EN BANC Agenda for October 18, 2005 Item No.

45

G.R. No. 168056 (ABAKADA Guro Party List Officer Samson S. Alcantara, et al. vs. The Hon. Executive Secretary Eduardo R. Ermita); G.R. No. 168207 (Aquilino Q. Pimentel, Jr., et al. vs. Executive Secretary Eduardo R. Ermita, et al.); G.R. No. 168461 (Association of Pilipinas Shell Dealers, Inc., et al. vs. Cesar V. Purisima, et al.); G.R. No. 168463 (Francis Joseph G. Escudero vs. Cesar V. Purisima, et al); and G.R. No. 168730 (Bataan Governor Enrique T. Garcia, Jr. vs. Hon. Eduardo R. Ermita, et al.)

RESOLUTION
For resolution are the following motions for reconsideration of the Courts Decision dated September 1, 2005 upholding the constitutionality of Republic Act No. 9337 or the VAT Reform Act[1]:

1) Motion for Reconsideration filed by petitioners in G.R. No. 168463, Escudero, et al., on the following grounds: A. THE DELETION OF THE NO PASS ON PROVISIONS FOR THE SALE OF PETROLEUM PRODUCTS AND POWER GENERATION SERVICES CONSTITUTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION ON THE PART OF THE BICAMERAL CONFERENCE COMMITTEE. B. REPUBLIC ACT NO. 9337 GROSSLY VIOLATES THE CONSTITUTIONAL IMPERATIVE ON EXCLUSIVE ORIGINATION OF REVENUE BILLS UNDER 24, ARTICLE VI, 1987 PHILIPPINE CONSTITUTION. C. REPUBLIC ACT NO. 9337S STAND-BY AUTHORITY TO THE EXECUTIVE TO INCREASE THE VAT RATE, ESPECIALLY ON ACCOUNT OF THE EFFECTIVE RECOMMENDATORY POWER GRANTED TO THE SECRETARY OF FINANCE, CONSTITUTES UNDUE DELEGATION OF LEGISLATIVE AUTHORITY.

2) Motion for Reconsideration of petitioner in G.R. No. 168730, Bataan Governor Enrique T. Garcia, Jr., with the argument that burdening the consumers with significantly higher prices under a VAT regime vis-vis a 3% gross tax renders the law unconstitutional for being arbitrary, oppressive and inequitable. and

3) Motion for Reconsideration by petitioners Association of Pilipinas Shell Dealers, Inc. in G.R. No. 168461, on the grounds that:

I. This Honorable Court erred in upholding the constitutionality of Section 110(A)(2) and Section 110(B) of the NIRC, as amended by the EVAT Law, imposing limitations on the amount of input VAT that may be claimed as a credit against output VAT, as well as Section 114(C) of the NIRC, as amended by the EVAT Law, requiring the government or any of its instrumentalities to withhold a 5% final withholding VAT on their gross payments on purchases of goods and services, and finding that the questioned provisions:

A.

are not arbitrary, oppressive and consfiscatory as to amount to a deprivation of property without due process of law in violation of Article III, Section 1 of the 1987 Philippine Constitution; do not violate the equal protection clause prescribed under Article III, Section 1 of the 1987 Philippine Constitution; and apply uniformly to all those belonging to the same class and do not violate Article VI, Section 28(1) of the 1987 Philippine Constitution.

B. C.

II. This Honorable Court erred in upholding the constitutionality of Section 110(B) of the NIRC, as amended by the EVAT Law, imposing a limitation on the amount of input VAT that may be claimed as a credit against output VAT notwithstanding the finding that the tax is not progressive as exhorted by Article VI, Section 28(1) of the 1987 Philippine Constitution.

Respondents filed their Consolidated Comment. Petitioner Garcia filed his Reply.

Petitioners Escudero, et al., insist that the bicameral conference committee should not even have acted on the no pass-on provisions since there is no disagreement between House Bill Nos. 3705 and 3555 on the one hand, and Senate Bill No. 1950 on the other, with regard to the no pass-on provision for the sale of service for power generation because both the Senate and the House were in agreement that the VAT burden for the sale of such service shall not be passed on to the end-consumer. As to the no pass-on provision for sale of petroleum products, petitioners argue that the fact that the presence of such a no pass-on provision in the House version and the absence thereof in the Senate Bill means there is no conflict because a House provision cannot be in conflict with something that does not exist.

Such argument is flawed. Note that the rules of both houses of Congress provide that a conference committee shall settle the differences in the respective bills of each house. Verily, the fact that a no pass-on provision is present in one version but absent in the other, and one version intends two industries, i.e., power generation companies and petroleum sellers, to bear the burden of the tax, while the other version intended only the industry of power generation, transmission and distribution to be saddled with such burden, clearly shows that there are indeed differences between the bills coming from each house, which differences should be acted upon by the bicameral conference committee. It is incorrect to conclude that there is no clash between two opposing forces with regard to the no pass-on provision for VAT on the sale of petroleum products merely because such provision exists in the House version while it is absent in the Senate version. It is precisely the absence of such provision in the Senate bill and the presence thereof in the House bills that causes the conflict. The absence of the provision in the Senate bill shows the Senates disagreement to the intention of the House of Representatives make the sellers of petroleum bear the burden of the VAT. Thus, there are indeed two opposing forces: on one side, the House of Representatives which wants petroleum dealers to be saddled with the burden of paying VAT and on the other, the Senate which does not see it proper to make that particular industry bear said burden. Clearly, such conflicts and differences between the no passon provisions in the Senate and House bills had to be acted upon by the bicameral conference committee as mandated by the rules of both houses of Congress.

Moreover, the deletion of the no pass-on provision made the present VAT law more in consonance with the very nature of VAT which, as stated in the Decision promulgated on September 1, 2005, is a tax on spending or consumption, thus, the burden thereof is ultimately borne by the end-consumer.

Escudero, et al., then claim that there had been changes introduced in the Rules of the House of Representatives regarding the conduct of the House panel in a bicameral conference committee, since the time of Tolentino vs. Secretary of Finance[2] to act as safeguards against possible abuse of authority by the House members of the bicameral conference committee. Even assuming that the rule requiring the House panel to report back to the House if there are substantial differences in the House and Senate bills had indeed been introduced after Tolentino, the Court stands by its ruling that the issue of whether or not the House panel in the bicameral conference committee complied with said internal rule cannot be inquired into by the Court. To reiterate, mere failure to conform to parliamentary usage will not invalidate the action (taken by a deliberative body) when the requisite number of members have agreed to a particular measure.[3]

Escudero, et. al., also contend that Republic Act No. 9337 grossly violates the constitutional imperative on exclusive origination of revenue bills under Section 24 of Article VI of the Constitution when the Senate introduced amendments not connected with VAT.

The Court is not persuaded.

Article VI, Section 24 of the Constitution provides:

Sec. 24 All appropriation, revenue or tariff bills, bills authorizing increase of the public debt, bills of local application, and private bills shall originate exclusively in the House of Representatives, but the Senate may propose or concur with amendments.

Section 24 speaks of origination of certain bills from the House of Representatives which has been interpreted in the Tolentino case as follows:

To begin with, it is not the law but the revenue bill which is required by the Constitution to "originate exclusively" in the House of Representatives. It is important to emphasize this, because a bill originating in the

House may undergo such extensive changes in the Senate that the result may be a rewriting of the whole At this point, what is important to note is that, as a result of the Senate action, a distinct bill may be produced. To insist that a revenue statute and not only the bill which initiated the legislative process culminating in the enactment of the law must substantially be the same as the House bill would be to deny the Senate's power not only to "concur with amendments" but also to " propose amendments." It would be to violate the coequality of legislative power of the two houses of Congress and in fact make the House superior to the Senate. Given, then, the power of the Senate to propose amendments, the Senate can propose its own version even with respect to bills which are required by the Constitution to originate in the House. ... Indeed, what the Constitution simply means is that the initiative for filing revenue, tariff, or tax bills, bills authorizing an increase of the public debt, private bills and bills of local application must come from the House of Representatives on the theory that, elected as they are from the districts, the members of the House can be expected to be more sensitive to the local needs and problems. On the other hand, the senators, who are elected at large, are expected to approach the same problems from the national perspective. Both views are thereby made to bear on the enactment of such laws.[4]

Clearly, after the House bills as approved on third reading are duly transmitted to the Senate, the Constitution states that the latter can propose or concur with amendments. The Court finds that the subject provisions found in the Senate bill are within the purview of such constitutional provision as declared in the Tolentino case.

The intent of the House of Representatives in initiating House Bill Nos. 3555 and 3705 was to solve the countrys serious financial problems. It was stated in the respective explanatory notes that there is a need for the government to make significant expenditure savings and a credible package of revenue measures. These measures include improvement of tax administration and control and leakages in revenues from income taxes and value added tax. It is also stated that one opportunity that could be beneficial to the overall status of our economy is to review existing tax rates, evaluating the relevance given our present conditions. Thus, with these purposes in mind and to accomplish these purposes for which the house bills were filed, i.e., to raise revenues for the government, the Senate introduced amendments on income taxes, which as admitted by Senator Ralph Recto, would yield about P10.5 billion a year.

Moreover, since the objective of these house bills is to raise revenues, the increase in corporate income taxes would be a great help and would also soften the impact of VAT measure on the consumers by distributing the burden across all sectors instead of putting it entirely on the shoulders of the consumers.

