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G.R. No.

L-5060

January 26, 1910

THE UNITED STATES, plaintiff-appellee,


vs.
LUIS TORIBIO, defendant-appellant.
Rodriguez & Del Rosario, for appellant.
Attorney-General Villamor, for appellee.
CARSON, J.:
The evidence of record fully sustains the findings of the trial court
that the appellant slaughtered or caused to be slaughtered for
human consumption, the carabao described in the information,
without a permit from the municipal treasure of the municipality
wherein it was slaughtered, in violation of the provisions of
sections 30 and 33 of Act No. 1147, an Act regulating the
registration, branding, and slaughter of large cattle.
It appears that in the town of Carmen, in the Province of Bohol,
wherein the animal was slaughtered there is no municipal
slaughterhouse, and counsel for appellant contends that under
such circumstances the provisions of Act No. 1147 do not prohibit
nor penalize the slaughter of large cattle without a permit of the
municipal treasure. Sections 30, 31, 32, and 33 of the Act are as
follows:
SEC. 30. No large cattle shall be slaughtered or killed
for food at the municipal slaughterhouse except upon
permit secured from the municipal treasure. Before
issuing the permit for the slaughter of large cattle for
human consumption, the municipal treasurer shall
require for branded cattle the production of the original
certificate of ownership and certificates of transfer
showing title in the person applying for the permit, and
for unbranded cattle such evidence as may satisfy said
treasurer as to the ownership of the animals for which
permit to slaughter has been requested.
SEC. 31. No permit to slaughter has been carabaos
shall be granted by the municipal treasurer unless such
animals are unfit for agricultural work or for draft
purposes, and in no event shall a permit be given to
slaughter for food any animal of any kind which is not fit
for human consumption.
SEC. 32. The municipal treasurer shall keep a record of
all permits for slaughter issued by him, and such record
shall show the name and residence of the owner, and
the class, sex, age, brands, knots of radiated hair
commonly know as remolinos or cowlicks, and other
marks of identification of the animal for the slaughter of
which permit is issued and the date on which such
permit is issued. Names of owners shall be
alphabetically arranged in the record, together with date
of permit.
A copy of the record of permits granted for slaughter
shall be forwarded monthly to the provincial treasurer,
who shall file and properly index the same under the
name of the owner, together with date of permit.
SEC. 33. Any person slaughtering or causing to be
slaughtered for human consumption or killing for food at
the municipal slaughterhouse any large cattle except
upon permit duly secured from the municipal treasurer,
shall be punished by a fine of not less than ten nor
more than five hundred pesos, Philippine currency, or
by imprisonment for not less than one month nor more
than six months, or by both such fine and
imprisonment, in the discretion of the court.

It is contended that the proper construction of the language of


these provisions limits the prohibition contained in section 30 and
the penalty imposed in section 33 to cases (1) of slaughter of
large cattle for human consumptionin a municipal
slaughter without a permit duly secured from the municipal
treasurer, and (2) cases of killing of large cattle for food in a
municipal slaughterhouse without a permit duly secured from the
municipal treasurer; and it is urged that the municipality of
Carmen not being provided with a municipal slaughterhouse,
neither the prohibition nor the penalty is applicable to cases of
slaughter of large cattle without a permit in that municipality.
We are of opinion, however, that the prohibition contained in
section 30 refers (1) to the slaughter of large cattle for human
consumption, anywhere, without a permit duly secured from the
municipal treasurer, and (2) expressly and specifically to the
killing for food of large cattle at a municipal slaughterhouse
without such permit; and that the penalty provided in section 33
applies generally to the slaughter of large cattle for human
consumption, anywhere, without a permit duly secured from the
municipal treasurer, and specifically to the killing for food of large
cattle at a municipal slaughterhouse without such permit.
It may be admitted at once, that the pertinent language of those
sections taken by itself and examined apart from the context fairly
admits of two constructions: one whereby the phrase "at the
municipal slaughterhouse" may be taken as limiting and
restricting both the word "slaughtered" and the words "killed for
food" in section 30, and the words "slaughtering or causing to be
slaughtered for human consumption" and the words "killing for
food" in section 33; and the other whereby the phrase "at the
municipal slaughterhouse" may be taken as limiting and
restricting merely the words "killed for food" and "killing for food"
as used in those sections. But upon a reading of the whole Act,
and keeping in mind the manifest and expressed purpose and
object of its enactment, it is very clear that the latter construction
is that which should be adopted.
The Act primarily seeks to protect the "large cattle" of the
Philippine Islands against theft and to make easy the recovery
and return of such cattle to their proper owners when lost,
strayed, or stolen. To this end it provides an elaborate and
compulsory system for the separate branding and registry of
ownership of all such cattle throughout the Islands, whereby
owners are enabled readily and easily to establish their title; it
prohibits and invalidates all transfers of large cattle
unaccompanied by certificates of transfer issued by the proper
officer in the municipality where the contract of sale is made; and
it provides also for the disposition of thieves or persons unlawfully
in possession, so as to protect the rights of the true owners. All
this, manifestly, in order to make it difficult for any one but the
rightful owner of such cattle to retain them in his possession or to
dispose of them to others. But the usefulness of this elaborate
and compulsory system of identification, resting as it does on the
official registry of the brands and marks on each separate animal
throughout the Islands, would be largely impaired, if not totally
destroyed, if such animals were requiring proof of ownership and
the production of certificates of registry by the person
slaughtering or causing them to be slaughtered, and this
especially if the animals were slaughtered privately or in a
clandestine manner outside of a municipal slaughterhouse.
Hence, as it would appear, sections 30 and 33 prohibit and
penalize the slaughter for human consumption or killing for food
at a municipal slaughterhouse of such animals without a permit
issued by the municipal treasurer, and section 32 provides for the
keeping of detailed records of all such permits in the office of the
municipal and also of the provincial treasurer.
If, however, the construction be placed on these sections which is
contended for by the appellant, it will readily be seen that all these
carefully worked out provisions for the registry and record of the
brands and marks of identification of all large cattle in the Islands
would prove in large part abortion, since thieves and persons
unlawfully in possession of such cattle, and naturally would,
evade the provisions of the law by slaughtering them outside of

municipal slaughterhouses, and thus enjoy the fruits of their


wrongdoing without exposing themselves to the danger of
detection incident to the bringing of the animals to the public
slaughterhouse, where the brands and other identification marks
might be scrutinized and proof of ownership required.

particular use of the property as would be inconsistent with or


injurious to the rights of the public. All property is acquired and
held under the tacit condition that it shall not be so used as to
injure the equal rights of others or greatly impair the public rights
and interest of the community."

Where the language of a statute is fairly susceptible of two or


more constructions, that construction should be adopted which
will most tend to give effect to the manifest intent of the lawmaker
and promote the object for which the statute was enacted, and a
construction should be rejected which would tend to render
abortive other provisions of the statute and to defeat the object
which the legislator sought to attain by its enactment. We are of
opinion, therefore, that sections 30 and 33 of the Act prohibit and
penalize the slaughtering or causing to be slaughtered for human
consumption of large cattle at any place without the permit
provided for in section 30.

It may be conceded that the benificial use and exclusive


enjoyment of the property of all carabao owners in these Islands
is to a greater or less degree interfered with by the provisions of
the statute; and that, without inquiring what quantum of interest
thus passes from the owners of such cattle, it is an interest the
deprivation of which detracts from their right and authority, and in
some degree interferes with their exclusive possession and
control of their property, so that if the regulations in question were
enacted for purely private purpose, the statute, in so far as these
regulations are concerned, would be a violation of the provisions
of the Philippine Bill relied on be appellant; but we are satisfied
that it is not such a taking, such an interference with the right and
title of the owners, as is involved in the exercise by the State of
the right of eminent domain, so as to entitle these owners to
compensation, and that it is no more than "a just restrain of an
injurious private use of the property, which the legislature had
authority to impose."

It is not essential that an explanation be found for the express


prohibition in these sections of the "killing for food at a municipal
slaughterhouse" of such animals, despite the fact that this
prohibition is clearly included in the general prohibition of the
slaughter of such animals for human consumption anywhere; but
it is not improbable that the requirement for the issue of a permit
in such cases was expressly and specifically mentioned out of
superabundance of precaution, and to avoid all possibility of
misunderstanding in the event that some of the municipalities
should be disposed to modify or vary the general provisions of the
law by the passage of local ordinances or regulations for the
control of municipal slaughterhouse.

In the case of Com. vs. Alger (7 Cush., 53, 84), wherein the
doctrine laid down in Com. vs. Tewksbury (supra) was reviewed
and affirmed, the same eminent jurist who wrote the former
opinion, in distinguishing the exercise of the right of eminent
domain from the exercise of the sovereign POLICE POWERs of
the State, said:

Similar reasoning applied to the specific provisions of section 31


of the Act leads to the same conclusion. One of the secondary
purposes of the law, as set out in that section, is to prevent the
slaughter for food of carabaos fit for agricultural and draft
purposes, and of all animals unfit for human consumption. A
construction which would limit the prohibitions and penalties
prescribed in the statute to the killing of such animals in municipal
slaughterhouses, leaving unprohibited and unpenalized their
slaughter outside of such establishments, so manifestly tends to
defeat the purpose and object of the legislator, that unless
imperatively demanded by the language of the statute it should be
rejected; and, as we have already indicated, the language of the
statute is clearly susceptible of the construction which we have
placed upon it, which tends to make effective the provisions of
this as well as all the other sections of the Act.

We think it is settled principle, growing out of the nature


of well-ordered civil society, that every holder of
property, however absolute and unqualified may be his
title, holds it under the implied liability that his use of it
may be so regulated that is shall not be injurious to the
equal enjoyment of others having an equal right to the
enjoyment of their property, nor injurious to the rights of
the community. . . . Rights of property, like all other
social and conventional rights, are subject to such
reasonable limitations in their enjoyment as shall
prevent them from being injurious, and to such
reasonable restrain and regulations establish by law, as
the legislature, under the governing and controlling
power vested in them by the constitution, may think
necessary and expedient.

It appears that the defendant did in fact apply for a permit to


slaughter his carabao, and that it was denied him on the ground
that the animal was not unfit "for agricultural work or for draft
purposes." Counsel for appellant contends that the statute, in so
far as it undertakes to penalize the slaughter of carabaos for
human consumption as food, without first obtaining a permit
which can not be procured in the event that the animal is not unfit
"for agricultural work or draft purposes," is unconstitutional and in
violation of the terms of section 5 of the Philippine Bill (Act of
Congress, July 1, 1902), which provides that "no law shall be
enacted which shall deprive any person of life, liberty, or property
without DUE PROCESS of law."

This is very different from the right of eminent domain,


the right of a government to take and appropriate
private property to public use, whenever the public
exigency requires it; which can be done only on
condition of providing a reasonable compensation
therefor. The power we allude to is rather the POLICE
POWER, the power vested in the legislature by the
constitution, to make, ordain, and establish all manner
of wholesome and reasonable laws, statutes, and
ordinances, either with penalties or without, not
repugnant to the constitution, as they shall judge to be
for the good and welfare of the commonwealth, and of
the subjects of the same.

It is not quite clear from the argument of counsel whether his


contention is that this provision of the statute constitutes a taking
of property for public use in the exercise of the right of eminent
domain without providing for the compensation of the owners, or
that it is an undue and unauthorized exercise of the POLICE
POWER of the State. But whatever may be the basis of his
contention, we are of opinion, appropriating, with necessary
modifications understood, the language of that great jurist, Chief
Justice Shaw (in the case of Com. vs. Tewksbury, 11 Met., 55,
where the question involved was the constitutionality of a statute
prohibiting and penalizing the taking or carrying away by any
person, including the owner, of any stones, gravel, or sand, from
any of the beaches in the town of Chesea,) that the law in
question "is not a taking of the property for public use, within the
meaning of the constitution, but is a just and legitimate exercise of
the power of the legislature to regulate and restrain such

It is much easier to perceive and realize the existence


and sources of this power than to mark its boundaries
or prescribe limits to its exercise.
Applying these principles, we are opinion that the restrain placed
by the law on the slaughter for human consumption of carabaos
fit for agricultural work and draft purpose is not an appropriation of
property interests to a "public use," and is not, therefore, within
the principle of the exercise by the State of the right of eminent
domain. It is fact a mere restriction or limitation upon a private
use, which the legislature deemed to be determental to the public
welfare. And we think that an examination of the general
provisions of the statute in relation to the public interest which it
seeks to safeguard and the public necessities for which it

provides, leaves no room for doubt that the limitations and


restraints imposed upon the exercise of rights of ownership by the
particular provisions of the statute under consideration were
imposed not for private purposes but, strictly, in the promotion of
the "general welfare" and "the public interest" in the exercise of
the sovereign POLICE POWER which every State possesses for
the general public welfare and which "reaches to every species of
property within the commonwealth."
For several years prior to the enactment of the statute a virulent
contagious or infectious disease had threatened the total
extinction of carabaos in these Islands, in many sections
sweeping away seventy, eighty, and in some cases as much as
ninety and even one hundred per cent of these animals.
Agriculture being the principal occupation of the people, and the
carabao being the work animal almost exclusively in use in the
fields as well as for draft purposes, the ravages of the disease
with which they were infected struck an almost vital blow at the
material welfare of the country. large areas of productive land lay
waste for years, and the production of rice, the staple food of the
inhabitants of the Islands, fell off to such an extent that the
impoverished people were compelled to spend many millions of
pesos in its importation, notwithstanding the fact that with
sufficient work animals to cultivate the fields the arable rice lands
of the country could easily be made to produce a supply more
that sufficient for its own needs. The drain upon the resources of
the Islands was such that famine soon began to make itself felt,
hope sank in the breast of the people, and in many provinces the
energies of the breadwinners seemed to be paralyzed by the
apparently hopeless struggle for existence with which they were
confronted.
To meet these conditions, large sums of money were expended
by the Government in relieving the immediate needs of the
starving people, three millions of dollars were voted by the
Congress of the United States as a relief or famine fund, public
works were undertaken to furnish employment in the provinces
where the need was most pressing, and every effort made to
alleviate the suffering incident to the widespread failure of the
crops throughout the Islands, due in large measure to the lack of
animals fit for agricultural work and draft purposes.
Such measures, however, could only temporarily relieve the
situation, because in an agricultural community material progress
and permanent prosperity could hardly be hoped for in the
absence of the work animals upon which such a community must
necessarily rely for the cultivation of the fields and the
transportation of the products of the fields to market. Accordingly
efforts were made by the Government to increase the supply of
these animals by importation, but, as appears from the official
reports on this subject, hope for the future depended largely on
the conservation of those animals which had been spared from
the ravages of the diseased, and their redistribution throughout
the Islands where the need for them was greatest.
At large expense, the services of experts were employed, with a
view to the discovery and applications of preventive and curative
remedies, and it is hoped that these measures have proved in
some degree successful in protecting the present inadequate
supply of large cattle, and that the gradual increase and
redistribution of these animals throughout the Archipelago, in
response to the operation of the laws of supply and demand, will
ultimately results in practically relieving those sections which
suffered most by the loss of their work animals.
As was to be expected under such conditions, the price of
carabaos rapidly increase from the three to five fold or more, and
it may fairly be presumed that even if the conservative measures
now adopted prove entirely successful, the scant supply will keep
the price of these animals at a high figure until the natural
increase shall have more nearly equalized the supply to the
demand.
Coincident with and probably intimately connected with this
sudden rise in the price of cattle, the crime of cattle stealing

became extremely prevalent throughout the Islands, necessitating


the enactment of a special law penalizing with the severest
penalties the theft of carabaos and other personal property by
roving bands; and it must be assumed from the legislative
authority found that the general welfare of the Islands
necessitated the enactment of special and somewhat
burdensome provisions for the branding and registration of large
cattle, and supervision and restriction of their slaughter for food. It
will hardly be questioned that the provisions of the statute
touching the branding and registration of such cattle, and
prohibiting and penalizing the slaughter of diseased cattle for food
were enacted in the due and proper exercise of the POLICE
POWER of the State; and we are of opinion that, under all the
circumstances, the provision of the statute prohibiting and
penalizing the slaughter for human consumption of carabaos fit
for work were in like manner enacted in the due and proper
exercise of that power, justified by the exigent necessities of
existing conditions, and the right of the State to protect itself
against the overwhelming disaster incident to the further reduction
of the supply of animals fit for agricultural work or draft purposes.
It is, we think, a fact of common knowledge in these Islands, and
disclosed by the official reports and records of the administrative
and legislative departments of the Government, that not merely
the material welfare and future prosperity of this agricultural
community were threatened by the ravages of the disease which
swept away the work animals during the years prior to the
enactment of the law under consideration, but that the very life
and existence of the inhabitants of these Islands as a civilized
people would be more or less imperiled by the continued
destruction of large cattle by disease or otherwise. Confronted by
such conditions, there can be no doubt of the right of the
Legislature to adopt reasonable measures for the preservation of
work animals, even to the extent of prohibiting and penalizing
what would, under ordinary conditions, be a perfectly legitimate
and proper exercise of rights of ownership and control of the
private property of the citizen. The POLICE POWER rests upon
necessity and the right of self-protection and if ever the invasion
of private property by police regulation can be justified, we think
that the reasonable restriction placed upon the use of carabaos
by the provision of the law under discussion must be held to be
authorized as a reasonable and proper exercise of that power.
As stated by Mr. Justice Brown in his opinion in the case
of Lawton vs. Steele (152 U.S., 133, 136):
The extent and limits of what is known as the POLICE
POWER have been a fruitful subject of discussion in
the appellate courts of nearly every State in the Union.
It is universally conceded to include everything
essential to the public safely, health, and morals, and to
justify the destruction or abatement, by summary
proceedings, of whatever may be regarded as a public
nuisance. Under this power it has been held that the
State may order the destruction of a house falling to
decay or otherwise endangering the lives of passersby; the demolition of such as are in the path of a
conflagration; the slaughter of diseased cattle; the
destruction of decayed or unwholesome food; the
prohibition of wooden buildings in cities; the regulation
of railways and other means of public conveyance, and
of interments in burial grounds; the restriction of
objectionable trades to certain localities; the
compulsary vaccination of children; the confinement of
the insane or those afficted with contagious deceases;
the restraint of vagrants, beggars, and habitual
drunkards; the suppression of obscene publications
and houses of ill fame; and the prohibition of gambling
houses and places where intoxicating liquors are
sold. Beyond this, however, the State may interfere
wherever the public interests demand it, and in this
particular a large discretion is necessarily vested in the
legislature to determine, not only what the interests of
the public require, but what measures are necessary
for the protection of such interests.
(Barbier vs. Connolly, 113 U. S., 27; Kidd vs. Pearson,
128 U. S., 1.) To justify the State in thus interposing its

authority in behalf of the public, it must appear, first,


that the interests of the public generally, as
distinguished from those of a particular class, require
such interference; and, second, that the means are
reasonably necessary for the accomplishment of the
purpose, and not unduly oppressive upon individuals.
The legislature may not, under the guise of protecting
the public interests, arbitrarily interfere with private
business, or impose unusual and unnecessary
restrictions upon lawful occupations. In other words, its
determination as to what is a proper exercise of its
POLICE POWERs is not final or conclusive, but is
subject to the supervision of the court.
From what has been said, we think it is clear that the enactment
of the provisions of the statute under consideration was required
by "the interests of the public generally, as distinguished from
those of a particular class;" and that the prohibition of the
slaughter of carabaos for human consumption, so long as these
animals are fit for agricultural work or draft purposes was a
"reasonably necessary" limitation on private ownership, to protect
the community from the loss of the services of such animals by
their slaughter by improvident owners, tempted either by greed of
momentary gain, or by a desire to enjoy the luxury of animal food,
even when by so doing the productive power of the community
may be measurably and dangerously affected.
Chief Justice Redfield, in Thorpe vs. Rutland & Burlington R. R.
Co. (27 Vt., 140), said (p. 149) that by this "general POLICE
POWER of the State, persons and property are subjected to all
kinds of restraints and burdens, in order to secure the general
comfort, health, and prosperity of the State; of the perfect right in
the legislature to do which no question ever was, or, upon
acknowledge and general principles, ever can be made, so far as
natural persons are concerned."
And Cooley in his "Constitutional Limitations" (6th ed., p. 738)
says:
It would be quite impossible to enumerate all the
instances in which the POLICE POWER is or may be
exercised, because the various cases in which the
exercise by one individual of his rights may conflict with
a similar exercise by others, or may be detrimental to
the public order or safety, are infinite in number and in
variety. And there are other cases where it becomes
necessary for the public authorities to interfere with the
control by individuals of their property, and even to
destroy it, where the owners themselves have fully
observed all their duties to their fellows and to the
State, but where, nevertheless, some controlling public
necessity demands the interference or destruction. A
strong instance of this description is where it becomes
necessary to take, use, or destroy the private property
of individuals to prevent the spreading of a fire, the
ravages of a pestilence, the advance of a hostile army,
or any other great public calamity. Here the individual is
in no degree in fault, but his interest must yield to that
"necessity" which "knows no law." The establishment of
limits within the denser portions of cities and villages
within which buildings constructed of inflammable
materials shall not be erected or repaired may also, in
some cases, be equivalent to a destruction of private
property; but regulations for this purpose have been
sustained notwithstanding this result. Wharf lines may
also be established for the general good, even though
they prevent the owners of water-fronts from building
out on soil which constitutes private property. And,
whenever the legislature deem it necessary to the
protection of a harbor to forbid the removal of stones,
gravel, or sand from the beach, they may establish
regulations to that effect under penalties, and make
them applicable to the owners of the soil equally with
other persons. Such regulations are only "a just
restraint of an injurious use of property, which the
legislature have authority" to impose.

So a particular use of property may sometimes be


forbidden, where, by a change of circumstances, and
without the fault of the power, that which was once
lawful, proper, and unobjectionable has now become a
public nuisance, endangering the public health or the
public safety. Milldams are sometimes destroyed upon
this grounds; and churchyards which prove, in the
advance of urban population, to be detrimental to the
public health, or in danger of becoming so, are liable to
be closed against further use for cemetery purposes.
These citations from some of the highest judicial and text-book
authorities in the United States clearly indicate the wide scope
and extent which has there been given to the doctrine us in our
opinion that the provision of the statute in question being a proper
exercise of that power is not in violation of the terms of section 5
of the Philippine Bill, which provide that "no law shall be enacted
which shall deprive any person of life, liberty, or property without
DUE PROCESS of law," a provision which itself is adopted from
the Constitution of the United States, and is found in substance in
the constitution of most if not all of the States of the Union.
The judgment of conviction and the sentence imposed by the trial
court should be affirmed with the costs of this instance against the
appellant. So ordered.

G.R. No. L-10572 December 21, 1915


FRANCIS A. CHURCHILL and STEWART TAIT, plaintiffsappellees,
vs.
JAMES J. RAFFERTY, Collector of Internal
Revenue, defendant-appellant.
Attorney-General Avancea for appellant.
Aitken and DeSelms for appellees.

TRENT, J.:
The judgment appealed from in this case perpetually restrains
and prohibits the defendant and his deputies from collecting and
enforcing against the plaintiffs and their property the annual tax
mentioned and described in subsection (b) of section 100 of Act
No. 2339, effective July 1, 1914, and from destroying or removing
any sign, signboard, or billboard, the property of the plaintiffs, for
the sole reason that such sign, signboard, or billboard is, or may
be, offensive to the sight; and decrees the cancellation of the
bond given by the plaintiffs to secure the issuance of the
preliminary injunction granted soon after the commencement of
this action.
This case divides itself into two parts and gives rise to two main
questions; (1) that relating to the power of the court to restrain by
injunction the collection of the tax complained of, and (2) that
relating to the validity of those provisions of subsection (b) of
section 100 of Act No. 2339, conferring power upon the Collector
of Internal Revenue to remove any sign, signboard, or billboard
upon the ground that the same is offensive to the sight or is
otherwise a nuisance.
The first question is one of the jurisdiction and is of vital
importance to the Government. The sections of Act No. 2339,
which bear directly upon the subject, are 139 and 140. The first
expressly forbids the use of an injunction to stay the collection of
any internal revenue tax; the second provides a remedy for any
wrong in connection with such taxes, and this remedy was
intended to be exclusive, thereby precluding the remedy by
injunction, which remedy is claimed to be constitutional. The two
sections, then, involve the right of a dissatisfied taxpayers to use

an exceptional remedy to test the validity of any tax or to


determine any other question connected therewith, and the
question whether the remedy by injunction is exceptional.
Preventive remedies of the courts are extraordinary and are not
the usual remedies. The origin and history of the writ of injunction
show that it has always been regarded as an extraordinary,
preventive remedy, as distinguished from the common course of
the law to redress evils after they have been consummated. No
injunction issues as of course, but is granted only upon the oath
of a party and when there is no adequate remedy at law. The
Government does, by section 139 and 140, take away the
preventive remedy of injunction, if it ever existed, and leaves the
taxpayer, in a contest with it, the same ordinary remedial actions
which prevail between citizen and citizen. The Attorney-General,
on behalf of the defendant, contends that there is no provisions of
the paramount law which prohibits such a course. While, on the
other hand, counsel for plaintiffs urge that the two sections are
unconstitutional because (a) they attempt to deprive aggrieved
taxpayers of all substantial remedy for the protection of their
property, thereby, in effect, depriving them of their property
without DUE PROCESS of law, and (b) they attempt to diminish
the jurisdiction of the courts, as conferred upon them by Acts Nos.
136 and 190, which jurisdiction was ratified and confirmed by the
Act of Congress of July 1, 1902.
In the first place, it has been suggested that section 139 does not
apply to the tax in question because the section, in speaking of a
"tax," means only legal taxes; and that an illegal tax (the one
complained of) is not a tax, and, therefore, does not fall within the
inhibition of the section, and may be restrained by injunction.
There is no force in this suggestion. The inhibition applies to all
internal revenue taxes imposes, or authorized to be imposed, by
Act No. 2339. (Snyder vs. Marks, 109 U.S., 189.) And,
furthermore, the mere fact that a tax is illegal, or that the law, by
virtue of which it is imposed, is unconstitutional, does not
authorize a court of equity to restrain its collection by injunction.
There must be a further showing that there are special
circumstances which bring the case under some well recognized
head of equity jurisprudence, such as that irreparable injury,
multiplicity of suits, or a cloud upon title to real estate will result,
and also that there is, as we have indicated, no adequate remedy
at law. This is the settled law in the United States, even in the
absence of statutory enactments such as sections 139 and 140.
(Hannewinkle vs. Mayor, etc., of Georgetown, 82 U.S., 547;
Indiana Mfg. Co. vs. Koehne, 188 U.S., 681; Ohio Tax cases, 232
U. S., 576, 587; Pittsburgh C. C. & St. L. R. Co. vs. Board of
Public Works, 172 U. S., 32; Shelton vs. Plat, 139 U.S., 591;
State Railroad Tax Cases, 92 U. S., 575.) Therefore, this branch
of the case must be controlled by sections 139 and 140, unless
the same be held unconstitutional, and consequently, null and
void.
The right and power of judicial tribunals to declare
whether enactments of the legislature exceed the
constitutional limitations and are invalid has always
been considered a grave responsibility, as well as a
solemn duty. The courts invariably give the most careful
consideration to questions involving the interpretation
and application of the Constitution, and approach
constitutional questions with great deliberation,
exercising their power in this respect with the greatest
possible caution and even reluctance; and they should
never declare a statute void, unless its invalidity is, in
their judgment, beyond reasonable doubt. To justify a
court in pronouncing a legislative act unconstitutional,
or a provision of a state constitution to be in
contravention of the Constitution of the United States,
the case must be so clear to be free from doubt, and
the conflict of the statute with the constitution must be
irreconcilable, because it is but a decent respect to the
wisdom, the integrity, and the patriotism of the
legislative body by which any law is passed to presume
in favor of its validity until the contrary is shown beyond
reasonable doubt. Therefore, in no doubtful case will
the judiciary pronounce a legislative act to be contrary
to the constitution. To doubt the constitutionality of a law

is to resolve the doubt in favor of its validity. (6 Ruling


Case Law, secs. 71, 72, and 73, and cases cited
therein.)
It is also the settled law in the United States that "DUE
PROCESS of law" does not always require, in respect to the
Government, the same process that is required between citizens,
though it generally implies and includes regular allegations,
opportunity to answer, and a trial according to some well settled
course of judicial proceedings. The case with which we are
dealing is in point. A citizen's property, both real and personal,
may be taken, and usually is taken, by the government in
payment of its taxes without any judicial proceedings whatever. In
this country, as well as in the United States, the officer charged
with the collection of taxes is authorized to seize and sell the
property of delinquent taxpayers without applying to the courts for
assistance, and the constitutionality of the law authorizing this
procedure never has been seriously questioned. (City of
Philadelphia vs. [Diehl] The Collector, 5 Wall., 720;
Nicholl vs. U.S., 7 Wall., 122, and cases cited.) This must
necessarily be the course, because it is upon taxation that the
Government chiefly relies to obtain the means to carry on its
operations, and it is of the utmost importance that the modes
adopted to enforce the collection of the taxes levied should be
summary and interfered with as little as possible. No government
could exist if every litigious man were permitted to delay the
collection of its taxes. This principle of public policy must be
constantly borne in mind in determining cases such as the one
under consideration.
With these principles to guide us, we will proceed to inquire
whether there is any merit in the two propositions insisted upon
by counsel for the plaintiffs. Section 5 of the Philippine Bill
provides: "That no law shall be enacted in said Islands which shall
deprive any person of life, liberty, or property without DUE
PROCESS of law, or deny to any person therein the equal
protection of the law."
The origin and history of these provisions are well-known. They
are found in substance in the Constitution of the United States
and in that of ever state in the Union.
Section 3224 of the Revised Statutes of the United States,
effective since 1867, provides that: "No suit for the purpose of
restraining the assessment or collection of any tax shall be
maintained in any court."
Section 139, with which we have been dealing, reads: "No court
shall have authority to grant an injunction to restrain the collection
of any internal-revenue tax."
A comparison of these two sections show that they are essentially
the same. Both expressly prohibit the restraining of taxes by
injunction. If the Supreme Court of the United States has clearly
and definitely held that the provisions of section 3224 do not
violate the "DUE PROCESS of law" and "equal protection of the
law" clauses in the Constitution, we would be going too far to hold
that section 139 violates those same provisions in the Philippine
Bill. That the Supreme Court of the United States has so held,
cannot be doubted.
In Cheatham vs. United States (92 U.S., 85,89) which involved
the validity of an income tax levied by an act of Congress prior to
the one in issue in the case of Pollock vs. Farmers' Loan & Trust
Co. (157 U.S., 429) the court, through Mr. Justice Miller, said: "If
there existed in the courts, state or National, any general power of
impeding or controlling the collection of taxes, or relieving the
hardship incident to taxation, the very existence of the
government might be placed in the power of a hostile judiciary.
(Dows vs. The City of Chicago, 11 Wall., 108.) While a free
course of remonstrance and appeal is allowed within the
departments before the money is finally exacted, the General
Government has wisely made the payment of the tax claimed,
whether of customs or of internal revenue, a condition precedent
to a resort to the courts by the party against whom the tax is

assessed. In the internal revenue branch it has further prescribed


that no such suit shall be brought until the remedy by appeal has
been tried; and, if brought after this, it must be within six months
after the decision on the appeal. We regard this as a condition on
which alone the government consents to litigate the lawfulness of
the original tax. It is not a hard condition. Few governments have
conceded such a right on any condition. If the compliance with
this condition requires the party aggrieved to pay the money, he
must do it."
Again, in State Railroad Tax Cases (92 U.S., 575, 613), the court
said: "That there might be no misunderstanding of the universality
of this principle, it was expressly enacted, in 1867, that "no suit for
the purpose of restraining the assessment or collection of any tax
shall be maintained in any court." (Rev, Stat., sec. 3224.) And
though this was intended to apply alone to taxes levied by the
United States, it shows the sense of Congress of the evils to be
feared if courts of justice could, in any case, interfere with the
process of collecting taxes on which the government depends for
its continued existence. It is a wise policy. It is founded in the
simple philosophy derived from the experience of ages, that the
payment of taxes has to be enforced by summary and stringent
means against a reluctant and often adverse sentiment; and to do
this successfully, other instrumentalities and other modes of
procedure are necessary, than those which belong to courts of
justice."
And again, in Snyder vs. Marks (109 U.S., 189), the court said:
"The remedy of a suit to recover back the tax after it is paid is
provided by statute, and a suit to restrain its collection is
forbidden. The remedy so given is exclusive, and no other remedy
can be substituted for it. Such has been the current of decisions
in the Circuit Courts of the United States, and we are satisfied it is
a correct view of the law."itc-a1f
In the consideration of the plaintiffs' second proposition, we will
attempt to show (1) that the Philippine courts never have had,
since the American occupation, the power to restrain by injunction
the collection of any tax imposed by the Insular Government for
its own purpose and benefit, and (2) that assuming that our courts
had or have such power, this power has not been diminished or
curtailed by sections 139 and 140.
We will first review briefly the former and present systems of
taxation. Upon the American occupation of the Philippine, there
was found a fairly complete system of taxation. This system was
continued in force by the military authorities, with but few
changes, until the Civil Government assumed charge of the
subject. The principal sources of revenue under the Spanish
regime were derived from customs receipts, the so-called
industrial taxes, the urbana taxes, the stamp tax, the personal
cedula tax, and the sale of the public domain. The industrial and
urbana taxes constituted practically an income tax of some 5 per
cent on the net income of persons engaged in industrial and
commercial pursuits and on the income of owners of improved
city property. The sale of stamped paper and adhesive stamp tax.
The cedula tax was a graduated tax, ranging from nothing up to
P37.50. The revenue derived from the sale of the public domain
was not considered a tax. The American authorities at once
abolished the cedula tax, but later restored it in a modified form,
charging for each cedula twenty centavos, an amount which was
supposed to be just sufficient to cover the cost of issuance. The
urbana tax was abolished by Act No. 223, effective September 6,
1901.
The "Municipal Code" (Act No. 82) and the Provincial Government
Act (No. 83), both enacted in 1901, authorize municipal councils
and provincial boards to impose an ad valorem tax on real estate.
The Municipal Code did not apply to the city of Manila. This city
was given a special charter (Act No. 183), effective August 30,
1901; Under this charter the Municipal Board of Manila is
authorized and empowered to impose taxes upon real estate and,
like municipal councils, to license and regulate certain
occupations. Customs matters were completely reorganized by
Act No. 355, effective at the port of Manila on February 7, 1902,
and at other ports in the Philippine Islands the day after the

receipt of a certified copy of the Act. The Internal Revenue Law of


1904 (Act No. 1189), repealed all existing laws, ordinances, etc.,
imposing taxes upon the persons, objects, or occupations taxed
under that act, and all industrial taxes and stamp taxes imposed
under the Spanish regime were eliminated, but the industrial tax
was continued in force until January 1, 1905. This Internal
Revenue Law did not take away from municipal councils,
provincial boards, and the Municipal Board of the city of Manila
the power to impose taxes upon real estate. This Act (No. 1189),
with its amendments, was repealed by Act No. 2339, an act
"revising and consolidating the laws relative to internal revenue."
Section 84 of Act No. 82 provides that "No court shall entertain
any suit assailing the validity of a tax assessed under this act until
the taxpayer shall have paid, under protest, the taxes assessed
against him, . . . ."
This inhibition was inserted in section 17 of Act No. 83 and
applies to taxes imposed by provincial boards. The inhibition was
not inserted in the Manila Charter until the passage of Act No.
1793, effective October 12, 1907. Act No. 355 expressly makes
the payment of the exactions claimed a condition precedent to a
resort to the courts by dissatisfied importers. Section 52 of Act
No. 1189 provides "That no courts shall have authority to grant an
injunction restraining the collection of any taxes imposed by virtue
of the provisions of this Act, but the remedy of the taxpayer who
claims that he is unjustly assessed or taxed shall be by payment
under protest of the sum claimed from him by the Collector of
Internal Revenue and by action to recover back the sum claimed
to have been illegally collected."
Sections 139 and 140 of Act No. 2339 contain, as we have
indicated, the same prohibition and remedy. The result is that the
courts have been expressly forbidden, in every act creating or
imposing taxes or imposts enacted by the legislative body of the
Philippines since the American occupation, to entertain any suit
assailing the validity of any tax or impost thus imposed until the
tax shall have been paid under protest. The only taxes which
have not been brought within the express inhibition were those
included in that part of the old Spanish system which completely
disappeared on or before January 1, 1905, and possibly the old
customs duties which disappeared in February, 1902.
Section 56 of the Organic Act (No. 136), effective June 16, 1901,
provides that "Courts of First Instance shall have original
jurisdiction:
xxx

xxx

xxx

2. In all civil actions which involve the ... legality of any


tax, impost, or assessment, . . . .
xxx

xxx

xxx

7. Said courts and their judges, or any of them, shall


have power to issue writs of
injunction, mandamus,certiorari, prohibition, quo
warranto, and habeas corpus in their respective
provinces and districts, in the manner provided in the
Code of Civil Procedure.
The provisions of the Code of Civil Procedure (Act No. 190),
effective October 1, 1901, which deals with the subject of
injunctions, are sections 162 to 172, inclusive. Injunctions, as
here defined, are of two kinds; preliminary and final. The former
may be granted at any time after the commencement of the action
and before final judgment, and the latter at the termination of the
trial as the relief or part of the relief prayed for (sec. 162). Any
judge of the Supreme Court may grant a preliminary injunction in
any action pending in that court or in any Court of First Instance.
A preliminary injunction may also be granted by a judge of the
Court of First Instance in actions pending in his district in which
he has original jurisdiction (sec. 163). But such injunctions may
be granted onlywhen the complaint shows facts entitling the

plaintiff to the relief demanded (sec. 166), and before a final or


permanent injunction can be granted, it must appear upon the trial
of the action that the plaintiff is entitled to have commission or
continuance of the acts complained of perpetually restrained (sec.
171). These provisions authorize the institution in Courts of First
Instance of what are known as "injunction suits," the sole object of
which is to obtain the issuance of a final injunction. They also
authorize the granting of injunctions as aiders in ordinary civil
actions. We have defined in Davesa vs. Arbes (13 Phil. Rep.,
273), an injunction to be "A "special remedy" adopted in that code
(Act 190) from American practice, and originally borrowed from
English legal procedure, which was there issued by the authority
and under the seal of a court of equity, and limited, as in other
cases where equitable relief is sought, to those cases where
there is no "plain, adequate, and complete remedy at law,"which
will not be granted while the rights between the parties are
undetermined, except in extraordinary cases where material and
irreparable injury will be done,"which cannot be compensated in
damages . . .
By paragraph 2 of section 56 of Act No. 136, supra, and the
provisions of the various subsequent Acts heretofore mentioned,
the Insular Government has consented to litigate with aggrieved
persons the validity of any original tax or impost imposed by it on
condition that this be done in ordinary civil actions after the taxes
or exactions shall have been paid. But it is said that paragraph 2
confers original jurisdiction upon Courts of First Instance to hear
and determine "all civil actions" which involve the validity of any
tax, impost or assessment, and that if the all-inclusive words "all"
and "any" be given their natural and unrestricted meaning, no
action wherein that question is involved can arise over which such
courts do not have jurisdiction. (Barrameda vs. Moir, 25 Phil.
Rep., 44.) This is true. But the term "civil actions" had its well
defined meaning at the time the paragraph was enacted. The
same legislative body which enacted paragraph 2 on June 16,
1901, had, just a few months prior to that time, defined the only
kind of action in which the legality of any tax imposed by it might
be assailed. (Sec. 84, Act 82, enacted January 31, 1901, and sec.
17, Act No. 83, enacted February 6, 1901.) That kind of action
being payment of the tax under protest and an ordinary suit to
recover and no other, there can be no doubt that Courts of First
Instance have jurisdiction over all such actions. The subsequent
legislation on the same subject shows clearly that the
Commission, in enacting paragraph 2, supra, did not intend to
change or modify in any way section 84 of Act No. 82 and section
17 of Act No. 83, but, on the contrary, it was intended that "civil
actions," mentioned in said paragraph, should be understood to
mean, in so far as testing the legality of taxes were concerned,
only those of the kind and character provided for in the two
sections above mentioned. It is also urged that the power to
restrain by injunction the collection of taxes or imposts is
conferred upon Courts of First Instance by paragraph 7 of section
56, supra. This paragraph does empower those courts to grant
injunctions, both preliminary and final, in any civil action pending
in their districts, provided always, that the complaint shows facts
entitling the plaintiff to the relief demanded. Injunction suits, such
as the one at bar, are "civil actions," but of a special or
extraordinary character. It cannot be said that the Commission
intended to give a broader or different meaning to the word
"action," used in Chapter 9 of the Code of Civil Procedure in
connection with injunctions, than it gave to the same word found
in paragraph 2 of section 56 of the Organic Act. The Insular
Government, in exercising the power conferred upon it by the
Congress of the United States, has declared that the citizens and
residents of this country shall pay certain specified taxes and
imposts. The power to tax necessarily carries with it the power to
collect the taxes. This being true, the weight of authority supports
the proposition that the Government may fix the conditions upon
which it will consent to litigate the validity of its original taxes.
(Tennessee vs. Sneed, 96 U.S., 69.)
We must, therefore, conclude that paragraph 2 and 7 of section
56 of Act No. 136, construed in the light of the prior and
subsequent legislation to which we have referred, and the
legislative and judicial history of the same subject in the United
States with which the Commission was familiar, do not empower
Courts of firs Instance to interfere by injunction with the collection
of the taxes in question in this case.1awphil.net

If we are in error as to the scope of paragraph 2 and 7, supra, and


the Commission did intend to confer the power upon the courts to
restrain the collection of taxes, it does not necessarily follow that
this power or jurisdiction has been taken away by section 139 of
Act No. 2339, for the reason that all agree that an injunction will
not issue in any case if there is an adequate remedy at law. The
very nature of the writ itself prevents its issuance under such
circumstances. Legislation forbidding the issuing of injunctions in
such cases is unnecessary. So the only question to be here
determined is whether the remedy provided for in section 140 of
Act No. 2339 is adequate. If it is, the writs which form the basis of
this appeal should not have been issued. If this is the correct
view, the authority to issue injunctions will not have been taken
away by section 139, but rendered inoperative only by reason of
an adequate remedy having been made available.
The legislative body of the Philippine Islands has declared from
the beginning (Act No. 82) that payment under protest and suit to
recover is an adequate remedy to test the legality of any tax or
impost, and that this remedy is exclusive. Can we say that the
remedy is not adequate or that it is not exclusive, or both? The
plaintiffs in the case at bar are the first, in so far as we are aware,
to question either the adequacy or exclusiveness of this remedy.
We will refer to a few cases in the United States where statutes
similar to sections 139 and 140 have been construed and applied.
In May, 1874, one Bloomstein presented a petition to the circuit
court sitting in Nashville, Tennessee, stating that his real and
personal property had been assessed for state taxes in the year
1872 to the amount of $132.60; that he tendered to the collector
this amount in "funds receivable by law for such purposes;" and
that the collector refused to receive the same. He prayed for an
alternative writ of mandamus to compel the collector to receive
the bills in payment for such taxes, or to show cause to the
contrary. To this petition the collector, in his answer, set up the
defense that the petitioner's suit was expressly prohibited by the
Act of the General Assembly of the State of Tennessee, passed in
1873. The petition was dismissed and the relief prayed for
refused. An appeal to the supreme court of the State resulted in
the affirmance of the judgment of the lower court. The case was
then carried to the Supreme Court of the United States
(Tennessee vs. Sneed, 96 U. S., 69), where the judgment was
again affirmed.
The two sections of the Act of [March 21,] 1873, drawn in
question in that cases, read as follows:
1. That in all cases in which an officer, charged by law
with the collection of revenue due the State, shall
institute any proceeding, or take any steps for the
collection of the same, alleged or claimed to be due by
said officer from any citizen, the party against whom the
proceeding or step is taken shall, if he conceives the
same to be unjust or illegal, or against any statute or
clause of the Constitution of the State, pay the same
under protest; and, upon his making said payment, the
officer or collector shall pay such revenue into the State
Treasury, giving notice at the time of payment to the
Comptroller that the same was paid under protest; and
the party paying said revenue may, at any time within
thirty days after making said payment, and not longer
thereafter, sue the said officer having collected said
sum, for the recovery thereof. And the same may be
tried in any court having the jurisdiction of the amount
and parties; and, if it be determined that the same was
wrongfully collected, as not being due from said party to
the State, for any reason going to the merits of the
same, then the court trying the case may certify of
record that the same was wrongfully paid and ought to
be refunded; and thereupon the Comptroller shall issue
his warrant for the same, which shall be paid in
preference to other claims on the Treasury.
2. That there shall be no other remedy, in any case of
the collection of revenue, or attempt to collect revenue
illegally, or attempt to collect revenue in funds only

receivable by said officer under the law, the same being


other or different funds than such as the tax payer may
tender, or claim the right to pay, than that above
provided; and no writ for the prevention of the collection
of any revenue claimed, or to hinder or delay the
collection of the same, shall in anywise issue, either
injunction, supersedeas, prohibition, or any other writ or
process whatever; but in all cases in which, for any
reason, any person shall claim that the tax so collected
was wrongfully or illegally collected, the remedy for said
party shall be as above provided, and in no other
manner."
In discussing the adequacy of the remedy provided by the
Tennessee Legislature, as above set forth, the Supreme Court of
the United States, in the case just cited, said: "This remedy is
simple and effective. A suit at law to recover money unlawfully
exacted is as speedy, as easily tried, and less complicated than a
proceeding bymandamus. ... In revenue cases, whether arising
upon its (United States) Internal Revenue Laws or those providing
for the collection of duties upon foreign imports, it (United States)
adopts the rule prescribed by the State of Tennessee. It requires
the contestant to pay the amount as fixed by the Government,
and gives him power to sue the collector, and in such suit to test
the legality of the tax. There is nothing illegal or even harsh in
this. It is a wise and reasonable precaution for the security of the
Government."
Thomas C. Platt commenced an action in the Circuit Court of the
United States for the Eastern District of Tennessee to restrain the
collection of a license tax from the company which he
represented. The defense was that sections 1 and 2 of the Act of
1873, supra, prohibited the bringing of that suit. This case also
reached the Supreme Court of the United States.
(Shelton vs. Platt, 139 U. 591.) In speaking of the inhibitory
provisions of sections 1 and 2 of the Act of 1873, the court said:
"This Act has been sanctioned and applied by the Courts of
Tennessee. (Nashville vs. Smith, 86 Tenn., 213; Louisville & N. R.
Co. vs. State, 8 Heisk., 663, 804.) It is, as counsel observe,
similar to the Act of Congress forbidding suit for the purpose of
restraining the assessment or collection of taxes under the
Internal Revenue Laws, in respect to which this court held that the
remedy by suit to recover back the tax after payment, provided for
by the Statute, was exclusive. (Snyder vs. Marks, of this character
has been called for by the embarrassments resulting from the
improvident employment of the writ of injunction in arresting the
collection of the public revenue; and, even in its absence, the
strong arm of the court of chancery ought not to be interposed in
that direction except where resort to that court is grounded upon
the settled principles which govern its jurisdiction."
In Louisville & N.R. Co. vs. State (8 Heisk. [64 Tenn.], 663, 804),
cited by the Supreme Court of the United States in
Shelton vs. Platt, supra, the court said: "It was urged that this
statute (sections 1 and 2 of the Act of 1873,supra) is
unconstitutional and void, as it deprives the citizen of the remedy
by certiorari, guaranteed by the organic law."
By the 10th section of the sixth article of the Constitution,
[Tennessee] it is provided that: "The judges or justices of inferior
courts of law and equity shall have power in all civil cases to issue
writs of certiorari, to remove any cause, or the transcript of the
record thereof, from any inferior jurisdiction into such court of law,
on sufficient cause, supported by oath or affirmation."
The court held the act valid as not being in conflict with these
provisions of the State constitution.
In Eddy vs. The Township of Lee (73 Mich., 123), the
complainants sought to enjoin the collection of certain taxes for
the year 1886. The defendants, in support of their demurrer,
insisted that the remedy by injunction had been taken away by
section 107 of the Act of 1885, which section reads as follows:
"No injunction shall issue to stay proceedings for the assessment
or collection of taxes under this Act."

