of a motel room for fewer than ten (10) hours are not those that have played
a critical role in the culture and traditions of the nation by cultivating and transmitting shared ideals
and beliefs.

The ordinance challenged in the above-cited case merely regulated the targeted businesses. It
imposed reasonable restrictions; hence, its validity was upheld.

The case of Ermita Malate Hotel and Motel Operators Association, Inc. v. City Mayor of Manila,96 it
needs pointing out, is also different from this case in that what was involved therein was a measure
which regulated the mode in which motels may conduct business in order to put an end to practices
which could encourage vice and immorality. Necessarily, there was no valid objection on due
process or equal protection grounds as the ordinance did not prohibit motels. The Ordinance in this
case however is not a regulatory measure but is an exercise of an assumed power to prohibit.97

The foregoing premises show that the Ordinance is an unwarranted and unlawful curtailment of
property and personal rights of citizens. For being unreasonable and an undue restraint of trade, it
cannot, even under the guise of exercising police power, be upheld as valid.

B. The Ordinance violates Equal

Protection Clause

Equal protection requires that all persons or things similarly situated should be treated alike, both as
to rights conferred and responsibilities imposed. Similar subjects, in other words, should not be
treated differently, so as to give undue favor to some and unjustly discriminate against others.98 The
guarantee means that no person or class of persons shall be denied the same protection of laws
which is enjoyed by other persons or other classes in like circumstances.99 The "equal protection of
the laws is a pledge of the protection of equal laws."100 It limits governmental discrimination. The
equal protection clause extends to artificial persons but only insofar as their property is concerned.101

The Court has explained the scope of the equal protection clause in this wise:

… What does it signify? To quote from J.M. Tuason & Co. v. Land Tenure Administration:
"The ideal situation is for the law's benefits to be available to all, that none be placed outside
the sphere of its coverage. Only thus could chance and favor be excluded and the affairs of
men governed by that serene and impartial uniformity, which is of the very essence of the
idea of law." There is recognition, however, in the opinion that what in fact exists "cannot
approximate the ideal. Nor is the law susceptible to the reproach that it does not take into
account the realities of the situation. The constitutional guarantee then is not to be given a
meaning that disregards what is, what does in fact exist. To assure that the general welfare
be promoted, which is the end of law, a regulatory measure may cut into the rights to liberty
and property. Those adversely affected may under such circumstances invoke the equal
protection clause only if they can show that the governmental act assailed, far from being
inspired by the attainment of the common weal was prompted by the spirit of hostility, or at
the very least, discrimination that finds no support in reason." Classification is thus not ruled
out, it being sufficient to quote from the Tuason decision anew "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 looked upon in terms of burden or charges,
those that fall within a class should be treated in the same fashion, whatever restrictions cast
on some in the group equally binding on the rest.102

Legislative bodies are allowed to classify the subjects of legislation. If the classification is
reasonable, the law may operate only on some and not all of the people without violating the equal
protection clause.103 The classification must, as an indispensable requisite, not be arbitrary. 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.

4) It must apply equally to all members of the class.104

In the Court's view, there are no substantial distinctions between motels, inns, pension houses,
hotels, lodging houses or other similar establishments. By definition, all are commercial
establishments providing lodging and usually meals and other services for the public. No reason
exists for prohibiting motels and inns but not pension houses, hotels, lodging houses or other similar
establishments. The classification in the instant case is invalid as similar subjects are not similarly
treated, both as to rights conferred and obligations imposed. It is arbitrary as it does not rest on
substantial distinctions bearing a just and fair relation to the purpose of the Ordinance.

The Court likewise cannot see the logic for prohibiting the business and operation of motels in the
Ermita-Malate area but not outside of this area. A noxious establishment does not become any less
noxious if located outside the area.
The standard "where women are used as tools for entertainment" is also discriminatory as
prostitutionone of the hinted ills the Ordinance aims to banishis not a profession exclusive to
women. Both men and women have an equal propensity to engage in prostitution. It is not any less
grave a sin when men engage in it. And why would the assumption that there is an ongoing immoral
activity apply only when women are employed and be inapposite when men are in harness? This
discrimination based on gender violates equal protection as it is not substantially related to important
government objectives.105 Thus, the discrimination is invalid.

Failing the test of constitutionality, the Ordinance likewise failed to pass the test of consistency with
prevailing laws.

C. The Ordinance is repugnant

to general laws; it is ultra vires

The Ordinance is in contravention of the Code as the latter merely empowers local government units
to regulate, and not prohibit, the establishments enumerated in Section 1 thereof.

The power of the City Council to regulate by ordinances the establishment, operation, and
maintenance of motels, hotels and other similar establishments is found in Section 458 (a) 4 (iv),
which provides that:

Section 458. Powers, Duties, Functions and Compensation. (a) The sangguniang
panlungsod, as the legislative body of the city, shall enact ordinances, approve resolutions
and appropriate funds for the general welfare of the city and its inhabitants pursuant to
Section 16 of this Code and in the proper exercise of the corporate powers of the city as
provided for under Section 22 of this Code, and shall:

. . .

(4) Regulate activities relative to the use of land, buildings and structures within the city in
order to promote the general welfare and for said purpose shall:

. . .

(iv) 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 . . . .

While its power to regulate the establishment, operation and maintenance of any entertainment or
amusement facilities, and to prohibit certain forms of amusement or entertainment is provided under
Section 458 (a) 4 (vii) of the Code, which reads as follows:

Section 458. Powers, Duties, Functions and Compensation. (a) The sangguniang
panlungsod, as the legislative body of the city, shall enact ordinances, approve resolutions
and appropriate funds for the general welfare of the city and its inhabitants pursuant to
Section 16 of this Code and in the proper exercise of the corporate powers of the city as
provided for under Section 22 of this Code, and shall:

. . .
 (4) Regulate activities relative to the use of land, buildings and structures within the city in
order to promote the general welfare and for said purpose shall:

. . .

(vii) Regulate the establishment, operation, and maintenance of any entertainment or

amusement facilities, including theatrical performances, circuses, billiard pools,
public dancing schools, public dance halls, sauna baths, massage parlors, and other
places for entertainment or amusement; regulate such other events or activities for
amusement or entertainment, particularly those which tend to disturb the community
or annoy the inhabitants, or require the suspension or suppression of the same; or,
prohibit certain forms of amusement or entertainment in order to protect the social
and moral welfare of the community.

Clearly, with respect to cafes, restaurants, beerhouses, hotels, motels, inns, pension houses,
lodging houses, and other similar establishments, the only power of the City Council to legislate
relative thereto is to regulate them to promote the general welfare. The Code still withholds from
cities the power to suppress and prohibit altogether the establishment, operation and maintenance of
such establishments. It is well to recall the rulings of the Court in Kwong Sing v. City of Manila106 that:

The word "regulate," as used in subsection (l), section 2444 of the Administrative Code,
means and includes the power to control, to govern, and to restrain; but "regulate" should not
be construed as synonymous with "suppress" or "prohibit." Consequently, under the power to
regulate laundries, the municipal authorities could make proper police regulations as to the
mode in which the employment or business shall be exercised.107

And in People v. Esguerra,108 wherein the Court nullified an ordinance of the Municipality of Tacloban
which prohibited the selling, giving and dispensing of liquor ratiocinating that the municipality is
empowered only to regulate the same and not prohibit. The Court therein declared that:

(A)s a general rule when a municipal corporation is specifically given authority or power to
regulate or to license and regulate the liquor traffic, power to prohibit is impliedly withheld.109

These doctrines still hold contrary to petitioners' assertion110 that they were modified by the Code
vesting upon City Councils prohibitory powers.

Similarly, the City Council exercises regulatory powers over public dancing schools, public dance
halls, sauna baths, massage parlors, and other places for entertainment or amusement as found in
the first clause of Section 458 (a) 4 (vii). Its powers to regulate, suppress and suspend "such other
events or activities for amusement or entertainment, particularly those which tend to disturb the
community or annoy the inhabitants" and to "prohibit certain forms of amusement or entertainment in
order to protect the social and moral welfare of the community" are stated in the second and third
clauses, respectively of the same Section. The several powers of the City Council as provided in
Section 458 (a) 4 (vii) of the Code, it is pertinent to emphasize, are separated by semi-colons (;), the
use of which indicates that the clauses in which these powers are set forth are independent of each
other albeit closely related to justify being put together in a single enumeration or paragraph.111 These
powers, therefore, should not be confused, commingled or consolidated as to create a
conglomerated and unified power of regulation, suppression and prohibition.112

The Congress unequivocably specified the establishments and forms of amusement or

entertainment subject to regulation among which are beerhouses, hotels, motels, inns, pension
houses, lodging houses, and other similar establishments (Section 458 (a) 4 (iv)), public dancing
schools, public dance halls, sauna baths, massage parlors, and other places for entertainment or
amusement (Section 458 (a) 4 (vii)). This enumeration therefore cannot be included as among "other
events or activities for amusement or entertainment, particularly those which tend to disturb the
community or annoy the inhabitants" or "certain forms of amusement or entertainment" which the
City Council may suspend, suppress or prohibit.