As to the other National Internal Revenue Code (NIRC) provisions found in Senate Bill No. 1950, i.e., percentage taxes, franchise taxes, amusement and excise taxes, these provisions are needed so as to cushion the effects of VAT on consumers. As we said in our decision, certain goods and services which were subject to percentage tax and excise tax would no longer be VAT exempt, thus, the consumer would be burdened more as they would be paying the VAT in addition to these taxes. Thus, there is a need to amend these sections to soften the impact of VAT. The Court finds no reason to reverse the earlier ruling that the Senate introduced amendments that are germane to the subject matter and purposes of the house bills.

Petitioners Escudero, et al., also reiterate that R.A. No. 9337s stand- by authority to the Executive to increase the VAT rate, especially on account of the recommendatory power granted to the Secretary of Finance, constitutes undue delegation of legislative power. They submit that the recommendatory power given to the Secretary of Finance in regard to the occurrence of either of two events using the Gross Domestic Product (GDP) as a benchmark necessarily and inherently required extended analysis and evaluation, as well as policy making.

There is no merit in this contention. The Court reiterates that in making his recommendation to the President on the existence of either of the two conditions, the Secretary of Finance is not acting as the alter ego of the President or even her subordinate. He is acting as the agent of the legislative department, to determine and declare the event upon which its expressed will is to take effect. The Secretary of Finance becomes the means or tool by which legislative policy is determined and implemented, considering that he possesses all the facilities to gather data and information and has a much broader perspective to properly evaluate them. His function is to gather and collate statistical data and other pertinent information and verify if any of the two conditions laid out by Congress is present. Congress granted the Secretary of Finance the authority to ascertain the existence of a fact, namely, whether by December 31, 2005, the value-added tax collection as a percentage of GDP of the previous year exceeds two and four-fifth percent (24/5%) or the national government deficit as a percentage of GDP of the previous year exceeds one and one-half percent (1%). If either of these two instances has occurred, the Secretary of Finance, by legislative mandate, must submit such information to the President. Then the 12% VAT rate must be imposed by the President effective January 1, 2006. Congress does not abdicate its functions or unduly delegate power when it describes what job must be done, who must do it, and what is the scope of his authority; in our complex economy that is frequently the only way in which the legislative process can go forward. There is

no undue delegation of legislative power but only of the discretion as to the execution of a law. This is constitutionally permissible. Congress did not delegate the power to tax but the mere implementation of the law. The intent and will to increase the VAT rate to 12% came from Congress and the task of the President is to simply execute the legislative policy. That Congress chose to use the GDP as a benchmark to determine economic growth is not within the province of the Court to inquire into, its task being to interpret the law.

With regard to petitioner Garcias arguments, the Court also finds the same to be without merit. As stated in the assailed Decision, the Court recognizes the burden that the consumers will be bearing with the passage of R.A. No. 9337. But as was also stated by the Court, it cannot strike down the law as unconstitutional simply because of its yokes. The legislature has spoken and the only role that the Court plays in the picture is to determine whether the law was passed with due regard to the mandates of the Constitution. Inasmuch as the Court finds that there are no constitutional infirmities with its passage, the validity of the law must therefore be upheld.

Finally, petitioners Association of Pilipinas Shell Dealers, Inc. reiterated their arguments in the petition, citing this time, the dissertation of Associate Justice Dante O. Tinga in his Dissenting Opinion.

The glitch in petitioners arguments is that it presents figures based on an event that is yet to happen. Their illustration of the possible effects of the 70% limitation, while seemingly concrete, still remains theoretical. Theories have no place in this case as the Court must only deal with an existing case or controversy that is appropriate or ripe for judicial determination, not one that is conjectural or merely anticipatory.[5] The Court will not intervene absent 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.[6]

The impact of the 70% limitation on the creditable input tax will ultimately depend on how one manages and operates its business. Market forces, strategy and acumen will dictate their moves. With or without these VAT provisions, an entrepreneur who does not have the ken to adapt to economic variables will surely perish in the competition. The arguments posed are within the realm of business, and the solution lies also in business.

Petitioners also reiterate their argument that the input tax is a property or a property right. In the same breath, the Court reiterates its finding that it is not a property or a property

right, and a VAT-registered persons entitlement to the creditable input tax is a mere statutory privilege.

Petitioners also contend that even if the right to credit the input VAT is merely a statutory privilege, it has already evolved into a vested right that the State cannot remove.

As the Court stated in its Decision, the right to credit the input tax is a mere creation of law. Prior to the enactment of multi-stage sales taxation, the sales taxes paid at every level of distribution are not recoverable from the taxes payable. With the advent of Executive Order No. 273 imposing a 10% multi-stage tax on all sales, it was only then that the crediting of the input tax paid on purchase or importation of goods and services by VAT-registered persons against the output tax was established. This continued with the Expanded VAT Law (R.A. No. 7716), and The Tax Reform Act of 1997 (R.A. No. 8424). The right to credit input tax as against the output tax is clearly a privilege created by law, a privilege that also the law can limit. It should be stressed that a person has no vested right in statutory privileges.[7]

The concept of vested right is a consequence of the constitutional guaranty of due process that expresses a present fixed interest which in right reason and natural justice is protected against arbitrary state action; it includes not only legal or equitable title to the enforcement of a demand but also exemptions from new obligations created after the right has become vested. Rights are considered vested when the right to enjoyment is a present interest, absolute, unconditional, and perfect or fixed and irrefutable.[8] As adeptly stated by Associate Justice Minita V. Chico-Nazario in her Concurring Opinion, which the Court adopts, petitioners right to the input VAT credits has not yet vested, thus

It should be remembered that prior to Rep. Act No. 9337, the petroleum dealers input VAT credits were inexistent they were unrecognized and disallowed by law. The petroleum dealers had no such property called input VAT credits. It is only rational, therefore, that they cannot acquire vested rights to the use of such input VAT credits when they were never entitled to such credits in the first place, at least, not until Rep. Act No. 9337. My view, at this point, when Rep. Act No. 9337 has not yet even been implemented, is that petroleum dealers right to use their input VAT as credit against their output VAT unlimitedly has not vested, being a mere expectancy of a future benefit and being contingent on the continuance of Section 110 of the

National Internal Revenue Code of 1997, prior to its amendment by Rep. Act No. 9337.

The elucidation of Associate Justice Artemio V. Panganiban is likewise worthy of note, to wit:

Moreover, there is no vested right in generally accepted accounting principles. These refer to accounting concepts, measurement techniques, and standards of presentation in a companys financial statements, and are not rooted in laws of nature, as are the laws of physical science, for these are merely developed and continually modified by local and international regulatory accounting bodies. To state otherwise and recognize such asset account as a vested right is to limit the taxing power of the State. Unlimited, plenary, comprehensive and supreme, this power cannot be unduly restricted by mere creations of the State.

More importantly, the assailed provisions of R.A. No. 9337 already involve legislative policy and wisdom. So long as there is a public end for which R.A. No. 9337 was passed, the means through which such end shall be accomplished is for the legislature to choose so long as it is within constitutional bounds. As stated in Carmichael vs. Southern Coal & Coke Co.:

If the question were ours to decide, we could not say that the legislature, in adopting the present scheme rather than another, had no basis for its choice, or was arbitrary or unreasonable in its action. But, as the state is free to distribute the burden of a tax without regard to the particular purpose for which it is to be used, there is no warrant in the Constitution for setting the tax aside because a court thinks that it could have distributed the burden more wisely. Those are functions reserved for the legislature.[9]

WHEREFORE, the Motions for Reconsideration are hereby DENIED WITH FINALITY. The temporary restraining order issued by the Court is LIFTED.

SO ORDERED.

(The Justices who filed their respective concurring and dissenting opinions maintain their respective positions. Justice Dante O. Tinga filed a dissenting opinion to the present Resolution; while Justice Consuelo Ynares- Santiago joins him in his dissenting opinion.)

[1] [2]

Also referred to as the EVAT Law. G.R. Nos. 115455, 115525, 115543, 115544, 115754, 115781, 115852, 115873 and 115931, August 25, 1994, 235 SCRA 630.

[3] Farias vs. The Executive Secretary, G.R. No. 147387, December 10, 2003, 417 SCRA 503, 530. [4] [5] [6] Supra, note no. 2, pp. 661-663. Velarde vs. Social Justice Society, G.R. No. 159357, April 28, 2004, 428 SCRA 283. Information Technology Foundation of the Phils. vs. COMELEC, G.R. No. 159139, June 15, 2005. Lahom vs. Sibulo, G.R. No. 143989, July 14, 2003, 406 SCRA 135. Ibid. 301 U.S. 495.

[7] [8] [9]

EN BANC Agenda for October 18, 2005 Item No. 45

G.R. No. 168056 (ABAKADA Guro Party List Officer Samson S. Alcantara, et al. vs. The Hon. Executive Secretary Eduardo R. Ermita); G.R. No. 168207 (Aquilino Q. Pimentel, Jr., et al. vs. Executive Secretary Eduardo R. Ermita, et al.); G.R. No. 168461 (Association of Pilipinas Shell Dealers, Inc., et al. vs. Cesar V. Purisima, et al.); G.R. No. 168463 (Francis Joseph G. Escudero vs. Cesar V. Purisima, et al); and G.R. No. 168730 (Bataan Governor Enrique T. Garcia, Jr. vs. Hon. Eduardo R. Ermita, et al.)

