FIRST DIVISION

[G.R. No. 109338. November 20, 2000]

1. to pay the plaintiff the sum of P1,798,750.00 with interest thereon

at the rate of 12% per annum from November, 1989 until the whole
amount shall have been fully paid;

CAMARINES NORTE ELECTRIC COOPERATIVE, INC.

(CANORECO), petitioner, vs. COURT OF APPEALS, HON. LUIS L.
DICTADO, Presiding Judge, RTC, Branch 39, Daet, Camarines Norte,
EDUARDO R. MORENO, LT. COL. RUFINO CHAVEZ, CAPT.
ALFREDO BORJA, CONRAD C. LEVISTE and VINES REALTY
CORPORATION, respondents.

2. to pay the plaintiff the sum of P11,500.00 as attorneys fees;

to pay the plaintiff the sum of P5,000.00 as expenses incidental to this
litigation; and
3. to pay the costs of this suit.

DECISION
PARDO, J.:

IT IS SO ORDERED.[5]

The acquisition of an easement of a right-of-way falls within the

purview of the power of eminent domain.

When the decision became final and executory, the trial court issued a
writ of execution and respondent sheriff Eduardo R. Moreno levied
upon two (2) parcels of land covered TCT Nos. T-13505 and T-13514
issued by the Registrar of Deeds in the name of PSC. On April 24,
1990, the parcels of land were sold at public auction in favor of Vines
Realty Corporation (Vines Realty). On April 25, 1990, the Clerk of
Court, as ex-officio Provincial Sheriff, issued a Certificate of Sale,[6]
which Judge Luis D. Dictado, in his capacity as executive judge,
approved.

We have before the Court for consideration a petition for review on

certiorari of the decision of the Court of Appeals,[1] and its resolution,
[2] which denied petitioners motion for reconsideration.[3]
The facts of the case, as found by the Court of Appeals, are as follows:
On May 18, 1989, Conrad L. Leviste filed with the Regional Trial
Court, Daet, Camarines Norte, a complaint[4] for collection of a sum
of money and foreclosure of mortgage against Philippine Smelter
Corporation (PSC).

On June 23, 1992, Vines Realty moved for the issuance of a writ of
possession over said property. On June 25, 1992, the trial court
granted the motion.[7]

For failure to file an answer to the complaint, the trial court declared
PSC in default and allowed plaintiff Leviste to present evidence exparte.

On August 7, 1992, copy of the writ of possession was served on

petitioner as owner of the power lines standing on certain portions of
the subject property. Later, on August 12, 1992, Vines Realty filed an
amended motion for an order of demolition and removal[8] of
improvements on the subject land.

On November 23, 1989, the trial court rendered a decision, the

dispositive portion of which reads:

Among the improvements for removal were the power lines and
electric posts belonging to petitioner.

WHEREFORE, judgment is hereby rendered in favor of plaintiff and

against the defendant ordering the latter

Petitioner opposed the motion[9]on the ground, among other reasons,

that petitioner was not a party to the case and therefore not bound by
1

the judgment of the trial court and that it had subsisting right-of-way
agreements over said property.

On December 11, 1992, the trial court issued another order directing
the National Power Corporation sub-unit in Camarines Norte to shut
off the power lines energizing the New Lucena Oil Products
Corporation, one of the consumers serviced by petitioner, as shown by
the radiogram[18] of Simeon P. Zao III, OIC Labo, NPC. Mr. Zao
filed a manifestation[19] with the trial court that if NPC would shut off
said power supply before the sub-station of petitioner, it would deprive
Benguet Mining Corporation of electricity and endanger the lives of its
miners.

The trial court[10] set the hearing on the amended motion on

September 29, 1992 but the hearing was re-scheduled on October 28,
1992, and then again on November 10, 1992.[11] On all these dates,
no hearing was conducted.
Then the case was re-raffled to Branch 39 of the regional trial court
presided over by respondent judge.

On the same day, December 11, 1992, respondent Vines Realty cut
down petitioners electric posts professedly using a chainsaw[20] and
resulting in a loud blast affecting the area. Philippine National Police
desk officer Bianito Cobacha[21] of Barangay Jose Panganiban Police
Station entered in the police blotter that on December 11, 1992, at
about 2 p.m., men led by the provincial sheriff felled petitioners
electric posts along the cemetery of Bagumbayan.

On November 27, 1992, the trial court[12] set the hearing on the
amended motion for demolition. However, instead of adducing
evidence for petitioner, its counsel[13] manifested that he was
withdrawing his appearance since the authority given him by petitioner
was only for the filing of the opposition to the amended motion. The
trial court proceeded with the hearing despite the fact that petitioner
had no counsel present. Thus, only Vines Realty presented its
evidence.

Even the members of the Sangguniang Bayan at San Jose appealed to

respondent Sheriff to desist from proceeding with the demolition due
to a restraining order but to no avail.

On the same date, November 27, 1992, the trial court ordered the
issuance of a writ of demolition directing and deputizing Lt. Col.
Rufino Chavez, Jr. and Capt. Alfredo Borja to constitute an
augmentation force for the immediate implementation of the writ.[14]

On January 4, 1993, Vines Realty filed with the trial court a motion for
the issuance of an alias writ of demolition.[22] The hearing was
scheduled on January 12, 1993, at 8:30 a. m. but petitioners lawyer,
Atty. Jose Maacop, received a copy only on January 11, 1994.

On December 7, 1992, petitioner filed with the Court of Appeals a

petition for prohibition with restraining order and preliminary
injunction.[15] Petitioner argued that the trial court acted without or in
excess of its jurisdiction or with grave abuse of discretion in issuing
the order dated November 27. 1992.

Atty. Bienvenido A. Paita made a special appearance for petitioner

through a manifestation with motion for reconsideration[23] dated
January 21, 1993. Atty. Paita declared it was impossible for him to
appear and file an opposition to the motion on very short notice. He
said that petitioner was not a party to the case, that the restraining
order of the Court of Appeals was good until further orders, and the
writ of execution was executed on December 11, 1992. Petitioner
manifested that it was denied its day in court.

On December 10, 1992, the Court of Appeals sent telegrams to

respondents informing them of the issuance of a restraining order. On
the same day, however, the trial court issued a writ of demolition.[16]
The court addressed the writ to sheriff Eduardo de los Reyes,[17] who
was not a respondent in the petition before the Court of Appeals, so
that the latter can implement the writ on the pretext that he was not
covered by the restraining order.

On January 25, 1993,[24] the trial court denied the motion for
reconsideration on the ground that the appearance of Atty. Paita was
2

irregular and that Atty. Maacop as the counsel in the appellate court
must first make an entry of appearance with the trial court.

On April 23, 1993, however, petitioner received a letter dated April

10, 1993, stating that Vines Realty was the owner of the roadside and
that petitioner could not construct power lines therein without its
permission. Petitioner promptly replied that the power lines were
constructed within the right of way of the provincial road leading to
the port of Osmea as granted by the District Engineer of DPWH.

On January 26, 1993, the trial court issued an alias writ of demolition.
[25]
The sheriff, at the request of Vines Realty demolished the remaining
electric posts resulting in the cutting off of power supply to various
business establishments and barangays.

Hence, this petition.[30]

At issue is whether petitioner is entitled to retain possession of the
power lines located in the land sold at public auction as a result of
extra-judicial foreclosure of mortgage.

Meantime, on January 19, 1993, the Court of Appeals, promulgated a

decision[26]dismissing the petition for lack of merit.
WHEREFORE, the present petition is DISMISSED for lack of merit.

The most basic tenet of due process is the right to be heard.[31] A

court denies a party due process if it renders its orders without giving
such party an opportunity to present its evidence.[32]

Let it be stated that the temporary restraining order which was issued
by this Court on December 9, 1992 has a limited life of twenty (20)
days from date of issue (Carbungco vs. CA, 181 SCRA 313) and has
therefore become void at the expiration of the said twenty (20) days
(Ilaw at Buklod ng Manggagawa vs. NLRC, 198 SCRA 586).

We find that petitioner was denied due process. Petitioner could have
negated private respondents claims by showing the absence of legal or
factual basis therefor if only the trial court in the exercise of justice
and equity reset the hearing instead of proceeding with the trial and
issuing an order of demolition on the same day.

SO ORDERED.
On February 19, 1993, petitioners new counsel, Gancayco Law
Offices, filed with the Court of Appeals an Urgent Appearance And
Motion To Admit Supplemental Petition.[27] This was a new petition
for certiorari and prohibition with prayer for issuance of a writ of
mandatory injunction.[28]

It is incumbent upon the trial court to receive evidence on petitioners

right over the property to be demolished.
The essence of due process is an opportunity to be heard, or as applied
to administrative proceedings, an opportunity to explain ones side or
an opportunity to seek a reconsideration of the action or ruling
complained of.[33] Due process is equally applicable in a case
involving public utilities, where a strict application of the rules would
bring about catastrophic inconveniences to the public. Hence, the act
would do more harm than good to the public, which the government
seeks to protect. Damages and losses of a considerable amount of time
(about 8 years) could have been prevented if the trial court did not
gravely abuse its discretion on the matter.

On March 15, 1993, the Court of Appeals denied the motion for
reconsideration as well as the admission of the supplemental petition
on the ground that the petition had been decided.[29]
Meanwhile, in response to the publics urgent basic need, petitioner reconstructed its power lines along the provincial road leading to the
Port of Osmea upon authority of the District Engineer of the
Department of Public Works and Highways [DPWH].

Well aware that the counsel was not authorized, the trial court could
have stretched its liberality a little to ensure that it would serve the
ends of justice well for the people of Camarines Norte. Petitioner
must be given the chance to prove its position.

constructing or operating electric generating plants and electric

transmission and distribution lines or systems.
Electric cooperatives, like CANORECO, are vested with the power of
eminent domain.

We cannot conceive how, knowing fully well that destroying the

power lines and electric posts would cause overwhelming losses to a
lot of business establishments and a great inconvenience to a lot of
people, the trial court still ordered the demolition of the property.
Their personal motives aside, the Court finds that the trial court
gravely abused its discretion in hastily ordering the removal of the
electric posts.

The acquisition of an easement of a right-of-way falls within the

purview of the power of eminent domain. Such conclusion finds
support in easements of right-of-way where the Supreme Court
sustained the award of just compensation for private property
condemned for public use.[37] The Supreme Court, in Republic vs.
PLDT[38] thus held that:

We are not a trier of facts. We cannot determine whether petitioners

Agreements of Right of Way[34] or that of the authorization[35] of the
OIC District Engineer to construct electric posts within the limits of
the road right of way were genuine instruments. We can, however,
determine the legality of the acts of the trial court in issuing the writs
of demolition over the property.

"Normally, of course, the power of eminent domain results in the

taking or appropriation of title to, and possession of, the expropriated
property; but no cogent reason appears why said power may not be
availed of to impose only a burden upon the owner of condemned
property, without loss of title and possession. It is unquestionable that
real property may, through expropriation, be subjected to an easement
of right-of-way."

The trial court failed to appreciate the nature of electric cooperatives as

public utilities.

However, a simple right-of-way easement transmits no rights, except

the easement.[39] Vines Realty retains full ownership and it is not
totally deprived of the use of the land. It can continue doing what it
wants to do with the land, except those that would result in contact
with the wires.

Among the powers granted to electric cooperatives by virtue of

Presidential Decree No. 269[36] are:
Section 16 Powers-

The acquisition of this easement, nevertheless, is not gratis.

Considering the nature and effect of the installation power lines, the
limitations on the use of the land for an indefinite period deprives
private respondents of its ordinary use. For these reasons, Vines
Realty is entitled to payment of just compensation,[40] which must be
neither more nor less than the money equivalent of the property.

(j) To construct, maintain and operate electric transmission and

distribution lines along, upon, under and across publicly owned lands
and public thoroughfares, including, without limitation, all roads,
highways, streets, alleys, bridges and causeways; Provided, that such
shall not prevent or unduly impair the primary public uses to which
such lands and thoroughfares are otherwise devoted;

Just compensation has been understood to be the just and complete

equivalent of the loss, which the owner of the res expropriated has to
suffer by reason of the expropriation.[41] The value of the land and its
character at the time it was taken by the Government are the criteria

(k) To exercise the power of eminent domain in the manner provided

by law for the exercise of such power by other corporations
4

for determining just compensation.[42] No matter how commendable

petitioners purpose is, it is just and equitable that Vines Realty be
compensated the fair and full equivalent for the taking of its property,
which is the measure of the indemnity, not whatever gain would
accrue to the expropriating entity.[43]

G.R. No. L-28896

Moreover, CANORECO only sought the continuation of the exercise

of its right-of-way easement and not ownership over the land. Public
utilities power of eminent domain may be exercised although title is
not transferred to the expropriator.[44]

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
February 17, 1988

COMMISSIONER OF INTERNAL REVENUE, petitioner,

vs. ALGUE, INC., and THE COURT OF TAX APPEALS,
respondents.
CRUZ, J.:

Consequently, we rule that a courts writ of demolition can not prevail

over the easement of a right-of-way which falls within the power of
eminent domain.

Taxes are the lifeblood of the government and so should be collected

without unnecessary hindrance On the other hand, such collection
should be made in accordance with law as any arbitrariness will negate
the very reason for government itself. It is therefore necessary to
reconcile the apparently conflicting interests of the authorities and the
taxpayers so that the real purpose of taxation, which is the promotion
of the common good, may be achieved.

WHEREFORE, the petition is hereby GRANTED. The decision of the

Court of Appeals promulgated on January 19, 1993, and the resolution
adopted on March 15, 1993, in CA-G. R. SP No. 29624, are SET
ASIDE. The orders of the trial court dated November 27, 1992,
December 10, 1992, January 18, 1993, and January 25, 1993 and the
writs of demolition issued on December 11, 1992, and January 26,
1993, are ANNULLED.

The main issue in this case is whether or not the Collector of Internal
Revenue correctly disallowed the P75,000.00 deduction claimed by
private respondent Algue as legitimate business expenses in its income
tax returns. The corollary issue is whether or not the appeal of the
private respondent from the decision of the Collector of Internal
Revenue was made on time and in accordance with law.

Private respondents are ordered to restore or restitute petitioners

electric posts and power lines or otherwise indemnify petitioner for the
cost of the restoration thereof. Finally, private respondents are
permanently enjoined or prohibited from disturbing or interfering with
the operation and maintenance of the business of petitioner.

We deal first with the procedural question.

Costs against private respondents.

SO ORDERED.

The record shows that on January 14, 1965, the private respondent, a
domestic corporation engaged in engineering, construction and other
allied activities, received a letter from the petitioner assessing it in the
total amount of P83,183.85 as delinquency income taxes for the years
1958 and 1959. 1 On January 18, 1965, Algue flied a letter of protest
or request for reconsideration, which letter was stamp received on the
same day in the office of the petitioner. 2 On March 12, 1965, a
warrant of distraint and levy was presented to the private respondent,
through its counsel, Atty. Alberto Guevara, Jr., who refused to receive

Davide, Jr., C.J., (Chairman), Puno, Kapunan, and Ynares-Santiago,

JJ., concur.

it on the ground of the pending protest. 3 A search of the protest in the

dockets of the case proved fruitless. Atty. Guevara produced his file
copy and gave a photostat to BIR agent Ramon Reyes, who deferred
service of the warrant. 4 On April 7, 1965, Atty. Guevara was finally
informed that the BIR was not taking any action on the protest and it
was only then that he accepted the warrant of distraint and levy earlier
sought to be served. 5 Sixteen days later, on April 23, 1965, Algue
filed a petition for review of the decision of the Commissioner of
Internal Revenue with the Court of Tax Appeals. 6

Now for the substantive question.

The petitioner contends that the claimed deduction of P75,000.00 was
properly disallowed because it was not an ordinary reasonable or
necessary business expense. The Court of Tax Appeals had seen it
differently. Agreeing with Algue, it held that the said amount had been
legitimately paid by the private respondent for actual services
rendered. The payment was in the form of promotional fees. These
were collected by the Payees for their work in the creation of the
Vegetable Oil Investment Corporation of the Philippines and its
subsequent purchase of the properties of the Philippine Sugar Estate
Development Company.

The above chronology shows that the petition was filed seasonably.
According to Rep. Act No. 1125, the appeal may be made within thirty
days after receipt of the decision or ruling challenged. 7 It is true that
as a rule the warrant of distraint and levy is "proof of the finality of the
assessment" 8 and renders hopeless a request for reconsideration," 9
being "tantamount to an outright denial thereof and makes the said
request deemed rejected." 10 But there is a special circumstance in the
case at bar that prevents application of this accepted doctrine.