It was claimed by the complainants that the above quoted


provisions of the Act of 1885 were unconstitutional and void as
being in conflict with article 6, sec. 8, of the Constitution, which
provides that: "The circuit courts shall have original jurisdiction in
all matters, civil and criminal, not excepted in this Constitution,
and not prohibited by law. ... They shall also have power to issue
writs of habeas corpus, mandamus, injunction, quo
warranto, certiorari, and other writs necessary to carry into effect
their orders, judgments, and decrees."
Mr. Justice Champlin, speaking for the court, said: "I have no
doubt that the Legislature has the constitutional authority, where it
has provided a plain, adequate, and complete remedy at law to
recover back taxes illegally assessed and collected, to take away
the remedy by injunction to restrain their collection."
Section 9 of the Philippine Bill reads in part as follows: "That the
Supreme Court and the Courts of First Instance of the Philippine
Islands shall possess and exercise jurisdiction as heretofore
provided and such additional jurisdiction as shall hereafter be
prescribed by the Government of said Islands, subject to the
power of said Government to change the practice and method of
procedure."
It will be seen that this section has not taken away from the
Philippine Government the power to change the practice and
method of procedure. If sections 139 and 140, considered
together, and this must always be done, are nothing more than a
mode of procedure, then it would seem that the Legislature did
not exceed its constitutional authority in enacting them.
Conceding for the moment that the duly authorized procedure for
the determination of the validity of any tax, impost, or assessment
was by injunction suits and that this method was available to
aggrieved taxpayers prior to the passage of Act No. 2339, may
the Legislature change this method of procedure? That the
Legislature has the power to do this, there can be no doubt,
provided some other adequate remedy is substituted in lieu
thereof. In speaking of the modes of enforcing rights created by
contracts, the Supreme Court of the United States, in
Tennessee vs. Sneed, supra, said: "The rule seems to be that in
modes of proceedings and of forms to enforce the contract the
Legislature has the control, and may enlarge, limit or alter them,
provided that it does not deny a remedy, or so embarrass it with
conditions and restrictions as seriously to impair the value of the
right."
In that case the petitioner urged that the Acts of 1873 were laws
impairing the obligation of the contract contained in the charter of
the Bank of Tennessee, which contract was entered into with the
State in 1838. It was claimed that this was done by placing such
impediments and obstructions in the way of its enforcement,
thereby so impairing the remedies as practically to render the
obligation of no value. In disposing of this contention, the court
said: "If we assume that prior to 1873 the relator had authority to
prosecute his claim against the State bymandamus, and that by
the statutes of that year the further use of that form was
prohibited to him, the question remains. whether an effectual
remedy was left to him or provided for him. We think the
regulation of the statute gave him an abundant means of
enforcing such right as he possessed. It provided that he might
pay his claim to the collector under protest, giving notice thereof
to the Comptroller of the Treasury; that at any time within thirty
days thereafter he might sue the officer making the collection; that
the case should be tried by any court having jurisdiction and, if
found in favor of the plaintiff on the merits, the court should certify
that the same was wrongfully paid and ought to be refunded and
the Comptroller should thereupon issue his warrant therefor,
which should be paid in preference to other claim on the
Treasury."
But great stress is laid upon the fact that the plaintiffs in the case
under consideration are unable to pay the taxes assessed against
them and that if the law is enforced, they will be compelled to
suspend business. This point may be best answered by quoting
from the case of Youngblood vs. Sexton (32 Mich., 406), wherein
Judge Cooley, speaking for the court, said: "But if this

consideration is sufficient to justify the transfer of a controversy


from a court of law to a court of equity, then every controversy
where money is demanded may be made the subject of equitable
cognizance. To enforce against a dealer a promissory note may in
some cases as effectually break up his business as to collect from
him a tax of equal amount. This is not what is known to the law as
irreparable injury. The courts have never recognized the
consequences of the mere enforcement of a money demand as
falling within that category."
Certain specified sections of Act No. 2339 were amended by Act
No. 2432, enacted December 23, 1914, effective January 1, 1915,
by imposing increased and additional taxes. Act No. 2432 was
amended, were ratified by the Congress of the United States on
March 4, 1915. The opposition manifested against the taxes
imposed by Acts Nos. 2339 and 2432 is a matter of local history.
A great many business men thought the taxes thus imposed were
too high. If the collection of the new taxes on signs, signboards,
and billboards may be restrained, we see no well-founded reason
why injunctions cannot be granted restraining the collection of all
or at least a number of the other increased taxes. The fact that
this may be done, shows the wisdom of the Legislature in denying
the use of the writ of injunction to restrain the collection of any tax
imposed by the Acts. When this was done, an equitable remedy
was made available to all dissatisfied taxpayers.
The question now arises whether, the case being one of which
the court below had no jurisdiction, this court, on appeal, shall
proceed to express an opinion upon the validity of provisions of
subsection (b) of section 100 of Act No. 2339, imposing the taxes
complained of. As a general rule, an opinion on the merits of a
controversy ought to be declined when the court is powerless to
give the relief demanded. But it is claimed that this case is, in
many particulars, exceptional. It is true that it has been argued on
the merits, and there is no reason for any suggestion or suspicion
that it is not a bona fide controversy. The legal points involved in
the merits have been presented with force, clearness, and great
ability by the learned counsel of both sides. If the law assailed
were still in force, we would feel that an opinion on its validity
would be justifiable, but, as the amendment became effective on
January 1, 1915, we think it advisable to proceed no further with
this branch of the case.
The next question arises in connection with the supplementary
complaint, the object of which is to enjoin the Collector of Internal
Revenue from removing certain billboards, the property of the
plaintiffs located upon private lands in the Province of Rizal. The
plaintiffs allege that the billboards here in question "in no sense
constitute a nuisance and are not deleterious to the health,
morals, or general welfare of the community, or of any persons."
The defendant denies these allegations in his answer and claims
that after due investigation made upon the complaints of the
British and German Consuls, he "decided that the billboard
complained of was and still is offensive to the sight, and is
otherwise a nuisance." The plaintiffs proved by Mr. Churchill that
the "billboards were quite a distance from the road and that they
were strongly built, not dangerous to the safety of the people, and
contained no advertising matter which is filthy, indecent, or
deleterious to the morals of the community." The defendant
presented no testimony upon this point. In the agreed statement
of facts submitted by the parties, the plaintiffs "admit that the
billboards mentioned were and still are offensive to the sight."
The pertinent provisions of subsection (b) of section 100 of Act
No. 2339 read: "If after due investigation the Collector of Internal
Revenue shall decide that any sign, signboard, or billboard
displayed or exposed to public view is offensive to the sight or is
otherwise a nuisance, he may by summary order direct the
removal of such sign, signboard, or billboard, and if same is not
removed within ten days after he has issued such order he my
himself cause its removal, and the sign, signboard, or billboard
shall thereupon be forfeited to the Government, and the owner
thereof charged with the expenses of the removal so effected.
When the sign, signboard, or billboard ordered to be removed as
herein provided shall not comply with the provisions of the
general regulations of the Collector of Internal Revenue, no

rebate or refund shall be allowed for any portion of a year for


which the tax may have been paid. Otherwise, the Collector of
Internal Revenue may in his discretion make a proportionate
refund of the tax for the portion of the year remaining for which
the taxes were paid. An appeal may be had from the order of the
Collector of Internal Revenue to the Secretary of Finance and
Justice whose decision thereon shall be final."
The Attorney-General, on behalf of the defendant, says: "The
question which the case presents under this head for
determination, resolves itself into this inquiry: Is the suppression
of advertising signs displayed or exposed to public view, which
are admittedly offensive to the sight, conducive to the public
interest?"
And cunsel for the plaintiffs states the question thus: "We contend
that that portion of section 100 of Act No. 2339, empowering the
Collector of Internal Revenue to remove billboards as nuisances,
if objectionable to the sight, is unconstitutional, as constituting a
deprivation of property without DUE PROCESS of law."
From the position taken by counsel for both sides, it is clear that
our inquiry is limited to the question whether the enactment
assailed by the plaintiffs was a legitimate exercise of the POLICE
POWER of the Government; for all property is held subject to that
power.
As a consequence of the foregoing, all discussion and authorities
cited, which go to the power of the state to authorize
administrative officers to find, as a fact, that legitimate trades,
callings, and businesses are, under certain circumstances,
statutory nuisances, and whether the procedure prescribed for
this purpose is DUE PROCESS of law, are foreign to the issue
here presented.
There can be no doubt that the exercise of the POLICE POWER
of the Philippine Government belongs to the Legislature and that
this power is limited only by the Acts of Congress and those
fundamentals principles which lie at the foundation of all
republican forms of government. An Act of the Legislature which
is obviously and undoubtedly foreign to any of the purposes of the
POLICE POWER and interferes with the ordinary enjoyment of
property would, without doubt, be held to be invalid. But where
the Act is reasonably within a proper consideration of and care for
the public health, safety, or comfort, it should not be disturbed by
the courts. The courts cannot substitute their own views for what
is proper in the premises for those of the Legislature. In
Munn vs. Illinois (94 U.S., 113), the United States Supreme Court
states the rule thus: "If no state of circumstances could exist to
justify such statute, then we may declare this one void because in
excess of the legislative power of this state; but if it could, we
must presume it did. Of the propriety of legislative interference,
within the scope of the legislative power, a legislature is the
exclusive judge."
This rule very fully discussed and declared in
Powell vs. Pennsylvania (127 U.S., 678) "oleo-margarine"
case. (See also Crowley vs. Christensen, 137 U.S., 86, 87;
Camfield vs. U.S., 167 U.S., 518.) While the state may interfere
wherever the public interests demand it, and in this particular a
large discretion is necessarily vested in the legislature to
determine, not only what the interest of the public require, but
what measures are necessary for the protection of such interests;
yet, its determination in these matters is not final or conclusive,
but is subject to the supervision of the courts. (Lawton vs. Steele,
152 U.S., 133.) Can it be said judicially that signs, signboards,
and billboards, which are admittedly offensive to the sight, are not
with the category of things which interfere with the public safety,
welfare, and comfort, and therefore beyond the reach of the
POLICE POWER of the Philippine Government?
The numerous attempts which have been made to limit by
definition the scope of the POLICE POWER are only interesting
as illustrating its rapid extension within comparatively recent
years to points heretofore deemed entirely within the field of

private liberty and property rights. Blackstone's definition of the


POLICE POWER was as follows: "The due regulation and
domestic order of the kingdom, whereby the individuals of the
state, like members of a well governed family, are bound to
conform their general behavior to the rules of propriety, good
neigborhood, and good manners, to be decent, industrious, and
inoffensive in their respective stations." (Commentaries, vol. 4, p.
162.)
Chanceller Kent considered the POLICE POWER the authority of
the state "to regulate unwholesome trades, slaughter houses,
operations offensive to the senses." Chief Justice Shaw of
Massachusetts defined it as follows: "The power vested in the
legislature by the constitution to make, ordain, and establish all
manner of wholesome and reasonable laws, statutes, and
ordinances, either with penalties or without, not repugnant to the
constitution, as they shall judge to be for the good and welfare of
the commonwealth, and of the subjects of the same."
(Com.vs. Alger, 7 Cush., 53.)
In the case of Butchers' Union Slaughter-house, etc.
Co. vs. Crescent City Live Stock Landing, etc. Co. (111 U.S.,
746), it was suggested that the public health and public morals
are matters of legislative concern of which the legislature cannot
divest itself. (See State vs. Mountain Timber Co. [1913], 75
Wash., 581, where these definitions are collated.)
In Champer vs. Greencastle (138 Ind., 339), it was said: "The
POLICE POWER of the State, so far, has not received a full and
complete definition. It may be said, however, to be the right of the
State, or state functionary, to prescribe regulations for the good
order, peace, health, protection, comfort, convenience and morals
of the community, which do not ... violate any of the provisions of
the organic law." (Quoted with approval in Hopkins vs. Richmond
[Va., 1915], 86 S.E., 139.)
In Com. vs. Plymouth Coal Co. ([1911] 232 Pa., 141), it was said:
"The POLICE POWER of the state is difficult of definition, but it
has been held by the courts to be the right to prescribe
regulations for the good order, peace, health, protection, comfort,
convenience and morals of the community, which does not
encroach on a like power vested in congress or state legislatures
by the federal constitution, or does not violate the provisions of
the organic law; and it has been expressly held that the fourteenth
amendment to the federal constitution was not designed to
interfere with the exercise of that power by the state."
In People vs. Brazee ([Mich., 1914], 149 N.W., 1053), it was said:
"It [the POLICE POWER] has for its object the improvement of
social and economic conditioned affecting the community at large
and collectively with a view to bring about "he greatest good of
the greatest number."Courts have consistently and wisely
declined to set any fixed limitations upon subjects calling for the
exercise of this power. It is elastic and is exercised from time to
time as varying social conditions demand correction."
In 8 Cyc., 863, it is said: "POLICE POWER is the name given to
that inherent sovereignty which it is the right and duty of the
government or its agents to exercise whenever public policy, in a
broad sense, demands, for the benefit of society at large,
regulations to guard its morals, safety, health, order or to insure in
any respect such economic conditions as an advancing
civilization of a high complex character requires." (As quoted with
approval in Stettlervs. O'Hara [1914], 69 Ore, 519.)
Finally, the Supreme Court of the United States has said in Noble
State Bank vs. Haskell (219 U.S. [1911], 575: "It may be said in a
general way that the POLICE POWER extends to all the great
public needs. It may be put forth in aid of what is sanctioned by
usage, or held by the prevailing morality or strong and
preponderant opinion to be greatly and immediately necessary to
the public welfare."

This statement, recent as it is, has been quoted with approval by


several courts. (Cunningham vs. Northwestern Imp. Co. [1911],
44 Mont., 180; State vs. Mountain Timber Co. [1913], 75 Wash.,
581; McDavid vs. Bank of Bay Minette [Ala., 1915], 69 Sou., 452;
Hopkins vs. City of Richmond [Va., 1915], 86 S.E., 139;
State vs. Philipps [Miss. 1915], 67 Sou., 651.)
It was said in Com. vs. Alger (7 Cush., 53, 85), per Shaw, C.J.,
that: "It is much easier to perceive and realize the existence and
sources of this POLICE POWER than to mark its boundaries, or
to prescribe limits to its exercise." In Stone vs. Mississippi (101
U.S., 814), it was said: "Many attempts have been made in this
court and elsewhere to define the POLICE POWER, but never
with entire success. It is always easier to determine whether a
particular case comes within the general scope of the power, than
to give an abstract definition of the power itself, which will be in all
respects accurate."
Other courts have held the same vow of efforts to evolve a
satisfactory definition of the POLICE POWER. Manifestly,
definitions which fail to anticipate cases properly within the scope
of the POLICE POWER are deficient. It is necessary, therefore, to
confine our discussion to the principle involved and determine
whether the cases as they come up are within that principle. The
basic idea of civil polity in the United States is that government
should interfere with individual effort only to the extent necessary
to preserve a healthy social and economic condition of the
country. State interference with the use of private property may be
exercised in three ways. First, through the power of taxation,
second, through the power of eminent domain, and third, through
the POLICE POWER. Buy the first method it is assumed that the
individual receives the equivalent of the tax in the form of
protection and benefit he receives from the government as such.
By the second method he receives the market value of the
property taken from him. But under the third method the benefits
he derived are only such as may arise from the maintenance of a
healthy economic standard of society and is often referred to
as damnum absque injuria. (Com. vs. Plymouth Coal Co. 232 Pa.,
141; Bemis vs. Guirl Drainage Co., 182 Ind., 36.) There was a
time when state interference with the use of private property
under the guise of the POLICE POWER was practically confined
to the suppression of common nuisances. At the present day,
however, industry is organized along lines which make it possible
for large combinations of capital to profit at the expense of the
socio-economic progress of the nation by controlling prices and
dictating to industrial workers wages and conditions of labor. Not
only this but the universal use of mechanical contrivances by
producers and common carriers has enormously increased the
toll of human life and limb in the production and distribution of
consumption goods. To the extent that these businesses affect
not only the public health, safety, and morals, but also the general
social and economic life of the nation, it has been and will
continue to be necessary for the state to interfere by regulation.
By so doing, it is true that the enjoyment of private property is
interfered with in no small degree and in ways that would have
been considered entirely unnecessary in years gone by. The
regulation of rates charged by common carriers, for instance, or
the limitation of hours of work in industrial establishments have
only a very indirect bearing upon the public health, safety, and
morals, but do bear directly upon social and economic conditions.
To permit each individual unit of society to feel that his industry
will bring a fair return; to see that his work shall be done under
conditions that will not either immediately or eventually ruin his
health; to prevent the artificial inflation of prices of the things
which are necessary for his physical well being are matters which
the individual is no longer capable of attending to himself. It is
within the province of the POLICE POWER to render assistance
to the people to the extent that may be necessary to safeguard
these rights. Hence, laws providing for the regulation of wages
and hours of labor of coal miners (Rail & River Coal
Co. vs. Taylor, 234 U.S., 224); requiring payment of employees of
railroads and other industrial concerns in legal tender and
requiring salaries to be paid semimonthly (Erie R.R.
Co. vs. Williams, 233 U.S., 685); providing a maximum number of
hours of labor for women (Miller vs. Wilson, U.S. Sup. Ct. [Feb.
23, 1915], Adv. Opns., p. 342); prohibiting child labor (Sturges &
Burn vs. Beauchamp, 231 U.S., 320); restricting the hours of
labor in public laundries (In re Wong Wing, 167 Cal., 109); limiting

hours of labor in industrial establishment generally


(State vs. Bunting, 71 Ore., 259); Sunday Closing Laws
(State vs. Nicholls [Ore., 1915], 151 Pac., 473; People vs. C.
Klinck Packing Co. [N.Y., 1915], 108 N. E., 278; Hiller vs. State
[Md., 1914], 92 Atl., 842; State vs.Penny, 42 Mont., 118; City of
Springfield vs. Richter, 257 Ill., 578, 580; State vs. Hondros [S.C.,
1915], 84 S.E., 781); have all been upheld as a valid exercise of
the POLICE POWER. Again, workmen's compensation laws have
been quite generally upheld. These statutes discard the common
law theory that employers are not liable for industrial accidents
and make them responsible for all accidents resulting from trade
risks, it being considered that such accidents are a legitimate
charge against production and that the employer by controlling
the prices of his product may shift the burden to the community.
Laws requiring state banks to join in establishing a depositors'
guarantee fund have also been upheld by the Federal Supreme
Court in Noble State Bank vs. Haskell (219 U. S., 104), and
Assaria State Bank vs. Dolley (219 U.S., 121).
Offensive noises and smells have been for a long time considered
susceptible of suppression in thickly populated districts. Barring
livery stables from such locations was approved of in
Reinman vs. Little Rock (U.S. Sup. Ct. [Apr. 5, 1915], U.S. Adv.
Opns., p. 511). And a municipal ordinance was recently upheld
(People vs. Ericsson, 263 Ill., 368), which prohibited the location
of garages within two hundred feet of any hospital, church, or
school, or in any block used exclusively for residential purposes,
unless the consent of the majority of the property owners be
obtained. Such statutes as these are usually upheld on the theory
of safeguarding the public health. But we apprehend that in point
of fact they have little bearing upon the health of the normal
person, but a great deal to do with his physical comfort and
convenience and not a little to do with his peace of mind. Without
entering into the realm of psychology, we think it quite
demonstrable that sight is as valuable to a human being as any of
his other senses, and that the proper ministration to this sense
conduces as much to his contentment as the care bestowed upon
the senses of hearing or smell, and probably as much as both
together. Objects may be offensive to the eye as well as to the
nose or ear. Man's esthetic feelings are constantly being
appealed to through his sense of sight. Large investments have
been made in theaters and other forms of amusement, in
paintings and spectacular displays, the success of which depends
in great part upon the appeal made through the sense of sight.
Moving picture shows could not possible without the sense of
sight. Governments have spent millions on parks and boulevards
and other forms of civic beauty, the first aim of which is to appeal
to the sense of sight. Why, then, should the Government not
interpose to protect from annoyance this most valuable of man's
senses as readily as to protect him from offensive noises and
smells?
The advertising industry is a legitimate one. It is at the same time
a cause and an effect of the great industrial age through which
the world is now passing. Millions are spent each year in this
manner to guide the consumer to the articles which he needs.
The sense of sight is the primary essential to advertising success.
Billboard advertising, as it is now conducted, is a comparatively
recent form of advertising. It is conducted out of doors and along
the arteries of travel, and compels attention by the strategic
locations of the boards, which obstruct the range of vision at
points where travelers are most likely to direct their eyes.
Beautiful landscapes are marred or may not be seen at all by the
traveler because of the gaudy array of posters announcing a
particular kind of breakfast food, or underwear, the coming of a
circus, an incomparable soap, nostrums or medicines for the
curing of all the ills to which the flesh is heir, etc. It is quite natural
for people to protest against this indiscriminate and wholesale use
of the landscape by advertisers and the intrusion of tradesmen
upon their hours of leisure and relaxation from work. Outdoor life
must lose much of its charm and pleasure if this form of
advertising is permitted to continue unhampered until it converts
the streets and highways into veritable canyons through which the
world must travel in going to work or in search of outdoor
pleasure.

The success of billboard advertising depends not so much upon


the use of private property as it does upon the use of the
channels of travel used by the general public. Suppose that the
owner of private property, who so vigorously objects to the
restriction of this form of advertising, should require the advertiser
to paste his posters upon the billboards so that they would face
the interior of the property instead of the exterior. Billboard
advertising would die a natural death if this were done, and its
real dependency not upon the unrestricted use of private property
but upon the unrestricted use of the public highways is at once
apparent. Ostensibly located on private property, the real and sole
value of the billboard is its proximity to the public thoroughfares.
Hence, we conceive that the regulation of billboards and their
restriction is not so much a regulation of private property as it is a
regulation of the use of the streets and other public
thoroughfares.
We would not be understood as saying that billboard advertising
is not a legitimate business any more than we would say that a
livery stable or an automobile garage is not. Even a billboard is
more sightly than piles of rubbish or an open sewer. But all these
businesses are offensive to the senses under certain conditions.
It has been urged against ministering to the sense of sight that
tastes are so diversified that there is no safe standard of
legislation in this direction. We answer in the language of the
Supreme Court in Noble State Bank vs.Haskell (219 U.S., 104),
and which has already been adopted by several state courts (see
supra), that "the prevailing morality or strong and preponderating
opinion" demands such legislation. The agitation against the
unrestrained development of the billboard business has produced
results in nearly all the countries of Europe. (Ency. Britannica, vol.
1, pp. 237-240.) Many drastic ordinances and state laws have
been passed in the United States seeking to make the business
amenable to regulation. But their regulation in the United states is
hampered by what we conceive an unwarranted restriction upon
the scope of the POLICE POWER by the courts. If the POLICE
POWER may be exercised to encourage a healthy social and
economic condition in the country, and if the comfort and
convenience of the people are included within those subjects,
everything which encroaches upon such territory is amenable to
the POLICE POWER. A source of annoyance and irritation to the
public does not minister to the comfort and convenience of the
public. And we are of the opinion that the prevailing sentiment is
manifestly against the erection of billboards which are offensive to
the sight.
We do not consider that we are in conflict with the decision in
Eubank vs. Richmond (226 U.S., 137), where a municipal
ordinance establishing a building line to which property owners
must conform was held unconstitutional. As we have pointed out,
billboard advertising is not so much a use of private property as it
is a use of the public thoroughfares. It derives its value to the
power solely because the posters are exposed to the public gaze.
It may well be that the state may not require private property
owners to conform to a building line, but may prescribe the
conditions under which they shall make use of the adjoining
streets and highways. Nor is the law in question to be held invalid
as denying equal protection of the laws. In Keokee Coke
Co. vs. Taylor (234 U.S., 224), it was said: "It is more pressed that
the act discriminates unconstitutionally against certain classes.
But while there are differences of opinion as to the degree and
kind of discrimination permitted by the Fourteenth Amendment, it
is established by repeated decisions that a statute aimed at what
is deemed an evil, and hitting it presumably where experience
shows it to be most felt, is not to be upset by thinking up and
enumerating other instances to which it might have been applied
equally well, so far as the court can see. That is for the legislature
to judge unless the case is very clear."
But we have not overlooked the fact that we are not in harmony
with the highest courts of a number of the states in the American
Union upon this point. Those courts being of the opinion that
statutes which are prompted and inspired by esthetic
considerations merely, having for their sole purpose the promotion
and gratification of the esthetic sense, and not the promotion or

protection of the public safety, the public peace and good order of
society, must be held invalid and contrary to constitutional
provisions holding inviolate the rights of private property. Or, in
other words, the POLICE POWER cannot interfere with private
property rights for purely esthetic purposes. The courts, taking
this view, rest their decisions upon the proposition that the
esthetic sense is disassociated entirely from any relation to the
public health, morals, comfort, or general welfare and is,
therefore, beyond the POLICE POWER of the state. But we are
of the opinion, as above indicated, that unsightly advertisements
or signs, signboards, or billboards which are offensive to the sight,
are not disassociated from the general welfare of the public. This
is not establishing a new principle, but carrying a well recognized
principle to further application. (Fruend on POLICE POWER, p.
166.)
For the foregoing reasons the judgment appealed from is hereby
reversed and the action dismissed upon the merits, with costs. So
ordered.
Arellano, C.J., Torres, Carson, and Araullo, JJ., concur.
DECISION ON THE MOTION FOR A REHEARING, JANUARY
24, 1916.
TRENT, J.:
Counsel for the plaintiffs call our attention to the case of Ex
parte Young (209 U.S., 123); and say that they are of the opinion
that this case "is the absolutely determinative of the question of
jurisdiction in injunctions of this kind." We did not refer to this case
in our former opinion because we were satisfied that the
reasoning of the case is not applicable to section 100 (b), 139 and
140 of Act No. 2339. The principles announced in the Young case
are stated as follows: "It may therefore be said that when the
penalties for disobedience are by fines so enormous and
imprisonment so severe as to intimidate the company and its
officers from resorting to the courts to test the validity of the
legislation, the result is the same as if the law in terms prohibited
the company from seeking judicial construction of laws which
deeply affect its rights.
It is urged that there is no principle upon which to base
the claim that a person is entitled to disobey a statute at
least once, for the purpose of testing its validity without
subjecting himself to the penalties for disobedience
provided by the statute in case it is valid. This is not an
accurate statement of the case. Ordinarily a law
creating offenses in the nature of misdemeanors or
felonies relates to a subject over which the jurisdiction
of the legislature is complete in any event. In these
case, however, of the establishment of certain rates
without any hearing, the validity of such rates
necessarily depends upon whether they are high
enough to permit at least some return upon the
investment (how much it is not now necessary to state),
and an inquiry as to that fact is a proper subject of
judicial investigation. If it turns out that the rates are too
low for that purpose, then they are illegal. Now, to
impose upon a party interested the burden of obtaining
a judicial decision of such a question (no prior hearing
having ever been given) only upon the condition that, if
unsuccessful, he must suffer imprisonment and pay
fines as provided in these acts, is, in effect, to close up
all approaches to the courts, and thus prevent any
hearing upon the question whether the rates as
provided by the acts are not too low, and therefore
invalid. The distinction is obvious between a case
where the validity of the acts depends upon the
existence of a fact which can be determined only after
investigation of a very complicated and technical
character, and the ordinary case of a statute upon a
subject requiring no such investigation and over which
the jurisdiction of the legislature is complete in any
event.

An examination of the sections of our Internal Revenue Law and


of the circumstances under which and the purposes for which
they were enacted, will show that, unlike the statutes under
consideration in the above cited case, their enactment involved
no attempt on the part of the Legislature to prevent dissatisfied
taxpayers "from resorting to the courts to test the validity of the
legislation;" no effort to prevent any inquiry as to their validity.
While section 139 does prevent the testing of the validity of
subsection (b) of section 100 in injunction suits instituted for the
purpose of restraining the collection of internal revenue taxes,
section 140 provides a complete remedy for that purpose. And
furthermore, the validity of subsection (b) does not depend upon
"the existence of a fact which can be determined only after
investigation of a very complicated and technical character," but
the jurisdiction of the Legislature over the subject with which the
subsection deals "is complete in any event." The judgment of the
court in the Young case rests upon the proposition that the
aggrieved parties had no adequate remedy at law.
Neither did we overlook the case of General Oil
Co. vs. Crain (209 U.S., 211), decided the same day
and citing Ex parte Young, supra. In that case the
plaintiff was a Tennessee corporation, with its principal
place of business in Memphis, Tennessee. It was
engaged in the manufacture and sale of coal oil, etc. Its
wells and plant were located in Pennsylvania and Ohio.
Memphis was not only its place of business, at which
place it sold oil to the residents of Tennessee, but also
a distributing point to which oils were shipped from
Pennsylvania and Ohio and unloaded into various tanks
for the purpose of being forwarded to the Arkansas,
Louisiana, and Mississippi customers. Notwithstanding
the fact that the company separated its oils, which were
designated to meet the requirements of the orders from
those States, from the oils for sale in Tennessee, the
defendant insisted that he had a right, under the Act of
the Tennessee Legislature, approved April 21, 1899, to
inspect all the oils unlocated in Memphis, whether for
sale in that State or not, and charge and collect for
such inspection a regular fee of twenty-five cents per
barrel. The company, being advised that the defendant
had no such right, instituted this action in the inferior
States court for the purpose of enjoining the defendant,
upon the grounds stated in the bill, from inspecting or
attempting to inspect its oils. Upon trial, the preliminary
injunction which had been granted at the
commencement of the action, was continued in force.
Upon appeal, the supreme court of the State of
Tennessee decided that the suit was one against the
State and reversed the judgment of the Chancellor. In
the Supreme Court of the United States, where the
case was reviewed upon a writ of error, the contentions
of the parties were stated by the court as follows: "It is
contended by defendant in error that this court is
without jurisdiction because no matter sought to be
litigated by plaintiff in error was determined by the
Supreme Court of Tennessee. The court simply held, it
is paid, that, under the laws of the State, it had no
jurisdiction to entertain the suit for any purpose. And it
is insisted "hat this holding involved no Federal
question, but only the powers and jurisdiction of the
courts of the State of Tennessee, in respect to which
the Supreme Court of Tennessee is the final arbiter."
Opposing these contentions, plaintiff in error urges that
whether a suit is one against a State cannot depend
upon the declaration of a statute, but depends upon the
essential nature ofthe suit, and that the Supreme Court
recognized that the statute "aded nothing to the
axiomatic principle that the State, as a sovereign, is not
subject to suit save by its own consent."And it is hence
insisted that the court by dismissing the bill gave effect
to the law which was attacked. It is further insisted that
the bill undoubtedly present rights under the
Constitution of the United States and conditions which
entitle plaintiff in error to an injunction for the protection
of such rights, and that a statute of the State which

operates to deny such rights, or such relief, `is itself in


conflict with the Constitution of the United States."
That statute of Tennessee, which the supreme court of that State
construed and held to be prohibitory of the suit, was an act
passed February 28, 1873, which provides: "That no court in the
State of Tennessee has, nor shall hereafter have, any power,
jurisdiction, or authority to entertain any suit against the State, or
any officer acting by the authority of the State, with a view to
reach the State, its treasury, funds or property; and all such suits
now pending, or hereafter brought, shall be dismissed as to the
State, or such officer, on motion, plea or demurrer of the law
officer of the State, or counsel employed by the State."
The Supreme Court of the United States, after reviewing many
cases, said: "Necessarily, to give adequate protection to
constitutional rights a distinction must be made between valid and
invalid state laws, as determining the character of the suit against
state officers. And the suit at bar illustrates the necessity. If a suit
against state officer is precluded in the national courts by the
Eleventh Amendment to the Constitution, and may be forbidden
by a State to its courts, as it is contended in the case at bar that it
may be, without power of review by this court, it must be evident
that an easy way is open to prevent the enforcement of many
provisions of the Constitution; and the Fourteenth Amendment,
which is directed at state action, could be nullified as to much of
its operation. ... It being then the right of a party to be protected
against a law which violates a constitutional right, whether by its
terms or the manner of its enforcement, it is manifest that a
decision which denies such protection gives effect to the law, and
the decision is reviewable by this court."
The court then proceeded to consider whether the law of 1899
would, if administered against the oils in question, violate any
constitutional right of the plaintiff and after finding and adjudging
that the oils were not in movement through the States, that they
had reached the destination of their first shipment, and were held
there, not in necessary delay at means of transportation but for
the business purposes and profit of the company, and resting its
judgment upon the taxing power of the State, affirmed the decree
of the supreme court of the State of Tennessee.
From the foregoing it will be seen that the Supreme Court of
Tennessee dismissed the case for want of jurisdiction because
the suit was one against the State, which was prohibited by the
Tennessee Legislature. The Supreme Court of the United States
took jurisdiction of the controversy for the reasons above quoted
and sustained the Act of 1899 as a revenue law.
The case of Tennessee vs. Sneed (96 U.S., 69), and
Shelton vs. Platt (139 U.S., 591), relied upon in our former
opinion, were not cited in General Oil Co. vs. Crain, supra,
because the questions presented and the statutes under
consideration were entirely different. The Act approved March 31,
1873, expressly prohibits the courts from restraining the collection
of any tax, leaving the dissatisfied taxpayer to his exclusive
remedy payment under protest and suit to recover while the
Act approved February 28, 1873, prohibits suits against the State.
In upholding the statute which authorizes the removal of
signboards or billboards upon the sole ground that they are
offensive to the sight, we recognized the fact that we are not in
harmony with various state courts in the American Union. We
have just examined the decision of the Supreme Court of the
State of Illinois in the recent case (October [December], 1914) of
Thomas Cusack Co. vs. City of Chicago (267 Ill., 344), wherein
the court upheld the validity of a municipal ordinances, which
reads as follows: "707. Frontage consents required. It shall be
unlawful for any person, firm or corporation to erect or construct
any bill-board or sign-board in any block on any public street in
which one-half of the buildings on both sides of the street are
used exclusively for residence purposes, without first obtaining
the consent, in writing, of the owners or duly authorized agents of
said owners owning a majority of the frontage of the property, on
both sides of the street, in the block in which such bill-board or

sign-board is to be erected, constructed or located. Such written


consent shall be filed with the commissioner of buildings before a
permit shall be issued for the erection, construction or location of
such bill-board or sign-board."
The evidence which the Illinois court relied upon was the danger
of fires, the fact that billboards promote the commission of various
immoral and filthy acts by disorderly persons, and the inadequate
police protection furnished to residential districts. The last
objection has no virtue unless one or the other of the other
objections are valid. If the billboard industry does, in fact, promote
such municipal evils to noticeable extent, it seems a curious
inconsistency that a majority of the property owners on a given
block may legalize the business. However, the decision is
undoubtedly a considerable advance over the views taken by
other high courts in the United States and distinguishes several
Illinois decisions. It is an advance because it permits the
suppression of billboards where they are undesirable. The
ordinance which the court approved will no doubt cause the
virtual suppression of the business in the residential districts.
Hence, it is recognized that under certain circumstances
billboards may be suppressed as an unlawful use of private
property. Logically, it would seem that the premise of fact relied
upon is not very solid. Objections to the billboard upon police,
sanitary, and moral grounds have been, as pointed out by counsel
for Churchill and Tait, duly considered by numerous high courts in
the United States, and, with one exception, have been rejected as
without foundation. The exception is the Supreme Court of
Missouri, which advances practically the same line of reasoning
as has the Illinois court in this recent case. (St. Louis Gunning
Advt. Co. vs. City of St. Louis, 137 S. W., 929.) In fact, the Illinois
court, in Haller Sign Works vs. Physical Culture Training School
(249 Ill., 436), "distinguished" in the recent case, said: "There is
nothing inherently dangerous to the health or safety of the public
in structures that are properly erected for advertising purposes."
If a billboard is so constructed as to offer no room for objections
on sanitary or moral grounds, it would seem that the ordinance
above quoted would have to be sustained upon the very grounds
which we have advanced in sustaining our own statute.
It might be well to note that billboard legislation in the United
States is attempting to eradicate a business which has already
been firmly established. This business was allowed to expand
unchecked until its very extent called attention to its objectionable
features. In the Philippine Islands such legislation has almost
anticipated the business, which is not yet of such proportions that
it can be said to be fairly established. It may be that the courts in
the United States have committed themselves to a course of
decisions with respect to billboard advertising, the full
consequences of which were not perceived for the reason that the
development of the business has been so recent that the
objectionable features of it did not present themselves clearly to
the courts nor to the people. We, in this country, have the benefit
of the experience of the people of the United States and may
make our legislation preventive rather than corrective. There are
in this country, moreover, on every hand in those districts where
Spanish civilization has held sway for so many centuries,
examples of architecture now belonging to a past age, and which
are attractive not only to the residents of the country but to
visitors. If the billboard industry is permitted without constraint or
control to hide these historic sites from the passerby, the country
will be less attractive to the tourist and the people will suffer a
district economic loss.
The motion for a rehearing is therefore denied.
G.R. No. L-12172

August 29, 1958

THE PEOPLE OF THE PHILIPPINES, plaintiff-appellee,


vs.
JUAN F. FAJARDO, ET AL., defendants-appellants.

Assistant Solicitor General Esmeraldo Umali and Higinio V.