The rule is that the City Council has only such powers as are expressly granted to it and those which
are necessarily implied or incidental to the exercise thereof. By reason of its limited powers and the
nature thereof, said powers are to be construed strictissimi juris and any doubt or ambiguity arising
out of the terms used in granting said powers must be construed against the City
Council.113 Moreover, it is a general rule in statutory construction that the express mention of one
person, thing, or consequence is tantamount to an express exclusion of all others. Expressio unius
est exclusio alterium. This maxim is based upon the rules of logic and the natural workings of human
mind. It is particularly applicable in the construction of such statutes as create new rights or
remedies, impose penalties or punishments, or otherwise come under the rule of strict
construction.114

The argument that the City Council is empowered to enact the Ordinance by virtue of the general
welfare clause of the Code and of Art. 3, Sec. 18 (kk) of the Revised Charter of Manila is likewise
without merit. On the first point, the ruling of the Court in People v. Esguerra,115 is instructive. It held
that:

The powers conferred upon a municipal council in the general welfare clause, or section
2238 of the Revised Administrative Code, refers to matters not covered by the other
provisions of the same Code, and therefore it can not be applied to intoxicating liquors, for
the power to regulate the selling, giving away and dispensing thereof is granted specifically
by section 2242 (g) to municipal councils. To hold that, under the general power granted by
section 2238, a municipal council may enact the ordinance in question, notwithstanding the
provision of section 2242 (g), would be to make the latter superfluous and nugatory, because
the power to prohibit, includes the power to regulate, the selling, giving away and dispensing
of intoxicating liquors.

On the second point, it suffices to say that the Code being a later expression of the legislative will
must necessarily prevail and override the earlier law, the Revised Charter of Manila. Legis
posteriores priores contrarias abrogant, or later statute repeals prior ones which are repugnant
thereto. As between two laws on the same subject matter, which are irreconcilably inconsistent, that
which is passed later prevails, since it is the latest expression of legislative will.116 If there is an
inconsistency or repugnance between two statutes, both relating to the same subject matter, which
cannot be removed by any fair and reasonable method of interpretation, it is the latest expression of
the legislative will which must prevail and override the earlier.117

Implied repeals are those which take place when a subsequently enacted law contains provisions
contrary to those of an existing law but no provisions expressly repealing them. Such repeals have
been divided into two general classes: those which occur where an act is so inconsistent or
irreconcilable with an existing prior act that only one of the two can remain in force and those which
occur when an act covers the whole subject of an earlier act and is intended to be a substitute
therefor. The validity of such a repeal is sustained on the ground that the latest expression of the
legislative will should prevail.118

In addition, Section 534(f) of the Code states that "All general and special laws, acts, city charters,
decrees, executive orders, proclamations and administrative regulations, or part or parts thereof
which are inconsistent with any of the provisions of this Code are hereby repealed or modified
accordingly." Thus, submitting to petitioners' interpretation that the Revised Charter of Manila
empowers the City Council to prohibit motels, that portion of the Charter stating such must be
considered repealed by the Code as it is at variance with the latter's provisions granting the City
Council mere regulatory powers.

It is well to point out that petitioners also cannot seek cover under the general welfare clause
authorizing the abatement of nuisances without judicial proceedings. That tenet applies to a
nuisance per se, or one which affects the immediate safety of persons and property and may be
summarily abated under the undefined law of necessity. It can not be said that motels are injurious
to the rights of property, health or comfort of the community. It is a legitimate business. If it be a
nuisance per accidens it may be so proven in a hearing conducted for that purpose. A motel is
not per se a nuisance warranting its summary abatement without judicial intervention.119

Notably, the City Council was conferred powers to prevent and prohibit certain activities and
establishments in another section of the Code which is reproduced as follows:

Section 458. Powers, Duties, Functions and Compensation. (a) The sangguniang
panlungsod, as the legislative body of the city, shall enact ordinances, approve resolutions
and appropriate funds for the general welfare of the city and its inhabitants pursuant to
Section 16 of this Code and in the proper exercise of the corporate powers of the city as
provided for under Section 22 of this Code, and shall:

(1) Approve ordinances and pass resolutions necessary for an efficient and effective city
government, and in this connection, shall:

. . .

(v) Enact ordinances intended to prevent, suppress and impose appropriate penalties for
habitual drunkenness in public places, vagrancy, mendicancy, prostitution, establishment
and maintenance of houses of ill repute, gambling and other prohibited games of
chance, fraudulent devices and ways to obtain money or property, drug addiction,
maintenance of drug dens, drug pushing, juvenile delinquency, the printing, distribution or
exhibition of obscene or pornographic materials or publications, and such other activities
inimical to the welfare and morals of the inhabitants of the city;

. . .

If it were the intention of Congress to confer upon the City Council the power to prohibit the
establishments enumerated in Section 1 of the Ordinance, it would have so declared in uncertain
terms by adding them to the list of the matters it may prohibit under the above-quoted Section.
The Ordinance now vainly attempts to lump these establishments with houses of ill-repute and
expand the City Council's powers in the second and third clauses of Section 458 (a) 4 (vii) of the
Code in an effort to overreach its prohibitory powers. It is evident that these establishments may only
be regulated in their establishment, operation and maintenance.

It is important to distinguish the punishable activities from the establishments themselves. That these
establishments are recognized legitimate enterprises can be gleaned from another Section of the
Code. Section 131 under the Title on Local Government Taxation expressly mentioned proprietors or
operators of massage clinics, sauna, Turkish and Swedish baths, hotels, motels and lodging houses
as among the "contractors" defined in paragraph (h) thereof. The same Section also defined
"amusement" as a "pleasurable diversion and entertainment," "synonymous to relaxation, avocation,
pastime or fun;" and "amusement places" to include "theaters, cinemas, concert halls, circuses and
other places of amusement where one seeks admission to entertain oneself by seeing or viewing the
show or performances." Thus, it can be inferred that the Code considers these establishments as
legitimate enterprises and activities. It is well to recall the maxim reddendo singula singulis which
means that words in different parts of a statute must be referred to their appropriate connection,
giving to each in its place, its proper force and effect, and, if possible, rendering none of them
useless or superfluous, even if strict grammatical construction demands otherwise. Likewise, where
words under consideration appear in different sections or are widely dispersed throughout an act the
same principle applies.120

Not only does the Ordinance contravene the Code, it likewise runs counter to the provisions of P.D.
499. As correctly argued by MTDC, the statute had already converted the residential Ermita-Malate
area into a commercial area. The decree allowed the establishment and operation of all kinds of
commercial establishments except warehouse or open storage depot, dump or yard, motor repair
shop, gasoline service station, light industry with any machinery or funeral establishment. The rule is
that for an ordinance to be valid and to have force and effect, it must not only be within the powers of
the council to enact but the same must not be in conflict with or repugnant to the general law.121 As
succinctly illustrated in Solicitor General v. Metropolitan Manila Authority:122

The requirement that the enactment must not violate existing law explains itself. Local
political subdivisions are able to legislate only by virtue of a valid delegation of legislative
power from the national legislature (except only that the power to create their own sources of
revenue and to levy taxes is conferred by the Constitution itself). They are mere agents
vested with what is called the power of subordinate legislation. As delegates of the
Congress, the local government units cannot contravene but must obey at all times the will of
their principal. In the case before us, the enactment in question, which are merely local in
origin cannot prevail against the decree, which has the force and effect of a statute.123

Petitioners contend that the Ordinance enjoys the presumption of validity. While this may be the rule,
it has already been held that although the presumption is always in favor of the validity or
reasonableness of the ordinance, such presumption must nevertheless be set aside when the
invalidity or unreasonableness appears on the face of the ordinance itself or is established by proper
evidence. The exercise of police power by the local government is valid unless it contravenes the
fundamental law of the land, or an act of the legislature, or unless it is against public policy or is
unreasonable, oppressive, partial, discriminating or in derogation of a common right.124

Conclusion

All considered, the Ordinance invades fundamental personal and property rights and impairs
personal privileges. It is constitutionally infirm. The Ordinance contravenes statutes; it is
discriminatory and unreasonable in its operation; it is not sufficiently detailed and explicit that abuses
may attend the enforcement of its sanctions. And not to be forgotten, the City Council under the
Code had no power to enact the Ordinance and is therefore ultra vires, null and void.

Concededly, the challenged Ordinance was enacted with the best of motives and shares the
concern of the public for the cleansing of the Ermita-Malate area of its social sins. Police power
legislation of such character deserves the full endorsement of the judiciary we reiterate our
support for it. But inspite of its virtuous aims, the enactment of the Ordinance has no statutory or
constitutional authority to stand on. Local legislative bodies, in this case, the City Council, cannot
prohibit the operation of the enumerated establishments under Section 1 thereof or order their
transfer or conversion without infringing the constitutional guarantees of due process and equal
protection of laws not even under the guise of police power.
WHEREFORE, the Petition is hereby DENIED and the decision of the Regional Trial Court declaring
the Ordinance void is AFFIRMED. Costs against petitioners.

SO ORDERED.

G.R. No. 166471 March 22, 2011

TAWANG MULTI-PURPOSE COOPERATIVE Petitioner,

vs.
LA TRINIDAD WATER DISTRICT, Respondent.

DECISION

CARPIO, J.:

The Case

This is a petition for review on certiorari under Rule 45 of the Rules of Court. The petition1 challenges
the 1 October 2004 Judgment2 and 6 November 2004 Order3 of the Regional Trial Court (RTC),
Judicial Region 1, Branch 62, La Trinidad, Benguet, in Civil Case No. 03-CV-1878.

