Consti2 Taxation Cases Fulltext

LIST OF CASES
TAXATION POWER
1. LUNG CENTER vs QUEZON CITY, G.R. NO. 144104, JUNE 29, 2004
2. MANILA AIRPORT AUTHORITY vs COURT OF APPEALS, G.R. NO. 155650, JULY 20, 2006
3. PLANTERS PRODUCTS vs FERTIPHIL, G.R. NO. 166006, MARCH 14, 2008
4. MCIAA vs MARCOS, G.R. NO. 120082, SEPTEMBER 11, 1996
5. CASANOVA vs HORD, 8 PHIL 125
6. GEROCHI vs DEPARTMENT OF ENERGY, G.R. NO. 159796
7. PUNZALAN vs MUNICIPAL BOARD OF MANILA, 95 PHIL 46
8. AMERICAN BIBLE SOCIETY vs CITY OF MANILA, 101 PHIL 46
9. ABRA VALLEY COLLEGE vs AQUINO, 162 SCRA 1006
[G.R. No. 144104. June 29, 2004.]
LUNG
CENTER
OF
THE
PHILIPPINES, petitioner, vs. QUEZON
CITY and CONSTANTINO P. ROSAS,
in his capacity as City Assessor of
Quezon City, respondents.
DECISION
CALLEJO, SR., J p:
This
is
a
petition
for
review
on certiorari under Rule 45 of the Rules of
Court, as amended, of the Decision 1 dated
July 17, 2000 of the Court of Appeals in

CA-G.R. SP No. 57014 which affirmed the
decision of the Central Board of Assessment
Appeals holding that the lot owned by the
petitioner and its hospital building
constructed thereon are subject to
assessment for purposes of real property tax.
The Antecedents
The petitioner Lung Center of the
Philippines is a non-stock and non-profit
entity established on January 16, 1981 by
virtue of Presidential Decree No. 1823. 2 It
is the registered owner of a parcel of land,
particularly described as Lot No. RP-3-B3A-1-B-1, SWO-04-000495, located at

Quezon Avenue corner Elliptical Road,
Central District, Quezon City. The lot has an
area of 121,463 square meters and is
covered by Transfer Certificate of Title
(TCT) No. 261320 of the Registry of Deeds
of Quezon City. Erected in the middle of the
aforesaid lot is a hospital known as the Lung
Center of the Philippines. A big space at the
ground floor is being leased to private
parties, for canteen and small store spaces,
and to medical or professional practitioners
who use the same as their private clinics for
1
CONSTITUTIONAL LAW 2 | ATTY. GALEON
their patients whom they charge for their

professional services. Almost one-half of the
entire area on the left side of the building
along Quezon Avenue is vacant and idle,
while a big portion on the right side, at the
corner of Quezon Avenue and Elliptical
Road, is being leased for commercial
purposes to a private enterprise known as
the Elliptical Orchids and Garden Center.
The petitioner accepts paying and nonpaying patients. It also renders medical
services to out-patients, both paying and
non-paying. Aside from its income from
paying patients, the petitioner receives
annual subsidies from the government.
On June 7, 1993, both the land and the
hospital building of the petitioner were
assessed for real property taxes in the
amount of P4,554,860 by the City Assessor
of
Quezon
City. 3 Accordingly, Tax
Declaration Nos. C-021-01226 (16-2518)
and C-021-01231 (15-2518-A) were issued
for the land and the hospital building,
respectively. 4 On August 25, 1993, the
petitioner
filed
a
Claim
for
Exemption 5 from real property taxes with
the City Assessor, predicated on its claim
that it is a charitable institution. The
petitioner's request was denied, and a
petition was, thereafter, filed before the
Local Board of Assessment Appeals of
Quezon City (QC-LBAA, for brevity) for
the reversal of the resolution of the City
Assessor. The petitioner alleged that under
Section 28, paragraph 3 of the
1987 Constitution, the property is exempt
USC - COLLEGE OF LAW
from real property taxes. It averred that a

minimum of 60% of its hospital beds are
exclusively used for charity patients and that
the major thrust of its hospital operation is to
serve charity patients. The petitioner
contends that it is a charitable institution
and, as such, is exempt from real property
taxes. The QC-LBAA rendered judgment
dismissing the petition and holding the
petitioner liable for real property taxes. 6
The QC-LBAA's decision was, likewise,
affirmed on appeal by the Central Board of
Assessment Appeals of Quezon City
(CBAA, for brevity) 7 which ruled that the
petitioner was not a charitable institution
and that its real properties were not actually,
directly and exclusively used for charitable
purposes; hence, it was not entitled to real
property
tax
exemption
under
the constitution and the law. The petitioner
sought relief from the Court of Appeals,
which rendered judgment affirming the
decision of the CBAA. 8
Undaunted, the petitioner filed its petition in
this Court contending that:
A. THE COURT A QUO ERRED IN
DECLARING PETITIONER AS
NOT ENTITLED TO REALTY
TAX EXEMPTIONS ON THE
GROUND THAT ITS LAND,
BUILDING
AND
IMPROVEMENTS,
SUBJECT
OF ASSESSMENT, ARE NOT
ACTUALLY, DIRECTLY AND
EXCLUSIVELY DEVOTED FOR
CHARITABLE PURPOSES.
GMTALVAREZ 402
B. WHILE PETITIONER IS NOT

DECLARED
AS
REAL
PROPERTY TAX
EXEMPT
UNDER ITS CHARTER, PD
1823, SAID EXEMPTION MAY
NEVERTHELESS
BE
EXTENDED UPON PROPER
APPLICATION.
The petitioner avers that it is a charitable
institution within the context of Section
28(3), Article VI of the 1987 Constitution. It
asserts that its character as a charitable
institution is not altered by the fact that it
admits paying patients and renders medical
services to them, leases portions of the land
to private parties, and rents out portions of
the hospital to private medical practitioners
from which it derives income to be used for
operational expenses. The petitioner points
out that for the years 1995 to 1999, 100% of
its out-patients were charity patients and of
the hospital's 282-bed capacity, 60% thereof,
or 170 beds, is allotted to charity patients. It
asserts that the fact that it receives subsidies
from the government attests to its character
as a charitable institution. It contends that
the
"exclusivity"
required
in
the Constitution does not necessarily mean
"solely." Hence, even if a portion of its real
estate is leased out to private individuals
from whom it derives income, it does not
lose its character as a charitable institution,
and its exemption from the payment of real
estate taxes on its real property. The
petitioner cited our ruling in Herrera v. QCBAA 9 to bolster its pose. The petitioner
further contends that even if P.D. No.
2
1823 does not exempt it from the payment

of real estate taxes, it is not precluded from
seeking
tax
exemption
under
the
1987 Constitution.
In their comment on the petition, the
respondents aver that the petitioner is not a
charitable entity. The petitioner's real
property is not exempt from the payment of
real estate taxes under P.D. No. 1823 and
even under the 1987 Constitution because it
failed to prove that it is a charitable
institution and that the said property is
actually, directly and exclusively used for
charitable purposes. The respondents noted
that in a newspaper report, it appears that
graft charges were filed with the
Sandiganbayan against the director of the
petitioner, its administrative officer, and
Zenaida Rivera, the proprietress of the
Elliptical Orchids and Garden Center, for
entering into a lease contract over 7,663.13
square meters of the property in 1990 for
only P20,000 a month, when the monthly
rental should be P357,000 a month as
determined by the Commission on Audit;
and that instead of complying with the
directive of the COA for the cancellation of
the contract for being grossly prejudicial to
the government, the petitioner renewed the
same on March 13, 1995 for a monthly
rental of only P24,000. They assert that the
petitioner uses the subsidies granted by the
government for charity patients and uses the
rest of its income from the property for the
benefit of paying patients, among other
purposes. They aver that the petitioner failed
to adduce substantial evidence that 100% of
its out-patients and 170 beds in the hospital

are reserved for indigent patients. The
respondents further assert, thus:
13. That the claims/allegations of the
Petitioner LCP do not speak well of
its record of service. That before a
patient is admitted for treatment in
the Center, first impression is that it
is pay-patient and required to pay a
certain amount as deposit. That even
if a patient is living below the
poverty line, he is charged with high
hospital bills. And, without these
bills being first settled, the poor
patient cannot be allowed to leave
the hospital or be discharged without
first paying the hospital bills or issue
a promissory note guaranteed and
indorsed by an influential agency or
person known only to the Center;
that even the remains of deceased
poor patients suffered the same fate.
Moreover, before a patient is
admitted for treatment as free or
charity patient, one must undergo a
series of interviews and must submit
all the requirements needed by the
Center, usually accompanied by
endorsement by an influential agency
or person known only to the Center.
These facts were heard and admitted
by the Petitioner LCP during the
hearings before the Honorable QCBAA and Honorable CBAA. These
are the reasons of indigent patients,
instead of seeking treatment with the
Center, they prefer to be treated at
GMTALVAREZ 402
the Quezon Institute. Can such

practice by the Center be called
charitable? 10
The Issues
The issues for resolution are the following:
(a) whether the petitioner is a charitable
institution within the context of Presidential
Decree No. 1823 and the 1973 and 1987
Constitutions
and
Section
234(b)
of Republic Act No. 7160; and (b) whether
the real properties of the petitioner are
exempt from real property taxes.
The Court's Ruling
The petition is partially granted.
On the first issue, we hold that the petitioner
is a charitable institution within the context
of the 1973 and 1987 Constitutions. To
determine whether an enterprise is a
charitable institution/entity or not, the
elements which should be considered
include the statute creating the enterprise, its
corporate purposes, its constitution and bylaws, the methods of administration, the
nature of the actual work performed, the
character of the services rendered, the
indefiniteness of the beneficiaries, and the
use and occupation of the properties. 11
In the legal sense, a charity may be fully
defined as a gift, to be applied consistently
with existing laws, for the benefit of an
indefinite number of persons, either by
bringing their minds and hearts under the
influence of education or religion, by
assisting them to establish themselves in life
3
or otherwise lessening the burden of

government. 12 It may be applied to almost
anything that tend to promote the well-doing
and well-being of social man. It embraces
the improvement and promotion of the
happiness of man. 13 The word "charitable"
is not restricted to relief of the poor or
sick. 14 The test of a charity and a charitable
organization are in law the same. The test
whether an enterprise is charitable or not is
whether it exists to carry out a purpose
reorganized in law as charitable or whether
it is maintained for gain, profit, or private
advantage.
Under P.D. No. 1823, the petitioner is a nonprofit and non-stock corporation which,
subject to the provisions of the decree, is to
be administered by the Office of the
President of the Philippines with the
Ministry of Health and the Ministry of
Human Settlements. It was organized for the
welfare and benefit of the Filipino people
principally to help combat the high
incidence of lung and pulmonary diseases in
the Philippines. The raison d'etre for the
creation of the petitioner is stated in the
decree, viz:
Whereas, for decades, respiratory
diseases have been a priority
concern, having been the leading
cause of illness and death in the
Philippines, comprising more than
45% of the total annual deaths from
all causes, thus, exacting a
tremendous toll on human resources,
which ailments are likely to increase

and degenerate into serious lung
diseases on account of unabated
pollution,
industrialization
and
unchecked cigarette smoking in the
country;
Whereas, the more common lung
diseases are, to a great extent,
preventable, and curable with early
and
adequate
medical
care,
immunization and through prompt
and intensive prevention and health
education programs;
Whereas, there is an urgent need to
consolidate and reinforce existing
programs, strategies and efforts at
preventing,
treating
and
rehabilitating people affected by lung
diseases, and to undertake research
and training on the cure and
prevention of lung diseases, through
a Lung Center which will house and
nurture the above and related
activities and provide tertiary-level
care for more difficult and
problematical cases;
Whereas, to achieve this purpose, the
Government intends to provide
material and financial support
towards the establishment and
maintenance of a Lung Center for the
welfare and benefit of the Filipino
people. 15
GMTALVAREZ 402
The purposes for which the petitioner was

created are spelled out in its Articles of
Incorporation, thus:
SECOND: That the purposes for
which such corporation is formed are
as follows:
1. To construct, establish, equip,
maintain, administer and conduct an
integrated medical institution which
shall specialize in the treatment,
care, rehabilitation and/or relief of
lung and allied diseases in line with
the concern of the government to
assist and provide material and
financial support in the establishment
and maintenance of a lung center
primarily to benefit the people of the
Philippines and in pursuance of the
policy of the State to secure the wellbeing of the people by providing
them specialized health and medical
services and by minimizing the
incidence of lung diseases in the
country and elsewhere.
2. To promote the noble undertaking
of scientific research related to the
prevention of lung or pulmonary
ailments and the care of lung
patients, including the holding of a
series of relevant congresses,
conventions,
seminars
and
conferences;
3. To stimulate and, whenever
possible,
underwrite
scientific
researches on the biological,
4
demographic, social, economic,

eugenic and physiological aspects of
lung or pulmonary diseases and their
control; and to collect and publish
the findings of such research for
public consumption;
4. To facilitate the dissemination of
ideas and public acceptance of
information on lung consciousness or
awareness, and the development of
fact-finding,
information
and
reporting facilities for and in aid of
the general purposes or objects
aforesaid, especially in human lung
requirements, general health and
physical fitness, and other relevant or
related fields;
5. To encourage the training of
physicians, nurses, health officers,
social workers and medical and
technical personnel in the practical
and scientific implementation of
services to lung patients;
6. To assist universities and research
institutions in their studies about
lung diseases, to encourage advanced
training in matters of the lung and
related fields and to support
educational programs of value to
general health;
7. To encourage the formation of
other organizations on the national,
provincial and/or city and local
levels; and to coordinate their
various efforts and activities for the
purpose of achieving a more

effective programmatic approach on
the common problems relative to the
objectives enumerated herein;
8. To seek and obtain assistance in
any form from both international and
local foundations and organizations;
and to administer grants and funds
that may be given to the
organization;
9. To extend, whenever possible and
expedient, medical services to the
public and, in general, to promote
and protect the health of the masses
of our people, which has long been
recognized as an economic asset and
a social blessing;
10. To help prevent, relieve and
alleviate the lung or pulmonary
afflictions and maladies of the people
in any and all walks of life, including
those who are poor and needy, all
without regard to or discrimination,
because of race, creed, color or
political belief of the persons helped;
and to enable them to obtain
treatment when such disorders occur;
11. To participate, as circumstances
may warrant, in any activity
designed and carried on to promote
the general health of the community;
12. To acquire and/or borrow funds
and to own all funds or equipment,
educational materials and supplies by
purchase, donation, or otherwise and
GMTALVAREZ 402
to dispose of and distribute the same

in such manner, and, on such basis as
the Center shall, from time to time,
deem proper and best, under the
particular circumstances, to serve its
general and non-profit purposes and
objectives;
13. To buy, purchase, acquire, own,
lease, hold, sell, exchange, transfer
and dispose of properties, whether
real or personal, for purposes herein
mentioned; and
14. To do everything necessary,
proper, advisable or convenient for
the accomplishment of any of the
powers herein set forth and to do
every other act and thing incidental
thereto or connected therewith. 16
Hence, the medical services of the petitioner
are to be rendered to the public in general in
any and all walks of life including those who
are poor and the needy without
discrimination. After all, any person, the rich
as well as the poor, may fall sick or be
injured or wounded and become a subject of
charity. 17
As a general principle, a charitable
institution does not lose its character as such
and its exemption from taxes simply because
it derives income from paying patients,
whether out-patient, or confined in the
hospital, or receives subsidies from the
government, so long as the money received
is devoted or used altogether to the
charitable object which it is intended to
5
achieve; and no money inures to the private

benefit of the persons managing or operating
the institution. 18 In Congregational Sunday
School, etc. v. Board of Review, 19 the State
Supreme Court of Illinois held, thus:
. . . [A]n institution does not lose its
charitable character, and consequent
exemption from taxation, by reason
of the fact that those recipients of its
benefits who are able to pay are
required to do so, where no profit is
made by the institution and the
amounts so received are applied in
furthering its charitable purposes,
and those benefits are refused to
none on account of inability to pay
therefor. The fundamental ground
upon which all exemptions in favor
of charitable institutions are based is
the benefit conferred upon the public
by them, and a consequent relief, to
some extent, of the burden upon the
state to care for and advance the
interests of its citizens. 20
As aptly stated by the State Supreme Court
of South Dakota in Lutheran Hospital
Association of South Dakota v. Baker: 21
. . . [T]he fact that paying patients
are taken, the profits derived from
attendance upon these patients being
exclusively
devoted
to
the
maintenance of the charity, seems
rather to enhance the usefulness of
the institution to the poor; for it is a
matter of common observation
amongst those who have gone about
at all amongst the suffering classes,

that the deserving poor can with
difficulty be persuaded to enter an
asylum of any kind confined to the
reception of objects of charity; and
that their honest pride is much less
wounded by being placed in an
institution in which paying patients
are also received. The fact of
receiving money from some of the
patients does not, we think, at all
impair the character of the charity, so
long as the money thus received is
devoted altogether to the charitable
object which the institution is
intended to further. 22
The money received by the petitioner
becomes a part of the trust fund and must be
devoted to public trust purposes and cannot
be diverted to private profit or benefit. 23
Under P.D. No. 1823, the petitioner is
entitled to receive donations. The petitioner
does not lose its character as a charitable
institution simply because the gift or
donation is in the form of subsidies granted
by the government. As held by the State
Supreme Court of Utah in Yorgason
v. County Board of Equalization of Salt
Lake County: 24
Second, the . . . government subsidy
payments are provided to the project.
Thus, those payments are like a gift
or donation of any other kind except
they come from the government. In
both Intermountain Health Care and
the present case, the crux is the
GMTALVAREZ 402
presence or absence of material

reciprocity. It is entirely irrelevant to
this analysis that the government,
rather than a private benefactor,
chose to make up the deficit resulting
from the exchange between St.
Mark's Tower and the tenants by
making a contribution to the
landlord, just as it would have been
irrelevant in Intermountain Health
Care if
the
patients'
income
supplements had come from private
individuals
rather
than
the
government.
Therefore, the fact that subsidization
of part of the cost of furnishing such
housing is by the government rather
than private charitable contributions
does not dictate the denial of a
charitable exemption if the facts
otherwise
support
such
an
exemption, as they do here. 25
In this case, the petitioner adduced
substantial evidence that it spent its income,
including the subsidies from the government
for 1991 and 1992 for its patients and for the
operation of the hospital. It even incurred a
net loss in 1991 and 1992 from its
operations.
Even as we find that the petitioner is a
charitable institution, we hold, anent the
second issue, that those portions of its real
property that are leased to private entities are
not exempt from real property taxes as these
6
are not actually, directly and exclusively

used for charitable purposes.
The settled rule in this jurisdiction is that
laws granting exemption from tax are
construed strictissimi
juris against
the
taxpayer and liberally in favor of the taxing
power. Taxation is the rule and exemption is
the exception. The effect of an exemption is
equivalent to an appropriation. Hence, a
claim for exemption from tax payments
must be clearly shown and based on
language in the law too plain to be
mistaken. 26 As held in Salvation Army
v.Hoehn: 27
An intention on the part of the
legislature to grant an exemption
from the taxing power of the state
will never be implied from language
which will admit of any other
reasonable construction. Such an
intention must be expressed in clear
and unmistakable terms, or must
appear by necessary implication
from the language used, for it is a
well settled principle that, when a
special privilege or exemption is
claimed under a statute, charter or
act of incorporation, it is to be
construed strictly against the
property owner and in favor of the
public. This principle applies with
peculiar force to a claim of
exemption from taxation. . . . 28
Section 2 of Presidential Decree No. 1823,
relied upon by the petitioner, specifically
provides that the petitioner shall enjoy the

tax exemptions and privileges:
SEC. 2. TAX EXEMPTIONS AND
PRIVILEGES. Being a nonprofit,
non-stock
corporation
organized primarily to help combat
the high incidence of lung and
pulmonary
diseases
in
the
Philippines,
all
donations,
contributions, endowments
and
equipment and supplies to be
imported by authorized entities or
persons and by the Board of Trustees
of the Lung Center of the
Philippines, Inc., for the actual use
and benefit of the Lung Center, shall
be exempt from income and gift
taxes, the same further deductible in
full for the purpose of determining
the maximum deductible amount
under Section 30, paragraph (h), of
the National Internal Revenue Code,
as amended.
The
Lung
Center
of
the
Philippines shall be exempt from the
payment of taxes, charges and fees
imposed by the Government or any
political
subdivision
or
instrumentality thereof with respect
to equipment purchases made by, or
for the Lung Center. 29
It is plain as day that under the decree, the
petitioner does not enjoy any property tax
exemption privileges for its real properties
as well as the building constructed thereon.
If the intentions were otherwise, the same
GMTALVAREZ 402
should have been among the enumeration of

tax exempt privileges under Section 2:
It is a settled rule of statutory
construction that the express mention
of one person, thing, or consequence
implies the exclusion of all others.
The rule is expressed in the familiar
maxim, expressio unius est exclusio
alterius.
The rule of expressio unius est
exclusio alterius is formulated in a
number of ways. One variation of the
rule is the principle that what is
expressed puts an end to that which
is implied. Expressium facit cessare
tacitum. Thus, where a statute, by its
terms, is expressly limited to certain
matters, it may not, by interpretation
or construction, be extended to other
matters.
xxx xxx xxx
The rule of expressio unius est
exclusio alterius and its variations
are
canons
of
restrictive
interpretation. They are based on the
rules of logic and the natural
workings of the human mind. They
are predicated upon one's own
voluntary act and not upon that of
others. They proceed from the
premise that the legislature would
not have made specified enumeration
in a statute had the intention been not
to restrict its meaning and confine its
7
terms
to
mentioned. 30
those
expressly
The exemption must not be so enlarged by

construction
since
the
reasonable
presumption is that the State has granted in
express terms all it intended to grant at all,
and that unless the privilege is limited to the
very terms of the statute the favor would be
intended beyond what was meant. 31
Section 28(3), Article VI of the 1987
Philippine Constitution provides, thus:
(3) Charitable institutions, churches
and
parsonages
or
convents
appurtenant thereto, mosques, nonprofit cemeteries, and all lands,
buildings,
and
improvements, actually,
directly and exclusively used
for
religious, charitable or educational
purposes shall be exempt from
taxation. 32
The tax exemption under this constitutional
provision covers property taxes only. 33 As
Chief Justice Hilario G. Davide, Jr., then a
member of the 1986 Constitutional
Commission, explained: ". . . what is
exempted is not the institution itself . . .;
those exempted from real estate taxes are
lands, buildings and improvements actually,
directly and exclusively used for religious,
charitable or educational purposes." 34
Consequently, the constitutional provision is
implemented by Section 234(b) of Republic
Act No. 7160 (otherwise known as the Local
Government Code of 1991) as follows:
SECTION 234. Exemptions from

Real Property Tax. The following
are exempted from payment of the
real property tax:
xxx xxx xxx
(b) Charitable institutions, churches,
parsonages or convents appurtenant
thereto, mosques, non-profit or
religious cemeteries and all lands,
buildings,
and
improvements actually,
directly,
and exclusively used for religious,
charitable
or
educational
purposes. 35
We note that under the 1935 Constitution,
". . . all lands, buildings, and improvements
used 'exclusively' for charitable . . .
purposes
shall
be
exempt
from
taxation." 36 However, under the 1973 and
the present Constitutions, for "lands,
buildings, and improvements" of the
charitable institution to be considered
exempt, the same should not only be
"exclusively" used for charitable purposes; it
is required that such property be used
"actually" and "directly" for such
purposes. 37
In light of the foregoing substantial changes
in the Constitution, the petitioner cannot rely
on our ruling in Herrera v. Quezon City
Board of Assessment Appeals which was
promulgated on September 30, 1961 before
the 1973 and 1987 Constitutions took
effect. 38 As this Court held in Province of
Abra v. Hernando: 39
GMTALVAREZ 402
. . . Under the 1935 Constitution:

"Cemeteries,
churches,
and
parsonages or convents appurtenant
thereto, and all lands, buildings, and
improvements used exclusively for
religious, charitable, or educational
purposes shall be exempt from
taxation."
The
present Constitution added
"charitable institutions, mosques, and
non-profit cemeteries" and required
that for the exemption of "lands,
buildings, and improvements," they
should not only be "exclusively" but
also "actually" and "directly" used
for religious or charitable purposes.
The Constitution is
worded
differently. The change should not be
ignored. It must be duly taken into
consideration. Reliance on past
decisions would have sufficed were
the words "actually" as well as
"directly" not added. There must be
proof
therefore
of
the actual and direct use of the lands,
buildings, and improvements for
religious or charitable purposes to be
exempt from taxation . . .
Under the 1973 and 1987 Constitutions
and Rep. Act No. 7160 in order to be
entitled to the exemption, the petitioner is
burdened to prove, by clear and unequivocal
proof, that (a) it is a charitable institution;
and (b) its real properties are ACTUALLY,
DIRECTLY and EXCLUSIVELY used for
charitable purposes. "Exclusive" is defined
as possessed and enjoyed to the exclusion of
8
others; debarred from participation or

enjoyment; and "exclusively" is defined, "in
a manner to exclude; as enjoying a privilege
exclusively." 40 If real property is used for
one or more commercial purposes, it is not
exclusively used for the exempted purposes
but is subject to taxation. 41 The words
"dominant use" or "principal use" cannot be
substituted for the words "used exclusively"
without doing violence to the Constitutions
and the law. 42 Solely is synonymous with
exclusively. 43
What is meant by actual, direct and
exclusive use of the property for charitable
purposes is the direct and immediate and
actual application of the property itself to the
purposes for which the charitable institution
is organized. It is not the use of the income
from the real property that is determinative
of whether the property is used for taxexempt purposes. 44
The petitioner failed to discharge its burden
to prove that the entirety of its real property
is actually, directly and exclusively used for
charitable purposes. While portions of the
hospital are used for the treatment of
patients and the dispensation of medical
services to them, whether paying or nonpaying, other portions thereof are being
leased to private individuals for their clinics
and a canteen. Further, a portion of the land
is being leased to a private individual for her
business enterprise under the business name
"Elliptical Orchids and Garden Center."
Indeed, the petitioner's evidence shows that
it collected P1,136,483.45 as rentals in 1991
and P1,679,999.28 for 1992 from the said

lessees.
Accordingly, we hold that the portions of the
land leased to private entities as well as
those parts of the hospital leased to private
individuals are not exempt from such
taxes. 45 On the other hand, the portions of
the land occupied by the hospital and
portions of the hospital used for its patients,
whether paying or non-paying, are exempt
from real property taxes.
IN LIGHT OF ALL THE FOREGOING, the
petition is PARTIALLY GRANTED. The
respondent Quezon City Assessor is hereby
DIRECTED to determine, after due hearing,
the precise portions of the land and the area
thereof which are leased to private persons,
and to compute the real property taxes due
thereon as provided for by law.
SO ORDERED.
||| (Lung Center of the Phil. v. Quezon City,
G.R. No. 144104, [June 29, 2004], 477
PHIL 141-160)
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
[G.R. No. 155650. July 20, 2006.]