Parenthetically, it may be observed that the petitioner had Originally

claimed these promotional fees to be personal holding company
income 12 but later conformed to the decision of the respondent court
rejecting this assertion. 13 In fact, as the said court found, the amount
was earned through the joint efforts of the persons among whom it was
distributed It has been established that the Philippine Sugar Estate
Development Company had earlier appointed Algue as its agent,
authorizing it to sell its land, factories and oil manufacturing process.
Pursuant to such authority, Alberto Guevara, Jr., Eduardo Guevara,
Isabel Guevara, Edith, O'Farell, and Pablo Sanchez, worked for the
formation of the Vegetable Oil Investment Corporation, inducing other
persons to invest in it. 14 Ultimately, after its incorporation largely
through the promotion of the said persons, this new corporation
purchased the PSEDC properties. 15 For this sale, Algue received as
agent a commission of P126,000.00, and it was from this commission
that the P75,000.00 promotional fees were paid to the aforenamed
individuals. 16

The proven fact is that four days after the private respondent received
the petitioner's notice of assessment, it filed its letter of protest. This
was apparently not taken into account before the warrant of distraint
and levy was issued; indeed, such protest could not be located in the
office of the petitioner. It was only after Atty. Guevara gave the BIR a
copy of the protest that it was, if at all, considered by the tax
authorities. During the intervening period, the warrant was premature
and could therefore not be served.
As the Court of Tax Appeals correctly noted," 11 the protest filed by
private respondent was not pro forma and was based on strong legal
considerations. It thus had the effect of suspending on January 18,
1965, when it was filed, the reglementary period which started on the
date the assessment was received, viz., January 14, 1965. The period
started running again only on April 7, 1965, when the private
respondent was definitely informed of the implied rejection of the said
protest and the warrant was finally served on it. Hence, when the
appeal was filed on April 23, 1965, only 20 days of the reglementary
period had been consumed.

There is no dispute that the payees duly reported their respective

shares of the fees in their income tax returns and paid the
corresponding taxes thereon. 17 The Court of Tax Appeals also found,
after examining the evidence, that no distribution of dividends was
involved. 18
6

The petitioner claims that these payments are fictitious because most
of the payees are members of the same family in control of Algue. It is
argued that no indication was made as to how such payments were
made, whether by check or in cash, and there is not enough
substantiation of such payments. In short, the petitioner suggests a tax
dodge, an attempt to evade a legitimate assessment by involving an
imaginary deduction.

(1)
In general.--All the ordinary and necessary expenses paid or
incurred during the taxable year in carrying on any trade or business,
including a reasonable allowance for salaries or other compensation
for personal services actually rendered; ... 22
and Revenue Regulations No. 2, Section 70 (1), reading as follows:
SEC. 70. Compensation for personal services.--Among the ordinary
and necessary expenses paid or incurred in carrying on any trade or
business may be included a reasonable allowance for salaries or other
compensation for personal services actually rendered. The test of
deductibility in the case of compensation payments is whether they are
reasonable and are, in fact, payments purely for service. This test and
deductibility in the case of compensation payments is whether they are
reasonable and are, in fact, payments purely for service. This test and
its practical application may be further stated and illustrated as
follows:

We find that these suspicions were adequately met by the private

respondent when its President, Alberto Guevara, and the accountant,
Cecilia V. de Jesus, testified that the payments were not made in one
lump sum but periodically and in different amounts as each payee's
need arose. 19 It should be remembered that this was a family
corporation where strict business procedures were not applied and
immediate issuance of receipts was not required. Even so, at the end of
the year, when the books were to be closed, each payee made an
accounting of all of the fees received by him or her, to make up the
total of P75,000.00. 20 Admittedly, everything seemed to be informal.
This arrangement was understandable, however, in view of the close
relationship among the persons in the family corporation.

Any amount paid in the form of compensation, but not in fact as the
purchase price of services, is not deductible. (a) An ostensible salary
paid by a corporation may be a distribution of a dividend on stock.
This is likely to occur in the case of a corporation having few
stockholders, Practically all of whom draw salaries. If in such a case
the salaries are in excess of those ordinarily paid for similar services,
and the excessive payment correspond or bear a close relationship to
the stockholdings of the officers of employees, it would seem likely
that the salaries are not paid wholly for services rendered, but the
excessive payments are a distribution of earnings upon the stock. . . .
(Promulgated Feb. 11, 1931, 30 O.G. No. 18, 325.)
It is worth noting at this point that most of the payees were not in the
regular employ of Algue nor were they its controlling stockholders. 23

We agree with the respondent court that the amount of the promotional
fees was not excessive. The total commission paid by the Philippine
Sugar Estate Development Co. to the private respondent was
P125,000.00. 21 After deducting the said fees, Algue still had a
balance of P50,000.00 as clear profit from the transaction. The amount
of P75,000.00 was 60% of the total commission. This was a reasonable
proportion, considering that it was the payees who did practically
everything, from the formation of the Vegetable Oil Investment
Corporation to the actual purchase by it of the Sugar Estate properties.
This finding of the respondent court is in accord with the following
provision of the Tax Code:

The Solicitor General is correct when he says that the burden is on the
taxpayer to prove the validity of the claimed deduction. In the present
case, however, we find that the onus has been discharged satisfactorily.
The private respondent has proved that the payment of the fees was
necessary and reasonable in the light of the efforts exerted by the
payees in inducing investors and prominent businessmen to venture in

SEC. 30. Deductions from gross income.--In computing net income

there shall be allowed as deductions
(a) Expenses:
7

an experimental enterprise and involve themselves in a new business

requiring millions of pesos. This was no mean feat and should be, as it
was, sufficiently recompensed.
It is said that taxes are what we pay for civilization society. Without
taxes, the government would be paralyzed for lack of the motive
power to activate and operate it. Hence, despite the natural reluctance
to surrender part of one's hard earned income to the taxing authorities,
every person who is able to must contribute his share in the running of
the government. The government for its part, is expected to respond in
the form of tangible and intangible benefits intended to improve the
lives of the people and enhance their moral and material values. This
symbiotic relationship is the rationale of taxation and should dispel the
erroneous notion that it is an arbitrary method of exaction by those in
the seat of power.
But even as we concede the inevitability and indispensability of
taxation, it is a requirement in all democratic regimes that it be
exercised reasonably and in accordance with the prescribed procedure.
If it is not, then the taxpayer has a right to complain and the courts will
then come to his succor. For all the awesome power of the tax
collector, he may still be stopped in his tracks if the taxpayer can
demonstrate, as it has here, that the law has not been observed.
We hold that the appeal of the private respondent from the decision of
the petitioner was filed on time with the respondent court in
accordance with Rep. Act No. 1125. And we also find that the claimed
deduction by the private respondent was permitted under the Internal
Revenue Code and should therefore not have been disallowed by the
petitioner.
ACCORDINGLY, the appealed decision of the Court of Tax Appeals
is AFFIRMED in toto, without costs.
SO ORDERED.
Teehankee, C.J., Narvasa, Gancayco and Grio-Aquino, JJ., concur.
8

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 79307

On 7 December 1978, the then Court of First Instance of Manila

(herein referred to as CFI-MANILA) issued Search and Seizure
Warrants in Criminal Case Nos. 8602 and 8603 entitled "People of the
Philippines vs. Howard J. Sosis,, et al.," for violation of Section 11 (a)
and/or 11(e) of Republic Act No. 3720, * and violation of Article 188
of the Revised Penal Code (captioned as "Substituting and altering
trademarks, tradenames, or service marks"), respectively, and ordering
the seizure of the following:

August 29, 1989

COMMISSIONER OF CUSTOMS, petitioner,

vs. THE HON.
RAMON P. MAKASIAR, RTC Judge, Branch 35, Manila and THE
DISTILLERS CO. LTD. OF ENGLAND, respondents.

a)

Quasha, Asperilla, Ancheta, Pena & Nolasco for private respondent.

Materials:

All whisky, bottles, labels, caps, cartons, boxes, machinery equipment

or other materials used or intended to be used, or suitable for use, in
connection with counter-feiting or imitation of Johnnie Walker Scotch
Whisky (Emphasis supplied)

CORTES, J.:
b)
Petitioner Commissioner of Customs seeks the reversal of respondent
judge's decision dated 20 July 1987 in Civil Case No. 82-12821
entitled "The Distillers Co. Ltd., of England v. Victorio Francisco, et
al.," the dispositive portion of which reads as follows:

Documents:

xxx
under the control and possession of:

WHEREFORE, having been issued by the Collector of Customs in

excess of his jurisdiction the disputed Warrant of Seizure and
Detention dated January 2, 1979, in Seizure Identification No. 2-79 of
the Bureau of Customs, as well as all the proceedings taken thereon are
declared NULL and VOID, and the writ of prohibition prayed for is
GRANTED. The public respondent is ordered to REFRAIN and
DESIST from conducting any proceedings for the seizure and
forfeiture of the articles in question until after the Court having taken
cognizance and legal custody thereof has rendered its final judgment in
the criminal cases which involve the same articles. Without costs.

1.

Howard J. Sosis

2.

George Morrison Lonie

3.

Hercules Bottling Co.

4.

Lauro Villanueva

5.

Vicente Velasco

6.

Manuel Esteban

7.

Eugenio Mauricio

SO ORDERED. [RTC Decision, p. 7; Rollo, p. 26].

The undisputed acts are as follows:
[Rollo, pp. 106-107].
9

On 8 December 1978, a composite team from the Ministry of Finance

Bureau of Investigation and Intelligence (herein referred to as BII), the
Bureau of Customs and the Integrated National Police enforced the
search and seizure warrants, and seized and confiscated the following
articles, among others, found in the premises of the Hercules Bottling
Co., Inc. (herein referred to as HERCULES) at Isla de Provisor, Paco,
Manila:

On 29 January 1979, the CFI-MANILA issued an order authorizing the

transfer and delivery of the seized articles to the customs warehouse
located at South Harbor, Port of Manila, subject to the following
conditions:
1.
The Commissioner of Customs is willing to have custody of
the same and guarantees their safekeeping at all times in the same
quantity, quality, manner and condition when the articles shall be
turned over to and received by the Bureau of Customs in custodia
legis, subject to the further orders from the Court;

Six (6) Tanks of Scotch Whisky; 417 cartons each containing I doz.
bottles of "Johnnie Walker Black Label Whisky"; 109 empty bottles;
Empty Cartons of "Johnnie Walker Black Label Scotch Whisky"
number 900-2044 empty cartons. [Rollo, p. 21].

2.
No article shall be transferred without the presence of a
representative of the applicant, the defendants, the Commissioner of
Customs and the Court; these representatives to secure the necessary
escort as guarantee that nothing will happen during the transfer of the
articles.

The articles seized remained in the premises of HERCULES guarded

and secured by BII personnel.
On 2 January 1979, the Collector of Customs for the Port of Manila,
after being informed of the seizure of the subject goods and upon
verification that the same were imported contrary to law, issued a
warrant of seizure and detention, in Seizure Identification No. 2-79,
and ordered the immediate seizure and turnover of the seized items to
its Auction and Cargo Disposal Division at the Port of Manila. Seizure
and forfeiture proceedings were then initiated against the aboveenumerated articles for alleged violation of Section 2530 (f) of the
Tariff and Customs Code, in relation to Republic Act 3720, to wit:

3.
The Commissioner of Customs to issue the proper and
necessary receipt for each and every article transferred to and received
by the Bureau of Customs pursuant to this order [Rollo, p. 22].
Meanwhile, the validity and constitutionality of the issuance and
service of the search and seizure warrants issued by the CFI- MANILA
were contested in and upheld by the Court of Appeals in CA-G.R. No.
SP-09153-R entitled "Hercules Bottling Co. Inc., et al., v. Victoriano
Savellano, et al." HERCULES filed a petition for certiorari in the
Supreme Court but in a resolution dated 26 November 1986 in G.R.
No. 55061 captioned as Hercules Bottling Co., Inc. v. The Court of
Appeals, the Court dismissed the petition.

Sec. 2530. Property subject to forfeiture under Tariff and Customs

law:
xxx
(f) Any article the importation or exportation of which is effected or
attempted contrary to law, or any article of prohibited importation or
exportation, and all other articles which, in the opinion of the collector
have been used, are or were entered to be used as instruments in the
importation or exportation of the former.

Consequently, the City Fiscal of Manila proceeded with the

preliminary investigation of the criminal cases, where private
respondent, The Distillers Co. Ltd. of England, claiming to be the
owner and exclusive manufacturer of Johnnie Walker Scotch Whiskey
was the private complainant [Rollo, p. 61], With the dismissal of
HERCULES' petition, the Bureau of Customs also resumed hearing
the seizure and forfeiture proceedings over the said articles.

xxx
10

The present controversy arose when private respondent, on 11 June

1982, objected to the continuation by the Collector of Customs of the
seizure proceedings claiming, among others, that these proceedings
would hamper or even jeopardize the preliminary investigation being
conducted by the fiscal. The Collector of Customs ignored the
objections.

I.
RESPONDENT JUDGE ERRED IN ISSUING A
TEMPORARY RESTRAINING ORDER AND SUBSEQUENTLY A
WRIT OF INJUNCTION IN CIVIL CASE NO. 82-12721
NOTWITHSTANDING
THE
FACT
THAT
PRIVATE
RESPONDENT, THE DISTILLERS CO., LTD., OF ENGLAND HAS
NO VALID CAUSE OF ACTION AGAINST HEREIN
PETITIONER;

In order to stop and enjoin the Hearing Officer of the Bureau of

Customs from taking further action in the seizure proceedings of the
subject goods, private respondent on 24 September 1982 filed a
petition for prohibition with preliminary injunction and/or temporary
restraining order, docketed as Civil Case No. 82-12721. It must be
noted at this juncture that the petition was heard not before the CFIMANILA which originally issued the search warrants, but before
another sala, that of respondent judge of the Regional Trial Court,
Branch 35, Manila.

II.
RESPONDENT RTC JUDGE GRAVELY ERRED IN
TAKING COGNIZANCE OF THE PETITION AND IN
PROCEEDING TO HEAR AND RENDER A DECISION IN CIVIL
CASE NO. 82-12721 NOTWITHSTANDING THE FACT THAT
THE TRIAL COURT HAS NO JURISDICTION OVER THE CASE
[Rollo, pp. 10-11].
Petitioner contends that the authority of the Bureau of Customs over
seizure and forfeiture cases is beyond the judicial interference of the
Regional Trial Court, even in the form of certiorari, prohibition or
mandamus which are really attempts to review the Commissioner's
actions [Rollo, p. 98]. Petitioner argues that judicial recourse from the
decision of the Bureau of Customs on seizure and forfeiture cases can
only be sought in the Court of Tax Appeals and eventually in this
Court.

Respondent judge issued a temporary restraining order on 29

September 1982. Subsequently, a writ for preliminary injunction was
issued as well. Petitioner filed an answer on 12 November 1982. On 20
July 1987, respondent judge rendered a decision holding that the
Collector of Customs acted in excess of its jurisdiction in issuing the
warrant of seizure and detention considering that the subject goods had
already come under the legal custody of the CFI-MANILA. Hence,
petitioner represented by the Solicitor General, filed the instant
petition on 11 August 1987.

Private respondent however contends that while the law may have
vested exclusive jurisdiction in the Bureau of Customs over forfeiture
and seizure cases, in this case respondent judge had jurisdiction to
enjoin the Bureau of Customs from continuing with its seizure and
forfeiture proceedings since the articles here were already in custodia
legis, by virtue of the search warrants issued by the CFI-MANILA.
Private respondent contends that respondent judge may properly take
cognizance of the instant case since unlike the cases cited by
petitioner, the action for prohibition was brought not to claim
ownership or possession over the goods but only to preserve the same
and to prevent the Bureau of Customs from doing anything prejudicial
to the successful prosecution of the criminal cases [Rollo, p. 123].

In the meantime, Howard Sosis and company were charged for

violation of Chapter VI, Sec. 11(a) & (e) of Republic Act 3720 in
Criminal Case No. 88-63157 and for violation of Article 188 of the
Revised Penal Code in Criminal Case No. 88-63156 before the
Regional Trial Court and the Metropolitan Trial Court of Manila,
respectively [Rollo, p. 83].
In his petition, the Commissioner of Customs assigns as errors the
following:

11

The issue thus presented is whether or not respondent judge may

enjoin the Collector of Customs from continuing with its seizure and
forfeiture proceedings over goods earlier seized by virtue of search
warrants issued by the CFI-MANILA.

are subject to the exclusive appellate jurisdiction of the Court of Tax

Appeals. Thereafter, an appeal lies to this Court through the
appropriate petition for review by writ of certiorari. Undeniably,
regional trial courts do not share these review powers.

The instant petition is impressed with merit.

The above rule is anchored upon the policy of placing no unnecessary

hindrance on the government's drive not only to prevent smuggling
and other frauds upon customs, but also, and more importantly, to
render effective and efficient the collection of import and export duties
due the state. For tariff and customs duties are taxes constituting a
significant portion of the public revenue which are the lifeblood that
enables the government to carry out functions it has been instituted to
perform.