The Facts

Tawang Multi-Purpose Cooperative (TMPC) is a cooperative, registered with the Cooperative

Development Authority, and organized to provide domestic water services in Barangay Tawang, La
Trinidad, Benguet.

La Trinidad Water District (LTWD) is a local water utility created under Presidential Decree (PD) No.
198, as amended. It is authorized to supply water for domestic, industrial and commercial purposes
within the municipality of La Trinidad, Benguet.

On 9 October 2000, TMPC filed with the National Water Resources Board (NWRB) an application for
a certificate of public convenience (CPC) to operate and maintain a waterworks system in Barangay
Tawang. LTWD opposed TMPC’s application. LTWD claimed that, under Section 47 of PD No. 198,
as amended, its franchise is exclusive. Section 47 states that:

Sec. 47. Exclusive Franchise. No franchise shall be granted to any other person or agency for
domestic, industrial or commercial water service within the district or any portion thereof unless and
except to the extent that the board of directors of said district consents thereto by resolution duly
adopted, such resolution, however, shall be subject to review by the Administration.

In its Resolution No. 04-0702 dated 23 July 2002, the NWRB approved TMPC’s application for a
CPC. In its 15 August 2002 Decision,4 the NWRB held that LTWD’s franchise cannot be exclusive
since exclusive franchises are unconstitutional and found that TMPC is legally and financially
qualified to operate and maintain a waterworks system. NWRB stated that:

With respect to LTWD’s opposition, this Board observes that:

1. It is a substantial reproduction of its opposition to the application for water permits previously filed
by this same CPC applicant, under WUC No. 98-17 and 98-62 which was decided upon by this
Board on April 27, 2000. The issues being raised by Oppositor had been already resolved when this
Board said in pertinent portions of its decision:

"The authority granted to LTWD by virtue of P.D. 198 is not Exclusive. While Barangay Tawang is
within their territorial jurisdiction, this does not mean that all others are excluded in engaging in such
service, especially, if the district is not capable of supplying water within the area. This Board has
time and again ruled that the "Exclusive Franchise" provision under P.D. 198 has misled most water
districts to believe that it likewise extends to be [sic] the waters within their territorial boundaries.
Such ideological adherence collides head on with the constitutional provision that "ALL WATERS
AND NATURAL RESOURCES BELONG TO THE STATE". (Sec. 2, Art. XII) and that "No franchise,
certificate or authorization for the operation of public [sic] shall be exclusive in character".

xxxx

All the foregoing premises all considered, and finding that Applicant is legally and financially qualified
to operate and maintain a waterworks system; that the said operation shall redound to the benefit of
the homeowners/residents of the subdivision, thereby, promoting public service in a proper and
suitable manner, the instant application for a Certificate of Public Convenience is, hereby,
GRANTED.5

LTWD filed a motion for reconsideration. In its 18 November 2002 Resolution,6 the NWRB denied
the motion.

LTWD appealed to the RTC.

The RTC’s Ruling

In its 1 October 2004 Judgment, the RTC set aside the NWRB’s 23 July 2002 Resolution and 15
August 2002 Decision and cancelled TMPC’s CPC. The RTC held that Section 47 is valid. The RTC
stated that:

The Constitution uses the term "exclusive in character". To give effect to this provision, a
reasonable, practical and logical interpretation should be adopted without disregard to the ultimate
purpose of the Constitution. What is this ultimate purpose? It is for the state, through its authorized
agencies or instrumentalities, to be able to keep and maintain ultimate control and supervision over
the operation of public utilities. Essential part of this control and supervision is the authority to grant
a franchise for the operation of a public utility to any person or entity, and to amend or repeal an
existing franchise to serve the requirements of public interest. Thus, what is repugnant to the
Constitution is a grant of franchise "exclusive in character" so as to preclude the State itself from
granting a franchise to any other person or entity than the present grantee when public interest so
requires. In other words, no franchise of whatever nature can preclude the State, through its duly
authorized agencies or instrumentalities, from granting franchise to any person or entity, or to repeal
or amend a franchise already granted. Consequently, the Constitution does not necessarily prohibit
a franchise that is exclusive on its face, meaning, that the grantee shall be allowed to exercise this
present right or privilege to the exclusion of all others. Nonetheless, the grantee cannot set up its
exclusive franchise against the ultimate authority of the State.7

TMPC filed a motion for reconsideration. In its 6 November 2004 Order, the RTC denied the motion.
Hence, the present petition.

Issue
TMPC raises as issue that the RTC erred in holding that Section 47 of PD No. 198, as amended, is
valid.

The Court’s Ruling

The petition is meritorious.

What cannot be legally done directly cannot be done indirectly. This rule is basic and, to a
reasonable mind, does not need explanation. Indeed, if acts that cannot be legally done directly can
be done indirectly, then all laws would be illusory.

In Alvarez v. PICOP Resources, Inc.,8 the Court held that, "What one cannot do directly, he cannot
do indirectly."9 In Akbayan Citizens Action Party v. Aquino,10 quoting Agan, Jr. v. Philippine
International Air Terminals Co., Inc.,11 the Court held that, "This Court has long and consistently
adhered to the legal maxim that those that cannot be done directly cannot be done
indirectly."12 In Central Bank Employees Association, Inc. v. Bangko Sentral ng Pilipinas,13 the Court
held that, "No one is allowed to do indirectly what he is prohibited to do directly."14

The President, Congress and the Court cannot create directly franchises for the operation of a public
utility that are exclusive in character. The 1935, 1973 and 1987 Constitutions expressly and clearly
prohibit the creation of franchises that are exclusive in character. Section 8, Article XIII of the 1935
Constitution states that:

No franchise, certificate, or any other form of authorization for the operation of a public utility shall be
granted except to citizens of the Philippines or to corporations or other entities organized under the
laws of the Philippines, sixty per centum of the capital of which is owned by citizens of the
Philippines, nor shall such franchise, certificate or authorization be exclusive in character or for a
longer period than fifty years. (Empahsis supplied)

Section 5, Article XIV of the 1973 Constitution states that:

No franchise, certificate, or any other form of authorization for the operation of a public utility shall be
granted except to citizens of the Philippines or to corporations or associations organized under the
laws of the Philippines at least sixty per centum of the capital of which is owned by such
citizens, nor shall such franchise, certificate or authorization be exclusive in character or for a
longer period than fifty years. (Emphasis supplied)

Section 11, Article XII of the 1987 Constitution states that:

No franchise, certificate, or any other form of authorization for the operation of a public utility shall be
granted except to citizens of the Philippines or to corporations or associations organized under the
laws of the Philippines, at least sixty per centum of whose capital is owned by such citizens, nor
shall such franchise, certificate or authorization be exclusive in character or for a longer period
than fifty years. (Emphasis supplied)

Plain words do not require explanation. The 1935, 1973 and 1987 Constitutions are clear —
franchises for the operation of a public utility cannot be exclusive in character. The 1935, 1973 and
1987 Constitutions expressly and clearly state that, "nor shall such franchise x x x be exclusive
in character." There is no exception.
When the law is clear, there is nothing for the courts to do but to apply it. The duty of the Court is to
apply the law the way it is worded. In Security Bank and Trust Company v. Regional Trial Court of
Makati, Branch 61,15 the Court held that:

Basic is the rule of statutory construction that when the law is clear and unambiguous, the court
is left with no alternative but to apply the same according to its clear language. As we have
held in the case of Quijano v. Development Bank of the Philippines:

"x x x We cannot see any room for interpretation or construction in the clear and unambiguous
language of the above-quoted provision of law. This Court had steadfastly adhered to the
doctrine that its first and fundamental duty is the application of the law according to its
express terms, interpretation being called for only when such literal application is impossible. No
process of interpretation or construction need be resorted to where a provision of law peremptorily
calls for application. Where a requirement or condition is made in explicit and unambiguous
terms, no discretion is left to the judiciary. It must see to it that its mandate is
obeyed."16 (Emphasis supplied)

In Republic of the Philippines v. Express Telecommunications Co., Inc.,17 the Court held that, "The
Constitution is quite emphatic that the operation of a public utility shall not be exclusive."18 In Pilipino
Telephone Corporation v. National Telecommunications Commission,19 the Court held that, "Neither
Congress nor the NTC can grant an exclusive ‘franchise, certificate, or any other form of
authorization’ to operate a public utility."20 In National Power Corp. v. Court of Appeals,21 the Court
held that, "Exclusivity of any public franchise has not been favored by this Court such that in most, if
not all, grants by the government to private corporations, the interpretation of rights, privileges or
franchises is taken against the grantee."22 In Radio Communications of the Philippines, Inc. v.
National Telecommunications Commission,23 the Court held that, "The Constitution mandates that a
franchise cannot be exclusive in nature."24

Indeed, the President, Congress and the Court cannot create directly franchises that are exclusive in
character. What the President, Congress and the Court cannot legally do directly they cannot do
indirectly. Thus, the President, Congress and the Court cannot create indirectly franchises that are
exclusive in character by allowing the Board of Directors (BOD) of a water district and the Local
Water Utilities Administration (LWUA) to create franchises that are exclusive in character.