MANILA INTERNATIONAL AIRPORT
AUTHORITY, petitioner, vs. COURT OF
APPEALS, CITY OF PARAAQUE,
CITY MAYOR OF PARAAQUE,
SANGGUNIANG PANGLUNGSOD NG
PARAAQUE, CITY ASSESSOR OF
GMTALVAREZ 402
PARAAQUE, and CITY TREASURER

OF PARAAQUE, respondents.
DECISION
CARPIO, J p:
The Antecedents
Petitioner Manila International Airport
Authority (MIAA) operates the Ninoy
Aquino International Airport (NAIA)
Complex in Paraaque City under Executive
Order No. 903, otherwise known as
the Revised Charter of the Manila
International Airport Authority ("MIAA
Charter"). Executive Order No. 903 was
issued on 21 July 1983 by then President
Ferdinand E. Marcos. Subsequently,
Executive
Order
Nos.
909 1 and
298 2 amended the MIAA Charter.
As operator of the international airport,
MIAA administers the land, improvements
and equipment within the NAIA Complex.
The MIAA Charter transferred to MIAA
approximately
600
hectares
of
land, 3 including the runways and buildings
("Airport Lands and Buildings") then under
the Bureau of Air Transportation. 4 The
MIAA Charter further provides that no
portion of the land transferred to MIAA
shall be disposed of through sale or any
other mode unless specifically approved by
the President of the Philippines. 5
On 21 March 1997, the Office of the
Government Corporate Counsel (OGCC)
issued Opinion No. 061. The OGCC opined
that the Local Government Code of 1991
9
withdrew the exemption from real estate tax

granted to MIAA under Section 21 of the
MIAA Charter. Thus, MIAA negotiated with
respondent City of Paraaque to pay the real
estate tax imposed by the City. MIAA then
paid some of the real estate tax already due.
On 28 June 2001, MIAA received Final
Notices of Real Estate Tax Delinquency
from the City of Paraaque for the taxable
years 1992 to 2001. MIAA's real estate tax
delinquency is broken down as follows:
TAX
DECLARATION
TAXABLE
YEAR
TAX DUE
PENALTY
TOTAL
E-01601370
1992
2001
1992
2001
1992
2001
1992
2001
1992
2001
1992
2001
1992
2001
1992
2001
19,558,
160.00
11,201,
083.20
30,789,
243.20
111,689
,424.90
68,149,
479.59
179,838
,904.49
E-01601374
E-01601375
E-01601376
E-01601377
E-01601378
E-01601379
E-01601380
20,276,
058.00
12,371,
832.00
32,647,
890.00
58,144,
028.00
35,477,
712.00
93,621,
740.00
18,134,
614.65
11,065,
188.59
29,199,
803.24
111,107
,950.40
67,794,
681.59
178,902
,631.99
4,322,3
40.00
2,637,3
60.00
6,959,7
00.00
7,776,4
36.00
4,744,9
44.00
12,521,
380.00
*E1998
016013-85 2001
*E1998
01601387 2001
*E1998
01601396 2001
GRAND
TOTAL
GMTALVAREZ 402
6,444,8
10.00
2,900,1
64.50
9,344,9
74.50
34,876,
800.00
5,694,5
60.00
50,571,
360.00
75,240.
00
33,858.
00
109,098
.00
P392,4
35,861.
95
P232,0
70,863.
47
P624,50
6,725.4
2
1992-1997 RPT was paid on Dec. 24, 1997

as per O.R. #9476102 for P4,207,028.75
#9476101 for P28,676,480.00 #9476103 for
P49,115.00 6
On 17 July 2001, the City of Paraaque,
through its City Treasurer, issued notices of
levy and warrants of levy on the Airport
Lands and Buildings. The Mayor of the City
of Paraaque threatened to sell at public
auction the Airport Lands and Buildings
should MIAA fail to pay the real estate tax
delinquency. MIAA thus sought a
clarification of OGCC Opinion No. 061.
On 9 August 2001, the OGCC issued
Opinion No. 147 clarifying OGCC Opinion
No. 061. The OGCC pointed out that
Section 206 of the Local Government Code
requires persons exempt from real estate tax
to show proof of exemption. The OGCC
opined that Section 21 of the MIAA Charter
is the proof that MIAA is exempt from real
estate tax.
On 1 October 2001, MIAA filed with the

Court of Appeals an original petition for
prohibition and injunction, with prayer for
preliminary injunction or temporary
restraining order. The petition sought to
restrain the City of Paraaque from
imposing real estate tax on, levying against,
and auctioning for public sale the Airport
Lands and Buildings. The petition was
docketed as CA-G.R. SP No. 66878.
On 5 October 2001, the Court of Appeals
dismissed the petition because MIAA filed it
beyond the 60-day reglementary period. The
Court of Appeals also denied on 27
September 2002 MIAA's motion for
reconsideration and supplemental motion for
reconsideration. Hence, MIAA filed on 5
December 2002 the present petition for
review. 7
Meanwhile, in January 2003, the City of
Paraaque posted notices of auction sale at
the Barangay Halls of Barangays Vitalez,
Sto. Nio, and Tambo, Paraaque City; in
the public market of Barangay La Huerta;
and in the main lobby of the Paraaque City
Hall. The City of Paraaque published the
notices in the 3 and 10 January 2003 issues
of the Philippine Daily Inquirer, a
newspaper of general circulation in the
Philippines. The notices announced the
public auction sale of the Airport Lands and
Buildings to the highest bidder on 7
February 2003, 10:00 a.m., at the Legislative
Session Hall Building of Paraaque City.
A day before the public auction, or on 6
February 2003, at 5:10 p.m., MIAA filed
10
before this Court an Urgent Ex-Parte and

Reiteratory Motion for the Issuance of a
Temporary Restraining Order. The motion
sought to restrain respondents the City of
Paraaque, City Mayor of Paraaque,
Sangguniang Panglungsod ng Paraaque,
City Treasurer of Paraaque, and the City
Assessor of Paraaque ("respondents")
from auctioning the Airport Lands and
Buildings.
Buildings is the Republic of the Philippines.

The MIAA Charter mandates MIAA to
devote the Airport Lands and Buildings for
the benefit of the general public. Since the
Airport Lands and Buildings are devoted to
public use and public service, the ownership
of these properties remains with the State.
The Airport Lands and Buildings are thus
inalienable and are not subject to real estate
tax by local governments.
On 7 February 2003, this Court issued a

temporary restraining order (TRO) effective
immediately. The Court ordered respondents
to cease and desist from selling at public
auction the Airport Lands and Buildings.
Respondents received the TRO on the same
day that the Court issued it. However,
respondents received the TRO only at 1:25
p.m. or three hours after the conclusion of
the public auction.
MIAA also points out that Section 21 of the

MIAA Charter specifically exempts MIAA
from the payment of real estate tax. MIAA
insists that it is also exempt from real estate
tax under Section 234 of the Local
Government Code because the Airport
Lands and Buildings are owned by the
Republic. To justify the exemption, MIAA
invokes the principle that the government
cannot tax itself. MIAA points out that the
reason for tax exemption of public property
is that its taxation would not inure to any
public advantage, since in such a case the
tax debtor is also the tax creditor.
On 10 February 2003, this Court issued a

Resolution confirming nunc pro tunc the
TRO.
On 29 March 2005, the Court heard the
parties in oral arguments. In compliance
with the directive issued during the hearing,
MIAA, respondent City of Paraaque, and
the Solicitor General subsequently submitted
their respective Memoranda.
MIAA admits that the MIAA Charter has
placed the title to the Airport Lands and
Buildings in the name of MIAA. However,
MIAA points out that it cannot claim
ownership over these properties since the
real owner of the Airport Lands and
Respondents invoke Section 193 of the

Local Government Code, which expressly
withdrew the tax exemption privileges of
"government-owned
and-controlled
corporations" upon the effectivity of the
Local Government Code. Respondents also
argue that a basic rule of statutory
construction is that the express mention of
one person, thing, or act excludes all others.
An international airport is not among the
exceptions mentioned in Section 193 of the
Local Government Code. Thus, respondents
GMTALVAREZ 402
assert that MIAA cannot claim that the

Airport Lands and Buildings are exempt
from real estate tax.
Respondents also cite the ruling of this
Court in Mactan International Airport v.
Marcos 8 where we held that the Local
Government Code has withdrawn the
exemption from real estate tax granted to
international airports. Respondents further
argue that since MIAA has already paid
some of the real estate tax assessments, it is
now estopped from claiming that the Airport
Lands and Buildings are exempt from real
estate tax.
The Issue
This petition raises the threshold issue of
whether the Airport Lands and Buildings of
MIAA are exempt from real estate tax under
existing laws. If so exempt, then the real
estate tax assessments issued by the City of
Paraaque, and all proceedings taken
pursuant to such assessments, are void. In
such event, the other issues raised in this
petition become moot.
The Court's Ruling
We rule that MIAA's Airport Lands and
Buildings are exempt from real estate tax
imposed by local governments.
First, MIAA is not a government-owned or
controlled
corporation
but
an instrumentality of
the
National
Government and thus exempt from local
taxation. Second, the real properties of
MIAA are owned by the Republic of the
11
Philippines and thus exempt from real estate

tax.
1. MIAA is Not a Government-Owned
or Controlled Corporation
Respondents argue that MIAA, being a
government-owned
or
controlled
corporation, is not exempt from real estate
tax. Respondents claim that the deletion of
the phrase "any government-owned or
controlled so exempt by its charter" in
Section 234(e) of the Local Government
Code withdrew the real estate tax exemption
of
government-owned
or
controlled
corporations. The deleted phrase appeared in
Section 40(a) of the 1974 Real Property Tax
Code enumerating the entities exempt from
real estate tax.
There is no dispute that a governmentowned or controlled corporation is not
exempt from real estate tax. However,
MIAA is not a government-owned or
controlled corporation. Section 2(13) of the
Introductory
Provisions
of
the Administrative Code of 1987 defines a
government-owned
or
controlled
corporation as follows:
SEC. 2. General Terms Defined.
...
(13) Government-owned
or
controlled corporation refers to any
agency organized as a stock or
non-stock corporation, vested with
functions relating to public needs
whether governmental or proprietary

in nature, and owned by the
Government directly or through its
instrumentalities either wholly, or,
where applicable as in the case of
stock corporations, to the extent of at
least fifty-one (51) percent of its
capital stock: . . . . (Emphasis
supplied)
A
government-owned
or
controlled
corporation must be "organized as a stock
or non-stock corporation." MIAA is not
organized as a stock or non-stock
corporation. MIAA is not a stock
corporation because it has no capital stock
divided into shares. MIAA has no
stockholders or voting shares. Section 10 of
the MIAA Charter 9 provides:
SECTION 10. Capital. The
capital of the Authority to be
contributed
by
the
National
Government shall be increased from
Two
and
One-half
Billion
(P2,500,000,000.00) Pesos to Ten
Billion (P10,000,000,000.00) Pesos
to consist of:
(a) The value of fixed assets
including airport facilities, runways
and equipment and such other
properties,
movable
and
immovable[,] which may be
contributed
by
the
National
Government or transferred by it from
any of its agencies, the valuation of
which shall be determined jointly
with the Department of Budget and
GMTALVAREZ 402
Management and the Commission on

Audit on the date of such
contribution or transfer after making
due allowances for depreciation and
other deductions taking into account
the loans and other liabilities of the
Authority at the time of the takeover
of the assets and other properties;
(b) That the amount of P605 million
as
of December 31, 1986
representing
about
seventy
percentum (70%) of the unremitted
share of the National Government
from 1983 to 1986 to be remitted to
the National Treasury as provided for
in Section 11 of E.O. No. 903 as
amended, shall be converted into the
equity of the National Government
in the Authority. Thereafter, the
Government contribution to the
capital of the Authority shall be
provided
in
the
General
Appropriations Act.
Clearly, under its Charter, MIAA does not
have capital stock that is divided into
shares.
Section
3
of
the
Corporation
Code 10 defines a stock corporation as one
whose "capital stock is divided into shares
and . . . authorized to distribute to the
holders of such shares dividends . . . ."
MIAA has capital but it is not divided into
shares of stock. MIAA has no stockholders
or voting shares. Hence, MIAA is not a
stock corporation.
12
MIAA is also not a non-stock corporation

because it has no members. Section 87 of
the Corporation Code defines a non-stock
corporation as "one where no part of its
income is distributable as dividends to its
members, trustees or officers." A non-stock
corporation must have members. Even if we
assume that the Government is considered as
the sole member of MIAA, this will not
make MIAA a non-stock corporation. Nonstock corporations cannot distribute any part
of their income to their members. Section 11
of the MIAA Charter mandates MIAA to
remit 20% of its annual gross operating
income to the National Treasury. 11 This
prevents MIAA from qualifying as a nonstock corporation.
Section 88 of the Corporation Code provides
that non-stock corporations are "organized
for charitable, religious, educational,
professional, cultural, recreational, fraternal,
literary, scientific, social, civil service, or
similar purposes, like trade, industry,
agriculture and like chambers." MIAA is not
organized for any of these purposes. MIAA,
a public utility, is organized to operate an
international and domestic airport for public
use.
Since MIAA is neither a stock nor a nonstock corporation, MIAA does not qualify as
a
government-owned
or
controlled
corporation. What then is the legal status of
MIAA within the National Government?
MIAA
is
instrumentality vested
powers
to
perform
a government
with
corporate
efficiently
its
governmental functions. MIAA is like any

other government instrumentality, the only
difference is that MIAA is vested with
corporate powers. Section 2(10) of the
Introductory
Provisions
of
the Administrative
Code defines
a
government "instrumentality" as follows:
. . .
(10) Instrumentality refers to any
agency of the National Government,
not integrated within the department
framework, vested with special
functions
or
jurisdiction
by
law, endowed with some if not all
corporate powers, administering
special
funds,
and enjoying
operational autonomy, usually
through a charter. . . . (Emphasis
supplied)
When the law vests in a government
instrumentality corporate powers, the
instrumentality does not become a
corporation. Unless the government
instrumentality is organized as a stock or
non-stock corporation, it remains a
government instrumentality exercising not
only governmental but also corporate
powers. Thus, MIAA exercises the
governmental
powers
of
eminent
domain, 12 police
authority 13 and
the
levying of fees and charges. 14 At the same
time, MIAA exercises "all the powers of a
corporation under the Corporation Law,
insofar as these powers are not inconsistent
GMTALVAREZ 402
with the provisions of this Executive

Order." 15
Likewise, when the law makes a government
instrumentality operationally autonomous,
the instrumentality remains part of the
National Government machinery although
not integrated with the department
framework. The MIAA Charter expressly
states that transforming MIAA into a
"separate and autonomous body" 16 will
make its operation more "financially
viable." 17
Many government instrumentalities are
vested with corporate powers but they do
not become stock or non-stock corporations,
which is a necessary condition before an
agency or instrumentality is deemed a
government-owned
or
controlled
corporation. Examples are the Mactan
International
Airport
Authority,
the
Philippine Ports Authority, the University of
the Philippines and Bangko Sentral ng
Pilipinas.
All
these
government
instrumentalities exercise corporate powers
but they are not organized as stock or nonstock corporations as required by Section
2(13) of the Introductory Provisions of
the Administrative Code. These government
instrumentalities are sometimes loosely
called government corporate entities.
However, they are not government-owned or
controlled corporations in the strict sense as
understood under the Administrative Code,
which is the governing law defining the
legal relationship and status of government
entities.
13
A government instrumentality like MIAA

falls under Section 133(o) of the Local
Government Code, which states:
SEC. 133. Common Limitations on
the Taxing Powers of Local
Government
Units.
Unless
otherwise provided herein, the
exercise of the taxing powers of
provinces, cities, municipalities,
and barangays shall not extend to
the levy of the following:
xxx xxx xxx
(o) Taxes, fees or charges of any
kind on the National Government,
its
agencies
and instrumentalities and
local
government units. (Emphasis and
underscoring supplied)
Section 133(o) recognizes the basic
principle that local governments cannot
tax the national government, which
historically merely delegated to local
governments the power to tax. While the
1987 Constitution now includes taxation
as one of the powers of local governments,
local governments may only exercise such
power "subject to such guidelines and
limitations as the Congress may
provide." 18
When local governments invoke the power
to
tax
on
national
government
instrumentalities, such power is construed
strictly against local governments. The rule
is that a tax is never presumed and there
must be clear language in the law imposing
the tax. Any doubt whether a person, article

or activity is taxable is resolved against
taxation. This rule applies with greater force
when local governments seek to tax national
government instrumentalities.
Another rule is that a tax exemption is
strictly construed against the taxpayer
claiming the exemption. However, when
Congress grants an exemption to a national
government instrumentality from local
taxation, such exemption is construed
liberally in favor of the national government
instrumentality. As this Court declared
in Maceda v. Macaraig, Jr.:
The reason for the rule does not
apply in the case of exemptions
running to the benefit of the
government itself or its agencies. In
such case the practical effect of an
exemption is merely to reduce the
amount of money that has to be
handled by government in the course
of its operations. For these reasons,
provisions granting exemptions to
government agencies may be
construed liberally, in favor of non
tax-liability of such agencies. 19
There is, moreover, no point in national
and local governments taxing each other,
unless a sound and compelling policy
requires such transfer of public funds from
one government pocket to another.
There is also no reason for local
governments to tax national government
instrumentalities for rendering essential
GMTALVAREZ 402
public services to inhabitants of local

governments. The only exception is when
the legislature clearly intended to tax
government instrumentalities for the
delivery of essential public services for
sound
and
compelling
policy
considerations. There must be express
language in the law empowering local
governments to tax national government
instrumentalities. Any doubt whether such
power exists is resolved against local
governments.
Thus, Section 133 of the Local Government
Code states that "unless otherwise
provided" in the Code, local governments
cannot
tax
national
government
instrumentalities. As this Court held
in Basco v. Philippine Amusements and
Gaming Corporation:
The states have no power by
taxation or otherwise, to
retard, impede, burden or in
any manner control the
operation of constitutional
laws enacted by Congress to
carry into execution the
powers vested in the federal
government. (MC Culloch v.
Maryland, 4 Wheat 316, 4 L
Ed. 579)
This doctrine emanates from the
"supremacy" of the National
Government over local governments.
14
"Justice Holmes, speaking for

the Supreme Court, made
reference to the entire
absence of power on the part
of the States to touch, in that
way (taxation) at least, the
instrumentalities
of
the
United States (Johnson v.
Maryland, 254 US 51) and it
can be agreed that no state or
political subdivision can
regulate
a
federal
instrumentality in such a way
as to prevent it from
consummating its federal
responsibilities, or even to
seriously burden it in the
accomplishment of them."
(Antieau,
Modern
Constitutional Law, Vol. 2, p.
140, emphasis supplied)
Otherwise, mere creatures of the
State can defeat National policies
thru extermination of what local
authorities may perceive to be
undesirable activities or enterprise
using the power to tax as "a tool for
regulation" (U.S. v. Sanchez, 340 US
42).
The power to tax which was called
by Justice Marshall as the "power to
destroy"
(Mc
Culloch
v.
Maryland, supra) cannot be allowed
to defeat an instrumentality or
creation of the very entity which has
the inherent power to wield it.20
2. Airport Lands and Buildings of

MIAA are Owned by the
Republic
a. Airport Lands and Buildings are of
Public Dominion
The Airport Lands and Buildings of MIAA
are property of public dominion and
therefore owned by the State or the
Republic of the Philippines. The Civil
Code provides:
ARTICLE 419. Property is either of
public dominion or of private
ownership.
ARTICLE
420. The
following
things are property of public
dominion:
(1) Those intended for public use,
such as roads, canals, rivers,
torrents, ports and
bridges constructed by the State,
banks, shores, roadsteads, and others
of similar character;
(2) Those which belong to the State,
without being for public use, and are
intended for some public service or
for the development of the national
wealth. (Emphasis supplied)
ARTICLE 421. All other property of
the State, which is not of the
character stated in the preceding
article, is patrimonial property.
ARTICLE 422. Property of public
dominion, when no longer intended
GMTALVAREZ 402
for public use or for public service,

shall form part of the patrimonial
property of the State.
No one can dispute that properties of public
dominion mentioned in Article 420 of the
Civil Code, like "roads, canals, rivers,
torrents, ports and bridges constructed by
the State," are owned by the State. The
term "ports" includes seaports and
airports. The MIAA Airport Lands and
Buildings constitute a "port" constructed by
the State. Under Article 420 of the Civil
Code, the MIAA Airport Lands and
Buildings are properties of public dominion
and thus owned by the State or the Republic
of the Philippines.
The Airport Lands and Buildings are
devoted to public use because they are used
by the public for international and
domestic travel and transportation. The
fact that the MIAA collects terminal fees and
other charges from the public does not
remove the character of the Airport Lands
and Buildings as properties for public use.
The operation by the government of a
tollway does not change the character of the
road as one for public use. Someone must
pay for the maintenance of the road, either
the public indirectly through the taxes they
pay the government, or only those among
the public who actually use the road through
the toll fees they pay upon using the road.
The tollway system is even a more efficient
and equitable manner of taxing the public
for the maintenance of public roads.
15
The charging of fees to the public does not

determine the character of the property
whether it is of public dominion or not.
Article 420 of the Civil Code defines
property of public dominion as one
"intended for public use." Even if the
government collects toll fees, the road is still
"intended for public use" if anyone can use
the road under the same terms and
conditions as the rest of the public. The
charging of fees, the limitation on the kind
of vehicles that can use the road, the speed
restrictions and other conditions for the use
of the road do not affect the public character
of the road.
The terminal fees MIAA charges to
passengers, as well as the landing fees
MIAA charges to airlines, constitute the bulk
of the income that maintains the operations
of MIAA. The collection of such fees does
not change the character of MIAA as an
airport for public use. Such fees are often
termed user's tax. This means taxing those
among the public who actually use a public
facility instead of taxing all the public
including those who never use the particular
public facility. A user's tax is more equitable
a principle of taxation mandated in the
1987 Constitution. 21
The Airport Lands and Buildings of MIAA,
which its Charter calls the "principal airport
of the Philippines for both international and
domestic air traffic," 22 are properties of
public dominion because they are intended
for public use. As properties of public
dominion, they indisputably belong to the