Catalan for appellee.
Prila, Pardalis and Pejo for appellants.
REYES, J. B. L., J.:
Appeal from the decision of the Court of First Instance of
Camarines Sur convicting defendants-appellants Juan F. Fajardo
and Pedro Babilonia of a violation of Ordinance No. 7, Series of
1950, of the Municipality of Baao, Camarines Sur, for having
constructed without a permit from the municipal mayor a building
that destroys the view of the public plaza.
It appears that on August 15, 1950, during the incumbency of
defendant-appellant Juan F. Fajardo as mayor of the municipality
of Baao, Camarines Sur, the municipal council passed the
ordinance in question providing as follows:
SECTION 1. Any person or persons who will construct
or repair a building should, before constructing or
repairing, obtain a written permit from the Municipal
Mayor.
SEC. 2. A fee of not less than P2.00 should be charged
for each building permit and P1.00 for each repair
permit issued.
SEC. 3. PENALTY Any violation of the provisions of
the above, this ordinance, shall make the violation
liable to pay a fine of not less than P25 nor more than
P50 or imprisonment of not less than 12 days nor more
than 24 days or both, at the discretion of the court. If
said building destroys the view of the Public Plaza or
occupies any public property, it shall be removed at the
expense of the owner of the building or house.
SEC. 4. EFFECTIVITY This ordinance shall take
effect on its approval. (Orig. Recs., P. 3)
Four years later, after the term of appellant Fajardo as mayor had
expired, he and his son in-law, appellant Babilonia, filed a written
request with the incumbent municipal mayor for a permit to
construct a building adjacent to their gasoline station on a parcel
of land registered in Fajardo's name, located along the national
highway and separated from the public plaza by a creek (Exh. D).
On January 16, 1954, the request was denied, for the reason
among others that the proposed building would destroy the view
or beauty of the public plaza (Exh. E). On January 18, 1954,
defendants reiterated their request for a building permit (Exh. 3),
but again the request was turned down by the mayor.
Whereupon, appellants proceeded with the construction of the
building without a permit, because they needed a place of
residence very badly, their former house having been destroyed
by a typhoon and hitherto they had been living on leased property.
On February 26, 1954, appellants were charged before and
convicted by the justice of the peace court of Baao, Camarines
Sur, for violation of the ordinance in question. Defendants
appealed to the Court of First Instance, which affirmed the
conviction, and sentenced appellants to pay a fine of P35 each
and the costs, as well as to demolish the building in question
because it destroys the view of the public plaza of Baao, in that "it
hinders the view of travelers from the National Highway to the
said public plaza." From this decision, the accused appealed to
the Court of Appeals, but the latter forwarded the records to us
because the appeal attacks the constitutionality of the ordinance
in question.
We find that the appealed conviction can not stand.
A first objection to the validity of the ordinance in question is that
under it the mayor has absolute discretion to issue or deny a
permit. The ordinance fails to state any policy, or to set up any

standard to guide or limit the mayor's action. No purpose to be


attained by requiring the permit is expressed; no conditions for its
grant or refusal are enumerated. It is not merely a case of
deficient standards; standards are entirely lacking. The ordinance
thus confers upon the mayor arbitrary and unrestricted power to
grant or deny the issuance of building permits, and it is a settled
rule that such an undefined and unlimited delegation of power to
allow or prevent an activity, per se lawful, is invalid (People vs.
Vera, 65 Phil., 56; Primicias vs. Fugoso, 80 Phil., 71; Schloss
Poster Adv. Co. vs. Rock Hill, 2 SE (2d) 392)
The ordinance in question in no way controls or guides
the discretion vested thereby in the respondents. It
prescribes no uniform rule upon which the special
permission of the city is to be granted. Thus the city is
clothed with the uncontrolled power to capriciously
grant the privilege to some and deny it others; to refuse
the application of one landowner or lessee and to grant
that of another, when for all material purposes, the two
applying for precisely the same privileges under the
same circumstances. The danger of such an ordinance
is that it makes possible arbitrary discriminations and
abuses in its execution, depending upon no conditions
or qualifications whatever, other than the unregulated
arbitrary will of the city authorities as the touchstone by
which its validity is to be tested. Fundamental rights
under our government do not depend for their existence
upon such a slender and uncertain thread. Ordinances
which thus invest a city council with a discretion which
is purely arbitrary, and which may be exercised in the
interest of a favored few, are unreasonable and invalid.
The ordinance should have established a rule by which
its impartial enforcement could be secured. All of the
authorities cited above sustain this conclusion.
As was said in City of Richmond vs. Dudley, 129 Ind.
112,28 N. E. 312, 314 13 L. R. A. 587, 28 Am. St. Rep.
180: "It seems from the foregoing authorities to be well
established that municipal ordinances placing
restrictions upon lawful conduct or the lawful use of
property must, in order to be valid, specify the rules and
conditions to be observed in such conduct or business;
and must admit of the exercise of the privilege of all
citizens alike who will comply with such rules and
conditions; and must not admit of the exercise, or of an
opportunity for the exercise, of any arbitrary
discrimination by the municipal authorities between
citizens who will so comply. (Schloss Poster Adv. Co.,
Inc. vs. City of Rock Hill, et al., 2 SE (2d), pp. 394-395).
It is contended, on the other hand, that the mayor can refuse a
permit solely in case that the proposed building "destroys the view
of the public plaza or occupies any public property" (as stated in
its section 3); and in fact, the refusal of the Mayor of Baao to
issue a building permit to the appellant was predicated on the
ground that the proposed building would "destroy the view of the
public plaza" by preventing its being seen from the public
highway. Even thus interpreted, the ordinance is unreasonable
and oppressive, in that it operates to permanently deprive
appellants of the right to use their own property; hence, it
oversteps the bounds of POLICE POWER, and amounts to a
taking of appellants property without just compensation. We do
not overlook that the modern tendency is to regard the
beautification of neighborhoods as conducive to the comfort and
happiness of residents. But while property may be regulated in
the interest of the general welfare, and in its pursuit, the State
may prohibit structures offensive to the sight (Churchill and
Tait vs. Rafferty, 32 Phil. 580), the State may not, under the guise
of POLICE POWER, permanently divest owners of the beneficial
use of their property and practically confiscate them solely to
preserve or assure the aesthetic appearance of the community.
As the case now stands, every structure that may be erected on
appellants' land, regardless of its own beauty, stands condemned
under the ordinance in question, because it would interfere with
the view of the public plaza from the highway. The appellants
would, in effect, be constrained to let their land remain idle and
unused for the obvious purpose for which it is best suited, being

urban in character. To legally achieve that result, the municipality


must give appellants just compensation and an opportunity to be
heard.
An ordinance which permanently so restricts the use of
property that it can not be used for any reasonable
purpose goes, it is plain, beyond regulation and must
be recognized as a taking of the property. The only
substantial difference, in such case, between restriction
and actual taking, is that the restriction leaves the
owner subject to the burden of payment of taxation,
while outright confiscation would relieve him of that
burden. (Arverne Bay Constr. Co. vs. Thatcher (N.Y.)
117 ALR. 1110, 1116).
A regulation which substantially deprives an owner of all
beneficial use of his property is confiscation and is a
deprivation within the meaning of the 14th Amendment.
(Sundlum vs. Zoning Bd., 145 Atl. 451; also Eaton vs.
Sweeny, 177 NE 412; Taylor vs. Jacksonville, 133 So.
114).
Zoning which admittedly limits property to a use which
can not reasonably be made of it cannot be said to set
aside such property to a use but constitutes the taking
of such property without just compensation. Use of
property is an element of ownership therein.
Regardless of the opinion of zealots that property may
properly, by zoning, be utterly destroyed without
compensation, such principle finds no support in the
genius of our government nor in the principles of justice
as we known them. Such a doctrine shocks the sense
of justice. If it be of public benefit that property remain
open and unused, then certainly the public, and not the
private individuals, should bear the cost of reasonable
compensation for such property under the rules of law
governing the condemnation of private property for
public use. (Tews vs. Woolhiser (1933) 352 I11. 212,
185 N.E. 827) (Emphasis supplied.)
The validity of the ordinance in question was justified by the court
below under section 2243, par. (c), of the Revised Administrative
Code, as amended. This section provides:
SEC. 2243. Certain legislative powers of discretionary
character. The municipal council shall have authority
to exercise the following discretionary powers:
xxx

xxx

was beyond the authority of said municipality to enact, and is


therefore null and void. Hence, the conviction of herein appellants
is reversed, and said accused are acquitted, with costs de oficio.
So ordered.
G.R. No. L-12172

August 29, 1958

THE PEOPLE OF THE PHILIPPINES, plaintiff-appellee,


vs.
JUAN F. FAJARDO, ET AL., defendants-appellants.
Assistant Solicitor General Esmeraldo Umali and Higinio V.
Catalan for appellee.
Prila, Pardalis and Pejo for appellants.
REYES, J. B. L., J.:
Appeal from the decision of the Court of First Instance of
Camarines Sur convicting defendants-appellants Juan F. Fajardo
and Pedro Babilonia of a violation of Ordinance No. 7, Series of
1950, of the Municipality of Baao, Camarines Sur, for having
constructed without a permit from the municipal mayor a building
that destroys the view of the public plaza.
It appears that on August 15, 1950, during the incumbency of
defendant-appellant Juan F. Fajardo as mayor of the municipality
of Baao, Camarines Sur, the municipal council passed the
ordinance in question providing as follows:
SECTION 1. Any person or persons who will construct
or repair a building should, before constructing or
repairing, obtain a written permit from the Municipal
Mayor.
SEC. 2. A fee of not less than P2.00 should be charged
for each building permit and P1.00 for each repair
permit issued.
SEC. 3. PENALTY Any violation of the provisions of
the above, this ordinance, shall make the violation
liable to pay a fine of not less than P25 nor more than
P50 or imprisonment of not less than 12 days nor more
than 24 days or both, at the discretion of the court. If
said building destroys the view of the Public Plaza or
occupies any public property, it shall be removed at the
expense of the owner of the building or house.

xxx

(c) To establish fire limits in populous centers, prescribe


the kinds of buildings that may be constructed or
repaired within them, and issue permits for the creation
or repair thereof, charging a fee which shall be
determined by the municipal council and which shall not
be less than two pesos for each building permit and
one peso for each repair permit issued. The fees
collected under the provisions of this subsection shall
accrue to the municipal school fund.
Under the provisions of the section above quoted, however, the
power of the municipal council to require the issuance of building
permits rests upon its first establishing fire limits in populous parts
of the town and prescribing the kinds of buildings that may be
constructed or repaired within them. As there is absolutely no
showing in this case that the municipal council had either
established fire limits within the municipality or set standards for
the kind or kinds of buildings to be constructed or repaired within
them before it passed the ordinance in question, it is clear that
said ordinance was not conceived and promulgated under the
express authority of sec. 2243 (c) aforequoted.
We rule that the regulation in question, Municipal Ordinance No.
7, Series of 1950, of the Municipality of Baao, Camarines Sur,

SEC. 4. EFFECTIVITY This ordinance shall take


effect on its approval. (Orig. Recs., P. 3)
Four years later, after the term of appellant Fajardo as mayor had
expired, he and his son in-law, appellant Babilonia, filed a written
request with the incumbent municipal mayor for a permit to
construct a building adjacent to their gasoline station on a parcel
of land registered in Fajardo's name, located along the national
highway and separated from the public plaza by a creek (Exh. D).
On January 16, 1954, the request was denied, for the reason
among others that the proposed building would destroy the view
or beauty of the public plaza (Exh. E). On January 18, 1954,
defendants reiterated their request for a building permit (Exh. 3),
but again the request was turned down by the mayor.
Whereupon, appellants proceeded with the construction of the
building without a permit, because they needed a place of
residence very badly, their former house having been destroyed
by a typhoon and hitherto they had been living on leased property.
On February 26, 1954, appellants were charged before and
convicted by the justice of the peace court of Baao, Camarines
Sur, for violation of the ordinance in question. Defendants
appealed to the Court of First Instance, which affirmed the
conviction, and sentenced appellants to pay a fine of P35 each
and the costs, as well as to demolish the building in question

because it destroys the view of the public plaza of Baao, in that "it
hinders the view of travelers from the National Highway to the
said public plaza." From this decision, the accused appealed to
the Court of Appeals, but the latter forwarded the records to us
because the appeal attacks the constitutionality of the ordinance
in question.
We find that the appealed conviction can not stand.
A first objection to the validity of the ordinance in question is that
under it the mayor has absolute discretion to issue or deny a
permit. The ordinance fails to state any policy, or to set up any
standard to guide or limit the mayor's action. No purpose to be
attained by requiring the permit is expressed; no conditions for its
grant or refusal are enumerated. It is not merely a case of
deficient standards; standards are entirely lacking. The ordinance
thus confers upon the mayor arbitrary and unrestricted power to
grant or deny the issuance of building permits, and it is a settled
rule that such an undefined and unlimited delegation of power to
allow or prevent an activity, per se lawful, is invalid (People vs.
Vera, 65 Phil., 56; Primicias vs. Fugoso, 80 Phil., 71; Schloss
Poster Adv. Co. vs. Rock Hill, 2 SE (2d) 392)
The ordinance in question in no way controls or guides
the discretion vested thereby in the respondents. It
prescribes no uniform rule upon which the special
permission of the city is to be granted. Thus the city is
clothed with the uncontrolled power to capriciously
grant the privilege to some and deny it others; to refuse
the application of one landowner or lessee and to grant
that of another, when for all material purposes, the two
applying for precisely the same privileges under the
same circumstances. The danger of such an ordinance
is that it makes possible arbitrary discriminations and
abuses in its execution, depending upon no conditions
or qualifications whatever, other than the unregulated
arbitrary will of the city authorities as the touchstone by
which its validity is to be tested. Fundamental rights
under our government do not depend for their existence
upon such a slender and uncertain thread. Ordinances
which thus invest a city council with a discretion which
is purely arbitrary, and which may be exercised in the
interest of a favored few, are unreasonable and invalid.
The ordinance should have established a rule by which
its impartial enforcement could be secured. All of the
authorities cited above sustain this conclusion.
As was said in City of Richmond vs. Dudley, 129 Ind.
112,28 N. E. 312, 314 13 L. R. A. 587, 28 Am. St. Rep.
180: "It seems from the foregoing authorities to be well
established that municipal ordinances placing
restrictions upon lawful conduct or the lawful use of
property must, in order to be valid, specify the rules and
conditions to be observed in such conduct or business;
and must admit of the exercise of the privilege of all
citizens alike who will comply with such rules and
conditions; and must not admit of the exercise, or of an
opportunity for the exercise, of any arbitrary
discrimination by the municipal authorities between
citizens who will so comply. (Schloss Poster Adv. Co.,
Inc. vs. City of Rock Hill, et al., 2 SE (2d), pp. 394-395).
It is contended, on the other hand, that the mayor can refuse a
permit solely in case that the proposed building "destroys the view
of the public plaza or occupies any public property" (as stated in
its section 3); and in fact, the refusal of the Mayor of Baao to
issue a building permit to the appellant was predicated on the
ground that the proposed building would "destroy the view of the
public plaza" by preventing its being seen from the public
highway. Even thus interpreted, the ordinance is unreasonable
and oppressive, in that it operates to permanently deprive
appellants of the right to use their own property; hence, it
oversteps the bounds of POLICE POWER, and amounts to a
taking of appellants property without just compensation. We do
not overlook that the modern tendency is to regard the
beautification of neighborhoods as conducive to the comfort and

happiness of residents. But while property may be regulated in


the interest of the general welfare, and in its pursuit, the State
may prohibit structures offensive to the sight (Churchill and
Tait vs. Rafferty, 32 Phil. 580), the State may not, under the guise
of POLICE POWER, permanently divest owners of the beneficial
use of their property and practically confiscate them solely to
preserve or assure the aesthetic appearance of the community.
As the case now stands, every structure that may be erected on
appellants' land, regardless of its own beauty, stands condemned
under the ordinance in question, because it would interfere with
the view of the public plaza from the highway. The appellants
would, in effect, be constrained to let their land remain idle and
unused for the obvious purpose for which it is best suited, being
urban in character. To legally achieve that result, the municipality
must give appellants just compensation and an opportunity to be
heard.
An ordinance which permanently so restricts the use of
property that it can not be used for any reasonable
purpose goes, it is plain, beyond regulation and must
be recognized as a taking of the property. The only
substantial difference, in such case, between restriction
and actual taking, is that the restriction leaves the
owner subject to the burden of payment of taxation,
while outright confiscation would relieve him of that
burden. (Arverne Bay Constr. Co. vs. Thatcher (N.Y.)
117 ALR. 1110, 1116).
A regulation which substantially deprives an owner of all
beneficial use of his property is confiscation and is a
deprivation within the meaning of the 14th Amendment.
(Sundlum vs. Zoning Bd., 145 Atl. 451; also Eaton vs.
Sweeny, 177 NE 412; Taylor vs. Jacksonville, 133 So.
114).
Zoning which admittedly limits property to a use which
can not reasonably be made of it cannot be said to set
aside such property to a use but constitutes the taking
of such property without just compensation. Use of
property is an element of ownership therein.
Regardless of the opinion of zealots that property may
properly, by zoning, be utterly destroyed without
compensation, such principle finds no support in the
genius of our government nor in the principles of justice
as we known them. Such a doctrine shocks the sense
of justice. If it be of public benefit that property remain
open and unused, then certainly the public, and not the
private individuals, should bear the cost of reasonable
compensation for such property under the rules of law
governing the condemnation of private property for
public use. (Tews vs. Woolhiser (1933) 352 I11. 212,
185 N.E. 827) (Emphasis supplied.)
The validity of the ordinance in question was justified by the court
below under section 2243, par. (c), of the Revised Administrative
Code, as amended. This section provides:
SEC. 2243. Certain legislative powers of discretionary
character. The municipal council shall have authority
to exercise the following discretionary powers:
xxx

xxx

xxx

(c) To establish fire limits in populous centers, prescribe


the kinds of buildings that may be constructed or
repaired within them, and issue permits for the creation
or repair thereof, charging a fee which shall be
determined by the municipal council and which shall not
be less than two pesos for each building permit and
one peso for each repair permit issued. The fees
collected under the provisions of this subsection shall
accrue to the municipal school fund.

Under the provisions of the section above quoted, however, the


power of the municipal council to require the issuance of building
permits rests upon its first establishing fire limits in populous parts
of the town and prescribing the kinds of buildings that may be
constructed or repaired within them. As there is absolutely no
showing in this case that the municipal council had either
established fire limits within the municipality or set standards for
the kind or kinds of buildings to be constructed or repaired within
them before it passed the ordinance in question, it is clear that
said ordinance was not conceived and promulgated under the
express authority of sec. 2243 (c) aforequoted.
We rule that the regulation in question, Municipal Ordinance No.
7, Series of 1950, of the Municipality of Baao, Camarines Sur,
was beyond the authority of said municipality to enact, and is
therefore null and void. Hence, the conviction of herein appellants
is reversed, and said accused are acquitted, with costs de oficio.
So ordered.
G.R. No. L-38429 June 30, 1988
CARLOS BALACUIT, LAMBERTO TAN and SERGIO YU
CARCEL, petitioners-appellants,
vs.
COURT OF FIRST INSTANCE OF AGUSAN DEL NORTE AND
BUTUAN CITY, Branch 11, and the CITY OF
BUTUAN, respondents-appellees.
Romeo B. Sanchez, Eduardo Deza Mercado and Wilfred D. Asis
for petitioners.
The City Legal Officer for respondents-appeliees.
GANCAYCO, J.:
At issue in the petition for review before Us is the validity and
constitutionality of Ordinance No. 640 passed by the Municipal
Board of the City of Butuan on April 21, 1969, the title and text of
which are reproduced below:
ORDINANCE--640
ORDINANCE PENALIZING ANY PERSON,
GROUP OF PERSONS, ENTITY OR
CORPORATION ENGAGED IN THE
BUSINESS OF SELLING ADMISSION
TICKETS TO ANY MOVIE OR OTHER
PUBLIC EXHIBITIONS,
GAMES
, CONTESTS OR OTHER
PERFORMANCES TO REQUIRE
CHILDREN BETWEEN SEVEN (7) AND
TWELVE (12) YEARS OF AGE TO PAY FULL
PAYMENT FOR TICKETS INTENDED FOR
ADULTS BUT SHOULD CHARGE ONLY
ONE-HALF OF THE SAID TICKET
xxx xxx xxx
Be it ordained by the Municipal Board of the
City of Butuan in session assembled, that:
SECTION 1It shall be unlawful for any
person, group of persons, entity, or
corporation engaged in the business of
selling admission tickets to any movie or
other public exhibitions, games, contests, or
other performances to require children
between seven (7) and twelve (12) years of
age to pay full payment for admission tickets
intended for adults but should charge only
one-half of the value of the said tickets.
SECTION 2Any person violating the
provisions of this Ordinance shall upon
conviction be punished by a fine of not less
than TWO HUNDRED PESOS (P200.00) but
not more than SIX HUNDRED PESOS
(P600.00) or an imprisonment of not less
than TWO (2) MONTHS or not more than SIX
(6) MONTHS or both such firm and
imprisonment in the discretion of the Court.
If the violator be a firm or corporation the
penalty shall be imposed upon the Manager,
Agent or Representative of such firm or
corporation.
SECTION 3This ordinance shall take effect
upon its approval.

Petitioners are Carlos Balacuit Lamberto Tan, and Sergio Yu


Carcel managers of the Maya and Dalisay Theaters, the Crown
Theater, and the Diamond Theater, respectively. Aggrieved by the
effect of Ordinance No. 640, they filed a complaint before the
Court of First Instance of Agusan del Norte and Butuan City
docketed as Special Civil Case No. 237 on June 30, 1969
praying, inter alia, that the subject ordinance be declared
unconstitutional and, therefore, void and unenforceable. 1
Upon motion of the petitioners, 2 a temporary restraining order
was issued on July 14, 1969 by the court a quo enjoining the
respondent City of Butuan and its officials from enforcing
Ordinance No. 640. 3 On July 29, 1969, respondents filed their
answer sustaining the validity of the ordinance. 4
On January 30, 1973, the litigants filed their stipulation of
facts. 5 On June 4, 1973, the respondent court rendered its
decision, 6 the dispositive part of which reads:
IN THE LIGHT OF ALL THE FOREGOING,
the Court hereby adjudges in favor of the
respondents and against the petitioners, as
follows:
1. Declaring Ordinance No. 640 of the City of
Butuan constitutional and valid: Provided,
however, that the fine for a single offense
shall not exceed TWO HUNDRED PESOS,
as prescribed in the aforequoted Section 15
(nn) of Rep. Act No. 523;
2. Dissolving the restraining order issued by
this Court; and;
3. Dismissing the complaint, with costs
against the petitioners.
4. SO ORDERED. 7
Petitioners filed their motion for reconsideration 8 of the decision
of the court a quo which was denied in a resolution of the said
court dated November 10, 1973. 9
Hence, this petition.
Petitioners attack the validity and constitutionality of Ordinance
No. 640 on the grounds that it is ultra vires and an invalid
exercise of POLICE POWER.
Petitioners contend that Ordinance No. 640 is not within the
power of' the Municipal Board to enact as provided for in Section
15(n) of Republic Act No. 523, the Charter of the City of Butuan,
which states:
Sec. 15. General powers and duties of the
Board Except as otherwise provided by
law, and subject to the conditions and
limitations thereof, the Municipal Board shall
have the following legislative powers:
xxx xxx xxx
(n) To regulate and fix the amount of the
license fees for the following; . . . theaters,
theatrical performances, cinematographs,
public exhibitions and all other performances
and places of amusements ...
xxx xxx xxx
Respondent City of Butuan, on the other hand, attempts to justify
the enactment of the ordinance by invoking the general welfare
clause embodied in Section 15 (nn) of the cited law, which
provides:
(nn) To enact all ordinances it may deem
necessary and proper for the sanitation and
safety, the furtherance of the prosperity, and
the promotion of the morality, peace, good
order, comfort, convenience, and general
welfare of the city and its inhabitants, and
such others as may be necessary to carry
into effect and discharge the powers and
duties conferred by this Act, and to fix the
penalties for the violation of the ordinances,
which shall not exceed a two hundred peso
fine or six months imprisonment, or both such
fine and imprisonment, for a single offense.
We can see from the aforecited Section 15(n) that the power to
regulate and fix the amount of license fees for theaters, theatrical
performances, cinematographs, public exhibitions and other
places of amusement has been expressly granted to the City of
Butuan under its charter. But the question which needs to be
resolved is this: does this power to regulate include the authority
to interfere in the fixing of prices of admission to these places of
exhibition and amusement whether under its general grant of

power or under the general welfare clause as invoked by the


City?
This is the first time this Court is confronted with the question of
direct interference by the local government with the operation of
theaters, cinematographs and the like to the extent of fixing the
prices of admission to these places. Previous decisions of this
Court involved the power to impose license fees upon businesses
of this nature as a corollary to the power of the local government
to regulate them. Ordinances which required moviehouses or
theaters to increase the price of their admission tickets
supposedly to cover the license fees have been held to be invalid
for these impositions were considered as not merely license fees
but taxes for purposes of revenue and not regulation which the
cities have no power to exact, 10 unless expressly granted by its
charter. 11
Applying the ruling in Kwong Sing v. City of Manila, 12 where the
word "regulate" was interpreted to include the power to control, to
govern and to restrain, it would seem that under its power to
regulate places of exhibitions and amusement, the Municipal
Board of the City of Butuan could make proper police regulations
as to the mode in which the business shall be exercised.
While in a New York case, 13 an ordinance which regulates the
business of selling admission tickets to public exhibitions or
performances by virtue of the power of cities under the General
City Law "to maintain order, enforce the laws, protect property
and preserve and care for the safety, health, comfort and general
welfare of the inhabitants of the city and visitors thereto; and for
any of said purposes, to regulate and license occupations" was
considered not to be within the scope of any duty or power
implied in the charter. It was held therein that the power of
regulation of public exhibitions and places of amusement within
the city granted by the charter does not carry with it any authority
to interfere with the price of admission to such places or the
resale of tickets or tokens of admission.
In this jurisdiction, it is already settled that the operation of
theaters, cinematographs and other places of public exhibition are
subject to regulation by the municipal council in the exercise of
delegated POLICE POWER by the local government. 14 Thus,
in People v. Chan, 15 an ordinance of the City of Manila prohibiting
first run cinematographs from selling tickets beyond their seating
capacity was upheld as constitutional for being a valid exercise of
POLICE POWER. Still in another case, 16 the validity of an
ordinance of the City of Bacolod prohibiting admission of two or
more persons in moviehouses and other amusement places with
the use of only one ticket was sustained as a valid regulatory
police measure not only in the interest of preventing fraud in so
far as municipal taxes are concerned but also in accordance with
public health, public safety, and the general welfare.
The City of Butuan, apparently realizing that it has no authority to
enact the ordinance in question under its power to regulate
embodied in Section 15(n), now invokes the POLICE POWER as
delegated to it under the general welfare clause to justify the
enactment of said ordinance.
To invoke the exercise of POLICE POWER, not only must it
appear that the interest of the public generally requires an
interference with private rights, but the means adopted must be
reasonably necessary for the accomplishment of the purpose and
not unduly oppressive upon individuals. 17 The legislature may
not, under the guise of protecting the public interest, arbitrarily
interfere with private business, or impose unusual and
unnecessary restrictions upon lawful occupations. In other words,
the determination as to what is a proper exercise of its POLICE
POWER is not final or conclusive, but is subject to the supervision
of the courts. 18
Petitioners maintain that Ordinance No. 640 violates the DUE
PROCESS clause of the Constitution for being oppressive, unfair,
unjust, confiscatory, and an undue restraint of trade, and violative
of the right of persons to enter into contracts, considering that the
theater owners are bound under a contract with the film owners
for just admission prices for general admission, balcony and
lodge.
In Homeowners' Association of the Philippines, Inc. v. Municipal
Board of the City of Manila, 19 this Court held:
The authority of municipal corporations to
regulate is essentially POLICE POWER,
Inasmuch as the same generally entails a
curtailment of the liberty, the rights and/or the
property of persons, which are protected and
even guaranteed by the Constitution, the

exercise of POLICE POWER is necessarily


subject to a qualification, limitation or
restriction demanded by the regard, the
respect and the obedience due to the
prescriptions of the fundamental law,
particularly those forming part of the
Constitution of Liberty, otherwise known as
the Bill of Rights the POLICE POWER
measure must be reasonable. In other words,
individual rights may be adversely affected by
the exercise of POLICE POWER to the
extent only and only to the extent--that
may be fairly required by the legitimate
demands of public interest or public welfare.
What is the reason behind the enactment of Ordinance No. 640?
A reading of the minutes of the regular session of the Municipal
Board when the ordinance in question was passed shows that a
certain Councilor Calo, the proponent of the measure, had taken
into account the complaints of parents that for them to pay the full
price of admission for their children is too financially burdensome.
The trial court advances the view that "even if the subject
ordinance does not spell out its raison d'etre in all probability the
respondents were impelled by the awareness that children are
entitled to share in the joys of their elders, but that considering
that, apart from size, children between the ages of seven and
twelve cannot fully grasp the nuance of movies or other public
exhibitions, games, contests or other performances, the
admission prices with respect to them ought to be reduced. 19a
We must bear in mind that there must be public necessity which
demands the adoption of proper measures to secure the ends
sought to be attained by the enactment of the ordinance, and the
large discretion is necessarily vested in the legislative authority to
determine not only what the interests of the public require, but
what measures are necessary for the protection of such
interests. 20 The methods or means used to protect the public
health, morals, safety or welfare, must have some relation to the
end in view, for under the guise of the POLICE POWER, personal
rights and those pertaining to private property will not be
permitted to be arbitralily invaded by the legislative department. 21
We agree with petitioners that the ordinance is not justified by any
necessity for the public interest. The POLICE POWER legislation
must be firmly grounded on public interest and welfare, and a
reasonable relation must exist between purposes and
means. 22 The evident purpose of the ordinance is to help ease
the burden of cost on the part of parents who have to shell out the
same amount of money for the admission of their children, as
they would for themselves, A reduction in the price of admission
would mean corresponding savings for the parents; however, the
petitioners are the ones made to bear the cost of these savings.
The ordinance does not only make the petitioners suffer the loss
of earnings but it likewise penalizes them for failure to comply
with it. Furthermore, as petitioners point out, there will be difficulty
in its implementation because as already experienced by
petitioners since the effectivity of the ordinance, children over 12
years of age tried to pass off their age as below 12 years in order
to avail of the benefit of the ordinance. The ordinance does not
provide a safeguard against this undesirable practice and as
such, the respondent City of Butuan now suggests that birth
certificates be exhibited by movie house patrons to prove the age
of children. This is, however, not at all practicable. We can see
that the ordinance is clearly unreasonable if not unduly
oppressive upon the business of petitioners. Moreover, there is no
discernible relation between the ordinance and the promotion of
public health, safety, morals and the general welfare.
Respondent City of Butuan claims that it was impelled to protect
the youth from the pernicious practice of movie operators and
other public exhibitions promoters or the like of demanding equal
price for their admission tickets along with the adults. This
practice is allegedly repugnant and unconscionable to the interest
of the City in the furtherance of the prosperity, peace, good order,
comfort, convenience and the general well-being of its
inhabitants.
There is nothing pernicious in demanding equal price for both
children and adults. The petitioners are merely conducting their
legitimate businesses. The object of every business entrepreneur
is to make a profit out of his venture. There is nothing immoral or
injurious in charging the same price for both children and adults.
In fact, no person is under compulsion to purchase a ticket. It is a

totally voluntary act on the part of the purchaser if he buys a ticket


to such performances.
Respondent City of Butuan claims that Ordinance No. 640 is
reasonable and necessary to lessen the economic burden of
parents whose minor children are lured by the attractive nuisance
being maintained by the petitioners. Respondent further alleges
that by charging the full price, the children are being exploited by
movie house operators. We fail to see how the children are
exploited if they pay the full price of admission. They are treated
with the same quality of
entertainment
as the adults. The supposition of the trial court that because of
their age children cannot fully grasp the nuances of such
entertainment
as adults do fails to convince Us that the reduction in admission
ticket price is justifiable. In fact, by the very claim of respondent
that movies and the like are attractive nuisances, it is difficult to
comprehend why the municipal board passed the subject
ordinance. How can the municipal authorities consider the movies
an attractive nuisance and yet encourage parents and children to
patronize them by lowering the price of admission for children?
Perhaps, there is some ,truth to the argument of petitioners that
Ordinance No. 640 is detrimental to the public good and the
general welfare of society for it encourages children of tender age
to frequent the movies, rather than attend to their studies in
school or be in their homes.
Moreover, as a logical consequence of the ordinance, movie
house and theater operators will be discouraged from exhibiting
wholesome movies for general patronage, much less children's
pictures if only to avoid compliance with the ordinance and still
earn profits for themselves. For after all, these movie house and
theater operators cannot be compelled to exhibit any particular
kind of film except those films which may be dictated by public
demand and those which are restricted by censorship laws. So
instead of children being able to share in the joys of their elders
as envisioned by the trial court, there will be a dearth of
wholesome and educational movies for them to enjoy.
There are a number of cases decided by the Supreme Court and
the various state courts of the United States which upheld the
right of the proprietor of a theater to fix the price of an admission
ticket as against the right of the state to interfere in this regard
and which We consider applicable to the case at bar.
A theater ticket has been described to be either a mere license,
revocable at the will of the proprietor of the theater or it may be
evidence of a contract whereby, for a valuable consideration, the
purchaser has acquired the right to enter the theater and observe
the performance on condition that he behaves properly. 23 Such
ticket, therefore, represents a right, Positive or conditional, as the
case may be, according to the terms of the original contract of
sale. This right is clearly a right of property. The ticket which
represents that right is also, necessarily, a species of property. As
such, the owner thereof, in the absence of any condition to the
contrary in the contract by which he obtained it, has the clear right
to dispose of it, to sell it to whom he pleases and at such price as
he can obtain. 24 So that an act prohibiting the sale of tickets to
theaters or other places of amusement at more than the regular
price was held invalid as conflicting with the state constitution
securing the right of property. 25
In Collister vs. Hayman, 26 it was held:
The defendants were conducting a private
business, which, even if clothed with a public
interest, was without a franchise to
accommodate the public, and they had the
right to control it, the same as the proprietors
of any other business, subject to such
obligations as were placed upon them by
statute. Unlike a carrier of passengers, for
instance, with a franchise from the state, and
hence under obligation to transport anyone
who applies and to continue the business
year in and year out, the proprietors of a
theater can open and close their place at will,
and no one can make a lawful complaint.
They can charge what they choose for
admission to their theater. They can limit the
number admitted. They can refuse to sell
tickets and collect the price of admission at
the door. They can preserve order and
enforce quiet while the performance is going

on. They can make it a part of the contract


and condition of admission, by giving due
notice and printing the condition in the ticket
that no one shall be admitted under 21 years
of age, or that men only or women only shall
be admitted, or that a woman cannot enter
unless she is accompanied by a male escort,
and the like. The proprietors, in the control of
their business, may regulate the terms of
admission in any reasonable way. If those
terms are not satisfactory, no one is obliged
to buy a ticket or make the contract. If the
terms are satisfactory, and the contract is
made, the minds of the parties meet upon the
condition, and the purchaser impliedly
promises to perform it.
In Tyson and Bro. United Theater Ticket Officers, Inc. vs.
27
Banton, the United States Supreme Court held:
... And certainly a place of entertainment is in
no legal sense a public utility; and quite as
certainly, its activities are not such that their
enjoyment can be regarded under any
conditions from the point of view of an
emergency.
The interest of the public in theaters and
other places of entertainment may be more
nearly, and with better reason, assimilated to
the like interest in provision stores and
markets and in the rental of houses and
apartments for residence purposes; although
in importance it fails below such an interest in
the proportion that food and shelter are of
more moment than amusement or instruction.
As we have shown there is no legislative
power to fix the prices of provisions or
clothing, or the rental charges for houses and
apartments, in the absence of some
controlling emergency; and we are unable to
perceive any dissimilarities of such quality or
degree as to justify a different rule in respect
of amusements and entertainment ...
We are in consonance with the foregoing observations and
conclusions of American courts. In this jurisdiction, legislation had
been passed controlling the prices of goods commodities and
drugs during periods of emergency,28 limiting the net profits of
public utility 29 as well as regulating rentals of residential
apartments for a limited period, 30 as a matter of national policy in
the interest of public health and safety, economic security and the
general welfare of the people. And these laws cannot be
impugned as unconstitutional for being violative of the DUE
PROCESS clause.
However, the same could not be said of theaters, cinematographs
and other exhibitions. In no sense could these businesses be
considered public utilities. The State has not found it appropriate
as a national policy to interfere with the admission prices to these
performances. This does not mean however, that theaters and
exhibitions are not affected with public interest even to a certain
degree. Motion pictures have been considered important both as
a medium for the communication of Ideas and expression of the
artistic impulse. Their effects on the perceptions by our people of
issues and public officials or public figures as well as the
prevailing cultural traits are considerable. 31 People of all ages
flock to movie houses, games and other public exhibitions for
recreation and relaxation. The government realizing their
importance has seen it fit to enact censorship laws to regulate the
movie industry.32 Their aesthetic entertainment and even
educational values cannot be underestimated. Even police
measures regulating the operation of these businesses have
been upheld in order to safeguard public health and safety.
Nonetheless, as to the question of the subject ordinance being a
valid exercise of POLICE POWER, the same must be resolved in
the negative. While it is true that a business may be regulated, it
is equally true that such regulation must be within the bounds of
reason, that is, the regulatory ordinance must be reasonable, and
its provisions cannot be oppressive amounting to an arbitrary
interference with the business or calling subject of regulation. A
lawful business or calling may not, under the guise of regulation,
be unreasonably interfered with even by the exercise of POLICE
POWER. 33 A police measure for the regulation of the conduct,

control and operation of a business should not encroach upon the


legitimate and lawful exercise by the citizens of their property
rights. 34 The right of the owner to fix a price at which his property
shall be sold or used is an inherent attribute of the property itself
and, as such, within the protection of the DUE PROCESS
clause."" Hence, the proprietors of a theater have a right to
manage their property in their own way, to fix what prices of
admission they think most for their own advantage, and that any
person who did not approve could stay away. 36
Respondent City of Butuan argues that the presumption is always
in favor of the validity of the ordinance. This maybe the rule but it
has already been held that although the presumption is always in
favor of the validity or reasonableness of the ordinance, such
presumption must nevertheless be set aside when the invalidity or
unreasonableness appears on the face of the ordinance itself or
is established by proper evidence. 37 The exercise of POLICE
POWER by the local government is valid unless it contravenes
the fundamental law of the land, or an act of the legislature, or
unless it is against public policy or is unreasonable, oppressive,
partial, discriminating or in derogation of a common right. 38
Ordinance No. 640 clearly invades the personal and property
rights of petitioners for even if We could assume that, on its face,
the interference was reasonable, from the foregoing
considerations, it has been fully shown that it is an unwarranted
and unlawful curtailment of the property and personal rights of
citizens. For being unreasonable and an undue restraint of trade,
it cannot, under the guise of exercising POLICE POWER, be
upheld as valid.
WHEREFORE, the decision of the trial court in Special Civil Case
No. 237 is hereby REVERSED and SET ASIDE and a new
judgment is hereby rendered declaring Ordinance No. 640
unconstitutional and, therefore, null and void. This decision is
immediately executory.
SO ORDERED.
G.R. No. L-49112 February 2, 1979
LEOVILLO C. AGUSTIN, petitioner,
vs.
HON. ROMEO F. EDU, in his capacity as Land Transportation
Commissioner; HON. JUAN PONCE ENRILE, in his capacity
as Minister of National Defense; HON. ALFREDO L. JUINIO,
in his capacity as Minister Of Public Works, Transportation
and Communications; and HON: BALTAZAR AQUINO, in his
capacity as Minister of Public Highways, respondents.
Leovillo C. Agustin Law Office for petitioner.
Solicitor General Estelito P. Mendoza, Assistant Solicitor General
Ruben E. Agpalo and Solicitor Amado D. Aquino for respondents.

FERNANDO, J.:
The validity of a letter of Instruction 1 providing for an early
seaming device for motor vehicles is assailed in this prohibition
proceeding as being violative of the constitutional guarantee of
DUE PROCESS and, insofar as the rules and regulations for its
implementation are concerned, for transgressing the fundamental
principle of non- delegation of legislative power. The Letter of
Instruction is stigmatized by petitioner who is possessed of the
requisite standing, as being arbitrary and oppressive. A temporary
restraining order as issued and respondents Romeo F. Edu, Land
Transportation Commissioner Juan Ponce Enrile, Minister of
National Defense; Alfredo L. Juinio, Minister of Public Works,
Transportation and Communications; and Baltazar Aquino,
Minister of Public Highways; were to answer. That they did in a
pleading submitted by Solicitor General Estelito P.
Mendoza. 2 Impressed with a highly persuasive quality, it makes
devoid clear that the imputation of a constitutional infirmity is
devoid of justification The Letter of Instruction on is a valid
POLICE POWER measure. Nor could the implementing rules and
regulations issued by respondent Edu be considered as

amounting to an exercise of legislative power. Accordingly, the


petition must be dismissed.
The facts are undisputed. The assailed Letter of Instruction No.
229 of President Marcos, issued on December 2, 1974, reads in
full: "[Whereas], statistics show that one of the major causes of
fatal or serious accidents in land transportation is the presence of
disabled, stalled or parked motor vehicles along streets or
highways without any appropriate early warning device to signal
approaching motorists of their presence; [Whereas], the hazards
posed by such obstructions to traffic have been recognized by
international bodies concerned with traffic safety, the 1968 Vienna
Convention on Road Signs and Signals and the United Nations
Organization (U.N.); [Whereas], the said Vienna Convention
which was ratified by the Philippine Government under P.D. No.
207, recommended the enactment of local legislation for the
installation of road safety signs and devices; [Now, therefore, I,
Ferdinand E. Marcos], President of the Philippines, in the interest
of safety on all streets and highways, including expressways or
limited access roads, do hereby direct: 1. That all owners, users
or drivers of motor vehicles shall have at all times in their motor
vehicles at least one (1) pair of early warning device consisting of
triangular, collapsible reflectorized plates in red and yellow colors
at least 15 cms. at the base and 40 cms. at the sides. 2.
Whenever any motor vehicle is stalled or disabled or is parked for
thirty (30) minutes or more on any street or highway, including
expressways or limited access roads, the owner, user or driver
thereof shall cause the warning device mentioned herein to be
installed at least four meters away to the front and rear of the
motor vehicle staged, disabled or parked. 3. The Land
Transportation Commissioner shall cause Reflectorized Triangular
Early Warning Devices, as herein described, to be prepared and
issued to registered owners of motor vehicles, except motorcycles
and trailers, charging for each piece not more than 15 % of the
acquisition cost. He shall also promulgate such rules and
regulations as are appropriate to effectively implement this order.
4. All hereby concerned shall closely coordinate and take such
measures as are necessary or appropriate to carry into effect then
instruction. 3 Thereafter, on November 15, 1976, it was amended
by Letter of Instruction No. 479 in this wise. "Paragraph 3 of Letter
of Instruction No. 229 is hereby amended to read as follows: 3.
The Land transportation Commissioner shall require every motor
vehicle owner to procure from any and present at the registration
of his vehicle, one pair of a reflectorized early warning device, as
d bed of any brand or make chosen by mid motor vehicle . The
Land Transportation Commissioner shall also promulgate such
rule and regulations as are appropriate to effectively implement
this order.'" 4 There was issued accordingly, by respondent Edu,
the implementing rules and regulations on December 10,
1976. 5 They were not enforced as President Marcos on January
25, 1977, ordered a six-month period of suspension insofar as the
installation of early warning device as a pre-registration
requirement for motor vehicle was concerned. 6 Then on June 30,
1978, another Letter of Instruction 7 the lifting of such suspension
and directed the immediate implementation of Letter of Instruction
No. 229 as amended. 8 It was not until August 29, 1978 that
respondent Edu issued Memorandum Circular No. 32, worded
thus: "In pursuance of Letter of Instruction No. 716, dated June
30, 1978, the implementation of Letter of Instruction No. 229, as
amended by Letter of Instructions No. 479, requiring the use of
Early Warning Devices (EWD) on motor vehicle, the following
rules and regulations are hereby issued: 1. LTC Administrative
Order No. 1, dated December 10, 1976; shall now be
implemented provided that the device may come from whatever
source and that it shall have substantially complied with the EWD
specifications contained in Section 2 of said administrative order;
2. In order to insure that every motor vehicle , except
motorcycles, is equipped with the device, a pair of serially
numbered stickers, to be issued free of charge by this
Commission, shall be attached to each EWD. The EWD. serial
number shall be indicated on the registration certificate and
official receipt of payment of current registration fees of the motor
vehicle concerned. All Orders, Circulars, and Memoranda in
conflict herewith are hereby superseded, This Order shall take
effect immediately. 9 It was for immediate implementation by
respondent Alfredo L. Juinio, as Minister of Public Works,
transportation, and Communications. 10

Petitioner, after setting forth that he "is the owner of a Volkswagen


Beetle Car, Model 13035, already properly equipped when it
came out from the assembly lines with blinking lights fore and aft,
which could very well serve as an early warning device in case of
the emergencies mentioned in Letter of Instructions No. 229, as
amended, as well as the implementing rules and regulations in
Administrative Order No. 1 issued by the land transportation
Commission," 11 alleged that said Letter of Instruction No. 229, as
amended, "clearly violates the provisions and delegation of
POLICE POWER, [sic] * * *: " For him they are "oppressive,
unreasonable, arbitrary, confiscatory, nay unconstitutional and
contrary to the precepts of our compassionate New Society." 12 He
contended that they are "infected with arbitrariness because it is
harsh, cruel and unconscionable to the motoring public;" 13 are
"one-sided, onerous and patently illegal and immoral because
[they] will make manufacturers and dealers instant millionaires at
the expense of car owners who are compelled to buy a set of the
so-called early warning device at the rate of P 56.00 to P72.00
per set." 14are unlawful and unconstitutional and contrary to the
precepts of a compassionate New Society [as being] compulsory
and confiscatory on the part of the motorists who could very well
provide a practical alternative road safety device, or a better
substitute to the specified set of EWD's." 15 He therefore prayed
for a judgment both the assailed Letters of Instructions and
Memorandum Circular void and unconstitutional and for a
restraining order in the meanwhile.
A resolution to this effect was handed down by this Court on
October 19, 1978: "L-49112 (Leovillo C. Agustin v. Hon. Romeo F.
Edu, etc., et al.) Considering the allegations contained, the
issues raised and the arguments adduced in the petition for
prohibition with writ of p prohibitory and/or mandatory injunction,
the Court Resolved to (require) the respondents to file an answer
thereto within ton (10) days from notice and not to move to
dismiss the petition. The Court further Resolved to [issue] a
[temporary restraining order] effective as of this date and
continuing until otherwise ordered by this Court. 16
Two motions for extension were filed by the Office of the Solicitor
General and granted. Then on November 15, 1978, he Answer for
respondents was submitted. After admitting the factual allegations
and stating that they lacked knowledge or information sufficient to
form a belief as to petitioner owning a Volkswagen Beetle car,"
they "specifically deny the allegations and stating they lacked
knowledge or information sufficient to form a belief as to petitioner
owning a Volkswagen Beetle Car, 17 they specifically deny the
allegations in paragraphs X and XI (including its subparagraphs 1,
2, 3, 4) of Petition to the effect that Letter of Instruction No. 229 as
amended by Letters of Instructions Nos. 479 and 716 as well as
Land transportation Commission Administrative Order No. 1 and
its Memorandum Circular No. 32 violates the constitutional
provisions on DUE PROCESS of law, equal protection of law and
undue delegation of POLICE POWER, and that the same are
likewise oppressive, arbitrary, confiscatory, one-sided, onerous,
immoral unreasonable and illegal the truth being that said
allegations are without legal and factual basis and for the reasons
alleged in the Special and Affirmative Defenses of this
Answer." 18 Unlike petitioner who contented himself with a
rhetorical recital of his litany of grievances and merely invoked the
sacramental phrases of constitutional litigation, the Answer, in
demonstrating that the assailed Letter of Instruction was a valid
exercise of the POLICE POWER and implementing rules and
regulations of respondent Edu not susceptible to the charge that
there was unlawful delegation of legislative power, there was in
the portion captioned Special and Affirmative Defenses, a citation
of what respondents believed to be the authoritative decisions of
this Tribunal calling for application. They are Calalang v.
Williams, 19 Morfe v. Mutuc, 20 and Edu v. Ericta. 21 Reference was
likewise made to the 1968 Vienna Conventions of the United
Nations on road traffic, road signs, and signals, of which the
Philippines was a signatory and which was duly
ratified. 22 Solicitor General Mendoza took pains to refute in detail,
in language calm and dispassionate, the vigorous, at times
intemperate, accusation of petitioner that the assailed Letter of
Instruction and the implementing rules and regulations cannot
survive the test of rigorous scrutiny. To repeat, its highlypersuasive quality cannot be denied.