This Court finds that respondent-judge has failed to adhere to the

prevailing rule which denies him jurisdiction to enjoin the Bureau of
Customs from taking further action in the seizure and forfeiture
proceedings over the subject goods.
Jurisprudence is replete with cases which have held that regional trial
courts are devoid of any competence to pass upon the validity or
regularity of seizure and forfeiture proceedings conducted in the
Bureau of Customs, and to enjoin, or otherwise interfere with, these
proceedings. The Collector of Customs sitting in seizure and forfeiture
proceedings has exclusive jurisdiction to hear and determine all
questions touching on the seizure and forfeiture of dutiable goods. The
regional trial courts are precluded from assuming cognizance over
such matters even through petitions of certiorari, prohibition or
mandamus [See General Travel Service v. David, G.R. No. L-19259,
September 23, 1966, 18 SCRA 59; Pacis v. Averia, G.R. No. L-22526,
November 29, 1966, 18 SCRA 907; De Joya v. Lantin, G.R. No. L24037, April 27, 1967, 19 SCRA 893; Ponce Enrile v. Vinuya G.R.
No. L-29043, January 30, 1971, 37 SCRA 381; Collector of Customs
v. Torres, G.R. No. L-22977, May 31, 1972, 45 SCRA 272; Pacis v.
Geronimo, G.R. No. L-24068, April 23, 1974,56 SCRA 583;
Commissioner of Customs v. Navarro, G.R. No. L-33146, May 31,
1977, 77 SCRA 264; Republic v. Bocar, G.R. No. L-35260, September
4, 1979,93 SCRA 78; De la Fuente v. De Veyra, G.R. No. L-35385,
January 31, 1983, 120 SCRA 451].

Notwithstanding these considerations, respondent judge entertained

private respondent's petition for prohibition holding that the seizure
and forfeiture proceedings instituted in the Bureau of Customs was
null and void because the subject goods were earlier seized by virtue
of the warrants issued by the CFI-MANILA in Criminal Cases Nos.
8602 and 8603.
This holding is erroneous.
Even if it be assumed that a taint of irregularity may be imputed to the
exercise by the Collector of Customs of his jurisdiction to institute
seizure and forfeiture proceedings over the subject goods because he
had accepted custody of the same under conditions specified in the
CFI-Manila order dated January 29, 1979, it would not mean that
respondent judge was correspondingly vested with the jurisdiction to
interfere with such proceedings (See Ponce Enrile v. Vinuya supra]. It
bears repeating that law and settled jurisprudence clearly deprive the
regional trial courts of jurisdiction to enjoin the Collector of Customs
from exercising his exclusive authority to order seizure and forfeiture
proceedings over imported goods.

It is likewise well-settled that the provisions of the Tariff and Customs

Code and that of Republic Act No. 1125, as amended ** specify the
proper fora for the ventilation of any legal objections or issues raised
concerning these proceedings. Actions of the Collector of Customs are
appealable to the Commissioner of Customs, whose decisions, in turn,

Moreover, there is no legal basis for respondent judge's conclusion that

the Collector of Customs is deprived of his jurisdiction to issue the
assailed warrant of seizure and detention, and to institute seizure and
12

forfeiture proceedings for the subject goods simply because the same
were first taken in custodia legis.

Co. v. Steckler, 188 F. 2d 715 (1951) citing Strong v. US, 46 F. 2d

257, 79 ALR 150 (1931)].

Undeniably, the subject goods have been brought under the legal
control of the CFI-MANILA by virtue of its search and seizure
warrants and are, therefore, in custodia legis. But this fact merely
serves to deprive any other court or tribunal, except one having
supervisory control or superior jurisdiction in the premises, of the right
to divest the CFI-MANILA of its custody and control of the said
property [Collector of Internal Revenue v. Flores Vda. de Codinera
G.R. No. L-9675, September 28, 1957], or to interfere with and change
its possession without its consent [National Power Corporation v. De
Veyra, G.R. No. L-15763, December 22, 1961, 3 SCRA 646; De Leon
v. Salvador, G.R. Nos. L-30871 & L-31603, December 28, 1970, 36
SCRA 567; Vlasons Enterprises Corporation v. Court of Appeals, G.R.
No. 61688, October 28, 1987, 155 SCRA 186].

Therefore, contrary to the import of respondent judge's decision, the

Collector of Customs was not precluded by law or legal principle from
assuming jurisdiction over the subject goods. No legal infirmity
attended the seizure and forfeiture proceedings over the subject goods.
The Court must emphasize at this point that the instant case does not
involve a conflict of jurisdictions. Proceedings before the regular
courts for criminal prosecutions against Howard Sosis, et al., and
seizure and forfeiture proceedings for the subject goods conducted by
the Bureau of Customs may be maintained simultaneously and
independently of each other. For the nature of the two proceedings are
entirely different such that a resolution in one is not decisive of the
issue in the other. The latter, which is administrative and civil in
nature, is directed against the res or articles imported and entails a
determination of the legality of its importation. The former is directed
against those persons who may be held liable for violating the penal
laws in connection with the importation [See Diosamito v. Balanque,
G.R. No. L-30734, July 28,1969,28 SCRA 836; People v. CFI, G.R.
No. L-41686, November 17, 1980, 101 SCRA 86].

In the instant case, the CFI-Manila was not divested of its jurisdiction
over the subject goods, nor were its processes interfered with by the
Collector of Customs. It, in fact, authorized the transfer and delivery of
the subject goods from the premises of HERCULES to the Bureau of
Customs warehouse/bodega at the South Harbor, Port of Manila
thereby entrusting the Bureau of Customs with the actual possession
and control of the same.

Private respondent, however, argues that conflict may arise regarding

the disposition of the subject goods if the proceedings before the
Collector of Customs and the regular courts were allowed to proceed
simultaneously. Private respondent contends that in view of the nature
of the seizure and forfeiture proceedings, a judgment in favor of
HERCULES will result in the release of the subject goods to the
claimants thereof, while an unfavorable decision will entail their
destruction or sale. It is asserted that either of the two outcomes will
hamper or even jeopardize the ongoing criminal prosecutions, said
goods comprising the substantial part of the evidence for the People of
the Philippines.

On the other hand, since the Collector of Customs herein had actual
possession and control over the subject goods, his jurisdiction over the
goods was secured for the purpose of instituting seizure and forfeiture
proceedings to determine whether or not the same were imported into
the country contrary to law [See Papa v. Mago, G.R. No. L-27360,
February 28, 1968, 22 SCRA 857]. This is consistent with the
principle that the basic operative fact for the institution and perfection
of proceedings in rem like the seizure and forfeiture proceedings
pursuant to the Tariff and Customs Code, is the actual or constructive
possession of the res by the tribunal empowered by law to conduct the
proceedings [See Dodge v. US, 71 L. ed. 392 (1926); US v. Mack, 79
L. ed. 1559 (1935) citing The Ann, 3 L. ed. 734 (1815); Fettig Canning

Proper adherence by both tribunals to the rules of comity as defined in

the leading case of The Government of the Philippines v. Gale [24
Phil. 95 (1931)] will forestall the conflict feared. In that case the Court
13

had established the rule that where the preservation and safekeeping of
the subject matter of an action is demanded, as it is made to appear that
these articles may prove to be of vital importance as exhibits in the
prosecution of other charges in another proceeding, the rules for the
orderly course of proceedings in courts and tribunals forbid the
disposition or destruction thereof in one action which would prejudice
the other, and vice versa [Id. at pp. 98-99].

Gutierrez, Jr., Feliciano and Bidin, JJ., concur.

Fernan, C.J., took no part.

The State in the instant case must be given reasonable opportunity to

present its cases for the proper enforcement of the applicable
provisions of the Revised Penal Code, Republic Act No. 3720, and the
Tariff and Customs Code, and the prosecution of the violators thereof.
It follows then that the execution of any final decision in the seizure
and forfeiture case before the Bureau of Customs, whether it requires
the destruction, sale or the release of the subject goods, should not
frustrate the prosecution's task of duly presenting and offering its
evidence in Criminal Cases Nos. 88-63156 and 88-63157.
It is apropos to note that for evidentiary purposes, it would not be
necessary to present each and every item of the goods in question
before the courts trying the criminal cases. Thus, a representative
quantity of the goods, as may be agreed upon by the authorized
customs officials and fiscals prosecuting the criminal cases, shall be
set aside as evidence to be presented in the above criminal cases and
retained in custodia legis until final judgment is secured in these cases.
The rest of the goods may be disposed of in accordance with the final
decision rendered in the seizure and forfeiture proceedings pursuant to
the Tariff and Customs Code.
WHEREFORE, in view of the foregoing, the respondent judge's
decision dated 20 July 1987 is REVERSED. The seizure and forfeiture
proceedings involving the goods in question before the Bureau of
Customs may proceed subject to the above pronouncements relative to
the setting aside of so much of the goods as may be required for
evidentiary purposes.
SO ORDERED.
14

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-7988

interested friends it was decided to conduct a campaign to secure funds

for an adequate and permanent association. In the name of the
international committee and friends in America Mr. Mott guaranteed
P170,000 for the construction of a building on condition that friend in
the Philippines secure the site and adequately furnish the building. The
campaign for funds was begun here on February 15, 1907, and, by the
15th of March following, P83,000 was subscribed, nearly one
thousand different persons contributing. Thereupon the Young Men's
Christian Association of Manila was incorporated under the law of the
Philippine Islands and received its character in June, 1907.

January 19, 1916

THE YOUNG MEN'S CHRISTIAN ASSOCIATION OF MANILA,

plaintiff-appellant, vs.
THE COLLECTOR OF INTERNAL
REVENUE, defendant-appellee.
Haussermann, Cohn and Fisher for appellant.
City Attorney Escaler for appellee.

A site for the new building was selected on Calle Concepcion, Ermita,
and the building contract was let on the 8th of January following. The
cornerstone was laid with appropriate ceremonies on July 10, 1908,
and the building was formally dedicated on October 20, 1909.

MORELAND, J.:
The question at issue in this case is whether or not the building and
grounds of the Young Men's Christian Association of Manila are
subject to taxation, under section 48 of the charter of the city of Manila
quoted in the footnote [syllabus].

The building is composed of three parts. The main structure, located in

the center, is three stories high and includes a reception hall, social hall
and game rooms, lecture room, library, reading room and rooming
apartments. The small building lying to the left of the principal
structure, as one faces the front from Called Concepcion, is the kitchen
and servant's quarters. The large wing to the right is known as the
athletic building, where the bowling alleys, swimming pool, locker
rooms and gymnasium-auditorium are located. The construction is of
reinforced concrete with steel trussed roof covered with interlocking
red tiles.

The city of Manila, contending that the property is taxable, assessed it

and levied a tax thereon. It was paid under protest and this action
begun to recover it on the ground that the property was exempt from
taxation under the charter of the city of Manila. The decision was for
the city and the association appealed.
The Young Men's Christian Association came to the Philippine with
the army of occupation in 1898. When the large body of troops in
Manila was removed to permanent quarters at Fort William McKinley
in February, 1905, an independent association for Manila was
organized under the direction of the Army and navy departments.
Shortly after the organization of the association the directors made a
formal request to the international committee of the Young Men's
Christian Association in New York City for the assistance and
cooperation of its foreign department. I response to this request Mr.
John R. Mott, general secretary of the foreign department, visited
Manila in January 1907. After a conference with the directors and

The main or central portion of the building is 150 by 45 feet and stands
20 meters back from the sidewalk. An iron canopy, suspended by
brackets, projects over the driveway which lies in front and shelters the
main entrance. A wide arched doorway opens into a large reception
room, on the left of which is the public office and the secretary's
private office, while on the right is the reading and writing rooms, and
beyond that the library, each about 30 feet square. From the reception
room, on the left, a broad concrete stairway leads to the second floor.
Passing out of the rear of the reception hall one enters upon a veranda
some 15 feet in width running the full length of the main structure
15

which looks out on the tennis courts and affords an excellent place for
lounging, games and general social purposes. To the left of the
entrance hall and also opening upon the veranda are two large rooms
of about the same size as those on the right of the reception hall, the
first being the billiard room and the other the restaurant. The athletic
building is entered from the rear veranda. It is a two story wing 68 by
85 feet. Passing from the veranda into the athletic hall one finds first,
on the left, the toilet room, and beyond this, to the rear, the shower
baths and locker rooms. The swimming pool is in the center of the
athletic wing and is 60 by 19 feet in size, lined with cement. To the
right of the swimming pool are the bowling alleys. A wide stairways
leads to the second floor. Above the swimming-pool and bowling alley
is a large room 50 by 85 feet which is the gymnasium and also the
auditorium when occasion requires. About one-third of the roof
converting the athletic wing is used as a roof garden.

usefulness of its members and in improving the spiritual, mental,

social and physical condition of young men.
Speaking generally, the association claims exemption from taxation on
the ground that it is a religious, charitable and educational institution
combined. That it has an educational department is not denied. It is
undisputed that the aim of this department is to furnish, at much less
than cost, instruction in subjects that will greatly increase the mental
efficiency and wage-earning capacity of young men, prepare them in
special lines of business and offer them special lines of study.
Attention is given to subjects included in civil service and consular
examinations both here and in the United States. The courses offer
commercial subjects, as well as many others, and include stenography
and typewriting, bookkeeping, arithmetic, English composition,
foreign languages, including elementary and advanced Spanish and
Tagalog, special courses in Philippine history, public speaking,
surveying, horticulture, tropical dependencies, and the group of
subjects required for entrance into the consular services, such as
political economy, American and modern history. Courses are also
offered in law, social, ethics, political economy and other subjects.

The second and third floors of the main building are given over almost
wholly to rooming apartments and baths. On the second floor over the
entrance hall is a members' parlor, from which a small balcony
projects over the main entrance. The remainder of the second floor and
all to the third are composed of the living rooms. These apartments, of
which there are 14 on the second and 20 on the third floor are
approximately 18 by 14 feet each. They provide accommodations for
64 men.

The institution has also its religious department. In that department

there are, generally speaking, three main lines of work Bible study,
religious meetings and special classes. Course are offered in the Life
of Christ and the Old Testament and in the larger social significance of
the teachings of Jesus. Meetings are held on Sunday afternoons and
several times during the week and courses are offered in the study of
missions, in the method of teaching the Bible and kindred subjects.

The purposes of the association, as set forth in its charter and

constitution, are:
To develop the Christian character and usefulness of its members, to
improve the spiritual, intellectual, social and physical condition of
young men, and to acquire, hold, mortgage, and dispose of the
necessary lands, buildings and personal property for the use of said
corporation exclusively for religious, charitable and educational
purposes, and not for investment or profit.

The atmosphere of the Young Men's Christian Association is distinctly

religious and there is constant effort on the part of the officials to
create a religious spirit; and to that end there is continuous pressure to
induce members to attend not only the religious services of the
association but also those of one or another of the churches of Manila.
While the association is nonsectarian, it is preeminently religious; and
the fundamental basis and groundwork is the Christian religion. All of
the officials of the association are devoted Christians, members of a

The purposes of this association shall be exclusively religious,

charitable and educational, in developing the Christian character and
16

church, and have dedicated their lives to the spread of the Christian
principles and building of Christian character.

feature of the institution not as a business or means of making money,

but, rather, as a very efficient means of maintaining the influence of
the institution over its membership. As we held in the case of the
Columbia Club, religious and moral teachings do not always stop with
the spoken word; but to be effective in the highest degree they must
follow the young man through as many moments of his life as
possible. To this end the feature of the Young Men's Christian
Association to which objection is made lends itself with great effect;
and we are, accordingly, forced to regards this activity of the
institution not as a business but as a method by which the institution
maintains its influence and conserves the benefits which its
organization was designed to confer.

The institution also has charitable features. It makes no profit on any

of its activities. The professors and instructors in all departments serve
without pay and freely give of their time and ability to further the
purposes of the institution. The chief secretary and his assistant receive
no salary from the institution. Whatever they are paid comes from the
United States. In estimating the cost of instruction in the various
departments, or of the other things for which pay is received, no
account is taken of the interest on the money invested in the grounds
and building, of deterioration in value resulting from the lapse of time,
or of the fact that the professors and instructors and certain officials
receive no pay. We have, then, a building and grounds, professors and
instructors, and certain institution officials, furnished free of charge,
and which makes no profit even on that basis. This, it would seem,
would lend some color to the claim that the association takes on some
of the aspect of a charitable institution. While it appears that the
association is not exclusively religious or charitable or educational, it
is demonstrated that it is a happy combination of all three, giving to its
membership the religious opportunities of the church, the educational
opportunities of the school and the blessings of charity where needed
without the recipient feeling or even knowing that he is the object of
charity.