State or the Republic of the Philippines.
b. Airport Lands and Buildings are
Outside the Commerce of Man
The Airport Lands and Buildings of MIAA
are devoted to public use and thus are
properties
of
public
dominion. As
properties of public dominion, the Airport
Lands and Buildings are outside the
commerce of man. The Court has ruled
repeatedly that properties of public
dominion are outside the commerce of man.
As early as 1915, this Court already ruled
in Municipality of Cavite v. Rojas that
properties devoted to public use are outside
the commerce of man, thus:
According to article 344 of the Civil
Code: "Property for public use in
provinces and in towns comprises
the provincial and town roads, the
squares, streets, fountains, and public
waters, the promenades, and public
works of general service supported
by said towns or provinces."
The said Plaza Soledad being a
promenade for public use, the
municipal council of Cavite could
not in 1907 withdraw or exclude
from public use a portion thereof in
order to lease it for the sole benefit
of the defendant Hilaria Rojas. In
leasing a portion of said plaza or
public place to the defendant for
private use the plaintiff municipality
exceeded its authority in the exercise
GMTALVAREZ 402
of its powers by executing a contract

over a thing of which it could not
dispose, nor is it empowered so to
do.
The Civil Code, article 1271,
prescribes that everything which is
not outside the commerce of man
may be the object of a contract, and
plazas and streets are outside of this
commerce, as was decided by the
supreme court of Spain in its
decision of February 12, 1895, which
says: "Communal things that
cannot be sold because they are by
their very nature outside of
commerce are those for public use,
such as the plazas, streets, common
lands, rivers, fountains, etc."
(Emphasis supplied) 23
Again in Espiritu v. Municipal Council, the
Court declared that properties of public
dominion are outside the commerce of man:
. . . Town plazas are properties of
public dominion, to be devoted to
public use and to be made available
to the public in general. They
are outside the commerce of
man and cannot be disposed of or
even leased by the municipality to
private parties. While in case of war
or during an emergency, town plazas
may be occupied temporarily by
private individuals, as was done and
as was tolerated by the Municipality
of Pozorrubio, when the emergency
has
ceased,
said
temporary
16
occupation or use must also cease,

and the town officials should see to it
that the town plazas should ever be
kept open to the public and free from
encumbrances or illegal private
constructions. 24 (Emphasis
supplied)
The Court has also ruled that property of
public dominion, being outside the
commerce of man, cannot be the subject of
an auction sale. 25
Properties of public dominion, being for
public use, are not subject to levy,
encumbrance or disposition through public
or private sale. Any encumbrance, levy on
execution or auction sale of any property of
public dominion is void for being contrary
to public policy. Essential public services
will stop if properties of public dominion are
subject to encumbrances, foreclosures and
auction sale. This will happen if the City of
Paraaque can foreclose and compel the
auction sale of the 600-hectare runway of
the MIAA for non-payment of real estate
tax.
Before MIAA can encumber 26 the Airport
Lands and Buildings, the President must
first withdraw from public use the Airport
Lands and Buildings. Sections 83 and 88 of
the Public Land Law or Commonwealth Act
No. 141, which "remains to this day the
existing general law governing the
classification and disposition of lands of the
public domain other than timber and mineral
lands," 27 provide:
SECTION
83. Upon
the
recommendation of the Secretary of
Agriculture and Natural Resources,
the President may designate by
proclamation any tract or tracts of
land of the public domain as
reservations for the use of the
Republic of the Philippines or of any
of its branches, or of the inhabitants
thereof,
in
accordance
with
regulations prescribed for this
purposes, or for quasi-public uses or
purposes when the public interest
requires it, including reservations for
highways, rights of way for
railroads, hydraulic power sites,
irrigation
systems,
communal
pastures or lequas communales,
public parks, public quarries, public
fishponds, working men's village and
other improvements for the public
benefit.
SECTION 88. The tract or tracts of
land reserved under the provisions
of Section eighty-three shall
be non-alienable and shall not be
subject to occupation, entry, sale,
lease, or other disposition until
again declared alienable under the
provisions of this Act or by
proclamation of the President.
(Emphasis
and
underscoring
supplied)
Thus, unless the President issues a
proclamation withdrawing the Airport Lands
and Buildings from public use, these
GMTALVAREZ 402
properties remain properties of public

dominion and are inalienable. Since the
Airport Lands and Buildings are inalienable
in their present status as properties of public
dominion, they are not subject to levy on
execution or foreclosure sale. As long as the
Airport Lands and Buildings are reserved for
public use, their ownership remains with the
The authority of the President to reserve
lands of the public domain for public use,
and to withdraw such public use, is
reiterated in Section 14, Chapter 4, Title I,
Book III of the Administrative Code of
1987, which states:
SEC. 14. Power to Reserve Lands of
the Public and Private Domain of
the
Government.
(1) The
President shall have the power to
reserve for settlement or public
use, and for specific public
purposes, any of the lands of the
public domain, the use of which is
not otherwise directed by law. The
reserved land shall thereafter
remain subject to the specific
public purpose indicated until
otherwise provided by law or
proclamation;
xxx xxx xxx. (Emphasis supplied)
There is no question, therefore, that unless
the Airport Lands and Buildings are
withdrawn by law or presidential
proclamation from public use, they are
17
properties of public dominion, owned by

the Republic and outside the commerce of
man.
c. MIAA is a Mere Trustee of the
Republic
MIAA is merely holding title to the Airport
Lands and Buildings in trust for the
Republic. Section 48, Chapter 12, Book I
of the Administrative
Code allows
instrumentalities like MIAA to hold title
to real properties owned by the Republic,
thus:
SEC. 48. Official Authorized to
Convey Real Property. Whenever
real property of the Government is
authorized by law to be conveyed,
the deed of conveyance shall be
executed in behalf of the government
by the following:
(1) For property belonging to and
titled in the name of the Republic of
the Philippines, by the President,
unless the authority therefor is
expressly vested by law in another
officer.
(2) For property belonging to the
Republic of the Philippines but
titled in the name of any political
subdivision or of any corporate
agency or instrumentality, by the
executive head of the agency or
instrumentality. (Emphasis supplied)
In MIAA's case, its status as a mere trustee
of the Airport Lands and Buildings is clearer
because even its executive head cannot sign

the deed of conveyance on behalf of the
Republic. Only the President of the Republic
can sign such deed of conveyance. 28
d. Transfer to MIAA was Meant to
Implement a Reorganization
The MIAA Charter, which is a law,
transferred to MIAA the title to the Airport
Lands and Buildings from the Bureau of Air
Transportation of the Department of
Transportation and Communications. The
MIAA Charter provides:
SECTION 3. Creation of the Manila
International Airport Authority. . .
.
The land where the Airport is
presently located as well as the
surrounding
land
area
of
approximately
six
hundred
hectares, are hereby transferred,
conveyed and assigned to the
ownership and administration of
the Authority, subject to existing
rights, if any. The Bureau of Lands
and other appropriate government
agencies shall undertake an actual
survey of the area transferred within
one year from the promulgation of
this Executive Order and the
corresponding title to be issued in the
name of the Authority. Any portion
thereof shall not be disposed
through sale or through any other
mode unless specifically approved
GMTALVAREZ 402
by the President of the Philippines.

(Emphasis supplied)
SECTION 22. Transfer of Existing
Facilities and Intangible Assets.
All existing public airport facilities,
runways, lands, buildings and
other property, movable or
immovable, belonging to the Airport,
and all assets, powers, rights,
interests and privileges belonging to
the
Bureau
of
Air
Transportation relating to airport
works or air operations, including all
equipment which are necessary for
the operation of crash fire and rescue
facilities, are hereby transferred to
the Authority. (Emphasis supplied)
SECTION 25. Abolition of the
Manila International Airport as a
Division in the Bureau of Air
Transportation
and
Transitory
Provisions.
The
Manila
International Airport including the
Manila Domestic Airport as a
division under the Bureau of Air
Transportation is hereby abolished.
xxx xxx xxx.
The MIAA Charter transferred the Airport
Lands and Buildings to MIAA without the
Republic receiving cash, promissory notes
or even stock since MIAA is not a stock
corporation.
The whereas clauses of the MIAA Charter
explain the rationale for the transfer of the
Airport Lands and Buildings to MIAA, thus:
18
WHEREAS, the Manila International

Airport as the principal airport of the
Philippines for both international and
domestic air traffic, is required to
provide
standards
of
airport
accommodation
and
service
comparable with the best airports in
the world;
WHEREAS, domestic and other
terminals, general aviation and other
facilities, have to be upgraded to
meet the current and future air traffic
and other demands of aviation in
Metro Manila;
WHEREAS, a management and
organization study has indicated
that the objectives of providing
high standards of accommodation
and service within the context of a
financially viable operation, will
best be achieved by a separate and
autonomous body; and
WHEREAS,
under Presidential
Decree No. 1416, as amended
by Presidential Decree No. 1772, the
President of the Philippines is given
continuing authority to reorganize
the National Government, which
authority includes the creation of
new
entities,
agencies
and
instrumentalities
of
the
Government[.] (Emphasis supplied)
The transfer of the Airport Lands and
Buildings from the Bureau of Air
Transportation to MIAA was not meant to
transfer beneficial ownership of these assets

from the Republic to MIAA. The purpose
was merely to reorganize a division in the
Bureau of Air Transportation into a
separate and autonomous body. The
Republic remains the beneficial owner of the
Airport Lands and Buildings. MIAA itself is
owned solely by the Republic. No party
claims any ownership rights over MIAA's
assets adverse to the Republic.
The MIAA Charter expressly provides that
the Airport Lands and Buildings "shall not
be disposed through sale or through any
other mode unless specifically approved
by the President of the Philippines." This
only means that the Republic retained the
beneficial ownership of the Airport Lands
and Buildings because under Article 428 of
the Civil Code, only the "owner has the right
to . . . dispose of a thing." Since MIAA
cannot dispose of the Airport Lands and
Buildings, MIAA does not own the Airport
Lands and Buildings.
At any time, the President can transfer back
to the Republic title to the Airport Lands and
Buildings without the Republic paying
MIAA any consideration. Under Section 3
of the MIAA Charter, the President is the
only one who can authorize the sale or
disposition of the Airport Lands and
Buildings. This only confirms that the
Airport Lands and Buildings belong to the
Republic.
e. Real Property Owned by the Republic
is Not Taxable
GMTALVAREZ 402
Section 234(a) of the Local Government

Code exempts from real estate tax any
"[r]eal property owned by the Republic of
the Philippines." Section 234(a) provides:
SEC. 234. Exemptions from Real
Property Tax. The following are
exempted from payment of the real
property tax:
(a) Real property owned by the
Republic of the Philippines or any
of its political subdivisions except
when the beneficial use thereof has
been granted, for consideration or
otherwise, to a taxable person;
This exemption should be read in relation
with Section 133(o) of the same Code,
which prohibits local governments from
imposing "[t]axes, fees or charges of any
kind on the National Government, its
agencies andinstrumentalities . . . ." The
real properties owned by the Republic are
titled either in the name of the Republic
itself or in the name of agencies or
instrumentalities
of
the
National
Government.
The Administrative
Codeallows real property owned by the
Republic to be titled in the name of agencies
or instrumentalities of the national
government. Such real properties remain
owned by the Republic and continue to be
exempt from real estate tax.
The Republic may grant the beneficial use of
its real property to an agency or
instrumentality of the national government.
19
This happens when title of the real property

is transferred to an agency or instrumentality
even as the Republic remains the owner of
the real property. Such arrangement does not
result in the loss of the tax exemption.
Section 234(a) of the Local Government
Code states that real property owned by the
Republic loses its tax exemption only if the
"beneficial use thereof has been granted, for
consideration or otherwise, to a taxable
person." MIAA, as a government
instrumentality, is not a taxable person under
Section 133(o) of the Local Government
Code. Thus, even if we assume that the
Republic has granted to MIAA the beneficial
use of the Airport Lands and Buildings, such
fact does not make these real properties
subject to real estate tax.
However, portions of the Airport Lands and
Buildings that MIAA leases to private
entities are not exempt from real estate tax.
For example, the land area occupied by
hangars that MIAA leases to private
corporations is subject to real estate tax. In
such a case, MIAA has granted the
beneficial use of such land area for a
consideration to a taxable person and
therefore such land area is subject to real
estate tax. In Lung Center of the
Philippines v. Quezon City, the Court ruled:
Accordingly, we hold that the
portions of the land leased to private
entities as well as those parts of the
hospital leased to private individuals
are not exempt from such taxes. On
the other hand, the portions of the
land occupied by the hospital and

portions of the hospital used for its
patients, whether paying or nonpaying, are exempt from real
property taxes. 29
3. Refutation of Arguments of Minority
The minority asserts that the MIAA is not
exempt from real estate tax because Section
193 of the Local Government Code of 1991
withdrew the tax exemption of "all persons,
whether natural or juridical" upon the
effectivity of the Code. Section 193
provides:
SEC. 193. Withdrawal of Tax
Exemption
Privileges Unless
otherwise provided in this Code,
tax exemptions or incentives granted
to, or presently enjoyed by all
persons, whether natural or
juridical, including
governmentowned or controlled corporations,
except
local
water
districts,
cooperatives
duly
registered
under R.A. No. 6938, non-stock and
non-profit hospitals and educational
institutions are hereby withdrawn
upon effectivity of this Code.
(Emphasis supplied)
The minority states that MIAA is
indisputably a juridical person. The
minority argues that since the Local
Government Code withdrew the tax
exemption of all juridical persons, then
GMTALVAREZ 402
MIAA is not exempt from real estate tax.

Thus, the minority declares:
It is evident from the quoted
provisions
of
the
Local
Government Code that the
withdrawn exemptions from realty
tax cover not just GOCCs, but all
persons. To repeat, the provisions
lay down the explicit proposition that
the withdrawal of realty tax
exemption applies to all persons. The
reference to or the inclusion of
GOCCs is only clarificatory or
illustrative of the explicit provision.
The
term
"All
persons"
encompasses the two classes of
persons recognized under our
laws, natural and juridical
persons. Obviously, MIAA is not a
natural
person.
Thus,
the
determinative test is not just
whether MIAA is a GOCC, but
whether MIAA is a juridical
person at all. (Emphasis and
underscoring in the original)
The minority posits that the "determinative
test" whether MIAA is exempt from local
taxation is its status whether MIAA is a
juridical person or not. The minority also
insists that "Sections 193 and 234 may be
examined in isolation from Section 133(o)
to ascertain MIAA's claim of exemption."
The argument of the minority is fatally
flawed. Section 193 of the Local
Government Code expressly withdrew the
20
tax exemption of all juridical persons

"[u]nless otherwise provided in this
Code." Now, Section 133(o) of the Local
Government
Code expressly
provides
otherwise,
specifically prohibiting local
governments from imposing any kind of tax
on national government instrumentalities.
Section 133(o) states:
the Taxing Powers of Local
Government Units. Unless
otherwise
provided
herein, the
provinces, cities, municipalities,
and barangays shall not extend to
the levy of the following:
xxx xxx xxx
(o) Taxes, fees or charges of any
kinds
on
the
National
Government,
its
agencies
and instrumentalities, and local
government units. (Emphasis and
underscoring supplied)
By express mandate of the Local
Government
Code,
local
governments cannot impose any kind of
tax on national government instrumentalities
like the MIAA. Local governments are
devoid of power to tax the national
government,
its
agencies
and
instrumentalities. The taxing powers of
local governments do not extend to the
national government, its agencies and
instrumentalities,
"[u]nless
otherwise
provided in this Code" as stated in the
saving clause of Section 133. The saving

clause refers to Section 234(a) on the
exception to the exemption from real estate
tax of real property owned by the Republic.
The minority, however, theorizes that unless
exempted in Section 193 itself, all juridical
persons are subject to tax by local
governments. The minority insists that the
juridical persons exempt from local
taxation are limited to the three classes of
entities specifically enumerated as exempt
in Section 193. Thus, the minority states:
. . . Under Section 193, the
exemption is limited to (a) local
water districts; (b) cooperatives
duly registered under Republic Act
No. 6938; and (c) non-stock and
non-profit
hospitals
and
educational institutions. It would
be belaboring the obvious why the
MIAA does not fall within any of the
exempt entities under Section 193.
(Emphasis supplied)
The minority's theory directly contradicts
and completely negates Section 133(o) of
the Local Government Code. This theory
will result in gross absurdities. It will make
the national government, which itself is a
juridical person, subject to tax by local
governments since the national government
is not included in the enumeration of exempt
entities in Section 193. Under this theory,
local governments can impose any kind of
local tax, and not only real estate tax, on
the national government.
GMTALVAREZ 402
Under the minority's theory, many national

government instrumentalities with juridical
personalities will also be subject to any
kind of local tax, and not only real estate
tax. Some of the national government
instrumentalities vested by law with
juridical personalities are: Bangko Sentral
ng Pilipinas, 30 Philippine Rice Research
Institute, 31 Laguna Lake Development
Authority, 32 Fisheries
Development
Authority, 33 Bases
Conversion
Development Authority, 34 Philippine Ports
Authority, 35 Cagayan
de
Oro
Port
Authority, 36 San
Fernando
Port
Authority, 37 Cebu Port Authority, 38 and
Philippine National Railways. 39
The minority's theory violates Section
133(o) of the Local Government Code
which expressly prohibits local governments
from imposing any kind of tax on national
government
instrumentalities. Section
133(o) does not distinguish between
national government instrumentalities
with or without juridical personalities.
Where the law does not distinguish, courts
should not distinguish. Thus, Section 133(o)
applies to all national government
instrumentalities, with or without juridical
personalities.
The determinative
test whether MIAA is exempt from local
taxation is not whether MIAA is a juridical
person, but whether it is a national
government instrumentality under Section
133(o) of the Local Government Code.
Section 133(o) is the specific provision of
law prohibiting local governments from
imposing any kind of tax on the national
21
government,
its
instrumentalities.
agencies
and
Section 133 of the Local Government Code

starts with the saving clause "[u]nless
otherwise provided in this Code." This
means that unless the Local Government
Code grants an express authorization, local
governments have no power to tax the
instrumentalities. Clearly, the rule is local
governments have no power to tax the
instrumentalities. As an exception to this
rule, local governments may tax the national
government,
its
agencies
and
instrumentalities only
if the
Local
Government Code expressly so provides.
The saving clause in Section 133 refers to
the exception to the exemption in Section
234(a) of the Code, which makes the
national government subject to real estate
tax when it gives the beneficial use of its
real properties to a taxable entity. Section
234(a) of the Local Government Code
provides:
Property Tax The following are
property tax:
Republic of the Philippines or any
of its political subdivisions except
when the beneficial use thereof has
been granted, for consideration or
otherwise, to a taxable person.

Under Section 234(a), real property owned
by the Republic is exempt from real estate
tax. The exception to this exemption is
when the government gives the beneficial
use of the real property to a taxable entity.
The exception to the exemption in Section
234(a) is the only instance when the
instrumentalities are subject to any kind
of tax by local governments. The exception
to the exemption applies only to real estate
tax and not to any other tax. The justification
for the exception to the exemption is that the
real property, although owned by the
Republic, is not devoted to public use or
public service but devoted to the private gain
of a taxable person.
The minority also argues that since Section
133 precedes Section 193 and 234 of the
Local Government Code, the later
provisions prevail over Section 133. Thus,
the minority asserts:
. . . Moreover, sequentially Section
133 antecedes Section 193 and 234.
Following an accepted rule of
construction, in case of conflict the
subsequent
provisions
should
prevail. Therefore, MIAA, as a
juridical person, is subject to real
property
taxes,
the
general
exemptions
attaching
to
instrumentalities
under
Section
133(o) of the Local Government
Code being qualified by Sections
GMTALVAREZ 402
193 and 234 of the same law.