This Court thus considered the petition submitted for decision, the
issues being clearly joined. As noted at the outset, it is far from
meritorious and must be dismissed.
1. The Letter of Instruction in question was issued in the exercise
of the POLICE POWER. That is conceded by petitioner and is the
main reliance of respondents. It is the submission of the former,
however, that while embraced in such a category, it has offended
against the DUE PROCESS and equal protection safeguards of
the Constitution, although the latter point was mentioned only in
passing. The broad and expansive scope of the POLICE POWER
which was originally Identified by Chief Justice Taney of the
American Supreme Court in an 1847 decision as "nothing more or
less than the powers of government inherent in every
sovereignty" 23 was stressed in the aforementioned case of Edu v.
Ericta thus: "Justice Laurel, in the first leading decision after the
Constitution came into force, Calalang v. Williams, Identified
POLICE POWER with state authority to enact legislation that may
interfere with personal liberty or property in order to promote the
general welfare. Persons and property could thus 'be subjected to
all kinds of restraints and burdens in order to we the general
comfort, health and prosperity of the state.' Shortly after
independence in 1948, Primicias v. Fugoso reiterated the
doctrine, such a competence being referred to as 'the power to
prescribe regulations to promote the health, morals, peace,
education, good order or safety, and general welfare of the
people. The concept was set forth in negative terms by Justice
Malcolm in a pre-Commonwealth decision as 'that inherent and
plenary power in the State which enables it to prohibit all things
hurtful to the comfort, safety and welfare of society. In that sense
it could be hardly distinguishable as noted by this Court in Morfe
v. Mutuc with the totality of legislative power. It is in the above
sense the greatest and most powerful at. tribute of government. It
is, to quote Justice Malcolm anew, 'the most essential, insistent,
and at least table powers, I extending as Justice Holmes aptly
pointed out 'to all the great public needs.' Its scope, everexpanding to meet the exigencies of the times, even to anticipate
the future where it could be done, provides enough room for an
efficient and flexible response to conditions and circumstances
thus assuring the greatest benefits. In the language of Justice
Cardozo: 'Needs that were narrow or parochial in the past may be
interwoven in the present with the well-being of the nation. What
is critical or urgent changes with the time.' The POLICE POWER
is thus a dynamic agency, suitably vague and far from precisely
defined, rooted in the conception that men in organizing the state
and imposing upon its government limitations to safeguard
constitutional rights did not intend thereby to enable an individual
citizen or a group of citizens to obstruct unreasonably the
enactment of such salutary measures calculated to communal
peace, safety, good order, and welfare." 24
2. It was thus a heavy burden to be shouldered by petitioner,
compounded by the fact that the particular POLICE POWER
measure challenged was clearly intended to promote public
safety. It would be a rare occurrence indeed for this Court to
invalidate a legislative or executive act of that character. None
has been called to our attention, an indication of its being nonexistent. The latest decision in point, Edu v. Ericta, sustained the
validity of the Reflector Law, 25 an enactment conceived with the
same end in view. Calalang v. Williams found nothing
objectionable in a statute, the purpose of which was: "To promote
safe transit upon, and. avoid obstruction on roads and streets
designated as national roads * * *. 26 As a matter of fact, the first
law sought to be nullified after the effectivity of the 1935
Constitution, the National Defense Act, 27 with petitioner failing in
his quest, was likewise prompted by the imperative demands of
public safety.
3. The futility of petitioner's effort to nullify both the Letter of
Instruction and the implementing rules and regulations becomes
even more apparent considering his failure to lay the necessary
factual foundation to rebut the presumption of validity. So it was
held in Ermita-Malate Hotel and Motel Operators Association, Inc.
v. City Mayor of Manila. 28 The rationale was clearly set forth in an
excerpt from a decision of Justice Branders of the American
Supreme Court, quoted in the opinion: "The statute here
questioned deals with a subject clearly within the scope of the

POLICE POWER. We are asked to declare it void on the ground


that the specific method of regulation prescribed is unreasonable
and hence deprives the plaintiff of DUE PROCESS of law. As
underlying questions of fact may condition the constitutionality of
legislation of this character, the presumption of constitutionality
must prevail in the absence of some factual foundation of record
in overthrowing the statute. 29
4. Nor did the Solicitor General as he very well could, rely solely
on such rebutted presumption of validity. As was pointed out in his
Answer "The President certainly had in his possession the
necessary statistical information and data at the time he issued
said letter of instructions, and such factual foundation cannot be
defeated by petitioner's naked assertion that early warning
devices 'are not too vital to the prevention of nighttime vehicular
accidents' because allegedly only 390 or 1.5 per cent of the
supposed 26,000 motor vehicle accidents that in 1976 involved
rear-end collisions (p. 12 of petition). Petitioner's statistics is not
backed up by demonstrable data on record. As aptly stated by
this Honorable Court: Further: "It admits of no doubt therefore that
there being a presumption of validity, the necessity for evidence to
rebut it is unavoidable, unless the statute or ordinance is void on
its face, which is not the case here"' * * *. But even as g the verity
of petitioner's statistics, is that not reason enough to require the
installation of early warning devices to prevent another 390 rearend collisions that could mean the death of 390 or more Filipinos
and the deaths that could likewise result from head-on or frontal
collisions with stalled vehicles?" 30 It is quite manifest then that the
issuance of such Letter of Instruction is encased in the armor of
prior, careful study by the Executive Department. To set it aside
for alleged repugnancy to the DUE PROCESS clause is to give
sanction to conjectural claims that exceeded even the broadest
permissible limits of a pleader's well known penchant for
exaggeration.
5. The rather wild and fantastic nature of the charge of
oppressiveness of this Letter of Instruction was exposed in the
Answer of the Solicitor General thus: "Such early warning device
requirement is not an expensive redundancy, nor oppressive, for
car owners whose cars are already equipped with 1) blinking
lights in the fore and aft of said motor vehicles,' 2) "batterypowered blinking lights inside motor vehicles," 3) "built-in
reflectorized tapes on front and rear bumpers of motor vehicles,"
or 4) "well-lighted two (2) petroleum lamps (the Kinke) * * *
because: Being universal among the signatory countries to the
said 1968 Vienna Conventions, and visible even under adverse
conditions at a distance of at least 400 meters, any motorist from
this country or from any part of the world, who sees a
reflectorized rectangular early seaming device installed on the
roads, highways or expressways, will conclude, without thinking,
that somewhere along the travelled portion of that road, highway,
or expressway, there is a motor vehicle which is stationary, stalled
or disabled which obstructs or endangers passing traffic. On the
other hand, a motorist who sees any of the aforementioned other
built in warning devices or the petroleum lamps will not
immediately get adequate advance warning because he will still
think what that blinking light is all about. Is it an emergency
vehicle? Is it a law enforcement car? Is it an ambulance? Such
confusion or uncertainty in the mind of the motorist will thus
increase, rather than decrease, the danger of collision. 31
6. Nor did the other extravagant assertions of constitutional
deficiency go unrefuted in the Answer of the Solicitor General
"There is nothing in the questioned Letter of Instruction No. 229,
as amended, or in Administrative Order No. 1, which requires or
compels motor vehicle owners to purchase the early warning
device prescribed thereby. All that is required is for motor vehicle
owners concerned like petitioner, to equip their motor vehicles
with a pair of this early warning device in question, procuring or
obtaining the same from whatever source. In fact, with a little of
industry and practical ingenuity, motor vehicle owners can even
personally make or produce this early warning device so long as
the same substantially conforms with the specifications laid down
in said letter of instruction and administrative order. Accordingly
the early warning device requirement can neither be oppressive,
onerous, immoral, nor confiscatory, much less does it make
manufacturers and dealers of said devices 'instant millionaires at

the expense of car owners' as petitioner so sweepingly concludes


* * *. Petitioner's fear that with the early warning device
requirement 'a more subtle racket may be committed by those
called upon to enforce it * * * is an unfounded speculation.
Besides, that unscrupulous officials may try to enforce said
requirement in an unreasonable manner or to an unreasonable
degree, does not render the same illegal or immoral where, as in
the instant case, the challenged Letter of Instruction No. 229 and
implementing order disclose none of the constitutional defects
alleged against it. 32
7 It does appear clearly that petitioner's objection to this Letter of
Instruction is not premised on lack of power, the justification for a
finding of unconstitutionality, but on the pessimistic, not to say
negative, view he entertains as to its wisdom. That approach, it
put it at its mildest, is distinguished, if that is the appropriate word,
by its unorthodoxy. It bears repeating "that this Court, in the
language of Justice Laurel, 'does not pass upon questions of
wisdom justice or expediency of legislation.' As expressed by
Justice Tuason: 'It is not the province of the courts to supervise
legislation and keep it within the bounds of propriety and common
sense. That is primarily and exclusively a legislative concern.'
There can be no possible objection then to the observation of
Justice Montemayor. 'As long as laws do not violate any
Constitutional provision, the Courts merely interpret and apply
them regardless of whether or not they are wise or salutary. For
they, according to Justice Labrador, 'are not supposed to override
legitimate policy and * * * never inquire into the wisdom of the
law.' It is thus settled, to paraphrase Chief Justice Concepcion in
Gonzales v. Commission on Elections, that only congressional
power or competence, not the wisdom of the action taken, may be
the basis for declaring a statute invalid. This is as it ought to be.
The principle of separation of powers has in the main wisely
allocated the respective authority of each department and
confined its jurisdiction to such a sphere. There would then be
intrusion not allowable under the Constitution if on a matter left to
the discretion of a coordinate branch, the judiciary would
substitute its own. If there be adherence to the rule of law, as
there ought to be, the last offender should be courts of justice, to
which rightly litigants submit their controversy precisely to
maintain unimpaired the supremacy of legal norms and
prescriptions. The attack on the validity of the challenged
provision likewise insofar as there may be objections, even if valid
and cogent on is wisdom cannot be sustained. 33
8. The alleged infringement of the fundamental principle of nondelegation of legislative power is equally without any support wellsettled legal doctrines. Had petitioner taken the trouble to
acquaint himself with authoritative pronouncements from this
Tribunal, he would not have the temerity to make such an
assertion. An exempt from the aforecited decision of Edu v.
Ericta sheds light on the matter: "To avoid the taint of unlawful
delegation, there must be a standard, which implies at the very
least that the legislature itself determines matters of principle and
lays down fundamental policy. Otherwise, the charge of complete
abdication may be hard to repel A standard thus defines
legislative policy, marks its maps out its boundaries and specifies
the public agency to apply it. It indicates the circumstances under
which the legislative command is to be effected. It is the criterion
by which legislative purpose may be carried out. Thereafter, the
executive or administrative office designated may in pursuance of
the above guidelines promulgate supplemental rules and
regulations. The standard may be either express or implied. If the
former, the non-delegation objection is easily met. The standard
though does not have to be spelled out specifically. It could be
implied from the policy and purpose of the act considered as a
whole. In the Reflector Law clearly, the legislative objective is
public safety. What is sought to be attained as in Calalang v.
Williams is "safe transit upon the roads.' This is to adhere to the
recognition given expression by Justice Laurel in a decision
announced not too long after the Constitution came into force and
effect that the principle of non-delegation "has been made to
adapt itself to the complexities of modern governments, giving
rise to the adoption, within certain limits, of the principle of
"subordinate legislation" not only in the United States and
England but in practically all modern governments.' He continued:
'Accordingly, with the growing complexity of modern life, the
multiplication of the subjects of governmental regulation, and the

increased difficulty of administering the laws, there is a constantly


growing tendency toward the delegation of greater powers by the
legislature and toward the approval of the practice by the courts.'
Consistency with the conceptual approach requires the reminder
that what is delegated is authority non-legislative in character, the
completeness of the statute when it leaves the hands of Congress
being assumed." 34
9. The conclusion reached by this Court that this petition must be
dismissed is reinforced by this consideration. The petition itself
quoted these two whereas clauses of the assailed Letter of
Instruction: "[Whereas], the hazards posed by such obstructions
to traffic have been recognized by international bodies concerned
with traffic safety, the 1968 Vienna Convention on Road Signs
and Signals and the United Nations Organization (U.N.);
[Whereas], the said Vionna Convention, which was ratified by the
Philippine Government under P.D. No. 207, recommended the
enactment of local legislation for the installation of road safety
signs and devices; * * * " 35 It cannot be disputed then that this
Declaration of Principle found in the Constitution possesses
relevance: "The Philippines * * * adopts the generally accepted
principles of international law as part of the law of the land * *
*." 36 The 1968 Vienna Convention on Road Signs and Signals is
impressed with such a character. It is not for this country to
repudiate a commitment to which it had pledged its word. The
concept of Pacta sunt servanda stands in the way of such an
attitude, which is, moreover, at war with the principle of
international morality.
10. That is about all that needs be said. The rather court
reference to equal protection did not even elicit any attempt on
the Part of Petitioner to substantiate in a manner clear, positive,
and categorical why such a casual observation should be taken
seriously. In no case is there a more appropriate occasion for
insistence on what was referred to as "the general rule"
in Santiago v. Far Eastern Broadcasting Co., 37 namely, "that the
constitutionality of a law wig not be considered unless the point is
specially pleaded, insisted upon, and adequately
argued."38 "Equal protection" is not a talismanic formula at the
mere invocation of which a party to a lawsuit can rightfully expect
that success will crown his efforts. The law is anything but that.
WHEREFORE, this petition is dismissed. The restraining order is
lifted. This decision is immediately executory. No costs.
2. ID.; ID.; ID.; ILLEGAL DISMISSAL; EMPLOYEES
ARE ENTITLED NOT ONLY TO FULL BACKWAGES BUT
ALSO TO OTHER BENEFITS TO WHICH HE IS
ENTITLED; EXCEPTION; CASE AT BAR. - As regards
the share of Damalerio in the service charges collected
during the period of his preventive suspension, the same
form part of his earnings, and his dismissal having been
adjudged to be illegal, he is entitled not only to full
backwages but also to other benefits, including a just
share in the service charges, to be computed from the
start of his preventive suspension until his
reinstatement. However, mindful of the animosity and
strained relations between the parties, emanating from
this litigation, we uphold the ruling a quo that in lieu of
reinstatement, separation pay may be given to the
private respondent, at the rate of one (1) month pay for
every year of service. Should petitioner opt in favor of
separation pay, the private respondent shall no longer be
entitled to share in the service charges collected during
his preventive suspension.

MARANAW HOTELS AND RESORT CORPORATION, (Owner of


Century
Park
Sheraton
Manila), petitioner, vs.
NATIONAL LABOR RELATIONS COMMISSION and
EDDIE DAMALERIO, respondents.

This special civil action for certiorari under Rule 65 of the


Revised Rules of Court seeks to annul and set aside the Decision, dated
September 18, 1995, of the National Labor Relations Commission
(NLRC)[1], and the Order[2], dated January 30, 1996, denying petitioner's
motion for reconsideration in NLRC-NCR-CA No. 005642-93, on the
ground of lack or excess of jurisdiction or grave abuse of discretion.
On April 2, 1992, Eddie Damalerio (Damalerio), a room attendant
of the Century Park Sheraton Hotel, operated by Maranaw Hotel and
Resort Corporation, was seen by hotel guest Jamie Glaser (Glaser) with
left hand inside the latter's suitcase. Confronted with what he was doing,
Damalerio explained that he was trying to tidy up the room. Not
satisfied with the explanation of Damalerio, Glaser lodged a written
complaint before William D. Despuig, shift-in-charge of security of the
hotel. Glaser also reported that Damalerio had previously asked from
him souvenirs, cassettes, and other giveaways. The complaint was later
brought by Despuig to the attention of Major Eddie Buluran, chief of
Security of the hotel.
On April 3, 1992, Damalerio was given a Disciplinary Action
Notice (DAN). The next day, an administrative hearing was conducted
on the matter. Among those present at the hearing were: 1) Lourdes
Ricardo (room attendant), 2) Angelito Torres (floor supervisor), 3)
Major
Eddie
Buluran (chief of
security), 4)
Susan
Dino (Personnelrepresentative), 5) Alfredo San Gabriel (senior floor
supervisor) and 6) Ben Hur Amador(union representative).
Taking the witness stand on his own behalf, Damalerio denied the
accusation against him, theorizing that when he found the room of
Glaser in disarray, and was about to make the bed, he noticed some
belongings, such as socks and T-shirts of the said hotel guest scattered
around, so much so that he thought of placing the same in his
luggage. While doing so, Glaser arrived. When asked by the latter if
something was wrong, he (Damalerio) said "I'm just cleaning your
room," and Glaser remarked, "Good work," and then, the two of them
chatted about Glaser's concert at the Araneta Coliseum.
On April 13, 1992, Damalerio received a memorandum[3] issued
by Alfredo San Gabriel, Sr., Floor Supervisor, bearing the approval of
Nicolas R. Kirit, Executive Housekeeper, stating that he (Damalerio)
was found to have committed qualified theft in violation of House Rule
No. 1, Section 3 of Hotel Rules and Regulations. The same
memorandum served as a notice of termination of his employment.
On May 19,1992, Damalerio filed with the Labor Arbiter a
Complaint for illegal dismissal against the petitioner.
On August 20, 1993, after the parties had sent in their position
papers, Labor Arbiter Ceferina J. Diosana decided the case; disposing,
thus:
"WHEREFORE, judgment is hereby rendered finding the dismissal of
complainant to be illegal and ordering the respondents to reinstate him
to his former or equivalent position without loss of seniority rights and
with backwages from April 15, 1992 when he was
preventively suspended up to actual reinstatement and other
benefits, including but not limited to his share in the charges and/or tips
which he failed to receive, and all other CBA benefits that have accrued
since his dismissal.
SO ORDERED.
From the aforesaid Labor Arbiter's disposition, the petitioner
appealed to the NLRC, which modified the appealed decision by giving
petitioner the option of paying Damalerio a separation pay equivalent to
one (1) month pay for every year of service, instead of reinstating him.
On November 22, 1995, petitioner interposed a motion for
reconsideration but to no avail. NLRC denied the same on January 30,
1996.

DECISION
PURISIMA, J.:

Undaunted, petitioner has come to this Court via the present


petition; posing the questions:

1. WHETHER OR NOT RESPONDENT NLRC


COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OF JURISDICTION IN
HOLDING THAT PETITIONER FAILED TO
ADDUCE CONCLUSIVE EVIDENCE IN SUPPORT
OF ITS VERSION OF THE INCIDENT,
CONSIDERING THE FACT THAT THE EVIDENCE
ON RECORD INELUCTABLY SHOWS THAT
PRIVATE
RESPONDENT
WAS
CAUGHT
INFLAGRANTE DELICTO; and
2. WHETHER OR NOT RESPONDENT NLRC
COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OF JURISDICTION IN
NOT REVERSING THAT PORTION OF THE
DECISION OF THE LABOR ARBITER ORDERING
HEREIN PETITIONER TO PAY PRIVATE
RESPONDENT HIS SHARE IN THE SERVICE
CHARGE WHICH WAS COLLECTED DURING
THE TIME HE WAS NOT WORKING IN THE
HOTEL.
The petition is barren of merit.
Petitioner's theory that Damalerio was caught committing
qualified theft in flagrante delicto is anemic of evidentiary
support. Records disclose petitioner's failure to substantiate such
imputation against him. During the investigation presided over by the
Labor Arbiter, Damalerio narrated a plausible and satisfactory
explanation for his behavior complained of. According to him, he was
then cleaning the hotel room of Glaser, and while in the process of
placing inside the luggage the personal belongings of Glaser scattered
near the bed, the latter entered the room. Glaser did not bother to testify
as all his things were intact.
Although it was not completely proper for Damalerio to be
touching the things of a hotel guest while cleaning the hotel rooms,
personal belongings of hotel guests being off-limits to roomboys, under
the attendant facts and circumstances, we believe that the dismissal of
Damalerio was unwarranted. To be sure, the investigation held by the
hotel security people did not unearth enough evidence of culpability. It
bears repeating that subject hotel guest lost nothing. Albeit petitioner
may have reasons to doubt the honesty and trustworthiness of
Damalerio, as a result of what happened, absent sufficient proof of guilt,
he (Damalerio), who is a rank-and-file employee, cannot be legally
dismissed.[4]Unsubstantiated suspicions and baseless conclusions by
employers are not legal justification for dismissing employees. The
burden of proving the existence of a valid and authorized cause of
termination is on the employer.[5] Any doubt should be resolved in favor
of the employee, in keeping with the principle of social justice enshrined
in the Constitution.[6]
All things studiedly considered and viewed in proper perspective,
the dismissal of Damalerio, under the premises, cannot be countenanced.
As regards the share of Damalerio in the service charges collected
during the period of his preventive suspension, the same form part of his
earnings, and his dismissal having been adjudged to be illegal, he is
entitled not only to full backwages but also to other benefits, including a
just share in the service charges, to be computed from the start of his
preventive suspension until his reinstatement.
However, mindful of the animosity and strained relations between
the parties, emanating from this litigation, we uphold the ruling a
quo that in lieu of reinstatement, separation pay may be given to the
private respondent, at the rate of one (1) month pay for every year of
service. Should petitioner opt in favor of separation pay, the private
respondent shall no longer be entitled to share in the service charges
collected during his preventive suspension.
WHEREFORE, the petition is hereby DISMISSED and the
Court affirms the questioned Decision of the National Labor Relations
Commission, to be implemented according to law and this
disposition. No pronouncement as to costs.

BLAS F. OPLE, petitioner,


vs.
RUBEN D. TORRES, ALEXANDER AGUIRRE, HECTOR
VILLANUEVA, CIELITO HABITO, ROBERT BARBERS,
CARMENCITA REODICA, CESAR SARINO, RENATO
VALENCIA, TOMAS P. AFRICA, HEAD OF THE NATIONAL
COMPUTER CENTER and CHAIRMAN OF THE COMMISSION
ON AUDIT, respondents.

PUNO, J.:
The petition at bar is a commendable effort on the part of Senator
Blas F. Ople to prevent the shrinking of the right to privacy, which
the revered Mr. Justice Brandeis considered as "the most
comprehensive of rights and the right most valued by civilized
men." 1 Petitioner Ople prays that we invalidate Administrative
Order No. 308 entitled "Adoption of a National Computerized
Identification Reference System" on two important constitutional
grounds, viz: one, it is a usurpation of the power of Congress to
legislate, and two, it impermissibly intrudes on our citizenry's
protected zone of privacy. We grant the petition for the rights
sought to be vindicated by the petitioner need stronger barriers
against further erosion.
A.O. No. 308 was issued by President Fidel V. Ramos On
December 12, 1996 and reads as follows:
ADOPTION OF A NATIONAL
COMPUTERIZED
IDENTIFICATION REFERENCE SYSTEM
WHEREAS, there is a need to provide
Filipino citizens and foreign residents with the
facility to conveniently transact business with
basic service and social security providers
and other government instrumentalities;
WHEREAS, this will require a computerized
system to properly and efficiently identify
persons seeking basic services on social
security and reduce, if not totally eradicate
fraudulent transactions and
misrepresentations;
WHEREAS, a concerted and collaborative
effort among the various basic services and
social security providing agencies and other
government intrumentalities is required to
achieve such a system;
NOW, THEREFORE, I, FIDEL V. RAMOS,
President of the Republic of the Philippines,
by virtue of the powers vested in me by law,
do hereby direct the following:
Sec. 1. Establishment of a National
Compoterized Identification Reference
System. A decentralized Identification
Reference System among the key basic
services and social security providers is
hereby established.
Sec. 2. Inter-Agency Coordinating
Committee. An Inter-Agency Coordinating

Committee (IACC) to draw-up the


implementing guidelines and oversee the
implementation of the System is hereby
created, chaired by the Executive Secretary,
with the following as members:
Head, Presidential Management Staff
Secretary, National Economic Development
Authority
Secretary, Department of the Interior and
Local Government
Secretary, Department of Health

DONE in the City of Manila, this 12th day of


December in the year of Our Lord, Nineteen
Hundred and Ninety-Six.
(SGD.) FIDEL V. RAMOS
A.O. No. 308 was published in four newspapers of general
circulation on January 22, 1997 and January 23, 1997. On
January 24, 1997, petitioner filed the instant petition against
respondents, then Executive Secretary Ruben Torres and the
heads of the government agencies, who as members of the InterAgency Coordinating Committee, are charged with the
implementation of A.O. No. 308. On April 8, 1997, we issued a
temporary restraining order enjoining its implementation.
Petitioner contends:

Administrator, Government Service Insurance


System,

A. THE ESTABLISNMENT OF A NATIONAL


COMPUTERIZED IDENTIFICATION
REFERENCE SYSTEM REQUIRES A
LEGISLATIVE ACT. THE ISSUANCE OF
A.O. NO. 308 BY THE PRESIDENT OF THE
REPUBLIC OF THE PHILIPPINES IS,
THEREFORE, AN UNCONSTITUTIONAL
USURPATION OF THE LEGISLATIVE
POWERS OF THE CONGRESS OF THE
REPUBLIC OF THE PHILIPPINES.

Administrator, Social Security System,


Administrator, National Statistics Office
Managing Director, National Computer
Center.

B. THE APPROPRIATION OF PUBLIC


FUNDS BY THE PRESIDENT FOR THE
IMPLEMENTATION OF A.O. NO. 308 IS AN
UNCONSTITUTIONAL USURPATION OF
THE EXCLUSIVE RIGHT OF CONGRESS
TO APPROPRIATE PUBLIC FUNDS FOR
EXPENDITURE.

Sec. 3. Secretariat. The National Computer


Center (NCC) is hereby designated as
secretariat to the IACC and as such shall
provide administrative and technical support
to the IACC.
Sec. 4. Linkage Among Agencies. The
Population Reference Number (PRN)
generated by the NSO shall serve as the
common reference number to establish a
linkage among concerned agencies. The
IACC Secretariat shall coordinate with the
different Social Security and Services
Agencies to establish the standards in the
use of Biometrics Technology and in
computer application designs of their
respective systems.

C. THE IMPLEMENTATION OF A.O. NO. 308


INSIDIOUSLY LAYS THE GROUNDWORK
FOR A SYSTEM WHICH WILL VIOLATE
THE BILL OF RIGHTS ENSHRINED IN THE
CONSTITUTION. 2
Respondents counter-argue:
A. THE INSTANT PETITION IS NOT A
JUSTICIABLE CASE AS WOULD WARRANT
A JUDICIAL REVIEW;

Sec. 5. Conduct of Information Dissemination


Campaign. The Office of the Press Secretary,
in coordination with the National Statistics
Office, the GSIS and SSS as lead agencies
and other concerned agencies shall
undertake a massive tri-media information
dissemination campaign to educate and raise
public awareness on the importance and use
of the PRN and the Social Security
Identification Reference.

B. A.O. NO. 308 [1996] WAS ISSUED


WITHIN THE EXECUTIVE AND
ADMINISTRATIVE POWERS OF THE
PRESIDENT WITHOUT ENCROACHING ON
THE LEGISLATIVE POWERS OF
CONGRESS;
C. THE FUNDS NECESSARY FOR THE
IMPLEMENTATION OF THE
IDENTIFICATION REFERENCE SYSTEM
MAY BE SOURCED FROM THE BUDGETS
OF THE CONCERNED AGENCIES;

Sec. 6. Funding. The funds necessary for the


implementation of the system shall be
sourced from the respective budgets of the
concerned agencies.
Sec. 7. Submission of Regular Reports. The
NSO, GSIS and SSS shall submit regular
reports to the Office of the President through
the IACC, on the status of implementation of
this undertaking.
Sec. 8. Effectivity. This Administrative Order
shall take effect immediately.

D. A.O. NO. 308 [1996] PROTECTS AN


INDIVIDUAL'S INTEREST IN PRIVACY. 3
We now resolve.
I
As is usual in constitutional litigation, respondents raise the
threshold issues relating to the standing to sue of the petitioner
and the justiciability of the case at bar. More specifically,

respondents aver that petitioner has no legal interest to uphold


and that the implementing rules of A.O. No. 308 have yet to be
promulgated.
These submissions do not deserve our sympathetic ear.
Petitioner Ople is a distinguished member of our Senate. As a
Senator, petitioner is possessed of the requisite standing to bring
suit raising the issue that the issuance of A.O. No. 308 is a
usurpation of legislative power. 4 As taxpayer and member of the
Government Service Insurance System (GSIS), petitioner can
also impugn the legality of the misalignment of public funds and
the misuse of GSIS funds to implement A.O. No. 308. 5
The ripeness for adjudication of the Petition at bar is not affected
by the fact that the implementing rules of A.O. No. 308 have yet to
be promulgated. Petitioner Ople assails A.O. No. 308 as
invalid per se and as infirmed on its face. His action is not
premature for the rules yet to be promulgated cannot cure its fatal
defects. Moreover, the respondents themselves have started the
implementation of A.O. No. 308 without waiting for the rules. As
early as January 19, 1997, respondent Social Security System
(SSS) caused the publication of a notice to bid for the
manufacture of the National Identification (ID) card. 6 Respondent
Executive Secretary Torres has publicly announced that
representatives from the GSIS and the SSS have completed the
guidelines for the national identification system. 7 All signals from
the respondents show their unswerving will to implement A.O. No.
308 and we need not wait for the formality of the rules to pass
judgment on its constitutionality. In this light, the dissenters
insistence that we tighten the rule on standing is not a
commendable stance as its result would be to throttle an
important constitutional principle and a fundamental right.
II
We now come to the core issues. Petitioner claims that A.O. No.
308 is not a mere administrative order but a law and hence,
beyond the power of the President to issue. He alleges that A.O.
No. 308 establishes a system of identification that is allencompassing in scope, affects the life and liberty of every
Filipino citizen and foreign resident, and more particularly, violates
their right to privacy.
Petitioner's sedulous concern for the Executive not to trespass on
the lawmaking domain of Congress is understandable. The
blurring of the demarcation line between the power of the
Legislature to make laws and the power of the Executive to
execute laws will disturb their delicate balance of power and
cannot be allowed. Hence, the exercise by one branch of
government of power belonging to another will be given a stricter
scrutiny by this Court.
The line that delineates Legislative and Executive power is not
indistinct. Legislative power is "the authority, under the
Constitution, to make laws, and to alter and repeal them." 8 The
Constitution, as the will of the people in their original, sovereign
and unlimited capacity, has vested this power in the Congress of
the Philippines. 9 The grant of legislative power to Congress is
broad, general and comprehensive. 10 The legislative body
possesses plenary power for all purposes of civil
government. 11 Any power, deemed to be legislative by usage and
tradition, is necessarily possessed by Congress, unless the
Constitution has lodged it elsewhere. 12 In fine, except as limited
by the Constitution, either expressly or impliedly, legislative power
embraces all subjects and extends to matters of general concern
or common interest. 13
While Congress is vested with the power to enact laws, the
President executes the laws. 14 The executive power is vested in
the Presidents. 15 It is generally defined as the power to enforce
and administer the laws. 16 It is the power of carrying the laws into
practical operation and enforcing their due observance. 17

As head of the Executive Department, the President is the Chief


Executive. He represents the government as a whole and sees to
it that all laws are enforced by the officials and employees of his
department. 18 He has control over the executive department,
bureaus and offices. This means that he has the authority to
assume directly the functions of the executive department, bureau
and office or interfere with the discretion of its officials. 19 Corollary
to the power of control, the President also has the duty of
supervising the enforcement of laws for the maintenance of
general peace and public order. Thus, he is granted
administrative power over bureaus and offices under his control to
enable him to discharge his duties effectively. 20
Administrative power is concerned with the work of applying
policies and enforcing orders as determined by proper
governmental organs. 21 It enables the President to fix a uniform
standard of administrative efficiency and check the official
conduct of his agents. 22 To this end, he can issue administrative
orders, rules and regulations.
Prescinding from these precepts, we hold that A.O. No. 308
involves a subject that is not appropriate to be covered by an
administrative order. An administrative order is:
Sec. 3. Administrative Orders. Acts of the
President which relate to particular aspects of
governmental operation in pursuance of his
duties as administrative head shall be
promulgated in administrative orders. 23
An administrative order is an ordinance issued by the
President which relates to specific aspects in the
administrative operation of government. It must be in
harmony with the law and should be for the sole
purpose of implementing the law and carrying out the
legislative policy. 24 We reject the argument that A.O.
No. 308 implements the legislative policy of the
Administrative Code of 1987. The Code is a general law
and "incorporates in a unified document the major
structural, functional and procedural principles of
governance." 25 and "embodies changes in
administrative structure and procedures designed to
serve the
people." 26 The Code is divided into seven (7) Books:
Book I deals with Sovereignty and General
Administration, Book II with the Distribution of Powers
of the three branches of Government, Book III on the
Office of the President, Book IV on the Executive
Branch, Book V on Constitutional Commissions, Book
VI on National Government Budgeting, and Book VII on
Administrative Procedure. These Books contain
provisions on the organization, powers and general
administration of the executive, legislative and judicial
branches of government, the organization and
administration of departments, bureaus and offices
under the executive branch, the organization and
functions of the Constitutional Commissions and other
constitutional bodies, the rules on the national
government budget, as well as guideline for the
exercise by administrative agencies of quasi-legislative
and quasi-judicial powers. The Code covers both the
internal administration of government, i.e, internal
organization, personnel and recruitment, supervision
and discipline, and the effects of the functions
performed by administrative officials on private
individuals or parties outside government. 27
It cannot be simplistically argued that A.O. No. 308 merely
implements the Administrative Code of 1987. It establishes for the
first time a National Computerized Identification Reference
System. Such a System requires a delicate adjustment of various
contending state policies the primacy of national security, the
extent of privacy interest against dossier-gathering by
government, the choice of policies, etc. Indeed, the dissent of Mr.
Justice Mendoza states that the A.O. No. 308 involves the allimportant freedom of thought. As said administrative order

redefines the parameters of some basic rights of our citizenry visa-vis the State as well as the line that separates the
administrative power of the President to make rules and the
legislative power of Congress, it ought to be evident that it deals
with a subject that should be covered by law.
Nor is it correct to argue as the dissenters do that A.D. No. 308 is
not a law because it confers no right, imposes no duty, affords no
proctection, and creates no office. Under A.O. No. 308, a citizen
cannot transact business with government agencies delivering
basic services to the people without the contemplated
identification card. No citizen will refuse to get this identification
card for no one can avoid dealing with government. It is thus clear
as daylight that without the ID, a citizen will have difficulty
exercising his rights and enjoying his privileges. Given this reality,
the contention that A.O. No. 308 gives no right and imposes no
duty cannot stand.
Again, with due respect, the dissenting opinions unduly expand
the limits of administrative legislation and consequently erodes
the plenary power of Congress to make laws. This is contrary to
the established approach defining the traditional limits of
administrative legislation. As well stated by Fisher: ". . . Many
regulations however, bear directly on the public. It is here that
administrative legislation must he restricted in its scope and
application. Regulations are not supposed to be a substitute for
the general policy-making that Congress enacts in the form of a
public law. Although administrative regulations are entitled to
respect, the authority to prescribe rules and regulations is not an
independent source of power to make laws." 28
III
Assuming, arguendo, that A.O. No. 308 need not be the subject of
a law, still it cannot pass constitutional muster as an
administrative legislation because facially it violates the right to
privacy. The essence of privacy is the "right to be let alone." 29 In
the 1965 case of Griswold v. Connecticut, 30 the United States
Supreme Court gave more substance to the right of privacy when
it ruled that the right has a constitutional foundation. It held that
there is a right of privacy which can be found within the
penumbras of the First, Third, Fourth, Fifth and Ninth
Amendments, 31 viz:
Specific guarantees in the Bill of Rights have
penumbras formed by emanations from these
guarantees that help give them life and
substance . . . various guarantees create
zones of privacy. The right of association
contained in the penumbra of the First
Amendment is one, as we have seen. The
Third Amendment in its prohibition against
the quartering of soldiers "in any house" in
time of peace without the consent of the
owner is another facet of that privacy. The
Fourth Amendment explicitly affirms the ''right
of the people to be secure in their persons,
houses and effects, against unreasonable
searches and seizures." The Fifth
Amendment in its Self-Incrimination Clause
enables the citizen to create a zone of
privacy which government may not force him
to surrender to his detriment. The Ninth
Amendment provides: "The enumeration in
the Constitution, of certain rights, shall not be
construed to deny or disparage others
retained by the people."
In the 1968 case of Morfe v. Mutuc, 32 we adopted the
Griswold ruling that there is a constitutional right to
privacy. Speaking thru Mr. Justice, later Chief Justice,
Enrique Fernando, we held:
xxx xxx xxx

The Griswold case invalidated a Connecticut


statute which made the use of contraceptives
a criminal offence on the ground of its
amounting to an unconstitutional invasion of
the right of privacy of married persons;
rightfully it stressed "a relationship lying
within the zone of privacy created by several
fundamental constitutional guarantees." It
has wider implications though. The
constitutional right to privacy has come into
its own.
So it is likewise in our jurisdiction. The right to
privacy as such is accorded recognition
independently of its identification with liberty;
in itself, it is fully deserving of constitutional
protection. The language of Prof. Emerson is
particularly apt: "The concept of limited
government has always included the idea
that governmental powers stop short of
certain intrusions into the personal life of the
citizen. This is indeed one of the basic
distinctions between absolute and limited
government. Ultimate and pervasive control
of the individual, in all aspects of his life, is
the hallmark of the absolute state. In
contrast, a system of limited government
safeguards a private sector, which belongs to
the individual, firmly distinguishing it from the
public sector, which the state can control.
Protection of this private sector protection,
in other words, of the dignity and integrity of
the individual has become increasingly
important as modern society has developed.
All the forces of a technological age
industrialization, urbanization, and
organization operate to narrow the area of
privacy and facilitate intrusion into it. In
modern terms, the capacity to maintain and
support this enclave of private life marks the
difference between a democratic and a
totalitarian society."
Indeed, if we extend our judicial gaze we will find that the right of
privacy is recognized and enshrined in several provisions of our
Constitution. 33 It is expressly recognized in section 3 (1) of the Bill
of Rights:
Sec. 3. (1) The privacy of communication and
correspondence shall be inviolable except
upon lawful order of the court, or when public
safety or order requires otherwise as
prescribed by law.
Other facets of the right to privacy are protectad in
various provisions of the Bill of Rights, viz: 34
Sec. 1. No person shall be deprived of life,
liberty, or property without DUE PROCESS of
law, nor shall any person be denied the equal
protection of the laws.
Sec. 2. The right of the people to be secure in
their persons, houses papers, and effects
against unreasonable searches and seizures
of whatever nature and for any purpose shall
be inviolable, and no search warrant or
warrant of arrest shall issue except upon
probable cause to be determined personally
by the judge after examination under oath or
affirmation of the complainant and the
witnesses he may produce, and particularly
describing the place to be searched and the
persons or things to be seized.

xxx xxx xxx


Sec. 6. The liberty of abode and of changing
the same within the limits prescribed by law
shall not be impaired except upon lawful
order of the court. Neither shall the right to
travel be impaired except in the interest of
national security, public safety, or public
health as may be provided by law.
xxx xxx xxx
Sec. 8. The right of the people, including
those employed in the public and private
sectors, to form unions, associations, or
societies for purposes not contrary to law
shall not be abridged.
Sec. 17. No person shall be compelled to be
a witness against himself.
Zones of privacy are likewise recognized and protected in our
laws. The Civil Code provides that "[e]very person shall respect
the dignity, personality, privacy and peace of mind of his
neighbors and other persons" and punishes as actionable torts
several acts by a person of meddling and prying into the privacy
of another. 35 It also holds a public officer or employee or any
private individual liable for damages for any violation of the rights
and liberties of another person, 36 and recognizes the privacy of
letters and other private communications. 37 The Revised Penal
Code makes a crime the violation of secrets by an officer, 38 the
revelation of trade and industrial secrets, 39 and trespass to
dwelling. 40Invasion of privacy is an offense in special laws like the
Anti-Wiretapping Law, 41 the Secrecy of Bank Deposits Act 42 and
the Intellectual Property Code. 43 The Rules of Court on privileged
communication likewise recognize the privacy of certain
information. 44
Unlike the dissenters, we prescind from the premise that the right
to privacy is a fundamental right guaranteed by the Constitution,
hence, it is the burden of government to show that A.O. No. 308 is
justified by some compelling state interest and that it is narrowly
drawn. A.O. No. 308 is predicated on two considerations: (1) the
need to provides our citizens and foreigners with the facility to
conveniently transact business with basic service and social
security providers and other government instrumentalities and (2)
the need to reduce, if not totally eradicate, fraudulent transactions
and misrepresentations by persons seeking basic services. It is
debatable whether these interests are compelling enough to
warrant the issuance of A.O. No. 308. But what is not arguable is
the broadness, the vagueness, the overbreadth of A.O. No. 308
which if implemented will put our people's right to privacy in clear
and present danger.
The heart of A.O. No. 308 lies in its Section 4 which provides for a
Population Reference Number (PRN) as a "common reference
number to establish a linkage among concerned agencies"
through the use of "Biometrics Technology" and "computer
application designs."
Biometry or biometrics is "the science of the applicatin of
statistical methods to biological facts; a mathematical analysis of
biological data." 45 The term "biometrics" has evolved into a broad
category of technologies which provide precise confirmation of an
individual's identity through the use of the individual's own
physiological and behavioral characteristics. 46 A physiological
characteristic is a relatively stable physical characteristic such as
a fingerprint, retinal scan, hand geometry or facial features. A
behavioral characteristic is influenced by the individual's
personality and includes voice print, signature and
keystroke. 47 Most biometric idenfication systems use a card or
personal identificatin number (PIN) for initial identification. The
biometric measurement is used to verify that the individual

holding the card or entering the PIN is the legitimate owner of the
card or PIN. 48
A most common form of biological encoding is finger-scanning
where technology scans a fingertip and turns the unique pattern
therein into an individual number which is called a biocrypt. The
biocrypt is stored in computer data banks 49 and becomes a
means of identifying an individual using a service. This technology
requires one's fingertip to be scanned every time service or
access is provided. 50 Another method is the retinal scan. Retinal
scan technology employs optical technology to map the capillary
pattern of the retina of the eye. This technology produces a
unique print similar to a finger print. 51 Another biometric method
is known as the "artificial nose." This device chemically analyzes
the unique combination of substances excreted from the skin of
people. 52 The latest on the list of biometric achievements is the
thermogram. Scientists have found that by taking pictures of a
face using infra-red cameras, a unique heat distribution pattern is
seen. The different densities of bone, skin, fat and blood vessels
all contribute to the individual's personal "heat signature." 53
In the last few decades, technology has progressed at a galloping
rate. Some science fictions are now science facts. Today,
biometrics is no longer limited to the use of fingerprint to identify
an individual. It is a new science that uses various technologies in
encoding any and all biological characteristics of an individual for
identification. It is noteworthy that A.O. No. 308 does not state
what specific biological characteristics and what particular
biometrics technology shall be used to identify people who will
seek its coverage. Considering the banquest of options available
to the implementors of A.O. No. 308, the fear that it threatens the
right to privacy of our people is not groundless.
A.O. No. 308 should also raise our antennas for a further look will
show that it does not state whether encoding of data is limited to
biological information alone for identification purposes. In fact, the
Solicitor General claims that the adoption of the Identification
Reference System will contribute to the "generation of population
data for development planning." 54 This is an admission that the
PRN will not be used solely for identification but the generation of
other data with remote relation to the avowed purposes of A.O.
No. 308. Clearly, the indefiniteness of A.O. No. 308 can give the
government the roving authority to store and retrieve information
for a purpose other than the identification of the individual through
his PRN.
The potential for misuse of the data to be gathered under A.O.
No. 308 cannot be undarplayed as the dissenters do. Pursuant to
said administrative order, an individual must present his PRN
everytime he deals with a government agency to avail of basic
services and security. His transactions with the government
agency will necessarily be recorded whether it be in the
computer or in the documentary file of the agency. The
individual's file may include his transactions for loan availments,
income tax returns, statement of assets and liabilities,
reimbursements for medication, hospitalization, etc. The more
frequent the use of the PRN, the better the chance of building a
huge formidable informatin base through the electronic linkage of
the files. 55 The data may be gathered for gainful and useful
government purposes; but the existence of this vast reservoir of
personal information constitutes a covert invitation to misuse, a
temptation that may be too great for some of our authorities to
resist. 56
We can even grant, arguendo, that the computer data file will be
limited to the name, address and other basic personal infomation
about the individual. 57 Even that hospitable assumption will not
save A.O. No. 308 from constitutional infirmity for again said order
does not tell us in clear and categorical terms how these
information gathered shall he handled. It does not provide who
shall control and access the data, under what circumstances and
for what purpose. These factors are essential to safeguard the
privacy and guaranty the integrity of the information. 58 Well to
note, the computer linkage gives other government agencies
access to the information. Yet, there are no controls to guard
against leakage of information. When the access code of the