As we have seen in the description already given of the association

building and grounds, no part is occupied for any but institutional
purposes. From end to end the building and grounds are devoted
exclusively to the purposes stated in the constitution of the association.
The library and reading rooms, the game and lounging halls, the
lecture rooms, the auditorium, the baths, pools, devices for physical
development, and the grounds, are all dedicated exclusively to the
objects and purpose of the association the building of Christian
character and the creation of moral sentiment and fiber in men. It is the
belief of the Young Men's Christian Association that a Christian man,
a man of moral sentiment and firm moral fiber, is yet a better man for
being also all-round man one who is sound not only according to
Christian principles and the highest moral conceptions, but physically
and mentally; whose body and mind act in harmony and within the
limits which the rights of others set; who are gentleman in physical
and mental struggles, as well as in religious service; who have selfrespect and self-restraint; who can hit hard and still kindly; who can
lose without envy; who can congratulate his conqueror with sincerity;
who can vie without temper, contend without malice, concede without
regret; who can win and still be generous, in short, one who fights
hard but square. To the production of such men the association lends
all its efforts, husbands all its resources.

It is claimed, however, that the institution is run as a business in that it

keeps a lodging and boarding house. It may be admitted that there are
64 persons occupying rooms in the main building as lodgers or
roomers and that they take their meals at the restaurant below. These
facts, however, are far from constituting a business in ordinary
acceptation of the word. In the first place, no profit is realized by the
association in any sense. In the second place, it is undoubted, as it is
undisputed, that the purpose of the association is not, primarily, to
obtain the money which comes from the lodgers and boarders. The real
purpose is to keep the membership continually within the sphere of
influence of the institution; and thereby to prevent, as far as possible,
the opportunities which vice president to young men in foreign
countries who lack home or other similar influences. We regard this

We are aware that there are many decisions holding that institutions of
this character are not exempt from taxation; but, on investigation, we
17

find that the majority of them are based on statutes much narrower
than the one under consider and that in all probability the decisions
would have been otherwise if the court had been passing on a statute
similar to ours. On the other hand, there are many decisions of the
courts in the United States founded on statutes like the Philippine
statute which hold that associations of this class are exempt from
taxation. We have examined all of the decisions, both for and against,
with care and deliberation, and we are convinced that the weight of
authority sustains the positions we take in this case.

etc., Missionary Society vs. City of Manila, March 16, 1910.,

unpublished); and in explanation of my dissent in this case, I set out
here my dissenting opinion in the former case. With the substitution of
the name of the Young Men's Christian Association of Manila for that
of the Columbia Club, that opinion sets forth very summarily the
grounds of my dissent in this case.

There is no doubt about the correctness of the contention that an

institution must devote itself exclusively to one or the other of the
purpose mentioned in the statute before it can be exempt from
taxation; but the statute does not say that it must be devoted
exclusively to any one of the purposes therein mentioned. It may be a
combination of two or three or more of those purposes and still be
entitled to exempt. The Young Men's Christian Association of Manila
cannot be said to be an institution used exclusively for religious
purposes, or an institution used exclusively for charitable purposes, or
an institution devoted exclusively to educational purposes; but we
believe it can be truthfully said that it is an institution used exclusively
for all three purposes, and that, as such, it is entitled to be exempted
from taxation.

This cardinal rule of American jurisprudence is based on the strongest

reasons of public policy and is supported by abundant authority. As
stated Mr. Justice Johnson in his dissenting opinion in Roman Catholic
Church vs. Hastings and City of Manila ( 5 Phil. Rep., 701, 708). "It is
the theory of the Government that all property within the State held by
individuals or corporations should contribute equally, in portions to its
value to the support of the Government, in return for the protection
which such property receives at the hands of the Government. This
being the policy of the Government, a law which relieves any property
from this burden should be strictly construed, to the end that no
individual or corporation shall be relieved from bearing his or its full
share of the burdens of taxation unless the law expressly so provides.
This exemption should not be allowed by any strained or unnatural
interpretation of law."

Firmly convinced as I am that statutory exemptions from taxation

should be strictly constructed, I am constrained to dissent.

The judgment appealed from is reversed and the cause remanded with
instructions to enter a judgment against the city of Manila and in favor
of the Young Men's Christian Association of Manila in the sum of
P6,221.35. Without costs in this instance. So ordered.

I am not a whit less satisfied than my brethren that, in the language of

appellee's brief, "To have lived in the city of Manila is to know the
immeasurable benefit accomplished by the Young Men's Christian
Association, a benefit so extensively as to call forth gratitude and
appreciation, not only from those personally interested in the purity of
life led by Manila's young manhood, but from the foremost
administrators of America's benign mission in these Islands;" but I am
wholly unable to agree, that the lands or buildings occupied by it are
"used exclusively for religious, charitable, scientific or educational
purposes, and not for profit," the only ground upon which the
exemption form taxation in question in these proceedings can
sustained.

Arellano, C.J., Torres, Johnson and Araullo, JJ., concur.

Separate Opinions
CARSON, J., dissenting:
I dissent.
I base my dissent on substantially identical grounds with those upon
which I dissented in the Columbia Club case (No. 5336, Domestic,
18

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-27588

on the lot, which formerly was the cemetery and on the portion where
the lower stood, was illegal. Both parties appealed from this judgment.
The exemption in favor of the convent in the payment of the land tax
(sec. 344 [c] Administrative Code) refers to the home of the parties
who presides over the church and who has to take care of himself in
order to discharge his duties. In therefore must, in the sense, include
not only the land actually occupied by the church, but also the adjacent
ground destined to the ordinary incidental uses of man. Except in large
cities where the density of the population and the development of
commerce require the use of larger tracts of land for buildings, a
vegetable garden belongs to a house and, in the case of a convent, it
use is limited to the necessities of the priest, which comes under the
exemption.lawphi1.net

December 31, 1927

THE ROMAN CATHOLIC BISHOP OF NUEVA SEGOVIA, as

representative of the Roman Catholic Apostolic Church, plaintiffappellant, vs. THE PROVINCIAL BOARD OF ILOCOS NORTE, ET
AL., defendants-appellants.
Vicente Llanes and Proceso Coloma for plaintiff-appellant.
Provincial Fiscal Santos for defendant-appellants.

In regard to the lot which formerly was the cemetery, while it is no

longer used as such, neither is it used for commercial purposes and,
according to the evidence, is now being used as a lodging house by the
people who participate in religious festivities, which constitutes an
incidental use in religious functions, which also comes within the
exemption.

AVANCEA, J.:
The plaintiff, the Roman Catholic Apostolic Church, represented by
the Bishop of Nueva Segovia, possesses and is the owner of a parcel of
land in the municipality of San Nicolas, Ilocos Norte, all four sides of
which face on public streets. On the south side is a part of the
churchyard, the convent and an adjacent lot used for a vegetable
garden, containing an area off 1,624 square meters, in which there is a
stable and a well for the use of the convent. In the center is the
remainder of the churchyard and the church. On the north is an old
cemetery with two of its walls still standing, and a portion where
formerly stood a tower, the base of which still be seen, containing a
total area of 8,955 square meters.

The judgment appealed from is reversed in all it parts and it is held

that both lots are exempt from land tax and the defendants are ordered
to refund to plaintiff whatever was paid as such tax, without any
special pronouncement as to costs. So ordered.
Johnson, Street, Villamor, Ostrand, Johns and Villa-Real, JJ., concur.

As required by the defendants, on July 3, 1925 the plaintiff paid, under

protest, the land tax on the lot adjoining the convent and the lot which
formerly was the cemetery with the portion where the tower stood.

Separate Opinions

The plaintiff filed this action for the recovery of the sum paid by to the
defendants by way of land tax, alleging that the collection of this tax is
illegal. The lower court absolved the defendants from the complaint in
regard to the lot adjoining convent and declared that the tax collected

The Assessment Law exempts from taxation "Cemeteries or burial

grounds . . . and all lands, buildings, and improvements use
exclusively for religious . . . purposes, but this exemption shall not
extend to property held for investment, or which produces income,

MALCOLM, J., dissenting:

19

even though the income be devoted to some one or more of the

purposes above specified." (Administrative Code, sec. 344; Act No.
2749, sec. 1.) That is the applicable law. The facts may be taken as
found by the judge of First Instance, who made his findings more
certain by an ocular inspection of the property under consideration.
The testimony and the inspection disclosed that the lot Known as
"huerta" was not devoted to religious purposes, and that the old
cemetery had long since leased to be used as such and had been
planted to corn. Those are the facts. The test to be applied to the
combined law and facts must be the actual use of the property. The
property legally exempt from the payment of taxes must be devoted to
some purpose specified in the law. A "huerta" not needed or used
exclusively for religious purposes is not thus exempt. A cemetery or
burial ground no longer a cemetery or a burial ground is not thus
exempt. Accordingly, I prefer to vote for the affirmance of Judge
Mariano's decision.

20

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-19201

should not be liable for the donee's gift tax. It was also asserted that
the assessment of the gift tax, even against the Roman Catholic
Church, would not be valid, for such would be a clear violation of the
provisions of the Constitution.

June 16, 1965

After hearing, the CTA rendered judgment, the pertinent portions of

which are quoted below:

REV. FR. CASIMIRO LLADOC, petitioner, vs.

The COMMISSIONER OF INTERNAL REVENUE and The COURT
of TAX APPEALS, respondents.
Hilado and Hilado for petitioner.
Office of the Solicitor General for respondents.

... . Parish priests of the Roman Catholic Church under canon laws are
similarly situated as its Archbishops and Bishops with respect to the
properties of the church within their parish. They are the guardians,
superintendents or administrators of these properties, with the right of
succession and may sue and be sued.

PAREDES, J.:

xxx

Sometime in 1957, the M.B. Estate, Inc., of Bacolod City, donated

P10,000.00 in cash to Rev. Fr. Crispin Ruiz, then parish priest of
Victorias, Negros Occidental, and predecessor of herein petitioner, for
the construction of a new Catholic Church in the locality. The total
amount was actually spent for the purpose intended.

The petitioner impugns the, fairness of the assessment with the

argument that he should not be held liable for gift taxes on donation
which he did not receive personally since he was not yet the parish
priest of Victorias in the year 1957 when said donation was given. It is
intimated that if someone has to pay at all, it should be petitioner's
predecessor, the Rev. Fr. Crispin Ruiz, who received the donation in
behalf of the Catholic parish of Victorias or the Roman Catholic
Church. Following petitioner's line of thinking, we should be equally
unfair to hold that the assessment now in question should have been
addressed to, and collected from, the Rev. Fr. Crispin Ruiz to be paid
from income derived from his present parish where ever it may be. It
does not seem right to indirectly burden the present parishioners of
Rev. Fr. Ruiz for donee's gift tax on a donation to which they were not
benefited.

On March 3, 1958, the donor M.B. Estate, Inc., filed the donor's gift
tax return. Under date of April 29, 1960, the respondent Commissioner
of Internal Revenue issued an assessment for donee's gift tax against
the Catholic Parish of Victorias, Negros Occidental, of which
petitioner was the priest. The tax amounted to P1,370.00 including
surcharges, interests of 1% monthly from May 15, 1958 to June 15,
1960, and the compromise for the late filing of the return.
Petitioner lodged a protest to the assessment and requested the
withdrawal thereof. The protest and the motion for reconsideration
presented to the Commissioner of Internal Revenue were denied. The
petitioner appealed to the Court of Tax Appeals on November 2, 1960.
In the petition for review, the Rev. Fr. Casimiro Lladoc claimed,
among others, that at the time of the donation, he was not the parish
priest in Victorias; that there is no legal entity or juridical person
known as the "Catholic Parish Priest of Victorias," and, therefore, he

xxx

xxx

xxx

xxx

xxx

We saw no legal basis then as we see none now, to include within the
Constitutional exemption, taxes which partake of the nature of an
excise upon the use made of the properties or upon the exercise of the
privilege of receiving the properties. (Phipps vs. Commissioner of
Internal Revenue, 91 F [2d] 627; 1938, 302 U.S. 742.)
21

It is a cardinal rule in taxation that exemptions from payment thereof

are highly disfavored by law, and the party claiming exemption must
justify his claim by a clear, positive, or express grant of such privilege
by law. (Collector vs. Manila Jockey Club, G.R. No. L-8755, March
23, 1956; 53 O.G. 3762.)

appurtenant thereto, and all lands, buildings, and improvements used

exclusively for religious purposes. The exemption is only from the
payment of taxes assessed on such properties enumerated, as property
taxes, as contra distinguished from excise taxes. In the present case,
what the Collector assessed was a donee's gift tax; the assessment was
not on the properties themselves. It did not rest upon general
ownership; it was an excise upon the use made of the properties, upon
the exercise of the privilege of receiving the properties (Phipps vs.
Com. of Int. Rec. 91 F 2d 627). Manifestly, gift tax is not within the
exempting provisions of the section just mentioned. A gift tax is not a
property tax, but an excise tax imposed on the transfer of property by
way of gift inter vivos, the imposition of which on property used
exclusively for religious purposes, does not constitute an impairment
of the Constitution. As well observed by the learned respondent Court,
the phrase "exempt from taxation," as employed in the Constitution
(supra) should not be interpreted to mean exemption from all kinds of
taxes. And there being no clear, positive or express grant of such
privilege by law, in favor of petitioner, the exemption herein must be
denied.

The phrase "exempt from taxation" as employed in Section 22(3),

Article VI of the Constitution of the Philippines, should not be
interpreted to mean exemption from all kinds of taxes. Statutes
exempting charitable and religious property from taxation should be
construed fairly though strictly and in such manner as to give effect to
the main intent of the lawmakers. (Roman Catholic Church vs.
Hastrings 5 Phil. 701.)
xxx

xxx

xxx

WHEREFORE, in view of the foregoing considerations, the decision

of the respondent Commissioner of Internal Revenue appealed from, is
hereby affirmed except with regard to the imposition of the
compromise penalty in the amount of P20.00 (Collector of Internal
Revenue v. U.S.T., G.R. No. L-11274, Nov. 28, 1958); ..., and the
petitioner, the Rev. Fr. Casimiro Lladoc is hereby ordered to pay to the
respondent the amount of P900.00 as donee's gift tax, plus the
surcharge of five per centum (5%) as ad valorem penalty under Section
119 (c) of the Tax Code, and one per centum (1%) monthly interest
from May 15, 1958 to the date of actual payment. The surcharge of
25% provided in Section 120 for failure to file a return may not be
imposed as the failure to file a return was not due to willful neglect.( ...
) No costs.

The next issue which readily presents itself, in view of petitioner's

thesis, and Our finding that a tax liability exists, is, who should be
called upon to pay the gift tax? Petitioner postulates that he should not
be liable, because at the time of the donation he was not the priest of
Victorias. We note the merit of the above claim, and in order to put
things in their proper light, this Court, in its Resolution of March 15,
1965, ordered the parties to show cause why the Head of the Diocese
to which the parish of Victorias pertains, should not be substituted in
lieu of petitioner Rev. Fr. Casimiro Lladoc it appearing that the Head
of such Diocese is the real party in interest. The Solicitor General, in
representation of the Commissioner of Internal Revenue, interposed no
objection to such a substitution. Counsel for the petitioner did not also
offer objection thereto.

The above judgment is now before us on appeal, petitioner assigning

two (2) errors allegedly committed by the Tax Court, all of which
converge on the singular issue of whether or not petitioner should be
liable for the assessed donee's gift tax on the P10,000.00 donated for
the construction of the Victorias Parish Church.

On April 30, 1965, in a resolution, We ordered the Head of the

Diocese to present whatever legal issues and/or defenses he might
wish to raise, to which resolution counsel for petitioner, who also
appeared as counsel for the Head of the Diocese, the Roman Catholic

Section 22 (3), Art. VI of the Constitution of the Philippines, exempts

from taxation cemeteries, churches and parsonages or convents,
22

Bishop of Bacolod, manifested that it was submitting itself to the

jurisdiction and orders of this Court and that it was presenting, by
reference, the brief of petitioner Rev. Fr. Casimiro Lladoc as its own
and for all purposes.
In view here of and considering that as heretofore stated, the
assessment at bar had been properly made and the imposition of the
tax is not a violation of the constitutional provision exempting
churches, parsonages or convents, etc. (Art VI, sec. 22 [3],
Constitution), the Head of the Diocese, to which the parish Victorias
Pertains, is liable for the payment thereof.
The decision appealed from should be, as it is hereby affirmed insofar
as tax liability is concerned; it is modified, in the sense that petitioner
herein is not personally liable for the said gift tax, and that the Head of
the Diocese, herein substitute petitioner, should pay, as he is presently
ordered to pay, the said gift tax, without special, pronouncement as to
costs.
Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L., Dizon,
Regala, Makalintal, Bengzon, J.P., and Zaldivar, JJ., concur.
Barrera, J., took no part.