(Emphasis supplied)
The minority assumesthat there is an
irreconcilable conflict between Section 133
on one hand, and Sections 193 and 234 on
the other. No one has urged that there is such
a conflict, much less has any one presented a
persuasive argument that there is such a
conflict. The minority's assumption of an
irreconcilable conflict in the statutory
provisions is an egregious error for two
reasons.
First, there is no conflict whatsoever
between
Sections
133
and
193
because Section 193 expressly admits its
subordination to other provisions of the
Code when Section 193 states "[u]nless
otherwise provided in this Code." By its
own
words,
Section
193
admits
the superiority of other provisions of the
Local Government Code that limit the
exercise of the taxing power in Section 193.
When a provision of law grants a power but
withholds such power on certain matters,
there is no conflict between the grant of
power and the withholding of power. The
grantee of the power simply cannot exercise
the power on matters withheld from its
power.
Second, Section 133 is entitled "Common
Limitations on the Taxing Powers of
Local Government Units." Section 133
limits the grant to local governments of the
power to tax, and not merely the exercise of
a delegated power to tax. Section 133 states
that the taxing powers of local governments
22
"shall not extend to the levy" of any kind

of tax on the national government, its
agencies and instrumentalities. There is no
clearer limitation on the taxing power than
this.
Since Section 133 prescribes the "common
limitations" on the taxing powers of local
governments, Section 133 logically prevails
over Section 193 which grants local
governments such taxing powers. By their
very meaning and purpose, the "common
limitations" on the taxing power prevail
over the grant or exercise of the taxing
power. If the taxing power of local
governments in Section 193 prevails over
the limitations on such taxing power in
Section 133, then local governments can
impose any kind of tax on the national
government,
its
agencies
and
instrumentalities a gross absurdity.
Local governments have no power to tax the
instrumentalities, except as otherwise
provided in the Local Government Code
pursuant to the saving clause in Section 133
stating "[u]nless otherwise provided in this
Code." This exception which is an
exception to the exemption of the Republic
from real estate tax imposed by local
governments refers to Section 234(a) of
the Code. The exception to the exemption in
Section 234(a) subjects real property owned
by the Republic, whether titled in the name
of the national government, its agencies or
instrumentalities, to real estate tax if the
beneficial use of such property is given to a

taxable entity.
The minority also claims that the definition
in the Administrative Code of the phrase
"government-owned
or
controlled
corporation" is not controlling. The minority
points out that Section 2 of the Introductory
Provisions
of
the
Administrative
Code admits that its definitions are not
controlling when it provides:
Unless the specific words of the text,
or the context as a whole, or a
particular statute, shall require a
different meaning:
xxx xxx xxx
The minority then concludes that reliance
on the Administrative Code definition is
"flawed."
The minority's argument is a non sequitur.
True, Section 2 of the Administrative
Code recognizes that a statute may require a
different meaning than that defined in
the Administrative Code. However, this does
not automatically mean that the definition in
the Administrative Code does not apply to
the Local Government Code. Section 2 of
the Administrative Code clearly states that
"unless the specific words . . . of a
particular statute shall require a different
meaning," the definition in Section 2 of
the Administrative Code shall apply. Thus,
unless there is specific language in the Local
Government Code defining the phrase
"government-owned
or
controlled
GMTALVAREZ 402
corporation" differently from the definition

in the Administrative Code, the definition in
the Administrative Code prevails.
The minority does not point to any provision
in the Local Government Code defining the
phrase "government-owned or controlled
corporation" differently from the definition
in the Administrative Code. Indeed, there is
none. The Local Government Code is
silent on the definition of the phrase
"government-owned
or
controlled
corporation." The Administrative Code,
however, expressly defines the phrase
"government-owned
or
controlled
corporation." The inescapable conclusion is
that the Administrative Code definition of
the phrase "government-owned or controlled
corporation" applies to the Local
Government Code.
The
third
whereas
clause
of
the Administrative Code states that the Code
"incorporates in a unified document the
major
structural,
functional
and
procedural principles and rules of
governance." Thus, the Administrative
Code is the governing law defining the
status and relationship of government
departments, bureaus, offices, agencies and
instrumentalities. Unless a statute expressly
provides for a different status and
relationship for a specific government unit
or
entity,
the
provisions
of
the Administrative Code prevail.
The minority also contends that the phrase
"government-owned
or
controlled
corporation" should apply only to
23
corporations
organized
under
the
Corporation Code, the general incorporation
law, and not to corporations created by
special charters. The minority sees no reason
why government corporations with special
charters should have a capital stock. Thus,
the minority declares:
I submit that the definition of
"government-owned or controlled
corporations"
under
the Administrative Code refer to
those corporations owned by the
government or its instrumentalities
which are created not by legislative
enactment, but formed and organized
under the Corporation Code through
registration with the Securities and
Exchange Commission. In short,
these are GOCCs without original
charters.
xxx xxx xxx
It might as well be worth pointing
out that there is no point in requiring
a capital structure for GOCCs whose
full ownership is limited by its
charter to the State or Republic. Such
GOCCs are not empowered to
declare dividends or alienate their
capital shares.
The contention of the minority is seriously
flawed. It is not in accord with
the Constitution and existing legislations.
It will also result in gross absurdities.
First, the Administrative Code definition of
the phrase "government-owned or controlled
corporation" does not distinguish between

one incorporated under the Corporation
Code or under a special charter. Where the
law does not distinguish, courts should not
distinguish.
Second, Congress has created through
special charters several government-owned
corporations organized
as
stock
corporations. Prime examples are the Land
Bank of the Philippines and the
Development Bank of the Philippines. The
special charter 40 of the Land Bank of the
Philippines provides:
SECTION
81. Capital.
The authorized capital stock of the

Bank shall be nine billion pesos,
divided into seven hundred and
eighty million common shares with
a par value of ten pesos each,
which shall be fully subscribed by
the Government, and one hundred
and twenty million preferred shares
with a par value of ten pesos each,
which shall be issued in accordance
with the provisions of Sections
seventy-seven and eighty-three of
this Code. (Emphasis supplied)
Likewise, the special charter 41 of the
Development Bank of the Philippines
provides:
SECTION 7. Authorized Capital
Stock Par value. The capital
stock of the Bank shall be Five
Billion Pesos to be divided into
Fifty Million common shares with
GMTALVAREZ 402
par value of P100 per share. These

shares are available for subscription
by the National Government. Upon
the effectivity of this Charter, the
National Government shall subscribe
to Twenty-Five Million common
shares of stock worth Two Billion
Five Hundred Million which shall be
deemed paid for by the Government
with the net asset values of the Bank
remaining after the transfer of assets
and liabilities as provided in Section
30 hereof. (Emphasis supplied)
Other government-owned corporations
organized as stock corporations under their
special charters are the Philippine Crop
Insurance
Corporation, 42 Philippine
International Trading Corporation, 43 and
the Philippine National Bank 44 before it
was reorganized as a stock corporation
under the Corporation Code. All these
government-owned corporations organized
under special charters as stock corporations
are subject to real estate tax on real
properties owned by them. To rule that they
are not government-owned or controlled
corporations because they are not registered
with the Securities and Exchange
Commission would remove them from the
reach of Section 234 of the Local
Government Code, thus exempting them
from real estate tax.
Third, the government-owned or controlled
corporations created through special charters
are those that meet the two conditions
prescribed in Section 16, Article XII of
24
the Constitution. The first condition is that

the government-owned or controlled
corporation must be established for the
common good. The second condition is
that the government-owned or controlled
corporation must meet the test of
economic viability. Section 16, Article XII
of the 1987 Constitution provides:
SEC. 16. The Congress shall not,
except by general law, provide for
the formation, organization, or
regulation
of
private
corporations. Government-owned
or controlled corporations may be
created or established by special
charters in the interest of the
common good and subject to the
test
of
economic
viability.
(Emphasis
and
underscoring
supplied)
The Constitution expressly authorizes the
legislature to create "government-owned or
controlled corporations" through special
charters only if these entities are required to
meet the twin conditions of common good
and economic viability. In other words,
Congress has no power to create
government-owned
or
controlled
corporations with special charters unless
they are made to comply with the two
conditions of common good and economic
viability. The test of economic viability
applies only to government-owned or
controlled corporations that perform
economic or commercial activities and need
to compete in the market place. Being
essentially economic vehicles of the State

for the common good meaning for
economic development purposes these
government-owned
or
controlled
corporations with special charters are
usually organized as stock corporations just
like ordinary private corporations.
In contrast, government instrumentalities
vested with corporate powers and
performing
governmental
or
public
functions need not meet the test of economic
viability. These instrumentalities perform
essential public services for the common
good, services that every modern State must
provide its citizens. These instrumentalities
need not be economically viable since the
government may even subsidize their entire
operations. These instrumentalities are not
the "government-owned or controlled
corporations" referred to in Section 16,
Article XII of the 1987 Constitution.
Thus, the Constitution imposes no limitation
when the legislature creates government
instrumentalities vested with corporate
powers
but
performing
essential
governmental or public functions. Congress
has plenary authority to create
government instrumentalities vested with
corporate
powers
provided
these
instrumentalities
perform
essential
government functions or public services.
However, when the legislature creates
through special charters corporations that
perform economic or commercial activities,
such entities known as "governmentowned or controlled corporations" must
GMTALVAREZ 402
meet the test of economic viability because

they compete in the market place.
This is the situation of the Land Bank of the
Philippines and the Development Bank of
the Philippines and similar governmentowned or controlled corporations, which
derive their income to meet operating
expenses
solely
from
commercial
transactions in competition with the private
sector. The intent of the Constitution is to
prevent the creation of government-owned
or controlled corporations that cannot
survive on their own in the market place and
thus merely drain the public coffers.
Commissioner Blas F. Ople, proponent of
the test of economic viability, explained to
the Constitutional Commission the purpose
of this test, as follows:
MR. OPLE: Madam President, the
reason for this concern is really that
when the government creates a
corporation, there is a sense in which
this corporation becomes exempt
from the test of economic
performance. We know what
happened in the past. If a
government corporation loses, then it
makes its claim upon the taxpayers'
money through new equity infusions
from the government and what is
always invoked is the common good.
That is the reason why this year, out
of a budget of P115 billion for the
entire government, about P28 billion
25
of this will go into equity infusions

to support a few government
financial institutions. And this is all
taxpayers' money which could have
been relocated to agrarian reform, to
social services like health and
education, to augment the salaries of
grossly underpaid public employees.
And yet this is all going down the
drain.
Therefore, when we insert the phrase
"ECONOMIC VIABILITY" together
with the "common good," this
becomes a restraint on future
enthusiasts for state capitalism to
excuse
themselves
from
the
responsibility of meeting the market
test so that they become viable. And
so, Madam President, I reiterate, for
the committee's consideration and I
am glad that I am joined in this
proposal by Commissioner Foz, the
insertion of the standard of
"ECONOMIC VIABILITY OR THE
ECONOMIC TEST," together with
the common good. 45
Father Joaquin G. Bernas, a leading member
of the Constitutional Commission, explains
in his textbook The 1987 Constitution of the
Republic of the Philippines: A Commentary:
The second sentence was added by
the 1986 Constitutional Commission.
The significant addition, however, is
the phrase "in the interest of the
common good and subject to the
test of economic viability." The
addition includes the ideas that they

must show capacity to function
efficiently in business and that
they should not go into activities
which the private sector can do
better. Moreover, economic viability
is more than financial viability but
also includes capability to make
profit and generate benefits not
quantifiable
in
financial
terms. 46 (Emphasis supplied)
Clearly, the test of economic viability does
not apply to government entities vested with
corporate powers and performing essential
public services. The State is obligated to
render essential public services regardless of
the economic viability of providing such
service. The non-economic viability of
rendering such essential public service does
not excuse the State from withholding such
essential services from the public.
However, government-owned or controlled
corporations with special charters, organized
essentially for economic or commercial
objectives, must meet the test of economic
viability. These are the government-owned
or controlled corporations that are usually
organized under their special charters as
stock corporations, like the Land Bank of
the Philippines and the Development Bank
of the Philippines. These are the
government-owned
or
controlled
corporations, along with government-owned
or controlled corporations organized under
the Corporation Code, that fall under the
definition of "government-owned or
GMTALVAREZ 402
controlled corporations" in Section 2(10) of

the Administrative Code.
The MIAA need not meet the test of
economic viability because the legislature
did not create MIAA to compete in the
market place. MIAA does not compete in the
market place because there is no competing
international airport operated by the private
sector. MIAA performs an essential public
service as the primary domestic and
international airport of the Philippines. The
operation of an international airport requires
the presence of personnel from the following
government agencies:
1. The Bureau of Immigration and
Deportation, to document the
arrival
and
departure
of
passengers, screening out those
without visas or travel documents,
or those with hold departure
orders;
2. The Bureau of Customs, to collect
import duties or enforce the ban
on prohibited importations;
3. The quarantine office of the
Department of Health, to enforce
health measures against the spread
of infectious diseases into the
country;
4. The Department of Agriculture, to
enforce measures against the
spread of plant and animal
diseases into the country;
26
5. The Aviation Security Command

of the Philippine National Police,
to prevent the entry of terrorists
and the escape of criminals, as
well as to secure the airport
premises from terrorist attack or
seizure;
6. The Air Traffic Office of the
Department of Transportation and
Communications, to authorize
aircraft to enter or leave Philippine
airspace, as well as to land on, or
take off from, the airport; and
7. The MIAA, to provide the proper
premises such as runway and
buildings for the government
personnel,
passengers,
and
airlines, and to manage the airport
operations.
All these agencies of government perform
government functions essential to the
operation of an international airport.
MIAA performs an essential public service
that every modern State must provide its
citizens. MIAA derives its revenues
principally from the mandatory fees and
charges MIAA imposes on passengers and
airlines. The terminal fees that MIAA
charges every passenger are regulatory or
administrative fees 47 and not income from
commercial transactions.
MIAA falls under the definition of a
government instrumentality under Section
2(10) of the Introductory Provisions of
the Administrative Code, which provides:

...
(10) Instrumentality refers to any
agency of the National Government,
not integrated within the department
framework, vested with special
functions
or
jurisdiction
by
law, endowed with some if not all
corporate powers, administering
special
funds,
and enjoying
operational autonomy, usually
through a charter. . . . (Emphasis
supplied)
The fact alone that MIAA is endowed with
corporate powers does not make MIAA a
government-owned
or
controlled
corporation. Without a change in its capital
structure, MIAA remains a government
instrumentality under Section 2(10) of the
Introductory
Provisions
of
the Administrative
Code.
More
importantly, as long as MIAA renders
essential public services, it need not
comply with the test of economic viability.
Thus, MIAA is outside the scope of the
phrase "government-owned or controlled
corporations" under Section 16, Article
XII of the 1987 Constitution.
The minority belittles the use in the Local
Government
Code
of
the
phrase
"government-owned
or
controlled
corporation" as merely "clarificatory or
illustrative."
This
is
fatal.
The
1987 Constitution prescribes
explicit
conditions for the creation of "governmentowned
or
controlled
corporations."
GMTALVAREZ 402
The Administrative
Code defines
what
constitutes a "government-owned or
controlled corporation." To belittle this
phrase as "clarificatory or illustrative" is
grave error.
To summarize, MIAA is not a governmentowned or controlled corporation under
Section 2(13) of the Introductory Provisions
of the Administrative Code because it is not
organized as a stock or non-stock
corporation. Neither is MIAA a governmentowned or controlled corporation under
Section
16, Article
XII
of
the
1987 Constitution because MIAA is not
required to meet the test of economic
viability. MIAA is
a government
instrumentality vested with corporate
powers and performing essential public
services pursuant to Section 2(10) of the
Introductory
Provisions
of
the Administrative Code. As a government
instrumentality, MIAA is not subject to any
kind of tax by local governments under
Section 133(o) of the Local Government
Code. The exception to the exemption in
Section 234(a) does not apply to MIAA
because MIAA is not a taxable entity under
the Local Government Code. Such exception
applies only if the beneficial use of real
property owned by the Republic is given to a
taxable entity.
Finally, the Airport Lands and Buildings of
MIAA are properties devoted to public use
and thus are properties of public
dominion. Properties of public dominion
27
are owned by the State or the Republic.

Article 420 of the Civil Code provides:
Art. 420. The following things
are property of public dominion:
(1) Those intended for public use,
such as roads, canals, rivers,
torrents, ports and
bridges constructed by the State,
banks, shores, roadsteads, and others
of similar character;
(2) Those which belong to the State,
without being for public use, and
are intended for some public
service or for the development of the
national wealth. (Emphasis supplied)
The term "ports . . . constructed by the
State" includes airports and seaports. The
Airport Lands and Buildings of MIAA are
intended for public use, and at the very least
intended for public service. Whether
intended for public use or public service, the
Airport Lands and Buildings are properties
of public dominion. As properties of public
dominion, the Airport Lands and Buildings
are owned by the Republic and thus exempt
from real estate tax under Section 234(a) of
the Local Government Code.
4. Conclusion
Under Section 2(10) and (13) of the
Introductory
Provisions
of
the Administrative Code, which governs the
legal relation and status of government
units, agencies and offices within the entire
government machinery, MIAA is a
government instrumentality and not a

government-owned
or
controlled
corporation. Under Section 133(o) of the
Local Government Code, MIAA as a
government instrumentality is not a taxable
person because it is not subject to "[t]axes,
fees or charges of any kind" by local
governments. The only exception is when
MIAA leases its real property to a "taxable
person" as provided in Section 234(a) of the
Local Government Code, in which case the
specific real property leased becomes
subject to real estate tax. Thus, only portions
of the Airport Lands and Buildings leased to
taxable persons like private parties are
subject to real estate tax by the City of
Paraaque.
Under Article 420 of the Civil Code, the
Airport Lands and Buildings of MIAA,
being devoted to public use, are properties
of public dominion and thus owned by the
Article 420 specifically mentions "ports . . .
constructed by the State," which includes
public airports and seaports, as properties of
public dominion and owned by the
Republic. As properties of public dominion
owned by the Republic, there is no doubt
whatsoever that the Airport Lands and
Buildings are expressly exempt from real
estate tax under Section 234(a) of the Local
Government Code. This Court has also
repeatedly ruled that properties of public
dominion are not subject to execution or
foreclosure sale.
GMTALVAREZ 402
WHEREFORE, we GRANT the petition. We

SET ASIDE the assailed Resolutions of the
Court of Appeals of 5 October 2001 and 27
September 2002 in CA-G.R. SP No. 66878.
We DECLARE the Airport Lands and
Buildings of the Manila International
Airport Authority EXEMPT from the real
estate tax imposed by the City of Paraaque.
We declare VOID all the real estate tax
assessments, including the final notices of
real estate tax delinquencies, issued by the
City of Paraaque on the Airport Lands and
Airport Authority, except for the portions
that the Manila International Airport
Authority has leased to private parties. We
also declare VOID the assailed auction sale,
and all its effects, of the Airport Lands and
Airport Authority.
No costs.
SO ORDERED.
||| (Manila International Airport Authority v.
Court of Appeals, G.R. No. 155650, [July
20, 2006], 528 PHIL 181-309)
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
[G.R. No. 166006. March 14, 2008.]

PLANTERS
PRODUCTS,
INC., petitioner, vs.
FERTIPHIL
CORPORATION, respondent.
DECISION
28
REYES, R.T., J p:
THE Regional Trial Courts (RTC) have the
authority and jurisdiction to consider the
constitutionality of statutes, executive
orders, presidential decrees and other
issuances. The Constitution vests that power
not only in the Supreme Court but in all
Regional Trial Courts.
The principle is relevant in this petition for
review on certiorari of the Decision 1 of the
Court of Appeals (CA) affirming with
modification that of the RTC in Makati
City, 2 finding petitioner Planters Products,
Inc. (PPI) liable to private respondent
Fertiphil Corporation (Fertiphil) for the
levies it paid under Letter of Instruction
(LOI) No. 1465.
The Facts
Petitioner PPI and private respondent
Fertiphil
are
private
corporations
incorporated under Philippine laws. 3 They
are both engaged in the importation and
distribution of fertilizers, pesticides and
agricultural chemicals.
On June 3, 1985, then President Ferdinand
Marcos, exercising his legislative powers,
issued LOI No. 1465 which provided,
among others, for the imposition of a capital
recovery component (CRC) on the domestic
sale of all grades of fertilizers in the
Philippines. 4 The LOI provides:
3. The Administrator of the Fertilizer
Pesticide Authority to include in
its fertilizer pricing formula
a capital contribution component

of not less than P10 per bag. This
capital contribution shall be
collected until adequate capital is
raised to make PPI viable. Such
applied by FPA to all domestic
sales of fertilizers in the
Philippines. 5 (Underscoring
supplied)
Pursuant to the LOI, Fertiphil paid P10 for
every bag of fertilizer it sold in the domestic
market to the Fertilizer and Pesticide
Authority (FPA). FPA then remitted the
amount collected to the Far East Bank and
Trust Company, the depositary bank of PPI.
Fertiphil paid P6,689,144 to FPA from July
8, 1985 to January 24, 1986. 6
After the 1986 Edsa Revolution, FPA
voluntarily stopped the imposition of the
P10 levy. With the return of democracy,
Fertiphil demanded from PPI a refund of the
amounts it paid under LOI No. 1465, but
PPI refused to accede to the demand. 7
Fertiphil filed a complaint for collection and
damages 8 against FPA and PPI with the
RTC in Makati. It questioned the
constitutionality of LOI No. 1465 for being
unjust, unreasonable, oppressive, invalid and
an unlawful imposition that amounted to a
denial of due process of law. 9 Fertiphil
alleged that the LOI solely favored PPI, a
privately owned corporation, which used the
proceeds to maintain its monopoly of the
fertilizer industry.
GMTALVAREZ 402
In its Answer, 10 FPA, through the Solicitor

General, countered that the issuance of LOI
No. 1465 was a valid exercise of the police
power of the State in ensuring the stability
of the fertilizer industry in the country. It
also averred that Fertiphil did not sustain
any damage from the LOI because the
burden imposed by the levy fell on the
ultimate consumer, not the seller.
RTC Disposition
On November 20, 1991, the RTC rendered
judgment in favor of Fertiphil, disposing as
follows:
WHEREFORE, in view of the
foregoing, the Court hereby renders
judgment in favor of the plaintiff and
against the defendant Planters
Product, Inc., ordering the latter to
pay the former:
1) the sum of P6,698,144.00
with interest at 12%
from the time of judicial
demand;
2) the sum of P100,000 as
attorney's fees;
3) the cost of suit.
SO ORDERED. 11
Ruling that the imposition of the P10 CRC
was an exercise of the State's inherent power
of taxation, the RTC invalidated the levy for
violating the basic principle that taxes can
only be levied for public purpose, viz.:
29
It is apparent that the imposition of

P10 per fertilizer bag sold in the
country by LOI 1465 is purportedly
in the exercise of the power of
taxation. It is a settled principle that
the power of taxation by the state is
plenary.
Comprehensive
and
supreme, the principal check upon its
abuse resting in the responsibility of
the members of the legislature to
their constituents. However, there are
two kinds of limitations on the power
of taxation: the inherent limitations
and the constitutional limitations.
One of the inherent limitations is that
a tax may be levied only for public
purposes:
The power to tax can be resorted
to only for a constitutionally valid
public purpose. By the same
token, taxes may not be levied for
purely private purposes, for
building up of private fortunes, or
for the redress of private wrongs.
They cannot be levied for the
improvement of private property,
or for the benefit, and promotion
of private enterprises, except
where the aid is incident to the
public benefit. It is well-settled
principle of constitutional law that
no general tax can be levied
except for the purpose of raising
money which is to be expended
for public use. Funds cannot be
exacted under the guise of taxation
to promote a purpose that is not of

public interest. Without such
limitation, the power to tax could
be exercised or employed as an
authority to destroy the economy
of the people. A tax, however, is
not held void on the ground of
want of public interest unless the
want of such interest is clear. (71
Am. Jur. pp. 371-372)
In the case at bar, the plaintiff paid
the amount of P6,698,144.00 to
the Fertilizer and Pesticide
Authority pursuant to the P10 per
bag of fertilizer sold imposition
under LOI 1465 which, in turn,
remitted the amount to the
defendant Planters Products, Inc.
thru the latter's depository bank,
Far East Bank and Trust Co. Thus,
by virtue of LOI 1465 the plaintiff,
Fertiphil Corporation, which is a
private domestic corporation,
became poorer by the amount of
P6,698,144.00 and the defendant,
Planters Product, Inc., another
private domestic corporation,
became richer by the amount of
P6,698,144.00.
Tested by the standards of
constitutionality as set forth in the
afore-quoted jurisprudence, it is
quite
evident
that LOI
1465 insofar as it imposes the
amount of P10 per fertilizer bag
sold in the country and orders that
GMTALVAREZ 402
the said amount should go to the

defendant Planters Product, Inc. is
unlawful because it violates the
mandate that a tax can be levied
only for a public purpose and not
to benefit, aid and promote a
private enterprise such as Planters
Product, Inc. 12
PPI moved for reconsideration but its
motion was denied. 13 PPI then filed a
notice of appeal with the RTC but it failed to
pay the requisite appeal docket fee. In a
separate but related proceeding, this
Court 14 allowed the appeal of PPI and
remanded the case to the CA for proper
disposition.
CA Decision
On November 28, 2003, the CA handed
down its decision affirming with
modification that of the RTC, with the
following fallo:
IN
VIEW
OF
ALL
THE
FOREGOING, the decision appealed
from is hereby AFFIRMED, subject
to the MODIFICATION that the
award of attorney's fees is
hereby DELETED. 15
In affirming the RTC decision, the CA ruled
that the lis mota of the complaint for
collection was the constitutionality of LOI
No. 1465, thus:
The question then is whether it was
proper for the trial court to exercise
its power to judicially determine the
30
constitutionality of the subject statute

in the instant case.
As a rule, where the controversy can
be settled on other grounds, the
courts will not resolve the
constitutionality of a law (Lim v.
Pacquing, 240 SCRA 649 [1995]).
The policy of the courts is to avoid
ruling on constitutional questions
and to presume that the acts of
political departments are valid,
absent a clear and unmistakable
showing to the contrary.
However, the courts are not
precluded from exercising such
power when the following requisites
are obtaining in a controversy before
it: First, there must be before the
court an actual case calling for the
exercise of judicial review. Second,
the question must be ripe for
adjudication. Third, the person
challenging the validity of the act
must have standing to challenge.
Fourth,
the
question
of
constitutionality must have been
raised at the earliest opportunity; and
lastly, the issue of constitutionality
must be the very lis mota of the case
(Integrated Bar of the Philippines v.
Zamora, 338 SCRA 81 [2000]).
Indisputably, the present case was
primarily instituted for collection and
damages. However, a perusal of the
complaint also reveals that the
instant action is founded on the claim
that the levy imposed was an