In PD No. 198, as amended, former President Ferdinand E. Marcos (President Marcos) created
indirectly franchises that are exclusive in character by allowing the BOD of LTWD and the LWUA to
create directly franchises that are exclusive in character. Section 47 of PD No. 198, as amended,
allows the BOD and the LWUA to create directly franchises that are exclusive in character. Section
47 states:

Sec. 47. Exclusive Franchise. No franchise shall be granted to any other person or agency for
domestic, industrial or commercial water service within the district or any portion thereof unless and
except to the extent that the board of directors of said district consents thereto by resolution
duly adopted, such resolution, however, shall be subject to review by the Administration.
(Emphasis supplied)

In case of conflict between the Constitution and a statute, the Constitution always prevails because
the Constitution is the basic law to which all other laws must conform to. The duty of the Court is to
uphold the Constitution and to declare void all laws that do not conform to it.

In Social Justice Society v. Dangerous Drugs Board,25 the Court held that, "It is basic that if a law or
an administrative rule violates any norm of the Constitution, that issuance is null and void and has no
effect. The Constitution is the basic law to which all laws must conform; no act shall be valid if it
conflicts with the Constitution."26 In Sabio v. Gordon,27 the Court held that, "the Constitution is the
highest law of the land. It is the ‘basic and paramount law to which all other laws must
conform.’"28 In Atty. Macalintal v. Commission on Elections,29 the Court held that, "The Constitution is
the fundamental and paramount law of the nation to which all other laws must conform and in
accordance with which all private rights must be determined and all public authority administered.
Laws that do not conform to the Constitution shall be stricken down for being
unconstitutional."30 In Manila Prince Hotel v. Government Service Insurance System,31 the Court held
that:

Under the doctrine of constitutional supremacy, if a law or contract violates any norm of the
constitution that law or contract whether promulgated by the legislative or by the executive
branch or entered into by private persons for private purposes is null and void and without any
force and effect. Thus, since the Constitution is the fundamental, paramount and supreme law
of the nation, it is deemed written in every statute and contract."32 (Emphasis supplied)

To reiterate, the 1935, 1973 and 1987 Constitutions expressly prohibit the creation of franchises that
are exclusive in character. They uniformly command that "nor shall such franchise x x x be
exclusive in character." This constitutional prohibition is absolute and accepts no exception. On the
other hand, PD No. 198, as amended, allows the BOD of LTWD and LWUA to create franchises that
are exclusive in character. Section 47 states that, "No franchise shall be granted to any other person
or agency x x x unless and except to the extent that the board of directors consents thereto x x
x subject to review by the Administration." Section 47 creates a glaring exception to the absolute
prohibition in the Constitution. Clearly, it is patently unconstitutional.

Section 47 gives the BOD and the LWUA the authority to make an exception to the absolute
prohibition in the Constitution. In short, the BOD and the LWUA are given the discretion to create
franchises that are exclusive in character. The BOD and the LWUA are not even legislative bodies.
The BOD is not a regulatory body but simply a management board of a water district. Indeed, neither
the BOD nor the LWUA can be granted the power to create any exception to the absolute prohibition
in the Constitution, a power that Congress itself cannot exercise.

In Metropolitan Cebu Water District v. Adala,33 the Court categorically declared Section 47 void. The
Court held that:

Nonetheless, while the prohibition in Section 47 of P.D. 198 applies to the issuance of CPCs for the
reasons discussed above, the same provision must be deemed void ab initio for being
irreconcilable with Article XIV, Section 5 of the 1973 Constitution which was ratified on January
17, 1973 — the constitution in force when P.D. 198 was issued on May 25, 1973. Thus, Section 5 of
Art. XIV of the 1973 Constitution reads:

"SECTION 5. No franchise, certificate, or any other form of authorization for the operation of a public
utility shall be granted except to citizens of the Philippines or to corporations or associations
organized under the laws of the Philippines at least sixty per centum of the capital of which is owned
by such citizens, nor shall such franchise, certificate, or authorization be exclusive in
character or for a longer period than fifty years. Neither shall any such franchise or right be granted
except under the condition that it shall be subject to amendment, alteration, or repeal by the
Batasang Pambansa when the public interest so requires. The State shall encourage equity
participation in public utiltities by the general public. The participation of foreign investors in the
governing body of any public utility enterprise shall be limited to their proportionate share in the
capital thereof."
This provision has been substantially reproduced in Article XII Section 11 of the 1987 Constitution,
including the prohibition against exclusive franchises.

xxxx

Since Section 47 of P.D. 198, which vests an "exclusive franchise" upon public utilities, is
clearly repugnant to Article XIV, Section 5 of the 1973 Constitution, it is unconstitutional and
may not, therefore, be relied upon by petitioner in support of its opposition against respondent’s
application for CPC and the subsequent grant thereof by the NWRB.

WHEREFORE, Section 47 of P.D. 198 is unconstitutional.34 (Emphasis supplied)

The dissenting opinion declares Section 47 valid and constitutional. In effect, the dissenting opinion
holds that (1) President Marcos can create indirectly franchises that are exclusive in character; (2)
the BOD can create directly franchises that are exclusive in character; (3) the LWUA can create
directly franchises that are exclusive in character; and (4) the Court should allow the creation of
franchises that are exclusive in character.

Stated differently, the dissenting opinion holds that (1) President Marcos can violate indirectly the
Constitution; (2) the BOD can violate directly the Constitution; (3) the LWUA can violate directly the
Constitution; and (4) the Court should allow the violation of the Constitution.

The dissenting opinion states that the BOD and the LWUA can create franchises that are exclusive
in character "based on reasonable and legitimate grounds," and such creation "should not be
construed as a violation of the constitutional mandate on the non-exclusivity of a franchise" because
it "merely refers to regulation" which is part of "the government’s inherent right to exercise police
power in regulating public utilities" and that their violation of the Constitution "would carry with it the
legal presumption that public officers regularly perform their official functions." The dissenting
opinion states that:

To begin with, a government agency’s refusal to grant a franchise to another entity, based on
reasonable and legitimate grounds, should not be construed as a violation of the constitutional
mandate on the non-exclusivity of a franchise; this merely refers to regulation, which the Constitution
does not prohibit. To say that a legal provision is unconstitutional simply because it enables a
government instrumentality to determine the propriety of granting a franchise is contrary to the
government’s inherent right to exercise police power in regulating public utilities for the protection of
the public and the utilities themselves. The refusal of the local water district or the LWUA to consent
to the grant of other franchises would carry with it the legal presumption that public officers regularly
perform their official functions.

The dissenting opinion states two "reasonable and legitimate grounds" for the creation of exclusive
franchise: (1) protection of "the government’s investment,"35 and (2) avoidance of "a situation where
ruinous competition could compromise the supply of public utilities in poor and remote areas."36

There is no "reasonable and legitimate" ground to violate the Constitution. The Constitution should
never be violated by anyone. Right or wrong, the President, Congress, the Court, the BOD and the
LWUA have no choice but to follow the Constitution. Any act, however noble its intentions, is void if it
violates the Constitution. This rule is basic.

In Social Justice Society,37 the Court held that, "In the discharge of their defined functions, the three
departments of government have no choice but to yield obedience to the commands of the
Constitution. Whatever limits it imposes must be observed."38 In Sabio,39 the Court held that,
"the Constitution is the highest law of the land. It is ‘the basic and paramount law to which x x
x all persons, including the highest officials of the land, must defer. No act shall be valid,
however noble its intentions, if it conflicts with the Constitution.’"40 In Bengzon v. Drilon,41 the
Court held that, "the three branches of government must discharge their respective functions within
the limits of authority conferred by the Constitution."42 In Mutuc v. Commission on Elections,43 the
Court held that, "The three departments of government in the discharge of the functions with
which it is [sic] entrusted have no choice but to yield obedience to [the
Constitution’s] commands. Whatever limits it imposes must be observed."44

Police power does not include the power to violate the Constitution. Police power is the plenary
power vested in Congress to make laws not repugnant to the Constitution. This rule is basic.

In Metropolitan Manila Development Authority v. Viron Transportation Co., Inc.,45 the Court held that,
"Police power is the plenary power vested in the legislature to make, ordain, and establish
wholesome and reasonable laws, statutes and ordinances, not repugnant to the
Constitution."46 In Carlos Superdrug Corp. v. Department of Social Welfare and Development,47 the
Court held that, police power "is ‘the power vested in the legislature by the constitution to make,
ordain, and establish all manner of wholesome and reasonable laws, statutes, and ordinances x x
x not repugnant to the constitution.’"48 In Metropolitan Manila Development Authority v.
Garin,49 the Court held that, "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 x x x not repugnant to the Constitution."50

There is no question that the effect of Section 47 is the creation of franchises that are exclusive in
character. Section 47 expressly allows the BOD and the LWUA to create franchises that are
exclusive in character.

The dissenting opinion explains why the BOD and the LWUA should be allowed to create franchises
that are exclusive in character — to protect "the government’s investment" and to avoid "a situation
where ruinous competition could compromise the supply of public utilities in poor and remote areas."
The dissenting opinion declares that these are "reasonable and legitimate grounds." The dissenting
opinion also states that, "The refusal of the local water district or the LWUA to consent to the grant of
other franchises would carry with it the legal presumption that public officers regularly perform their
official functions."

When the effect of a law is unconstitutional, it is void. In Sabio,51 the Court held that, "A statute may
be declared unconstitutional because it is not within the legislative power to enact; or it creates or
establishes methods or forms that infringe constitutional principles; or its purpose or effect violates
the Constitution or its basic principles."52 The effect of Section 47 violates the Constitution, thus, it
is void.