23

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-49336

assessment made by the Provincial Assessor on the properties of

respondent Roman Catholic Bishop, petitioner failed to exhaust the
administrative remedies available under Presidential Decree No. 464
before filing such court action. Further, it was pointed out to
respondent Judge that he failed to abide by the pertinent provision of
such Presidential Decree which provides as follows: "No court shall
entertain any suit assailing the validity of a tax assessed under this
Code until the taxpayer, shall have paid, under protest, the tax assessed
against him nor shall any court declare any tax invalid by reason of
irregularities or informalities in the proceedings of the officers charged
with the assessment or collection of taxes, or of failure to perform their
duties within this time herein specified for their performance unless
such irregularities, informalities or failure shall have impaired the
substantial rights of the taxpayer; nor shall any court declare any
portion of the tax assessed under the provisions of this Code invalid
except upon condition that the taxpayer shall pay the just amount of
the tax, as determined by the court in the pending proceeding." 6

August 31, 1981

THE PROVINCE OF ABRA, represented by LADISLAO

ANCHETA, Provincial Assessor, petitioner, vs.
HONORABLE HAROLD M. HERNANDO, in his capacity as
Presiding Judge of Branch I, Court of First Instance Abra; THE
ROMAN CATHOLIC BISHOP OF BANGUED, INC., represented by
Bishop Odilo etspueler and Reverend Felipe Flores, respondents.
FERNANDO, C.J.:
On the face of this certiorari and mandamus petition filed by the
Province of Abra, 1 it clearly appears that the actuation of respondent
Judge Harold M. Hernando of the Court of First Instance of Abra left
much to be desired. First, there was a denial of a motion to dismiss 2
an action for declaratory relief by private respondent Roman Catholic
Bishop of Bangued desirous of being exempted from a real estate tax
followed by a summary judgment 3 granting such exemption, without
even hearing the side of petitioner. In the rather vigorous language of
the Acting Provincial Fiscal, as counsel for petitioner, respondent
Judge "virtually ignored the pertinent provisions of the Rules of Court;
... wantonly violated the rights of petitioner to due process, by giving
due course to the petition of private respondent for declaratory relief,
and thereafter without allowing petitioner to answer and without any
hearing, adjudged the case; all in total disregard of basic laws of
procedure and basic provisions of due process in the constitution,
thereby indicating a failure to grasp and understand the law, which
goes into the competence of the Honorable Presiding Judge." 4

When asked to comment, respondent Judge began with the allegation

that there "is no question that the real properties sought to be taxed by
the Province of Abra are properties of the respondent Roman Catholic
Bishop of Bangued, Inc." 7 The very next sentence assumed the very
point it asked when he categorically stated: "Likewise, there is no
dispute that the properties including their procedure are actually,
directly and exclusively used by the Roman Catholic Bishop of
Bangued, Inc. for religious or charitable purposes." 8 For him then:
"The proper remedy of the petitioner is appeal and not this special civil
action." 9 A more exhaustive comment was submitted by private
respondent Roman Catholic Bishop of Bangued, Inc. It was, however,
unable to lessen the force of the objection raised by petitioner Province
of Abra, especially the due process aspect. it is to be admitted that his
opposition to the petition, pressed with vigor, ostensibly finds a
semblance of support from the authorities cited. It is thus impressed
with a scholarly aspect. It suffers, however, from the grave infirmity of
stating that only a pure question of law is presented when a claim for
exemption is made.

It was the submission of counsel that an action for declaratory relief

would be proper only before a breach or violation of any statute,
executive order or regulation. 5 Moreover, there being a tax

The petition must be granted.

24

1.
Respondent Judge would not have erred so grievously had he
merely compared the provisions of the present Constitution with that
appearing in the 1935 Charter on the tax exemption of "lands,
buildings, and improvements." There is a marked difference. Under the
1935 Constitution: "Cemeteries, churches, and parsonages or convents
appurtenant thereto, and all lands, buildings, and improvements used
exclusively for religious, charitable, or educational purposes shall be
exempt from taxation." 10 The present Constitution added "charitable
institutions, mosques, and non-profit cemeteries" and required that for
the exemption of ":lands, buildings, and improvements," they should
not only be "exclusively" but also "actually and "directly" used for
religious or charitable purposes. 11 The Constitution is worded
differently. The change should not be ignored. It must be duly taken
into consideration. Reliance on past decisions would have sufficed
were the words "actually" as well as "directly" not added. There must
be proof therefore of the actual and direct use of the lands, buildings,
and improvements for religious or charitable purposes to be exempt
from taxation. According to Commissioner of Internal Revenue v.
Guerrero: 12 "From 1906, in Catholic Church v. Hastings to 1966, in
Esso Standard Eastern, Inc. v. Acting Commissioner of Customs, it has
been the constant and uniform holding that exemption from taxation is
not favored and is never presumed, so that if granted it must be strictly
construed against the taxpayer. Affirmatively put, the law frowns on
exemption from taxation, hence, an exempting provision should be
construed strictissimi juris." 13 In Manila Electric Company v. Vera,
14 a 1975 decision, such principle was reiterated, reference being
made to Republic Flour Mills, Inc. v. Commissioner of Internal
Revenue; 15 Commissioner of Customs v. Philippine Acetylene Co. &
CTA; 16 and Davao Light and Power Co., Inc. v. Commissioner of
Customs. 17

owned by it, are that they are used "actually, directly and exclusively"
as sources of support of the parish priest and his helpers and also of
private respondent Bishop. 18 In the motion to dismiss filed on behalf
of petitioner Province of Abra, the objection was based primarily on
the lack of jurisdiction, as the validity of a tax assessment may be
questioned before the Local Board of Assessment Appeals and not
with a court. There was also mention of a lack of a cause of action, but
only because, in its view, declaratory relief is not proper, as there had
been breach or violation of the right of government to assess and
collect taxes on such property. It clearly appears, therefore, that in
failing to accord a hearing to petitioner Province of Abra and deciding
the case immediately in favor of private respondent, respondent Judge
failed to abide by the constitutional command of procedural due
process.
WHEREFORE, the petition is granted and the resolution of June 19,
1978 is set aside. Respondent Judge, or who ever is acting on his
behalf, is ordered to hear the case on the merit. No costs.
Barredo, Concepcion, Jr., and De Castro, JJ., concur.
Aquino, J., concur in the result.
Abad Santos, J., is on leave.

2.
Petitioner Province of Abra is therefore fully justified in
invoking the protection of procedural due process. If there is any case
where proof is necessary to demonstrate that there is compliance with
the constitutional provision that allows an exemption, this is it. Instead,
respondent Judge accepted at its face the allegation of private
respondent. All that was alleged in the petition for declaratory relief
filed by private respondents, after mentioning certain parcels of land
25

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-39086

is less than P6,000.00, the remainder must be returned to the Director

of Pedro Borgonia, who represents the plaintiff herein;
That the deposit of the Municipal Treasurer in the amount of
P6,000.00 also before the trial must be returned to said Municipal
Treasurer of Bangued, Abra;

June 15, 1988

ABRA VALLEY COLLEGE, INC., represented by PEDRO V.

BORGONIA, petitioner,
vs. HON. JUAN P. AQUINO, Judge,
Court of First Instance, Abra; ARMIN M. CARIAGA, Provincial
Treasurer, Abra; GASPAR V. BOSQUE, Municipal Treasurer,
Bangued, Abra; HEIRS OF PATERNO MILLARE, respondents.

And finally the case is hereby ordered dismissed with costs against the
plaintiff.
SO ORDERED. (Rollo, pp. 22-23)
Petitioner, an educational corporation and institution of higher learning
duly incorporated with the Securities and Exchange Commission in
1948, filed a complaint (Annex "1" of Answer by the respondents
Heirs of Paterno Millare; Rollo, pp. 95-97) on July 10, 1972 in the
court a quo to annul and declare void the "Notice of Seizure' and the
"Notice of Sale" of its lot and building located at Bangued, Abra, for
non-payment of real estate taxes and penalties amounting to
P5,140.31. Said "Notice of Seizure" of the college lot and building
covered by Original Certificate of Title No. Q-83 duly registered in the
name of petitioner, plaintiff below, on July 6, 1972, by respondents
Municipal Treasurer and Provincial Treasurer, defendants below, was
issued for the satisfaction of the said taxes thereon. The "Notice of
Sale" was caused to be served upon the petitioner by the respondent
treasurers on July 8, 1972 for the sale at public auction of said college
lot and building, which sale was held on the same date. Dr. Paterno
Millare, then Municipal Mayor of Bangued, Abra, offered the highest
bid of P6,000.00 which was duly accepted. The certificate of sale was
correspondingly issued to him.

PARAS, J.:
This is a petition for review on certiorari of the decision * of the
defunct Court of First Instance of Abra, Branch I, dated June 14, 1974,
rendered in Civil Case No. 656, entitled "Abra Valley Junior College,
Inc., represented by Pedro V. Borgonia, plaintiff vs. Armin M. Cariaga
as Provincial Treasurer of Abra, Gaspar V. Bosque as Municipal
Treasurer of Bangued, Abra and Paterno Millare, defendants," the
decretal portion of which reads:
IN VIEW OF ALL THE FOREGOING, the Court hereby declares:
That the distraint seizure and sale by the Municipal Treasurer of
Bangued, Abra, the Provincial Treasurer of said province against the
lot and building of the Abra Valley Junior College, Inc., represented
by Director Pedro Borgonia located at Bangued, Abra, is valid;
That since the school is not exempt from paying taxes, it should
therefore pay all back taxes in the amount of P5,140.31 and back taxes
and penalties from the promulgation of this decision;

On August 10, 1972, the respondent Paterno Millare (now deceased)

filed through counstel a motion to dismiss the complaint.
On August 23, 1972, the respondent Provincial Treasurer and
Municipal Treasurer, through then Provincial Fiscal Loreto C. Roldan,
filed their answer (Annex "2" of Answer by the respondents Heirs of
Patemo Millare; Rollo, pp. 98-100) to the complaint. This was

That the amount deposited by the plaintaff him the sum of P60,000.00
before the trial, be confiscated to apply for the payment of the back
taxes and for the redemption of the property in question, if the amount
26

followed by an amended answer (Annex "3," ibid, Rollo, pp. 101-103)

on August 31, 1972.

property taxes thereon, amounting to P5,140.31; the Notice of Seizure

being the one attached to the complaint as Exhibit A;

On September 1, 1972 the respondent Paterno Millare filed his answer

(Annex "5," ibid; Rollo, pp. 106-108).

4.
That on June 8, 1972 the above properties of the Abra Valley
Junior College, Inc. was sold at public auction for the satisfaction of
the unpaid real property taxes thereon and the same was sold to
defendant Paterno Millare who offered the highest bid of P6,000.00
and a Certificate of Sale in his favor was issued by the defendant
Municipal Treasurer.

On October 12, 1972, with the aforesaid sale of the school premises at
public auction, the respondent Judge, Hon. Juan P. Aquino of the
Court of First Instance of Abra, Branch I, ordered (Annex "6," ibid;
Rollo, pp. 109-110) the respondents provincial and municipal
treasurers to deliver to the Clerk of Court the proceeds of the auction
sale. Hence, on December 14, 1972, petitioner, through Director
Borgonia, deposited with the trial court the sum of P6,000.00
evidenced by PNB Check No. 904369.

5.
That all other matters not particularly and specially covered by
this stipulation of facts will be the subject of evidence by the parties.
WHEREFORE, it is respectfully prayed of the Honorable Court to
consider and admit this stipulation of facts on the point agreed upon by
the parties.

On April 12, 1973, the parties entered into a stipulation of facts

adopted and embodied by the trial court in its questioned decision.
Said Stipulations reads:

Bangued, Abra, April 12, 1973.

STIPULATION OF FACTS

Sgd. Agripino Brillantes

Typ AGRIPINO BRILLANTES
Attorney for Plaintiff

COME NOW the parties, assisted by counsels, and to this Honorable

Court respectfully enter into the following agreed stipulation of facts:

Sgd. Loreto Roldan

Typ LORETO ROLDAN
Provincial Fiscal
Counsel for Defendants
Provincial Treasurer of
Abra and the Municipal
Treasurer of Bangued, Abra

1.
That the personal circumstances of the parties as stated in
paragraph 1 of the complaint is admitted; but the particular person of
Mr. Armin M. Cariaga is to be substituted, however, by anyone who is
actually holding the position of Provincial Treasurer of the Province of
Abra;
2.
That the plaintiff Abra Valley Junior College, Inc. is the owner
of the lot and buildings thereon located in Bangued, Abra under
Original Certificate of Title No. 0-83;

Sgd. Demetrio V. Pre

Typ. DEMETRIO V. PRE
Attorney for Defendant
Paterno Millare (Rollo, pp. 17-18)

3.
That the defendant Gaspar V. Bosque, as Municipal treasurer
of Bangued, Abra caused to be served upon the Abra Valley Junior
College, Inc. a Notice of Seizure on the property of said school under
Original Certificate of Title No. 0-83 for the satisfaction of real

Aside from the Stipulation of Facts, the trial court among others, found
the following: (a) that the school is recognized by the government and
27

is offering Primary, High School and College Courses, and has a

school population of more than one thousand students all in all; (b)
that it is located right in the heart of the town of Bangued, a few
meters from the plaza and about 120 meters from the Court of First
Instance building; (c) that the elementary pupils are housed in a twostorey building across the street; (d) that the high school and college
students are housed in the main building; (e) that the Director with his
family is in the second floor of the main building; and (f) that the
annual gross income of the school reaches more than one hundred
thousand pesos.

In the resolution dated August 16, 1974, this Court resolved to give
DUE COURSE to the petition (Rollo, p. 58). Respondents were
required to answer said petition (Rollo, p. 74).

From all the foregoing, the only issue left for the Court to determine
and as agreed by the parties, is whether or not the lot and building in
question are used exclusively for educational purposes. (Rollo, p. 20)

II
THE COURT A QUO ERRED IN DECLARING THAT THE
COLLEGE LOT AND BUILDING OF THE PETITIONER ARE
NOT USED EXCLUSIVELY FOR EDUCATIONAL PURPOSES
MERELY BECAUSE THE COLLEGE PRESIDENT RESIDES IN
ONE ROOM OF THE COLLEGE BUILDING.

Petitioner raised the following assignments of error:

I
THE COURT A QUO ERRED IN SUSTAINING AS VALID THE
SEIZURE AND SALE OF THE COLLEGE LOT AND BUILDING
USED FOR EDUCATIONAL PURPOSES OF THE PETITIONER.

The succeeding Provincial Fiscal, Hon. Jose A. Solomon and his

Assistant, Hon. Eustaquio Z. Montero, filed a Memorandum for the
Government on March 25, 1974, and a Supplemental Memorandum on
May 7, 1974, wherein they opined "that based on the evidence, the
laws applicable, court decisions and jurisprudence, the school building
and school lot used for educational purposes of the Abra Valley
College, Inc., are exempted from the payment of taxes." (Annexes "B,"
"B-1" of Petition; Rollo, pp. 24-49; 44 and 49).

III
THE COURT A QUO ERRED IN DECLARING THAT THE
COLLEGE LOT AND BUILDING OF THE PETITIONER ARE
NOT EXEMPT FROM PROPERTY TAXES AND IN ORDERING
PETITIONER TO PAY P5,140.31 AS REALTY TAXES.
IV
THE COURT A QUO ERRED IN ORDERING THE
CONFISCATION OF THE P6,000.00 DEPOSIT MADE IN THE
COURT BY PETITIONER AS PAYMENT OF THE P5,140.31
REALTY TAXES. (See Brief for the Petitioner, pp. 1-2)

Nonetheless, the trial court disagreed because of the use of the second
floor by the Director of petitioner school for residential purposes. He
thus ruled for the government and rendered the assailed decision.
After having been granted by the trial court ten (10) days from August
6, 1974 within which to perfect its appeal (Per Order dated August 6,
1974; Annex "G" of Petition; Rollo, p. 57) petitioner instead availed of
the instant petition for review on certiorari with prayer for preliminary
injunction before this Court, which petition was filed on August 17,
1974 (Rollo, p.2).

The main issue in this case is the proper interpretation of the phrase
"used exclusively for educational purposes."
Petitioner contends that the primary use of the lot and building for
educational purposes, and not the incidental use thereof, determines
and exemption from property taxes under Section 22 (3), Article VI of
the 1935 Constitution. Hence, the seizure and sale of subject college
lot and building, which are contrary thereto as well as to the provision
28

of Commonwealth Act No. 470, otherwise known as the Assessment

Law, are without legal basis and therefore void.

In this regard petitioner argues that the primary use of the school lot
and building is the basic and controlling guide, norm and standard to
determine tax exemption, and not the mere incidental use thereof.

On the other hand, private respondents maintain that the college lot
and building in question which were subjected to seizure and sale to
answer for the unpaid tax are used: (1) for the educational purposes of
the college; (2) as the permanent residence of the President and
Director thereof, Mr. Pedro V. Borgonia, and his family including the
in-laws and grandchildren; and (3) for commercial purposes because
the ground floor of the college building is being used and rented by a
commercial establishment, the Northern Marketing Corporation (See
photograph attached as Annex "8" (Comment; Rollo, p. 90]).