control programs of the particular computer system is broken, an


intruder, without fear of sanction or penalty, can make use of the
data for whatever purpose, or worse, manipulate the data stored
within the system. 59
It is plain and we hold that A.O. No. 308 falls short of assuring
that personal information which will be gathered about our people
will only be processed for unequivocally specified
purposes. 60 The lack of proper safeguards in this regard of A.O.
No. 308 may interfere with the individual's liberty of abode and
travel by enabling authorities to track down his movement; it may
also enable unscrupulous persons to access confidential
information and circumvent the right against self-incrimination; it
may pave the way for "fishing expeditions" by government
authorities and evade the right against unreasonable searches
and seizures. 61 The possibilities of abuse and misuse of the PRN,
biometrics and computer technology are accentuated when we
consider that the individual lacks control over what can be read or
placed on his ID, much less verify the correctness of the data
encoded. 62 They threaten the very abuses that the Bill of Rights
seeks to prevent. 63
The ability of sophisticated data center to generate a
comprehensive cradle-to-grave dossier on an individual and
transmit it over a national network is one of the most graphic
threats of the computer revolution. 64 The computer is capable of
producing a comprehensive dossier on individuals out of
information given at different times and for varied purposes. 65 It
can continue adding to the stored data and keeping the
information up to date. Retrieval of stored date is simple. When
information of a privileged character finds its way into the
computer, it can be extracted together with other data on the
subject. 66 Once extracted, the information is putty in the hands of
any person. The end of privacy begins.
Though A.O. No. 308 is undoubtedly not narrowly drawn, the
dissenting opinions would dismiss its danger to the right to
privacy as speculative and hypothetical. Again, we cannot
countenance such a laidback posture. The Court will not be true
to its role as the ultimate guardian of the people's liberty if it would
not immediately smother the sparks that endanger their rights but
would rather wait for the fire that could consume them.
We reject the argument of the Solicitor General that an individual
has a reasonable expectation of privacy with regard to the Natioal
ID and the use of biometrics technology as it stands on
quicksand. The reasonableness of a person's expectation of
privacy depends on a two-part test: (1) whether by his conduct,
the individual has exhibited an expectation of privacy; and (2)
whether this expectation is one that society recognizes as
reasonable.67 The factual circumstances of the case determines
the reasonableness of the expectation. 68 However, other factors,
such as customs, physical surroundings and practices of a
particular activity, may serve to create or diminish this
expectation. 69 The use of biometrics and computer technology in
A.O. No. 308 does not assure the individual of a reasonable
expectation of privacy. 70 As technology advances, the level of
reasonably expected privacy decreases. 71 The measure of
protection granted by the reasonable expectation diminishes as
relevant technology becomes more widely accepted. 72 The
security of the computer data file depends not only on the
physical inaccessibility of the file but also on the advances in
hardware and software computer technology. A.O. No. 308 is so
widely drawn that a minimum standard for a reasonable
expectation of privacy, regardless of technology used, cannot be
inferred from its provisions.
The rules and regulations to be by the IACC cannot remedy this
fatal defect. Rules and regulations merely implement the policy of
the law or order. On its face, A.O. No. gives the IACC virtually
infettered discretion to determine the metes and bounds of the ID
System.
Nor do your present laws prvide adequate safeguards for a
reasonable expectation of privacy. Commonwealth Act. No. 591

penalizes the disclosure by any person of data furnished by the


individual to the NSO with imprisonment and fine. 73 Republic Act.
No. 1161 prohibits public disclosure of SSS employment records
and reports. 74These laws, however, apply to records and data
with the NSO and the SSS. It is not clear whether they may be
applied to data with the other government agencies forming part
of the National ID System. The need to clarify the penal aspect of
A.O. No. 308 is another reason why its enactment should be
given to Congress.
Next, the Solicitor General urges us to validate A.O. No. 308's
abridgment of the right of privacy by using the rational relationship
test. 75 He stressed that the purposes of A.O. No. 308 are: (1) to
streamline and speed up the implementation of basic government
services, (2) eradicate fraud by avoiding duplication of services,
and (3) generate population data for development planning. He
cocludes that these purposes justify the incursions into the right to
privacy for the means are rationally related to the end. 76
We are not impressed by the argument. In Morfe v. Mutuc, 77 we
upheld the constitutionality of R.A. 3019, the Anti-Graft and
Corrupt Practices Act, as a valid POLICE POWER measure. We
declared that the law, in compelling a public officer to make an
annual report disclosing his assets and liabilities, his sources of
income and expenses, did not infringe on the individual's right to
privacy. The law was enacted to promote morality in public
administration by curtailing and minimizing the opportunities for
official corruption and maintaining a standard of honesty in the
public service. 78
The same circumstances do not obtain in the case at bar. For
one, R.A. 3019 is a statute, not an administrative order. Secondly,
R.A. 3019 itself is sufficiently detailed. The law is clear on what
practices were prohibited and penalized, and it was narrowly
drawn to avoid abuses. IN the case at bar, A.O. No. 308 may
have been impelled by a worthy purpose, but, it cannot pass
constitutional scrutiny for it is not narrowly drawn. And we now
hod that when the integrity of a fundamental right is at stake, this
court will give the challenged law, administrative order, rule or
regulation a stricter scrutiny. It will not do for the authorities to
invoke the presumption of regularity in the performance of official
duties. Nor is it enough for the authorities to prove that their act is
not irrational for a basic right can be diminished, if not defeated,
even when the government does not act irrationally. They must
satisfactorily show the presence of compelling state interests and
that the law, rule or regulation is narrowly drawn to preclude
abuses. This approach is demanded by the 1987 Constitution
whose entire matrix is designed to protect human rights and to
prevent authoritarianism. In case of doubt, the least we can do is
to lean towards the stance that will not put in danger the rights
protected by the Constitutions.
The case of Whalen v. Roe 79 cited by the Solicitor General is also
off-line. In Whalen, the United States Supreme Court was
presented with the question of whether the State of New York
could keep a centralized computer record of the names and
addresses of all persons who obtained certain drugs pursuant to
a doctor's prescription. The New York State Controlled Substance
Act of 1972 required physicians to identify parties obtaining
prescription drugs enumerated in the statute, i.e., drugs with a
recognized medical use but with a potential for abuse, so that the
names and addresses of the patients can be recorded in a
centralized computer file of the State Department of Health. The
plaintiffs, who were patients and doctors, claimed that some
people might decline necessary medication because of their fear
that the computerized data may be readily available and open to
public disclosure; and that once disclosed, it may stigmatize them
as drug addicts. 80 The plaintiffs alleged that the statute invaded a
constitutionally protected zone of privacy, i.e., the individual
interest in avoiding disclosure of personal matters, and the
interest in independence in making certain kinds of important
decisions. The U.S. Supreme Court held that while an individual's
interest in avoiding disclosuer of personal matter is an aspect of
the right to privacy, the statute did not pose a grievous threat to
establish a constitutional violation. The Court found that the
statute was necessary to aid in the enforcement of laws designed

to minimize the misuse of dangerous drugs. The patientidentification requirement was a product of an orderly and rational
legislative decision made upon recommmendation by a specially
appointed commission which held extensive hearings on the
matter. Moreover, the statute was narrowly drawn and contained
numerous safeguards against indiscriminate disclosure. The
statute laid down the procedure and requirements for the
gathering, storage and retrieval of the informatin. It ebumerated
who were authorized to access the data. It also prohibited public
disclosure of the data by imposing penalties for its violation. In
view of these safeguards, the infringement of the patients' right to
privacy was justified by a valid exercise of POLICE POWER. As
we discussed above, A.O. No. 308 lacks these vital safeguards.
Even while we strike down A.O. No. 308, we spell out in neon that
the Court is not per se agains the use of computers to
accumulate, store, process, retvieve and transmit data to improve
our bureaucracy. Computers work wonders to achieve the
efficiency which both government and private industry seek. Many
information system in different countries make use of the
computer to facilitate important social objective, such as better
law enforcement, faster delivery of public services, more efficient
management of credit and insurance programs, improvement of
telecommunications and streamlining of financial
activities. 81 Used wisely, data stored in the computer could help
good administration by making accurate and comprehensive
information for those who have to frame policy and make key
decisions. 82 The benefits of the computer has revolutionized
information technology. It developed the internet, 83 introduced the
concept of cyberspace 84 and the information superhighway where
the individual, armed only with his personal computer, may surf
and search all kinds and classes of information from libraries and
databases connected to the net.
In no uncertain terms, we also underscore that the right to privacy
does not bar all incursions into individual privacy. The right is not
intended to stifle scientific and technological advancements that
enhance public service and the common good. It merely requires
that the law be narrowly focused 85 and a compelling interest
justify such intrusions. 86 Intrusions into the right must be
accompanied by proper safeguards and well-defined standards to
prevent unconstitutional invasions. We reiterate that any law or
order that invades individual privacy will be subjected by this
Court to strict scrutiny. The reason for this stance was laid down
in Morfe v. Mutuc, to wit:
The concept of limited government has
always included the idea that governmental
powers stop short of certain intrusions into
the personal life of the citizen. This is indeed
one of the basic disctinctions between
absolute and limited government. Ultimate
and pervasive control of the individual, in all
aspects of his life, is the hallmark of the
absolute state. In contrast, a system of
limited government safeguards a private
sector, which belongs to the individual, firmly
distinguishing it from the public sector, which
the state can control. Protection of this
private sector protection, in other words, of
the dignity and integrity of the individual
has become increasingly important as
modern society has developed. All the forces
of a technological age industrialization,
urbanization, and organization operate to
narrow the area of privacy and facilitate
intrusion into it. In modern terms, the capacity
to maintain and support this enclave of
private life marks the difference between a
democratic and a totalitarian society. 87
IV
The right to privacy is one of the most threatened rights of man
living in a mass society. The threats emanate from various
sources governments, journalists, employers, social scientists,

etc. 88 In th case at bar, the threat comes from the executive


branch of government which by issuing A.O. No. 308 pressures
the people to surrender their privacy by giving information about
themselves on the pretext that it will facilitate delivery of basic
services. Given the record-keeping power of the computer, only
the indifferent fail to perceive the danger that A.O. No. 308 gives
the government the power to compile a devastating dossier
against unsuspecting citizens. It is timely to take note of the wellworded warning of Kalvin, Jr., "the disturbing result could be that
everyone will live burdened by an unerasable record of his past
and his limitations. In a way, the threat is that because of its
record-keeping, the society will have lost its benign capacity to
forget." 89 Oblivious to this counsel, the dissents still say we
should not be too quick in labelling the right to privacy as a
fundamental right. We close with the statement that the right to
privacy was not engraved in our Constitution for flattery.
IN VIEW WHEREOF, the petition is granted and Adminisrative
Order No. 308 entitled "Adoption of a National Computerized
Identification Reference System" declared null and void for being
unconstitutional.
The expenses of government, having
for their object the interest of all, should be borne
by everyone, and the more man enjoys the
advantages of society, the more he ought to hold
himself honored in contributing to those expenses.
-Anne Robert
Jacques Turgot (1727-1781)
French statesman
and economist
Mounting budget deficit, revenue generation, inadequate
fiscal allocation for education, increased emoluments for health workers,
and wider coverage for full value-added tax benefits these are the
reasons why Republic Act No. 9337 (R.A. No. 9337)[1] was enacted.
Reasons, the wisdom of which, the Court even with its extensive
constitutional power of review, cannot probe. The petitioners in these
cases, however, question not only the wisdom of the law, but also
perceived constitutional infirmities in its passage.
Every law enjoys in its favor the presumption of
constitutionality. Their arguments notwithstanding, petitioners failed to
justify their call for the invalidity of the law. Hence, R.A. No. 9337 is
not unconstitutional.
LEGISLATIVE HISTORY
R.A. No. 9337 is a consolidation of three legislative bills
namely, House Bill Nos. 3555 and 3705, and Senate Bill No. 1950.
House Bill No. 3555[2] was introduced on first reading
on January 7, 2005. The House Committee on Ways and Means
approved the bill, in substitution of House Bill No. 1468, which
Representative (Rep.) Eric D. Singson introduced on August 8, 2004.
The President certified the bill onJanuary 7, 2005 for immediate
enactment. On January 27, 2005, the House of Representatives
approved the bill on second and third reading.
House Bill No. 3705[3] on the other hand, substituted House
Bill No. 3105 introduced by Rep. Salacnib F. Baterina, and House Bill
No. 3381 introduced by Rep. Jacinto V. Paras. Its mother bill is House
Bill No. 3555. The House Committee on Ways and Means approved the
bill onFebruary 2, 2005. The President also certified it as urgent
on February 8, 2005. The House of Representatives approved the bill on
second and third reading on February 28, 2005.
Meanwhile, the Senate Committee on Ways and Means
approvedSenate Bill No. 1950[4] on March 7, 2005, in substitution of
Senate Bill Nos. 1337, 1838 and 1873, taking into consideration House
Bill Nos. 3555 and 3705. Senator Ralph G. Recto sponsored Senate
Bill No. 1337, while Senate Bill Nos. 1838 and 1873 were both
sponsored by Sens. Franklin M. Drilon, Juan M. Flavier and Francis N.
Pangilinan. The President certified the bill on March 11, 2005, and was
approved by the Senate on second and third reading on April 13, 2005.

On the same date, April 13, 2005, the Senate agreed to the
request of the House of Representatives for a committee conference on
the disagreeing provisions of the proposed bills.
Before long, the Conference Committee on the Disagreeing
Provisions of House Bill No. 3555, House Bill No. 3705, and Senate Bill
No. 1950, after having met and discussed in full free and conference,
recommended the approval of its report, which the Senate did on May
10, 2005, and with the House of Representatives agreeing thereto the
next day, May 11, 2005.

uniformly isnt
it?
ATTY. BANIQUED

No, Your Honor.

J. PANGANIBAN

It is not?

ATTY. BANIQUED

On May 23, 2005, the enrolled copy of the consolidated


House and Senate version was transmitted to the President, who signed
the same into law on May 24, 2005. Thus, came R.A. No. 9337.
July 1, 2005 is the effectivity date of R.A. No. 9337.[5] When
said date came, the Court issued a temporary restraining order, effective
immediately and continuing until further orders, enjoining respondents
from enforcing and implementing the law.
Oral arguments were held on July 14, 2005. Significantly,
during the hearing, the Court speaking through Mr. Justice Artemio V.
Panganiban, voiced the rationale for its issuance of the temporary
restraining order onJuly 1, 2005, to wit:
J. PANGANIBAN
:
. . . But before I go
into the details
of
your
presentation, let
me just tell you
a
little
background.
You know when
the law took
effect on July 1,
2005, the Court
issued a TRO at
about 5
oclock in the
afternoon. But
before
that,
there was a lot
of
complaints
aired
on
television and
on radio. Some
people in a gas
station
were
complaining
that the gas
prices went up
by 10%. Some
people
were
complaining
that
their
electric bill will
go up by 10%.
Other
times
people riding in
domestic
air
carrier
were
complaining
that the prices
that theyll have
to pay would
have to go up by
10%. While all
that was being
aired, per your
presentation and
per our own
understanding
of the law, thats
not true. Its not
true that the evat
law
necessarily
increased prices
by
10%

J. PANGANIBAN

ATTY. BANIQUED

Its not, because,


Your
Honor,
there
is
an
Executive Order
that granted the
Petroleum
companies some
subsidy . . .
interrupted
Thats correct . . .

J. PANGANIBAN

. . . and therefore
that was meant
to temper the
impact . . .
interrupted
:

. . . mitigating
measures . . .

ATTY. BANIQUED

Yes, Your Honor.

J. PANGANIBAN

As a matter of fact
a part of the
mitigating
measures would
be
the
elimination of
the Excise Tax
and the import
duties. That is
why, it is not
correct to say
that the VAT as
to
petroleum
dealers
increased prices
by 10%.

ATTY. BANIQUED

Yes, Your Honor.

J. PANGANIBAN

And therefore, there


is
no
justification for
increasing the
retail price by
10% to cover
the E-Vat tax. If
you consider the
excise tax and
the
import
duties, the Net
Tax
would
probably be in
the
neighborhood of
7%? We are not
going into exact
figures I am just
trying to deliver
a point that
different
industries,
different
products,
different
services are hit
differently. So
its not correct

ATTY. BANIQUED

J. PANGANIBAN

to say that all


prices must go
up by 10%.
Youre right, Your
Honor.
Now. For instance,
Domestic
Airline
companies, Mr.
Counsel, are at
present imposed
a Sales Tax of
3%. When this
E-Vat law took
effect the Sales
Tax was also
removed as a
mitigating
measure.
So,
therefore, there
is
no
justification to
increase
the
fares by 10% at
best
7%,
correct?

these mitigating
measures
and
the location and
situation of each
product, of each
service, of each
company, isnt
it?
ATTY. BANIQUED
J. PANGANIBAN

Yes, Your Honor.


:

Alright. So thats
one reason why
we had to issue
a TRO pending
the clarification
of all these and
we wish the
government will
take time to
clarify all these
by means of a
more
detailed
implementing
rules, in case the
law is upheld by
this Court. . . .[6]

ATTY. BANIQUED

I guess so, Your


Honor, yes.

The Court also directed the parties to file their respective


Memoranda.

J. PANGANIBAN

There are other


products that the
people
were
complaining on
that first day,
were
being
increased
arbitrarily
by
10%. And thats
one
reason
among
many
others this Court
had to issue
TRO because of
the confusion in
the
implementation.
Thats why we
added as an
issue in this
case, even if its
tangentially
taken up by the
pleadings of the
parties,
the
confusion in the
implementation
of the E-vat.
Our people were
subjected to the
mercy of that
confusion of an
across the board
increase of 10%,
which
you
yourself
now
admit and I
think even the
Government
will admit is
incorrect.
In
some cases, it
should be 3%
only, in some
cases it should
be
6%
depending
on

G.R. No. 168056


Before R.A. No. 9337 took effect, petitioners ABAKADA
GURO Party List, et al., filed a petition for prohibition on May 27,
2005. They question the constitutionality of Sections 4, 5 and 6 of R.A.
No. 9337, amending Sections 106, 107 and 108, respectively, of the
National Internal Revenue Code (NIRC). Section 4 imposes a 10% VAT
on sale of goods and properties, Section 5 imposes a 10% VAT on
importation of goods, and Section 6 imposes a 10% VAT on sale of
services and use or lease of properties. These questioned provisions
contain
a
uniform provisoauthorizing
the
President,
upon
recommendation of the Secretary of Finance, to raise the VAT rate to
12%, effective January 1, 2006, after any of the following conditions
have been satisfied, to wit:
. . . That the President, upon the
recommendation of the Secretary of Finance,
shall, effective January 1, 2006, raise the rate of
value-added tax to twelve percent (12%), after
any of the following conditions has been satisfied:
(i) Value-added tax collection as a
percentage of Gross Domestic Product (GDP) of
the previous year exceeds two and four-fifth
percent (2 4/5%); or
(ii) National government deficit as a
percentage of GDP of the previous year exceeds
one and one-half percent (1 %).
Petitioners argue that the law is unconstitutional, as it
constitutes abandonment by Congress of its exclusive authority to fix the
rate of taxes under Article VI, Section 28(2) of the 1987 Philippine
Constitution.
G.R. No. 168207
On June 9, 2005, Sen. Aquilino Q. Pimentel, Jr., et al., filed a
petition for certiorari likewise assailing the constitutionality of Sections
4, 5 and 6 of R.A. No. 9337.
Aside from questioning the so-called stand-by authority of
the President to increase the VAT rate to 12%, on the ground that it
amounts to an undue delegation of legislative power, petitioners also
contend that the increase in the VAT rate to 12% contingent on any of
the two conditions being satisfied violates the DUE PROCESS clause
embodied in Article III, Section 1 of the Constitution, as it imposes an

unfair and additional tax burden on the people, in that: (1) the 12%
increase is ambiguous because it does not state if the rate would be
returned to the original 10% if the conditions are no longer satisfied; (2)
the rate is unfair and unreasonable, as the people are unsure of the
applicable VAT rate from year to year; and (3) the increase in the VAT
rate, which is supposed to be an incentive to the President to raise the
VAT collection to at least 2 4/5 of the GDP of the previous year, should
only be based on fiscal adequacy.

1)

Sections 4, 5, and 6 of R.A. No. 9337


constitute an undue delegation of
legislative power, in violation of
Article VI, Section 28(2) of the
Constitution;

2)

The Bicameral Conference


acted without jurisdiction
the no pass on provisions
Senate Bill No. 1950 and
No. 3705; and

3)

Insertion by the Bicameral Conference


Committee of Sections 27, 28, 34, 116,
117, 119, 121, 125,[7] 148, 151, 236,
237 and 288, which were present in
Senate Bill No. 1950, violates Article
VI, Section 24(1) of the Constitution,
which provides that all appropriation,
revenue or tariff bills shall originate
exclusively in the House of
Representatives

Petitioners further claim that the inclusion of a stand-by


authoritygranted to the President by the Bicameral Conference
Committee is a violation of the no-amendment rule upon last reading
of a bill laid down in Article VI, Section 26(2) of the Constitution.
G.R. No. 168461
Thereafter, a petition for prohibition was filed on June 29,
2005, by the Association of Pilipinas Shell Dealers, Inc., et al., assailing
the following provisions of R.A. No. 9337:
1)
Section 8, amending Section 110 (A)(2) of
the NIRC, requiring that the input tax
on depreciable goods shall be
amortized over a 60-month period, if
the acquisition, excluding the VAT
components, exceeds One Million
Pesos (P1, 000,000.00);
2)

Section 8, amending Section 110 (B) of


the NIRC, imposing a 70% limit on the
amount of input tax to be credited
against the output tax; and

3)

Section 12, amending Section 114 (c) of


the NIRC, authorizing the Government
or any of its political subdivisions,
instrumentalities or agencies, including
GOCCs, to deduct a 5% final
withholding tax on gross payments of
goods and services, which are subject
to 10% VAT under Sections 106 (sale
of goods and properties) and 108 (sale
of services and use or lease of
properties) of the NIRC.

Petitioners contend that these provisions are unconstitutional


for being arbitrary, oppressive, excessive, and confiscatory.
Petitioners argument is premised on the constitutional right
of non-deprivation of life, liberty or property without DUE PROCESS
of law under Article III, Section 1 of the Constitution. According to
petitioners, the contested sections impose limitations on the amount of
input tax that may be claimed. Petitioners also argue that the input tax
partakes the nature of a property that may not be confiscated,
appropriated, or limited without DUE PROCESS of law. Petitioners
further contend that like any other property or property right, the input
tax credit may be transferred or disposed of, and that by limiting the
same, the government gets to tax a profit or value-added even if there is
no profit or value-added.
Petitioners also believe that these provisions violate the
constitutional guarantee of equal protection of the law under Article III,
Section 1 of the Constitution, as the limitation on the creditable input tax
if: (1) the entity has a high ratio of input tax; or (2) invests in capital
equipment; or (3) has several transactions with the government, is not
based on real and substantial differences to meet a valid classification.
Lastly, petitioners contend that the 70% limit is anything but
progressive, violative of Article VI, Section 28(1) of the Constitution,
and that it is the smaller businesses with higher input tax to output tax
ratio that will suffer the consequences thereof for it wipes out whatever
meager margins the petitioners make.

Committee
in deleting
present in
House Bill

G.R. No. 168730


On the eleventh hour, Governor Enrique T. Garcia filed a
petition forcertiorari and prohibition on July 20, 2005, alleging
unconstitutionality of the law on the ground that the limitation on the
creditable input tax in effect allows VAT-registered establishments to
retain a portion of the taxes they collect, thus violating the principle that
tax collection and revenue should be solely allocated for public purposes
and expenditures. Petitioner Garcia further claims that allowing these
establishments to pass on the tax to the consumers is inequitable, in
violation of Article VI, Section 28(1) of the Constitution.
RESPONDENTS COMMENT
The Office of the Solicitor General (OSG) filed a Comment
in behalf of respondents. Preliminarily, respondents contend that R.A.
No. 9337 enjoys the presumption of constitutionality and petitioners
failed to cast doubt on its validity.
Relying on the case of Tolentino vs. Secretary of Finance,
235 SCRA
630 (1994), respondents argue that the procedural issues raised by
petitioners, i.e., legality of the bicameral proceedings, exclusive
origination of revenue measures and the power of the Senate
concomitant thereto, have already been settled. With regard to the issue
of undue delegation of legislative power to the President, respondents
contend that the law is complete and leaves no discretion to the
President but to increase the rate to 12% once any of the two conditions
provided therein arise.
Respondents also refute petitioners argument that the
increase to 12%, as well as the 70% limitation on the creditable input
tax, the 60-month amortization on the purchase or importation of capital
goods exceedingP1,000,000.00, and the 5% final withholding tax by
government agencies, is arbitrary, oppressive, and confiscatory, and that
it violates the constitutional principle on progressive taxation, among
others.
Finally, respondents manifest that R.A. No. 9337 is the
anchor of the governments fiscal reform agenda. A reform in the valueadded system of taxation is the core revenue measure that will tilt the
balance towards a sustainable macroeconomic environment necessary
for economic growth.
ISSUES
The Court defined the issues, as follows:
PROCEDURAL ISSUE

G.R. No. 168463


Several members of the House of Representatives led by
Rep. Francis Joseph G. Escudero filed this petition for certiorari on June
30, 2005. They question the constitutionality of R.A. No. 9337 on the
following grounds:

Whether R.A. No. 9337 violates the


following provisions of the Constitution:
a.
b.

Article VI, Section 24, and


Article VI, Section 26(2)

SUBSTANTIVE ISSUES
1.
Whether Sections 4, 5 and 6 of R.A. No.
9337, amending Sections 106, 107 and 108 of the
NIRC, violate the following provisions of the
Constitution:
a.
b.

Article VI, Section 28(1), and


Article VI, Section 28(2)

2.
Whether Section 8 of R.A. No. 9337,
amending Sections 110(A)(2) and 110(B) of the
NIRC; and Section 12 of R.A. No. 9337,
amending Section 114(C) of the NIRC, violate the
following provisions of the Constitution:
a.
b.

Article VI, Section 28(1), and


Article III, Section 1

RULING OF THE COURT


As a prelude, the Court deems it apt to restate the general
principles and concepts of value-added tax (VAT), as the confusion and
inevitably, litigation, breeds from a fallacious notion of its nature.
The VAT is a tax on spending or consumption. It is levied on
the sale, barter, exchange or lease of goods or properties and services. [8]
Being an indirect tax on expenditure, the seller of goods or services may
pass on the amount of tax paid to the buyer,[9] with the seller acting
merely as a tax collector.[10] The burden of VAT is intended to fall on the
immediate buyers and ultimately, the end-consumers.
In contrast, a direct tax is a tax for which a taxpayer is
directly liable on the transaction or business it engages in, without
transferring the burden to someone else.[11] Examples are individual and
corporate income taxes, transfer taxes, and residence taxes. [12]
In the Philippines, the value-added system of sales taxation
has long been in existence, albeit in a different mode. Prior to 1978, the
system was a single-stage tax computed under the cost deduction
method and was payable only by the original sellers. The single-stage
system was subsequently modified, and a mixture of the cost deduction
method and tax credit method was used to determine the value-added
tax payable.[13] Under the tax credit method, an entity can credit
against or subtract from the VAT charged on its sales or outputs the VAT
paid on its purchases, inputs and imports.[14]
It was only in 1987, when President Corazon C. Aquino
issued Executive Order No. 273, that the VAT system was rationalized
by imposing a multi-stage tax rate of 0% or 10% on all sales using the
tax credit method.[15]

1)
Inserting the stand-by authority in favor of
the President in Sections 4, 5, and 6 of R.A. No.
9337;
2)
Deleting
entirely
the no
passon provisions found in both the House and Senate
bills;
3)
Inserting the provision imposing a 70%
limit on the amount of input tax to be credited
against the output tax; and
4)
Including the amendments introduced
only by Senate Bill No. 1950 regarding other
kinds of taxes in addition to the value-added tax.
Petitioners now beseech the Court to define the powers of the
Bicameral Conference Committee.
It should be borne in mind that the power of internal
regulation and discipline are intrinsic in any legislative body for, as
unerringly elucidated by Justice Story, [i]f the power did not exist, it
would be utterly impracticable to transact the business of the
nation, either at all, or at least with decency, deliberation, and
order.[19] Thus, Article VI, Section 16 (3) of the Constitution provides
that each House may determine the rules of its proceedings. Pursuant
to this inherent constitutional power to promulgate and implement its
own rules of procedure, the respective rules of each house of Congress
provided for the creation of a Bicameral Conference Committee.
Thus, Rule XIV, Sections 88 and 89 of the Rules of House of
Representatives provides as follows:
Sec. 88. Conference Committee. In
the event that the House does not agree with the
Senate on the amendment to any bill or joint
resolution, the differences may be settled by the
conference committees of both chambers.
In resolving the differences with the
Senate, the House panel shall, as much as
possible, adhere to and support the House Bill. If
the differences with the Senate are so substantial
that they materially impair the House Bill, the
panel shall report such fact to the House for the
latters appropriate action.
Sec.
89. Conference
Committee
Reports. . . . Each report shall contain a detailed,
sufficiently explicit statement of the changes in or
amendments to the subject measure.
...

E.O. No. 273 was followed by R.A. No. 7716 or the


Expanded VAT Law,[16] R.A. No. 8241 or the Improved VAT Law,
[17]
R.A. No. 8424 or the Tax Reform Act of 1997,[18] and finally, the
presently beleaguered R.A. No. 9337, also referred to by respondents as
the VAT Reform Act.

The Chairman of the House panel may


be interpellated on the Conference Committee
Report prior to the voting thereon. The House
shall vote on the Conference Committee Report in
the same manner and procedure as it votes on a
bill on third and final reading.

The Court will now discuss the issues in logical sequence.


PROCEDURAL ISSUE
I.
Whether R.A. No. 9337 violates the following provisions of the
Constitution:
a. Article VI, Section 24, and
b. Article VI, Section
26(2)
A.
The Bicameral
Conference Committee
Petitioners Escudero, et al., and Pimentel, et al., allege that
the Bicameral Conference Committee exceeded its authority by:

Rule XII, Section 35 of the Rules of the Senate states:


Sec. 35. In the event that the Senate
does not agree with the House of Representatives
on the provision of any bill or joint resolution, the
differences shall be settled by a conference
committee of both Houses which shall meet
within ten (10) days after their composition. The
President shall designate the members of the
Senate Panel in the conference committee with
the approval of the Senate.
Each Conference Committee Report
shall contain a detailed and sufficiently explicit
statement of the changes in, or amendments to the
subject measure, and shall be signed by a majority

of the members of each House panel, voting


separately.

any rate, courts have


declared that the rules
adopted by deliberative
bodies are subject to
revocation, modification or
waiver at the pleasure of
the
body
adopting
them. And it has been
said that Parliamentary
rules
are
merely
procedural, and with
their observance, the
courts have no concern.
They may be waived or
disregarded
by
the
legislative
body.
Consequently,
mere
failure to conform to
parliamentary usage will
not invalidate the action
(taken by a deliberative
body) when the requisite
number of members have
agreed to a particular
measure.[21]
(Emphasis
supplied)

A comparative presentation of the


conflicting House and Senate provisions and a
reconciled version thereof with the explanatory
statement of the conference committee shall be
attached to the report.
...
The creation of such conference committee was apparently in
response to a problem, not addressed by any constitutional provision,
where the two houses of Congress find themselves in disagreement over
changes or amendments introduced by the other house in a legislative
bill. Given that one of the most basic powers of the legislative branch is
to formulate and implement its own rules of proceedings and to
discipline its members, may the Court then delve into the details of how
Congress complies with its internal rules or how it conducts its business
of passing legislation? Note that in the present petitions, the issue is not
whether provisions of the rules of both houses creating the bicameral
conference committee are unconstitutional, but whether the bicameral
conference committee has strictly complied with the rules of both
houses, thereby remaining within the jurisdiction conferred upon it
by Congress.
In the recent case of Farias vs. The Executive Secretary,
the Court En Banc, unanimously reiterated and emphasized its
adherence to the enrolled bill doctrine, thus, declining therein
petitioners plea for the Court to go behind the enrolled copy of the bill.
Assailed in said case was Congresss creation of two sets of bicameral
conference committees, the lack of records of said committees
proceedings, the alleged violation of said committees of the rules of both
houses, and the disappearance or deletion of one of the provisions in the
compromise bill submitted by the bicameral conference committee. It
was argued that such irregularities in the passage of the law nullified
R.A. No. 9006, or the Fair Election Act.
[20]

Striking down such argument, the Court held thus:


Under the enrolled bill doctrine, the
signing of a bill by the Speaker of the House and
the Senate President and the certification of the
Secretaries of both Houses of Congress that it was
passed are conclusive of its due enactment. A
review of cases reveals the Courts consistent
adherence to the rule. The Court finds no
reason to deviate from the salutary rule in this
case where the irregularities alleged by the
petitioners mostly involved the internal rules of
Congress, e.g.,
creation
of
the
2 nd or
3rd Bicameral Conference Committee by the
House. This Court is not the proper forum for
the enforcement of these internal rules of
Congress, whether House or Senate.
Parliamentary rules are merely procedural and
with their observance the courts have no
concern. Whatever doubts there may be as to
the formal validity of Rep. Act No. 9006 must
be resolved in its favor. The Court reiterates its
ruling in Arroyo vs. De Venecia, viz.:
But the cases,
both here and abroad, in
varying
forms
of
expression, all deny to the
courts the power to
inquire into allegations
that, in enacting a law, a
House of Congress failed
to comply with its own
rules, in the absence of
showing that there was a
violation
of
a
constitutional provision
or the rights of private
individuals. In Osmea v.
Pendatun, it was held: At

The foregoing declaration is exactly in point with the present


cases, where petitioners allege irregularities committed by the
conference committee in introducing changes or deleting provisions in
the House and Senate bills. Akin to the Farias case,[22] the present
petitions also raise an issue regarding the actions taken by the
conference committee on matters regarding Congress compliance with
its own internal rules. As stated earlier, one of the most basic and
inherent power of the legislature is the power to formulate rules for its
proceedings and the discipline of its members. Congress is the best
judge of how it should conduct its own business expeditiously and in
the most orderly manner. It is also the sole
concern of Congress to instill discipline among the members of its
conference committee if it believes that said members violated any of its
rules of proceedings. Even the expanded jurisdiction of this Court
cannot apply to questions regarding only the internal operation of
Congress, thus, the Court is wont to deny a review of the internal
proceedings of a co-equal branch of government.
Moreover, as far back as 1994 or more than ten years ago, in
the case of Tolentino vs. Secretary of Finance,[23] the Court already made
the pronouncement that [i]f a change is desired in the practice [of the
Bicameral Conference Committee] it must be sought in Congress
since this question is not covered by any constitutional provision but
is only an internal rule of each house. [24] To date, Congress has not
seen it fit to make such changes adverted to by the Court. It seems,
therefore, that Congress finds the practices of the bicameral conference
committee to be very useful for purposes of prompt and efficient
legislative action.
Nevertheless, just to put minds at ease that no blatant
irregularities tainted the proceedings of the bicameral conference
committees, the Court deems it necessary to dwell on the issue. The
Court observes that there was a necessity for a conference committee
because a comparison of the provisions of House Bill Nos. 3555 and
3705 on one hand, and Senate Bill No. 1950 on the other, reveals that
there were indeed disagreements. As pointed out in the petitions, said
disagreements were as follows:
House Bill No.
3555

House Bill
No.3705

Senate Bill No.


1950

With regard to Stand-By Authority in favor of President


Provides
for
12% VAT on
every sale of
goods
or
properties
(amending Sec.
106 of NIRC);

Provides for 12%


VAT in general on
sales of goods or
properties
and
reduced rates for
sale of certain
locally

Provides for a
single rate of 10%
VAT on sale of
goods or properties
(amending Sec. 106
of NIRC), 10%
VAT on sale of

12% VAT on
importation of
goods
(amending Sec.
107 of NIRC);
and 12% VAT
on
sale
of
services
and
use or lease of
properties
(amending Sec.
108 of NIRC)

manufactured
goods
and
petroleum
products and raw
materials to be
used
in
the
manufacture
thereof (amending
Sec.
106
of
NIRC); 12% VAT
on importation of
goods and reduced
rates for certain
imported products
including
petroleum
products
(amending
Sec.
107 of NIRC); and
12% VAT on sale
of services and use
or
lease
of
properties and a
reduced rate for
certain
services
including power
generation
(amending
Sec.
108 of NIRC)

services including
sale of electricity
by
generation
companies,
transmission and
distribution
companies, and use
or
lease
of
properties
(amending Sec. 108
of NIRC)

With regard to amendments to be made to NIRC provisions


regarding income and excise taxes
No similar
provision

With regard to the no pass-on provision


No
similar
provision

Provides that the


VAT imposed on
sales of electricity
by
generation
companies
and
services
of
transmission
companies
and
distribution
companies, as well
as
those
of
franchise grantees
of electric utilities
shall not apply to
residential
end-users.
VAT
shall be absorbed
by
generation,
transmission, and
distribution
companies.
With regard to 70% limit on input tax credit

Provides that
the input tax
credit
for
capital goods
on which a VAT
has been paid
shall be equally
distributed over
5 years or the
depreciable life
of such capital
goods; the input
tax credit for
goods
and
services other
than
capital
goods shall not
exceed 5% of
the
total
amount of such
goods
and
services;
and
for
persons

Provides that the


VAT imposed on
power generation
and on the sale of
petroleum
products shall be
absorbed
by
generation
companies
or
sellers,
respectively, and
shall not be passed
on to consumers

No
provision

similar

engaged
in
retail trading of
goods,
the
allowable input
tax credit shall
not exceed 11%
of the total
amount
of
goods
purchased.

Provides that the


input tax credit for
capital goods on
which a VAT has
been paid shall be
equally distributed
over 5 years or the
depreciable life of
such capital goods;
the input tax credit
for goods and
services other than
capital goods shall
not exceed 90% of
the output VAT.

No
provision

similar

Provided
for
amendments
to
several
NIRC
provisions
regarding corporate
income,
percentage,
franchise
and
excise taxes

The disagreements between the provisions in the House bills


and the Senate bill were with regard to (1) what rate of VAT is to be
imposed; (2) whether only the VAT imposed on electricity generation,
transmission and distribution companies should not be passed on to
consumers, as proposed in the Senate bill, or both the VAT imposed on
electricity generation, transmission and distribution companies and the
VAT imposed on sale of petroleum products should not be passed on to
consumers, as proposed in the House bill; (3) in what manner input tax
credits should be limited; (4) and whether the NIRC provisions on
corporate income taxes, percentage, franchise and excise taxes should be
amended.
There being differences and/or disagreements on the
foregoing provisions of the House and Senate bills, the Bicameral
Conference Committee was mandated by the rules of both houses of
Congress to act on the same by settling said differences and/or
disagreements. The Bicameral Conference Committee acted on the
disagreeing provisions by making the following changes:
1.
With regard to the disagreement on the rate of VAT to
be imposed, it would appear from the Conference Committee Report
that the Bicameral Conference Committee tried to bridge the gap in the
difference between the 10% VAT rate proposed by the Senate, and the
various rates with 12% as the highest VAT rate proposed by the House,
by striking a compromise whereby the present 10% VAT rate would be
retained until certain conditions arise, i.e., the value-added tax collection
as a percentage of gross domestic product (GDP) of the previous year
exceeds 2 4/5%, or National Government deficit as a percentage of GDP
of the previous year exceeds 1%, when the President, upon
recommendation of the Secretary of Finance shall raise the rate of VAT
to 12% effective January 1, 2006.
2.
With regard to the disagreement on whether only the
VAT imposed on electricity generation, transmission and distribution
companies should not be passed on to consumers or whether both the
VAT imposed on electricity generation, transmission and distribution
companies and the VAT imposed on sale of petroleum products may be
passed on to consumers, the Bicameral Conference Committee chose to
settle such disagreement by altogether deleting from its Report any no
pass-on provision.
3.
With regard to the disagreement on whether input tax
credits should be limited or not, the Bicameral Conference Committee
decided to adopt the position of the House by putting a limitation on the
amount of input tax that may be credited against the output tax, although
it crafted its own language as to the amount of the limitation on input tax
credits and the manner of computing the same by providing thus:
(A)
Creditable
Input Tax. . . .
...

Provided, The input


tax on goods purchased or
imported in a calendar
month for use in trade or
business
for
which
deduction for depreciation
is allowed under this Code,
shall be spread evenly over
the month of acquisition
and the fifty-nine (59)
succeeding months if the
aggregate acquisition cost
for such goods, excluding
the
VAT
component
thereof,
exceeds
one
million
Pesos
(P1,000,000.00):
PROVIDED, however, that
if the estimated useful life
of the capital good is less
than five (5) years, as used
for depreciation purposes,
then the input VAT shall be
spread over such shorter
period: . . .
(B)
Excess
Output or Input Tax. If at
the end of any taxable
quarter the output tax
exceeds the input tax, the
excess shall be paid by the
VAT-registered person. If
the input tax exceeds the
output tax, the excess shall
be carried over to the
succeeding
quarter
or
quarters: PROVIDED that
the input tax inclusive of
input VAT carried over
from the previous quarter
that may be credited in
every quarter shall not
exceed seventy percent
(70%) of the output VAT:
PROVIDED, HOWEVER,
THAT any input tax
attributable to zero-rated
sales by a VAT-registered
person may at his option be
refunded or credited against
other internal revenue
taxes, . . .
4.
With regard to the amendments to other provisions of
the NIRC on corporate income tax, franchise, percentage and excise
taxes, the conference committee decided to include such amendments
and basically adopted the provisions found in Senate Bill No. 1950, with
some changes as to the rate of the tax to be imposed.
Under the provisions of both the Rules of the House of
Representatives and Senate Rules, the Bicameral Conference Committee
is mandated to settle the differences between the disagreeing provisions
in the House bill and the Senate bill. The term settle is synonymous to
reconcile and harmonize.[25] To reconcile or harmonize disagreeing
provisions, the Bicameral Conference Committee may then (a) adopt the
specific provisions of either the House bill or Senate bill, (b) decide that
neither provisions in the House bill or the provisions in the Senate bill
would
be carried into the final form of the bill, and/or (c) try to arrive at a
compromise between the disagreeing provisions.
In the present case, the changes introduced by the Bicameral
Conference Committee on disagreeing provisions were meant only to
reconcile and harmonize the disagreeing provisions for it did not inject
any idea or intent that is wholly foreign to the subject embraced by the
original provisions.

The so-called stand-by authority in favor of the President,


whereby the rate of 10% VAT wanted by the Senate is retained until such
time that certain conditions arise when the 12% VAT wanted by the
House shall be imposed, appears to be a compromise to try to bridge the
difference in the rate of VAT proposed by the two houses of Congress.
Nevertheless, such compromise is still totally within the subject of what
rate of VAT should be imposed on taxpayers.
The no pass-on provision was deleted altogether. In the
transcripts of the proceedings of the Bicameral Conference Committee
held on May 10, 2005, Sen. Ralph Recto, Chairman of the Senate Panel,
explained the reason for deleting the no pass-on provision in this wise:
. . . the thinking was just to keep the
VAT law or the VAT bill simple. And we were
thinking that no sector should be a beneficiary of
legislative grace, neither should any sector be
discriminated on. The VAT is an indirect tax. It
is a pass on-tax. And lets keep it plain and
simple. Lets not confuse the bill and put a no
pass-on provision. Two-thirds of the world have a
VAT system and in this two-thirds of the globe, I
have yet to see a VAT with a no pass-though
provision. So, the thinking of the Senate is
basically simple, lets keep the VAT simple.
[26]
(Emphasis supplied)
Rep. Teodoro Locsin further made the manifestation that
the no pass-on provision never really enjoyed the support of either
House.[27]
With regard to the amount of input tax to be credited against
output tax, the Bicameral Conference Committee came to a compromise
on the percentage rate of the limitation or cap on such input tax credit,
but again, the change introduced by the Bicameral Conference
Committee was totally within the intent of both houses to put a cap
on input tax that may be
credited against the output tax. From the inception of the subject
revenue bill in the House of Representatives, one of the major objectives
was to plug a glaring loophole in the tax policy and administration by
creating vital restrictions on the claiming of input VAT tax credits . . .
and [b]y introducing limitations on the claiming of tax credit, we are
capping a major leakage that has placed our collection efforts at an
apparent disadvantage.[28]
As to the amendments to NIRC provisions on taxes other
than the value-added tax proposed in Senate Bill No. 1950, since said
provisions were among those referred to it, the conference committee
had to act on the same and it basically adopted the version of the Senate.
Thus, all the changes or modifications made by the
Bicameral Conference Committee were germane to subjects of the
provisions referred
to it for reconciliation. Such being the case, the Court does not see any
grave abuse of discretion amounting to lack or excess of jurisdiction
committed by the Bicameral Conference Committee. In the earlier
cases ofPhilippine Judges Association vs. Prado[29] and Tolentino vs.
Secretary of Finance,[30] the Court recognized the long-standing
legislative practice of giving said conference committee ample
latitude for compromising differences between the Senate and the
House. Thus, in theTolentino case, it was held that:
. . . it is within the power of a
conference committee to include in its report an
entirely new provision that is not found either in
the House bill or in the Senate bill. If the
committee can propose an amendment consisting
of one or two provisions, there is no reason why it
cannot propose several provisions, collectively
considered as an amendment in the nature of a
substitute, so long as such amendment is
germane to the subject of the bills before the
committee. After all, its report was not final but
needed the approval of both houses of Congress to
become valid as an act of the legislative
department. The charge that in this case the
Conference Committee acted as a third
legislative chamber is thus without any basis.
[31]
(Emphasis supplied)

B.