In Strategic Alliance Development Corporation v. Radstock Securities Limited,53 the Court held that,
"This Court must perform its duty to defend and uphold the Constitution."54 In Bengzon,55 the Court
held that, "The Constitution expressly confers on the judiciary the power to maintain inviolate what it
decrees."56 In Mutuc,57 the Court held that:

The concept of the Constitution as the fundamental law, setting forth the criterion for the validity of
any public act whether proceeding from the highest official or the lowest functionary, is a postulate of
our system of government. That is to manifest fealty to the rule of law, with priority accorded to that
which occupies the topmost rung in the legal hierarchy. The three departments of government in the
discharge of the functions with which it is [sic] entrusted have no choice but to yield obedience to its
commands. Whatever limits it imposes must be observed. Congress in the enactment of statutes
must ever be on guard lest the restrictions on its authority, whether substantive or formal, be
transcended. The Presidency in the execution of the laws cannot ignore or disregard what it ordains.
In its task of applying the law to the facts as found in deciding cases, the judiciary is called upon to
maintain inviolate what is decreed by the fundamental law. Even its power of judicial review to pass
upon the validity of the acts of the coordinate branches in the course of adjudication is a logical
corollary of this basic principle that the Constitution is paramount. It overrides any governmental
measure that fails to live up to its mandates. Thereby there is a recognition of its being the supreme
law.58

Sustaining the RTC’s ruling would make a dangerous precedent. It will allow Congress to do
indirectly what it cannot do directly. In order to circumvent the constitutional prohibition on franchises
that are exclusive in character, all Congress has to do is to create a law allowing the BOD and the
LWUA to create franchises that are exclusive in character, as in the present case.

WHEREFORE, we GRANT the petition. We DECLARE Section 47 of Presidential Decree No.

198 UNCONSTITUTIONAL. We SET ASIDE the 1 October 2004 Judgment and 6 November 2004
Order of the Regional Trial Court, Judicial Region 1, Branch 62, La Trinidad, Benguet, in Civil Case
No. 03-CV-1878 and REINSTATE the 23 July 2002 Resolution and 15 August 2002 Decision of the
National Water Resources Board.

SO ORDERED.

ANTONIO T. CARPIO
Associate Justice

WE CONCUR:
G.R. No. L-42935 February 15, 1935

FELIPE REGALADO, petitioner,

vs.
JOSE YULO, Secretary of Justice,
JUAN G. LESACA, Judge of First Instance of Albay,
and ESTEBAN T. VILLAR, respondents.

L.R. Peña for petitioner.

Office of the Solicitor-General Hilado for respondents.
Respondent Villar in his own behalf.

MALCOLM, J.:

This is an action of quo warranto originally brought in this court to determine the respective rights of
the petitioner Felipe Regalado and one of the respondents, Esteban T. Villar, to the office of justice
of the peace of Malinao, Albay. The issue in the case is whether or not under the provisions of
section 203 of the Administrative Code, as amended by Act No. 3899, the justices of the peace and
auxiliary justices of the peace appointed prior to the approval of the last mentioned Act who reached
the age of sixty-five years after said Act took effect shall cease to hold office upon reaching the age
of sixty-five years.

The facts as stipulated are principally the following: Felipe Regalado qualified for the office of justice
of the peace of Malinao, Albay, on April 12, 1906. On September 13, 1934, Regalado became sixty-
five years of age. As a consequence, shortly thereafter, the judge of first instance of Albay, acting in
accordance with instructions from the Secretary of Justice, designated Esteban T. Villar, justice of
the peace of Tabaco, Albay, to act as justice of the peace of Malinao, Albay. Regalado surrendered
the office to Villar under protest. On December 17, 1934, Villar qualified as justice of the peace of
Malinao, Albay, and entered upon the discharge of the duties of the office.

The text of section 203 of the Administrative Code, as amended by Act No. 3899, reads in Spanish,
the language in which this Act was enacted by the Philippine Legislature, as follows:

ART. 203. Nombramiento y distribucion de jueces de paz. — El Gobernador General

nombrara, con el consejo y consentimiento del Senado de Filipinas, un juez de paz y un juez
de paz auxilizr para la Ciudad de Baguio y para cada municipio, township, y distrito
municipal da las Islas Filipinas y si el interes publico asi lo exigiere para cualquier otra
division politica de menos importancia y territorio no organizado en dichas
Islas: Entendiendose, Que los jueces de paz y jueces de paz auxiliares seran nombrados
para servir cumplir sesenta y cinco años de edad: Entendiendose, ademas, Que los actuales
jueces de paz y jueces de paz auxiliares que al tiempo de la vigencia de esta Ley hayan
cumplido sesenta y cinco años de edad, cesaran el primero de enero de mil novecientos
treinta y tres en sus cargos; y el Gobernador General, con el consejo y consentimiento del
Senado de Filipinas, hara nuevos nombramientos para cubrir las vacantes que habran de
ocurir por ministerio de esta Ley.

The English version of the same codal section, as amended, reads as follows:

SEC. 203. Appointment and distribution of justices of the peace. — One justice of the peace
and one auxiliary justice of the peace shall be appointed by the Governor-General, with the
advise and consent of the Philippine Senate, for the City of Baguio, and for each
municipality, township, and municipal district in the Philippine Islands, and if the public
 interests shall so require, for any other minor political division or unorganized territory in said
Islands: Provided, That justices and auxiliary justices of the peace shall be appointed to
serve until they have reached the age of sixty-five years: Provided, further, That the present
justices and auxiliary justices of the peace who shall, at the time this Act takes effect, have
completed sixty-five years of age, shall automatically cease to hold office on January first,
nineteen hundred and thirty-three; and the Governor-General, with the advise and consent of
the Philippine Senate, shall make new appointments to cover the vacancies occurring by
operation of this Act.

Petitioner Regalado insists that the law is clear and accordingly needs no interpretation. The
meaning of the law according to him is that only those justice of the peace and auxiliary justices of
the peace ceased to hold office who had completed sixty-five years of age on or before November
16, 1931, when Act No. 3899 took effect. On the other hand, the Solicitor-General, as attorney for
the respondents, admits that the provisions of the second proviso added to section 203 of the
Administrative Code by Act No. 3899, are not very specific, but that according to the real intention of
the law the only sensible and proper construction that could be place on the proviso in question in
that under its provisions all justices of the peace and auxiliary justices of the peace, whether
appointed prior to the approval of the Act or subsequent thereto, who had completed the age of
sixty-five years of age at the time of the approval of the Act, and those who shall complete that age
thereafter, shall cease to hold office, the former on January 1, 1933, and the latter at the time they
complete that age.

All are agreed that the language which should prevail in the interpretation of Act No. 3899 is
Spanish, but that the English text may be consulted to explain the Spanish. The English text is
deficient in that it includes the word "automatically", the equivalent of which does not appear in the
Spanish. Also, in the Administrative Code containing a compilation of section 203, as amended, the
word "office" was omitted after the word "hold". Finally, the spanish uses the term "al teimpo de la
vigencia de esta ley", translated into English as "at the time this Act takes effect". But the Solicitor-
General insists that the equivalent of the term "al" is "at" and that "at" can be construed as equivalent
to "during".

The Solicitor-General properly invites attention to the history of the law and from that history would
deduce the legislative intention to be effectuated. Let us briefly notice this point. Originally judges of
first instance and justices of the peace had no age limits on their tenures of office. Eventually,
however, the Philippine Legislature enacted Act No. 2347. That law not only provided that judges of
first instance shall serve until they have reached the age of sixty-five years, but it further provided
that "... the present judges of Courts of First Instance ... vacate their positions on the taking effect of
this Act: and the Governor-General, with the advice and consent of the Philippine Commission, shall
make new appointments of judges of the Courts of First Instance ... ." This law was held valid.
(Chanco vs. Imperial [1916], 34 Phil., 329.) Subsequently section 203 of the Administrative Code,
relating to justices of the peace, was amended by section 1 of Act No. 3107 by adding at the end
thereof the following proviso: "... Provided, That justices and auxiliary justices of the peace shall be
appointed to serve until they have reached the age of sixty-five years." It was held that the law
should be given prospective effect only and was not applicable to justices and auxiliary justices of
the peace appointed before it went into effect. (Segovia vs. Noel [1925], 47 Phil., 543.) Thereafter
the matter again came before the Philippine Legislature and apparently it was in the mind of certain
members of the Legislature to make the law fixing the age limit for justices of the peace retroactive in
nature. At least the bill as introduced in the Senate, and providing: "Entendiendose, ademas, Que
los actuales jueces de paz y jueces de paz auxiliares que al tiempo de la vigencia de esta Ley
hayan cumplido sesenta y cinco años de edad, cesaran automaticamente en sus cargos; y el
Gobernador General, con el consejo y consentimiento del Senado de Filipinas, hara nuevos
nombramientos para cubrir las vacantes que habran de ocurrir por ministerio de esta ley," —
appears to have had this purpose both because of the langage used and because of what can be
gleaned from the debates on the bill while it was under consideration in the Senate. But when the bill
left the Philippine Legislature it was in a different form, for the word "automaticamente" had been
omitted and instead there was to be found the words "el primero de enero de mil novecientos treinta
y tres".