RESOLUTION
For resolution are the following motions for reconsideration of the Courts Decision dated September 1, 2005 upholding the constitutionality of Republic Act No. 9337 or the VAT Reform Act[1]:

1) Motion for Reconsideration filed by petitioners in G.R. No. 168463, Escudero, et al., on the following grounds: A. THE DELETION OF THE NO PASS ON PROVISIONS FOR THE SALE OF PETROLEUM PRODUCTS AND POWER GENERATION SERVICES CONSTITUTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION ON THE PART OF THE BICAMERAL CONFERENCE COMMITTEE. B. REPUBLIC ACT NO. 9337 GROSSLY VIOLATES THE CONSTITUTIONAL IMPERATIVE ON EXCLUSIVE ORIGINATION OF REVENUE BILLS UNDER 24, ARTICLE VI, 1987 PHILIPPINE CONSTITUTION. C. REPUBLIC ACT NO. 9337S STAND-BY AUTHORITY TO THE EXECUTIVE TO INCREASE THE VAT RATE, ESPECIALLY ON ACCOUNT OF THE EFFECTIVE RECOMMENDATORY POWER GRANTED TO THE SECRETARY OF FINANCE, CONSTITUTES UNDUE DELEGATION OF LEGISLATIVE AUTHORITY.

2) Motion for Reconsideration of petitioner in G.R. No. 168730, Bataan Governor Enrique T. Garcia, Jr., with the argument that burdening the consumers with significantly higher prices under a VAT regime vis-vis a 3% gross tax renders the law unconstitutional for being arbitrary, oppressive and inequitable. and

3) Motion for Reconsideration by petitioners Association of Pilipinas Shell Dealers, Inc. in G.R. No. 168461, on the grounds that:

I. This Honorable Court erred in upholding the constitutionality of Section 110(A)(2) and Section 110(B) of the NIRC, as amended by the EVAT Law, imposing limitations on the amount of input VAT that may be claimed as a credit against output VAT, as well as Section 114(C) of the NIRC, as amended by the EVAT Law, requiring the government or any of its instrumentalities to withhold a 5% final withholding VAT on their gross payments on purchases of goods and services, and finding that the questioned provisions:

A.

are not arbitrary, oppressive and consfiscatory as to amount to a deprivation of property without due process of law in violation of Article III, Section 1 of the 1987 Philippine Constitution; do not violate the equal protection clause prescribed under Article III, Section 1 of the 1987 Philippine Constitution; and apply uniformly to all those belonging to the same class and do not violate Article VI, Section 28(1) of the 1987 Philippine Constitution.

B. C.

II. This Honorable Court erred in upholding the constitutionality of Section 110(B) of the NIRC, as amended by the EVAT Law, imposing a limitation on the amount of input VAT that may be claimed as a credit against output VAT notwithstanding the finding that the tax is not progressive as exhorted by Article VI, Section 28(1) of the 1987 Philippine Constitution.

Respondents filed their Consolidated Comment. Petitioner Garcia filed his Reply.

Petitioners Escudero, et al., insist that the bicameral conference committee should not even have acted on the no pass-on provisions since there is no disagreement between House Bill Nos. 3705 and 3555 on the one hand, and Senate Bill No. 1950 on the other, with regard to the no pass-on provision for the sale of service for power generation because both the Senate and the House were in agreement that the VAT burden for the sale of such service shall not be passed on to the end-consumer. As to the no pass-on provision for sale of petroleum products, petitioners argue that the fact that the presence of such a no pass-on provision in the House version and the absence thereof in the Senate Bill means there is no conflict because a House provision cannot be in conflict with something that does not exist.

Such argument is flawed. Note that the rules of both houses of Congress provide that a conference committee shall settle the differences in the respective bills of each house. Verily, the fact that a no pass-on provision is present in one version but absent in the other, and one version intends two industries, i.e., power generation companies and petroleum sellers, to bear the burden of the tax, while the other version intended only the industry of power generation, transmission and distribution to be saddled with such burden, clearly shows that there are indeed differences between the bills coming from each house, which differences should be acted upon by the bicameral conference committee. It is incorrect to conclude that there is no clash between two opposing forces with regard to the no pass-on provision for VAT on the sale of petroleum products merely because such provision exists in the House version while it is absent in the Senate version. It is precisely the absence of such provision in the Senate bill and the presence thereof in the House bills that causes the conflict. The absence of the provision in the Senate bill shows the Senates disagreement to the intention of the House of Representatives make the sellers of petroleum bear the burden of the VAT. Thus, there are indeed two opposing forces: on one side, the House of Representatives which wants petroleum dealers to be saddled with the burden of paying VAT and on the other, the Senate which does not see it proper to make that particular industry bear said burden. Clearly, such conflicts and differences between the no passon provisions in the Senate and House bills had to be acted upon by the bicameral conference committee as mandated by the rules of both houses of Congress.

Moreover, the deletion of the no pass-on provision made the present VAT law more in consonance with the very nature of VAT which, as stated in the Decision promulgated on September 1, 2005, is a tax on spending or consumption, thus, the burden thereof is ultimately borne by the end-consumer.

Escudero, et al., then claim that there had been changes introduced in the Rules of the House of Representatives regarding the conduct of the House panel in a bicameral conference committee, since the time of Tolentino vs. Secretary of Finance[2] to act as safeguards against possible abuse of authority by the House members of the bicameral conference committee. Even assuming that the rule requiring the House panel to report back to the House if there are substantial differences in the House and Senate bills had indeed been introduced after Tolentino, the Court stands by its ruling that the issue of whether or not the House panel in the bicameral conference committee complied with said internal rule cannot be inquired into by the Court. To reiterate, mere failure to conform to parliamentary usage will not invalidate the action (taken by a deliberative body) when the requisite number of members have agreed to a particular measure.[3]

Escudero, et. al., also contend that Republic Act No. 9337 grossly violates the constitutional imperative on exclusive origination of revenue bills under Section 24 of Article VI of the Constitution when the Senate introduced amendments not connected with VAT.

The Court is not persuaded.

Article VI, Section 24 of the Constitution provides:

Sec. 24 All appropriation, revenue or tariff bills, bills authorizing increase of the public debt, bills of local application, and private bills shall originate exclusively in the House of Representatives, but the Senate may propose or concur with amendments.

Section 24 speaks of origination of certain bills from the House of Representatives which has been interpreted in the Tolentino case as follows:

To begin with, it is not the law but the revenue bill which is required by the Constitution to "originate exclusively" in the House of Representatives. It is important to emphasize this, because a bill originating in the

House may undergo such extensive changes in the Senate that the result may be a rewriting of the whole At this point, what is important to note is that, as a result of the Senate action, a distinct bill may be produced. To insist that a revenue statute and not only the bill which initiated the legislative process culminating in the enactment of the law must substantially be the same as the House bill would be to deny the Senate's power not only to "concur with amendments" but also to " propose amendments." It would be to violate the coequality of legislative power of the two houses of Congress and in fact make the House superior to the Senate. Given, then, the power of the Senate to propose amendments, the Senate can propose its own version even with respect to bills which are required by the Constitution to originate in the House. ... Indeed, what the Constitution simply means is that the initiative for filing revenue, tariff, or tax bills, bills authorizing an increase of the public debt, private bills and bills of local application must come from the House of Representatives on the theory that, elected as they are from the districts, the members of the House can be expected to be more sensitive to the local needs and problems. On the other hand, the senators, who are elected at large, are expected to approach the same problems from the national perspective. Both views are thereby made to bear on the enactment of such laws.[4]

Clearly, after the House bills as approved on third reading are duly transmitted to the Senate, the Constitution states that the latter can propose or concur with amendments. The Court finds that the subject provisions found in the Senate bill are within the purview of such constitutional provision as declared in the Tolentino case.

The intent of the House of Representatives in initiating House Bill Nos. 3555 and 3705 was to solve the countrys serious financial problems. It was stated in the respective explanatory notes that there is a need for the government to make significant expenditure savings and a credible package of revenue measures. These measures include improvement of tax administration and control and leakages in revenues from income taxes and value added tax. It is also stated that one opportunity that could be beneficial to the overall status of our economy is to review existing tax rates, evaluating the relevance given our present conditions. Thus, with these purposes in mind and to accomplish these purposes for which the house bills were filed, i.e., to raise revenues for the government, the Senate introduced amendments on income taxes, which as admitted by Senator Ralph Recto, would yield about P10.5 billion a year.

Moreover, since the objective of these house bills is to raise revenues, the increase in corporate income taxes would be a great help and would also soften the impact of VAT measure on the consumers by distributing the burden across all sectors instead of putting it entirely on the shoulders of the consumers.

As to the other National Internal Revenue Code (NIRC) provisions found in Senate Bill No. 1950, i.e., percentage taxes, franchise taxes, amusement and excise taxes, these provisions are needed so as to cushion the effects of VAT on consumers. As we said in our decision, certain goods and services which were subject to percentage tax and excise tax would no longer be VAT exempt, thus, the consumer would be burdened more as they would be paying the VAT in addition to these taxes. Thus, there is a need to amend these sections to soften the impact of VAT. The Court finds no reason to reverse the earlier ruling that the Senate introduced amendments that are germane to the subject matter and purposes of the house bills.