unlawful and unconstitutional special
assessment.
Consequently,
the
requisite that the constitutionality of
the law in question be the very lis
mota of the case is present, making it
proper for the trial court to rule on
the constitutionality of LOI 1465. 16
The CA held that even on the assumption
that LOI No. 1465 was issued under the
police power of the state, it is still
unconstitutional because it did not promote
public welfare. The CA explained:
In
declaring LOI
1465 unconstitutional, the trial court
held that the levy imposed under the
said law was an invalid exercise of
the State's power of taxation
inasmuch as it violated the inherent
and constitutional prescription that
taxes be levied only for public
purposes. It reasoned out that the
amount collected under the levy was
remitted to the depository bank
of PPI, which the latter used to
advance its private interest.
On the other hand, appellant submits
that the subject statute's passage was
a valid exercise of police power. In
addition, it disputes the court a
quo's findings arguing that the
collections under LOI 1465 was for
the benefit of Planters Foundation,
Incorporated (PFI), a foundation
created by law to hold in trust for
GMTALVAREZ 402
millions of farmers,
ownership of PPI.
the
stock
Of the three fundamental powers of

the State, the exercise of police
power has been characterized as the
most essential, insistent and the least
limitable of powers, extending as it
does to all the great public needs. It
may be exercised as long as the
activity or the property sought to be
regulated has some relevance to
public welfare (Constitutional Law,
by Isagani A. Cruz, p. 38, 1995
Edition).
Vast as the power is, however, it
must be exercised within the limits
set by the Constitution, which
requires the concurrence of a lawful
subject and a lawful method. Thus,
our courts have laid down the test to
determine the validity of a police
measure as follows: (1) the interests
of the public generally, as
distinguished from those of a
particular class, requires its exercise;
and (2) the means employed are
reasonably necessary for the
accomplishment of the purpose and
not
unduly
oppressive
upon
individuals (National Development
Company v. Philippine Veterans
Bank, 192 SCRA 257 [1990]).
It is upon applying this established
tests that We sustain the trial court's
31
holding LOI
1465 unconstitutional. To be sure,
ensuring the continued supply and
distribution of fertilizer in the
country is an undertaking imbued
with public interest. However, the
method by which LOI 1465 sought
to achieve this is by no means a
measure that will promote the public
welfare.
The
government's
commitment
to
support
the
successful
rehabilitation
and
continued viability of PPI, a private
corporation, is an unmistakable
attempt to mask the subject statute's
impartiality. There is no way to treat
the self-interest of a favored entity,
like PPI, as identical with the general
interest of the country's farmers or
even the Filipino people in general.
Well to stress, substantive due
process exacts fairness and equal
protection disallows distinction
where none is needed. When a
statute's public purpose is spoiled by
private interest, the use of police
power becomes a travesty which
must be struck down for being an
arbitrary exercise of government
power. To rule in favor of appellant
would contravene the general
principle that revenues derived from
taxes cannot be used for purely
private purposes or for the exclusive
benefit of private individuals. 17
The CA did not accept PPI's claim that the
levy imposed under LOI No. 1465 was for
the benefit of Planters Foundation, Inc., a

foundation created to hold in trust the stock
ownership of PPI. The CA stated:
Appellant next claims that the
collections under LOI 1465 was for
the benefit of Planters Foundation,
Incorporated (PFI), a foundation
created by law to hold in trust for
millions of farmers, the stock
ownership of PFI on the strength of
Letter of Undertaking (LOU) issued
by then Prime Minister Cesar Virata
on April 18, 1985 and affirmed by
the Secretary of Justice in an
Opinion dated October 12, 1987, to
wit:
"2. Upon the effective date of
this Letter of Undertaking,
the Republic shall cause FPA
to include in its fertilizer
pricing formula a capital
recovery component, the
proceeds of which will be
used initially for the purpose
of funding the unpaid portion
of the outstanding capital
stock of Planters presently
held in trust by Planters
Foundation, Inc. (Planters
Foundation), which unpaid
capital is estimated at
approximately P206 million
(subject to validation by
Planters
and
Planters
Foundation) (such unpaid
portion of the outstanding
GMTALVAREZ 402
capital stock of Planters

being hereafter referred to as
the 'Unpaid Capital'), and
subsequently for such capital
increases as may be required
for the continuing viability of
Planters.
The
capital
recovery
component shall be in the
minimum amount of P10 per
bag, which will be added to
the price of all domestic sales
of fertilizer in the Philippines
by any importer and/or
fertilizer mother company. In
this connection, the Republic
hereby acknowledges that the
advances by Planters to
Planters Foundation which
were applied to the payment
of the Planters shares now
held in trust by Planters
Foundation,
have
been
assigned to, among others,
the Creditors. Accordingly,
the Republic, through FPA,
hereby agrees to deposit the
proceeds of the capital
recovery component in the
special
trust
account
designated in the notice dated
April 2, 1985, addressed by
counsel for the Creditors to
Planters Foundation. Such
proceeds shall be deposited
by FPA on or before the 15th
day of each month.
32
The
capital
recovery
component shall continue to
be charged and collected until
payment in full of (a) the
Unpaid Capital and/or (b) any
shortfall in the payment of
the Subsidy Receivables, (c)
any carrying cost accruing
from the date hereof on the
amounts which may be
outstanding from time to time
of the Unpaid Capital and/or
the Subsidy Receivables and
(d) the capital increases
contemplated in paragraph 2
hereof. For the purpose of the
foregoing clause (c), the
'carrying cost' shall be at such
rate as will represent the full
and reasonable cost to
Planters of servicing its
debts, taking into account
both its peso and foreign
currency-denominated
obligations." (Records, pp.
42-43)
Appellant's proposition is open to
question, to say the least. The LOU
issued by then Prime Minister Virata
taken together with the Justice
Secretary's Opinion does not
preponderantly demonstrate that the
collections made were held in trust in
favor of millions of farmers.
Unfortunately for appellant, in the
absence of sufficient evidence to
establish its claims, this Court is
GMTALVAREZ 402
constrained to rely on what is

explicitly provided in LOI 1465
that one of the primary aims in
imposing the levy is to support the
successful
rehabilitation
and
continued viability of PPI. 18
PPI moved for reconsideration but its
motion was denied. 19 It then filed the
present petition with this Court.
Issues
Petitioner PPI raises four issues for Our
consideration, viz.:
I
THE
CONSTITUTIONALITY
OF LOI
1465 CANNOT
BE
COLLATERALLY
ATTACKED AND BE DECREED
VIA A DEFAULT JUDGMENT IN
A
CASE
FILED
FOR
COLLECTION AND DAMAGES
WHERE
THE
ISSUE
OF
CONSTITUTIONALITY IS NOT
THE VERY LIS MOTA OF THE
CASE. NEITHER
CAN LOI
1465 BE CHALLENGED BY ANY
PERSON OR ENTITY WHICH
HAS NO STANDING TO DO SO.
II
LOI 1465, BEING A
IMPLEMENTED
FOR
PURPOSE OF ASSURING
FERTILIZER
SUPPLY
DISTRIBUTION
IN
COUNTRY,
AND
LAW
THE
THE
AND
THE
FOR
BENEFITING A FOUNDATION
CREATED BY LAW TO HOLD IN
TRUST FOR MILLIONS OF
FARMERS
THEIR
STOCK
OWNERSHIP
IN
PPI CONSTITUTES A VALID
LEGISLATION PURSUANT TO
THE EXERCISE OF TAXATION
AND POLICE POWER FOR
PUBLIC PURPOSES.
III
THE AMOUNT COLLECTED
UNDER
THE CAPITAL
RECOVERY COMPONENT WAS
REMITTED
TO
THE
GOVERNMENT, AND BECAME
GOVERNMENT
FUNDS
PURSUANT TO AN EFFECTIVE
AND VALIDLY ENACTED LAW
WHICH IMPOSED DUTIES AND
CONFERRED
RIGHTS
BY
VIRTUE OF THE PRINCIPLE OF
"OPERATIVE FACT" PRIOR TO
ANY
DECLARATION
OF
UNCONSTITUTIONALITY
OF LOI 1465.
IV
THE PRINCIPLE OF UNJUST
VEXATION
(SHOULD
BE
ENRICHMENT)
FINDS
NO
APPLICATION IN THE INSTANT
CASE. 20 (Underscoring supplied)
Our Ruling
33
We shall first tackle the procedural issues

of locus standi and the jurisdiction of the
RTC to resolve constitutional issues.
Fertiphil has locus standi because it
suffered direct injury; doctrine of
standing
is a mere procedural
technicality which may be waived.
PPI argues that Fertiphil has no locus
standi to question the constitutionality
of LOI No. 1465 because it does not have a
"personal and substantial interest in the case
or will sustain direct injury as a result of its
enforcement".21 It asserts that Fertiphil did
not suffer any damage from the CRC
imposition because "incidence of the levy
fell on the ultimate consumer or the farmers
themselves, not on the seller fertilizer
company".22
We cannot agree. The doctrine of locus
standi or the right of appearance in a court
of justice has been adequately discussed by
this Court in a catena of cases. Succinctly
put, the doctrine requires a litigant to have a
material interest in the outcome of a case. In
private suits, locus standi requires a litigant
to be a "real party in interest", which is
defined as "the party who stands to be
benefited or injured by the judgment in the
suit or the party entitled to the avails of the
suit". 23
In public suits, this Court recognizes the
difficulty of applying the doctrine especially
when plaintiff asserts a public right on
behalf of the general public because of
conflicting public policy issues. 24 On one
GMTALVAREZ 402
end, there is the right of the ordinary citizen

to petition the courts to be freed from
unlawful government intrusion and illegal
official action. At the other end, there is the
public policy precluding excessive judicial
interference in official acts, which may
unnecessarily hinder the delivery of basic
public services.
to the ultimate consumer, but that does not

disqualify
it
from
attacking
the
constitutionality of the LOI or from seeking
a refund. As seller, it bore the ultimate
burden of paying the levy. It faced the
possibility of severe sanctions for failure to
pay the levy. The fact of payment is
sufficient injury to Fertiphil.
In this jurisdiction, We have adopted the

"direct injury test" to determine locus
standi in public suits. In People v. Vera, 25 it
was held that a person who impugns the
validity of a statute must have "a personal
and substantial interest in the case such that
he has sustained, or will sustain direct injury
as a result." The "direct injury test" in public
suits is similar to the "real party in interest"
rule for private suits under Section 2, Rule 3
of the 1997 Rules of Civil Procedure. 26
Moreover, Fertiphil suffered harm from the

enforcement of the LOI because it was
compelled to factor in its product the levy.
The levy certainly rendered the fertilizer
products of Fertiphil and other domestic
sellers much more expensive. The harm to
their business consists not only in fewer
clients because of the increased price, but
also in adopting alternative corporate
strategies to meet the demands of LOI No.
1465. Fertiphil and other fertilizer sellers
may have shouldered all or part of the levy
just to be competitive in the market. The
harm occasioned on the business of Fertiphil
is sufficient injury for purposes of locus
standi.
Recognizing that a strict application of the

"direct injury" test may hamper public
interest, this Court relaxed the requirement
in cases of "transcendental importance" or
with "far reaching implications." Being a
mere procedural technicality, it has also been
held that locus standi may be waived in the
public interest. 27
Whether or not the complaint for collection
is characterized as a private or public suit,
Fertiphil has locus standi to file it. Fertiphil
suffered a direct injury from the
enforcement of LOI No. 1465. It was
required, and it did pay, the P10 levy
imposed for every bag of fertilizer sold on
the domestic market. It may be true that
Fertiphil has passed some or all of the levy
Even assuming arguendo that there is no

direct injury, We find that the liberal policy
consistently adopted by this Court on locus
standi must apply. The issues raised by
Fertiphil are of paramount public
importance. It involves not only the
constitutionality of a tax law but, more
importantly, the use of taxes for public
purpose.
Former
President
Marcos
issued LOI No. 1465 with the intention of
rehabilitating an ailing private company.
34
This is clear from the text of the LOI. PPI is

expressly named in the LOI as the direct
beneficiary of the levy. Worse, the levy was
made dependent and conditional upon PPI
becoming financially viable. The LOI
provided that "the capital contribution shall
be collected until adequate capital is raised
to make PPI viable".
The constitutionality of the levy is already in
doubt on a plain reading of the statute. It is
Our constitutional duty to squarely resolve
the issue as the final arbiter of all justiciable
controversies. The doctrine of standing,
being a mere procedural technicality, should
be waived, if at all, to adequately thresh out
an important constitutional issue.
RTC may resolve constitutional issues;
the constitutional issue was adequately
raised in the complaint; it is the lis mota
of the case.
PPI insists that the RTC and the CA erred in
ruling on the constitutionality of the LOI. It
asserts that the constitutionality of the LOI
cannot be collaterally attacked in a
complaint for collection. 28 Alternatively,
the resolution of the constitutional issue is
not necessary for a determination of the
complaint for collection. 29
Fertiphil counters that the constitutionality
of the LOI was adequately pleaded in its
complaint. It claims that the constitutionality
of LOI No. 1465 is the very lis mota of the
case because the trial court cannot determine
its claim without resolving the issue. 30
It is settled that the RTC has jurisdiction to

resolve the constitutionality of a statute,
presidential decree or an executive order.
This is clear from Section 5, Article VIII of
the 1987 Constitution, which provides:
SECTION 5. The Supreme Court
shall have the following powers:
xxx xxx xxx
(2) Review, revise, reverse, modify,
or affirm on appeal or certiorari, as
the law or the Rules of Court may
provide, final judgments and orders
of lower courts in:
(a) All cases in which
the constitutionality
or
validity
of
any treaty,
international or executive
agreement, law, presidential
decree, proclamation, order,
instruction, ordinance, or
regulation is in question.
(Underscoring supplied)
In Mirasol v. Court of Appeals, 31 this Court
recognized the power of the RTC to resolve
constitutional issues, thus:
On the first issue. It is settled that
Regional Trial Courts have the
authority and jurisdiction to consider
the constitutionality of a statute,
presidential decree, or executive
order. The Constitution vests the
power of judicial review or the
power to declare a law, treaty,
international or executive agreement,
GMTALVAREZ 402
presidential
decree,
order,
instruction, ordinance, or regulation
not only in this Court, but in all
Regional Trial Courts. 32
In the recent case of Equi-Asia Placement,
Inc.
v.
Department
of
Foreign
Affairs, 33 this Court reiterated:
There is no denying that regular
courts have jurisdiction over cases
involving
the
validity
or
constitutionality of a rule or
regulation issued by administrative
agencies. Such jurisdiction, however,
is not limited to the Court of Appeals
or to this Court alone for even the
regional trial courts can take
cognizance of actions assailing a
specific rule or set of rules
promulgated
by
administrative
bodies. Indeed, the Constitution vests
the power of judicial review or the
power to declare a law, treaty,
international or executive agreement,
presidential
decree,
order,
instruction, ordinance, or regulation
in the courts, including the regional
trial courts. 34
Judicial review of official acts on the ground
of unconstitutionality may be sought or
availed of through any of the actions
cognizable by courts of justice, not
necessarily in a suit for declaratory relief.
Such review may be had in criminal actions,
as in People v. Ferrer 35 involving the
constitutionality of the now defunct AntiSubversion law, or in ordinary actions, as
35
in Krivenko
v.
Register
of
Deeds 36 involving the constitutionality of
laws prohibiting aliens from acquiring
public lands. The constitutional issue,
however, (a) must be properly raised and
presented in the case, and (b) its resolution
is necessary to a determination of the case,
i.e., the issue of constitutionality must be the
very lis mota presented. 37
Contrary to PPI's claim, the constitutionality
of LOI No. 1465 was properly and
adequately raised in the complaint for
collection filed with the RTC. The pertinent
portions of the complaint allege:
6. The CRC of P10 per bag levied
under LOI 1465 on domestic sales of
all grades of fertilizer in the
Philippines, is unlawful, unjust,
uncalled
for,
unreasonable,
inequitable and oppressive because:
xxx xxx xxx
(c) It favors only one private
domestic corporation, i.e.,
defendant PPPI, and imposed
at
the
expense
and
disadvantage of the other
fertilizer
importers/distributors
who
were themselves in tight
business situation and were
then exerting all efforts and
maximizing management and
marketing skills to remain
viable;
xxx xxx xxx
(e) It was a glaring example

of crony capitalism, a forced
program through which the
PPI,
having
been
presumptuously masqueraded
as "the" fertilizer industry
itself, was the sole and
anointed beneficiary;
7. The CRC was an unlawful; and
unconstitutional special assessment
and its imposition is tantamount to
illegal exaction amounting to a
denial of due process since the
persons of entities which had to bear
the burden of paying the CRC
derived no benefit therefrom; that on
the contrary it was used by PPI in
trying to regain its former despicable
monopoly of the fertilizer industry to
the detriment of other distributors
and
importers. 38(Underscoring
supplied)
The constitutionality of LOI No. 1465 is
also the very lis mota of the complaint for
collection. Fertiphil filed the complaint to
compel PPI to refund the levies paid under
the statute on the ground that the law
imposing the levy is unconstitutional. The
thesis is that an unconstitutional law is void.
It has no legal effect. Being void, Fertiphil
had no legal obligation to pay the levy.
Necessarily, all levies duly paid pursuant to
an unconstitutional law should be refunded
under the civil code principle against unjust
enrichment. The refund is a mere
consequence of the law being declared
GMTALVAREZ 402
unconstitutional. The RTC surely cannot

order PPI to refund Fertiphil if it does not
declare the LOI unconstitutional. It is the
unconstitutionality of the LOI which triggers
the refund. The issue of constitutionality is
the very lis mota of the complaint with the
RTC.
The P10 levy under LOI No. 1465 is an
exercise of the power of taxation.
At any rate, the Court holds that the RTC
and the CA did not err in ruling against the
constitutionality of the LOI.
PPI insists that LOI No. 1465 is a valid
exercise either of the police power or the
power of taxation. It claims that the LOI was
implemented for the purpose of assuring the
fertilizer supply and distribution in the
country and for benefiting a foundation
created by law to hold in trust for millions of
farmers their stock ownership in PPI.
Fertiphil counters that the LOI is
unconstitutional because it was enacted to
give benefit to a private company. The levy
was imposed to pay the corporate debt of
PPI. Fertiphil also argues that, even if the
LOI is enacted under the police power, it is
still unconstitutional because it did not
promote the general welfare of the people or
public interest.
Police power and the power of taxation are
inherent powers of the State. These powers
are distinct and have different tests for
validity. Police power is the power of the
State to enact legislation that may interfere
with personal liberty or property in order to
36
promote the general welfare, 39 while the

power of taxation is the power to levy taxes
to be used for public purpose. The main
purpose of police power is the regulation of
a behavior or conduct, while taxation is
revenue generation. The "lawful subjects"
and "lawful means" tests are used to
determine the validity of a law enacted
under the police power. 40 The power of
taxation, on the other hand, is circumscribed
by inherent and constitutional limitations.
We agree with the RTC that the imposition
of the levy was an exercise by the State of
its taxation power. While it is true that the
power of taxation can be used as an
implement of police power, 41 the primary
purpose of the levy is revenue generation. If
the purpose is primarily revenue, or if
revenue is, at least, one of the real and
substantial purposes, then the exaction is
properly called a tax. 42
In Philippine Airlines, Inc. v. Edu, 43 it was
held that the imposition of a vehicle
registration fee is not an exercise by the
State of its police power, but of its taxation
power, thus:
It is clear from the provisions of
Section 73 of Commonwealth Act
123 and Section 61 of the Land
Transportation and Traffic Code that
the legislative intent and purpose
behind the law requiring owners of
vehicles to pay for their registration
is mainly to raise funds for the
construction and maintenance of
highways and to a much lesser
degree, pay for the operating

expenses of the administering
agency. . . . Fees may be properly
regarded as taxes even though they
also serve as an instrument of
regulation.
Taxation may be made the
implement of the state's police power
(Lutz v. Araneta, 98 Phil. 148). If the
purpose is primarily revenue, or if
revenue is, at least, one of the real
and substantial purposes, then the
exaction is properly called a tax.
Such is the case of motor vehicle
registration fees. The same provision
appears as Section 59(b) in the Land
Transportation Code. It is patent
therefrom that the legislators had in
mind a regulatory tax as the law
refers to the imposition on the
registration, operation or ownership
of a motor vehicle as a "tax or
fee." . . . Simply put, if the exaction
under Rep. Act 4136 were merely a
regulatory fee, the imposition in Rep.
Act 5448 need not be an "additional"
tax. Rep. Act 4136 also speaks of
other "fees" such as the special
permit fees for certain types of motor
vehicles (Sec. 10) and additional fees
for change of registration (Sec.
11). These are not to be understood
as taxes because such fees are very
minimal to be revenue-raising. Thus,
they are not mentioned by Sec. 59(b)
of the Code as taxes like the motor
vehicle
registration
fee
and
GMTALVAREZ 402
chauffeurs' license fee. Such fees are

to go into the expenditures of the
Land Transportation Commission as
provided for in the last proviso of
Sec. 61. 44 (Underscoring supplied)
The P10 levy under LOI No. 1465 is too
excessive to serve a mere regulatory
purpose. The levy, no doubt, was a big
burden on the seller or the ultimate
consumer. It increased the price of a bag of
fertilizer by as much as five percent. 45 A
plain reading of the LOI also supports the
conclusion that the levy was for revenue
generation. The LOI expressly provided that
the levy was imposed "until adequate
capital is raised to make PPI viable".
Taxes are exacted only for a public
purpose.
The
P10
levy
is
unconstitutional because it was not for a
public purpose. The levy was imposed to
give undue benefit to PPI.
An inherent limitation on the power of
taxation is public purpose. Taxes are exacted
only for a public purpose. They cannot be
used for purely private purposes or for the
exclusive benefit of private persons. 46 The
reason for this is simple. The power to tax
exists for the general welfare; hence,
implicit in its power is the limitation that it
should be used only for a public purpose. It
would be a robbery for the State to tax its
citizens and use the funds generated for a
private purpose. As an old United States
case bluntly put it: "To lay with one hand,
37
the power of the government on the property

of the citizen, and with the other to bestow it
upon favored individuals to aid private
enterprises and build up private fortunes, is
nonetheless a robbery because it is done
under the forms of law and is called
taxation". 47
The term "public purpose" is not defined. It
is an elastic concept that can be hammered
to fit modern standards. Jurisprudence states
that "public purpose" should be given a
broad interpretation. It does not only pertain
to those purposes which are traditionally
viewed as essentially government functions,
such as building roads and delivery of basic
services, but also includes those purposes
designed to promote social justice. Thus,
public money may now be used for the
relocation of illegal settlers, low-cost
housing and urban or agrarian reform.
While the categories of what may constitute
a public purpose are continually expanding
in light of the expansion of government
functions, the inherent requirement that
taxes can only be exacted for a public
purpose still stands. Public purpose is the
heart of a tax law. When a tax law is only a
mask to exact funds from the public when its
true intent is to give undue benefit and
advantage to a private enterprise, that law
will not satisfy the requirement of "public
purpose".
The purpose of a law is evident from its text
or inferable from other secondary sources.
Here, We agree with the RTC and that CA
that the levy imposed under LOI No.