The Solicitor-General finally points out that the Secretary of Justice has consistently interpreted the
proviso in question as meaning, that all justices of the peace and auxiliary justices of the peace no
matter when appointed who had completed the age of sixty-five years prior to the approval of the law
and those who shall complete that age thereafter, shall cease to hold office upon their attaining that
age. It is of course a cardinal rule that the practical construction of a statute by the department
whose duty it is to carry it into execution is entitled to great weight. Nevertheless the court is not
bound by such construction and the rule does not apply in cases where the construction is not
doubtful.

The fundamental purpose in enacting Act No. 3899, it is argued, was to correct the phraseology of
the first proviso to section 203 of the Administrative Code added thereto by Act No. 3107, and to
place justices of the peace and auxiliary justices of the peace on the same footing as regards their
cessation from office by reason of age. We are asked for effectuate this legislative purpose. We
would accede if that result was obtainable by any logical construction of the law whether strict or
liberal. But we cannot reach that result when to do so compels us to rewrite a law and to insert
words or phrases not found in it. If the court should do that it would pass beyond the bounds of
judicial power to usurp legislative power.

The intent of the Legislature to be ascertained and enforced is the intent expressed in the words of
the statute. If legislative intent is not expressed in some appropriate manner, the courts cannot by
interpretation speculate as to an intent and supply a meaning not found in the phraseology of the
law. In other words, the courts cannot assume some purpose in no way expressed and then
construe the statute to accomplish this supposed intention.

Delving a little more deeply into the meaning of the law as applied to the case of the petitioner, at the
time Act No. 3899 took effect he was one of the "actuales jueces de paz" (present justices of the
peace). Giving the term "al tiempo de la vigencia de la ley" the ordinary meaning of "at the time this
Act takes effect," which was on November 16, 1931, on that date the petitioner was not sixty-five
years of age. Proceeding further, the phrase "hayan cumplido se senta cinco años de edad",
appearing in English as "have completed sixty-five years of age", is of the past tense and could not
regularly be taken to contemplate the future. Finally the phrase "el primero de enero de mil
novecientos treinta y tres", in English "on January first nineteen hundred and thirty-three", is also a
date in the past, for on that date the petitioner had not yet reached the age of sixty-five.

Before we conclude, let us again return to the consideration of the law and see if it would be possible
under any logical interpretation, to give the law the meaning which the Government insists it should
have. Supposing we give to the phrase "al tiempo de la vigencia de esta ley" the unusual meaning of
"within the time this Act is effective", but having done so, we then reach the barrier that the petitioner
within the time this Act is effective must have completed sixty-five years of age and cease to hold
office on January 1, 1933. The petitioner having become sixty-five years of age on September 13,
1934, could not be included under a law which required justices of the peace sixty-five years of age
to cease to hold office on January 1, 1933.

For the reasons given, we are of the opinion that the natural and reasonable meaning of the
language used in Act No. 3899 leaves room for no other deduction than that a justice of the peace
appointed prior to the approval of the Act and who completed sixty-five years of age on September
13, 1934, subsequent to the approval of the Act, which was on November 16, 1931, and who by the
law was required to cease to hold office on January 1, 1933, is not affected by the said Act.
Accordingly it is our judgment that the respondent Esteban T. Villar be ousted from the office of
justice of the peace of Malinao, Albay, and that the petitioner Felipe Regalado be placed in
possession of the same. So ordered, without special pronouncement as to the costs.

Villa-Real, Imperial, Butte, and Goddard, JJ., concur.

G.R. No. L-22301 August 30, 1967

THE PEOPLE OF THE PHILIPPINES, plaintiff-appellee,

vs.
MARIO MAPA Y MAPULONG, defendant-appellant.

Francisco P. Cabigao for defendant-appellant.

Office of the Solicitor General Arturo A. Alafriz, Assistant Solicitor General F. R. Rosete and Solicitor
O. C. Hernandez for plaintiff-appellee.

FERNANDO, J.:

The sole question in this appeal from a judgment of conviction by the lower court is whether or not
the appointment to and holding of the position of a secret agent to the provincial governor would
constitute a sufficient defense to a prosecution for the crime of illegal possession of firearm and
ammunition. We hold that it does not.

The accused in this case was indicted for the above offense in an information dated August 14, 1962
reading as follows: "The undersized accuses MARIO MAPA Y MAPULONG of a violation of Section
878 in connection with Section 2692 of the Revised Administrative Code, as amended by
Commonwealth Act No. 56 and as further amended by Republic Act No. 4, committed as follows:
That on or about the 13th day of August, 1962, in the City of Manila, Philippines, the said accused
did then and there wilfully and unlawfully have in his possession and under his custody and control
one home-made revolver (Paltik), Cal. 22, without serial number, with six (6) rounds of ammunition,
without first having secured the necessary license or permit therefor from the corresponding
authorities. Contrary to law."

When the case was called for hearing on September 3, 1963, the lower court at the outset asked the
counsel for the accused: "May counsel stipulate that the accused was found in possession of the
gun involved in this case, that he has neither a permit or license to possess the same and that we
can submit the same on a question of law whether or not an agent of the governor can hold a firearm
without a permit issued by the Philippine Constabulary." After counsel sought from the fiscal an
assurance that he would not question the authenticity of his exhibits, the understanding being that
only a question of law would be submitted for decision, he explicitly specified such question to be
"whether or not a secret agent is not required to get a license for his firearm."

Upon the lower court stating that the fiscal should examine the document so that he could pass on
their authenticity, the fiscal asked the following question: "Does the accused admit that this pistol cal.
22 revolver with six rounds of ammunition mentioned in the information was found in his possession
on August 13, 1962, in the City of Manila without first having secured the necessary license or permit
thereof from the corresponding authority?" The accused, now the appellant, answered categorically:
"Yes, Your Honor." Upon which, the lower court made a statement: "The accused admits, Yes, and
his counsel Atty. Cabigao also affirms that the accused admits."
Forthwith, the fiscal announced that he was "willing to submit the same for decision." Counsel for the
accused on his part presented four (4) exhibits consisting of his appointment "as secret agent of the
Hon. Feliciano Leviste," then Governor of Batangas, dated June 2, 1962;1 another document
likewise issued by Gov. Leviste also addressed to the accused directing him to proceed to Manila,
Pasay and Quezon City on a confidential mission;2 the oath of office of the accused as such secret
agent,3 a certificate dated March 11, 1963, to the effect that the accused "is a secret agent" of Gov.
Leviste.4 Counsel for the accused then stated that with the presentation of the above exhibits he was
"willing to submit the case on the question of whether or not a secret agent duly appointed and
qualified as such of the provincial governor is exempt from the requirement of having a license of
firearm." The exhibits were admitted and the parties were given time to file their respective
memoranda. 1äwphï1.ñët

Thereafter on November 27, 1963, the lower court rendered a decision convicting the accused "of
the crime of illegal possession of firearms and sentenced to an indeterminate penalty of from one
year and one day to two years and to pay the costs. The firearm and ammunition confiscated from
him are forfeited in favor of the Government."

The only question being one of law, the appeal was taken to this Court. The decision must be
affirmed.

The law is explicit that except as thereafter specifically allowed, "it shall be unlawful for any person to
. . . possess any firearm, detached parts of firearms or ammunition therefor, or any instrument or
implement used or intended to be used in the manufacture of firearms, parts of firearms, or
ammunition."5 The next section provides that "firearms and ammunition regularly and lawfully issued
to officers, soldiers, sailors, or marines [of the Armed Forces of the Philippines], the Philippine
Constabulary, guards in the employment of the Bureau of Prisons, municipal police, provincial
governors, lieutenant governors, provincial treasurers, municipal treasurers, municipal mayors, and
guards of provincial prisoners and jails," are not covered "when such firearms are in possession of
such officials and public servants for use in the performance of their official duties."6

The law cannot be any clearer. No provision is made for a secret agent. As such he is not exempt.
Our task is equally clear. The first and fundamental duty of courts is to apply the law. "Construction
and interpretation come only after it has been demonstrated that application is impossible or
inadequate without them."7 The conviction of the accused must stand. It cannot be set aside.

Accused however would rely on People v. Macarandang,8 where a secret agent was acquitted on
appeal on the assumption that the appointment "of the accused as a secret agent to assist in the
maintenance of peace and order campaigns and detection of crimes, sufficiently put him within the
category of a "peace officer" equivalent even to a member of the municipal police expressly covered
by section 879." Such reliance is misplaced. It is not within the power of this Court to set aside the
clear and explicit mandate of a statutory provision. To the extent therefore that this decision conflicts
with what was held in People v. Macarandang, it no longer speaks with authority.

Wherefore, the judgment appealed from is affirmed.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Bengzon, J.P., Zaldivar, Sanchez, Castro and
Angeles, JJ., concur.
G.R. No. L-28396 December 29, 1967

AGRIPINO DEMAFILES, petitioner,

vs.
COMMISSION ON ELECTIONS, PROVINCIAL BOARD OF ANTIQUE, in its capacity as Board of
Canvassers for the newly created Municipality of Sebaste of the Province of Antique, and
BENITO B. GALIDO, respondents.

Salonga, Ordoñez Sicat and Associates for respondent.

Ramon Barrios for respondent Comelec.
Jose W. Diokno for petitioner.