As early as 1916 in YMCA of Manila vs. Collector of lnternal

Revenue, 33 Phil. 217 [1916], this Court ruled that while it may be
true that the YMCA keeps a lodging and a boarding house and
maintains a restaurant for its members, still these do not constitute
business in the ordinary acceptance of the word, but an institution used
exclusively for religious, charitable and educational purposes, and as
such, it is entitled to be exempted from taxation.
In the case of Bishop of Nueva Segovia v. Provincial Board of Ilocos
Norte, 51 Phil. 352 [1972], this Court included in the exemption a
vegetable garden in an adjacent lot and another lot formerly used as a
cemetery. It was clarified that the term "used exclusively" considers
incidental use also. Thus, the exemption from payment of land tax in
favor of the convent includes, not only the land actually occupied by
the building but also the adjacent garden devoted to the incidental use
of the parish priest. The lot which is not used for commercial purposes
but serves solely as a sort of lodging place, also qualifies for
exemption because this constitutes incidental use in religious
functions.

Due to its time frame, the constitutional provision which finds

application in the case at bar is Section 22, paragraph 3, Article VI, of
the then 1935 Philippine Constitution, which expressly grants
exemption from realty taxes for "Cemeteries, churches and parsonages
or convents appurtenant thereto, and all lands, buildings, and
improvements used exclusively for religious, charitable or educational
purposes ...
Relative thereto, Section 54, paragraph c, Commonwealth Act No. 470
as amended by Republic Act No. 409, otherwise known as the
Assessment Law, provides:

The phrase "exclusively used for educational purposes" was further

clarified by this Court in the cases of Herrera vs. Quezon City Board
of assessment Appeals, 3 SCRA 186 [1961] and Commissioner of
Internal Revenue vs. Bishop of the Missionary District, 14 SCRA 991
[1965], thus

The following are exempted from real property tax under the
Assessment Law:
xxx

xxx

xxx

(c)
churches and parsonages or convents appurtenant thereto, and
all lands, buildings, and improvements used exclusively for religious,
charitable, scientific or educational purposes.
xxx

xxx

Moreover, the exemption in favor of property used exclusively for

charitable or educational purposes is 'not limited to property actually
indispensable' therefor (Cooley on Taxation, Vol. 2, p. 1430), but
extends to facilities which are incidental to and reasonably necessary
for the accomplishment of said purposes, such as in the case of
hospitals, "a school for training nurses, a nurses' home, property use to
provide housing facilities for interns, resident doctors, superintendents,
and other members of the hospital staff, and recreational facilities for

xxx

29

student nurses, interns, and residents' (84 CJS 6621), such as "Athletic
fields" including "a firm used for the inmates of the institution.
(Cooley on Taxation, Vol. 2, p. 1430).

squarely raised below, still in the interest of substantial justice, this

Court is not prevented from considering a pivotal factual matter. "The
Supreme Court is clothed with ample authority to review palpable
errors not assigned as such if it finds that their consideration is
necessary in arriving at a just decision." (Perez vs. Court of Appeals,
127 SCRA 645 [1984]).

The test of exemption from taxation is the use of the property for
purposes mentioned in the Constitution (Apostolic Prefect v. City
Treasurer of Baguio, 71 Phil, 547 [1941]).

Under the 1935 Constitution, the trial court correctly arrived at the
conclusion that the school building as well as the lot where it is built,
should be taxed, not because the second floor of the same is being used
by the Director and his family for residential purposes, but because the
first floor thereof is being used for commercial purposes. However,
since only a portion is used for purposes of commerce, it is only fair
that half of the assessed tax be returned to the school involved.

It must be stressed however, that while this Court allows a more liberal
and non-restrictive interpretation of the phrase "exclusively used for
educational purposes" as provided for in Article VI, Section 22,
paragraph 3 of the 1935 Philippine Constitution, reasonable emphasis
has always been made that exemption extends to facilities which are
incidental to and reasonably necessary for the accomplishment of the
main purposes. Otherwise stated, the use of the school building or lot
for commercial purposes is neither contemplated by law, nor by
jurisprudence. Thus, while the use of the second floor of the main
building in the case at bar for residential purposes of the Director and
his family, may find justification under the concept of incidental use,
which is complimentary to the main or primary purposeeducational,
the lease of the first floor thereof to the Northern Marketing
Corporation cannot by any stretch of the imagination be considered
incidental to the purpose of education.

PREMISES CONSIDERED, the decision of the Court of First Instance

of Abra, Branch I, is hereby AFFIRMED subject to the modification
that half of the assessed tax be returned to the petitioner.
SO ORDERED.
Yap, C.J., Melencio-Herrera, Padilla and Sarmiento, JJ., concur.

It will be noted however that the aforementioned lease appears to have

been raised for the first time in this Court. That the matter was not
taken up in the to court is really apparent in the decision of respondent
Judge. No mention thereof was made in the stipulation of facts, not
even in the description of the school building by the trial judge, both
embodied in the decision nor as one of the issues to resolve in order to
determine whether or not said properly may be exempted from
payment of real estate taxes (Rollo, pp. 17-23). On the other hand, it is
noteworthy that such fact was not disputed even after it was raised in
this Court.
Indeed, it is axiomatic that facts not raised in the lower court cannot be
taken up for the first time on appeal. Nonetheless, as an exception to
the rule, this Court has held that although a factual issue is not
30

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-9637

Plaintiff protested against this requirement, but the City Treasurer

demanded that plaintiff deposit and pay under protest the sum of
P5,891.45, if suit was to be taken in court regarding the same (Annex
B). To avoid the closing of its business as well as further fines and
penalties in the premises on October 24, 1953, plaintiff paid to the
defendant under protest the said permit and license fees in the
aforementioned amount, giving at the same time notice to the City
Treasurer that suit would be taken in court to question the legality of
the ordinances under which, the said fees were being collected (Annex
C), which was done on the same date by filing the complaint that gave
rise to this action. In its complaint plaintiff prays that judgment be
rendered declaring the said Municipal Ordinance No. 3000, as
amended, and Ordinances Nos. 2529, 3028 and 3364 illegal and
unconstitutional, and that the defendant be ordered to refund to the
plaintiff the sum of P5,891.45 paid under protest, together with legal
interest thereon, and the costs, plaintiff further praying for such other
relief and remedy as the court may deem just equitable.

April 30, 1957

AMERICAN BIBLE SOCIETY, plaintiff-appellant,

vs.
CITY OF MANILA, defendant-appellee.
City Fiscal Eugenio Angeles and Juan Nabong for appellant.
Assistant City Fiscal Arsenio Naawa for appellee.
FELIX, J.:
Plaintiff-appellant is a foreign, non-stock, non-profit, religious,
missionary corporation duly registered and doing business in the
Philippines through its Philippine agency established in Manila in
November, 1898, with its principal office at 636 Isaac Peral in said
City. The defendant appellee is a municipal corporation with powers
that are to be exercised in conformity with the provisions of Republic
Act No. 409, known as the Revised Charter of the City of Manila.

Defendant answered the complaint, maintaining in turn that said

ordinances were enacted by the Municipal Board of the City of Manila
by virtue of the power granted to it by section 2444, subsection (m-2)
of the Revised Administrative Code, superseded on June 18, 1949, by
section 18, subsection (1) of Republic Act No. 409, known as the
Revised Charter of the City of Manila, and praying that the complaint
be dismissed, with costs against plaintiff. This answer was replied by
the plaintiff reiterating the unconstitutionality of the often-repeated
ordinances.

In the course of its ministry, plaintiff's Philippine agency has been

distributing and selling bibles and/or gospel portions thereof (except
during the Japanese occupation) throughout the Philippines and
translating the same into several Philippine dialects. On May 29 1953,
the acting City Treasurer of the City of Manila informed plaintiff that
it was conducting the business of general merchandise since
November, 1945, without providing itself with the necessary Mayor's
permit and municipal license, in violation of Ordinance No. 3000, as
amended, and Ordinances Nos. 2529, 3028 and 3364, and required
plaintiff to secure, within three days, the corresponding permit and
license fees, together with compromise covering the period from the
4th quarter of 1945 to the 2nd quarter of 1953, in the total sum of
P5,821.45 (Annex A).

Before trial the parties submitted the following stipulation of facts:

COME NOW the parties in the above-entitled case, thru their
undersigned attorneys and respectfully submit the following stipulation
of facts:
1. That the plaintiff sold for the use of the purchasers at its principal
office at 636 Isaac Peral, Manila, Bibles, New Testaments, bible
portions and bible concordance in English and other foreign languages
imported by it from the United States as well as Bibles, New
31

Testaments and bible portions in the local dialects imported and/or

purchased locally; that from the fourth quarter of 1945 to the first
quarter of 1953 inclusive the sales made by the plaintiff were as
follows:
Quarter
4th quarter 1945
1st quarter 1946
2nd quarter 1946
3rd quarter 1946
4th quarter 1946
1st quarter 1947
2nd quarter 1947
3rd quarter 1947
4th quarter 1947
1st quarter 1948
2nd quarter 1948
3rd quarter 1948
4th quarter 1948
1st quarter 1949
2nd quarter 1949
3rd quarter 1949
4th quarter 1949
1st quarter 1950
2nd quarter 1950
3rd quarter 1950
4th quarter 1950
1st quarter 1951
2nd quarter 1951
3rd quarter 1951
4th quarter 1951
1st quarter 1952
2nd quarter 1952
3rd quarter 1952
4th quarter 1952
1st quarter 1953

2. That the parties hereby reserve the right to present evidence of other
facts not herein stipulated.
WHEREFORE, it is respectfully prayed that this case be set for
hearing so that the parties may present further evidence on their behalf.
(Record on Appeal, pp. 15-16).

Amount of Sales
P 1 ,244.21
2,206.85
1,950.38
2,235.99
3,256.04
13,241.07
15,774.55
14,654.13
12,590.94
11,143.90
14,715.26
38,333.83
16,179.90
23,975.10
17,802.08
16,640.79
15,961.38
18,562.46
21,816.32
25,004.55
45,287.92
37,841.21
29,103.98
20,181.10
22,968.91
23,002.65
17,626.96
17,921.01
24,180.72
29,516.21

When the case was set for hearing, plaintiff proved, among other
things, that it has been in existence in the Philippines since 1899, and
that its parent society is in New York, United States of America; that
its, contiguous real properties located at Isaac Peral are exempt from
real estate taxes; and that it was never required to pay any municipal
license fee or tax before the war, nor does the American Bible Society
in the United States pay any license fee or sales tax for the sale of bible
therein. Plaintiff further tried to establish that it never made any profit
from the sale of its bibles, which are disposed of for as low as one
third of the cost, and that in order to maintain its operating cost it
obtains substantial remittances from its New York office and voluntary
contributions and gifts from certain churches, both in the United States
and in the Philippines, which are interested in its missionary work.
Regarding plaintiff's contention of lack of profit in the sale of bibles,
defendant retorts that the admissions of plaintiff-appellant's lone
witness who testified on cross-examination that bibles bearing the
price of 70 cents each from plaintiff-appellant's New York office are
sold here by plaintiff-appellant at P1.30 each; those bearing the price
of $4.50 each are sold here at P10 each; those bearing the price of $7
each are sold here at P15 each; and those bearing the price of $11 each
are sold here at P22 each, clearly show that plaintiff's contention that it
never makes any profit from the sale of its bible, is evidently
untenable.
After hearing the Court rendered judgment, the last part of which is as
follows:
As may be seen from the repealed section (m-2) of the Revised
Administrative Code and the repealing portions (o) of section 18 of
Republic Act No. 409, although they seemingly differ in the way the
legislative intent is expressed, yet their meaning is practically the same
32

for the purpose of taxing the merchandise mentioned in said legal

provisions, and that the taxes to be levied by said ordinances is in the
nature of percentage graduated taxes (Sec. 3 of Ordinance No. 3000, as
amended, and Sec. 1, Group 2, of Ordinance No. 2529, as amended by
Ordinance No. 3364).

and valid; and (2) whether the provisions of said ordinances are
applicable or not to the case at bar.

IN VIEW OF THE FOREGOING CONSIDERATIONS, this Court is

of the opinion and so holds that this case should be dismissed, as it is
hereby dismissed, for lack of merits, with costs against the plaintiff.

(7) No law shall be made respecting an establishment of religion, or

prohibiting the free exercise thereof, and the free exercise and
enjoyment of religious profession and worship, without discrimination
or preference, shall forever be allowed. No religion test shall be
required for the exercise of civil or political rights.

Section 1, subsection (7) of Article III of the Constitution of the

Republic of the Philippines, provides that:

Not satisfied with this verdict plaintiff took up the matter to the Court
of Appeals which certified the case to Us for the reason that the errors
assigned to the lower Court involved only questions of law.

Predicated on this constitutional mandate, plaintiff-appellant contends

that Ordinances Nos. 2529 and 3000, as respectively amended, are
unconstitutional and illegal in so far as its society is concerned,
because they provide for religious censorship and restrain the free
exercise and enjoyment of its religious profession, to wit: the
distribution and sale of bibles and other religious literature to the
people of the Philippines.

Appellant contends that the lower Court erred:

1. In holding that Ordinances Nos. 2529 and 3000, as respectively
amended, are not unconstitutional;
2. In holding that subsection m-2 of Section 2444 of the Revised
Administrative Code under which Ordinances Nos. 2592 and 3000
were promulgated, was not repealed by Section 18 of Republic Act
No. 409;

Before entering into a discussion of the constitutional aspect of the

case, We shall first consider the provisions of the questioned
ordinances in relation to their application to the sale of bibles, etc. by
appellant. The records, show that by letter of May 29, 1953 (Annex
A), the City Treasurer required plaintiff to secure a Mayor's permit in
connection with the society's alleged business of distributing and
selling bibles, etc. and to pay permit dues in the sum of P35 for the
period covered in this litigation, plus the sum of P35 for compromise
on account of plaintiff's failure to secure the permit required by
Ordinance No. 3000 of the City of Manila, as amended. This
Ordinance is of general application and not particularly directed
against institutions like the plaintiff, and it does not contain any
provisions whatever prescribing religious censorship nor restraining
the free exercise and enjoyment of any religious profession. Section 1
of Ordinance No. 3000 reads as follows:

3. In not holding that an ordinance providing for taxes based on gross

sales or receipts, in order to be valid under the new Charter of the City
of Manila, must first be approved by the President of the Philippines;
and
4. In holding that, as the sales made by the plaintiff-appellant have
assumed commercial proportions, it cannot escape from the operation
of said municipal ordinances under the cloak of religious privilege.
The issues. As may be seen from the proceeding statement of the
case, the issues involved in the present controversy may be reduced to
the following: (1) whether or not the ordinances of the City of Manila,
Nos. 3000, as amended, and 2529, 3028 and 3364, are constitutional

SEC. 1. PERMITS NECESSARY. It shall be unlawful for any

person or entity to conduct or engage in any of the businesses, trades,
33

or occupations enumerated in Section 3 of this Ordinance or other

businesses, trades, or occupations for which a permit is required for the
proper supervision and enforcement of existing laws and ordinances
governing the sanitation, security, and welfare of the public and the
health of the employees engaged in the business specified in said
section 3 hereof, WITHOUT FIRST HAVING OBTAINED A
PERMIT THEREFOR FROM THE MAYOR AND THE
NECESSARY LICENSE FROM THE CITY TREASURER.

pay the initial license fee based on the probable gross sales or receipts
for the first quarter beginning from the date of the opening of the
business as indicated herein for the corresponding business or
occupation.
xxx

xxx

xxx

GROUP 2. Retail dealers in new (not yet used) merchandise, which

dealers are not yet subject to the payment of any municipal tax, such as
(1) retail dealers in general merchandise; (2) retail dealers exclusively
engaged in the sale of . . . books, including stationery.

The business, trade or occupation of the plaintiff involved in this case

is not particularly mentioned in Section 3 of the Ordinance, and the
record does not show that a permit is required therefor under existing
laws and ordinances for the proper supervision and enforcement of
their provisions governing the sanitation, security and welfare of the
public and the health of the employees engaged in the business of the
plaintiff. However, sections 3 of Ordinance 3000 contains item No. 79,
which reads as follows:

xxx

xxx

xxx

As may be seen, the license fees required to be paid quarterly in

Section 1 of said Ordinance No. 2529, as amended, are not imposed
directly upon any religious institution but upon those engaged in any
of the business or occupations therein enumerated, such as retail
"dealers in general merchandise" which, it is alleged, cover the
business or occupation of selling bibles, books, etc.