1465 was not for a public purpose.
First, the LOI expressly provided that the
levy be imposed to benefit PPI, a private
company. The purpose is explicit from
Clause 3 of the law, thus:
3. The Administrator of the Fertilizer
Pesticide Authority to include in
its fertilizer pricing formula
a capital contribution component
of not less than P10 per bag. This
collected until adequate capital is
raised to make PPI viable. Such
applied by FPA to all domestic
sales of fertilizers in the
Philippines. 48 (Underscoring
supplied)
It is a basic rule of statutory construction
that the text of a statute should be given a
literal meaning. In this case, the text of the
LOI is plain that the levy was imposed in
order to raise capital for PPI. The framers of
the LOI did not even hide the insidious
purpose of the law. They were cavalier
enough to name PPI as the ultimate
beneficiary of the taxes levied under the
LOI. We find it utterly repulsive that a tax
law would expressly name a private
company as the ultimate beneficiary of the
taxes to be levied from the public. This is a
clear case of crony capitalism.
Second, the LOI provides that the imposition
of the P10 levy was conditional and
GMTALVAREZ 402
dependent upon PPI becoming financially

"viable." This suggests that the levy was
actually imposed to benefit PPI. The LOI
notably does not fix a maximum amount
when PPI is deemed financially "viable".
Worse, the liability of Fertiphil and other
domestic sellers of fertilizer to pay the levy
is made indefinite. They are required to
continuously pay the levy until adequate
capital is raised for PPI.
Third, the RTC and the CA held that the
levies paid under the LOI were directly
remitted and deposited by FPA to Far East
Bank and Trust Company, the depositary
bank of PPI. 49 This proves that PPI
benefited from the LOI. It is also proves that
the main purpose of the law was to give
undue benefit and advantage to PPI.
Fourth, the levy was used to pay the
corporate debts of PPI. A reading of the
Letter of Understanding 50 dated May 18,
1985 signed by then Prime Minister Cesar
Virata reveals that PPI was in deep financial
problem because of its huge corporate debts.
There were pending petitions for
rehabilitation against PPI before the
Securities and Exchange Commission. The
government guaranteed payment of PPI's
debts to its foreign creditors. To fund the
payment, President Marcos issued LOI No.
1465. The pertinent portions of the letter of
understanding read: EICSDT
Republic of the Philippines
Office of the Prime Minister
Manila
LETTER OF UNDERTAKING
38
May 18, 1985

TO: THE BANKING AND FINANCIAL
INSTITUTIONS
LISTED IN ANNEX A HERETO
WHICH
ARE
CREDITORS
(COLLECTIVELY,
THE
"CREDITORS")
OF
PLANTERS PRODUCTS, INC.
("PLANTERS")
Gentlemen:
This has reference to Planters
which is the principal importer
and distributor of fertilizer,
pesticides
and
agricultural
chemicals in the Philippines. As
regards Planters, the Philippine
Government
confirms
its
awareness of the following: (1)
that Planters
has
outstanding
obligations in foreign currency
and/or pesos, to the Creditors, (2)
that Planters
is
currently
experiencing financial difficulties,
and (3) that there are presently
pending with the Securities and
Exchange Commission of the
Philippines a petition filed at
Planters' own behest for the
suspension of payment of all its
obligations, and a separate petition
filed by Manufacturers Hanover
Trust Company, Manila Offshore
Branch for the appointment of a
rehabilitation receiver for Planters.
In connection with the foregoing,
the Republic of the Philippines
(the "Republic") confirms that it

considers and continues to
consider Planters as a major
fertilizer distributor. Accordingly,
for and in consideration of your
expressed willingness to consider
and participate in the effort to
rehabilitate Planters, the Republic
hereby manifests its full and
unqualified support of the
successful
rehabilitation
and
continuing viability of Planters,
and to that end, hereby binds and
obligates itself to the creditors and
Planters, as follows:
xxx xxx xxx
2. Upon the effective date of this
Letter of Undertaking, the
Republic
shall
cause
FPA
to include in its fertilizer pricing
formula a capital recovery
component, the proceeds of which
will be used initially for the
purpose of funding the unpaid
portion of the outstanding capital
stock of Planters presently held in
trust by Planters Foundation, Inc.
("Planters Foundation"), which
unpaid capital is estimated at
approximately
P206
million
(subject to validation by Planters
and Planters Foundation) such
unpaid portion of the outstanding
capital stock of Planters being
hereafter referred to as the
GMTALVAREZ 402
"Unpaid
Capital"),
and
subsequently for such capital
increases as may be required for
the continuing viability of
Planters.
xxx xxx xxx
The capital recovery component
shall continue to be charged and
collected until payment in full of
(a) the Unpaid Capital and/or (b)
any shortfall in the payment of the
Subsidy Receivables, (c) any
carrying cost accruing from the
date hereof on the amounts which
may be outstanding from time to
time of the Unpaid Capital and/or
the Subsidy Receivables, and (d)
the capital increases contemplated
in paragraph 2 hereof. For the
purpose of the foregoing clause
(c), the "carrying cost" shall be at
such rate as will represent the full
and reasonable cost to Planters of
servicing its debts, taking into
account both its peso and foreign
currency-denominated obligations.
REPUBLIC
OF
THE
PHILIPPINES
By:
(signed)
CESAR E. A. VIRATA
Prime Minister and Minister of
Finance 51
39
It is clear from the Letter of Understanding

that the levy was imposed precisely to pay
the corporate debts of PPI. We cannot agree
with PPI that the levy was imposed to ensure
the stability of the fertilizer industry in the
country. The letter of understanding and the
plain text of the LOI clearly indicate that the
levy was exacted for the benefit of a private
corporation.
All told, the RTC and the CA did not err in
holding that the levy imposed under LOI
No. 1465 was not for a public purpose. LOI
No. 1465 failed to comply with the public
purpose requirement for tax laws.
The LOI is still unconstitutional even if
enacted under the police power; it did not
promote public interest.
Even if We consider LOI No. 1695 enacted
under the police power of the State, it would
still be invalid for failing to comply with the
test of "lawful subjects" and "lawful means".
Jurisprudence states the test as follows: (1)
the interest of the public generally, as
distinguished from those of particular class,
requires its exercise; and (2) the means
employed are reasonably necessary for the
accomplishment of the purpose and not
unduly oppressive upon individuals. 52
For the same reasons as discussed, LOI No.
1695 is invalid because it did not promote
public interest. The law was enacted to give
undue advantage to a private corporation.
We quote with approval the CA ratiocination
on this point, thus:
It is upon applying this established

tests that We sustain the trial court's
holding LOI 1465 unconstitutional.
To be sure, ensuring the continued
supply and distribution of fertilizer
in the country is an undertaking
imbued
with
public
interest.
However, the method by which LOI
1465 sought to achieve this is by no
means a measure that will promote
the public welfare. The government's
commitment
to
support
the
successful
rehabilitation
and
continued viability of PPI, a private
corporation, is an unmistakable
attempt to mask the subject statute's
impartiality. There is no way to treat
the self-interest of a favored entity,
like PPI, as identical with the general
interest of the country's farmers or
even the Filipino people in general.
Well to stress, substantive due
process exacts fairness and equal
protection disallows distinction
where none is needed. When a
statute's public purpose is spoiled by
private interest, the use of police
power becomes a travesty which
must be struck down for being an
arbitrary exercise of government
power. To rule in favor of appellant
would contravene the general
principle that revenues derived from
taxes cannot be used for purely
private purposes or for the exclusive
benefit of private individuals.
(Underscoring supplied)
GMTALVAREZ 402
The
general
rule
is
that
an
unconstitutional law is void; the doctrine
of operative fact is inapplicable.
PPI also argues that Fertiphil cannot seek a
refund even if LOI No. 1465 is declared
unconstitutional. It banks on the doctrine of
operative fact, which provides that an
unconstitutional law has an effect before
being declared unconstitutional. PPI wants
to retain the levies paid under LOI No.
1465 even if it is subsequently declared to
be unconstitutional.
We cannot agree. It is settled that no
question, issue or argument will be
entertained on appeal, unless it has been
raised in the court a quo. 53 PPI did not
raise the applicability of the doctrine of
operative fact with the RTC and the CA. It
cannot belatedly raise the issue with Us in
order to extricate itself from the dire effects
of an unconstitutional law.
At any rate, We find the doctrine
inapplicable. The general rule is that an
unconstitutional law is void. It produces no
rights, imposes no duties and affords no
protection. It has no legal effect. It is, in
legal contemplation, inoperative as if it has
not been passed. 54 Being void, Fertiphil is
not required to pay the levy. All levies paid
should be refunded in accordance with the
general civil code principle against unjust
enrichment. The general rule is supported by
Article 7 of the Civil Code, which provides:
40
ART. 7. Laws are repealed only by

subsequent ones, and their violation
or non-observance shall not be
excused by disuse or custom or
practice to the contrary.
When the courts declare a law to be
inconsistent with the Constitution,
the former shall be void and the
latter shall govern.
The doctrine of operative fact, as an
exception to the general rule, only applies as
a matter of equity and fair play. 55 It
nullifies the effects of an unconstitutional
law by recognizing that the existence of a
statute prior to a determination of
unconstitutionality is an operative fact and
may have consequences which cannot
always be ignored. The past cannot always
be erased by a new judicial declaration. 56
The doctrine is applicable when a
declaration of unconstitutionality will
impose an undue burden on those who have
relied on the invalid law. Thus, it was
applied to a criminal case when a declaration
of unconstitutionality would put the accused
in double jeopardy 57 or would put in limbo
the acts done by a municipality in reliance
upon a law creating it. 58
Here, We do not find anything iniquitous in
ordering PPI to refund the amounts paid by
Fertiphil under LOI No. 1465. It unduly
benefited from the levy. It was proven
during the trial that the levies paid were
remitted and deposited to its bank account.
Quite the reverse, it would be inequitable
and unjust not to order a refund. To do so

would unjustly enrich PPI at the expense of
Fertiphil. Article 22 of the Civil Code
explicitly provides that "every person who,
through an act of performance by another
comes into possession of something at the
expense of the latter without just or legal
ground shall return the same to him". We
cannot allow PPI to profit from an
unconstitutional law. Justice and equity
dictate that PPI must refund the amounts
paid by Fertiphil.
WHEREFORE, the petition is DENIED.
The Court of Appeals Decision dated
November 28, 2003 is AFFIRMED.
SO ORDERED.
||| (Planters Products, Inc. v. Fertiphil Corp.,
G.R. No. 166006, [March 14, 2008], 572
PHIL 270-302)
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
[G.R. No. 120082. September 11, 1996.]

MACTAN CEBU INTERNATIONAL
AIRPORT AUTHORITY, petitioner, vs.
HON. FERDINAND J. MARCOS, in his
capacity as the Presiding Judge of the
Regional Trial Court, Branch 20, Cebu
City, THE CITY OF CEBU, represented
by its Mayor, HON. TOMAS R.
OSMEA,
and
EUSTAQUIO
B.
CESA, respondents.
The Solicitor General for petitioner.
GMTALVAREZ 402
The Office of the City Attorney for City of

Cebu.
SYLLABUS
1. POLITICAL LAW; GOVERNMENT;
POWER OF TAXATION; CONSTRUED.
As a general rule, the power to tax is an
incident of sovereignty and is unlimited in
its range, acknowledging in its very nature
no limits, so that security against its abuse is
to be found only in the responsibility of the
legislature which imposes the tax on the
constituency who are to pay it. Nevertheless,
effective limitations thereon may be
imposed
by
the
people
through
their Constitution. Our Constitution, for
instance, provides that the rule of taxation
shall be uniform and equitable and Congress
shall evolve a progressive system of
taxation. So potent indeed is the power that
it was once opined that "the power to tax
involves the power to destroy." Verily,
taxation is a destructive power which
interferes with the personal and property
rights of the people and takes from them a
portion of their property for the support of
the government. Accordingly, tax statutes
must be construed strictly against the
government and liberally in favor of the
taxpayer. But since taxes are what we pay
for civilized society, or are the lifeblood of
the nation, the law frowns against
exemptions from taxation and statutes
granting the exemptions are thus
juris against
the
41
authority. A claim of exemption from tax

payments must be clearly shown and based
on language in the law too plain to be
mistaken. Elsewise stated, taxation is the
rule, exemption therefrom is the exception.
However, if the grantee of the exemption is
a political subdivision or instrumentality, the
rigid rule of construction does not apply
because the practical effect of the exemption
is merely to reduce the amount of money
that has to be handled by the government in
the course of its operation.
2. ID., ID.; ID.; MAYBE EXERCISED BY
THE LOCAL LEGISLATIVE BODIES.
The power to tax is primarily vested in the
Congress; however, in our jurisdictions, it
may be exercised by local legislative bodies,
no longer merely by virtue of a valid
delegation as before, but pursuant to direct
authority conferred by Section 5, Article X
of the Constitution. Under the latter, the
exercise of the power may be subject to such
guidelines and limitations as the Congress
may provide which, however, must be
consistent with the basic policy of local
autonomy. The LGC, enacted pursuant to
Section 3, Article X of the Constitution,
provides for the exercise by local
government units of their power to tax, the
scope thereof or its limitations, and the
exemptions from taxation. Section 133 of
the LGC prescribes the common limitations
on the taxing powers of local government
units.
3. ID.; ID .; ID.; EXEMPTION FROM
PAYMENT
OF
TAX
MAYBE
WITHDRAWN AT THE PLEASURE OF

THE
TAXING
AUTHORITY;
EXCEPTION. There can be no question
that under Section 14 of R.A. No. 6958 the
petitioner is exempt from the payment of
realty taxes imposed by the National
Government or any of its political
subdivisions,
agencies,
and
instrumentalities.
Nevertheless,
since
taxation is the rule and exemption therefrom
the exception, the exemption may thus be
withdrawn at the pleasure of the taxing
authority. The only exception to this rule is
where the exemption was granted to private
parties based on material consideration of a
mutual nature, which then becomes
contractual and is thus covered by the nonimpairment claim of the Constitution.
4. ID.; LOCAL GOVERNMENT CODE;
SEC. 234 PROVIDES FOR THE
EXEMPTION FROM THE PAYMENT OF
REAL
PROPERTY
TAX;
BASIS
THEREOF.
Section
234
of
the LGC provides for the exemptions from
payment of real property taxes and
withdraws previous exemptions therefrom
granted to natural and juridical persons,
including government-owned and controlled
corporations, except as provided therein.
These exemptions are based on the
ownership, character, and use of the
property. Thus: (a) Ownership Exemptions.
Exemptions from real property taxes on the
basis of ownership are real properties owned
by: (i) the Republic, (ii) a province, (iii) a
city, (iv) a municipality, (v) a barangay, (vi)
registered cooperatives. (b) character
GMTALVAREZ 402
exemptions. Exempted from real property

taxes on the basis of their character are: (i)
charitable institutions, (ii) houses and
temples of prayer like churches, parsonages
or convents appurtenant thereto, mosques,
and (iii) non-profit or religious cemeteries.
(c) Usage exemptions. Exempted from real
property taxes on the basis of the actual,
direct and exclusive use to which they are
devoted are: (i) all lands, buildings and
improvements which are actually, directly
and exclusively used for religious, charitable
or educational purposes; (ii) all machineries
and equipment actually, directly and
exclusively used by local water districts or
by government-owned or controlled
corporations engaged in the supply and
distribution of water and/or generation and
transmission of electric power; and (iii) all
machinery and equipment used for pollution
control and environmental protection. To
help provide a healthy environment in the
midst of the modernization of the country,
all machinery and equipment for pollution
control and environmental protection may
not be taxed by local governments. 2. Other
Exemptions
Withdrawn.
All
other
exemptions previously granted to natural or
juridical persons including governmentowned or controlled corporations are
withdrawn upon effectivity of the Code.
5. ID.; REPUBLIC OF THE PHILIPPINES
AS DISTINGUISHED FROM NATIONAL
GOVERNMENT. The terms "Republic
of the Philippines" and "National
Government" are not interchangeable. The
former is broader and synonymous with
42
"Government of the Republic of the

Philippines" which the Administrative Code
of 1987 defines as the "corporate
governmental entity through which the
functions of government are exercised
throughout the Philippines, including, save
as the contrary appears from the context, the
various arms through which political
authority is made effective in the
Philippines, whether pertaining to the
autonomous regions, the provincial, city,
municipal or barangay subdivisions or other
forms of local government." (Section 2[1],
Introductory Provisions, Administrative
Code of 1987.) These "autonomous regions,
provincial, city, municipal or barangay
subdivisions" are the political subdivisions.
(Section l, Article X, 1987 Constitution.) On
the other hand, "National Government"
refers "to the entire machinery of the central
government, as distinguished from the
different forms of local government."
(Section 2[2], Introductory Provisions,
Administrative Code of 1987. The National
Government then is composed of the three
great departments: the executive, the
legislative and the judicial.
6. ID.; GOVERNMENT; AGENCY AS
DISTINGUISHED
FROM
INSTRUMENTALITY. An "agency" of
the Government refers to "any of the various
units of the Government, including a
department, bureau, office, instrumentality,
or
government-owned
or
controlled
corporation, or a local government or a
distinct
unit
therein,"
while
an
"instrumentality" refers to "any agency of
the National Government, not integrated

within the department framework, vested
with special functions or jurisdiction by law,
endowed with some if not all corporate
powers, administering special funds, and
enjoying operational autonomy, usually,
through a charter. This term includes
regulatory agencies, chartered institutions
and government-owned and controlled
corporations."
DECISION
DAVIDE, JR., J p:
For review under Rule 45 of the Rules of
Court on a pure question of law are the
decision of 22 March 1995 1 of the Regional
Trial Court (RTC) of Cebu City, Branch 20,
dismissing the petition for declaratory relief
in Civil Case No. CEB-16900, entitled
"Mactan Cebu International Airport
Authority vs. City of Cebu," and its order of
4 May 1995 2 denying the motion to
reconsider the decision.
We resolved to give due course to this
petition for it raises issues dwelling on the
scope of the taxing power of local
government units and the limits of tax
exemption privileges of government-owned
and controlled corporations.
The uncontradicted factual antecedents are
summarized in the instant petition as
follows:
Petitioner Mactan Cebu International Airport
Authority (MCIAA) was created by virtue
GMTALVAREZ 402
of Republic Act No. 6958, mandated to

"principally undertake the economical,
efficient and effective control, management
and supervision of the Mactan International
Airport in the Province of Cebu and the
Lahug Airport in Cebu City, . . . and such
other airports as may be established in the
Province of Cebu . . ." (Sec. 3, RA 6958). It
is also mandated to:
a) encourage, promote and develop
international and domestic air
traffic in the Central Visayas and
Mindanao regions as a means of
making the regions centers of
international trade and tourism,
and accelerating the development
of the means of transportation and
communication in the country;
and,
b) upgrade the services and facilities
of the airports and to formulate
internationally
acceptable
standards
of
airport
accommodation and service.
Since the time of its creation, petitioner
MCIAA enjoyed the privilege of exemption
from payment of realty taxes in accordance
with Section 14 of its Charter:
Sec. 14. Tax Exemptions. The
Authority shall be exempt from
realty taxes imposed by the National
Government or any of its political
subdivisions,
agencies
and
instrumentalities . . ..
43
On October 11, 1994, however, Mr.

Eustaquio B. Cesa, Officer-in-Charge,
Office of the Treasurer of the City of Cebu,
demanded payment for realty taxes on
several parcels of land belonging to the
petitioner (Lot Nos. 913-G, 743, 88 SWO,
948-A, 989-A, 474, 109(931), I-M, 918,
919, 913-F, 941, 942, 947, 77 Psd., 746 and
991-A), located at Barrio Apas and Barrio
Kasambagan, Lahug, Cebu City, in the total
amount of P2,229,078.79.
Petitioner objected to such demand for
payment as baseless and unjustified,
claiming in its favor the aforecited Section
14 of RA 6958 which exempts it from
payment of realty taxes. It was also asserted
that it is an instrumentality of the
government
performing
governmental
functions, citing Section 133 of the Local
Government Code of 1991 which puts
limitations on the taxing powers of local
government units:
Section 133. Common Limitations
on the Taxing Powers of Local
provinces, cities, municipalities, and
barangays shall not extend to the
levy of the following:
a) . . .
xxx xxx xxx
o) Taxes, fees or charges of any kind

on the National Government, its
agencies and instrumentalities, and
local government units. (italics
supplied)
Respondent City refused to cancel and set
aside petitioner's realty tax account, insisting
that the MCIAA is a government-controlled
corporation whose tax exemption privilege
has been withdrawn by virtue of Sections
193 and 234 of the Local Government
Code that took effect on January 1, 1992:
Section 193. Withdrawal of Tax
Exemption Privilege. Unless
otherwise provided in this Code, tax
exemptions or incentives granted to,
or presently enjoyed by all persons
whether
natural
or
juridical, including
governmentowned or controlled corporations,
except
local
water
districts,
cooperatives
duly
registered
under RA No. 6938, non-stock and
non-profit hospitals and educational
institutions, are hereby withdrawn
upon the effectivity of this Code.
(italics supplied)
xxx xxx xxx
Section 234. Exemptions from Real
Property Taxes. . . .
(a) . . .
xxx xxx xxx
(e) . . .
GMTALVAREZ 402
Except as provided herein,

any exemption from payment of
real property tax previously
granted to, or presently enjoyed by
all persons, whether natural or
juridical, including governmentowned or controlled corporations
are hereby withdrawn upon the
effectivity of this Code.
As the City of Cebu was about to
issue a warrant of levy against the
properties of petitioner, the latter
was compelled to pay its tax
account "under protest" and
thereafter filed a Petition for
Declaratory Relief with the
Regional Trial Court of Cebu,
Branch 20, on December 29, 1994.
MCIAA basically contended that
the taxing powers of local
government units do not extend to
the levy of taxes or fees of any
kind on an instrumentality of the
national government. Petitioner
insisted that while it is indeed a
government-owned corporation, it
nonetheless stands on the same
footing as an agency or
instrumentality of the national
government by the very nature of
its powers and functions.
Respondent
City,
however,
asserted that MCIAA is not an
instrumentality of the government
but merely a government-owned
corporation
performing
44
proprietary functions. As such, all

exemptions previously granted to
it were deemed withdrawn by
operation of law, as provided
under Sections 193 and 234 of
the Local Government Code when
it took effect on January 1, 1992. 3
The petition for declaratory relief was
docketed as Civil Case No. CEB-16900.
In its decision of 22 March 1995, 4 the trial
court dismissed the petition in light of its
findings, to wit:
A close reading of the New Local
Government Code of 1991 or RA
7160 provides
the
express
cancellation and withdrawal of
exemption of taxes by governmentowned and controlled corporation
per Sections after the effectivity of
said Code on January 1, 1992, to wit:
[proceeds to quote Sections 193 and
234]
Petitioners claimed that its real
properties assessed by respondent
City Government of Cebu are
exempted from paying realty taxes in
view of the exemption granted
under RA 6958 to pay the same
(citing Section 14 of RA 6958).
However, RA
7160 expressly
provides that "All general and
special laws, acts, city charters,
decrees [sic], executive orders,
proclamations and administrative
regulations, or part or parts thereof
which are inconsistent with any of

the provisions of this Code are
hereby repealed or modified
accordingly." (/f/, Section 534, RA
7160).
With that repealing clause in RA
7160, it is safe to infer and state that
the tax exemption provided for
in RA 6958 creating petitioner had
been expressly repealed by the
provisions of the New Local
Government Code of 1991.
So that petitioner in this case has to
pay the assessed realty tax of its
properties effective after January 1,
1992 until the present.
This Court's ruling finds expression
to give impetus and meaning to the
overall objectives of the New Local
Government Code of 1991, RA
7160. "It is hereby declared the
policy of the State that the territorial
and political subdivisions of the
State shall enjoy genuine and
meaningful local autonomy to enable
them to attain their fullest
development
as
self-reliant
communities and make them more
effective partners in the attainment of
national goals. Toward this end, the
State shall provide for a more
responsive and accountable local
government
structure
instituted
through a system of decentralization
whereby local government units shall
be given more powers, authority,
GMTALVAREZ 402
responsibilities, and resources. The

process of decentralization shall
proceed
from
the
national
government to the local government
units. . . ." 5
Its motion for reconsideration having been
denied by the trial court in its 4 May 1995
order, the petitioner filed the instant petition
based on the following assignment of errors:
I. RESPONDENT JUDGE ERRED
IN FAILING TO RULE THAT
THE
PETITIONER
IS
VESTED
WITH
GOVERNMENT
POWERS
AND FUNCTIONS WHICH
PLACE IT IN THE SAME
CATEGORY
AS
AN
INSTRUMENTALITY
OR
AGENCY
OF
THE
GOVERNMENT.
II. RESPONDENT JUDGE ERRED
IN
RULING
THAT
PETITIONER IS LIABLE TO
PAY
REAL
PROPERTY
TAXES TO THE CITY OF
CEBU.
Anent the first assigned error, the petitioner
asserts that although it is a governmentowned or controlled corporation, it is
mandated to perform functions in the same
category as an instrumentality of
Government.
An
instrumentality
of
Government is one created to perform
governmental functions primarily to
promote certain aspects of the economic life
45
of the people. 6 Considering its task "not

merely to efficiently operate and manage the
Mactan-Cebu International Airport, but
more importantly, to carry out the
Government policies of promoting and
developing the Central Visayas and
Mindanao regions as centers of international
trade and tourism, and accelerating the
development of the means of transportation
and communication in the country," 7 and
that it is an attached agency of the
Department
of
Transportation
and
Communication (DOTC), 8 the petitioner
"may stand in [sic] the same footing as an
agency or instrumentality of the national
government." Hence, its tax exemption
privilege under Section 14 of its Charter
"cannot be considered withdrawn with the
passage of the Local Government Code of
1991 (hereinafter LGC) because Section 133
thereof specifically states that the 'taxing
powers of local government units shall not
extend to the levy of taxes or fees or charges
of any kind on the national government, its
agencies and instrumentalities.'"
As to the second assigned error, the
petitioner contends
that being an
instrumentality of the National Government,
respondent City of Cebu has no power nor
authority to impose realty taxes upon it in
accordance with the aforesaid Section 133 of
the LGC,
as
explained
in Basco
vs. Philippine Amusement and Gaming
Corporation: 9
Local governments have no power to
tax instrumentalities of the National
Government.
PAGCOR
is
a
government owned or controlled
corporation
with
an
original
charter, PD 1869. All of its shares of
stock are owned by the National
Government. . . .
PAGCOR has a dual role, to operate
and regulate gambling casinos. The
latter role is governmental, which
places it in the category of an agency
or
instrumentality
of
the
Government. Being
an
instrumentality of the Government,
PAGCOR should be and actually is
exempt from local taxes. Otherwise,
its operation might be burdened,
impeded or subjected to control by a
mere Local government.
The states have no power by taxation
or otherwise, to retard, impede,
burden or in any manner control the
operation of constitutional laws
enacted by Congress to carry into
execution the powers vested in the
federal government (McCulloch
v. Maryland, 4 Wheat 316, 4 L Ed.
579)
This doctrine emanates from the
"supremacy" of the National
Government over local governments.
"Justice Holmes, speaking for the
Supreme Court, made reference to
the entire absence of power on the
part of the States to touch, in that
way (taxation) at least, the
GMTALVAREZ 402
instrumentalities of the United States