R.A. No. 9337 Does


Not
Violate
Article
VI,
Section 26(2) of
the Constitution
on the NoAmendment
Rule

28(A)
(1)
28(B)
(1)
34(B)
(1)

Article VI, Sec. 26 (2) of the Constitution, states:


116
No bill passed by either House shall
become a law unless it has passed three readings
on separate days, and printed copies thereof in its
final form have been distributed to its Members
three days before its passage, except when the
President certifies to the necessity of its
immediate enactment to meet a public calamity or
emergency. Upon the last reading of a bill, no
amendment thereto shall be allowed, and the vote
thereon shall be taken immediately thereafter, and
the yeas and nays entered in the Journal.

117

119
121

Petitioners argument that the practice where a bicameral


conference committee is allowed to add or delete provisions in the
House bill and the Senate bill after these had passed three readings is in
effect a circumvention of the no amendment rule (Sec. 26 (2), Art. VI
of the 1987 Constitution), fails to convince the Court to deviate from its
ruling in the Tolentino case that:
Nor is there any reason for requiring
that the Committees Report in these cases must
have undergone three readings in each of the two
houses. If that be the case, there would be no end
to negotiation since each house may seek
modification of the compromise bill. . . .

148

151
236

Art. VI. 26 (2) must, therefore, be


construed as referring only to bills introduced
for the first time in either house of Congress,
not to the conference committee report.[32]
(Emphasis supplied)

237

288
The Court reiterates here that the no-amendment rule
refers only to the procedure to be followed by each house of
Congress with regard to bills initiated in each of said respective
houses, before said bill is transmitted to the other house for its
concurrence or amendment. Verily, to construe said provision in a
way as to proscribe any further changes to a bill after one house has
voted on it would lead to absurdity as this would mean that the other
house of Congress would be deprived of its constitutional power to
amend or introduce changes to said bill. Thus, Art. VI, Sec. 26 (2) of the
Constitution cannot be taken to mean that the introduction by the
Bicameral Conference Committee of amendments and modifications to
disagreeing provisions in bills that have been acted upon by both houses
of Congress is prohibited.
C.

R.A. No. 9337 Does


Not
Violate
Article
VI,
Section 24 of
the Constitution
on
Exclusive
Origination of
Revenue Bills

Petitioners claim that the amendments to these provisions of


the NIRC did not at all originate from the House. They aver that House
Bill No. 3555 proposed amendments only regarding Sections 106, 107,
108, 110 and 114 of the NIRC, while House Bill No. 3705 proposed
amendments only to Sections 106, 107,108, 109, 110 and 111 of the
NIRC; thus, the other sections of the NIRC which the Senate amended
but which amendments were not found in the House bills are not
intended to be amended by the House of Representatives. Hence, they
argue that since the proposed amendments did not originate from the
House, such amendments are a violation of Article VI, Section 24 of the
Constitution.
The argument does not hold water.
Article VI, Section 24 of the Constitution reads:

Coming to the issue of the validity of the amendments made


regarding the NIRC provisions on corporate income taxes and
percentage, excise taxes. Petitioners refer to the following provisions, to
wit:
Section
27

Income Tax
on Domestic
Corporation
Tax
on
Resident
Foreign
Corporation
Intercorporate
Dividends
Intercorporate
Dividends
Tax
on
Persons
Exempt from
VAT
Percentage
Tax
on
domestic
carriers and
keepers of
Garage
Tax
on
franchises
Tax on banks
and
NonBank
Financial
Intermediari
es
Excise Tax
on
manufacture
d oils and
other fuels
Excise Tax
on mineral
products
Registration
requirements
Issuance of
receipts or
sales
or
commercial
invoices
Disposition
of
Incremental
Revenue

Rates

of

Sec. 24. All appropriation, revenue or


tariff bills, bills authorizing increase of the public
debt, bills of local application, and private bills
shall originate exclusively in the House of
Representatives but the Senate may propose or
concur with amendments.
In the present cases, petitioners admit that it was indeed
House Bill Nos. 3555 and 3705 that initiated the move for amending
provisions of the NIRC dealing mainly with the value-added tax. Upon

transmittal of said House bills to the Senate, the Senate came out with
Senate Bill No. 1950 proposing amendments not only to NIRC
provisions on the value-added tax but also amendments to NIRC
provisions on other kinds of taxes. Is the introduction by the Senate of
provisions not dealing directly with the value- added tax, which is the
only kind of tax being amended in the House bills, still within the
purview of the constitutional provision authorizing the Senate to propose
or concur with amendments to a revenue bill that originated from the
House?
The foregoing question had been squarely answered in
the Tolentinocase, wherein the Court held, thus:
. . . To begin with, it is not the law
but the revenue bill which is required by the
Constitution to originate exclusively in the
House of Representatives. It is important to
emphasize this, because a bill originating in the
House may undergo such extensive changes in the
Senate that the result may be a rewriting of the
whole. . . . At this point, what is important to note
is that, as a result of the Senate action, a distinct
bill may be produced. To insist that a revenue
statute and not only the bill which initiated
the legislative process culminating in the
enactment of the law must substantially be
the same as the House bill would be to deny the
Senates power not only to concur with
amendments
but
also
to
propose
amendments. It would be to violate the
coequality of legislative power of the two houses
of Congress and in fact make the House superior
to the Senate.

problems. To do this, government expenditures


must be strictly monitored and controlled and
revenues must be significantly increased. This
may be easier said than done, but our fiscal
authorities are still optimistic the government will
be operating on a balanced budget by the year
2009. In fact, several measures that will result to
significant expenditure savings have been
identified by the administration. It is supported
with a credible package of revenue measures
that include measures to improve tax
administration and control the leakages in
revenues from income taxes and the valueadded tax (VAT). (Emphasis supplied)
Rep. Eric D. Singson, in his sponsorship speech for House
Bill No. 3555, declared that:
In the budget message of our President
in the year 2005, she reiterated that we all
acknowledged that on top of our agenda must be
the restoration of the health of our fiscal system.
In order to considerably lower the
consolidated public sector deficit and eventually
achieve a balanced budget by the year 2009, we
need to seize windows of opportunities which
might seem poignant in the beginning, but in
the long run prove effective and beneficial to
the overall status of our economy. One such
opportunity is a review of existing tax rates,
evaluating the relevance given our present
conditions.[34] (Emphasis supplied)

Given, then, the power of the


Senate to propose amendments, the Senate can
propose its own version even with respect to
bills which are required by the Constitution to
originate in the House.
...
Indeed, what the Constitution simply
means is that the initiative for filing revenue, tariff
or tax bills, bills authorizing an increase of the
public debt, private bills and bills of local
application must come from the House of
Representatives on the theory that, elected as they
are from the districts, the members of the House
can be expected to be more sensitive to the
local needs and problems. On the other hand,
the senators, who are elected at large, are
expected to approach the same problems from
the national perspective. Both views are
thereby made to bear on the enactment of such
laws.[33] (Emphasis supplied)
Since there is no question that the revenue bill exclusively
originated in the House of Representatives, the Senate was
acting within its
constitutional power to introduce amendments to the House bill when it
included provisions in Senate Bill No. 1950 amending corporate income
taxes, percentage, excise and franchise taxes. Verily, Article VI, Section
24 of the Constitution does not contain any prohibition or limitation on
the extent of the amendments that may be introduced by the Senate to
the House revenue bill.
Furthermore, the amendments introduced by the Senate to the
NIRC provisions that had not been touched in the House bills are still in
furtherance of the intent of the House in initiating the subject revenue
bills. The Explanatory Note of House Bill No. 1468, the very first
House bill introduced on the floor, which was later substituted by House
Bill No. 3555, stated:
One of the challenges faced by the
present administration is the urgent and daunting
task of solving the countrys serious financial

Notably therefore, the main purpose of the bills emanating


from the House of Representatives is to bring in sizeable revenues for
the government
to supplement our countrys serious financial problems, and improve tax
administration and control of the leakages in revenues from income
taxes and value-added taxes. As these house bills were transmitted to
the Senate, the latter, approaching the measures from the point of
national perspective, can introduce amendments within the purposes of
those bills. It can provide for ways that would soften the impact of the
VAT measure on the consumer,i.e., by distributing the burden across all
sectors instead of putting it entirely on the shoulders of the consumers.
The sponsorship speech of Sen. Ralph Recto on why the provisions on
income tax on corporation were included is worth quoting:
All in all, the proposal of the Senate
Committee on Ways and Means will raise P64.3
billion in additional revenues annually even while
by mitigating prices of power, services and
petroleum products.
However, not all of this will be wrung
out of VAT. In fact, onlyP48.7 billion amount is
from the VAT on twelve goods and services. The
rest of the tab P10.5 billion- will be picked by
corporations.
What we therefore prescribe is a
burden sharing between corporatePhilippines and
the consumer. Why should the latter bear all the
pain? Why should the fiscal salvation be only on
the burden of the consumer?
The corporate worlds equity is in form
of the increase in the corporate income tax from
32 to 35 percent, but up to 2008 only. This will
raise P10.5 billion a year. After that, the rate will
slide back, not to its old rate of 32 percent, but
two notches lower, to 30 percent.
Clearly, we are telling those with the
capacity to pay, corporations, to bear with this
emergency provision that will be in effect for

1,200 days, while we put our fiscal house in order.


This fiscal medicine will have an expiry date.
For their assistance, a reward of tax
reduction awaits them. We intend to keep the
length of their sacrifice brief. We would like to
assure them that not because there is a light at the
end of the tunnel, this government will keep on
making the tunnel long.
The responsibility will not rest solely
on the weary shoulders of the small man. Big
business will be there to share the burden.

Legi
slati
ve
Pow
er
Petitioners ABAKADA GURO Party List, et al., Pimentel,
Jr., et al., and Escudero, et al. contend in common that Sections 4, 5 and
6 of R.A. No. 9337, amending Sections 106, 107 and 108, respectively,
of the NIRC giving the President the stand-by authority to raise the VAT
rate from 10% to 12% when a certain condition is met, constitutes undue
delegation of the legislative power to tax.

[35]

The assailed provisions read as follows:


As the Court has said, the Senate can propose amendments
and in fact, the amendments made on provisions in the tax on income of
corporations are germane to the purpose of the house bills which is to
raise revenues for the government.

SEC. 4. Sec. 106 of the same Code, as


amended, is hereby further amended to read as
follows:
SEC. 106. Value-Added Tax
on Sale of Goods or Properties.

Likewise, the Court finds the sections referring to other


percentage and excise taxes germane to the reforms to the VAT system,
as these sections would cushion the effects of VAT on consumers.
Considering that certain goods and services which were subject to
percentage tax and excise tax would no longer be VAT-exempt, the
consumer would be burdened more as they would be paying the VAT in
addition to these taxes. Thus, there is a need to amend these sections to
soften the impact of VAT. Again, in his sponsorship speech, Sen. Recto
said:
However, for power plants that run on
oil, we will reduce to zero the present excise tax
on bunker fuel, to lessen the effect of a VAT on
this product.
For electric utilities like Meralco, we
will wipe out the franchise tax in exchange for a
VAT.
And in the case of petroleum, while we
will levy the VAT on oil products, so as not to
destroy the VAT chain, we will however bring
down the excise tax on socially sensitive products
such as diesel, bunker, fuel and kerosene.

(A)
Rate and Base of
Tax. There shall be
levied,
assessed
and
collected on every sale,
barter or exchange of goods
or properties, a value-added
tax equivalent to ten
percent (10%) of the gross
selling price or gross value
in money of the goods or
properties sold, bartered or
exchanged, such tax to be
paid by the seller or
transferor:provided,
that the President, upon
the recommendation of
the Secretary of Finance,
shall, effective January 1,
2006, raise the rate of
value-added tax to twelve
percent (12%), after any
of
the
following
conditions
has
been
satisfied.

...
(i)

value-added
tax collection
as a percentage
of
Gross
Domestic
Product (GDP)
of the previous
year
exceeds
two and fourfifth percent (2
4/5%) or

(ii)

national
government
deficit as a
percentage of
GDP of the
previous year
exceeds
one
and
one-half
percent (1
%).

What do all these exercises point to?


These are not contortions of giving to the left
hand what was taken from the right. Rather, these
sprang from our concern of softening the impact
of VAT, so that the people can cushion the blow of
higher prices they will have to pay as a result of
VAT.[36]
The other sections amended by the Senate pertained to
matters of tax administration which are necessary for the
implementation of the changes in the VAT system.
To reiterate, the sections introduced by the Senate are
germane to the subject matter and purposes of the house bills, which is
to supplement our countrys fiscal deficit, among others. Thus, the
Senate acted within its power to propose those amendments.
SUBSTANTIVE ISSUES
I.
Whether Sections 4, 5 and 6 of R.A. No. 9337, amending Sections 106,
107 and 108 of the NIRC, violate the following provisions of the
Constitution:
a. Article VI, Section 28(1), and
b. Article VI, Section 28(2)
A.

No Undue
Dele
gatio
n of

SEC. 5. Section 107 of the same Code,


as amended, is hereby further amended to read as
follows:
SEC. 107. Value-Added Tax
Importation of Goods.
(A)
In General. There
shall be levied, assessed

on

and collected on every


importation of goods a
value-added tax equivalent
to ten percent (10%) based
on the total value used by
the Bureau of Customs in
determining tariff and
customs
duties,
plus
customs duties, excise
taxes, if any, and other
charges, such tax to be paid
by the importer prior to the
release of such goods from
customs custody: Provided,
That where the customs
duties are determined on
the basis of the quantity or
volume of the goods, the
value-added tax shall be
based on the landed cost
plus excise taxes, if
any: provided,
further,
that the President, upon
the recommendation of
the Secretary of Finance,
shall, effective January 1,
2006, raise the rate of
value-added tax to twelve
percent (12%) after any
of
the
following
conditions
has
been
satisfied.
(i)

(ii)

value-added tax
collection as a
percentage of
Gross Domestic
Product (GDP)
of the previous
year
exceeds
two and fourfifth percent (2
4/5%) or
national
government
deficit as a
percentage of
GDP of the
previous year
exceeds
one
and
one-half
percent (1
%).

conditions
satisfied.
(i)

(ii)

has

been

value-added tax
collection as a
percentage of
Gross Domestic
Product (GDP)
of the previous
year
exceeds
two and fourfifth percent (2
4/5%) or
national
government
deficit as a
percentage of
GDP of the
previous year
exceeds
one
and
one-half
percent (1
%). (Emphasis
supplied)

Petitioners allege that the grant of the stand-by authority to


the President to increase the VAT rate is a virtual abdication by Congress
of its exclusive power to tax because such delegation is not within the
purview of Section 28 (2), Article VI of the Constitution, which
provides:
The Congress may, by law, authorize
the President to fix within specified limits, and
may impose, tariff rates, import and export
quotas, tonnage and wharfage dues, and other
duties or imposts within the framework of the
national development program of the government.
They argue that the VAT is a tax levied on the sale, barter or
exchange of goods and properties as well as on the sale or exchange of
services, which cannot be included within the purview of tariffs under
the exempted delegation as the latter refers to customs duties, tolls or
tribute payable upon merchandise to the government and usually
imposed on goods or merchandise imported or exported.

SEC. 6. Section 108 of the same Code,


as amended, is hereby further amended to read as
follows:

Petitioners ABAKADA GURO Party List, et al., further


contend that delegating to the President the legislative power to tax is
contrary to republicanism. They insist that accountability, responsibility
and transparency should dictate the actions of Congress and they should
not pass to the President the decision to impose taxes. They also argue
that the law also effectively nullified the Presidents power of control,
which includes the authority to set aside and nullify the acts of her
subordinates like the Secretary of Finance, by mandating the fixing of
the tax rate by the President upon the recommendation of the Secretary
of Finance.

SEC. 108. Value-added Tax


on Sale of Services and Use
or Lease of Properties

Petitioners Pimentel, et al. aver that the President has ample


powers to cause, influence or create the conditions provided by the law
to bring about either or both the conditions precedent.

(A)
Rate and Base of
Tax. There shall be
levied,
assessed
and
collected, a value-added tax
equivalent to ten percent
(10%) of gross receipts
derived from the sale or
exchange
of
services: provided,
that
the President, upon the
recommendation of the
Secretary of Finance,
shall, effective January 1,
2006, raise the rate of
value-added tax to twelve
percent (12%), after any
of
the
following

On the other hand, petitioners Escudero, et al. find bizarre


and revolting the situation that the imposition of the 12% rate would be
subject to the whim of the Secretary of Finance, an unelected bureaucrat,
contrary to the principle of no taxation without representation. They
submit that the Secretary of Finance is not mandated to give a favorable
recommendation and he may not even give his recommendation.
Moreover, they allege that no guiding standards are provided in the law
on what basis and as to how he will make his recommendation. They
claim, nonetheless, that any recommendation of the Secretary of Finance
can easily be brushed aside by the President since the former is a mere
alter ego of the latter, such that, ultimately, it is the President who
decides whether to impose the increased tax rate or not.
A brief discourse on the principle of non-delegation of
powers is instructive.

The principle of separation of powers ordains that each of the


three great branches of government has exclusive cognizance of and is
supreme in matters falling within its own constitutionally allocated
sphere.[37] A logical
corollary to the doctrine of separation of powers is the principle of nondelegation of powers, as expressed in the Latin maxim: potestas
delegata non delegari potest which means what has been delegated,
cannot be delegated.[38] This doctrine is based on the ethical principle
that such as delegated power constitutes not only a right but a duty to be
performed by the delegate through the instrumentality of his own
judgment and not through the intervening mind of another.[39]
With respect to the Legislature, Section 1 of Article VI of the
Constitution provides that the Legislative power shall be vested in the
Congress of the Philippines which shall consist of a Senate and a House
of Representatives. The powers which Congress is prohibited from
delegating are those which are strictly, or inherently and exclusively,
legislative. Purely legislative power, which can never be delegated, has
been described as the authority to make a complete law complete as
to the time when it shall take effect and as to whom it shall be
applicable and to determine the expediency of its enactment.[40]
Thus, the rule is that in order that a court may be justified in holding a
statute unconstitutional as a delegation of legislative power, it must
appear that the power involved is purely legislative in nature that is,
one appertaining exclusively to the legislative department. It is the
nature of the power, and not the liability of its use or the manner of its
exercise, which determines the validity of its delegation.
Nonetheless, the general rule barring delegation of legislative
powers is subject to the following recognized limitations or exceptions:
(1)
(2)
(3)
(4)
(5)

Delegation of tariff powers to


President under Section 28 (2)
Article VI of the Constitution;
Delegation of emergency powers to
President under Section 23 (2)
Article VI of the Constitution;
Delegation to the people at large;
Delegation to local governments; and
Delegation to administrative bodies.

the
of
the
of

In every case of permissible delegation, there must be a


showing that the delegation itself is valid. It is valid only if the law (a) is
complete in itself, setting forth therein the policy to be executed, carried
out, or implemented by the delegate;[41] and (b) fixes a standard the
limits of which are sufficiently determinate and determinable to
which the delegate must conform in the performance of his functions.
[42]
A sufficient standard is one which defines legislative policy, marks its
limits, maps out its boundaries and specifies the public agency to apply
it. It indicates the circumstances under which the legislative command is
to be effected.[43]Both tests are intended to prevent a total transference of
legislative authority to the delegate, who is not allowed to step into the
shoes of the legislature and exercise a power essentially legislative.[44]
In People vs. Vera,[45] the Court, through eminent Justice Jose
P. Laurel, expounded on the concept and extent of delegation of power
in this wise:
In testing whether a statute constitutes
an undue delegation of legislative power or not, it
is usual to inquire whether the statute was
complete in all its terms and provisions when it
left the hands of the legislature so that nothing
was left to the judgment of any other appointee or
delegate of the legislature.
...
The true distinction, says Judge
Ranney, is between the delegation of power to
make the law, which necessarily involves a
discretion as to what it shall be, and conferring
an authority or discretion as to its execution, to
be exercised under and in pursuance of the law.
The first cannot be done; to the latter no valid
objection can be made.
...

It is contended, however, that a


legislative act may be made to the effect as law
after it leaves the hands of the legislature. It is
true that laws may be made effective on certain
contingencies, as by proclamation of the
executive or the adoption by the people of a
particular community. In Wayman vs. Southard,
the Supreme Court of the United States ruled that
the legislature may delegate a power not
legislative which it may itself rightfully
exercise. The power to ascertain facts is such a
power which may be delegated. There is
nothing essentially legislative in ascertaining
the existence of facts or conditions as the basis
of the taking into effect of a law. That is a
mental process common to all branches of the
government. Notwithstanding
the
apparent
tendency, however, to relax the rule prohibiting
delegation of legislative authority on account of
the complexity arising from social and economic
forces at work in this modern industrial age, the
orthodox pronouncement of Judge Cooley in his
work on Constitutional Limitations finds
restatement in Prof. Willoughby's treatise on the
Constitution of the United States in the following
language speaking of declaration of legislative
power to administrative agencies: The principle
which permits the legislature to provide that
the administrative agent may determine when
the circumstances are such as require the
application of a law is defended upon the
ground that at the time this authority is
granted, the rule of public policy, which is the
essence of the legislative act, is determined by
the legislature. In other words, the legislature,
as it is its duty to do, determines that, under
given circumstances, certain executive or
administrative action is to be taken, and that,
under other circumstances, different or no
action at all is to be taken. What is thus left to
the administrative official is not the legislative
determination of what public policy demands,
but simply the ascertainment of what the facts
of the case require to be done according to the
terms of the law by which he is governed. The
efficiency of an Act as a declaration of
legislative will must, of course, come from
Congress, but the ascertainment of the
contingency upon which the Act shall take
effect may be left to such agencies as it may
designate. The legislature, then, may provide
that a law shall take effect upon the happening
of future specified contingencies leaving to
some other person or body the power to
determine when the specified contingency has
arisen.(Emphasis supplied).[46]
In Edu vs. Ericta,[47] the Court reiterated:
What cannot be delegated is the
authority under the Constitution to make laws and
to alter and repeal them; the test is the
completeness of the statute in all its terms and
provisions when it leaves the hands of the
legislature. To determine whether or not there is
an undue delegation of legislative power, the
inquiry must be directed to the scope and
definiteness of the measure enacted. The
legislative does not abdicate its functions when
it describes what job must be done, who is to
do it, and what is the scope of his authority. For
a complex economy, that may be the only way in
which the legislative process can go forward. A
distinction has rightfully been made between
delegation of power to make the laws which
necessarily involves a discretion as to what it
shall be, which constitutionally may not be

done, and delegation of authority or discretion


as to its execution to be exercised under and in
pursuance of the law, to which no valid
objection can be made. The Constitution is thus
not to be regarded as denying the legislature the
necessary
resources
of
flexibility
and
practicability. (Emphasis supplied).[48]
Clearly, the legislature may delegate to executive officers or
bodies the power to determine certain facts or conditions, or the
happening of contingencies, on which the operation of a statute is, by its
terms, made to depend, but the legislature must prescribe sufficient
standards, policies or limitations on their authority.[49] While the power
to tax cannot be delegated to executive agencies, details as to the
enforcement and administration of an exercise of such power may be left
to them, including the power to determine the existence of facts on
which its operation depends.[50]
The rationale for this is that the preliminary ascertainment of
facts as basis for the enactment of legislation is not of itself a legislative
function, but is simply ancillary to legislation. Thus, the duty of
correlating information and making recommendations is the kind of
subsidiary activity which the legislature may perform through its
members, or which it may delegate to others to perform. Intelligent
legislation on the complicated problems of modern society is impossible
in the absence of accurate information on the part of the legislators, and
any reasonable method of securing such information is proper. [51] The
Constitution as a continuously operative charter of government does not
require that Congress find for itself
every fact upon which it desires to base legislative action or that it make
for itself detailed determinations which it has declared to be prerequisite
to application of legislative policy to particular facts and circumstances
impossible for Congress itself properly to investigate.[52]
In the present case, the challenged section of R.A. No. 9337
is the common proviso in Sections 4, 5 and 6 which reads as follows:
That the President, upon the
recommendation of the Secretary of Finance,
shall, effective January 1, 2006, raise the rate of
value-added tax to twelve percent (12%), after
any of the following conditions has been satisfied:
(i) Value-added
tax
collection
as
a
percentage
of
Gross
Domestic Product (GDP) of
the previous year exceeds
two and four-fifth percent
(2 4/5%); or
(ii)
National
government deficit as a
percentage of GDP of the
previous year exceeds one
and one-half percent (1
%).
The case before the Court is not a delegation of legislative
power. It is simply a delegation of ascertainment of facts upon which
enforcement and administration of the increase rate under the law is
contingent. The legislature has made the operation of the 12% rate
effective January 1, 2006, contingent upon a specified fact or condition.
It leaves the entire operation or non-operation of the 12% rate upon
factual matters outside of the control of the executive.
No discretion would be exercised by the President.
Highlighting the absence of discretion is the fact that the word shall is
used in the commonproviso. The use of the word shall connotes a
mandatory order. Its use in a statute denotes an imperative obligation
and is inconsistent with the idea of discretion. [53] Where the law is clear
and unambiguous, it must be taken to mean exactly what it says, and
courts have no choice but to see to it that the mandate is obeyed. [54]
Thus, it is the ministerial duty of the President to
immediately impose the 12% rate upon the existence of any of the
conditions specified by Congress. This is a duty which cannot be evaded

by the President. Inasmuch as the law specifically uses the word shall,
the exercise of discretion by the President does not come into play. It is
a clear directive to impose the 12% VAT rate when the specified
conditions are present. The time of taking into effect of the 12% VAT
rate is based on the happening of a certain specified contingency, or
upon the ascertainment of certain facts or conditions by a person or body
other than the legislature itself.
The Court finds no merit to the contention of
petitioners ABAKADA GURO Party List, et al. that the law effectively
nullified the Presidents power of control over the Secretary of Finance
by mandating the fixing of the tax rate by the President upon the
recommendation of the Secretary of Finance. The Court cannot also
subscribe to the position of petitioners
Pimentel, et al. that the word shall should be interpreted to mean may in
view of the phrase upon the recommendation of the Secretary of
Finance. Neither does the Court find persuasive the submission of
petitioners Escudero, et al. that any recommendation by the Secretary of
Finance can easily be brushed aside by the President since the former is
a mere alter ego of the latter.
When one speaks of the Secretary of Finance as the alter ego
of the President, it simply means that as head of the Department of
Finance he is the assistant and agent of the Chief Executive. The
multifarious executive and administrative functions of the Chief
Executive are performed by and through the executive departments, and
the acts of the secretaries of such departments, such as the Department
of Finance, performed and promulgated in the regular course of
business, are, unless disapproved or reprobated by the Chief Executive,
presumptively the acts of the Chief Executive. The Secretary of Finance,
as such, occupies a political position and holds office in an advisory
capacity, and, in the language of Thomas Jefferson, "should be of the
President's bosom confidence" and, in the language of Attorney-General
Cushing, is subject to the direction of the President." [55]
In the present case, in making his recommendation to the
President on the existence of either of the two conditions, the Secretary
of Finance is not acting as the alter ego of the President or even her
subordinate. In such instance, he is not subject to the power of control
and direction of the President. He is acting as the agent of the legislative
department, to determine and declare the event upon which its expressed
will is to take effect.[56] The Secretary of Finance becomes the means or
tool by which legislative policy is determined and implemented,
considering that he possesses all the facilities to gather data and
information and has a much broader perspective to properly evaluate
them. His function is to gather and collate statistical data and other
pertinent information and verify if any of the two conditions laid out by
Congress is present. His personality in such instance is in reality but a
projection of that of Congress. Thus, being the agent of Congress and
not of the President, the President cannot alter or modify or nullify, or
set aside the findings of the Secretary of Finance and to substitute the
judgment of the former for that of the latter.
Congress simply granted the Secretary of Finance the
authority to ascertain the existence of a fact, namely, whether by
December 31, 2005, the value-added tax collection as a percentage of
Gross Domestic Product (GDP) of the previous year exceeds two and
four-fifth percent (24/5%) or the national government deficit as a
percentage of GDP of the previous year exceeds one and one-half
percent (1%). If either of these two instances has occurred, the
Secretary of Finance, by legislative mandate, must submit such
information to the President. Then the 12% VAT rate must be imposed
by the President effective January 1, 2006. There is no undue
delegation of legislative power but only of the discretion as to the
execution of a law. This is constitutionally permissible.[57] Congress
does not abdicate its functions or unduly delegate power when it
describes what job must be done, who must do it, and what is the scope
of his authority; in our complex economy that is frequently the only way
in which the legislative process can go forward.[58]
As to the argument of petitioners ABAKADA GURO Party
List, et al.that delegating to the President the legislative power to tax is
contrary to the principle of republicanism, the same deserves scant
consideration. Congress did not delegate the power to tax but the mere
implementation of the law. The intent and will to increase the VAT rate
to 12% came from Congress and the task of the President is to simply
execute the legislative policy. That Congress chose to do so in such a

manner is not within the province of the Court to inquire into, its task
being to interpret the law.[59]
The insinuation by petitioners Pimentel, et al. that the President
has ample powers to cause, influence or create the conditions to bring
about either or both the conditions precedent does not deserve any merit
as this argument is highly speculative. The Court does not rule on
allegations which are manifestly conjectural, as these may not exist at
all. The Court deals with facts, not fancies; on realities, not
appearances. When the Court acts on appearances instead of realities,
justice and law will be short-lived.
B.

The 12% Increase


VAT Rate Does
Not Impose an
Unfair
and
Unnecessary
Additional Tax
Burden

The condition set for increasing VAT


when deficit/GDP is 1.5% or less means the fiscal
condition of government has reached a relatively
sound position or is towards the direction of a
balanced budget position. Therefore, there is no
need to increase the VAT rate since the fiscal
house is in a relatively healthy position.
Otherwise stated, if the ratio is more than 1.5%,
there is indeed a need to increase the VAT rate.[62]
That the first condition amounts to an incentive to the
President to increase the VAT collection does not render it
unconstitutional so long as there is a public purpose for which the law
was passed, which in this case, is mainly to raise revenue. In fact, fiscal
adequacy dictated the need for a raise in revenue.
The principle of fiscal adequacy as a characteristic of a sound
tax system was originally stated by Adam Smith in his Canons of
Taxation(1776), as:

Petitioners Pimentel, et al. argue that the 12% increase in the


VAT rate imposes an unfair and additional tax burden on the people.
Petitioners also argue that the 12% increase, dependent on any of the 2
conditions set forth in the contested provisions, is ambiguous because it
does not state if the VAT rate would be returned to the original 10% if
the rates are no longer satisfied. Petitioners also argue that such rate is
unfair and unreasonable, as the people are unsure of the applicable VAT
rate from year to year.
Under the common provisos of Sections 4, 5 and 6 of R.A.
No. 9337, if any of the two conditions set forth therein are satisfied, the
President shall increase the VAT rate to 12%. The provisions of the law
are clear. It does not provide for a return to the 10% rate nor does it
empower the President to so revert if, after the rate is increased to 12%,
the VAT collection goes below the 2 4/5 of the GDP of the previous year
or that the national government deficit as a percentage of GDP of the
previous year does not exceed 1%.
Therefore, no statutory construction or interpretation is
needed. Neither can conditions or limitations be introduced where none
is provided for. Rewriting the law is a forbidden ground that only
Congress may tread upon.[60]
Thus, in the absence of any provision providing for a return
to the 10% rate, which in this case the Court finds none, petitioners
argument is, at best, purely speculative. There is no basis for petitioners
fear of a fluctuating VAT rate because the law itself does not provide that
the rate should go back to 10% if the conditions provided in Sections 4,
5 and 6 are no longer present. The rule is that where the provision of the
law is clear and unambiguous, so that there is no occasion for the court's
seeking the legislative intent, the law must be taken as it is, devoid of
judicial addition or subtraction.[61]
Petitioners also contend that the increase in the VAT rate,
which was allegedly an incentive to the President to raise the VAT
collection to at least 2 4/5 of the GDP of the previous year, should be
based on fiscal adequacy.

IV.

Every tax ought to be so contrived as both


to take out and to keep out of the
pockets of the people as little as
possible over and above what it brings
into the public treasury of the state.[63]

It simply means that sources of revenues must be adequate to


meet government expenditures and their variations.[64]
The dire need for revenue cannot be ignored. Our country is
in a quagmire of financial woe. During the Bicameral Conference
Committee hearing, then Finance Secretary Purisima bluntly depicted
the countrys gloomy state of economic affairs, thus:
First, let me explain the position that
the Philippines finds itself in right now. We are in
a position where 90 percent of our revenue is used
for debt service. So, for every peso of revenue
that we currently raise, 90 goes to debt service.
Thats interest plus amortization of our debt. So
clearly, this is not a sustainable situation. Thats
the first fact.
The second fact is that our debt to
GDP level is way out of line compared to other
peer countries that borrow money from that
international financial markets. Our debt to GDP
is approximately equal to our GDP. Again, that
shows you that this is not a sustainable situation.
The third thing that Id like to point
out is the environment that we are presently
operating in is not as benign as what it used to be
the past five years.
What do I mean by that?

Petitioners obviously overlooked that increase in VAT


collection is not the only condition. There is another condition, i.e., the
national government deficit as a percentage of GDP of the previous year
exceeds one and one-half percent (1 %).
Respondents
alternative conditions:
1.

explained

the

philosophy

behind

VAT/GDP Ratio > 2.8%

The condition set for increasing VAT


rate to 12% have economic or fiscal meaning. If
VAT/GDP is less than 2.8%, it means that
government has weak or no capability of
implementing the VAT or that VAT is not effective
in the function of the tax collection. Therefore,
there is no value to increase it to 12% because
such action will also be ineffectual.
2.

Natl Govt Deficit/GDP >1.5%

these

In the past five years, weve been


lucky because we were operating in a period of
basically global growth and low interest rates.
The past few months, we have seen an inching up,
in fact, a rapid increase in the interest rates in the
leading economies of the world. And, therefore,
our ability to borrow at reasonable prices is going
to be challenged. In fact, ultimately, the question
is our ability to access the financial markets.
When the President made her speech
in July last year, the environment was not as bad
as it is now, at least based on the forecast of most
financial institutions. So, we were assuming that
raising 80 billion would put us in a position where
we can then convince them to improve our ability
to borrow at lower rates. But conditions have
changed on us because the interest rates have
gone up. In fact, just within this room, we tried to

access the market for a billion dollars because for


this year alone, the Philippines will have to
borrow 4 billion dollars. Of that amount, we have
borrowed 1.5 billion. We issued last January a 25year bond at 9.7 percent cost. We were trying to
access last week and the market was not as
favorable and up to now we have not accessed
and we might pull back because the conditions are
not very good.

character as would lead to such a conclusion. Absent such a showing, the


presumption of validity must prevail.[68]

So given this situation, we at the


Department of Finance believe that we really need
to front-end our deficit reduction. Because it is
deficit that is causing the increase of the debt and
we are in what we call a debt spiral. The more
debt you have, the more deficit you have because
interest and debt service eats and eats more of
your revenue. We need to get out of this debt
spiral. And the only way, I think, we can get out
of this debt spiral is really have a front-end
adjustment in our revenue base.[65]

Input Tax is defined under Section 110(A) of the NIRC, as


amended, as the value-added tax due from or paid by a VAT-registered
person on the importation of goods or local purchase of good and
services, including lease or use of property, in the course of trade or
business, from a VAT-registered person, and Output Tax is the valueadded tax due on the sale or lease of taxable goods or properties or
services by any person registered or required to register under the law.

The image portrayed is chilling. Congress passed the law


hoping for rescue from an inevitable catastrophe. Whether the law is
indeed sufficient to answer the states economic dilemma is not for the
Court to judge. In theFarias case, the Court refused to consider the
various arguments raised therein that dwelt on the wisdom of Section 14
of R.A. No. 9006 (The Fair Election Act), pronouncing that:
. . . policy matters are not the concern
of the Court. Government policy is within the
exclusive dominion of the political branches of
the government. It is not for this Court to look
into the wisdom or propriety of legislative
determination. Indeed, whether an enactment is
wise or unwise, whether it is based on sound
economic theory, whether it is the best means to
achieve the desired results, whether, in short, the
legislative discretion within its prescribed limits
should be exercised in a particular manner are
matters for the judgment of the legislature, and
the serious conflict of opinions does not suffice to
bring them within the range of judicial
cognizance.[66]
In the same vein, the Court in this case will not dawdle on the
purpose of Congress or the executive policy, given that it is not for the
judiciary to "pass upon questions of wisdom, justice or expediency of
legislation.[67]
II.
Whether Section 8 of R.A. No. 9337, amending Sections 110(A)(2) and
110(B) of the NIRC; and Section 12 of R.A. No. 9337, amending
Section 114(C) of the NIRC, violate the following provisions of the
Constitution:
a. Article VI, Section 28(1), and
b. Article III, Section 1
A.

DUE PROCESS and Equal Protection Clauses

Petitioners Association of Pilipinas Shell Dealers, Inc., et


al. argue that Section 8 of R.A. No. 9337, amending Sections 110 (A)
(2), 110 (B), and Section 12 of R.A. No. 9337, amending Section 114
(C) of the NIRC are arbitrary, oppressive, excessive and confiscatory.
Their argument is premised on the constitutional right against
deprivation of life, liberty of property without DUE PROCESS of law,
as embodied in Article III, Section 1 of the Constitution.
Petitioners also contend that these provisions violate the
constitutional guarantee of equal protection of the law.
The doctrine is that where the DUE PROCESS and equal
protection clauses are invoked, considering that they are not fixed rules
but rather broad standards, there is a need for proof of such persuasive

Section 8 of R.A. No. 9337, amending Section 110(B) of the


NIRC imposes a limitation on the amount of input tax that may be
credited against the output tax. It states, in part: [P]rovided, that the
input tax inclusive of the input VAT carried over from the previous
quarter that may be credited in every quarter shall not exceed seventy
percent (70%) of the output VAT:

Petitioners claim that the contested sections impose


limitations on the amount of input tax that may be claimed. In effect, a
portion of the input tax that has already been paid cannot now be
credited against the output tax.
Petitioners argument is not absolute. It assumes that the
input tax exceeds 70% of the output tax, and therefore, the input tax in
excess of 70% remains uncredited. However, to the extent that the input
tax is less than 70% of the output tax, then 100% of such input tax is still
creditable.
More importantly, the excess input tax, if any, is retained in a
businesss books of accounts and remains creditable in the succeeding
quarter/s. This is explicitly allowed by Section 110(B), which provides
that if the input tax exceeds the output tax, the excess shall be carried
over to the succeeding quarter or quarters. In addition, Section 112(B)
allows a VAT-registered person to apply for the issuance of a tax credit
certificate or refund for any unused input taxes, to the extent that such
input taxes have not been applied against the output taxes. Such unused
input tax may be used in payment of his other internal revenue taxes.
The non-application of the unutilized input tax in a given
quarter is not ad infinitum, as petitioners exaggeratedly contend. Their
analysis of the effect of the 70% limitation is incomplete and one-sided.
It ends at the net effect that there will be unapplied/unutilized inputs
VAT for a given quarter. It does not proceed further to the fact that such
unapplied/unutilized input tax may be credited in the subsequent periods
as allowed by the carry-over provision of Section 110(B) or that it may
later on be refunded through a tax credit certificate under Section
112(B).
Therefore, petitioners argument must be rejected.
On the other hand, it appears that petitioner Garcia failed to
comprehend the operation of the 70% limitation on the input tax.
According to petitioner, the limitation on the creditable input tax in
effect allows VAT-registered establishments to retain a portion of the
taxes they collect, which violates the principle that tax collection and
revenue should be for public purposes and expenditures
As earlier stated, the input tax is the tax paid by a person,
passed on to him by the seller, when he buys goods. Output tax
meanwhile is the tax due to the person when he sells goods. In
computing the VAT payable, three possible scenarios may arise:
First, if at the end of a taxable quarter the output taxes
charged by the seller are equal to the input taxes that he paid and passed
on by the suppliers, then no payment is required;
Second, when the output taxes exceed the input taxes, the
person shall be liable for the excess, which has to be paid to the Bureau
of Internal Revenue (BIR);[69] and
Third, if the input taxes exceed the output taxes, the excess
shall be carried over to the succeeding quarter or quarters. Should the
input taxes result from zero-rated or effectively zero-rated transactions,
any excess over the output taxes shall instead be refunded to the
taxpayer or credited against other internal revenue taxes, at the
taxpayers option.[70]

Section 8 of R.A. No. 9337 however, imposed a 70%


limitation on the input tax. Thus, a person can credit his input tax only
up to the extent of 70% of the output tax. In laymans term, the valueadded taxes that a person/taxpayer paid and passed on to him by a seller
can only be credited up to 70% of the value-added taxes that is due to
him on a taxable transaction. There is no retention of any tax collection
because the person/taxpayer has already previously paid the input tax to
a seller, and the seller will subsequently remit such input tax to the BIR.
The party directly liable for the payment of the tax is the seller. [71] What
only needs to be done is for the person/taxpayer to apply or credit these
input taxes, as evidenced by receipts, against his output taxes.

also justified its move by saying that the provision was designed to raise
an annual revenue of 22.6 billion. [77] The legislature also dispelled the
fear that the provision will fend off foreign investments, saying that
foreign investors have other tax incentives provided by law, and citing
the case of China, where despite a 17.5% non-creditable VAT, foreign
investments were not deterred.[78] Again, for whatever is the purpose of
the 60-month amortization, this involves executive economic policy and
legislative wisdom in which the Court cannot intervene.
With regard to the 5% creditable withholding tax imposed on
payments made by the government for taxable transactions, Section 12
of R.A. No. 9337, which amended Section 114 of the NIRC, reads:

Petitioners Association of Pilipinas Shell Dealers, Inc., et


al. also argue that the input tax partakes the nature of a property that
may not be confiscated, appropriated, or limited without DUE
PROCESS of law.
The input tax is not a property or a property right within the
constitutional purview of the DUE PROCESS clause. A VAT-registered
persons entitlement to the creditable input tax is a mere statutory
privilege.
The distinction between statutory privileges and vested rights
must be borne in mind for persons have no vested rights in statutory
privileges. The state may change or take away rights, which were
created by the law of the state, although it may not take away property,
which was vested by virtue of such rights.[72]
Under the previous system of single-stage taxation, taxes
paid at every level of distribution are not recoverable from the taxes
payable, although it becomes part of the cost, which is deductible from
the gross revenue. When Pres. Aquino issued E.O. No. 273 imposing a
10% multi-stage tax on all sales, it was then that the crediting of the
input tax paid on purchase or importation of goods and services by VATregistered persons against the output tax was introduced. [73] This was
adopted by the Expanded VAT Law (R.A. No. 7716), [74] and The Tax
Reform Act of 1997 (R.A. No. 8424). [75] The right to credit input tax as
against the output tax is clearly a privilege created by law, a privilege
that also the law can remove, or in this case, limit.
Petitioners also contest as arbitrary, oppressive, excessive
and confiscatory, Section 8 of R.A. No. 9337, amending Section 110(A)
of the NIRC, which provides:

SEC. 114. Return and Payment of


Value-added Tax.
(C) Withholding of Value-added Tax.
The Government or any of its political
subdivisions, instrumentalities or agencies,
including government-owned or controlled
corporations (GOCCs) shall, before making
payment on account of each purchase of goods
and services which are subject to the value-added
tax imposed in Sections 106 and 108 of this Code,
deduct and withhold a final value-added tax at the
rate of five percent (5%) of the gross payment
thereof: Provided, That the payment for lease or
use of properties or property rights to nonresident
owners shall be subject to ten percent (10%)
withholding tax at the time of payment. For
purposes of this Section, the payor or person in
control of the payment shall be considered as the
withholding agent.
The value-added tax withheld under
this Section shall be remitted within ten (10) days
following the end of the month the withholding
was made.
Section 114(C) merely provides a method of collection, or as
stated by respondents, a more simplified VAT withholding system. The
government in this case is constituted as a withholding agent with
respect to their payments for goods and services.

SEC. 110. Tax Credits.


(A) Creditable Input Tax.
Provided, That the input tax on goods
purchased or imported in a calendar month for use
in trade or business for which deduction for
depreciation is allowed under this Code, shall be
spread evenly over the month of acquisition and
the fifty-nine (59) succeeding months if the
aggregate acquisition cost for such goods,
excluding the VAT component thereof, exceeds
One million pesos (P1,000,000.00): Provided,
however, That if the estimated useful life of the
capital goods is less than five (5) years, as used
for depreciation purposes, then the input VAT
shall be spread over such a shorter
period: Provided, finally, That in the case of
purchase of services, lease or use of properties,
the input tax shall be creditable to the purchaser,
lessee or license upon payment of the
compensation, rental, royalty or fee.
The foregoing section imposes a 60-month period within
which to amortize the creditable input tax on purchase or importation of
capital goods with acquisition cost of P1 Million pesos, exclusive of the
VAT component. Such spread out only poses a delay in the crediting of
the input tax. Petitioners argument is without basis because the
taxpayer is not permanently deprived of his privilege to credit the input
tax.
It is worth mentioning that Congress admitted that the
spread-out of the creditable input tax in this case amounts to a 4-year
interest-free loan to the government. [76] In the same breath, Congress

Prior to its amendment, Section 114(C) provided for different


rates of value-added taxes to be withheld -- 3% on gross payments for
purchases of goods; 6% on gross payments for services supplied by
contractors other than by public works contractors; 8.5% on gross
payments for services supplied by public work contractors; or 10% on
payment for the lease or use of properties or property rights to
nonresident owners. Under the present Section 114(C), these different
rates, except for the 10% on lease or property rights payment to
nonresidents, were deleted, and a uniform rate of 5% is applied.
The Court observes, however, that the law the used the
word final. In tax usage, final, as opposed to creditable, means full.
Thus, it is provided in Section 114(C): final value-added tax at the rate
of five percent (5%).
In Revenue Regulations No. 02-98, implementing R.A. No.
8424 (The Tax Reform Act of 1997), the concept of final withholding
tax on income was explained, to wit:
SECTION 2.57. Withholding of Tax
at Source
(A) Final Withholding Tax. Under
the final withholding tax system the amount of
income tax withheld by the withholding agent is
constituted as full and final payment of the
income tax due from the payee on the said
income. The liability for payment of the tax rests
primarily on the payor as a withholding agent.
Thus, in case of his failure to withhold the tax or
in case of underwithholding, the deficiency tax
shall be collected from the payor/withholding
agent.