79. All other businesses, trades or occupations not

mentioned in this Ordinance, except those upon which the
City is not empowered to license or to tax P5.00

Chapter 60 of the Revised Administrative Code which includes section

2444, subsection (m-2) of said legal body, as amended by Act No.
3659, approved on December 8, 1929, empowers the Municipal Board
of the City of Manila:

Therefore, the necessity of the permit is made to depend upon the

power of the City to license or tax said business, trade or occupation.
As to the license fees that the Treasurer of the City of Manila required
the society to pay from the 4th quarter of 1945 to the 1st quarter of
1953 in the sum of P5,821.45, including the sum of P50 as
compromise, Ordinance No. 2529, as amended by Ordinances Nos.
2779, 2821 and 3028 prescribes the following:

(M-2) To tax and fix the license fee on (a) dealers in new automobiles
or accessories or both, and (b) retail dealers in new (not yet used)
merchandise, which dealers are not yet subject to the payment of any
municipal tax.

SEC. 1. FEES. Subject to the provisions of section 578 of the

Revised Ordinances of the City of Manila, as amended, there shall be
paid to the City Treasurer for engaging in any of the businesses or
occupations below enumerated, quarterly, license fees based on gross
sales or receipts realized during the preceding quarter in accordance
with the rates herein prescribed: PROVIDED, HOWEVER, That a
person engaged in any businesses or occupation for the first time shall

For the purpose of taxation, these retail dealers shall be classified as

(1) retail dealers in general merchandise, and (2) retail dealers
exclusively engaged in the sale of (a) textiles . . . (e) books, including
stationery, paper and office supplies, . . .: PROVIDED, HOWEVER,
That the combined total tax of any debtor or manufacturer, or both,
enumerated under these subsections (m-1) and (m-2), whether dealing
34

in one or all of the articles mentioned herein, SHALL NOT BE IN

EXCESS OF FIVE HUNDRED PESOS PER ANNUM.

Appellant's counsel states that section 18 (o) of Republic Act No, 409
introduces a new and wider concept of taxation and is different from
the provisions of Section 2444(m-2) that the former cannot be
considered as a substantial re-enactment of the provisions of the latter.
We have quoted above the provisions of section 2444(m-2) of the
Revised Administrative Code and We shall now copy hereunder the
provisions of Section 18, subdivision (o) of Republic Act No. 409,
which reads as follows:

and appellee's counsel maintains that City Ordinances Nos. 2529 and
3000, as amended, were enacted in virtue of the power that said Act
No. 3669 conferred upon the City of Manila. Appellant, however,
contends that said ordinances are longer in force and effect as the law
under which they were promulgated has been expressly repealed by
Section 102 of Republic Act No. 409 passed on June 18, 1949, known
as the Revised Manila Charter.

(o) To tax and fix the license fee on dealers in general merchandise,
including importers and indentors, except those dealers who may be
expressly subject to the payment of some other municipal tax under the
provisions of this section.

Passing upon this point the lower Court categorically stated that
Republic Act No. 409 expressly repealed the provisions of Chapter 60
of the Revised Administrative Code but in the opinion of the trial
Judge, although Section 2444 (m-2) of the former Manila Charter and
section 18 (o) of the new seemingly differ in the way the legislative
intent was expressed, yet their meaning is practically the same for the
purpose of taxing the merchandise mentioned in both legal provisions
and, consequently, Ordinances Nos. 2529 and 3000, as amended, are to
be considered as still in full force and effect uninterruptedly up to the
present.

Dealers in general merchandise shall be classified as (a) wholesale

dealers and (b) retail dealers. For purposes of the tax on retail dealers,
general merchandise shall be classified into four main classes: namely
(1) luxury articles, (2) semi-luxury articles, (3) essential commodities,
and (4) miscellaneous articles. A separate license shall be prescribed
for each class but where commodities of different classes are sold in
the same establishment, it shall not be compulsory for the owner to
secure more than one license if he pays the higher or highest rate of tax
prescribed by ordinance. Wholesale dealers shall pay the license tax as
such, as may be provided by ordinance.

Often the legislature, instead of simply amending the pre-existing

statute, will repeal the old statute in its entirety and by the same
enactment re-enact all or certain portions of the preexisting law. Of
course, the problem created by this sort of legislative action involves
mainly the effect of the repeal upon rights and liabilities which accrued
under the original statute. Are those rights and liabilities destroyed or
preserved? The authorities are divided as to the effect of simultaneous
repeals and re-enactments. Some adhere to the view that the rights and
liabilities accrued under the repealed act are destroyed, since the
statutes from which they sprang are actually terminated, even though
for only a very short period of time. Others, and they seem to be in the
majority, refuse to accept this view of the situation, and consequently
maintain that all rights an liabilities which have accrued under the
original statute are preserved and may be enforced, since the reenactment neutralizes the repeal, therefore, continuing the law in force
without interruption. (Crawford-Statutory Construction, Sec. 322).

For purposes of this section, the term "General merchandise" shall

include poultry and livestock, agricultural products, fish and other
allied products.
The only essential difference that We find between these two
provisions that may have any bearing on the case at bar, is that, while
subsection (m-2) prescribes that the combined total tax of any dealer or
manufacturer, or both, enumerated under subsections (m-1) and (m-2),
whether dealing in one or all of the articles mentioned therein, shall
not be in excess of P500 per annum, the corresponding section 18,
subsection (o) of Republic Act No. 409, does not contain any
limitation as to the amount of tax or license fee that the retail dealer
has to pay per annum. Hence, and in accordance with the weight of the
35

authorities above referred to that maintain that "all rights and liabilities
which have accrued under the original statute are preserved and may
be enforced, since the reenactment neutralizes the repeal, therefore
continuing the law in force without interruption", We hold that the
questioned ordinances of the City of Manila are still in force and
effect.

illegal because it restrains the free exercise and enjoyment of the

religious profession and worship of appellant.
Article III, section 1, clause (7) of the Constitution of the Philippines
aforequoted, guarantees the freedom of religious profession and
worship. "Religion has been spoken of as a profession of faith to an
active power that binds and elevates man to its Creator" (Aglipay vs.
Ruiz, 64 Phil., 201).It has reference to one's views of his relations to
His Creator and to the obligations they impose of reverence to His
being and character, and obedience to His Will (Davis vs. Beason, 133
U.S., 342). The constitutional guaranty of the free exercise and
enjoyment of religious profession and worship carries with it the right
to disseminate religious information. Any restraints of such right can
only be justified like other restraints of freedom of expression on the
grounds that there is a clear and present danger of any substantive evil
which the State has the right to prevent". (Taada and Fernando on the
Constitution of the Philippines, Vol. 1, 4th ed., p. 297). In the case at
bar the license fee herein involved is imposed upon appellant for its
distribution and sale of bibles and other religious literature:

Plaintiff, however, argues that the questioned ordinances, to be valid,

must first be approved by the President of the Philippines as per
section 18, subsection (ii) of Republic Act No. 409, which reads as
follows:
(ii) To tax, license and regulate any business, trade or occupation being
conducted within the City of Manila, not otherwise enumerated in the
preceding subsections, including percentage taxes based on gross sales
or receipts, subject to the approval of the PRESIDENT, except
amusement taxes.
but this requirement of the President's approval was not contained in
section 2444 of the former Charter of the City of Manila under which
Ordinance No. 2529 was promulgated. Anyway, as stated by appellee's
counsel, the business of "retail dealers in general merchandise" is
expressly enumerated in subsection (o), section 18 of Republic Act
No. 409; hence, an ordinance prescribing a municipal tax on said
business does not have to be approved by the President to be effective,
as it is not among those referred to in said subsection (ii). Moreover,
the questioned ordinances are still in force, having been promulgated
by the Municipal Board of the City of Manila under the authority
granted to it by law.

In the case of Murdock vs. Pennsylvania, it was held that an ordinance

requiring that a license be obtained before a person could canvass or
solicit orders for goods, paintings, pictures, wares or merchandise
cannot be made to apply to members of Jehovah's Witnesses who went
about from door to door distributing literature and soliciting people to
"purchase" certain religious books and pamphlets, all published by the
Watch Tower Bible & Tract Society. The "price" of the books was
twenty-five cents each, the "price" of the pamphlets five cents each. It
was shown that in making the solicitations there was a request for
additional "contribution" of twenty-five cents each for the books and
five cents each for the pamphlets. Lesser sum were accepted, however,
and books were even donated in case interested persons were without
funds.

The question that now remains to be determined is whether said

ordinances are inapplicable, invalid or unconstitutional if applied to
the alleged business of distribution and sale of bibles to the people of
the Philippines by a religious corporation like the American Bible
Society, plaintiff herein.

On the above facts the Supreme Court held that it could not be said
that petitioners were engaged in commercial rather than a religious
venture. Their activities could not be described as embraced in the
occupation of selling books and pamphlets. Then the Court continued:

With regard to Ordinance No. 2529, as amended by Ordinances Nos.

2779, 2821 and 3028, appellant contends that it is unconstitutional and
36

vs. Texas (326 U.S. 517). In the former case the Supreme Court
expressed the opinion that the right to enjoy freedom of the press and
religion occupies a preferred position as against the constitutional right
of property owners.

"We do not mean to say that religious groups and the press are free
from all financial burdens of government. See Grosjean vs. American
Press Co., 297 U.S., 233, 250, 80 L. ed. 660, 668, 56 S. Ct. 444. We
have here something quite different, for example, from a tax on the
income of one who engages in religious activities or a tax on property
used or employed in connection with activities. It is one thing to
impose a tax on the income or property of a preacher. It is quite
another to exact a tax from him for the privilege of delivering a
sermon. The tax imposed by the City of Jeannette is a flat license tax,
payment of which is a condition of the exercise of these constitutional
privileges. The power to tax the exercise of a privilege is the power to
control or suppress its enjoyment. . . . Those who can tax the exercise
of this religious practice can make its exercise so costly as to deprive it
of the resources necessary for its maintenance. Those who can tax the
privilege of engaging in this form of missionary evangelism can close
all its doors to all those who do not have a full purse. Spreading
religious beliefs in this ancient and honorable manner would thus be
denied the needy. . . .

"When we balance the constitutional rights of owners of property

against those of the people to enjoy freedom of press and religion, as
we must here, we remain mindful of the fact that the latter occupy a
preferred position. . . . In our view the circumstance that the property
rights to the premises where the deprivation of property here involved,
took place, were held by others than the public, is not sufficient to
justify the State's permitting a corporation to govern a community of
citizens so as to restrict their fundamental liberties and the
enforcement of such restraint by the application of a State statute."
(Taada and Fernando on the Constitution of the Philippines, Vol. 1,
4th ed., p. 304-306).
Section 27 of Commonwealth Act No. 466, otherwise known as the
National Internal Revenue Code, provides:

It is contended however that the fact that the license tax can suppress
or control this activity is unimportant if it does not do so. But that is to
disregard the nature of this tax. It is a license tax a flat tax imposed
on the exercise of a privilege granted by the Bill of Rights . . . The
power to impose a license tax on the exercise of these freedom is
indeed as potent as the power of censorship which this Court has
repeatedly struck down. . . . It is not a nominal fee imposed as a
regulatory measure to defray the expenses of policing the activities in
question. It is in no way apportioned. It is flat license tax levied and
collected as a condition to the pursuit of activities whose enjoyment is
guaranteed by the constitutional liberties of press and religion and
inevitably tends to suppress their exercise. That is almost uniformly
recognized as the inherent vice and evil of this flat license tax."

SEC. 27. EXEMPTIONS FROM TAX ON CORPORATIONS. The

following organizations shall not be taxed under this Title in respect to
income received by them as such
(e) Corporations or associations organized and operated exclusively
for religious, charitable, . . . or educational purposes, . . .: Provided,
however, That the income of whatever kind and character from any of
its properties, real or personal, or from any activity conducted for
profit, regardless of the disposition made of such income, shall be
liable to the tax imposed under this Code;
Appellant's counsel claims that the Collector of Internal Revenue has
exempted the plaintiff from this tax and says that such exemption
clearly indicates that the act of distributing and selling bibles, etc. is
purely religious and does not fall under the above legal provisions.

Nor could dissemination of religious information be conditioned upon

the approval of an official or manager even if the town were owned by
a corporation as held in the case of Marsh vs. State of Alabama (326
U.S. 501), or by the United States itself as held in the case of Tucker

It may be true that in the case at bar the price asked for the bibles and
other religious pamphlets was in some instances a little bit higher than
37

the actual cost of the same but this cannot mean that appellant was
engaged in the business or occupation of selling said "merchandise"
for profit. For this reason We believe that the provisions of City of
Manila Ordinance No. 2529, as amended, cannot be applied to
appellant, for in doing so it would impair its free exercise and
enjoyment of its religious profession and worship as well as its rights
of dissemination of religious beliefs.

Wherefore, and on the strength of the foregoing considerations, We

hereby reverse the decision appealed from, sentencing defendant return
to plaintiff the sum of P5,891.45 unduly collected from it. Without
pronouncement as to costs. It is so ordered.
Bengzon, Padilla, Montemayor, Bautista
Concepcion and Endencia, JJ., concur.

With respect to Ordinance No. 3000, as amended, which requires the

obtention the Mayor's permit before any person can engage in any of
the businesses, trades or occupations enumerated therein, We do not
find that it imposes any charge upon the enjoyment of a right granted
by the Constitution, nor tax the exercise of religious practices. In the
case of Coleman vs. City of Griffin, 189 S.E. 427, this point was
elucidated as follows:
An ordinance by the City of Griffin, declaring that the practice of
distributing either by hand or otherwise, circulars, handbooks,
advertising, or literature of any kind, whether said articles are being
delivered free, or whether same are being sold within the city limits of
the City of Griffin, without first obtaining written permission from the
city manager of the City of Griffin, shall be deemed a nuisance and
punishable as an offense against the City of Griffin, does not deprive
defendant of his constitutional right of the free exercise and enjoyment
of religious profession and worship, even though it prohibits him from
introducing and carrying out a scheme or purpose which he sees fit to
claim as a part of his religious system.
It seems clear, therefore, that Ordinance No. 3000 cannot be
considered unconstitutional, even if applied to plaintiff Society. But as
Ordinance No. 2529 of the City of Manila, as amended, is not
applicable to plaintiff-appellant and defendant-appellee is powerless to
license or tax the business of plaintiff Society involved herein for, as
stated before, it would impair plaintiff's right to the free exercise and
enjoyment of its religious profession and worship, as well as its rights
of dissemination of religious beliefs, We find that Ordinance No. 3000,
as amended is also inapplicable to said business, trade or occupation of
the plaintiff.
38

Angelo,

Labrador,

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-4817

Having already paid their occupation tax under section 201 of the
National Internal Revenue Code, plaintiffs, upon being required to pay
the additional tax prescribed in the ordinance, paid the same under
protest and then brought the present suit for the purpose already stated.
The lower court upheld the validity of the provision of law authorizing
the enactment of the ordinance but declared the ordinance itself illegal
and void on the ground that the penalty there in provided for nonpayment of the tax was not legally authorized. From this decision both
parties appealed to this Court, and the only question they have
presented for our determination is whether this ruling is correct or not,
for though the decision is silent on the refund of taxes paid plaintiffs
make no assignment of error on this point.

May 26, 1954

SILVESTER M. PUNSALAN, ET AL., plaintiffs-appellants,

vs. THE MUNICIPAL BOARD OF THE CITY OF MANILA, ET
AL., defendants-appellants.
Calanog and Alafriz for plaintiffs-appellants.
City Fiscal Eugenio Angeles and Assistant Fiscal Eulogio S. Serreno
for defendants-appellants.

To begin with defendants' appeal, we find that the lower court was in
error in saying that the imposition of the penalty provided for in the
ordinance was without the authority of law. The last paragraph (kk) of
the very section that authorizes the enactment of this tax ordinance
(section 18 of the Manila Charter) in express terms also empowers the
Municipal Board "to fix penalties for the violation of ordinances which
shall not exceed to(sic) two hundred pesos fine or six months"
imprisonment, or both such fine and imprisonment, for a single
offense." Hence, the pronouncement below that the ordinance in
question is illegal and void because it imposes a penalty not authorized
by law is clearly without basis.

REYES, J.:
This suit was commenced in the Court of First Instance of Manila by
two lawyers, a medical practitioner, a public accountant, a dental
surgeon and a pharmacist, purportedly "in their own behalf and in
behalf of other professionals practising in the City of Manila who may
desire to join it." Object of the suit is the annulment of Ordinance No.
3398 of the City of Manila together with the provision of the Manila
charter authorizing it and the refund of taxes collected under the
ordinance but paid under protest.

As to plaintiffs' appeal, the contention in substance is that this

ordinance and the law authorizing it constitute class legislation, are
unjust and oppressive, and authorize what amounts to double taxation.