(Johnson v. Maryland, 254 USA 51)
and it can be agreed that no state or
political subdivision can regulate a
federal instrumentality in such a way
as to prevent it from consummating
its federal responsibilities, or even to
seriously
burden
it
in
the
accomplishment of them." (Antieau,
Modern Constitutional Law, Vol. 2,
p. 140)
Otherwise, mere creatures of the
State can defeat National policies
thru extermination of what local
authorities may perceive to be
undesirable activities or enterprise
using the power to tax as "a tool for
regulation" (U.S. v.Sanchez, 340 US
42). The power to tax which was
called by Justice Marshall as the
"power to destroy" (Mc Culloch
v. Maryland, supra) cannot be
allowed to defeat an instrumentality
or creation of the very entity which
has the inherent power to wield it.
(italics supplied)
It then concludes that the respondent Judge
"cannot therefore correctly say that the
questioned provisions of the Code do not
contain any distinction between a
government
corporation
performing
governmental functions as against one
performing merely proprietary ones such
that the exemption privilege withdrawn
under the said Code would apply
to all government corporations." For it is
46
clear from Section 133, in relation to Section

234, of theLGC that the legislature meant to
exclude instrumentalities of the national
government from the taxing powers of the
local government units.
In its comment, respondent City of Cebu
alleges that as a local government unit and a
political subdivision, it has the power to
impose, levy, assess, and collect taxes within
its jurisdiction. Such power is guaranteed by
theConstitution 10 and enhanced further by
the LGC. While it may be true that under its
Charter the petitioner was exempt from the
payment of realty taxes, 11 this exemption
was withdrawn by Section 234 of the LGC.
In response to the petitioner's claim that
such exemption was not repealed because
being an instrumentality of the National
Government,
Section
133
of
the LGC prohibits local government units
from imposing taxes, fees, or charges of any
kind on it, respondent City of Cebu points
out that the petitioner is likewise a
government-owned corporation, and Section
234 thereof does not distinguish between
government-owned
or
controlled
corporations performing governmental and
purely proprietary functions. Respondent
City of Cebu urges this Court to apply by
analogy its ruling that the Manila
International Airport Authority is a
government-owned corporation, 12 and to
reject the application of Basco because it
was "promulgated . . . before the enactment
and the signing into law of R.A. No. 7160,"
and was not, therefore, decided "in the light

of the spirit and intention of the framers of"
the said law.
As a general rule, the power to tax is an
incident of sovereignty and is unlimited in
its range, acknowledging in its very nature
no limits, so that security against its abuse is
to be found only in the responsibility of the
legislature which imposes the tax on the
constituency who are to pay it. Nevertheless,
effective limitations thereon may be
imposed by the people through their
Constitutions. 13 Our Constitution,
for
instance, provides that the rule of taxation
shall be uniform and equitable and Congress
shall evolve a progressive system of
taxation. 14 So potent indeed is the power
that it was once opined that "the power to
tax
involves
the
power
to
destroy." 15 Verily, taxation is a destructive
power which interferes with the personal
and property rights of the people and takes
from them a portion of their property for the
support of the government. Accordingly, tax
statutes must be construed strictly against
the government and liberally in favor of the
taxpayer. 16 But since taxes are what we pay
for civilized society, 17 or are the lifeblood
of the nation, the law frowns against
exemptions from taxation and statutes
granting tax exemptions are thus
juris against
the
authority. 18 A claim of exemption from tax
payments must be clearly shown and based
on language in the law too plain to be
mistaken. 19 Elsewise stated, taxation is the
GMTALVAREZ 402
rule, exemption therefrom is the exception.

20 However, if the grantee of the exemption
is a political subdivision or instrumentality,
the rigid rule of construction does not apply
because the practical effect of the exemption
is merely to reduce the amount of money
that has to be handled by the government in
the course of its operations. 21
The power to tax is primarily vested in the
Congress; however, in our jurisdiction, it
may be exercised by local legislative bodies,
no longer merely by virtue of a valid
delegation as before, but pursuant to direct
authority conferred by Section 5, Article X
of the Constitution. 22 Under the latter, the
exercise of the power may be subject to such
guidelines and limitations as the Congress
may provide which, however, must be
consistent with the basic policy of local
autonomy.
There can be no question that under Section
14 of R.A. No. 6958 the petitioner is exempt
from the payment of realty taxes imposed by
the National Government or any of its
political subdivisions, agencies, and
instrumentalities.
Nevertheless,
since
taxation is the rule and exemption therefrom
the exception, the exemption may thus be
withdrawn at the pleasure of the taxing
authority. The only exception to this rule is
where the exemption was granted to private
parties based on material consideration of a
mutual nature, which then becomes
contractual and is thus covered by the nonimpairment clause of the Constitution. 23
47
The LGC, enacted pursuant to Section 3,

Article X of the Constitution, provides for
the exercise by local government units of
their power to tax, the scope thereof or its
limitations, and the exemptions from
taxation.
Section 133 of the LGC prescribes the
common limitations on the taxing powers of
local government units as follows:
the Taxing Power of Local
provinces, cities, municipalities, and
barangays shall not extend to the
levy of the following:
(a) Income tax, except when
levied on banks and other
financial institutions;
(b) Documentary stamp tax;
(c) Taxes on estates, inheritance,
gifts, legacies and other
acquisitions mortis
causa,
except as otherwise provided
herein;
(d) Customs duties, registration
fees of vessel and wharfage
on wharves, tonnage dues,
and all other kinds of
customs fees, charges and
dues except wharfage on
wharves constructed and
maintained by the local

government unit concerned;
(e) Taxes, fees and charges and
other impositions upon goods
carried into or out of, or
passing
through,
the
territorial jurisdictions of
local government units in the
guise
of
charges
for
wharfage, tolls for bridges or
otherwise, or other taxes, fees
or charges in any form
whatsoever upon such goods
or merchandise;
(f) Taxes, fees or charges on
agricultural
and
aquatic
products when sold by
marginal
farmers
or
fishermen;
(g) Taxes on business enterprises
certified to by the Board of
Investments as pioneer or
non-pioneer for a period of
six (6) and four (4) years,
respectively from the date of
registration;
(h) Excise taxes on articles
enumerated
under
the
National Internal Revenue
Code, as amended, and taxes,
fees or charges on petroleum
products;
(i) Percentage or value-added tax
(VAT) on sales, barters or
exchanges
or
similar
GMTALVAREZ 402
transactions on goods or
services except as otherwise
provided herein;
(j) Taxes on the gross receipts of
transportation contractors and
persons engaged in the
transportation of passengers
or freight by hire and
common carriers by air, land
or water, except as provided
in this Code;
(k) Taxes on premiums paid by
way of reinsurance or
retrocession;
(l) Taxes, fees or charges for the
registration of motor vehicles
and for the issuance of all
kinds of licenses or permits
for the driving thereof,
except, tricycles;
(m) Taxes, fees, or other charges
on
Philippine
products
actually exported, except as
otherwise provided herein;
(n) Taxes, fees, or charges, on
Countryside and Barangay
Business Enterprises and
cooperatives duly registered
under R.A. No. 6810 and
Republic Act Numbered
Sixty-nine hundred thirtyeight (R.A. No. 6938)
otherwise known as the
"Cooperatives Code of the
'Philippines' respectively; and
48
(o) TAXES, FEES OR CHARGES

OF ANY KIND ON THE
NATIONAL GOVERNMENT,
ITS
AGENCIES
AND
INSTRUMENTALITIES,
AND
LOCAL
GOVERNMENT
UNITS.
(italics supplied)
Needless to say, the last item (item o) is
pertinent to this case. The "taxes, fees or
charges" referred to are "of any kind";
hence, they include all of these, unless
otherwise provided by the LGC. The term
"taxes" is well understood so as to need no
further elaboration, especially in light of the
above enumeration. The term "fees" means
charges fixed by law or ordinance for the
regulation or inspection of business or
activity, 24 while "charges" are pecuniary
liabilities such as rents or fees against
persons or property. 25
Among the "taxes" enumerated in
the LGC is real property tax, which is
governed by Section 232. It reads as
follows:
SEC. 232. Power to Levy Real
Property Tax. A province or city
or a municipality within the
Metropolitan Manila Area may levy
an annual ad valorem tax on real
property such as land, building,
machinery, and other improvements
not hereafter specifically exempted.
Section 234 of the LGC provides for the
exemptions from payment of real property
taxes and withdraws previous exemptions

therefrom granted to natural and juridical
persons, including government-owned and
controlled corporations, except as provided
therein. It provides:
Property Tax. The following are
property tax:
Republic of the Philippines or
any
of
its
political
subdivisions except when the
beneficial use thereof had
been
granted,
for
consideration or otherwise, to
a taxable person;
(b) Charitable
institutions,
churches, parsonages or
convents appurtenant thereto,
mosques,
non-profit
or
religious cemeteries and all
lands,
buildings
and
improvements
actually,
directly, and exclusively used
for religious, charitable or
educational purposes;
(c) All machineries and equipment
that are actually, directly and
exclusively used by local
water
districts
and
government-owned
or
controlled
corporations
engaged in the supply and
distribution of water and/or
GMTALVAREZ 402
generation and transmission

of electric power;
(d) All real property owned by
duly registered cooperatives
as provided for under R.A.
No. 6938; and
(e) Machinery and equipment used
for pollution control and
environmental protection.
Except as provided herein, any
exemption from payment of real
property tax previously granted to, or
presently enjoyed by, all persons,
whether
natural
or
juridical,
including all government-owned or
controlled corporations are hereby
withdrawn upon the effectivity of
this Code.
These exemptions are based on the
ownership, character, and use of the
property. Thus:
(a) Ownership
Exemptions.
Exemptions
from
real
property taxes on the basis
of ownership are
real
properties owned by: (i) the
Republic, (ii) a province, (iii)
a city, (iv) a municipality, (v)
a
barangay,
and
(vi)
registered cooperatives.
(b) Character Exemptions. Exempted
from real property taxes on
the basis of their character
49
are: (i) charitable institutions,

(ii) houses and temples of
prayer
like
churches,
parsonages
or
convents
appurtenant thereto, mosques,
and (iii) non-profit or
religious cemeteries.
(c) Usage exemptions. Exempted
from real property taxes on
the basis of the actual, direct
and exclusive use to which
they are devoted are: (i) all
lands,
buildings
and
improvements which are
actually
directly
and
exclusively
used
for
religious,
charitable
or
educational purposes; (ii) all
machineries and equipment
actually,
directly
and
exclusively used by local
water
districts
or
by
government-owned
or
controlled
corporations
engaged in the supply and
distribution of water and/or
generation and transmission
of electric power; and (iii) all
machinery and equipment
used for pollution control and
environmental protection.
To help provide a healthy
environment in the midst of the
modernization of the country, all
machinery and equipment for
pollution control and environmental
protection may not be taxed by local

governments.
2. Other Exemptions Withdrawn. All
other exemptions previously
granted to natural or juridical
persons
including
government-owned
or
controlled corporations are
withdrawn
upon
the
effectivity of the Code. 26
Section 193 of the LGC is the general
provision on withdrawal of tax exemption
privileges. It provides:
SEC. 193. Withdrawal of Tax
Exemption Privileges. Unless
otherwise provided in this Code, tax
exemptions or incentives granted to,
or presently enjoyed by all persons,
whether
natural
or
juridical,
including government-owned or
controlled corporations, except local
water districts, cooperatives duly
registered under R.A. 6938, nonstock and non-profit hospitals and
educational institutions, are hereby
withdrawn upon the effectivity of
this Code.
On the other hand, the LGC authorizes local
government units to grant tax exemption
privileges. Thus, Section 192 thereof
provides:
SEC. 192. Authority to Grant Tax
Exemption Privileges. Local
government units may, through
ordinances duly approved, grant tax
GMTALVAREZ 402
exemptions, incentives or reliefs

under such terms and conditions as
they may deem necessary.
The foregoing sections of the LGC speak of:
(a) the limitations on the taxing powers of
local government units and the exceptions to
such limitations; and (b) the rule on tax
exemptions and the exceptions thereto. The
use of exceptions or provisos in these
sections, as shown by the following clauses:
(1) "unless
otherwise
provided
herein"
in
the
opening
paragraph of Section 133;
(2) "Unless otherwise provided in
this Code" in Section 193;
(3) "not
hereafter
specifically
exempted" in Section 232; and
(4) "Except as provided herein" in
the last paragraph of Section
234
initially hampers a ready understanding of
the sections. Note, too, that the
aforementioned clause in Section 133
seems to be inaccurately worded. Instead
of the clause "unless otherwise
provided herein," with the "herein" to
mean, of course, the section, it should
have used the clause "unless otherwise
provided in this Code." The former results
in absurdity since the section itself
enumerates what are beyond the taxing
powers of local government units and,
where exceptions were intended, the
exceptions are explicitly indicated in the
50
next. For instance, in item (a) which

excepts income taxes "when levied on
banks and other financial institutions";
item (d) which excepts "wharfage on
wharves constructed and maintained by
the local government unit concerned"; and
item (1) which excepts taxes, fees and
charges for the registration and issuance of
licenses or permits for the driving of
"tricycles." It may also be observed that
within the body itself of the section, there
are exceptions which can be found only in
other parts of the LGC, but the section
interchangeably uses therein the clause,
"except as otherwise provided herein" as
in items (c) and (i), or the clause "except
as provided in this Code" in item (j). These
clauses would be obviously unnecessary or
mere surplusages if the opening clause of
the section were "Unless otherwise
provided in this Code" instead of "Unless
otherwise provided herein." In any event,
even if the latter is used, since under
Section 232 local government units have
the power to levy real property tax, except
those exempted therefrom under Section
234, then Section 232 must be deemed to
qualify Section 133.
Thus, reading together Sections 133, 232,
and 234 of the LGC, we conclude that as a
general rule, as laid down in Section 133,
the taxing powers of local government units
cannot extend to the levy of, inter alia,
"taxes, fees and charges of any kind on the
National Government, its agencies and
instrumentalities, and local government
units"; however, pursuant to Section 232,
provinces, cities, and municipalities in the

Metropolitan Manila Area may impose the
real property tax except on, inter alia, "real
property owned by the Republic of the
Philippines or any of its political
subdivisions except when the beneficial use
thereof has been granted, for consideration
or otherwise, to a taxable person," as
provided in item (a) of the first paragraph of
Section 234.
As to tax exemptions or incentives granted
to or presently enjoyed by natural or judicial
persons, including government-owned and
controlled corporations, Section 193 of
the LGC prescribes the general rule, viz.,
they arewithdrawn upon the effectivity of
the LGC, except those granted to local water
districts, cooperatives duly registered
under R.A. No. 6938, non-stock and nonprofit hospitals and educational institutions,
and unless otherwise provided in the LGC.
The latter proviso could refer to Section 234
which enumerates the properties exempt
from real property tax. But the last
paragraph of Section 234 further qualifies
the retention of the exemption insofar as real
property taxes are concerned by limiting the
retention only to those enumerated therein;
all others not included in the enumeration
lost the privilege upon the effectivity of
the LGC. Moreover, even as to real property
owned by the Republic of the Philippines or
any of its political subdivisions covered by
item (a) of the first paragraph of Section
234, the exemption is withdrawn if the
beneficial use of such property has been
GMTALVAREZ 402
granted to a taxable person for consideration

or otherwise.
Since the last paragraph of Section 234
unequivocally withdrew, upon the effectivity
of the LGC, exemptions from payment of
real property taxes granted to natural or
juridical persons, including governmentowned or controlled corporations, except as
provided in the said section, and the
petitioner is, undoubtedly, a governmentowned corporation, it necessarily follows
that its exemption from such tax granted it in
Section 14 of its Charter, R.A. No. 6958, has
been withdrawn. Any claim to the contrary
can only be justified if the petitioner can
seek refuge under any of the exceptions
provided in Section 234, but not under
Section 133, as it now asserts, since, as
shown above, the said section is qualified by
Sections 232 and 234.
In short, the petitioner can no longer invoke
the general rule in Section 133 that the
taxing powers of the local government units
cannot extend to the levy of:
(o) taxes, fees or charges of any kind
on the National Government, its
agencies or instrumentalities,
and local government units.
It must show that the parcels of land in
question, which are real property, are any
one of those enumerated in Section 234,
either by virtue of ownership, character, or
use of the property. Most likely, it could
only be the first, but not under any explicit
provision of the said section, for none exists.
51
In light of the petitioner's theory that it is an

"instrumentality of the Government," it
could only be within the first item of the
first paragraph of the section by expanding
the scope of the term "Republic of the
Philippines"
to
embrace
its
"instrumentalities" and "agencies." For
expediency, we quote:
(a) real property owned by the
Republic of the Philippines, or
any of its political subdivisions
except when the beneficial use
thereof has been granted, for
consideration or otherwise, to a
taxable person.
This view does not persuade us. In the first
place, the petitioner's claim that it is an
instrumentality of the Government is based
on Section
133(o),
which
expressly
mentions the word "instrumentalities"; and,
in the second place, it fails to consider the
fact that the legislature used the phrase
"National Government, its agencies and
instrumentalities" in Section 133(o), but
only the phrase "Republic of the Philippines
or any of its political subdivisions"
in Section 234(a).
The terms "Republic of the Philippines" and
"National
Government"
are
not
interchangeable. The former is broader and
synonymous with "Government of the
Republic of the Philippines" which
the Administrative Code of 1987 defines as
the "corporate governmental entity through
which the functions of government are
exercised throughout the Philippines,
including, save as the contrary appears from

the context, the various arms through which
political authority is made affective in the
Philippines, whether pertaining to the
autonomous regions, the provincial, city,
municipal or barangay subdivisions or other
forms of local government." 27 These
"autonomous regions, provincial, city,
municipal or barangay subdivisions" are the
political subdivisions. 28
On the other hand, "National Government"
refers "to the entire machinery of the central
government, as distinguished from the
different
forms
of
local
governments." 29 The National Government
then is composed of the three great
departments: the executive, the legislative
and the judicial. 30
An "agency" of the Government refers to
"any of the various units of the Government,
including a department, bureau, office,
instrumentality, or government-owned or
controlled corporation, or a local
government
or
a
distinct
unit
therein;" 31 while an
"instrumentality"
refers to "any agency of the National
Government, not integrated within the
department framework, vested with special
functions or jurisdiction by law, endowed
with some if not all corporate powers,
administering special funds, and enjoying
operational autonomy, usually through a
charter. This term includes regulatory
agencies,
chartered
institutions
and
government-owned
and
controlled
corporations." 32
GMTALVAREZ 402
If Section 234(a) intended to extend the

exception therein to the withdrawal of the
exemption from payment of real property
taxes under the last sentence of the said
section to the agencies and instrumentalities
of the National Government mentioned in
Section 133(o), then it should have restated
the wording of the latter. Yet, it did not.
Moreover, that Congress did not wish to
expand the scope of the exemption in
Section 234(a) to include real property
owned by other instrumentalities or agencies
of the government including governmentowned and controlled corporations is further
borne out by the fact that the source of this
exemption is Section 40(a) of P.D. No. 464,
otherwise known as The Real Property Tax
Code, which reads:
Property Tax. The exemption
shall be as follows:
Republic of the Philippines or
any of its political subdivisions
and any government-owned or
controlled
corporation
so
exempt by its charter: Provided,
however, That this exemption
shall not apply to real property
of the above-mentioned entities
the beneficial use of which has
been granted, for consideration
or otherwise, to a taxable
person.
52
Note that as reproduced in Section 234(a),

the phrase "and any government-owned or
controlled corporation so exempt by its
charter" was excluded. The justification
for this restricted exemption in Section
234(a) seems obvious: to limit further tax
exemption privileges, especially in light of
the general provision on withdrawal of tax
exemption privileges in Section 193 and
the special provision on withdrawal of
exemption from payment of real property
taxes in the last paragraph of Section
234. These policy considerations are
consistent with the State policy to ensure
autonomy to local governments 33 and the
objective of the LGC that they enjoy
genuine and meaningful local autonomy to
enable them to attain their fullest
development as self-reliant communities
and make them effective partners in the
attainment of national goals. 34 The power
to tax is the most effective instrument to
raise needed revenues to finance and
support myriad activities of local
government units for the delivery of basic
services essential to the promotion of the
general welfare and the enhancement of
peace, progress, and prosperity of the
people. It may also be relevant to recall
that the original reasons for the withdrawal
of tax exemption privileges granted to
government-owned
and
controlled
corporations and all other units of
government were that such privilege
resulted in serious tax base erosion and
distortions in the tax treatment of similarly
situated enterprises, and there was a need
for these entities to share in the

requirements of development, fiscal or
otherwise, by paying the taxes and other
charges due from them. 35
The crucial issues then to be addressed are:
(a) whether the parcels of land in question
belong to the Republic of the Philippines
whose beneficial use has been granted to the
petitioner, and (b) whether the petitioner is a
"taxable person."
Section 15 of the petitioner's Charter
provides:
Sec. 15. Transfer of Existing
Facilities and Intangible Assets.
All existing public airport facilities,
runways, lands, buildings and other
properties, movable or immovable,
belonging
to
or
presently
administered by the airports, and all
assets, powers, rights, interests and
privileges relating on airport works
or air operations, including all
equipment which are necessary for
the operations of air navigation,
aerodrome control towers, crash,
fire, and rescue facilities are hereby
transferred
to
the Authority:
Provided,
however,
that
the
operations control of all equipment
necessary for the operation of radio
aids to air navigation, airways
communication, the approach control
office, and the area control center
shall be retained by the Air
Transportation
Office.
No
equipment, however, shall be
GMTALVAREZ 402
removed by the Air Transportation