Petitioners Escudero, et al., also reiterate that R.A. No. 9337s stand- by authority to the Executive to increase the VAT rate, especially on account of the recommendatory power granted to the Secretary of Finance, constitutes undue delegation of legislative power. They submit that the recommendatory power given to the Secretary of Finance in regard to the occurrence of either of two events using the Gross Domestic Product (GDP) as a benchmark necessarily and inherently required extended analysis and evaluation, as well as policy making.

There is no merit in this contention. The Court reiterates that in making his recommendation to the President on the existence of either of the two conditions, the Secretary of Finance is not acting as the alter ego of the President or even her subordinate. He is acting as the agent of the legislative department, to determine and declare the event upon which its expressed will is to take effect. The Secretary of Finance becomes the means or tool by which legislative policy is determined and implemented, considering that he possesses all the facilities to gather data and information and has a much broader perspective to properly evaluate them. His function is to gather and collate statistical data and other pertinent information and verify if any of the two conditions laid out by Congress is present. Congress granted the Secretary of Finance the authority to ascertain the existence of a fact, namely, whether by December 31, 2005, the value-added tax collection as a percentage of GDP of the previous year exceeds two and four-fifth percent (24/5%) or the national government deficit as a percentage of GDP of the previous year exceeds one and one-half percent (1%). If either of these two instances has occurred, the Secretary of Finance, by legislative mandate, must submit such information to the President. Then the 12% VAT rate must be imposed by the President effective January 1, 2006. Congress does not abdicate its functions or unduly delegate power when it describes what job must be done, who must do it, and what is the scope of his authority; in our complex economy that is frequently the only way in which the legislative process can go forward. There is

no undue delegation of legislative power but only of the discretion as to the execution of a law. This is constitutionally permissible. Congress did not delegate the power to tax but the mere implementation of the law. The intent and will to increase the VAT rate to 12% came from Congress and the task of the President is to simply execute the legislative policy. That Congress chose to use the GDP as a benchmark to determine economic growth is not within the province of the Court to inquire into, its task being to interpret the law.

With regard to petitioner Garcias arguments, the Court also finds the same to be without merit. As stated in the assailed Decision, the Court recognizes the burden that the consumers will be bearing with the passage of R.A. No. 9337. But as was also stated by the Court, it cannot strike down the law as unconstitutional simply because of its yokes. The legislature has spoken and the only role that the Court plays in the picture is to determine whether the law was passed with due regard to the mandates of the Constitution. Inasmuch as the Court finds that there are no constitutional infirmities with its passage, the validity of the law must therefore be upheld.

Finally, petitioners Association of Pilipinas Shell Dealers, Inc. reiterated their arguments in the petition, citing this time, the dissertation of Associate Justice Dante O. Tinga in his Dissenting Opinion.

The glitch in petitioners arguments is that it presents figures based on an event that is yet to happen. Their illustration of the possible effects of the 70% limitation, while seemingly concrete, still remains theoretical. Theories have no place in this case as the Court must only deal with an existing case or controversy that is appropriate or ripe for judicial determination, not one that is conjectural or merely anticipatory.[5] The Court will not intervene absent 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.[6]

The impact of the 70% limitation on the creditable input tax will ultimately depend on how one manages and operates its business. Market forces, strategy and acumen will dictate their moves. With or without these VAT provisions, an entrepreneur who does not have the ken to adapt to economic variables will surely perish in the competition. The arguments posed are within the realm of business, and the solution lies also in business.

Petitioners also reiterate their argument that the input tax is a property or a property right. In the same breath, the Court reiterates its finding that it is not a property or a property

right, and a VAT-registered persons entitlement to the creditable input tax is a mere statutory privilege.

Petitioners also contend that even if the right to credit the input VAT is merely a statutory privilege, it has already evolved into a vested right that the State cannot remove.

As the Court stated in its Decision, the right to credit the input tax is a mere creation of law. Prior to the enactment of multi-stage sales taxation, the sales taxes paid at every level of distribution are not recoverable from the taxes payable. With the advent of Executive Order No. 273 imposing a 10% multi-stage tax on all sales, it was only then that the crediting of the input tax paid on purchase or importation of goods and services by VAT-registered persons against the output tax was established. This continued with the Expanded VAT Law (R.A. No. 7716), and The Tax Reform Act of 1997 (R.A. No. 8424). The right to credit input tax as against the output tax is clearly a privilege created by law, a privilege that also the law can limit. It should be stressed that a person has no vested right in statutory privileges.[7]

The concept of vested right is a consequence of the constitutional guaranty of due process that expresses a present fixed interest which in right reason and natural justice is protected against arbitrary state action; it includes not only legal or equitable title to the enforcement of a demand but also exemptions from new obligations created after the right has become vested. Rights are considered vested when the right to enjoyment is a present interest, absolute, unconditional, and perfect or fixed and irrefutable.[8] As adeptly stated by Associate Justice Minita V. Chico-Nazario in her Concurring Opinion, which the Court adopts, petitioners right to the input VAT credits has not yet vested, thus

It should be remembered that prior to Rep. Act No. 9337, the petroleum dealers input VAT credits were inexistent they were unrecognized and disallowed by law. The petroleum dealers had no such property called input VAT credits. It is only rational, therefore, that they cannot acquire vested rights to the use of such input VAT credits when they were never entitled to such credits in the first place, at least, not until Rep. Act No. 9337. My view, at this point, when Rep. Act No. 9337 has not yet even been implemented, is that petroleum dealers right to use their input VAT as credit against their output VAT unlimitedly has not vested, being a mere expectancy of a future benefit and being contingent on the continuance of Section 110 of the

National Internal Revenue Code of 1997, prior to its amendment by Rep. Act No. 9337.

The elucidation of Associate Justice Artemio V. Panganiban is likewise worthy of note, to wit:

Moreover, there is no vested right in generally accepted accounting principles. These refer to accounting concepts, measurement techniques, and standards of presentation in a companys financial statements, and are not rooted in laws of nature, as are the laws of physical science, for these are merely developed and continually modified by local and international regulatory accounting bodies. To state otherwise and recognize such asset account as a vested right is to limit the taxing power of the State. Unlimited, plenary, comprehensive and supreme, this power cannot be unduly restricted by mere creations of the State.

More importantly, the assailed provisions of R.A. No. 9337 already involve legislative policy and wisdom. So long as there is a public end for which R.A. No. 9337 was passed, the means through which such end shall be accomplished is for the legislature to choose so long as it is within constitutional bounds. As stated in Carmichael vs. Southern Coal & Coke Co.:

If the question were ours to decide, we could not say that the legislature, in adopting the present scheme rather than another, had no basis for its choice, or was arbitrary or unreasonable in its action. But, as the state is free to distribute the burden of a tax without regard to the particular purpose for which it is to be used, there is no warrant in the Constitution for setting the tax aside because a court thinks that it could have distributed the burden more wisely. Those are functions reserved for the legislature.[9]

WHEREFORE, the Motions for Reconsideration are hereby DENIED WITH FINALITY. The temporary restraining order issued by the Court is LIFTED.

SO ORDERED.

(The Justices who filed their respective concurring and dissenting opinions maintain their respective positions. Justice Dante O. Tinga filed a dissenting opinion to the present Resolution; while Justice Consuelo Ynares- Santiago joins him in his dissenting opinion.)

[1] [2]

Also referred to as the EVAT Law. G.R. Nos. 115455, 115525, 115543, 115544, 115754, 115781, 115852, 115873 and 115931, August 25, 1994, 235 SCRA 630.

[3] Farias vs. The Executive Secretary, G.R. No. 147387, December 10, 2003, 417 SCRA 503, 530. [4] [5] [6] Supra, note no. 2, pp. 661-663. Velarde vs. Social Justice Society, G.R. No. 159357, April 28, 2004, 428 SCRA 283. Information Technology Foundation of the Phils. vs. COMELEC, G.R. No. 159139, June 15, 2005. Lahom vs. Sibulo, G.R. No. 143989, July 14, 2003, 406 SCRA 135. Ibid. 301 U.S. 495.

[7] [8] [9]

THIRD DIVISION [G.R. No. 140500. January 21, 2002] ERNESTINA BERNABE, petitioner, vs. CAROLINA ALEJO as guardian ad litem for the minor ADRIAN BERNABE, respondent. DECISION PANGANIBAN, J.: The right to seek recognition granted by the Civil Code to illegitimate children who were still minors at the time the Family Code took effect cannot be impaired or taken away. The minors have up to four years from attaining majority age within which to file an action for recognition. Statement of the Case Before us is a Petitioni[1] for Review on Certiorari under Rule 45 of the Rules of Court, praying for (1) the nullification of the July 7, 1999 Court of Appealsii[2] (CA) Decisioniii[3] in CA-GR CV No. 51919 and the October 14, 1999 CA Resolutioniv[4] denying petitioners Motion for Reconsideration, as well as (2) the reinstatement of the two Orders issued by the Regional Trial Court (RTC) of Pasay City (Branch 109) concerning the same case. The dispositive portion of the assailed Decision reads as follows: WHEREFORE, premises considered, the order of the lower court dismissing Civil Case No. 940562 is REVERSED and SET ASIDE. Let the records of this case be remanded to the lower court for trial on the merits.v[5] The Facts The undisputed facts are summarized by the Court of Appeals in this wise: The late Fiscal Ernesto A. Bernabe allegedly fathered a son with his secretary of twenty-three (23) years, herein plaintiff-appellant Carolina Alejo. The son was born on September 18, 1981 and was named Adrian Bernabe. Fiscal Bernabe died on August 13, 1993, while his wife Rosalina died on December 3 of the same year, leaving Ernestina as the sole surviving heir. On May 16, 1994, Carolina, in behalf of Adrian, filed the aforesaid complaint praying that Adrian be declared an acknowledged illegitimate son of Fiscal Bernabe and as such he (Adrian) be given his share in Fiscal Bernabes estate, which is now being held by Ernestina as the sole surviving heir. On July 16, 1995, the Regional Trial Court dismissed the complaint, ruling that under the provisions of the Family Code as well as the case of Uyguangco vs. Court of Appeals, the complaint is now barred x x x.vi[6]