CASTRO, J.:

The new municipality of Sebaste1 in Antique province held its first election of officers in the general
elections of November 14, 1967, with the petitioner Agripino Demafiles and the respondent Benito B.
Galido vying for the mayoralty.

On November 21 the respondent Galido asked the provincial board, acting as municipal board of
canvassers pursuant to section 167 (b) of the Revised Election Code, to disregard, as "obviously
manufactured", the election return from precinct 7 on the ground that the said return shows that 195
voters were registered (of whom 188 voted), when, according to a certificate of the municipal
election registrar only 182 had registered in that precinct as of October 30, 1997. At its session on
the following day, November 22, the board, over the objection of one member, voted to reject the
return from precinct 7 and then proceeded with the canvass of the returns from the other precints.
The resulting tally gave Galido 888 votes as against 844 for Demafiles. Accordingly, Galido was
proclaimed mayor-elect of the municipality of Sebaste.

On November 24 Demafiles wired the Commission on Elections, protesting the board's action of
rejection of the return from precinct 7 and the subsequent proclamation of Galido, and challenging
the right of two board members, Julito Moscoso and Quirico Escaño, to sit, considering that they
were reelectionists. Acting on the protest, the COMELEC resolved on November 28, 1967:

To annul the canvass and proclamation of the local officials of the new municipality of
Sebaste, Antique, which was made by the Provincial Board of Antique;

To constitute the Board of Canvassers by appointing the substitutes pursuant to the

provisions of Sec. 167 (a) of the Revised Election Code, which shall canvass anew the
results of the election for local offices of Sebaste, Antique, in accordance with the
Instructions to Boards of Canvassers contained in the Resolution of the Commission No. RR-
544, particularly No. 5-K thereof, and thereafter to proclaim the winning candidates for local
offices of said municipality.

In turn, Galido asked for a reconsideration on the ground that the two members of the provincial
board who were reelectionists were disqualified from sitting only when the board was acting as a
provincial, but not as a municipal, board of canvassers and that the COMELEC resolution annulling
the canvass and proclamation of officials was issued without giving him an opportunity to be heard.
In its resolution of December 4, 1967 the respondent Commission reconsidered its previous order
and held "that the canvass and proclamation already made of the local officials . . . stands".

Failing to secure a reconsideration of this latter resolution, Demafiles filed the present petition
for mandamus and certiorari to set aside the aforesaid resolution of the COMELEC, to annull the
proclamation of Galido, and to secure an order directing the COMELEC to appoint substitute
members of the provincial board and to order a new canvass of the returns, including that from
precinct 7.

The three principal issues tendered for resolution in this case are: (1) whether the respondent board
of canvassers was within the periphery of its power in rejecting the return from precinct 7 on the
strength of an election registrar's certificate that a less number of voters than that shown in the
return had registered; (2) whether the provincial board members, who were candidates for
reelection, were disqualified from sitting in the board in its capacity as a municipal board of
canvassers; and (3) whether the Commission on Elections can order the board of canvassers to
count a return from a given precinct.

These issues, together with the arguments of the parties, will be discussed seriatim, but we must
first proceed to dispose of the preliminary question raised by the respondent Galido, namely, that
this case is moot because he had taken his oath and assumed office on November 22, pursuant to
Republic Act 4870.

Obviously, the frame of reference is section 2 of the statute which reads:

The first mayor, vice-mayor and councilors of the Municipality of Sebaste shall be elected in
the next general elections for local officials and shall have qualified [sic].

In our view, the last portion of the provision — "and shall have qualified" — is devoid of any
meaning, is unmitigated jargon in or out of context, and does not warrant the respondent's reading
that the term of office of the first municipal officials of Sebaste begins immediately after their
proclamation. It is quite probable that that is what the legislature meant. But here is a clear case of a
failure to express a meaning, and a becoming sense of judicial modesty forbids the courts from
assuming and, consequently, from supplying. "If there is no meaning in it," said the King in Alice in
itc-alf

Wonderland, "that saves a world of trouble, you know, as we needn't try to find any." Frankfurter,
who himself was fond of quoting this passage, admonishes that "a judge must not rewrite a statute,
neither to enlarge nor to contract it. Whatever temptations the statesmanship of policy-making might
wisely suggest, construction must eschew interpolation and evisceration."2 Accordingly, we have to
go by the general rule that the term of office of municipal officials shall begin on the first day of
January following their election,3 and so the assumption of office by the respondent Galido in no way
affected the basic issues in this case, which we need not reach and resolve.

First, a canvassing board performs a purely ministerial function — that of compiling and adding the
results they appear in the returns, transmitted to it. This is the teaching in Nacionalista Party v.
Commission on Elections:4 "the canvassers are to be satisfied of the, genuineness of the returns —
namely, that the papers presented to them are not forged and spurious, that they are returns, and
that they are signed by the proper officers. When so satisfied, . . . they may not reject any returns
because of informalities in them or because of illegal and fraudulent practices in the
elections."5 Thus, they cannot pass upon the validity of an election return, much less exclude it from
the canvass on the ground that the votes cast in the precinct from whence it came are illegal.6

But the exclusion of the return in this case is sought to be justified on the ground that it is "obviously
manufactured" because, contrary to the statement therein that there were 195 registered voters, of
whom 188 voted, the certificate of the local election registrar states that only 182 voters had
registered on October 30, 1967. Lagumbay v. Commission on Elections7 is cited in support of this
view. In Lagumbay the returns were palpably false as it was indeed statistically improbable that "all
the eight candidates of one party garnered all the votes, each of them receiving exactly the same
number, whereas all the eight candidates of the other party got precisely nothing. " In other words,
itc-alf
the aid of evidence aliunde was not needed, as "the fraud [being] so palpable from the return itself
(res ipsa loquitur — the thing speaks for itself), there is no reason to accept it and give it prima
facie value.

On the other hand, the return in this case shows nothing on its face from which the canvassers might
conclude that it does not speak the truth. It is only when it is compared in the certificate of the
election registrar that a discrepancy appears as to the number of registered voters. The return
therefore is by no means "obviously manufactured" so as to justify its exclusion.

This is not to belittle the respondent's claim that more people than registered voters were allowed to
vote in precinct 7. Perhaps that is true, although the petitioner claims that after October 30, 1967
eight more voters were allowed to register (making a total of 190, voters), and on the day of the
election 5 voters erroneously assigned to precinct 6 were allowed to vote in precinct 7 because that
was where they were really assigned. The point is simply that this question should be threshed out in
an election contest. Lagumbay itself explicitly says —
itc-alf

Of course we agree that fraud in the holding of the election should be handled — and finally
settled — by the corresponding courts or electoral tribunals. That is the general rule, where
testimonial or documentary evidence is necessary. . . .

Consequently, the canvass made and proclamation had should be annulled.8

Second, the canvass and proclamation should be annulled because two of the four members of the
board of canvassers were disqualified from sitting in it, they being candidates for reelection. As this
Court held in Salcedo v. Commission on Elections:9

And added reason for the nullification of the actuation of the Provincial Board of Oriental
Mindoro is the fact that its members were disqualified to act it appearing that they were all
candidates for reelection. This is clear from Section 28 of the Revised Election Code which
provides that any member of the provincial board who is a candidate for an elective office
shall be incompetent to act in said board in the performance of its duties in connection with
the election.

Branding the above statement as obiter dictum, the respondent Galido argues that reelectionist
members of the provincial board are disqualified under section 28 only when the board acts as a
provincial board of canvassers, to prevent them fro canvassing their own votes, and not when they
sit as a municipal board of canvassers.

With respect to the canvass and proclamation made the provincial board of Oriental Mindoro, three
issues raised in Salcedo, in resolving which this Court held (1) that a provincial board cannot act as
a municipal board of canvassers where a municipal council has been formed; (2) that provincial
board members who are candidates for reelection are disqualified to sit in the board and (3) that a
board of canvassers which excludes from canvass the return from a precinct acts "in contravention
of law."

At any rate the language of section 28 is all-inclusive Thus:

Any member of a provincial board or of a municipal council who is a candidate for office in
any election, shall be incompetent to act on said body in the performance of the duties the of
relative to said election . . . .
The statute draws no distinction between the provincial board acting as a provincial board of
canvassers and the same board acting as a municipal canvassing body new municipalities, and so
we make none, in line with the maxim ubi lex non distinguit, nec nos distinguere debemos.

Third, it is now settled doctrine that the COMELEC has the power to annul an illegal canvass and an
illegal proclamation as when they are based on incomplete returns, and order a new canvass to be
made by counting the returns wrongfully excluded.10 If it has power to direct that certain copies of
election returns be used in preference to other copies of the same returns,11 there is no reason why it
cannot direct canvassing bodies to count all turns which are otherwise regular. Indeed, it is its duty
itc-alf

to do so, failing which it may be compelled by mandamus. As earlier pointed out, it is the ministerial
function a board of canvassers to count the results as they appeal in the returns which on their face
do not reveal any irregularities or falsities.

ACCORDINGLY, the resolutions dated December 4 and 8, 1967 of the Commission on Elections are
set aside, and the canvass of returns made and the subsequent proclamation of the respondent
Benito B. Galido are annulled. The respondent Commission on Elections is hereby directed. (1) to
appoint new members of the board of canvassers in substitution of Julito Moscoso and Quirico
Escaño, and (2) immediately thereafter to order the board of canvassers as reconstituted to
convene, canvass all votes including those appearing in the return from precinct 7, and, in
accordance with the results of such canvass, proclaim the winning candidates. Costs against the
private respondent Galido.