(B) Creditable Withholding Tax.


Under the creditable withholding tax system,
taxes withheld on certain income payments are
intended to equal or at least approximate the tax
due of the payee on said income. Taxes
withheld on income payments covered by the
expanded withholding tax (referred to in Sec.
2.57.2 of these regulations) and compensation
income (referred to in Sec. 2.78 also of these
regulations) are creditable in nature.
As applied to value-added tax, this means that taxable
transactions with the government are subject to a 5% rate, which
constitutes as full payment of the tax payable on the transaction. This
represents the net VAT payable of the seller. The other 5% effectively
accounts for the standard input VAT (deemed input VAT), in lieu of the
actual input VAT directly or attributable to the taxable transaction.[79]
The Court need not explore the rationale behind the
provision. It is clear that Congress intended to treat differently taxable
transactions with the government.[80] This is supported by the fact that
under the old provision, the 5% tax withheld by the government remains
creditable against the tax liability of the seller or contractor, to wit:
SEC. 114. Return and Payment of
Value-added Tax.
(C) Withholding
of Creditable Value-added
Tax.

The
Government or any of its political subdivisions,
instrumentalities
or
agencies,
including
government-owned or controlled corporations
(GOCCs) shall, before making payment on
account of each purchase of goods from sellers
and services rendered by contractors which are
subject to the value-added tax imposed in
Sections 106 and 108 of this Code, deduct and
withhold the value-added tax due at the rate of
three percent (3%) of the gross payment for the
purchase of goods and six percent (6%) on gross
receipts for services rendered by contractors on
every sale or installment payment which shall
be creditable against the value-added tax
liability of the seller or contractor: Provided,
however, That in the case of government public
works contractors, the withholding rate shall be
eight and one-half percent (8.5%): Provided,
further, That the payment for lease or use of
properties or property rights to nonresident
owners shall be subject to ten percent (10%)
withholding tax at the time of payment. For this
purpose, the payor or person in control of the
payment shall be considered as the withholding
agent.
The valued-added tax withheld
under this Section shall be remitted within ten
(10) days following the end of the month the
withholding was made. (Emphasis supplied)
As amended, the use of the word final and the deletion of the
wordcreditable exhibits Congresss intention to treat transactions with
the government differently. Since it has not been shown that the class
subject to the 5% final withholding tax has been unreasonably narrowed,
there is no reason to invalidate the provision. Petitioners, as petroleum
dealers, are not the only ones subjected to the 5% final withholding tax.
It applies to all those who deal with the government.
Moreover, the actual input tax is not totally lost or
uncreditable, as petitioners believe. Revenue Regulations No. 14-2005
or the Consolidated Value-Added Tax Regulations 2005 issued by the
BIR, provides that should the actual input tax exceed 5% of gross
payments, the excess may form part of the cost. Equally, should the
actual input tax be less than 5%, the difference is treated as income. [81]

Petitioners also argue that by imposing a limitation on the


creditable input tax, the government gets to tax a profit or value-added
even if there is no profit or value-added.
Petitioners stance is purely hypothetical, argumentative, and
again, one-sided. The Court will not engage in a legal joust where
premises are what ifs, arguments, theoretical and facts, uncertain. Any
disquisition by the Court on this point will only be, as Shakespeare
describes life in Macbeth,[82] full of sound and fury, signifying nothing.
Whats more, petitioners contention assumes the proposition
that there is no profit or value-added. It need not take an astute
businessman to know that it is a matter of exception that a business will
sell goods or services without profit or value-added. It cannot be
overstressed that a business is created precisely for profit.
The equal protection clause under the Constitution means
that no person or class of persons shall be deprived of the same
protection of laws which is enjoyed by other persons or other classes in
the same place and in like circumstances.[83]
The power of the State to make reasonable and natural
classifications for the purposes of taxation has long been established.
Whether it relates to the subject of taxation, the kind of property, the
rates to be levied, or the amounts to be raised, the methods of
assessment, valuation and collection, the States power is entitled to
presumption of validity. As a rule, the judiciary will not interfere with
such power absent a clear showing of unreasonableness, discrimination,
or arbitrariness.[84]
Petitioners point out that the limitation on the creditable input
tax if the entity has a high ratio of input tax, or invests in capital
equipment, or has several transactions with the government, is not based
on real and substantial differences to meet a valid classification.
The argument is pedantic, if not outright baseless. The law
does not make any classification in the subject of taxation, the kind of
property, the rates to be levied or the amounts to be raised, the methods
of assessment, valuation and collection. Petitioners alleged distinctions
are based on variables that bear different consequences. While the
implementation of the law may yield varying end results depending on
ones profit margin and value-added, the Court cannot go beyond what
the legislature has laid down and interfere with the affairs of business.
The equal protection clause does not require the universal
application of the laws on all persons or things without distinction. This
might in fact sometimes result in unequal protection. What the clause
requires is equality among equals as determined according to a valid
classification. By classification is meant the grouping of persons or
things similar to each other in certain particulars and different from all
others in these same particulars.[85]
Petitioners brought to the Courts attention the introduction
of Senate Bill No. 2038 by Sens. S.R. Osmea III and Ma. Ana
Consuelo A.S. Madrigal on June 6, 2005, and House Bill No. 4493 by
Rep. Eric D. Singson. The proposed legislation seeks to amend the 70%
limitation by increasing the same to 90%. This, according to petitioners,
supports their stance that the 70% limitation is arbitrary and
confiscatory. On this score, suffice it to say that these are still proposed
legislations. Until Congress amends the law, and absent any
unequivocal basis for its unconstitutionality, the 70% limitation stays.
B.
Uniformity and
Equitability of Taxation
Article VI, Section 28(1) of the Constitution reads:
The rule of taxation shall be uniform
and equitable. The Congress shall evolve a
progressive system of taxation.
Uniformity in taxation means that all taxable articles or kinds
of property of the same class shall be taxed at the same rate. Different
articles may be taxed at different amounts provided that the rate is
uniform on the same class everywhere with all people at all times.[86]

In this case, the tax law is uniform as it provides a standard


rate of 0% or 10% (or 12%) on all goods and services. Sections 4, 5 and
6 of R.A. No. 9337, amending Sections 106, 107 and 108, respectively,
of the NIRC, provide for a rate of 10% (or 12%) on sale of goods and
properties, importation of goods, and sale of services and use or lease of
properties. These same sections also provide for a 0% rate on certain
sales and transaction.
Neither does the law make any distinction as to the type of
industry or trade that will bear the 70% limitation on the creditable input
tax, 5-year amortization of input tax paid on purchase of capital goods or
the 5% final withholding tax by the government. It must be stressed that
the rule of uniform taxation does not deprive Congress of the power to
classify subjects of taxation, and only demands uniformity within the
particular class.[87]
R.A. No. 9337 is also equitable. The law is equipped with a
threshold margin. The VAT rate of 0% or 10% (or 12%) does not apply
to sales of goods or services with gross annual sales or receipts not
exceedingP1,500,000.00.[88] Also, basic marine and agricultural food
products in their original state are still not subject to the tax, [89] thus
ensuring that prices at the grassroots level will remain accessible. As
was stated inKapatiran ng mga Naglilingkod sa Pamahalaan ng
Pilipinas, Inc. vs. Tan:[90]
The disputed sales tax is also
equitable. It is imposed only on sales of goods or
services by persons engaged in business with an
aggregate
gross
annual
sales
exceeding P200,000.00.
Small
corner sarisari stores are consequently exempt from its
application. Likewise exempt from the tax are
sales of farm and marine products, so that the
costs of basic food and other necessities, spared as
they are from the incidence of the VAT, are
expected to be relatively lower and within the
reach of the general public.
It is admitted that R.A. No. 9337 puts a premium on
businesses with low profit margins, and unduly favors those with high
profit margins. Congress was not oblivious to this. Thus, to equalize the
weighty burden the law entails, the law, under Section 116, imposed a
3% percentage tax on VAT-exempt persons under Section 109(v), i.e.,
transactions with gross annual sales and/or receipts not exceeding P1.5
Million. This acts as a equalizer because in effect, bigger businesses that
qualify for VAT coverage and VAT-exempt taxpayers stand on equalfooting.
Moreover, Congress provided mitigating measures to cushion
the impact of the imposition of the tax on those previously exempt.
Excise taxes on petroleum products[91] and natural gas[92] were reduced.
Percentage tax on domestic carriers was removed. [93] Power producers
are now exempt from paying franchise tax.[94]
Aside from these, Congress also increased the income tax
rates of corporations, in order to distribute the burden of taxation.
Domestic, foreign, and non-resident corporations are now subject to a
35% income tax rate, from a previous 32%.[95] Intercorporate dividends
of non-resident foreign corporations are still subject to 15% final
withholding tax but the tax credit allowed on the corporations domicile
was increased to 20%.[96] The Philippine Amusement and Gaming
Corporation (PAGCOR) is not exempt from income taxes anymore. [97]
Even the sale by an artist of his works or services performed for the
production of such works was not spared.

Progressive taxation is built on the principle of the taxpayers


ability to pay. This principle was also lifted from Adam
Smiths Canons of Taxation, and it states:
I.

The subjects of every state ought to


contribute towards the support of the
government, as nearly as possible, in
proportion to their respective abilities;
that is, in proportion to the revenue
which they respectively enjoy under
the protection of the state.
Taxation is progressive when its rate goes up depending on
the resources of the person affected.[98]
The VAT is an antithesis of progressive taxation. By its very
nature, it is regressive. The principle of progressive taxation has no
relation with the VAT system inasmuch as the VAT paid by the consumer
or business for every goods bought or services enjoyed is the same
regardless of income. In
other words, the VAT paid eats the same portion of an income, whether
big or small. The disparity lies in the income earned by a person or
profit margin marked by a business, such that the higher the income or
profit margin, the smaller the portion of the income or profit that is eaten
by VAT. A converso, the lower the income or profit margin, the bigger
the part that the VAT eats away. At the end of the day, it is really the
lower income group or businesses with low-profit margins that is always
hardest hit.
Nevertheless, the Constitution does not really prohibit the
imposition of indirect taxes, like the VAT. What it simply provides is
that Congress shall "evolve a progressive system of taxation." The
Court stated in theTolentino case, thus:
The Constitution does not really
prohibit the imposition of indirect taxes which,
like the VAT, are regressive. What it simply
provides is that Congress shall evolve a
progressive system of taxation. The constitutional
provision has been interpreted to mean simply
that direct taxes are . . . to be preferred [and] as
much as possible, indirect taxes should be
minimized.
(E.
FERNANDO,
THE
CONSTITUTION OF THE PHILIPPINES 221
(Second ed. 1977)) Indeed, the mandate to
Congress is not to prescribe, but to evolve, a
progressive tax system. Otherwise, sales taxes,
which perhaps are the oldest form of indirect
taxes, would have been prohibited with the
proclamation of Art. VIII, 17 (1) of the 1973
Constitution from which the present Art. VI, 28
(1) was taken. Sales taxes are also regressive.
Resort to indirect taxes should be
minimized but not avoided entirely because it is
difficult, if not impossible, to avoid them by
imposing such taxes according to the taxpayers'
ability to pay. In the case of the VAT, the law
minimizes the regressive effects of this imposition
by providing for zero rating of certain transactions
(R.A. No. 7716, 3, amending 102 (b) of the
NIRC), while granting exemptions to other
transactions. (R.A. No. 7716, 4 amending 103
of the NIRC)[99]
CONCLUSION

All these were designed to ease, as well as spread out, the


burden of taxation, which would otherwise rest largely on the
consumers. It cannot therefore be gainsaid that R.A. No. 9337 is
equitable.
C.

Progressivity of Taxation

Lastly, petitioners contend that the limitation on the


creditable input tax is anything but regressive. It is the smaller business
with higher input tax-output tax ratio that will suffer the consequences.

It has been said that taxes are the lifeblood of the


government. In this case, it is just an enema, a first-aid measure to
resuscitate an economy in distress. The Court is neither blind nor is it
turning a deaf ear on the plight of the masses. But it does not have the
panacea for the malady that the law seeks to remedy. As in other cases,
the Court cannot strike down a law as unconstitutional simply because
of its yokes.
Let us not be overly influenced by the
plea that for every wrong there is a remedy, and
that the judiciary should stand ready to afford
relief. There are undoubtedly many wrongs the

judicature may not correct, for instance, those


involving political questions. . . .
Let us likewise disabuse our minds
from the notion that the judiciary is the repository
of remedies for all political or social ills; We
should not forget that the Constitution has
judiciously allocated the powers of government to
three distinct and separate compartments; and that
judicial interpretation has tended to the
preservation of the independence of the three, and
a zealous regard of the prerogatives of each,
knowing full well that one is not the guardian of
the others and that, for official wrong-doing, each
may be brought to account, either by
impeachment, trial or by the ballot box.[100]
The words of the Court in Vera vs. Avelino[101] holds true then,
as it still holds true now. All things considered, there is no raison
d'tre for the unconstitutionality of R.A. No. 9337.
WHEREFORE, Republic Act No. 9337 not being
unconstitutional, the petitions in G.R. Nos. 168056, 168207, 168461,
168463, and 168730, are hereby DISMISSED.
There being no constitutional impediment to the full
enforcement and implementation of R.A. No. 9337, the temporary
restraining order issued by the Court on July 1, 2005 is LIFTED upon
finality of herein decision.
SO ORDERED.

GOVERNMENT SERVICE INSURANCE SYSTEM, Cebu City


Branch, petitioner,
vs.
MILAGROS
O.
MONTESCLAROS,respondent.
DECISION
CARPIO, J.:

[7]

According to GSIS, Nicolas wed Milagros on 10 July 1983, less


than one year from his date of retirement on 17 February 1984.
On 2 October 1992, Milagros filed with the trial court a
special civil action for declaratory relief questioning the validity of
Section 18 of PD 1146 disqualifying her from receiving
survivorship pension.
On 9 November 1994, the trial court rendered judgment
declaring Milagros eligible for survivorship pension. The trial court
ordered GSIS to pay Milagros the benefits due including interest.
Citing Articles 115[8] and 117[9] of the Family Code, the trial court
held that retirement benefits, which the pensioner has earned for
services rendered and for which the pensioner has contributed
through monthly salary deductions, are onerous acquisitions.
Since retirement benefits are property the pensioner acquired
through labor, such benefits are conjugal property. The trial court
held that the prohibition in Section 18 of PD 1146 is deemed
repealed for being inconsistent with the Family Code, a later
law. The Family Code has retroactive effect if it does not
prejudice or impair vested rights.
GSIS appealed to the Court of Appeals, which affirmed the
decision of the trial court. Hence, this petition for review.
In the meantime, in a letter dated 10 January 2003,
Milagros informed the Court that she has accepted GSIS decision
disqualifying her from receiving survivorship pension and that she
is no longer interested in pursuing the case. [10] Commenting on
Milagros letter, GSIS asserts that the Court must decide the case
on the merits.[11]
The Court will resolve the issue despite the manifestation of
Milagros. The issue involves not only the claim of Milagros but
also that of other surviving spouses who are similarly situated and
whose claims GSIS would also deny based on the
proviso. Social justice and public interest demand that we resolve
the constitutionality of the proviso.
The Ruling of the Court of Appeals

The Case
This is a petition for review oncertiorari of the
Decision[1] dated 13 December 2000 of the Court of Appeals in
CA-G.R. CV No. 48784. The Court of Appeals affirmed the
Decision[2] of the Regional Trial Court, Branch 21, Cebu City (trial
court), which held that Milagros Orbiso Montesclaros is entitled
to survivorship pension.
The Facts
Sangguniang Bayan member Nicolas Montesclaros
(Nicolas) married Milagros Orbiso (Milagros) on 10 July 1983.
[3]
Nicolas was a 72- year old widower when he married Milagros
who was then 43 years old.
On 4 January 1985, Nicolas filed with the Government
Service Insurance System (GSIS) an application for retirement
benefits effective 18 February 1985 under Presidential Decree
No. 1146 or the Revised Government Service Insurance Act of
1977 (PD 1146). In his retirement application, Nicolas
designated his wife Milagros as his sole beneficiary.[4] Nicolas last
day of actual service was on 17 February 1985.[5] On 31 January
1986, GSIS approved Nicolas application for retirement
effective 17 February 1984, granting a lump sum payment of
annuity for the first five years and a monthly annuity thereafter.
[6]
Nicolas died on 22 April 1992. Milagros filed with GSIS a claim
for survivorship pension under PD 1146. On 8 June 1992, GSIS
denied the claim because under Section 18 of PD 1146, the
surviving spouse has no right to survivorship pension if the
surviving spouse contracted the marriage with the pensioner
within three years before the pensioner qualified for the pension.

The Court of Appeals agreed with the trial court that the
retirement benefits are onerous and conjugal because the
pension came from the deceased pensioners salary
deductions. The Court of Appeals held that the pension is not
gratuitous since it is a deferred compensation for services
rendered.
The Issues
GSIS raises the following issues:
1. Whether Section 16 of PD 1146 entitles Milagros to
survivorship pension;
2. Whether retirement benefits form part of conjugal
property;
3. Whether Articles 254 and 256 of the Family Code
repealed Section 18 of PD 1146.[12]
The Courts Ruling
The pertinent provisions of PD 1146 on survivorship
benefits read:
SEC. 16. Survivorship Benefits. When a member or pensioner dies, the
beneficiary shall be entitled to survivorship benefits provided for in
sections seventeen and eighteen hereunder. The survivorship pension
shall consist of:

(1) basic survivorship pension which is fifty percent of the


basic monthly pension; and
(2) dependents pension not exceeding fifty percent of the basic
monthly pension payable in accordance with the rules and regulations
prescribed by the System.
SEC. 17. Death of a Member. (a) Upon the death of a member, the
primary beneficiaries shall be entitled to:
(1) the basic monthly pension which is guaranteed for five
years; Provided, That, at the option of the beneficiaries, it may be
paid in lump sum as defined in this Act: Provided, further, That, the
member is entitled to old-age pension at the time of his death; or
(2) the basic survivorship pension which is guaranteed for thirty months
and the dependents pension; Provided, That, the deceased had paid at
least thirty-six monthly contributions within the five-year period
immediately preceding his death, or a total of at least one hundred eighty
monthly contributions prior to his death.

dependent parents and legitimate descendants except dependent


children.[14] The law defines dependent as the legitimate,
legitimated, legally adopted, acknowledged natural or illegitimate
child who is unmarried, not gainfully employed, and not over
twenty-one years of age or is over twenty-one years of age but
physically or mentally incapacitated and incapable of selfsupport. The term also includes the legitimate spouse
dependent for support on the member, and the legitimate
parent wholly dependent on the member for support.[15]
The main question for resolution is the validity of the
proviso in Section 18 of PD 1146, which proviso prohibits the
dependent spouse from receiving survivorship pension if such
dependent spouse married the pensioner within three years
before the pensioner qualified for the pension (the proviso).
We hold that the proviso, which was the sole basis for the
rejection by GSIS of Milagros claim, is unconstitutional because it
violates the DUE PROCESS clause. The proviso is also
discriminatory and denies equal protection of the law.
Retirement Benefits as Property Interest

(b) At the end of the guaranteed periods mentioned in the preceding


sub-section (a), the survivorship pension shall be paid as follows:
(1) when the dependent spouse is the only survivor, he shall receive the
basic survivorship pension for life or until he remarries;
(2) when only dependent children are the survivors, they shall be
entitled to the survivorship pension for as long as they are qualified;
(3) when the survivors are the dependent spouse and the dependent
children, they shall be entitled to the survivorship pension so long as
there are dependent children and, thereafter, the surviving spouse shall
receive the basic survivorship pension for life or until he remarries.
(c) In the absence of primary beneficiaries, the secondary beneficiaries
designated by the deceased and recorded in the System, shall be entitled
to:
(1) a cash payment equivalent to thirty times the basic survivorship
pension when the member is qualified for old-age pension; or
(2) a cash payment equivalent to fifty percent of the average monthly
compensation for each year he paid contributions, but not less than
five hundred pesos; Provided, That, the member paid at least thirty-six
monthly contributions within the five-year period immediately
preceding his death or paid a total of at least one hundred eighty
monthly contributions prior to his death.
(d) When the primary beneficiaries are not entitled to the benefits
mentioned in paragraph (a) of this section, they shall receive a cash
payment equivalent to one hundred percent of the average monthly
compensation for each year the member paid contributions, but not less
than five hundred pesos. In the absence of primary beneficiaries, the
amount shall revert to the funds of the System.
SEC. 18. Death of a Pensioner. Upon the death of a pensioner, the
primary beneficiaries shall receive the applicable pension mentioned
under paragraph (b) of section seventeen of this Act: Provided, That,
the dependent spouse shall not be entitled to said pension if his
marriage with the pensioner is contracted within three years before
the pensioner qualified for the pension. When the pensioner dies
within the period covered by the lump sum, the survivorship pension
shall be paid only after the expiration of the said period. This shall also
apply to the pensioners living as of the effectivity of this Act, but the
survivorship benefit shall be based on the monthly pension being
received at the time of death. (Emphasis supplied)
Under PD 1146, the primary beneficiaries are (1) the
dependent spouse until such spouse remarries, and (2) the
dependent children.[13] The secondary beneficiaries are the

Under Section 5 of PD 1146, it is mandatory for the


government employee to pay monthly contributions. PD 1146
mandates the government to include in its annual appropriation
the necessary amounts for its share of the contributions. It is
compulsory on the government employer to take off and withhold
from the employees monthly salaries their contributions and to
remit the same to GSIS. [16] The government employer must also
remit its corresponding share to GSIS. [17] Considering the
mandatory salary deductions from the government employee, the
government pensions do not constitute mere gratuity but form
part of compensation.
In a pension plan where employee participation is
mandatory, the prevailing view is that employees have contractual
or vested rights in the pension where the pension is part of the
terms of employment.[18] The reason for providing retirement
benefits is to compensate service to the government. Retirement
benefits to government employees are part of emolument to
encourage and retain qualified employees in the government
service. Retirement benefits to government employees reward
them for giving the best years of their lives in the service of their
country.[19]
Thus, where the employee retires and meets the eligibility
requirements, he acquires a vested right to benefits that is
protected by the DUE PROCESS clause.[20] Retirees enjoy a
protected property interest whenever they acquire a right to
immediate payment under pre-existing law.[21] Thus, a pensioner
acquires a vested right to benefits that have become due as
provided under the terms of the public employees pension
statute.[22] No law can deprive such person of his pension rights
without DUE PROCESS of law, that is, without notice and
opportunity to be heard.[23]
In addition to retirement and disability benefits, PD 1146
also provides for benefits to survivors of deceased government
employees and pensioners. Under PD 1146, the dependent
spouse is one of the beneficiaries of survivorship benefits. A
widows right to receive pension following the demise of her
husband is also part of the husbands contractual compensation.
[24]

Denial of DUE PROCESS


The proviso is contrary to Section 1, Article III of the
Constitution, which provides that [n]o person shall be deprived of
life, liberty, or property without DUE PROCESS of law, nor shall
any person be denied the equal protection of the laws. The
proviso is unduly oppressive in outrightly denying a dependent
spouses claim for survivorship pension if the dependent spouse
contracted marriage to the pensioner within the three-year

prohibited period. There is outright confiscation of benefits due


the surviving spouse without giving the surviving spouse an
opportunity to be heard. The proviso undermines the purpose of
PD 1146, which is to assure comprehensive and integrated social
security and insurance benefits to government employees and
their dependents in the event of sickness, disability, death, and
retirement of the government employees.
The whereas clauses of PD 1146 state:
WHEREAS, the Government Service Insurance System in promoting
the efficiency and welfare of the employees of the Government of
the Philippines, administers the laws that grant to its members social
security and insurance benefits;
WHEREAS, it is necessary to preserve at all times the actuarial solvency
of the funds administered by the System; to guarantee to the government
employee all the benefits due him; and to expand and increase the
benefits made available to him and his dependents to the extent
permitted by available resources;
WHEREAS, provisions of existing laws have impeded the efficient and
effective discharge by the System of its functions and have unduly
hampered the System from being more responsive to the dramatic
changes of the times and from meeting the increasing needs and
expectations of the Filipino public servant;
WHEREAS, provisions of existing laws that have prejudiced, rather
than benefited, the government employee; restricted, rather than
broadened, his benefits, prolonged, rather than facilitated the payment of
benefits, must now yield to his paramount welfare;
WHEREAS, the social security and insurance benefits of government
employees must be continuously re-examined and improved to assure
comprehensive and integrated social security and insurance programs
that will provide benefits responsive to their needs and those of their
dependents in the event of sickness, disability, death, retirement, and
other contingencies; and to serve as a fitting reward for dedicated public
service;
WHEREAS, in the light of existing economic conditions affecting the
welfare of government employees, there is a need to expand and
improve the social security and insurance programs administered by the
Government Service Insurance System, specifically, among others, by
increasing pension benefits, expanding disability benefits, introducing
survivorship benefits, introducing sickness and income benefits, and
eventually extending the compulsory coverage of these programs to all
government employees regardless of employment status.
PD 1146 has the following purposes:
a. to preserve at all times the actuarial solvency of
the funds administered by the System;
b. to guarantee to the government employee all the
benefits due him; and
c. to expand, increase, and improve the social
security and insurance benefits made available to
him and his dependents such as:

increasing pension benefits

expanding disability benefits

introducing survivorship benefits

introducing sickness income benefits

extending compulsory membership to all

government employees irrespective of


status[25]
The law extends survivorship benefits to the surviving and
qualified beneficiaries of the deceased member or pensioner to
cushion the beneficiaries against the adverse economic effects
resulting from the death of the wage earner or pensioner.[26]
Violation of the Equal Protection Clause
The surviving spouse of a government employee is entitled
to receive survivors benefits under a pension system. However,
statutes sometimes require that the spouse should have married
the employee for a certain period before the employees death to
prevent sham marriages contracted for monetary gain. One
example is the Illinois Pension Code which restricts survivors
annuity benefits to a surviving spouse who was married to a state
employee for at least one year before the employees
death. The Illinoispension system classifies spouses into those
married less than one year before a members death and those
married one year or more. The classification seeks to prevent
conscious adverse risk selection of deathbed marriages where a
terminally ill member of the pension system marries another so
that person becomes eligible for benefits. In Sneddon v. The
State Employees Retirement System of Illinois, [27] the
Appellate Court of Illinois held that such classification was based
on difference in situation and circumstance, bore a rational
relation to the purpose of the statute, and was therefore not in
violation of constitutional guarantees of DUE PROCESS and
equal protection.
A statute based on reasonable classification does not
violate the constitutional guaranty of the equal protection of the
law.[28] The requirements for a valid and reasonable classification
are: (1) it must rest on substantial distinctions; (2) it must be
germane to the purpose of the law; (3) it must not be limited to
existing conditions only; and (4) it must apply equally to all
members of the same class.[29] Thus, the law may treat and
regulate one class differently from another class provided there
are real and substantial differences to distinguish one class from
another.[30]
The proviso in question does not satisfy these
requirements. The proviso discriminates against the dependent
spouse who contracts marriage to the pensioner within three
years before the pensioner qualified for the pension. [31]Under the
proviso, even if the dependent spouse married the pensioner
more than three years before the pensioners death, the
dependent spouse would still not receive survivorship pension if
the marriage took place within three years before the pensioner
qualified for pension. The object of the prohibition is
vague. There is no reasonable connection between the means
employed and the purpose intended. The law itself does not
provide any reason or purpose for such a prohibition. If the
purpose of the proviso is to prevent deathbed marriages, then
we do not see why the proviso reckons the three-year prohibition
from the date the pensioner qualified for pension and not from the
date the pensioner died. The classification does not rest on
substantial distinctions. Worse, the classification lumps all those
marriages contracted within three years before the pensioner
qualified for pension as having been contracted primarily for
financial convenience to avail of pension benefits.
Indeed,
the
classification
is
discriminatory
and
arbitrary. This is probably the reason Congress deleted the
proviso in Republic Act No. 8291 (RA 8291), [32]otherwise known
as the Government Service Insurance Act of 1997, the law
revising the old charter of GSIS (PD 1146). Under the
implementing rules of RA 8291, the surviving spouse who married
the member immediately before the members death is still
qualified to receive survivorship pension unless the GSIS proves
that the surviving spouse contracted the marriage solely to
receive the benefit.[33]

Thus, the present GSIS law does not presume that


marriages contracted within three years before retirement or
death of a member are sham marriages contracted to avail of
survivorship benefits. The present GSIS law does not
automatically forfeit the survivorship pension of the surviving
spouse who contracted marriage to a GSIS member within three
years before the members retirement or death. The law
acknowledges that whether the surviving spouse contracted the
marriage mainly to receive survivorship benefits is a matter of
evidence. The law no longer prescribes a sweeping classification
that unduly prejudices the legitimate surviving spouse and defeats
the purpose for which Congress enacted the social legislation.
WHEREFORE, the petition is DENIED for want of merit. We
declare VOID for being violative of the constitutional guarantees
of DUE PROCESS and equal protection of the law the proviso in
Section 18 of Presidential Decree No. 1146, which proviso states
that the dependent spouse shall not be entitled to said pension if
his marriage with the pensioner is contracted within three years
before the pensioner qualified for the pension. The Government
Service Insurance System cannot deny the claim of Milagros O.
Montesclaros for survivorship benefits based on this invalid
proviso.
No pronouncement as to costs.
SO ORDERED.

G.R. No. 158793

June 8, 2006

JAMES MIRASOL, RICHARD SANTIAGO, and LUZON


MOTORCYCLISTS FEDERATION, INC., Petitioners,
vs.
DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS and
TOLL REGULATORY BOARD, Respondents.
DECISION
CARPIO, J.:
This petition for review on certiorari1 seeks to reverse the
Decision dated 10 March 2003 of the Regional Trial Court, Branch
147, Makati City (RTC) in Civil Case No. 01-034, as well as the
RTCs Order dated 16 June 2003 which denied petitioners Motion
for Reconsideration. Petitioners assert that Department of Public
Works and Highways (DPWH) Department Order No. 74 (DO 74),
Department Order No. 215 (DO 215), and the Revised Rules and
Regulations on Limited Access Facilities of the Toll Regulatory
Board (TRB) violate Republic Act No. 2000 (RA 2000) or the
Limited Access Highway Act. Petitioners also seek to declare
Department Order No. 123 (DO 123) and Administrative Order
No. 1 (AO 1)2 unconstitutional.
Antecedent Facts
The facts are not in dispute. As summarized by the Solicitor
General, the facts are as follows:
1. On January 10, 2001, petitioners filed before the trial
court a Petition for Declaratory Judgment with
Application for Temporary Restraining Order and
Injunction docketed as Civil Case No. 01-034. The
petition sought the declaration of nullity of the following
administrative issuances for being inconsistent with the
provisions of Republic Act 2000, entitled "Limited
Access Highway Act" enacted in 1957:

b. DPWH Department Order No. 74, Series of


1993;
c. Art. II, Sec. 3(a) of the Revised Rules on
Limited Access Facilities promulgated in
199[8] by the DPWH thru the Toll Regulatory
Board (TRB).
2. Previously, pursuant to its mandate under R.A. 2000,
DPWH issued on June 25, 1998 Department Order
(DO) No. 215 declaring the Manila-Cavite (Coastal
Road) Toll Expressway as limited access facilities.
3. Accordingly, petitioners filed an Amended Petition on
February 8, 2001 wherein petitioners sought the
declaration of nullity of the aforesaid administrative
issuances. Moreover, petitioners prayed for the
issuance of a temporary restraining order and/or
preliminary injunction to prevent the enforcement of the
total ban on motorcycles along the entire breadth of
North and South Luzon Expressways and the ManilaCavite (Coastal Road) Toll Expressway under DO 215.
4. On June 28, 2001, the trial court, thru then Presiding
Judge Teofilo Guadiz, after due hearing, issued an
order granting petitioners application for preliminary
injunction. On July 16, 2001, a writ of preliminary
injunction was issued by the trial court, conditioned
upon petitioners filing of cash bond in the amount
ofP100,000.00, which petitioners subsequently
complied with.
5. On July 18, 2001, the DPWH acting thru the TRB,
issued Department Order No. 123 allowing motorcycles
with engine displacement of 400 cubic centimeters
inside limited access facilities (toll ways).
6. Upon the assumption of Honorable Presiding Judge
Ma. Cristina Cornejo, both the petitioners and
respondents were required to file their respective
Memoranda. Petitioners likewise filed [their]
Supplemental Memorandum. Thereafter, the case was
deemed submitted for decision.
7. Consequently, on March 10, 2003, the trial court
issued the assailed decision dismissing the petition but
declaring invalid DO 123. Petitioners moved for a
reconsideration of the dismissal of their petition; but it
was denied by the trial court in its Order dated June 16,
2003.3
Hence, this petition.
The RTCs Ruling
The dispositive portion of the RTCs Decision dated 10 March
2003 reads:
WHEREFORE, [t]he Petition is denied/dismissed insofar as
petitioners seek to declare null and void ab initio DPWH
Department Order No. 74, Series of 1993, Administrative Order
No. 1, and Art. II, Sec. 3(a) of the Revised Rules on Limited
Access Facilities promulgated by the DPWH thru the TRB, the
presumed validity thereof not having been overcome; but the
petition is granted insofar as DPWH Department Order No. 123 is
concerned, declaring the same to be invalid for being violative of
the equal protection clause of the Constitution.
SO ORDERED.4

a. DPWH Administrative Order No. 1, Series


of 1968;

The Issues

Petitioners seek a reversal and raise the following issues for


resolution:

AO 1, which, among others, prohibited motorcycles on limited


access highways. The pertinent provisions of AO 1 read:

1. WHETHER THE RTCS DECISION IS ALREADY


BARRED BY RES JUDICATA;

SUBJECT: Revised Rules and Regulations Governing Limited


Access Highways

2. WHETHER DO 74, DO 215 AND THE TRB


REGULATIONS CONTRAVENE RA 2000; AND

By virtue of the authority granted the Secretary [of] Public


Works and Communications under Section 3 of R.A. 2000,
otherwise known as the Limited Access Highway Act, the
following rules and regulations governing limited access highways
are hereby promulgated for the guidance of all concerned:

3. WHETHER AO 1 AND DO 123 ARE


UNCONSTITUTIONAL.5

xxxx

The Ruling of the Court


The petition is partly meritorious.

Section 3 On limited access highways, it is unlawful for any


person or group of persons to:

Whether the RTCs Decision Dismissing Petitioners Case is


Barred by Res Judicata
Petitioners rely on the RTCs Order dated 28 June 2001, which
granted their prayer for a writ of preliminary injunction. Since
respondents did not appeal from that Order, petitioners argue that
the Order became "a final judgment" on the issues. Petitioners
conclude that the RTC erred when it subsequently dismissed their
petition in its Decision dated 10 March 2003.
Petitioners are mistaken. As the RTC correctly stated, the Order
dated 28 June 2001 was not an adjudication on the merits of the
case that would trigger res judicata. A preliminary injunction does
not serve as a final determination of the issues. It is a provisional
remedy, which merely serves to preserve the status quo until the
court could hear the merits of the case.6 Thus, Section 9 of Rule
58 of the 1997 Rules of Civil Procedure requires the issuance of a
final injunction to confirm the preliminary injunction should the
court during trial determine that the acts complained of deserve to
be permanently enjoined. A preliminary injunction is a mere
adjunct, an ancillary remedy which exists only as an incident of
the main proceeding.7
Validity of DO 74, DO 215 and the TRB Regulations
Petitioners claim that DO 74,8 DO 215,9 and the TRBs Rules and
Regulations issued under them violate the provisions of RA 2000.
They contend that the two issuances unduly expanded the power
of the DPWH in Section 4 of RA 2000 to regulate toll ways.
Petitioners assert that the DPWHs regulatory authority is limited
to acts like redesigning curbings or central dividing sections. They
claim that the DPWH is only allowed to re-design the physical
structure of toll ways, and not to determine "who or what can be
qualified as toll way users."10
11

Section 4 of RA 2000 reads:


SEC. 4. Design of limited access facility. The Department of
Public Works and Communications is authorized to so
design any limited access facility and to so regulate, restrict,
or prohibit access as to best serve the traffic for which such
facility is intended; and its determination of such design shall be
final. In this connection, it is authorized to divide and separate any
limited access facility into separate roadways by the construction
of raised curbings, central dividing sections, or other physical
separations, or by designating such separate roadways by signs,
markers, stripes, and the proper lane for such traffic by
appropriate signs, markers, stripes and other devices. No person,
shall have any right of ingress or egress to, from or across limited
access facilities to or from abutting lands, except at such
designated points at which access may be permitted, upon such
terms and conditions as may be specified from time to time.
(Emphasis supplied)

xxxx
(h) Drive any bicycle, tricycle, pedicab, motorcycle or any
vehicle (not motorized);
x x x x12 (Emphasis supplied)
On 5 April 1993, Acting Secretary Edmundo V. Mir of
the Department of Public Works and Highways issued DO 74:
SUBJECT: Declaration of the North Luzon Expressway from
Balintawak to Tabang and the South Luzon Expressway from
Nichols to Alabang as Limited Access Facilities
Pursuant to Section 2 of Republic Act No. 2000, a limited access
facility is defined as "a highway or street especially designed for
through traffic, and over, from, or to which owners or occupants of
abutting land or other persons have no right or easement or only
a limited right or easement of access, light, air or view by reason
of the fact that their proper[t]y abuts upon such limited access
facility or for any other reason. Such highways or streets may be
parkways, from which trucks, buses, and other commerical [sic]
vehicles shall be excluded; or they may be free ways open to use
by all customary forms of street and highway traffic."
Section 3 of the same Act authorizes the Department of Public
Works and Communications (now Department of Public Works
and Highways) "to plan, designate, establish, regulate, vacate,
alter, improve, maintain, and provide limited access facilities for
public use wherever it is of the opinion that traffic conditions,
present or future, will justify such special facilities."
Therefore, by virtue of the authority granted above, the
Department of Public Works and Highways hereby designates
and declares the Balintawak to Tabang Sections of the North
Luzon Expressway, and the Nichols to Alabang Sections of the
South Luzon Expressways, to be LIMITED ACCESS
HIGHWAYS/FACILITIES subject to such rules and regulations
that may be imposed by the DPWH thru the Toll Regulatory Board
(TRB).
In view thereof, the National Capital Region (NCR) of this
Department is hereby ordered, after consultation with the TRB
and in coordination with the Philippine National Police (PNP), to
close all illegal openings along the said Limited Access
Highways/Facilities. In this connection, the NCR is instructed to
organize its own enforcement and security group for the purpose
of assuring the continued closure of the right-of-way fences and
the implementation of the rules and regulations that may be
imposed by the DPWH thru the TRB.
This Order shall take effect immediately.13

On 19 February 1968, Secretary Antonio V. Raquiza of


the Department of Public Works and Communicationsissued

On 25 June 1998, then DPWH Secretary Gregorio R. Vigilar


issued DO 215:
SUBJECT: Declaration of the R-1 Expressway, from Seaside drive
to Zapote, C-5 Link Expressway, from Zapote to Noveleta, of the
Manila Cavite Toll Expressway as Limited Access Facility.
Pursuant to Section 2 of Republic Act No. 2000, a limited access
facility is defined as "a highway or street especially designed for
through traffic, and over, from, or to which owners or occupants of
abutting land or other persons have no right or easement or only
a limited right or easement of access, light, air or view by reason
of the fact that their property abuts upon such limited access
facility or for any other reason. Such highways or streets may be
parkways, from which trucks, buses, and other commercial
vehicles shall be excluded; or they may be free ways open to use
by all customary forms of street and highway traffic."
Section 3 of the same Act authorizes the Department of Public
Works and Communications (now Department of Public Works
and Highways) "to plan, designate, establish, regulate, vacate,
alter, improve, maintain, and provide limited access facilities for
public use wherever it is of the opinion that traffic conditions,
present or future, will justify such special facilities."
Therefore, by virtue of the authority granted above, the
Department of Public Works and Highways hereby designates
and declares the R-1 Expressway, C-5 Link Expressway and the
R-1 Extension Expressway Sections of the Manila Cavite Toll
Expressway to be LIMITED ACCESS HIGHWAYS/FACILITIES
subject to such rules and regulations that may be imposed by the
DPWH thru the Toll Regulatory Board (TRB).
In view thereof, the National Capital Region (NCR) of this
Department is hereby ordered, after consultation with the TRB
and in coordination with the Philippine National Police (PNP), to
close all illegal openings along the said Limited Access
Highways/Facilities. In this connection, the NCR is instructed to
organize its own enforcement and security group for the purpose
of assuring the continued closure of the right-of-way fences and
the implementation of the rules and regulations that may be
imposed by the DPWH thru the TRB.
This Order shall take effect immediately.14
The RTC held that Section 4 of RA 2000 expressly authorized the
DPWH to design limited access facilities and to regulate, restrict,
or prohibit access as to serve the traffic for which such facilities
are intended. According to the RTC, such authority to regulate,
restrict, or prohibit logically includes the determination of who and
what can and cannot be permitted entry or access into the limited
access facilities. Thus, the RTC concluded that AO 1, DO 74, and
the Revised Rules and Regulations on Limited Access Facilities,
which ban motorcycles entry or access to the limited access
facilities, are not inconsistent with RA 2000.
RA 2000, otherwise known as the Limited Access Highway Act,
was approved on 22 June 1957. Section 4 of RA 2000 provides
that "[t]he Department of Public Works and
Communications is authorized to so design any limited access
facility and to so regulate, restrict, or prohibit access as to best
serve the traffic for which such facility is intended." The RTC
construed this authorization to regulate, restrict, or prohibit access
to limited access facilities to apply to the Department of Public
Works and Highways (DPWH).
The RTCs ruling is based on a wrong premise. The RTC
assumed that the DPWH derived its authority from its
predecessor, the Department of Public Works and
Communications, which is expressly authorized to regulate,
restrict, or prohibit access to limited access facilities under
Section 4 of RA 2000. However, such assumption fails to consider
the evolution of the Department of Public Works and
Communications.