Orders of the Trial Court In an Order dated July 26, 1995, the trial court granted Ernestina Bernabes Motion for Reconsideration of the trial courts Decision and ordered the dismissal of the Complaint for recognition. Citing Article 175 of the Family Code, the RTC held that the death of the putative father had barred the action. In its Order dated October 6, 1995, the trial court added that since the putative father had not acknowledged or recognized Adrian Bernabe in writing, the action for recognition should have been filed during the lifetime of the alleged father to give him the opportunity to either affirm or deny the childs filiation. Ruling of the Court of Appeals On the other hand, the Court of Appeals ruled that in the interest of justice, Adrian should be allowed to prove that he was the illegitimate son of Fiscal Bernabe. Because the boy was born in 1981, his rights are governed by Article 285 of the Civil Code, which allows an action for recognition to be filed within four years after the child has attained the age of majority. The subsequent enactment of the Family Code did not take away that right. Hence, this appeal.vii[7] Issues In her Memorandum,viii[8] petitioner raises the following issues for our consideration: I Whether or not respondent has a cause of action to file a case against petitioner, the legitimate daughter of the putative father, for recognition and partition with accounting after the putative fathers death in the absence of any written acknowledgment of paternity by the latter. II Whether or not the Honorable Court of Appeals erred in ruling that respondents had four years from the attainment of minority to file an action for recognition as provided in Art. 285 of the Civil Code, in complete disregard of its repeal by the [express] provisions of the Family Code and the applicable jurisprudence as held by the Honorable Court of Appeals. III Whether or not the petition for certiorari filed by the petition[er] is fatally defective for failure to implead the Court of Appeals as one of the respondents.ix[9] The Courts Ruling

The Petition has no merit. First and Second Issues: Period to File Action for Recognition Because the first and the second issues are interrelated, we shall discuss them jointly. Petitioner contends that respondent is barred from filing an action for recognition, because Article 285 of the Civil Code has been supplanted by the provisions of the Family Code. She argues that the latter Code should be given retroactive effect, since no vested right would be impaired. We do not agree. Article 285 of the Civil Code provides the period for filing an action for recognition as follows: ART. 285. The action for the recognition of natural children may be brought only during the lifetime of the presumed parents, except in the following cases: (1) If the father or mother died during the minority of the child, in which case the latter may file the action before the expiration of four years from the attainment of his majority; If after the death of the father or of the mother a document should appear of which nothing had been heard and in which either or both parents recognize the child.

(2)

In this case, the action must be commenced within four years from the finding of the document. The two exceptions provided under the foregoing provision, have however been omitted by Articles 172, 173 and 175 of the Family Code, which we quote: ART. 172. The filiation of legitimate children is established by any of the following: (1) The record of birth appearing in the civil register or a final judgment; or

(2) An admission of legitimate filiation in a public document or a private handwritten instrument and signed by the parent concerned. In the absence of the foregoing evidence, the legitimate filiation shall be proved by: (1) (2) The open and continuous possession of the status of a legitimate child; or Any other means allowed by the Rules of Court and special laws.

ART. 173. The action to claim legitimacy may be brought by the child during his or her lifetime and shall be transmitted to the heirs should the child die during minority or in a state of insanity. In these cases, the heirs shall have a period of five years within which to institute the action.

The action already commenced by the child shall survive notwithstanding the death of either or both of the parties. ART. 175. Illegitimate children may establish their illegitimate filiation in the same way and on the same, evidence as legitimate children. The action must be brought within the same period specified in Article 173, except when the action is based on the second paragraph of Article 172, in which case the action may be brought during the lifetime of the alleged parent. Under the new law, an action for the recognition of an illegitimate child must be brought within the lifetime of the alleged parent. The Family Code makes no distinction on whether the former was still a minor when the latter died. Thus, the putative parent is given by the new Code a chance to dispute the claim, considering that illegitimate children are usually begotten and raised in secrecy and without the legitimate family being aware of their existence. x x x The putative parent should thus be given the opportunity to affirm or deny the childs filiation, and this, he or she cannot do if he or she is already dead.x[10] Nonetheless, the Family Code provides the caveat that rights that have already vested prior to its enactment should not be prejudiced or impaired as follows: ART. 255. This Code shall have retroactive effect insofar as it does not prejudice or impair vested or acquired rights in accordance with the Civil Code or other laws. The crucial issue to be resolved therefore is whether Adrians right to an action for recognition, which was granted by Article 285 of the Civil Code, had already vested prior to the enactment of the Family Code. Our answer is affirmative. A vested right is defined as one which is absolute, complete and unconditional, to the exercise of which no obstacle exists, and which is immediate and perfect in itself and not dependent upon a contingency x x x.xi[11] Respondent however contends that the filing of an action for recognition is procedural in nature and that as a general rule, no vested right may attach to [or] arise from procedural laws.xii[12] Bustos v. Luceroxiii[13] distinguished substantive from procedural law in these words: x x x. Substantive law creates substantive rights and the two terms in this respect may be said to be synonymous. Substantive rights is a term which includes those rights which one enjoys under the legal system prior to the disturbance of normal relations. Substantive law is that part of the law which creates, defines and regulates rights, or which regulates the rights and duties which give rise to a cause of action; that part of the law which courts are established to administer; as opposed to adjective or remedial law, which prescribes the method of enforcing rights or obtains redress for their invasion.xiv[14] (Citations omitted) Recently, in Fabian v. Desierto,xv[15] the Court laid down the test for determining whether a rule is procedural or substantive:

[I]n determining whether a rule prescribed by the Supreme Court, for the practice and procedure of the lower courts, abridges, enlarges, or modifies any substantive right, the test is whether the rule really regulates procedure, that is, the judicial process for enforcing rights and duties recognized by substantive law and for justly administering remedy and redress for a disregard or infraction of them. If the rule takes away a vested right, it is not procedural. If the rule creates a right such as the right to appeal, it may be classified as a substantive matter; but if it operates as a means of implementing an existing right then the rule deals merely with procedure.xvi[16] Applying the foregoing jurisprudence, we hold that Article 285 of the Civil Code is a substantive law, as it gives Adrian the right to file his petition for recognition within four years from attaining majority age. Therefore, the Family Code cannot impair or take Adrians right to file an action for recognition, because that right had already vested prior to its enactment. Uyguangco v. Court of Appealsxvii[17] is not applicable to the case at bar, because the plaintiff therein sought recognition as an illegitimate child when he was no longer a minor. On the other hand, in Aruego Jr. v. Court of Appealsxviii[18] the Court ruled that an action for recognition filed while the Civil Code was in effect should not be affected by the subsequent enactment of the Family Code, because the right had already vested. Not Limited to Natural Children To be sure, Article 285 of the Civil Code refers to the action for recognition of natural children. Thus, petitioner contends that the provision cannot be availed of by respondent, because at the time of his conception, his parents were impeded from marrying each other. In other words, he is not a natural child. A natural child is one whose parents, at the time of conception, were not disqualified by any legal impediment from marrying each other. Thus, in De Santos v. Angeles,xix[19] the Court explained: A childs parents should not have been disqualified to marry each other at the time of conception for him to qualify as a natural child.xx[20] A strict and literal interpretation of Article 285 has already been frowned upon by this Court in the aforesaid case of Aruego, which allowed minors to file a case for recognition even if their parents were disqualified from marrying each other. There, the Complaint averred that the late Jose Aruego Sr., a married man, had an extramarital liason with Luz Fabian. Out of this relationship were born two illegitimate children who in 1983 filed an action for recognition. The two children were born in 1962 and 1963, while the alleged putative father died in 1982. In short, at the time of their conception, the two childrens parents were legally disqualified from marrying each other. The Court allowed the Complaint to prosper, even though it had been filed almost a year after the death of the presumed father. At the time of his death, both children were still minors. Moreover, in the earlier case Divinagracia v. Rovira,xxi[21] the Court said that the rules on voluntary and compulsory acknowledgment of natural children, as well as the prescriptive period