Concepcion, C.J., Reyes, J.B.L., Makalintal, Bengzon, J.P., Sanchez and Angeles, JJ., concur.

Dizon, Zaldivar and Fernando, JJ., took no part.

G.R. No. 155344 January 20, 2004

ROLANDO N. CANET, Petitioner,

vs.
MAYOR JULIETA A. DECENA, Respondent.

DECISION

YNARES-SANTIAGO, J.:

On July 27, 1998, the Sangguniang Bayan of Bula, Camarines Sur, passed Resolution No. 049,
Series of 1998,1 authorizing petitioner Rolando N. Canet to establish, operate and maintain a cockpit
in Sitio, Cabaya, San Roque, Bula, Camarines Sur.

Subsequently, the Sangguniang Bayan passed Ordinance No. 001, Series of 1999, entitled "An
Ordinance Regulating the Operation of Cockpits and Other Related Game-Fowl Activities in the
Municipality of Bula, Camarines Sur and Providing Penalties for any Violation to (sic) the Provisions
Thereof."2 Upon transmittal to respondent Mayor Julieta A. Decena of the said municipality, it was
noted that the Ordinance does not contain rules and regulations on cockfighting and other related
game fowl activities and a separability clause. The Ordinance was returned to the Sangguniang
Bayan. In Resolution No. 078, Series of 1999, Sangguniang Bayan resolved to withdraw, set aside
and shelf indefinitely Ordinance No. 001, Series of 1999.3

Meanwhile, petitioner, relying on Resolution No. 049, Series of 1998, of the Sangguniang
Bayan, filed an application for a mayor’s permit to operate, establish and maintain a cockpit in Sitio
Cabuya, San Roque, Bula, Camarines Sur. Respondent Mayor Julieta Decena denied the
application on the ground, among others, that under the Local Government Code of 1991, the
authority to give licenses for the establishment, operation and maintenance of cockpits as well as the
regulation of cockfighting and commercial breeding of gamecocks is vested in the Sangguniang
Bayan.4

Therefore, she cannot issue the said permit inasmuch as there was no ordinance passed by the
Sangguniang Bayan authorizing the same.

On July 26, 1999, petitioner filed a complaint5 against respondent Mayor with the Regional Trial Court
of Pili, Camarines Sur, Branch XXXI, which was docketed as Special Civil Action No. P-84-99, for
Mandamus and Damages with Application for Preliminary Mandatory Injunction. Respondent moved
for the dismissal of the complaint.

A Resolution was issued by the trial court on January 27, 2000, the dispositive portion of which
reads:

WHEREFORE, in view of the foregoing, the motion to dismiss is hereby denied. Let a writ of
preliminary mandatory injunction issue upon the posting of an injunction bond by the plaintiff in the
amount of FIFTY THOUSAND PESOS (P50,000.00) executed to defendant to stand for all the
damages which she may sustain if it should be finally found that plaintiff is not entitled thereto, said
mandatory injunction ordering and commanding herein defendant, incumbent Mayor of the
Municipality of Bula, Camarines Sur to approve and issue forthwith the Mayor’s Permit and to accept
the fees therefor for plaintiff to establish, maintain and operate a cockpit in Cabaya, San Roque,
Bula, Camarines Sur. Upon finality of this resolution, let the main case be set for further
proceedings.
SO ORDERED.6

The writ of preliminary mandatory injunction was issued on February 1, 2000.7

Respondent filed a petition for certiorari and prohibition with the Court of Appeals, docketed as CA-
G.R. SP No. 57797.8 On April 3, 2000, the Court of Appeals issued a temporary restraining
order,9 directing petitioner and the presiding judge to temporarily cease and desist from enforcing the
writ of preliminary mandatory injunction issued on February 1, 2000 in Special Civil Action No. P-84-
99.

On June 3, 2002, the Court of Appeals rendered the assailed Decision, the dispositive portion of
which reads:

WHEREFORE, the petition is granted and the questioned January 27, 2000 Resolution and
February 1, 2000 writ of preliminary mandatory injunction issued by respondent Judge are
ANNULLED AND SET ASIDE while the writ of preliminary injunction heretofore issued by this Court
on July 10, 2000 is made permanent. No costs.

SO ORDERED.10

Petitioner filed a Motion for Reconsideration which was denied for lack of merit in a Resolution dated
August 2002.11

Hence, this petition for review.

The core issue in this petition is whether or not respondent, in her capacity as Municipal Mayor, can
be compelled to issue the necessary business permit to petitioner absent a municipal ordinance
which would empower her to do so.

The pertinent provision of law in contention is Section 447 (a) (3) (v) of the Local Government Code
of 1991 (Republic Act No. 7160), which reads:

SEC. 447. Powers, Functions and Compensation. (a) The Sangguniang Bayan as the legislative
body of the municipality shall enact ordinances, approve resolutions and appropriate funds for the
general welfare of the municipality and its inhabitants pursuant to Section 16 of this Code and in the
proper exercise of the corporate powers of the municipality as provided for under Section 22, and
shall:

xxx xxx xxx

(3) Subject to the provisions of Book II of this Code, grant franchises, enact ordinances levying
taxes, fees and charges upon such conditions and for such purposes intended to promote the
general welfare of the inhabitants of the municipality, and pursuant to this legislative authority shall:

xxx xxx xxx

(v) Any law to the contrary notwithstanding, authorize and license the establishment, operation and
maintenance of cockpits and regulate cockfighting and commercial breeding of gamecocks:
Provided, That existing rights should not be prejudiced.
Petitioner admits that there is no ordinance in Bula, Camarines Sur which authorizes the grant of a
mayor’s permit to operate and maintain a cockfighting arena. However, he invokes Resolution No.
049, S. 1998, wherein the Sangguniang Bayan authorized him to operate a cockpit. Furthermore, he
cites Municipal Tax Ordinances Nos. 01, S. 1989, and 05, S. 1993, which generally provide for the
issuance of a mayor’s permit for the operation of businesses.

Municipal Tax Ordinances Nos. 01, S. 1989 and 05, S. 1993 contain general provisions for the
issuance of business permits but do not contain specific provisions prescribing the reasonable fees
to be paid in the operation of cockpits and other game fowl activities.

It was Ordinance No. 001, S. 1999 which provided for the collection of application filing fees, ocular
inspection fees, mayor’s permit fees, filing fees for the institution of complaints, entrance fees and
special derby assessments for the operation of cockpits.12 This Ordinance, however, was withdrawn
by the Sangguniang Bayan.

Hence, there being in effect no ordinance allowing the operation of a cockpit, Resolution No. 049, S.
1998, authorizing petitioner to establish, operate and maintain a cockpit in Bula, Camarines Sur
cannot be implemented. Suffice it to state in this regard that to compel respondent to issue the
mayor’s permit would not only be a violation of the explicit provisions of Section 447 of the Local
Government Code of 1991, but would also be an undue encroachment on respondent’s
administrative prerogatives.

Along the same vein, to read into the ordinances relied upon by petitioner objects which were neither
specifically mentioned nor enumerated would be to run afoul of the dictum that where a statute, by
its terms, is expressly limited to certain matters, it may not, by interpretation or construction, be
extended to other matters.13 In other words, 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
oft-repeated maxim expression unius est exlusio alterius.14 Elsewise stated, expressium facit cessare
tacitum – what is expressed puts an end to what is implied.15 The rule proceeds from the premise that
the legislative body would not have made specific enumerations in a statute, if it had the intention
not to restrict its meaning and confine its terms to those expressly mentioned.

Even on the assumption that there is in fact a legislative gap caused by such an omission, neither
could the Court presume otherwise and supply the details thereof, because a legislative lacuna
cannot be filled by judicial fiat.16 Indeed, courts may not, in the guise of interpretation, enlarge the
scope of a statute and include therein situations not provided nor intended by the lawmakers. An
omission at the time of the enactment, whether careless or calculated, cannot be judicially supplied
however after later wisdom may recommend the inclusion.17 Courts are not authorized to insert into
the law what they think should be in it or to supply what they think the legislature would have
supplied if its attention has been called to the omission.18
1âwphi1

Courts should not, by construction, revise even the most arbitrary and unfair action of the legislature,
nor rewrite the law to conform with what they think should be the law.19 Nor may they interpret into the
law a requirement which the law does not prescribe.20 Where a statute contains no limitations in its
operation or scope, courts should not engraft any.21 And where a provision of law expressly limits its
application to certain transactions, it cannot be extended to other transactions by interpretation.22 To
do any of such things would be to do violence to the language of the law and to invade the legislative
sphere.23

It should, furthermore, be borne in mind that cockfighting although authorized by law is still a form of
gambling. Gambling is essentially antagonistic to the aims of enhancing national productivity and
self-reliance.24 As has been previously said, a statute which authorizes a gambling activity or
business should be strictly construed, and every reasonable doubt resolved so as to limit rather than
expand the powers and rights claimed by franchise holders under its authority.25

WHEREFORE, in view of all the foregoing, the petition is hereby DENIED for lack of merit. The
Decision of the Court of Appeals dated June 3, 2002 in CA-G.R. SP No. 57797 is AFFIRMED in toto.

SO ORDERED.