Under Act No. 2711, otherwise known as the Revised


Administrative Code, approved on 10 March 1917, there were
only seven executive departments, namely: the Department of the
Interior, the Department of Finance, the Department of Justice,
the Department of Agriculture and Commerce, the Department of
Public Works and Communications, the Department of Public
Instruction, and the Department of Labor.15 On 20 June 1964,
Republic Act No. 413616 created the Land Transportation
Commission under the Department of Public Works and
Communications. Later, the Department of Public Works and
Communications was restructured into theDepartment of Public
Works, Transportation and Communications.
On 16 May 1974, Presidential Decree No. 458 (PD 458)
separated the Bureau of Public Highways from the Department of
Public Works, Transportation and Communications and created it
as a department to be known as Department of Public Highways.
Under Section 3 of PD 458, the Department of Public Highways is
"responsible for developing and implementing programs on the
construction and maintenance of roads, bridges and airport
runways."
With the amendment of the 1973 Philippine Constitution in 1976,
resulting in the shift in the form of government, national agencies
were renamed from Departments to Ministries. Thus, the
Department of Public Works, Transportation and Communications
became the Ministry of Public Works, Transportation and
Communications.
On 23 July 1979, then President Ferdinand E. Marcos issued
Executive Order No. 546 (EO 546), creating aMinistry of Public
Works and a Ministry of Transportation and
Communications.17 Under Section 1 of EO 546, the Ministry of
Public Works assumed the public works functions of
the Ministry of Public Works, Transportation and
Communications. The functions of the Ministry of Public
Works were the "construction, maintenance and repair of port
works, harbor facilities, lighthouses, navigational aids, shore
protection works, airport buildings and associated facilities, public
buildings and school buildings, monuments and other related
structures, as well as undertaking harbor and river dredging
works, reclamation of foreshore and swampland areas, water
supply, and flood control and drainage works."18
On the other hand, the Ministry of Transportation and
Communications became the "primary policy, planning,
programming, coordinating, implementing, regulating and
administrative entity of the executive branch of the government in
the promotion, development, and regulation of a dependable and
coordinated network of transportation and communication
systems."19 The functions of the Ministry of Transportation and
Communications were:
a. Coordinate and supervise all activities of the Ministry
relative to transportation and communications;
b. Formulate and recommend national policies and
guidelines for the preparation and implementation
of an integrated and comprehensive transportation
and communications system at the national,
regional and local levels;
c. Establish and administer comprehensive and
integrated programs for transportation and
communication, and for this purpose, may call on any
agency, corporation, or organization, whether
government or private, whose development programs
include transportation and communications as an
integral part to participate and assist in the preparation
and implementation of such programs;
d. Regulate, whenever necessary, activities relative
to transportation and communications and

prescribe and collect fees in the exercise of such


power;
e. Assess, review and provide direction to
transportation and communications research and
development programs of the government in
coordination with other institutions concerned; and
f. Perform such other functions as may be necessary to
carry into effect the provisions of this Executive
Order.20 (Emphasis supplied)
On 27 July 1981, then President Marcos issued Executive Order
No. 710 (EO 710), which merged the Ministry of Public Works and
the Ministry of Public Highways for "greater simplicity and
economy in operations."21 The restructured agency became
known as the Ministry of Public Works and Highways. Under
Section 1 of EO 710 the functions of the Ministry of Public Works
and the Ministry of Public Highways22 were transferred to the
Ministry of Public Works and Highways.
Upon the ratification of the 1987 Constitution in February 1987,
the former Ministry of Public Works and Highways became
the Department of Public Works and Highways (DPWH) and
the former Ministry of Transportation and Communications
became the Department of Transportation and
Communications (DOTC).
DPWH issued DO 74 and DO 215 declaring certain expressways
as limited access facilities on 5 April 1993 and 25 June 1998,
respectively. Later, the TRB, under the DPWH, issued the
Revised Rules and Regulations on Limited Access Facilities.
However, on 23 July 1979, long before these department orders
and regulations were issued, the Ministry of Public Works,
Transportation and Communications was divided into two
agencies the Ministry of Public Works and the Ministry of
Transportation and Communications by virtue of EO 546.
The question is, which of these two agencies is now authorized to
regulate, restrict, or prohibit access to limited access facilities?23
Under Section 1 of EO 546, the Ministry of Public
Works (now DPWH) assumed the public works functions of
the Ministry of Public Works, Transportation and
Communications. On the other hand, among the functions of
the Ministry of Transportation and
Communications (now Department of Transportation and
Communications [DOTC]) were to (1) formulate and
recommend national policies and guidelines for the preparation
and implementation of an integrated and comprehensive
transportation and communications systems at the national,
regional, and local levels; and (2) regulate, whenever necessary,
activities relative to transportation and communications and
prescribe and collect fees in the exercise of such power. Clearly,
under EO 546, it is the DOTC, not the DPWH, which has authority
to regulate, restrict, or prohibit access to limited access facilities.
Even under Executive Order No. 125 (EO 125)24 and Executive
Order No. 125-A (EO 125-A),25 which further reorganized the
DOTC, the authority to administer and enforce all laws, rules and
regulations relative to transportation is clearly with the DOTC.26
Thus, DO 74 and DO 215 are void because the DPWH has no
authority to declare certain expressways as limited access
facilities. Under the law, it is the DOTC which is authorized to
administer and enforce all laws, rules and regulations in the field
of transportation and to regulate related activities.
Since the DPWH has no authority to regulate activities relative to
transportation, the TRB27 cannot derive its power from the DPWH
to issue regulations governing limited access facilities. The
DPWH cannot delegate a power or function which it does not
possess in the first place. Since DO 74 and DO 215 are void, it
follows that the rules implementing them are likewise void.

Whether AO 1 and DO 123 are Unconstitutional


DPWH Secretary Simeon A. Datumanong issued DO 123 on 18
July 2001. DO 123 reads in part:
SUBJECT: Revised Rules and Regulations Governing Limited
Access Highways
By virtue of the authority granted the Secretary of Public
Works and Highways under Section 3 of R.A. 2000, otherwise
known as the Limited Access Highway Act, the following
revised rules and regulations governing limited access highways
are hereby promulgated for the guidance of all concerned:
1. Administrative Order No. 1 dated February 19, 1968, issued by
the Secretary of the then Department of Public Works and
Communications, is hereby amended by deleting the word
"motorcycles" mentioned in Section 3(h) thereof.
Therefore, motorcycles are hereby allowed to operate inside
the toll roads and limited access highways, subject to the
following:
a. Motorcycles shall have an engine displacement of at least
400 cubic centimeters (cc) provided that:
x x x x28 (Emphasis supplied)
The RTCs Decision dated 10 March 2003 declared DO 123
unconstitutional on the ground that it violates the equal protection
clause by allowing only motorcycles with at least 400 cubic
centimeters engine displacement to use the toll ways. The RTC
reasoned that the creation of a distinction within the class of
motorcycles was not based on real differences.
We need not pass upon the constitutionality of the classification of
motorcycles under DO 123. As previously discussed, the DPWH
has no authority to regulate limited access highways since EO
546 has devolved this function to the DOTC. Thus, DO 123 is void
for want of authority of the DPWH to promulgate it.
On the other hand, the assailed portion of AO 1 states:
Section 3. On limited access highways, it is unlawful for any
person or group of persons to:
xxxx
(h) Drive any bicycle, tricycle, pedicab, motorcycle or any vehicle
(not motorized);
xxxx
Petitioners assail the DPWHs failure to provide "scientific" and
"objective" data on the danger of having motorcycles plying our
highways. They attack this exercise of POLICE POWER as
baseless and unwarranted. Petitioners belabor the fact that there
are studies that provide proof that motorcycles are safe modes of
transport. They also claim that AO 1 introduces an unreasonable
classification by singling-out motorcycles from other motorized
modes of transport. Finally, petitioners argue that AO 1 violates
their right to travel.
Petitioners arguments do not convince us.
We emphasize that the Secretary of the Department of Public
Works and Communications issued AO 1 on 19 February
1968.
Section 3 of RA 200029 authorized the issuance of the guidelines.
In contrast, DPWH issued DO 74, DO 215 and DO 123 after EO

546 devolved to the DOTC the authority to regulate limited access


highways.

petitioners right to travel but merely bars motorcycles, bicycles,


tricycles, pedicabs, and any non-

We now discuss the constitutionality of AO 1. Administrative


issuances have the force and effect of law.30 They benefit from the
same presumption of validity and constitutionality enjoyed by
statutes.31 These two precepts place a heavy burden upon any
party assailing governmental regulations. The burden of proving
unconstitutionality rests on such party.32 The burden becomes
heavier when the POLICE POWER is at issue.

motorized vehicles as the mode of traveling along limited access


highways.41 Several cheap, accessible and practical alternative
modes of transport are open to petitioners. There is nothing
oppressive in being required to take a bus or drive a car instead
of ones scooter, bicycle, calesa, or motorcycle upon using a toll
way.

The use of public highways by motor vehicles is subject to


regulation as an exercise of the POLICE POWER of the
state.33 The POLICE POWER is far-reaching in scope and is the
"most essential, insistent and illimitable" of all government
powers.34 The tendency is to extend rather than to restrict the use
of POLICE POWER. The sole standard in measuring its exercise
is reasonableness.35 What is "reasonable" is not subject to exact
definition or scientific formulation. No all-embracing test of
reasonableness exists,36 for its determination rests upon human
judgment applied to the facts and circumstances of each
particular case.37
We find that AO 1 does not impose unreasonable restrictions. It
merely outlines several precautionary measures, to which toll way
users must adhere. These rules were designed to ensure public
safety and the uninhibited flow of traffic within limited access
facilities. They cover several subjects, from what lanes should be
used by a certain vehicle, to maximum vehicle height. The
prohibition of certain types of vehicles is but one of these. None of
these rules violates reason. The purpose of these rules and the
logic behind them are quite evident. A toll way is not an ordinary
road. The special purpose for which a toll way is constructed
necessitates the imposition of guidelines in the manner of its use
and operation. Inevitably, such rules will restrict certain rights. But
the mere fact that certain rights are restricted does not invalidate
the rules.
Consider Section 3(g) of AO 1, which prohibits the conduct of
rallies inside toll ways.38 The regulation affects the right to
peaceably assemble. The exercise of POLICE POWER involves
restriction, restriction being implicit in the power itself. Thus, the
test of constitutionality of a POLICE POWER measure is limited
to an inquiry on whether the restriction imposed on constitutional
rights is reasonable, and not whether it imposes a restriction on
those rights.
None of the rules outlined in AO 1 strikes us as arbitrary and
capricious. The DPWH, through the Solicitor General, maintains
that the toll ways were not designed to accommodate motorcycles
and that their presence in the toll ways will compromise safety
and traffic considerations. The DPWH points out that the same
study the petitioners rely on cites that the inability of other drivers
to detect motorcycles is the predominant cause of
accidents.39 Arguably, prohibiting the use of motorcycles in toll
ways may not be the "best" measure to ensure the safety and
comfort of those who ply the toll ways.
However, the means by which the government chooses to act is
not judged in terms of what is "best," rather, on simply whether
the act is reasonable. The validity of a POLICE POWER measure
does not depend upon the absolute assurance that the purpose
desired can in fact be probably fully accomplished, or upon the
certainty that it will best serve the purpose intended.40 Reason,
not scientific exactitude, is the measure of the validity of the
governmental regulation. Arguments based on what is "best" are
arguments reserved for the Legislatures discussion. Judicial
intervention in such matters will only be warranted if the assailed
regulation is patently whimsical. We do not find the situation in
this case to be so.
Neither do we find AO 1 oppressive. Petitioners are not being
deprived of their right to use the limited access facility. They are
merely being required, just like the rest of the public, to adhere to
the rules on how to use the facility. AO 1 does not infringe upon

Petitioners reliance on the studies they gathered is misplaced.


POLICE POWER does not rely upon the existence of definitive
studies to support its use. Indeed, no requirement exists that the
exercise of POLICE POWER must first be conclusively justified
by research. The yardstick has always been simply whether the
governments act is reasonable and not oppressive.42 The use of
"reason" in this sense is simply meant to guard against arbitrary
and capricious government action. Scientific certainty and
conclusiveness, though desirable, may not be demanded in every
situation. Otherwise, no government will be able to act in
situations demanding the exercise of its residual powers because
it will be tied up conducting studies.
A POLICE POWER measure may be assailed upon proof that it
unduly violates constitutional limitations like DUE PROCESS and
equal protection of the law.43 Petitioners attempt to seek redress
from the motorcycle ban under the aegis of equal protection must
fail. Petitioners contention that AO 1 unreasonably singles out
motorcycles is specious. To begin with, classification by itself is
not prohibited.44
A classification can only be assailed if it is deemed invidious, that
is, it is not based on real or substantial differences. As explained
by Chief Justice Fernando in Bautista v. Juinio:45
x x x To assure that the general welfare be promoted, which is the
end of law, a regulatory measure may cut into the rights to liberty
and property. Those adversely affected may under such
circumstances invoked the equal protection clause only if they
can show that the governmental act assailed, far from being
inspired by the attainment of the common weal was prompted by
the spirit of hostility, or at the very least, discrimination that finds
no support in reason. It suffices then that the laws operate equally
and uniformly on all persons under similar circumstances or that
all persons must be treated in the same manner, the conditions
not being different, both in the privileges conferred and the
liabilities imposed. Favoritism and undue preference cannot be
allowed. For the principle is that equal protection and security
shall be given to every person under circumstances, which if not
identical is analogous. If law be looked upon in terms of burden or
charges, those that fall within a class should be treated in the
same fashion, whatever restrictions cast on some in the group
equally binding the rest.
We find that it is neither warranted nor reasonable for petitioners
to say that the only justifiable classification among modes of
transport is the motorized against the non-motorized. Not all
motorized vehicles are created equal. A 16-wheeler truck is
substantially different from other light vehicles. The first may be
denied access to some roads where the latter are free to drive.
Old vehicles may be reasonably differentiated from newer
models.46 We find that real and substantial differences exist
between a motorcycle and other forms of transport sufficient to
justify its classification among those prohibited from plying the toll
ways. Amongst all types of motorized transport, it is obvious, even
to a child, that a motorcycle is quite different from a car, a bus or a
truck. The most obvious and troubling difference would be that a
two-wheeled vehicle is less stable and more easily overturned
than a four-wheeled vehicle.
A classification based on practical convenience and common
knowledge is not unconstitutional simply because it may lack
purely theoretical or scientific uniformity. Moreover, we take note
that the Philippines is home to a host of unique motorized modes
of transport ranging from modified hand-carts (kuliglig) to bicycle

"sidecars" outfitted with a motor. To follow petitioners argument to


its logical conclusion would open up toll ways to all these
contraptions. Both safety and traffic considerations militate
against any ruling that would bring about such a nightmare.
Petitioners complain that the prohibition on the use of motorcycles
in toll ways unduly deprive them of their right to travel.
We are not persuaded.
A toll way is not an ordinary road. As a facility designed to
promote the fastest access to certain destinations, its use,
operation, and maintenance require close regulation. Public
interest and safety require the imposition of certain restrictions on
toll ways that do not apply to ordinary roads. As a special kind of
road, it is but reasonable that not all forms of transport could use
it.
The right to travel does not mean the right to choose any vehicle
in traversing a toll way. The right to travel refers to the right to
move from one place to another. Petitioners can traverse the toll
way any time they choose using private or public four-wheeled
vehicles. Petitioners are not denied the right to move from Point A
to Point B along the toll way. Petitioners are free to access the toll
way, much as the rest of the public can. The mode by which
petitioners wish to travel pertains to the manner of using the toll
way, a subject that can be validly limited by regulation.
Petitioners themselves admit that alternative routes are available
to them. Their complaint is that these routes are not the safest
and most convenient. Even if their claim is true, it hardly qualifies
as an undue curtailment of their freedom of movement and travel.
The right to travel does not entitle a person to the best form of
transport or to the most convenient route to his destination. The
obstructions found in normal streets, which petitioners complain
of (i.e., potholes, manholes, construction barriers, etc.), are not
suffered by them alone.
Finally, petitioners assert that their possession of a drivers
license from the Land Transportation Office (LTO) and the fact
that their vehicles are registered with that office entitle them to
use all kinds of roads in the country. Again, petitioners are
mistaken. There exists no absolute right to drive. On the contrary,
this privilege, is heavily regulated. Only a qualified group is
allowed to drive motor vehicles: those who pass the tests
administered by the LTO. A drivers license issued by the LTO
merely allows one to drive a particular mode of transport. It is not
a license to drive or operate any form of transportation on any
type of road. Vehicle registration in the LTO on the other hand
merely signifies the roadworthiness of a vehicle. This does not
preclude the government from prescribing which roads are
accessible to certain vehicles.
WHEREFORE, we PARTLY GRANT the petition.
We MODIFY the Decision dated 10 March 2003 of the Regional
Trial Court, Branch 147, Makati City and its Order dated 16 June
2003 in Civil Case No. 01-034. We declare VOIDDepartment
Order Nos. 74, 215, and 123 of the Department of Public Works
and Highways, and the Revised Rules and Regulations on
Limited Access Facilities of the Toll Regulatory Board. We
declare VALIDAdministrative Order No. 1 of the Department of
Public Works and Communications.
SO ORDERED.

Respondent corporation, the Bagong Tanyag Homeowners


Association, Inc. (BATAHAI), was in 1989 incorporated to enable the
occupants of the land owned by Fortune Development Corporation,
Guillermo Tantuco, and Daniel Ignacio and located in Bagong Tanyag,
Taguig to purchase the respective lots they were occupying under the
Community Mortgage Program (CMP) of the National Home Mortgage
Finance Corporation (NHMFC).

Respondents Remedios Bico, Alfonso Ignacio, Gloria


Misterio, Salvacion Poras, Rhobby Acosta, Adela Giray, Edmon Banse,
Violeta Alba,Sofranio Mangampo, Navarro Abbarientos, Zacarias Arzaga,
Rodrigo Picart, and Livino Torino were, at the time material to the case,
officers and directors of BATAHAI, while petitioners were former
members thereof.
Under the CMP, BATAHAI could obtain a loan from NHMFC
to purchase the land from its owners and subdivide it among its memberbeneficiaries, subject to the supervision and guidance of the National
Housing Administration (NHA).[1] In turn, each member-beneficiary
would pay amortizations of the loan to BATAHAI.
The BATAHAI Code of Policies (the Code) named as first
prioritybeneficiaries the owners of houses or structures that were part of
the census survey conducted in October 1984 in Bagong Tanyag and who
were members of BATAHAI.
The Code named as second priority beneficiaries members of
BATAHAI who were part of the census survey as lessees or rent-free
occupants (nangungupahan na may bayad, nakikitira, o nakikisama) of
houses or structures in Bagong Tanyag.
Under the Code, each beneficiary is entitled to only one lot,
that on which his or her house or structure stands, structure and
house being defined as follows:
[2]

1.
2.

ESTRAKTURA pasilidad na ginawa


para sa kanlungan at tirahan ng tao,
kasama ang palikuran.
BAHAY isang parisukat na
kabahayan
na
tinitirahan
ng
namamahay.[3]

Petitioners, however, wanted to claim the vacant lots adjacent


to theirs on which vacant lots they planted crops or put up fences and
other improvements.[4]
On December 15, 1989, BATAHAI, in a Pahayag, required its
members to submit the following documents required by the NHMFC:
A.

Para sa mga empleyado (may


pormal na hanapbuhay)
1.
Certificate of Employment and
Compensation (CEC)
2.
Income Tax Returns para sa
taong 1988
3.
Residence
Certificate
or Sedula (1990)
4.
Policy contract para sa mga
miyembro ng GSIS/Certificate of
Remittances (sa loob ng 12
buwan) at xerox copy ng ID para
sa miyembro ng GSIS
5.
Marriage Contract

B.

Para sa mga self-employed (tindera,


labandera, driver, negosyante, atbp.)
1.
Affidavit of Income
2.
Residence Certificate o sedula
(1990)
3.
Marriage Contract[5]

In the meantime, a geodetic engineer, assisted by


respondents, conducted a structural survey of the houses or structures
in Bagong Tanyag to determine the actual lot sizes as well as the rightful
owners of houses or structures standing thereon. Lots on which no
houses or structures were built were considered open areas available for
distribution to secondary beneficiaries.
Following the conduct of the structural survey, it was
recommended that some houses or structures would be relocated
to make way for the construction of roads under a schematic plan
selected by a majority of the BATAHAI members.[6]

Petitioners, who had laid claim on vacant lots beside those


they were occupying, objected to the reduction of the number of lots
they were applying for, rejected the option of assigning the adjacent
vacant lots to their nearest relatives, and refused to submit the
documents-requirements of the NHMFC.

avoided by the HIGC Appeals Board and the


Court of Appeals thereby causing denial of
DUE PROCESS.[21]
The petition fails.

From the March 16, 1990 Pahayag[7] issued by the


NHA, only 30% of the BATAHAI members had, as of said date,
submitted complete documents. It gave 15 days for the rest of the
members to comply with the requirements of the NHMFC, with the
caveat that the NHMFC would not release the proceeds of the loan if all
requirements were not complied with.
On March 15, 1991, a Pahayag was posted containing the list
of BATAHAI members who had not complied with the NHMFC
requirements, and calling for compliance therewith.[8]
On November 25, 1991, respondents issued a list of
prospective CMP beneficiaries.[9] The BATAHAI members who did not
comply with the requirements were delisted. To afford the delisted
members a chance to benefit from the CMP, however, respondents set
new deadlines for compliance with the requirements [10] and sent
petitioners individual letters demanding compliance therewith, failing
which they would be deemed to have lacked interest to thereby forfeit
their rights as beneficiaries of the CMP.[11]
NHA personnel in fact visited recalcitrant BATAHAI
members, reminding them to comply with the requirements.[12]
Respondents later issued Resolution No. 24 on April 20,
1992declaring that the lots occupied by the recalcitrant members would
be shared among the other BATAHAI members and that the vacant lots
would be raffled off to the second priority beneficiaries.[13]
Petitioners were thus prompted to file on February 4, 1993 a
complaint before the Home Insurance and Guaranty Corporation
(HIGC),
docketed
as
HIGC
Case
No.
HOA-93004, for reinstatement and declaration of nullity of actions by the
defendants-herein respondents.[14]
In their complaint, petitioners alleged that respondents
subdivided the lots which they have been occupying since 1978 without
their knowledge and consent, reassigned the lots without observing
DUE PROCESS of law, omitted or deleted their names from the January
3, 1993 certified list of prospective beneficiaries, and unlawfully
replaced three BATAHAI directors.

The resolution of the petition hinges on a determination of


whether petitioners were deprived of property without DUE PROCESS
of law.
The essence of DUE PROCESS is the opportunity to be
heard. What the law prohibits is not the absence of previous notice but
the absolute absence thereof and the lack of opportunity to be heard.[22]
The records of the case show that petitioners had had more
than sufficient notice and opportunity to be heard before they were
delisted as prospective beneficiaries.
Before respondents issued the questioned November 25,
1991 list of prospective beneficiaries, sufficient notices were posted
informing petitioners of the need to submit the documents required by the
NHMFC.
Even after petitioners were delisted as beneficiaries,
respondents set new deadlines for petitioners to submit the requirements,
sending each of them letters reminding them of the consequences of noncompliance therewith.
Petitioners argue, however, that the HIGC Hearing Officer
found that they showed their consistent interest to acquire the lots and pay
the cost of acquisition to BATAHAI as soon as the re-subdivided
lots be reverted to their original sizes. [23] They add that the BATAHAI
should have created an Arbitration Committee and that the NHMFC
should have organized an Adjudication Committee according to the
amended by-laws of BATAHAI and the associations Code, which bodies
should have heard their grievances to afford them DUE PROCESS.
Petitioners arguments fail.
First, the structural survey which triggered the controversy
did not subdivide petitioners lots. By petitioner Delfin Espinocillas
admission before the HIGC Hearing Committee, the purpose of the
structural survey was to identify the actual structures owned by
Bagong Tanyag settlers:
Q

By Decision[15] of February 6, 1995, Hearing Officer Roberto


C. Abrajano of the HIGC held that by deleting petitioners names from
the master list of beneficiaries and reassigning the lots they occupied to
others, respondents deprived them of their property without DUE
PROCESS of law.[16]
A
On appeal, the HIGC Appeals Board reversed the hearing
officers findings and declared valid the acts of respondents. [17]
The Court of Appeals affirmed the findings of the HIGC
Appeals Board.[18] Hence, the present Petition for Review[19] which faults
theappellate court

Q:
A:
Q:

. . . in not declaring the act of the


respondents as contrary to the express
mandate of Article XIII, Section 9 and 10 of
the 1987 Constitution of the Philippines and
the laws passed in relation thereto,
particularly Republic Act No. 7279[20] [and]

A:

. . . in completely ignoring the


findings of fact of the HIGC Hearing Officer
to the effect that respondents failed to create
and organize the required Arbitration
Committee, as well as the Final Arbitration
Committee (Adjudication Committee) which
is the final arbiter of all disputes and
controversies in the allocation of lots within
the area of the CMP which issue was
constantly raised by the petitioners in all
stages by the proceedings but which was

A:

[Atty. Almo]: As a member of the


BATAHAI, were you aware of any
activities that the officers of the
BATAHAI undertake [sic] in order
that your occupancy of the lot
may be properly known?
[Delfin Espinocilla]: Yes sir.
What is this action does [sic] the
BATAHAI undertake?
The structural survey submitted in
April 1990 executed by Engineer
Ponciano Miranda.
When you said structural survey, what
does this survey referred [sic] to?
Respective structural houses of the
individual claimant.
xxxx

Q:

Q:
A:

What does this structural plan refer


to?
To distinguished [sic] the actual
structure of the respective
beneficiaries sir.
Will you be able to tell this Honorable
Office about the particular
purpose of this structural plan?
Para malaman ang structure ng mga
bahay diyan sa BATAHAI at para
mabilang ang mga structure na
sinasabi.

G.R. No. 141010


Hearing Officer:
So you mean if there is the
existing house, it shall be included
in the structural plan?
A:
Yes sir.
Hearing Officer:
So if you have no structure, you
will not be included in the
structural survey?
A:
Yes sir.[24] (Italics and underscoring
supplied)
Second, the records of the case show that petitioners were
afforded the opportunity to be heard on the alleged subdivision of their
lots. Thus they brought up their concerns to the Office of the President
which, in turn, referred the same to the NHA which passed upon them.

February 7, 2007

UNITED BF HOMEOWNERS ASSOCIATIONS, INC., ROMEO T.


VILLAMEJOR, RAUL S. LANUEVO, ROBERTO ARNALDO,
FLORENTINO CONCEPCION, BF NORTHWEST
HOMEOWNERS ASSOCIATION, INC., KK HOMEOWNERS
ASSOCIATION, INC., and BF (CRAB) HOMEOWNERS
ASSOCIATION, INC., Petitioners,
vs.
THE (MUNICIPAL) CITY MAYOR, THE (MUNICIPAL) CITY
PLANNING AND DEVELOPMENT COORDINATING OFFICER
OR ZONING ADMINISTRATOR, THE (MUNICIPAL) CITY
ENGINEER AND/OR BUILDING OFFICIAL, THE CHIEF OF THE
PERMITS AND LICENSES DIVISION, THE SANGGUNIANG
(BAYAN) PANGLUNGSOD, and BARANGAY BF HOMES, ALL
OF PARAAQUE CITY, METRO MANILA, Respondents,
EL GRANDE AGUIRRE COMMERCE AND TRADE
ASSOCIATION (EL ACTO), Respondent-Intervenor.

[25]

At all events, the DUE PROCESS guarantee cannot be


invoked when no vested right has been acquired.[26] The period during
which petitioners occupied the lots, no matter how long, [27] did not vest
them with any right to claim ownership since it is a fundamental
principle of law that acts of possessory character executed by virtue of
license or tolerance of the owner, no matter how long, do not start the
running of the period of acquisitive prescription.[28] It bears recalling
that BATAHAI was formed precisely to enable the Bagong Tanyag
settlers, including petitioners, to purchase the lots they were occupying.
Petitioners nevertheless invoke the following social justice
provisions of the Constitution:

DECISION
CARPIO, J.:
The Case
This is a petition for review1 of the 28 June 1999 Decision2 and
the 16 November 1999 Resolution3 of the Court of Appeals in CAG.R. SP No. 46624. The Court of Appeals held that Municipal
Ordinance No. 97-08 is a valid exercise of POLICE POWER by
the Municipality of Paraaque.4

Article XIII.

The Facts
xxxx

Section 9. The State shall, by law,


and for the common good, undertake, in
cooperation with the private sector, a
continuing program of urban land reform and
housing which will make available at
affordable cost decent housing and basic
services to underprivileged and homeless
citizens in urban centers and resettlement
areas. It shall also promote adequate
employment
opportunities
to
such
citizens. In the implementation of such
programs the State shall respect the rights of
small property owners.
Section 10. Urban or rural poor
dwellers shall not be evicted nor their
dwellings demolished, except in accordance
with law and in a just and humane manner.
No resettlement of urban or rural
dwellers shall be undertaken without
adequate consultation with them and the
communities where they are to be relocated.
The invocation does not help their cause. Petitioners obstinancy in not
complying with the BATAHAI and NHMFC requirements had delayed
the release of the loan to BATAHAI[29] to the detriment of the other
BATAHAI members who, like petitioners, are also urban poor dwellers
but who complied with the requirements and even agreed to be relocated
in case the construction of roads for the common interest required the
demolition of their houses or structures. [30] To grant the petition would,
instead of promoting, defeat social justice.
WHEREFORE, the petition is DENIED and the challenged
decision of the Court of Appeals is AFFIRMED.

BF Homes Paraaque Subdivision (BF Homes Paraaque), with


a land area straddling the cities of Paraaque, Las Pias, and
Muntinlupa, is the largest subdivision in the country.
On 11 November 1997, the Municipal Council of Paraaque
enacted Municipal Ordinance No. 97-085 entitled, "An Ordinance
Prescribing the Comprehensive Land Use Plan & Zoning of the
Municipality of Paraaque Pursuant to the Local
Government Code of 1991 and Other Pertinent Laws." Sections
11.5 and 11.6 of Municipal Ordinance No. 97-08, reclassifying El
Grande and Aguirre Avenues in BF Homes Paraaque from
residential to commercial areas, read:
11.5 C-1 LOW INTENSITY COMMERCIAL ZONES
xxxx
BARANGAY BF HOMES
Lot deep both side[s] along Aguirre Avenue from
Governor A. Santos Street eastward to Gng. Elsie
Gatches Street
Lot deep both side[s] along El Grande Avenue from
Lopez Avenue gate southward to corner Aguirre Avenue
xxxx
11.6 C-2 MAJOR COMMERCIAL ZONES
xxxx

No pronouncement as to costs.

BARANGAY BF HOMES

SO ORDERED.

Lot deep both side[s] along Aguirre Avenue from Dallas


to El Grande Avenue

Lot deep both side[s] along Aguirre Avenue from El


Grande Avenue to Gov. A. Santos Street

On 28 June 1999, the Court of Appeals dismissed the petition.


Petitioners moved for reconsideration, which the Court of Appeals
denied.

BF Paraaque Commercial Plaza


Hence, this petition.
Area bounded on the
The Ruling of the Court of Appeals
North - Pres. Quezon Street
South - A. Aguirre Avenue
East - Presidents Avenue
West - MMP, Creek along BF Homeowners
Association clubhouse
Lot deep east side along Presidents Avenue from Mac
Donald southward to M. Rufino Street
Area bounded on the
North - A. Aguirre Avenue
South - A. Soriano Sr. & M. Rufino Street
East - Presidents Avenue
West - Gng. Elsie Ga[t]ches Street
x x x x6
On 27 January 1998, the United BF Homeowners Associations,
Inc. (UBFHAI),7 several homeowners associations, and residents
of BF Homes Paraaque (collectively petitioners) filed with the
Court of Appeals a petition for prohibition with an application
for temporary restraining order and preliminary injunction.
Petitioners questioned the constitutionality of Sections 11.5, 11.6,
15,8 17,9 and 19.610 of Municipal Ordinance No. 97-08.

Citing the General Welfare Clause11 of Republic Act No. 7160 (RA
7160), the Court of Appeals held that the enactment of Municipal
Ordinance No. 97-08 which, among others, reclassified El Grande
and Aguirre Avenues in BF Homes Paraaque as commercial
zones, was a valid exercise of POLICE POWER by the
Municipality of Paraaque.
The Court of Appeals took judicial notice of the fact that El
Grande and Aguirre Avenues are main streets of BF Homes
Paraaque which have long been commercialized, thus:
The declaration of El Grande and Aguirre Avenues as commercial
zones through Municipal Ordinance No. 97-08 is an exercise of
POLICE POWER.
Obviously, because of the rapid and tremendous increase in
population, the needs of the homeowners in the BF Paraaque
Subdivision grew. The commercial zones in the area proved
inadequate to service the needs of its residents. There was
therefore a need to open more commercial districts. In fact,
records show that several homeowners along El Grande and
Aguirre Avenues converted their residences into business
establishments. El Actos members are among them.
Aside from the increasing number of commercial establishments
therein, judicial notice may be taken of the fact that El Grande
and Aguirre Avenues are main thoroughfares of BF Homes
Paraaque which have long been commercialized. The local
government therefore responded to these changes in the
community by enacting Ordinance No. 97-08 x x x.12
The Issues
Petitioners raise the following issues:

Petitioners alleged that the reclassification of certain portions of


BF Homes Paraaque from residential to commercial zone is
unconstitutional because it amounts to impairment of the
contracts between the developer of BF Homes Paraaque and
the lot buyers. Petitioners cited the annotation on the lot buyers
titles which provides that "the property shall be used for
residential purposes only and for no other purpose."
On the other hand, public respondents alleged that the passage
of Municipal Ordinance No. 97-08 is a valid exercise of POLICE
POWER by the Municipal Council of Paraaque and that such
ordinance can nullify or supersede the contractual obligations
entered into by the petitioners and the developer.
Meanwhile, El Grande Aguirre Commerce and
Trade Organization (EL ACTO), a non-stock, non-profit
corporation, intervened as respondent. EL ACTO claimed that its
members are lot owners, residents, and operators of commercial
establishments along El Grande and Aguirre Avenues in BF
Homes Paraaque, who will be affected if Municipal Ordinance
No. 97-08 is declared unconstitutional. EL ACTO asserted that
Municipal Ordinance No. 97-08 is a valid exercise of POLICE
POWER and that petitioners are guilty of estoppel since
petitioners endorsed the opening of many of these commercial
establishments in BF Homes Paraaque. EL ACTO further
alleged that the instant petition should have been initially filed with
the Regional Trial Court in accordance with the principle of
hierarchy of courts.1awphi1.net

1. Whether R.A. 7160, the Local Government Code of


1991 has repealed PD 957, the Subdivision and
Condominium Buyers Protective Decree;
2. Whether the power of local government units to
enact comprehensive zoning ordinances has legal
limitations;
3. Whether Municipal Ordinance No. 97-08 is a
legitimate exercise of POLICE POWER;
4. Whether Municipal Ordinance No. 97-08 is
constitutional considering that it impairs a contractual
obligation annotated in homeowners titles and violates
the doctrine of separation of powers;
5. Whether Municipal Ordinance No. 97-08 is
enforceable pending review by the MMDA, the Metro
Manila Mayors Council and the HLURB.13
The resolution of these issues turns on the validity of Municipal
Ordinance No. 97-08.
The Ruling of the Court
The petition is without merit.

Power to Enact Zoning Ordinances


The Municipal Council of Paraaque enacted Municipal
Ordinance No. 97-08 pursuant to the provisions of RA 7160
and Executive Order No. 72.14
Under Section 447 of RA 7160, the Sangguniang Bayan or the
Municipal Council, as the legislative body of the municipality, has
the power to enact ordinances for the general welfare of the
municipality and its inhabitants.
Among the functions of the Sangguniang Bayan enumerated
under Section 447 of RA 7160 are:
(2) Generate and maximize the use of resources and revenues
for the development plans, program objectives and priorities of
the municipality as provided for under Section 18 of this Code
with particular attention to agro-industrial development and
countryside growth and progress, and relative thereto, shall:
xxxx
(vii) Adopt a comprehensive land use plan for the
municipality: Provided, That the formulation, adoption,
or modification of said plan shall be in coordination with
the approved provincial comprehensive land use plan;
(viii) Reclassify land within the jurisdiction of the
municipality subject to the pertinent provision of
this Code;
(ix) Enact integrated zoning ordinances in
consonance with the approved comprehensive land
use plan, subject to existing laws, rules and
regulations; establish fire limits or zones, particularly in
populous centers; and regulate the construction, repair
or modification of buildings within said fire limits or
zones in accordance with the provisions of the Fire
Code; (Emphasis supplied)
On the other hand, Executive Order No. 72 provides:
SECTION 1. Plan formulation or updating. (a) Cities and
municipalities shall continue to formulate or update their
respective comprehensive land use plans, in conformity with
the land use planning and zoning standards and guidelines
prescribed by the HLURB pursuant to national policies.
As a policy recommending body of the LGU, the city or municipal
development council (CDC/MDC) shall initiate the formulation or
updating of its land use plan, in consultation with the concerned
sectors in the community. For this purpose, the CDC/MDC may
seek the assistance of any local official or field officer of NGAs
operation in the LGU.
The city or municipal planning and development coordinator
(CPDC/MPDC) and/or the city or municipal agriculturist, if there is
any, shall provide the technical support services and such other
assistance as may be required by the CDC/MDC to effectively
carry out this function.
The comprehensive land use plan prepared by the CDC/MDC
shall be submitted to the sangguniang panglungsod or
sangguniang bayan, as the case may be, for enactment into a
zoning ordinance. Such ordinance shall be enacted and
approved in accordance with Articles 107 and 108 of the
Implementing Rules and Regulations (IRR) of the LGC.
(b) The comprehensive land use plans of component cities and
municipalities shall be formulated, adopted, or modified in

accordance with the approved provincial comprehensive land use


plans.
(c) Cities and municipalities of metropolitan Manila shall continue
to formulate or update their respective comprehensive land use
plans, in accordance with the land use planning and zoning
standards and guidelines prescribed by the HLURB pursuant to
EO 392, S. of 1990, and other pertinent national policies.
x x x x (Emphasis supplied)
Under Section 3(m), Rule 131 of the Rules of Court, there is a
presumption that official duty has been regularly performed. Thus,
in the absence of evidence to the contrary, there is a presumption
that public officers performed their official duties regularly and
legally and in compliance with applicable laws, in good faith, and
in the exercise of sound judgment.15
We find no sufficient evidence disputing the regularity of the
enactment of Municipal Ordinance No. 97-08. Before the
Municipal Council of Paraaque passed Municipal Ordinance No.
97-08,16 it has been the subject of barangay consultations and
committee hearings in accordance with Executive Order No. 72.
Reclassification of El Grande and Aguirre Avenues
Contrary to petitioners allegations, we find Municipal Ordinance
No. 97-08 reasonable and not discriminating or oppressive with
respect to BF Homes Paraaque. As held by the Court of
Appeals, the increasing number of homeowners in BF Homes
Paraaque necessitated the addition of commercial areas in the
subdivision to service the needs of the homeowners. In fact,
several homeowners along El Grande and Aguirre Avenues
already converted their residences into business establishments.
Furthermore, as found by the Court of Appeals, El Grande and
Aguirre Avenues are main thoroughfares in BF Homes Paraaque
which have long been commercialized.
Even petitioner UBFHAI, the recognized umbrella organization of
all homeowners associations in BF Homes Paraaque,
acknowledged the need for additional commercial area. Records
reveal that as early as 30 July 1989, UBFHAI recommended for
approval an "Amended Integrated Zoning Policies and Guidelines
for BF Homes Paraaque."17 UBFHAI proposed another
commercial zone in BF Homes Paraaque to accommodate the
growing needs of the residents, thus:
Subject to the approval of BF Homes, Inc., the Local Zoning
Official/Planning Officer of Paraaque and the Metro Manila
Commission and in recognition of the fact that the subdivision
has tremendously grown in size and population since 1983
when the above-mentioned guidelines of the MMC
[Ordinance 81-01] were promulgated, such that one
commercial zone for the entire subdivision is now
inadequate vis-a-vis the needs of the residents, the UBFHAI
is proposing another commercial zone in Phase III of the
Subdivision, in the vicinity of the Parish of the Presentation
of the Child Jesus as follows:
One lot deep along Aguirre Avenue from Gov. Santos St., to
the end of Aguirre Avenue and two lots deep along El Grande
from where it intersects Aguirre Avenue.
Pending approval of the aforesaid proposal, commercial
buildings constructed and existing in the aforesaid area will
be given temporary-use permits good for five (5) years from
December 31, 1986 or until December 31, 1991, after which,
the same must revert to residential status, unless, in the
meantime the proposal is approved, provided all such buildings
must comply with the set-back and parking provision of the Metro
Manila Commission Ordinance 81-01; I.M. 09-83.
xxxx

The term for temporary use permits of the designated


commercial area shall be considered extended for 8 years
from December 31, 1991 to December 31, 1998; without
prejudice to the official conversion of the area under existing
MMA/LGC guidelines to commercial.18 (Emphasis supplied)
Thus, UBFHAIs proposed new commercial area, encompassing
El Grande and Aguirre Avenues, is substantially the same area,
which Municipal Ordinance No. 97-08 later reclassified as a
commercial zone.
Furthermore, in the subsequent years, UBFHAI and its member
homeowners associations endorsed the issuance of municipal
and barangay permits for commercial establishments along El
Grande and Aguirre Avenues. Contrary to petitioners allegations,
the commercial establishments endorsed by UBFHAI were not
mere convenience stores, which Metro Manila Commission
Ordinance No. 81-0119 and Municipal Ordinance No. 97-08 allow
in residential areas. Among the commercial establishments which
UBFHAI endorsed were a trading business,20 electronics repair
shop,21 mini-grocery store,22 beauty salon,23 school,24 dress
shop,25 and consultancy or management services business.26
Clearly, the reclassification of El Grande and Aguirre Avenues in
BF Homes Paraaque as commercial area was reasonable and
justified under the circumstances.
Non-Impairment of Contract
Petitioners invoke Presidential Decree No. 957 (PD
957),27 otherwise known as the Subdivision and Condominium
Buyers Protective Decree. Petitioners maintain that PD 957 is
intended primarily to protect the buyers and to ensure that
subdivision developers keep their promises and representations.
Petitioners allege that one of the promises of the developer of BF
Homes Paraaque is that the property shall be used for
residential purposes only. Petitioners assert that the
reclassification of certain portions of BF Homes Paraaque from
residential to commercial zone is unconstitutional because it
impairs the contracts between the developer of BF Homes
Paraaque and the lot buyers.
The Court has upheld in several cases the superiority of POLICE
POWER over the non-impairment clause.28 The constitutional
guaranty of non-impairment of contracts is limited by the exercise
of the POLICE POWER of the State, in the interest of public
health, safety, morals and general welfare.29
In Ortigas & Co., Limited Partnership v. Feati Bank and Trust
Co.,30 the Court held that contractual restrictions on the use of
property could not prevail over the reasonable exercise of
POLICE POWER through zoning regulations. The Court held:
With regard to the contention that said resolution cannot nullify
the contractual obligations assumed by the defendant-appellee
referring to the restrictions incorporated in the deeds of sale and
later in the corresponding Transfer Certificates of Title issued to
defendant-appelleeit should be stressed, that while nonimpairment of contracts is constitutionally guaranteed, the
rule is not absolute, since it has to be reconciled with the
legitimate exercise of POLICE POWER, i.e., "the power to
prescribe regulations to promote the health, morals, peace,
education, good order or safety and general welfare of the
people." Invariably described as "the most essential,
insistent, and illimitable of powers" and "in a sense, the
greatest and most powerful attribute of government," the
exercise of the power may be judicially inquired into and
corrected only if it is capricious, whimsical, unjust or
unreasonable, there having been a denial of DUE PROCESS
or a violation of any other applicable constitutional

guarantee. As this Court held through Justice Jose P. Bengzon


in Philippine Long Distance Company v. City of Davao, et al.,
POLICE POWER "is elastic and must be responsive to various
social conditions; it is not confined within narrow circumscriptions
of precedents resting on past conditions; it must follow the legal
progress of a democratic way of life." We were even more
emphatic inVda. De Genuino v. The Court of Agrarian Relations,
et al., when We declared: "We do not see why the public
welfare when clashing with the individual right to property
should not be made to prevail through the states exercise of
its POLICE POWER."
Resolution No. 27. s-1960 declaring the western part of Highway
54, now E. de los Santos Avenue (EDSA, for short) from Shaw
Boulevard to the Pasig River as an industrial and commercial
zone, was obviously passed by the Municipal Council of
Mandaluyong, Rizal in the exercise of POLICE POWER to
safeguard or promote the health, safety, peace, good order and
general welfare of the people in the locality. Judicial notice may
be taken of the conditions prevailing in the area, especially where
Lots Nos. 5 and 6 are located. The lots themselves not only front
the highway; industrial and commercial complexes have
flourished about the place. EDSA, a main traffic artery which runs
through several cities and municipalities in the Metro Manila area,
supports an endless stream of traffic and the resulting activity,
noise and pollution are hardly conducive to the health, safety or
welfare of the residents in its route. Having been expressly
granted the power to adopt zoning and subdivision ordinances or
regulations, the municipality of Mandaluyong, through its
Municipal Council, was reasonably, if not perfectly, justified under
the circumstances, in passing the subject resolution.31 (Emphasis
supplied)
Likewise, in Sangalang v. Intermediate Appellate Court,32 the
Court upheld Metro Manila Commission Ordinance No. 81-01,
which reclassified Jupiter Street in Makati into a high-density
commercial zone, as a legitimate exercise of POLICE POWER.
The Court held that the power of the Metro Manila Commission
and the Makati Municipal Council to enact zoning ordinances for
the general welfare prevails over the deed restrictions on the lot
owners in Bel-Air Village which restricted the use of the lots for
residential purposes only. The Court held:
It is not that we are saying that restrictive easements, especially
the easements herein in question, are invalid or ineffective. As far
as the Bel-Air subdivision itself is concerned, certainly, they are
valid and enforceable. But they are, like all contracts, subject to
the overriding demands, needs, and interests of the greater
number as the State may determine in the legitimate exercise of
POLICE POWER. Our jurisdiction guarantees sanctity of
contract and is said to be the "law between the contracting
parties," but while it is so, it cannot contravene "law, morals,
good customs, public order, or public policy." Above all, it
cannot be raised as a deterrent to POLICE POWER, designed
precisely to promote health, safety, peace, and enhance the
common good, at the expense of contractual rights,
whenever necessary. x x x33 (Emphasis supplied)
Similarly, in this case, Municipal Ordinance No. 97-08 is a
legitimate exercise of POLICE POWER and the reclassification of
El Grande and Aguirre Avenues in BF Homes Paraaque is not
arbitrary or unreasonable.
WHEREFORE, we AFFIRM the Decision dated 28 June 1999
and the Resolution dated 16 November 1999 of the Court of
Appeals in CA-G.R. SP No. 46624.
SO ORDERED.

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