for filing such action, may likewise be applied to spurious children. Pertinent portions of the case are quoted hereunder: The so-called spurious children, or illegitimate children other than natural children, commonly known as bastards, include those adulterous children or those born out of wedlock to a married woman cohabiting with a man other than her husband or to a married man cohabiting with a woman other than his wife. They are entitled to support and successional rights. But their filiation must be duly proven. How should their filiation be proven? Article 289 of the Civil Code allows the investigation of the paternity or maternity or spurious children under the circumstances specified in articles 283 and 284 of the Civil Code. The implication is that the rules on compulsory recognition of natural children are applicable to spurious children. Spurious children should not be in a better position than natural children. The rules on proof of filiation of natural children or the rules on voluntary and compulsory acknowledgment for natural children may be applied to spurious children. That does not mean that spurious children should be acknowledged, as that term is used with respect to natural children. What is simply meant is that the grounds or instances for the acknowledgment of natural children are utilized to establish the filiation of spurious children. A spurious child may prove his filiation by means of a record of birth, a will, a statement before a court of record, or in any authentic writing. These are the modes of voluntary recognition of natural children. In case there is no evidence on the voluntary recognition of the spurious child, then his filiation may be established by means of the circumstances or grounds for compulsory recognition prescribed in the aforementioned articles 283 and 284. The prescriptive period for filing the action for compulsory recognition in the case of natural children, as provided for in article 285 of the Civil Code, applies to spurious children.xxii[22] (Citations omitted, italics supplied) Thus, under the Civil Code, natural children have superior successional rights over spurious ones.xxiii[23] However, Rovira treats them as equals with respect to other rights, including the right to recognition granted by Article 285. To emphasize, illegitimate children who were still minors at the time the Family Code took effect and whose putative parent died during their minority are thus given the right to seek recognition (under Article 285 of the Civil Code) for a period of up to four years from attaining majority age. This vested right was not impaired or taken away by the passage of the Family Code. Indeed, our overriding consideration is to protect the vested rights of minors who could not have filed suit, on their own, during the lifetime of their putative parents. As respondent aptly points

out in his Memorandum,xxiv[24] the State as parens patriae should protect a minors right. Born in 1981, Adrian was only seven years old when the Family Code took effect and only twelve when his alleged father died in 1993. The minor must be given his day in court. Third Issue: Failure to Implead the CA Under Section 4(a) of Rule 45 of the current Rules of Court, it is no longer required to implead the lower courts or judges x x x either as petitioners or respondents. Under Section 3, however, the lower tribunal should still be furnished a copy of the petition. Hence, the failure of petitioner to implead the Court of Appeals as a party is not a reversible error; it is in fact the correct procedure. WHEREFORE, the Petition is hereby DENIED and the assailed Decision and Resolution AFFIRMED. Costs against petitioner. SO ORDERED. Melo, (Chairman), Sandoval-Gutierrez, and Carpio, JJ., concur. Vitug, J., no part. Relationship with family.

i[1]

Rollo, pp. 3-14. The Petition was signed by Atty. Wenceslao B. Trinidad.

Special First Division; penned by J. Jesus M. Elbinias (presiding justice and Division chairman); concurred in by JJ Delilah Vidallon Magtolis and Edgardo P. Cruz (members).
ii[2] iii[3]

Rollo, pp. 33-37. Rollo, p. 18. J. Andres B. Reyes Jr. signed for J. Magtolis who was on leave. Assailed Decision, p. 5; Rollo, p. 37. Assailed Decision, pp. 1-2; Rollo, pp. 33-34.

iv[4]

v[5]

vi[6]

This case was deemed submitted for decision on August 16, 2000, upon this Courts receipt of petitioners Memorandum signed by Atty. Jose Allan M. Tebelin. Respondents Memorandum, signed by Attys. Felix D. Carao Jr. and R.A.V. Saguisag, was received by this Court on August 14, 2000.
vii[7] viii[8]

Rollo, pp. 103-116; original underscored and in upper case.

ix[9]

Memorandum for petitioner, p. 4; Rollo, p. 106. Alicia V. Sempio-Diy, Handbook on the Family Code (1995 ed.), p. 282. Reyes v. Commission on Audit, 305 SCRA 512, 518, March 29, 1999, per Pardo, J.

x[10]

xi[11]

Medina Investigation & Security Corporation v. Court of Appeals, GR No. 144074, March 20, 2001, per Gonzaga-Reyes, J.
xii[12] xiii[13]

81 Phil. 648, March 8, 1949. Ibid., pp. 649-650, per Tuason, J. 295 SCRA 470, 492, September 16, 1998. Ibid., p. 492, per Regalado, J. 178 SCRA 684, October 26, 1989. 254 SCRA 711, March 13, 1996.

xiv[14]

xv[15]

xvi[16]

xvii[17]

xviii[18]

xix[19]

251 SCRA 206, December 12, 1995. Ibid., p. 212, per Romero, J. 72 SCRA 307, August 10, 1976. Ibid., pp. 314-315, per Aquino, J. (later CJ). Cf. Jose C. Vitug, Compendium of Civil Law and Jurisprudence, (1993 rev. ed.), p.218. Pages 12-15.

xx[20]

xxi[21]

xxii[22]

xxiii[23]

xxiv[24]

THIRD DIVISION [G.R. No. 123450. August 31, 2005] GERARDO B. CONCEPCION, petitioner, vs. COURT OF APPEALS and MA. THERESA ALMONTE, respondents. DECISION CORONA, J.: The child, by reason of his mental and physical immaturity, needs special safeguard and care, including appropriate legal protection before as well as after birth.[1] In case of assault on his rights by those who take advantage of his innocence and vulnerability, the law will rise in his defense with the single-minded purpose of upholding only his best interests. This is the story of petitioner Gerardo B. Concepcion and private respondent Ma. Theresa Almonte, and a child named Jose Gerardo. Gerardo and Ma. Theresa were married on December 29, 1989.[2] After their marriage, they lived with Ma. Theresas parents in Fairview, Quezon City.[3] Almost a year later, on December 8, 1990, Ma. Theresa gave birth to Jose Gerardo.[4] Gerardo and Ma. Theresas relationship turned out to be short-lived, however. On December 19, 1991, Gerardo filed a petition to have his marriage to Ma. Theresa annulled on the ground of bigamy.[5] He alleged that nine years before he married Ma. Theresa on December 10, 1980, she had married one Mario Gopiao, which marriage was never annulled.[6] Gerardo also found out that Mario was still alive and was residing in Loyola Heights, Quezon City.[7] Ma. Theresa did not deny marrying Mario when she was twenty years old. She, however, averred that the marriage was a sham and that she never lived with Mario at all.[8] The trial court ruled that Ma. Theresas marriage to Mario was valid and subsisting when she married Gerardo and annulled her marriage to the latter for being bigamous. It declared Jose Gerardo to be an illegitimate child as a result. The custody of the child was awarded to Ma. Theresa while Gerardo was granted visitation rights.[9] Ma. Theresa felt betrayed and humiliated when Gerardo had their marriage annulled. She held him responsible for the bastardization of Gerardo. She moved for the reconsideration of the above decision INSOFAR ONLY as that portion of the decision which grant(ed) to the petitioner so-called visitation rights between the hours of 8 in the morning to 12:00 p.m. of any Sunday.[10] She argued that there was nothing in the law granting visitation rights in favor of the putative father of an illegitimate child.[11] She further maintained that Jose Gerardos

surname should be changed from Concepcion to Almonte, her maiden name, following the rule that an illegitimate child shall use the mothers surname. Gerardo opposed the motion. He insisted on his visitation rights and the retention of Concepcion as Jose Gerardos surname. Applying the best interest of the child principle, the trial court denied Ma. Theresas motion and made the following observations: It is a pity that the parties herein seem to be using their son to get at or to hurt the other, something they should never do if they want to assure the normal development and well-being of the boy. The Court allowed visitorial rights to the father knowing that the minor needs a father, especially as he is a boy, who must have a father figure to recognize something that the mother alone cannot give. Moreover, the Court believes that the emotional and psychological well-being of the boy would be better served if he were allowed to maintain relationships with his father. There being no law which compels the Court to act one way or the other on this matter, the Court invokes the provision of Art. 8, PD 603 as amended, otherwise known as the Child and Youth Welfare Code, to wit: In all questions regarding the care, custody, education and property of the child, his welfare shall be the paramount consideration. WHEREFORE, the respondents Motion for Reconsideration has to be, as it is hereby DENIED.[12] Ma. Theresa elevated the case to the Court of Appeals, assigning as error the ruling of the trial court granting visitation rights to Gerardo. She likewise opposed the continued use of Gerardos surname (Concepcion) despite the fact that Jose Gerardo had already been declared illegitimate and should therefore use her surname (Almonte). The appellate court denied the petition and affirmed in toto the decision of the trial court.[13] On the issue raised by Ma. Theresa that there was nothing in the law that granted a putative father visitation rights over his illegitimate child, the appellate court affirmed the best interest of the child policy invoked by the court a quo. It ruled that [a]t bottom, it (was) the childs welfare and not the convenience of the parents which (was) the primary consideration in granting visitation rights a few hours once a week.[14] The appellate court likewise held that an illegitimate child cannot use the mothers surname motu proprio. The child, represented by the mother, should file a separate proceeding for a change of name under Rule 103 of the Rules of Court to effect the correction in the civil registry.[15]