The ordinance in question, which was approved by the municipal

board of the City of Manila on July 25, 1950, imposes a municipal
occupation tax on persons exercising various professions in the city
and penalizes non-payment of the tax "by a fine of not more than two
hundred pesos or by imprisonment of not more than six months, or by
both such fine and imprisonment in the discretion of the court."
Among the professions taxed were those to which plaintiffs belong.
The ordinance was enacted pursuant to paragraph (1) of section 18 of
the Revised Charter of the City of Manila (as amended by Republic
Act No. 409), which empowers the Municipal Board of said city to
impose a municipal occupation tax, not to exceed P50 per annum, on
persons engaged in the various professions above referred to.

In raising the hue and cry of "class legislation", the burden of

plaintiffs' complaint is not that the professions to which they
respectively belong have been singled out for the imposition of this
municipal occupation tax; and in any event, the Legislature may, in its
discretion, select what occupations shall be taxed, and in the exercise
of that discretion it may tax all, or it may select for taxation certain
classes and leave the others untaxed. (Cooley on Taxation, Vol. 4, 4th
ed., pp. 3393-3395.) Plaintiffs' complaint is that while the law has
authorized the City of Manila to impose the said tax, it has withheld
that authority from other chartered cities, not to mention
39

municipalities. We do not think it is for the courts to judge what

particular cities or municipalities should be empowered to impose
occupation taxes in addition to those imposed by the National
Government. That matter is peculiarly within the domain of the
political departments and the courts would do well not to encroach
upon it. Moreover, as the seat of the National Government and with a
population and volume of trade many times that of any other
Philippine city or municipality, Manila, no doubt, offers a more
lucrative field for the practice of the professions, so that it is but fair
that the professionals in Manila be made to pay a higher occupation
tax than their brethren in the provinces.

Separate Opinions
PARAS, C.J., dissenting:
I am constrained to dissent from the decision of the majority upon the ground
that the Municipal Board of Manila cannot outlaw what Congress of the
Philippines has already authorized. The plaintiffs-appellants two lawyers,
a physician, an accountant, a dentist and a pharmacist had already paid the
occupation tax under section 201 of the National Internal Revenue Code and
are thereby duly licensed to practice their respective professions throughout
the Philippines; and yet they had been required to pay another occupation tax
under Ordinance No. 3398 for practising in the City of Manila. This is a
glaring example of contradiction the license granted by the National
Government is in effect withdrawn by the City in case of non-payment of the
tax under the ordinance. I fit be argued that the national occupation tax is
collected to allow the professional residing in Manila to pursue his calling in
other places in the Philippines, it should then be exacted only from
professionals practising simultaneously in and outside of Manila. At any rate,
we are confronted with the following situation: Whereas the professionals
elsewhere pay only one occupation tax, in the City of Manila they have to
pay two, although all are on equal footing insofar as opportunities for earning
money out of their pursuits are concerned. The statement that practice in
Manila is more lucrative than in the provinces, may be true perhaps with
reference only to a limited few, but certainly not to the general mass of
practitioners in any field. Again, provincial residents who have occasional or
isolated practice in Manila may have to pay the city tax. This obvious
discrimination or lack of uniformity cannot be brushed aside or justified by
any trite pronouncement that double taxation is legitimate or that legislation
may validly affect certain classes.

Plaintiffs brand the ordinance unjust and oppressive because they say
that it creates discrimination within a class in that while professionals
with offices in Manila have to pay the tax, outsiders who have no
offices in the city but practice their profession therein are not subject
to the tax. Plaintiffs make a distinction that is not found in the
ordinance. The ordinance imposes the tax upon every person
"exercising" or "pursuing" in the City of Manila naturally any
one of the occupations named, but does not say that such person must
have his office in Manila. What constitutes exercise or pursuit of a
profession in the city is a matter of judicial determination. The
argument against double taxation may not be invoked where one tax is
imposed by the state and the other is imposed by the city (1 Cooley on
Taxation, 4th ed., p. 492), it being widely recognized that there is
nothing inherently obnoxious in the requirement that license fees or
taxes be exacted with respect to the same occupation, calling or
activity by both the state and the political subdivisions thereof. (51
Am. Jur., 341.)

My position is that a professional who has paid the occupation tax under the
National Internal Revenue Code should be allowed to practice in Manila
even without paying the similar tax imposed by Ordinance No. 3398. The
City cannot give what said professional already has. I would not say that this
Ordinance, enacted by the Municipal Board pursuant to paragraph 1 of
section 18 of the Revised Charter of Manila, as amended by Republic Act
No. 409, empowering the Board to impose a municipal occupation tax not to
exceed P50 per annum, is invalid; but that only one tax, either under the
Internal Revenue Code or under Ordinance No. 3398, should be imposed
upon a practitioner in Manila.

In view of the foregoing, the judgment appealed from is reversed in so

far as it declares Ordinance No. 3398 of the City of Manila illegal and
void and affirmed in so far as it holds the validity of the provision of
the Manila charter authorizing it. With costs against plaintiffsappellants.
Pablo, Bengzon, Montemayor, Jugo, Bautista Angelo, Labrador, and
Concepcion, JJ., concur.
40

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-10448

things that the trial court erred in holding that the Ordinance in
question has not restricted the practice of massotherapy in massage
clinics to hygienic and aesthetic massage, that the Ordinance is valid
as it does not regulate the practice of massage, that the Municipal
Board of Manila has the power to enact the Ordinance in question by
virtue of Section 18, Subsection (kk), Republic Act 409, and that
permit fee of P100.00 is moderate and not unreasonable. Inasmuch as
the appellant assails and discuss certain provisions regarding the
ordinance in question, and it is necessary to pass upon the same, for
purposes of ready reference, we are reproducing said ordinance in toto.

August 30, 1957

IN THE MATTER OF A PETITION FOR DECLARATORY

JUDGMENT REGARDING THE VALIDITY OF MUNICIPAL
ORDINANCE NO. 3659 OF THE CITY OF MANILA. PHYSICAL
THERAPY ORGANIZATION OF THE PHILIPPINES, INC.,
petitioner-appellant,
vs.
THE MUNICIPAL BOARD OF THE CITY OF MANILA and
ARSENIO H. LACSON, as Mayor of the City of Manila, respondentsappellees.

ORDINANCE No. 3659

AN ORDINANCE REGULATING THE OPERATION OF
MASSAGE CLINICS IN THE CITY OF MANILA AND
PROVIDING PENALTIES FOR VIOLATIONS THEREOF.

Mariano M. de Joya for appellant.

City Fiscal Eugenio Angeles and Assistant Fiscal Arsenio Naawa for
appellees.

Be it ordained by the Municipal Board of the City of Manila, that:

Section 1. Definition. For the purpose of this Ordinance the
following words and phrases shall be taken in the sense hereinbelow
indicated:

MONTEMAYOR, J.:
The petitioner-appellant, an association of registered massagists and
licensed operators of massage clinics in the City of Manila and other
parts of the country, filed an action in the Court of First Instance of
Manila for declaratory judgment regarding the validity of Municipal
Ordinance No. 3659, promulgated by the Municipal Board and
approved by the City Mayor. To stop the City from enforcing said
ordinance, the petitioner secured an injunction upon filing of a bond in
the sum of P1,000.00. A hearing was held, but the parties without
introducing any evidence submitted the case for decision on the
pleadings, although they submitted written memoranda. Thereafter, the
trial court dismissed the petition and later dissolved the writ of
injunction previously issued.

(a) Massage clinic shall include any place or establishment used in the
practice of hygienic and aesthetic massage;
(b) Hygienic and aesthetic massage shall include any system of
manipulation of treatment of the superficial parts of the human body of
hygienic and aesthetic purposes by rubbing, stroking, kneading, or
tapping with the hand or an instrument;
(c) Massagist shall include any person who shall have passed the
required examination and shall have been issued a massagist certificate
by the Committee of Examiners of Massagist, or by the Director of
Health or his authorized representative;

The petitioner appealed said order of dismissal directly to this Court.

In support of its appeal, petitioner-appellant contends among other
41

(d) Attendant or helper shall include any person employed by a duly

qualified massagist in any message clinic to assist the latter in the
practice of hygienic and aesthethic massage;

SEC. 4. Regulations for the operation of massage clinics. (a) It shall

be unlawful for any operator massagist, attendant or helper to use, or
allow the use of, a massage clinic as a place of assignation or permit
the commission therein of any incident or immoral act. Massage
clinics shall be used only for hygienic and aesthetic massage.

(e) Operator shall include the owner, manager, administrator, or any

person who operates or is responsible for the operation of a message
clinic.

(b) Massage clinics shall open at eight o'clock a.m. and shall close at
eleven o'clock p.m.

SEC. 2. Permit Fees. No person shall engage in the operation of a

massage clinic or in the occupation of attendant or helper therein
without first having obtained a permit therefor from the Mayor. For
every permit granted under the provisions of this Ordinance, there
shall be paid to the City Treasurer the following annual fees:
(a) Operator of a massage
(b) Attendant or helper

(c) While engaged in the actual performance of their duties,

massagists, attendants and helpers in a massage clinic shall be as
properly and sufficiently clad as to avoid suspicion of intent to commit
an indecent or immoral act;

P100.00

(d) Attendants or helpers may render service to any individual

customer only for hygienic and aesthetic purposes under the order,
direction, supervision, control and responsibility of a qualified
massagist.

5.00

Said permit, which shall be renewed every year, may be revoked by

the Mayor at any time for the violation of this Ordinance.

SEC. 5. Qualifications No person who has previously been

convicted by final judgment of competent court of any violation of the
provisions of paragraphs 3 and 5 of Art. 202 and Arts. 335, 336, 340
and 342 of the Revised Penal Code, or Secs. 819 of the City of Manila,
or who is suffering from any venereal or communicable disease shall
engage in the occupation of massagist, attendant or helper in any
massage clinic. Applicants for Mayor's permit shall attach to their
application a police clearance and health certificate duly issued by the
City Health Officers as well as a massagist certificate duly issued by
the Committee or Examiners for Massagists or by the Director of
Health or his authorized representatives, in case of massagists.

SEC. 3. Building requirement. (a) In each massage clinic, there

shall be separate rooms for the male and female customers. Rooms
where massage operations are performed shall be provided with sliding
curtains only instead of swinging doors. The clinic shall be properly
ventilated, well lighted and maintained under sanitary conditions at all
times while the establishment is open for business and shall be
provided with the necessary toilet and washing facilities.
(b) In every clinic there shall be no private rooms or separated
compartment except those assigned for toilet, lavatories, dressing
room, office or kitchen.

SEC. 6. Duty of operator of massage clinic. No operator of massage

clinic shall allow such clinic to operate without a duly qualified
massagist nor allow, any man or woman to act as massagist, attendant
or helper therein without the Mayor's permit provided for in the
preceding sections. He shall submit whenever required by the Mayor
or his authorized representative the persons acting as massagists,
attendants or helpers in his clinic. He shall place the massage clinic

(c) Every massage clinic shall "provided with only one entrance and it
shall have no direct or indirect communication whatsoever with any
dwelling place, house or building.

42

open to inspection at all times by the police, health officers, and other
law enforcement agencies of the government, shall be held liable for
anything which may happen with the premises of the massage clinic.

Secretary of Health and duly published in the Official Gazette; that

Section 1 (a) of Ordinance No. 3659 has restricted the practice of
massage to only hygienic and aesthetic massage prohibits or does not
allow qualified massagists to practice therapeutic massage in their
massage clinics. Appellant also contends that the license fee of
P100.00 for operator in Section 2 of the Ordinance is unreasonable,
nay, unconscionable.

SEC. 7. Penalty. Any person violating any of the provisions of this

Ordinance shall upon conviction, be punished by a fine of not less than
fifty pesos nor more than two hundred pesos or by imprisonment for
not less than six days nor more than six months, or both such fine and
imprisonment, at the discretion of the court.

If we can ascertain the intention of the Manila Municipal Board in

promulgating the Ordinance in question, much of the objection of
appellant to its legality may be solved. It would appear to us that the
purpose of the Ordinance is not to regulate the practice of massage,
much less to restrict the practice of licensed and qualified massagists
of therapeutic massage in the Philippines. The end sought to be
attained in the Ordinance is to prevent the commission of immorality
and the practice of prostitution in an establishment masquerading as a
massage clinic where the operators thereof offer to massage or
manipulate superficial parts of the bodies of customers for hygienic
and aesthetic purposes. This intention can readily be understood by the
building requirements in Section 3 of the Ordinance, requiring that
there be separate rooms for male and female customers; that instead of
said rooms being separated by permanent partitions and swinging
doors, there should only be sliding curtains between them; that there
should be "no private rooms or separated compartments, except those
assigned for toilet, lavatories, dressing room, office or kitchen"; that
every massage clinic should be provided with only one entrance and
shall have no direct or indirect communication whatsoever with any
dwelling place, house or building; and that no operator, massagists,
attendant or helper will be allowed "to use or allow the use of a
massage clinic as a place of assignation or permit the commission
therein of any immoral or incident act", and in fixing the operating
hours of such clinic between 8:00 a.m. and 11:00 p.m. This intention
of the Ordinance was correctly ascertained by Judge Hermogenes
Concepcion, presiding in the trial court, in his order of dismissal where
he said: "What the Ordinance tries to avoid is that the massage clinic
run by an operator who may not be a masseur or massagista may be
used as cover for the running or maintaining a house of prostitution."

SEC. 8. Repealing Clause. All ordinances or parts of ordinances,

which are inconsistent herewith, are hereby repealed.
SEC. 9. Effectivity. This Ordinance shall take effect upon its
approval.
Enacted, August 27, 1954.
Approved, September 7, 1954.
The main contention of the appellant in its appeal and the principal
ground of its petition for declaratory judgment is that the City of
Manila is without authority to regulate the operation of massagists and
the operation of massage clinics within its jurisdiction; that whereas
under the Old City Charter, particularly, Section 2444 (e) of the
Revised Administrative Code, the Municipal Board was expressly
granted the power to regulate and fix the license fee for the occupation
of massagists, under the New Charter of Manila, Republic Act 409,
said power has been withdrawn or omitted and that now the Director
of Health, pursuant to authority conferred by Section 938 of the
Revised Administrative Code and Executive Order No. 317, series of
1941, as amended by Executive Order No. 392, series, 1951, is the one
who exercises supervision over the practice of massage and over
massage clinics in the Philippines; that the Director of Health has
issued Administrative Order No. 10, dated May 5, 1953, prescribing
"rules and regulations governing the examination for admission to the
practice of massage, and the operation of massage clinics, offices, or
establishments in the Philippines", which order was approved by the
43

Ordinance No. 3659, particularly, Sections 1 to 4, should be

considered as limited to massage clinics used in the practice of
hygienic and aesthetic massage. We do not believe that Municipal
Board of the City of Manila and the Mayor wanted or intended to
regulate the practice of massage in general or restrict the same to
hygienic and aesthetic only.

Evidently, the Manila Municipal Board considered the practice of

hygienic and aesthetic massage not as a useful and beneficial
occupation which will promote and is conducive to public morals, and
consequently, imposed the said permit fee for its regulation.
In conclusion, we find and hold that the Ordinance in question as we
interpret it and as intended by the appellees is valid. We deem it
unnecessary to discuss and pass upon the other points raised in the
appeal. The order appealed from is hereby affirmed. No costs.

As to the authority of the City Board to enact the Ordinance in

question, the City Fiscal, in representation of the appellees, calls our
attention to Section 18 of the New Charter of the City of Manila, Act
No. 409, which gives legislative powers to the Municipal Board to
enact all ordinances it may deem necessary and proper for the
promotion of the morality, peace, good order, comfort, convenience
and general welfare of the City and its inhabitants. This is generally
referred to as the General Welfare Clause, a delegation in statutory
form of the police power, under which municipal corporations, are
authorized to enact ordinances to provide for the health and safety, and
promote the morality, peace and general welfare of its inhabitants. We
agree with the City Fiscal.

Paras, C.J., Bengzon, Padilla, Reyes, A., Bautista Angelo, Labrador,

Concepcion, Reyes, J.B.L., Endencia and Felix, JJ., concur.

As regards the permit fee of P100.00, it will be seen that said fee is
made payable not by the masseur or massagist, but by the operator of a
massage clinic who may not be a massagist himself. Compared to
permit fees required in other operations, P100.00 may appear to be too
large and rather unreasonable. However, much discretion is given to
municipal corporations in determining the amount of said fee without
considering it as a tax for revenue purposes:
The amount of the fee or charge is properly considered in determining
whether it is a tax or an exercise of the police power. The amount may
be so large as to itself show that the purpose was to raise revenue and
not to regulate, but in regard to this matter there is a marked distinction
between license fees imposed upon useful and beneficial occupations
which the sovereign wishes to regulate but not restrict, and those
which are inimical and dangerous to public health, morals or safety. In
the latter case the fee may be very large without necessarily being a
tax. (Cooley on Taxation, Vol. IV, pp. 3516-17; underlining supplied.)
44