Undaunted, Ma. Theresa moved for the reconsideration of the adverse decision of the appellate court. She also filed a motion to set the case for oral arguments so that she could better ventilate the issues involved in the controversy. After hearing the oral arguments of the respective counsels of the parties, the appellate court resolved the motion for reconsideration. It reversed its earlier ruling and held that Jose Gerardo was not the son of Ma. Theresa by Gerardo but by Mario during her first marriage: It is, therefore, undeniable established by the evidence in this case that the appellant [Ma. Theresa] was married to Mario Gopiao, and that she had never entered into a lawful marriage with the appellee [Gerardo] since the so-called marriage with the latter was void ab initio. It was [Gerardo] himself who had established these facts. In other words, [Ma. Theresa] was legitimately married to Mario Gopiao when the child Jose Gerardo was born on December 8, 1990. Therefore, the child Jose Gerardo under the law is the legitimate child of the legal and subsisting marriage between [Ma. Theresa] and Mario Gopiao; he cannot be deemed to be the illegitimate child of the void and non-existent marriage between [Ma. Theresa] and [Gerardo], but is said by the law to be the child of the legitimate and existing marriage between [Ma. Theresa] and Mario Gopiao (Art. 164, Family Code). Consequently, [she] is right in firmly saying that [Gerardo] can claim neither custody nor visitorial rights over the child Jose Gerardo. Further, [Gerardo] cannot impose his name upon the child. Not only is it without legal basis (even supposing the child to be his illegitimate child [Art. 146, The Family Code]); it would tend to destroy the existing marriage between [Ma. Theresa] and Gopiao, would prevent any possible rapproachment between the married couple, and would mean a judicial seal upon an illegitimate relationship.[16] The appellate court brushed aside the common admission of Gerardo and Ma. Theresa that Jose Gerardo was their son. It gave little weight to Jose Gerardos birth certificate showing that he was born a little less than a year after Gerardo and Ma. Theresa were married: We are not unaware of the movants argument that various evidence exist that appellee and the appellant have judicially admitted that the minor is their natural child. But, in the same vein, We cannot overlook the fact that Article 167 of the Family Code mandates: The child shall be considered legitimate although the mother may have declared against its legitimacy or may have been sentenced as an adulteress. (underscoring ours) Thus, implicit from the above provision is the fact that a minor cannot be deprived of his/her legitimate status on the bare declaration of the mother and/or even much less, the supposed father. In fine, the law and only the law determines who are the legitimate or illegitimate children for ones legitimacy or illegitimacy cannot ever be compromised. Not even the birth certificate of the minor can change his status for the information contained therein are merely supplied by the mother and/or the supposed father. It should be what the law says and not what a parent says it is.[17] (Emphasis supplied)

Shocked and stunned, Gerardo moved for a reconsideration of the above decision but the same was denied.[18] Hence, this appeal. The status and filiation of a child cannot be compromised.[19] Article 164 of the Family Code is clear. A child who is conceived or born during the marriage of his parents is legitimate.[20] As a guaranty in favor of the child[21] and to protect his status of legitimacy, Article 167 of the Family Code provides: Article 167. The child shall be considered legitimate although the mother may have declared against its legitimacy or may have been sentenced as an adulteress. The law requires that every reasonable presumption be made in favor of legitimacy.[22] We explained the rationale of this rule in the recent case of Cabatania v. Court of Appeals[23]: The presumption of legitimacy does not only flow out of a declaration in the statute but is based on the broad principles of natural justice and the supposed virtue of the mother. It is grounded on the policy to protect the innocent offspring from the odium of illegitimacy. Gerardo invokes Article 166 (1)(b)[24] of the Family Code. He cannot. He has no standing in law to dispute the status of Jose Gerardo. Only Ma. Theresas husband Mario or, in a proper case,[25] his heirs, who can contest the legitimacy of the child Jose Gerardo born to his wife.[26] Impugning the legitimacy of a child is a strictly personal right of the husband or, in exceptional cases, his heirs.[27] Since the marriage of Gerardo and Ma. Theresa was void from the very beginning, he never became her husband and thus never acquired any right to impugn the legitimacy of her child. The presumption of legitimacy proceeds from the sexual union in marriage, particularly during the period of conception.[28] To overthrow this presumption on the basis of Article 166 (1)(b) of the Family Code, it must be shown beyond reasonable doubt that there was no access that could have enabled the husband to father the child.[29] Sexual intercourse is to be presumed where personal access is not disproved, unless such presumption is rebutted by evidence to the contrary.[30] The presumption is quasi-conclusive and may be refuted only by the evidence of physical impossibility of coitus between husband and wife within the first 120 days of the 300 days which immediately preceded the birth of the child.[31] To rebut the presumption, the separation between the spouses must be such as to make marital intimacy impossible.[32] This may take place, for instance, when they reside in different countries or provinces and they were never together during the period of conception.[33] Or, the husband was in prison during the period of conception, unless it appears that sexual union took place through the violation of prison regulations.[34]

Here, during the period that Gerardo and Ma. Theresa were living together in Fairview, Quezon City, Mario was living in Loyola Heights which is also in Quezon City. Fairview and Loyola Heights are only a scant four kilometers apart. Not only did both Ma. Theresa and Mario reside in the same city but also that no evidence at all was presented to disprove personal access between them. Considering these circumstances, the separation between Ma. Theresa and her lawful husband, Mario, was certainly not such as to make it physically impossible for them to engage in the marital act. Sexual union between spouses is assumed. Evidence sufficient to defeat the assumption should be presented by him who asserts the contrary. There is no such evidence here. Thus, the presumption of legitimacy in favor of Jose Gerardo, as the issue of the marriage between Ma. Theresa and Mario, stands. Gerardo relies on Ma. Theresas statement in her answer[35] to the petition for annulment of marriage[36] that she never lived with Mario. He claims this was an admission that there was never any sexual relation between her and Mario, an admission that was binding on her. Gerardos argument is without merit. First, the import of Ma. Theresas statement is that Jose Gerardo is not her legitimate son with Mario but her illegitimate son with Gerardo. This declaration an avowal by the mother that her child is illegitimate is the very declaration that is proscribed by Article 167 of the Family Code. The language of the law is unmistakable. An assertion by the mother against the legitimacy of her child cannot affect the legitimacy of a child born or conceived within a valid marriage. Second, even assuming the truth of her statement, it does not mean that there was never an instance where Ma. Theresa could have been together with Mario or that there occurred absolutely no intercourse between them. All she said was that she never lived with Mario. She never claimed that nothing ever happened between them. Telling is the fact that both of them were living in Quezon City during the time material to Jose Gerardos conception and birth. Far from foreclosing the possibility of marital intimacy, their proximity to each other only serves to reinforce such possibility. Thus, the impossibility of physical access was never established beyond reasonable doubt. Third, to give credence to Ma. Theresas statement is to allow her to arrogate unto herself a right exclusively lodged in the husband, or in a proper case, his heirs.[37] A mother has no right to disavow a child because maternity is never uncertain.[38] Hence, Ma. Theresa is not permitted by law to question Jose Gerardos legitimacy. Finally, for reasons of public decency and morality, a married woman cannot say that she had no intercourse with her husband and that her offspring is illegitimate.[39] The proscription is in

consonance with the presumption in favor of family solidarity. It also promotes the intention of the law to lean toward the legitimacy of children.[40] Gerardos insistence that the filiation of Jose Gerardo was never an issue both in the trial court and in the appellate court does not hold water. The fact that both Ma. Theresa and Gerardo admitted and agreed that Jose Gerardo was born to them was immaterial. That was, in effect, an agreement that the child was illegitimate. If the Court were to validate that stipulation, then it would be tantamount to allowing the mother to make a declaration against the legitimacy of her child and consenting to the denial of filiation of the child by persons other than her husband. These are the very acts from which the law seeks to shield the child. Public policy demands that there be no compromise on the status and filiation of a child.[41] Otherwise, the child will be at the mercy of those who may be so minded to exploit his defenselessness. The reliance of Gerardo on Jose Gerardos birth certificate is misplaced. It has no evidentiary value in this case because it was not offered in evidence before the trial court. The rule is that the court shall not consider any evidence which has not been formally offered.[42] Moreover, the law itself establishes the status of a child from the moment of his birth.[43] Although a record of birth or birth certificate may be used as primary evidence of the filiation of a child,[44] as the status of a child is determined by the law itself, proof of filiation is necessary only when the legitimacy of the child is being questioned, or when the status of a child born after 300 days following the termination of marriage is sought to be established.[45] Here, the status of Jose Gerardo as a legitimate child was not under attack as it could not be contested collaterally and, even then, only by the husband or, in extraordinary cases, his heirs. Hence, the presentation of proof of legitimacy in this case was improper and uncalled for. In addition, a record of birth is merely prima facie evidence of the facts contained therein.[46] As prima facie evidence, the statements in the record of birth may be rebutted by more preponderant evidence. It is not conclusive evidence with respect to the truthfulness of the statements made therein by the interested parties.[47] Between the certificate of birth which is prima facie evidence of Jose Gerardos illegitimacy and the quasi-conclusive presumption of law (rebuttable only by proof beyond reasonable doubt) of his legitimacy, the latter shall prevail. Not only does it bear more weight, it is also more conducive to the best interests of the child and in consonance with the purpose of the law. It perplexes us why both Gerardo and Ma. Theresa would doggedly press for Jose Gerardos illegitimacy while claiming that they both had the childs interests at heart. The law, reason and common sense dictate that a legitimate status is more favorable to the child. In the eyes of the law, the legitimate child enjoys a preferred and superior status. He is entitled to bear the surnames of both his father and mother, full support and full inheritance.[48] On the other hand, an illegitimate child is bound to use the surname and be under the parental authority only of his mother. He can claim support only from a more limited group and his legitime is only half of that

of his legitimate counterpart.[49] Moreover (without unwittingly exacerbating the discrimination against him), in the eyes of society, a bastard is usually regarded as bearing a stigma or mark of dishonor. Needless to state, the legitimacy presumptively vested by law upon Jose Gerardo favors his interest. It is unfortunate that Jose Gerardo was used as a pawn in the bitter squabble between the very persons who were passionately declaring their concern for him. The paradox was that he was made to suffer supposedly for his own sake. This madness should end. This case has been pending for a very long time already. What is specially tragic is that an innocent child is involved. Jose Gerardo was barely a year old when these proceedings began. He is now almost fifteen and all this time he has been a victim of incessant bickering. The law now comes to his aid to write finis to the controversy which has unfairly hounded him since his infancy. Having only his best interests in mind, we uphold the presumption of his legitimacy. As a legitimate child, Jose Gerardo shall have the right to bear the surnames of his father Mario and mother Ma. Theresa, in conformity with the provisions of the Civil Code on surnames.[50] A persons surname or family name identifies the family to which he belongs and is passed on from parent to child.[51] Hence, Gerardo cannot impose his surname on Jose Gerardo who is, in the eyes of the law, not related to him in any way. The matter of changing Jose Gerardos name and effecting the corrections of the entries in the civil register regarding his paternity and filiation should be threshed out in a separate proceeding. In case of annulment or declaration of absolute nullity of marriage, Article 49 of the Family Code grants visitation rights to a parent who is deprived of custody of his children. Such visitation rights flow from the natural right of both parent and child to each others company. There being no such parent-child relationship between them, Gerardo has no legally demandable right to visit Jose Gerardo. Our laws seek to promote the welfare of the child. Article 8 of PD 603, otherwise known as the Child and Youth Welfare Code, is clear and unequivocal: Article 8. Childs Welfare Paramount. In all questions regarding the care, custody, education and property of the child, his welfare shall be the paramount consideration. Article 3 (1) of the United Nations Convention on the Rights of a Child of which the Philippines is a signatory is similarly emphatic: Article 3

1. In all actions concerning children, whether undertaken by public or private social welfare institutions, courts of law, administrative authorities or legislative bodies, the best interests of the child shall be a primary consideration. The State as parens patriae affords special protection to children from abuse, exploitation and other conditions prejudicial to their development. It is mandated to provide protection to those of tender years.[52] Through its laws, the State safeguards them from every one, even their own parents, to the end that their eventual development as responsible citizens and members of society shall not be impeded, distracted or impaired by family acrimony. This is especially significant where, as in this case, the issue concerns their filiation as it strikes at their very identity and lineage. WHEREFORE, the petition is hereby DENIED. The September 14, 1995 and January 10, 1996 resolutions of the Court of Appeals in CA-G.R. CV No. 40651 are hereby AFFIRMED. Costs against petitioner. SO ORDERED. Panganiban, (Chairman), Sandoval-Gutierrez, and Garcia, JJ., concur. Carpio-Morales, J., no part.

[1]

Universal Declaration of the Rights of the Child. Marriage Contract, Annex A, Rollo, p. 41. Decision, Annex E, Rollo, pp. 46-48. Certificate of Live Birth, Annex M, Rollo, p. 127. Petition, Annex C, Rollo, pp. 38-40. Marriage Certificate, Annex B-1, Rollo, p. 43. Supra at note 5. Answer, Annex D, Rollo, pp. 44-45.

[2]

[3]

[4]

[5]

[6]

[7]

[8]

Penned by Judge (now Court of Appeals Justice) Delilah Vidallon-Magtolis, CC No. 9110935, Regional Trial Court, National Capital Judicial Region, Branch 107, Quezon City, Annex E, Rollo, p. 46.
[9] [10]

Motion for Reconsideration, Annex F, Rollo, p. 49. Id., p. 61. Order, Annex G, Rollo, pp. 53-54.

[11]

[12]

Penned by Associate Justice Ramon A. Barcelona and concurred in by Associate Justices Arturo B. Buena (a retired Associate Justice of the Supreme Court) and Serafin V.C. Guingona. Decision dated September 29, 1994, CA-G.R. CV No. 40651, Court of Appeals, Third Division; CA Rollo, pp. 55-64.
[13] [14]

Id. Id.

[15]

Penned by Associate Justice Ramon A. Barcelona and concurred in by Associate Justices Arturo M. Buena and Conchita Carpio Morales (now an Associate Justice of the Supreme Court). Resolution dated September 14, 1995, CA-G.R. CV No. 40651, Court of Appeals, Former Third Division; Rollo, Annex A, pp. 29-32.
[16] [17]

Id.

Resolution dated January 10, 1996, CA-G.R. CV No. 40651, Court of Appeals, Former Third Division; Rollo, Annex B, pp. 34-37.
[18]

Article 2035 (1), Civil Code; Baluyut v. Baluyut, G.R. No. 33659, 14 June 1990, 186 SCRA 506.
[19]

Further, under Article 54 of the Family Code, a child who was conceived or born before the judgment of annulment or of absolute nullity of the marriage on the ground of psychological incapacity has become final and executory shall be considered legitimate. It also provides that a child who was born from a subsequent void marriage as a result of the failure of the contracting parties to comply with the mandatory provisions of Articles 52 and 53 of the Family Code shall likewise be considered legitimate.
[20]

Tolentino, Arturo, Civil Code of the Philippines with the Family Code, Commentaries and Jurisprudence, vol. I, 1990 edition, p. 528.
[21] [22]

Bowers v. Bailey, 237 Iowa 295, 21 N.W. 2d 773. G.R. No. 124814, October 21, 2004.

[23]

[24]

In particular, Article 166 (1)(b) provides:

Article 166. Legitimacy of a child may be impugned only on the following grounds: (1) That it was physically impossible for the husband to have sexual intercourse with his wife within the first 120 days of the 300 days which immediately preceded the birth of the child because of: xxx xxx xxx

(b) the fact that the husband and wife were living separately in such a way that sexual intercourse was not possible; or xxx
[25]

xxx

xxx

Article 171 provides for the instances where the heirs of the husband may impugn the filiation of the child. Thus: Article 171. The heirs of the husband may impugn the filiation of the child within the period prescribed in the preceding article only in the following cases: (1) If the husband should die before the expiration of the period fixed for bringing his action; (2) If he should die after the filing of the complaint without having desisted therefrom; or (3) If the child was born after the death of the husband. Macadangdang v. Court of Appeals, G.R. No. L-49542, 12 September 1980, 100 SCRA 73; Article 170, Family Code.
[26] [27]

Liyao, Jr. v. Liyao, 428 Phil. 628 (2002). Supra at note 21 citing People v. Giberson, 197 Phil. 509 (1982). Supra at note 26. Id. citing Tolentino supra. Id. Id. Id. citing Estate of Benito Marcelo, 60 Phil. 442 (1934). Id. citing 1 Manresa 492-500.

[28]

[29]

[30]

[31]

[32]

[33]

[34]

[35]

Supra at note 8. Supra at note 5. Supra at note 26. See also Articles 170 and 171, Family Code. Id. People ex rel. Gonzales v. Monroe, 43 Ill. App 2d 1, 192 N.E. 2d 691. Cf. Article 220 of the Civil Code. It provides:

[36]

[37]

[38]

[39]

[40]

Art. 220. In case of doubt, all presumptions favor the solidarity of the family. Thus, every intendment of law or fact leans toward the validity of marriage, the indissolubility of the marriage bonds, the legitimacy of children, the community of property during marriage, the authority of parents over the children, and the validity of defense for any member of family in case of unlawful aggression. While this provision of the Civil Code may have been omitted in the Family Code, the principles they contain are valid norms in family relations and in cases involving family members. They are even already embodied in jurisprudence. (Tolentino, supra, p. 506)
[41]

Supra at note 19. Section 34, Rule 132, Rules of Court.

[42]

Tolentino, supra, p. 539; Sempio-Diy, Alicia, Handbook on the Family Code of the Philippines, 1995 edition, p. 275.
[43] [44]

Articles 172 and 175, Family Code. Article 172 states:

Article 172. The filiation of legitimate children is established by any of the following: (1) The record of birth appearing in the civil register or a final judgment; or (2) An admission of legitimate filiation in a public document or a private handwritten instrument and signed by the parent concerned. In the absence of the foregoing evidence, the legitimate filiation shall be proved by: (1) The open and continuous possession of the status of a legitimate child; or (2) Any other means allowed by the Rules of Court and special laws. On the other hand, Article 175 provides:

Article 175. Illegitimate children may establish their illegitimate filiation in the same way and on the same evidence as legitimate children. xxx
[45]

xxx

xxx

Cf. Article 169, Family Code. 410, Civil Code.

[46] Article [47]

Dupilas v. Cabacungan, 36 Phil. 254 (1917). Article 174, Family Code provides:

[48]

Article 174. Legitimate children shall have the right: (1) To bear the surnames of the father and the mother, in conformity with the provisions of the Civil Code on Surnames; (2) To receive support from their parents, their ascendants, and in proper cases, their brothers and sisters, in conformity with the provisions of this Code on Support; and (3) To be entitled to the legitime and other successional rights granted to them by the Civil Code.
[49]

Article 176, Family Code states:

Article 176. Illegitimate children shall use the surname and shall be under the parental authority of their mother, and shall be entitled to support in conformity with this Code. The legitime of each illegitimate child shall consist of one-half of the legitime of a legitimate child. Except for this modification, all other provisions in the Civil Code governing successional rights shall remain in force.
[50]

Id.

In the Matter of the Adoption of Stephanie Nathy Astorga Garcia, G.R. No. 148311, 31 March 2005.
[51] [52]

People v. Dolores, G.R. No. 76468, 20 August 1990, 188 SCRA 660.