Office from Mactan without the
concurrence of the Authority. The
Authority may assist in the
maintenance
of
the
Air
Transportation Office equipment.
The "airports" referred to are the "Lahug Air
Port" in Cebu City and the "Mactan
International Airport in the Province of
Cebu," 36 which belonged to the Republic
of the Philippines, then under the Air
Transportation Office (ATO). 37
It may be reasonable to assume that the term
"lands" refer to "lands" in Cebu City then
administered by the Lahug Air Port and
included the parcels of land the respondent
City of Cebu seeks to levy on for real
property taxes. This section involves a
"transfer" of the "lands," among other
things, to the petitioner and not just the
transfer of the beneficial use thereof, with
the ownership being retained by the
Republic of the Philippines.
This "transfer" is actually an absolute
conveyance of the ownership thereof
because the petitioner's authorized capital
stock consists of, inter alia, "the value of
such real estate owned and/or administered
by the airports." 38Hence, the petitioner is
now the owner of the land in question and
the exception in Section 234(c) of
the LGC is inapplicable.
Moreover, the petitioner cannot claim that it
was never a "taxable person" under its
Charter. It was only exempted from the
53
payment of real property taxes. The grant of

the privilege only in respect of this tax is
conclusive proof of the legislative intent to
make it a taxable person subject to all taxes,
except real property tax.
||| (Mactan Cebu International Airport

Authority v. Marcos, G.R. No. 120082,
[September 11, 1996], 330 PHIL 392-420)
Finally, even if the petitioner was originally

not a taxable person for purposes of real
property tax, in light of the foregoing
disquisitions, it had already become, even if
it be conceded to be an "agency" or
"instrumentality" of the Government, a
taxable person for such purpose in view of
the withdrawal in the last paragraph of
Section 234 of exemptions from the
payment of real property taxes, which, as
earlier adverted to, applies to the petitioner.
[G.R. No. L-3473. March 22, 1907.]
Accordingly, the position taken by the

petitioner is untenable. Reliance on Basco
vs. Philippine Amusement and Gaming
Corporation 39 is unavailing since it was
decided before the effectivity of the LGC.
Besides, nothing can prevent Congress from
decreeing that even instrumentalities or
agencies of the Government performing
governmental functions may be subject to
tax. Where it is done precisely to fulfill a
constitutional mandate and national policy,
no one can doubt its wisdom.
WHEREFORE, the instant petition is
DENIED. The challenged decision and order
of the Regional Trial Court of Cebu, Branch
20, in Civil Case No. CEB-16900 are
AFFIRMED.
No pronouncement as to costs.
SO ORDERED.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
J.
CASANOVAS, plaintiff-appellant, vs.
JNO. S. HORD, defendant-appellee.
F.G. Waite, for appellant.
Attorney-General Araneta, for appellee.
SYLLABUS
1. TAXATION;
CONTRACT
BY
GOVERNMENT. A government may make
a valid contract with an individual in respect
to taxation, which contract can be enforced
against it.
2. INTERNAL
REVENUE
LAW;
OBLIGATION OF CONTRACTS. Section
134 of the Internal Revenue Law of 1904 (Act
No. 1189) is void because it impairs the
obligation of the contracts contained in the
concessions of mines made by the Spanish
Government.
3. ID.; ID. Section 134 of the Internal
Revenue Law of 1904 (Act No. 1189) is void
because it is in conflict with section 60 of the
act of Congress of July 1, 1902.
DECISION
WILLARD, J p:
GMTALVAREZ 402
The plaintiff brought this action against the

defendant, the Collector of Internal
Revenue, to recover the sum of P9,600, paid
by him under protest as taxes on certain
mining claims owned by him in the Province
of Ambos Camarines. Judgment was
rendered in the court below in favor of the
defendant, and from that judgment the
plaintiff appealed.
There is no dispute about the facts.
In January, 1897, the Spanish Government,
in accordance with the provisions of the
royal decree of the 14th of May, 1867,
granted to the plaintiff certain mines in the
said Province of Ambos Camarines, of
which mines the plaintiff is now the owner.
That these were valid perfected mining
concessions granted prior to the 11th of
April, 1899, is conceded. They were so
considered by the Collector of Internal
Revenue and were by him said to fall within
the provisions of section 134 of Act No.
1189, known as the Internal Revenue Act.
That section is as follows:
"SEC. 134. On all valid perfected
mining concessions granted prior
to April eleventh, eighteen
hundred and ninety-nine, there
shall be levied and collected on
the after January first, nineteen
hundred and five, the following
taxes:
"1. (a) On each claim containing an
area of sixty thousand square
meters, an annual tax of one
hundred pesos; (b) and at the same
54
rate proportionately on each claim

containing an area in excess of, or
less than, sixty thousand square
meters.
"2. (a) On the gross output of each
mine an ad valorem tax equal to
three per centum of the actual
market value of such output."
The defendant accordingly imposed upon
these properties the tax mentioned in section
134, which tax, as has before been stated,
plaintiff paid under protest.
The only question in the case is whether this
section 134 is void or valid.
I. It is claimed by the plaintiff that it is void
because it comes within the provision of
section 5 of the act of Congress of July 1,
1902 1 (32 U.S. Stat. L., 691), which
provides "that no law impairing the
obligation of contracts shall be enacted."
The royal decree of the 14th of May, 1867,
provided, among other things, as follows:
"ART. 76. On each pertenencia
minera (mining claim) of the area
prescribed in the first paragraph of
article 13 (sixty thousand square
meters) there shall be paid
annually a
fixed
tax
of
forty escudos (about
P20.00).
Thepertenencias referred to in the
second paragraph of the same
article, though of greater area than
the others (one hundred and fifty
thousand square meters), shall pay
only
twenty escudos (about
P10.00)."
"ART. 78. Pertenencias of

iron
mines and mines of combustible
minerals shall be exempt from the
annual tax for a period of thirty
years from the date of publication
of this decree."
"ART. 80. A further tax of three per
centum on the gross earnings shall
be paid without deduction of costs
of any kind whatsoever. All
substances enumerated in section
one shall be exempt from said tax
of three per centum for a period of
thirty years.
"ART. 81. No other taxes than those
herein mentioned shall be imposed
upon mining and metallurgical
industries."
The royal decree and regulation for its
enforcement provided that the deeds granted
by the Government should be in a particular
form, which form was inserted in the
regulations. It must be presumed that the
deeds granted to the plaintiff were made as
provided by law, and, in fact, one of such
concessions was exhibited during the
argument in this court, and was found to be
in exact conformity with the form prescribed
by law. The deed is as follows:
"Don Camilo Garcia de Polavieja,
Marquez de Polavieja, Teniente
General de los Ejercitos Nacionales,
Caballero Gran Cruz de la Real y
Militar Orden de San Hermenegildo,
de la Real y distinguida de Isabel la
Catolica, de la del Merito Militar
GMTALVAREZ 402
Roja, de la de la Corona de Italia,

Comendador de Carlos Tercero,
Bennemerito de la Patria en grado
eminente, condecorado con varias
cruses de distincion por meritos de
guerra,
Capitan
General
y
Gobernador General de Filipinas.
"Whereas I have granted to Don
Joaquin Casanovas y Llovet and to
Don Martin Buck the concession of a
gold mine entitled "Nueva California
Segunda" in the jurisdiction of
Paracale, Province of Ambos
Camarines: Now, therefore, in the
name of His Majesty the King
(whom God preserve), and pursuant
to the provisions of article 37 of the
royal decree of May 14, 1867,
regulating mining in these Islands, I
issue, this fifth day of November,
eighteen hundred and ninety-six, this
title deed to four pertenencias,
comprising an area of two hundred
and forty thousand square meters, as
shown in the attached sketch map
drafted by the engineer Don Enrique
Abella y Casariego, and dated at
Manila December sixteenth of the
said year, subject to the following
general terms and conditions:
"1. That the mine shall be
worked in conformity with
the rules in mining, the
grantee and his laborers to be
governed by the police rules
established
by
existing
regulations.
55
"2. That the grantee shall be

liable for all damages to third
parties that may be caused by
his operations.
"3. That the grantee shall
likewise
indemnify
his
neighbors for any damage
they may suffer by reason of
water accumulated on his
works, if, upon being
requested, he fail to drain the
same within the time
indicated.
"4. That he shall contribute for
the drainage of the adjacent
mines and for the general
galleries for drainage or
haulage in proportion to the
benefit he derives therefrom,
whenever, by authority of the
Governor-General,
such
works shall be opened for a
group of pertenencias or for
the entire mining locality in
which the mine is situated.
"5. That he shall commence
work
on
the
mine
immediately upon receipt of
this
concession
unless
prevented by force majeure.
"6. That he shall keep the mine
in active operation by
employing at the rate of at
least four laborers for
each pertenencia for at least
six months of each year.
"7. That he shall strengthen the

walls of the mine within the
time indicated whenever, by
reason of mismanagement of
the work, it threatens to cave
in, unless he be prevented
by force majeure.
"8. That he shall not render
further
profitable
development of the mine
difficult or impossible by
avaricious operation.
"9. That he shall not suspend
the operation of the mine
with
the
intention
of
abandoning the same without
first informing the Governor
of his intention, in which case
he must leave the mine in a
good state of timbering.
"10. That he shall pay taxes on
the mine and its output as
prescribed in the royal
decree.
"11. Finally, that he shall
comply
with
all
the
requirements contained in the
royal decree and in the
regulations for concessions of
the same nature as the
present.
"Without special conditions.
"Now, therefore, by virtue of this
title deed, I grant to Don Joaquin
Casanovas y Llovet and to Don
GMTALVAREZ 402
Martin Buck the ownership of the

said mine for an unlimited period of
time so long as they shall comply
with the foregoing terms and
conditions, to the end that they may
develop the same and make free use
and disposition of the output thereof,
with the right to alienate the said
mine subject to the provisions of
existing laws, and to enjoy all the
rights and benefits conceded to such
grantees by the royal decree and by
the mining regulations. And for the
prompt fulfillment and observance of
the said conditions, both on the part
of the said grantees and by all
authorities, courts, corporations, and
private persons whom it may
concern, I have ordered this title
deed to be issued given under my
hand and the proper seal and
countersigned by the undersigned
Director-General
of
Civil
Administration."
It seems very clear to us that this deed
constituted a contract between the Spanish
Government and the plaintiff, the obligation
of which contract was impaired by the
enactment of section 134 of the Internal
Revenue Law above cited, thereby
infringing the provisions above quoted from
section 5 of the act of Congress of July 1,
1902. This conclusion seems necessarily to
result from the decisions of the Supreme
Court of the United States in similar cases.
In the case of McGee vs. Mathis (4 Wallace,
143), it appeared that the State of Arkansas,
56
by an act of the legislature of 1851, provided

for the sale of certain swamp lands granted
to it by the United States; for the issue of
transferable scrip receivable for any lands
not already taken up at the time of selection
by the holder; for contracts for the making
of levees and drains, and for the payment of
contractors in scrip and otherwise. In the
fourteenth section of this act it was provided
that
"To encourage by all just means the
progress and completion of the
reclaiming of such lands by offering
inducements to purchasers and
contractors to take up said lands, all
said swamp and overflowed lands
shall be exempt from taxation for the
term of ten years or until they shall
be reclaimed."
In 1855 this section was repealed and
provision was made by law for the taxation
of swamp and overflowed lands, sold or to
be sold, precisely as other lands. McGee,
before this appeal, had become the owner by
transfer from contractors of a large amount
of scrip issued under the Act of 1851, and
with this scrip, after the repeal, took up and
paid for many sections and parts of sections
of the granted lands. Taxes were levied by
the State on the lands so taken up by
McGee. The Supreme Court held that these
taxes could not be collected. The Court said
at page 156:
"It seems quite clear that the Act of
1851 authorizing the issue of land
scrip constituted a contract between

the State and the holders of the land
scrip issued under the act."
In the case of the Home of the Friendless vs.
Rouse (8 Wallace, 430), it appeared that on
the 3d day of February, 1853, the legislature
of Missouri passed on act to incorporate the
Home of the Friendless in the city of St.
Louis. Section 1 of the act provided that
"All property of said corporation
shall be exempt from taxation."
The court held that the State had no power
afterwards to pass laws providing for the
levying of taxes upon this institution. The
Court said among other things at page 438:
"The validity of this contract is
questioned at the bar on the ground
that the legislature had no authority
to grant away the power of taxation.
The answer to this position is, that
the question is no longer open for
argument here, for it is settled by the
repeated adjudications of this court,
that a State may be contract based on
a consideration exempt the property
of an individual or corporation from
taxation, either for a specified period
or permanently. And it is equally
well settled that the exemption is
presumed to be on sufficient
consideration, and binds the State if
the charter containing it is accepted."
In the case of The Asylum vs. The City of
New Orleans (105 U.S., 362), it appears that
St. Ariva's Asylum was incorporated by an
act of the legislature of Louisiana, approved
GMTALVAREZ 402
April 29, 1853. The law incorporating it

provided that it should enjoy the same
exemption from taxation which was enjoyed
by the Orphan Boys' Asylum of New
Orleans. The law relating to the last named
institution provided (page 364):
"That, from and after the passage of
this act, all the property, real and
personal, belonging to the Orphan
Boys' Asylum of New Orleans be,
and the same is hereby exempted
from all taxation, either by the State,
parish, or city in which it is situated,
any
law
to
the
contrary
notwithstanding."
It was held that the State had no power by
subsequent legislation to impose taxes upon
the property of this institution.
That the doctrine announced in these cases is
still maintained in that court is apparent
from the case of Powers vs. The Detroit,
Grand Haven and Milwaukee Railway
which was decided on the 16th of April,
1906, and reported in 201 U. S., 543.
Section 9 of the act of the legislature of
Michigan, incorporating the railway
company, provided:
"Said company shall, on or before
the 1st day of July, pay to the State
treasurer, an annual tax of one per
cent on the capital stock of said
company, pain in, which tax shall be
in lieu of all other taxation."
The court said at page 556:
57
"It has often been decided by this

court, so often that a citation on
authorities in unnecessary, that the
legislature of a State may, in the
absence of special restrictions in its
constitution, make a valid contract
with a corporation in respect to
taxation, and that such contract can
be enforced against the State at the
instance of the corporation."
The case at bar falls within the cases
hereinbefore cited. It is to be distinguished
from the case of the Metropolitan Street
Railway Company vs. The New York State
Board of Tax Commissioners (199 U.S., 1).
In that case it was provided by various acts
of the legislature, that the companies therein
referred to, should pay annually to the city
of New York, a fixed amount or percentage,
varying from 2 to 8 per cent of their gross
earnings additional taxes was sustained by
the court. It was sustained on the ground that
the prior legislation did not expressly say
that the taxes thus provided for should be in
lieu of all other taxes. The court said at page
37:
"Applying these well-established
rules to the several contracts, it will
be perceived that there was no
express relinquishment of the right
of taxation. The plaintiff in error
must rely upon some implication,
and not upon any direct stipulation.
In each contract there was a grant of
privileges, but the grant was
specifically or privileges in respect
to the construction, operation and
maintenance of the street railroad.

These were all that in terms were
granted. As consideration for this
grant, the grantees were to pay
something, and such payment is
nowhere said to be in lieu of, or as an
equivalent or substitute of taxes. All
that can be extracted from the
language used, was a grant of
privileges and a payment therefor.
Other words must be written into the
contract before there can be found
any relinquishment of the power of
taxation."
But in the case at bar, there is found not only
the provisions for the payment of certain
taxes annually, but there is also found the
provision contained in article 81, above
quoted, which expressly declares that no
other taxes shall be imposed upon these
mines.
The present case is to be distinguished also
from that class of cases of which Grands
Lodge vs. The City of New Orleans (166
U.S., 143) is a type, and which includes Salt
Company vs. East Saginaw (13 Wall., 373)
and Welch vs. Cook (97 U.S., 541). In these
cases the exemption was a mere bounty and
did not form a part of any contract.
The fact that this concession was made by
the Government of Spain, and not by the
Government of the United States, is not
important.
(Trustees
of
Dartmouth
College vs. Woodward, 4 Wheaton, 518.)
Our conclusion is that the concessions
granted by the Government of Spain to the
GMTALVAREZ 402
plaintiff, constitute contracts between the

parties; that section 134 of the Internal
Revenue Law impairs the obligation of these
contracts, and is therefore void as to them.
II. We think that this section is also void
because in conflict with section 60 of the act
of Congress of July 1, 1902. This section is
as follows:
"That nothing in this Act shall be
construed to effect the rights of any
person, partnership, or corporation,
having a valid, perfected mining
concession granted prior to April
eleventh, eighteen hundred and
ninety-nine, but all such concessions
shall be conducted under the
provisions of the law in force at the
time they were granted, subject at all
times to cancellation by reason of
illegality in the procedure by which
they were obtained, or for failure to
comply
with
the
conditions
prescribed as requisite to their
retention in the laws under which
they were granted: Provided, That
the owner or owners of every such
concession shall cause the corners
made by its boundaries to be
distinctly marked with permanent
monuments within six months after
this act has been promulgated in the
Philippine Islands, and that any
concessions, the boundaries of which
are not so marked within this period
shall be free and open to explorations
and purchase under the provisions of
this act." 1
58
This section seems to indicate that

concessions, like those in question, can be
canceled only by reason of illegality in the
procedure by which they were obtained, or
for failure to comply with the conditions
prescribed as requisite for their retention in
the laws under which they were granted.
There is nothing in the section which
indicates that they can be canceled for
failure to comply with the conditions
prescribed by subsequent legislation. In fact,
the real intention of the act seems to be that
such concession should be subject to the
former legislation and not to any subsequent
legislation. There is no claim in this case
that there was any illegality in the procedure
by which these concessions were obtained,
nor is there any claim that the plaintiff has
not complied with the conditions prescribed
in the said royal decree of 1867.
III. In view of the result at which we have
arrived, it is not necessary to consider the
further claim made by the plaintiff that the
taxes imposed by article 134 above quoted,
are in violation of the part of section 5 of the
act of July 1, 1902, which declares "that the
rule of taxation in said Islands shall be
uniform."
The judgment of the court below is reversed,
and judgment is ordered in favor of the
plaintiff and against the defendant for
P9,600, with interest thereon, at 6 per cent,
from the 21st day of February, 1906, and the
costs of the Court of First Instance. No costs
will be allowed to either party in this court.
After the expiration of twenty days let

judgment be entered in accordance herewith
and ten days thereafter let the case be
remanded to the court from whence it came
for proper action. So ordered.
||| (Casanovas v. Hord, G.R. No. L-3473,
[March 22, 1907], 8 PHIL 125-134)
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
[G.R. No. 159796. July 17, 2007.]

ROMEO
P.
GEROCHI,
KATULONG NG BAYAN (KB) and
ENVIRONMENTALIST
CONSUMERS NETWORK, INC.
(ECN), petitioners, vs.
DEPARTMENT
OF
ENERGY
(DOE), ENERGY REGULATORY
COMMISSION (ERC), NATIONAL
POWER CORPORATION (NPC),
POWER SECTOR ASSETS AND
LIABILITIES
MANAGEMENT
GROUP
(PSALM
Corp.),
STRATEGIC POWER UTILITIES
GROUP (SPUG), and PANAY
ELECTRIC
COMPANY
INC.
(PECO), respondents.
DECISION
NACHURA, J p:
Petitioners Romeo P. Gerochi, Katulong Ng
Bayan (KB), and Environmentalist Consumers
Network, Inc. (ECN) (petitioners), come
GMTALVAREZ 402
before this Court in this original action

praying that Section 34 of Republic Act (RA)
9136, otherwise known as the "Electric Power
Industry Reform Act of 2001" (EPIRA),
imposing the Universal Charge, 1 and Rule 18
of the Rules and Regulations (IRR) 2 which
seeks to implement the said imposition, be
declared unconstitutional. Petitioners also pray
that the Universal Charge imposed upon the
consumers be refunded and that a preliminary
injunction and/or temporary restraining order
(TRO) be issued directing the respondents to
refrain from implementing, charging, and
collecting the said charge. 3 The assailed
provision of law reads:
SECTION 34. Universal Charge.
Within one (1) year from the
effectivity of this Act, a universal
charge to be determined, fixed and
approved by the ERC, shall be
imposed on all electricity endusers for the following purposes:
(a) Payment for the stranded
debts 4 in excess of the
amount assumed by the
National Government and
stranded contract costs of
NPC 5 and as well as
qualified stranded contract
costs of distribution utilities
resulting
from
the
restructuring of the industry;
(b) Missionary electrification; 6
(c) The equalization of the taxes
and royalties applied to
59
indigenous or renewable
sources of energy vis--vis
imported energy fuels;
(d) An environmental charge
equivalent to one-fourth of
one centavo per kilowatthour (P0.0025/kWh), which
shall
accrue
to
an
environmental fund to be
used solely for watershed
rehabilitation
and
management. Said fund shall
be managed by NPC under
existing arrangements; and
(e) A charge to account for all
forms of cross-subsidies for a
period not exceeding three
(3) years.
The universal charge shall be a
non-bypassable charge which shall
be passed on and collected from
all end-users on a monthly basis
by the distribution utilities.
Collections by the distribution
utilities and the TRANSCO in any
given month shall be remitted to
the PSALM Corp. on or before the
fifteenth (15th) of the succeeding
month, net of any amount due to
the distribution utility. Any enduser or self-generating entity not
connected to a distribution utility
shall remit its corresponding
universal charge directly to the
TRANSCO. The PSALM Corp.,
as administrator of the fund, shall
create a Special Trust Fund which

shall be disbursed only for the
purposes specified herein in an
open and transparent manner. All
amount collected for the universal
charge shall be distributed to the
respective beneficiaries within a
reasonable period to be provided
by the ERC.
The Facts
Congress enacted the EPIRA on June 8, 2001;
on June 26, 2001, it took effect. 7
GMTALVAREZ 402
SPUG from the Universal Charge for

Missionary Electrification and authorizing the
National
Transmission
Corporation
(TRANSCO) and Distribution Utilities to
collect the same from its end-users on a
monthly basis.
On June 26, 2003, the ERC rendered its
Decision 13 (for ERC Case No. 2002-165)
modifying its Order of December 20, 2002,
thus:
On May 7, 2002, NPC filed another petition

with ERC, docketed as ERC Case No. 2002194, praying that the proposed share from the
Universal Charge for the Environmental
charge of P0.0025 per kilowatt-hour (/kWh),
or a total of P119,488,847.59, be approved for
withdrawal from the Special Trust Fund (STF)
managed by respondent Power Sector Assets
and
Liabilities
Management
Group
(PSALM) 10 for the rehabilitation and
management of watershed areas. 11
WHEREFORE, the foregoing

premises
considered,
the
provisional authority granted to
petitioner
National
Power
Corporation-Strategic
Power
Utilities Group (NPC-SPUG) in
the Order dated December 20,
2002 is hereby modified to the
effect that an additional amount of
P0.0205 per kilowatt-hour should
be added to the P0.0168 per
kilowatt-hour
provisionally
authorized by the Commission in
the said Order. Accordingly, a total
amount of P0.0373 per kilowatthour is hereby APPROVED for
withdrawal from the Special Trust
Fund managed by PSALM as its
share from the Universal Charge
for Missionary Electrification
(UC-ME) effective on the
following billing cycles:
On December 20, 2002, the ERC issued an

Order 12 in ERC Case No. 2002-165
provisionally approving the computed amount
of P0.0168/kWh as the share of the NPC-
(a) June 26-July 25, 2003 for

National Transmission
Corporation
(TRANSCO); and
On April 5, 2002, respondent National Power

Corporation-Strategic
Power
Utilities
Group 8 (NPC-SPUG) filed with respondent
Energy Regulatory Commission (ERC) a
petition for the availment from the Universal
Charge of its share for Missionary
Electrification, docketed as ERC Case No.
2002-165. 9
60
(b) July 2003 for Distribution

Utilities (Dus).
Relative thereto, TRANSCO and
Dus are directed to collect the UCME in the amount of P0.0373 per
kilowatt-hour and remit the same
to PSALM on or before the 15th
day of the succeeding month.
In the meantime, NPC-SPUG is
directed to submit, not later than
April 30, 2004, a detailed report to
include
Audited
Financial
Statements and physical status
(percentage of completion) of the
projects using the prescribed
format.
Let copies of this Order be
furnished petitioner NPC-SPUG
and all distribution utilities (Dus).
SO ORDERED.
On August 13, 2003, NPC-SPUG filed a
Motion for Reconsideration asking the ERC,
among others, 14 to set aside the abovementioned Decision, which the ERC granted
in its Order dated October 7, 2003, disposing:
WHEREFORE, the foregoing
premises considered, the "Motion
for Reconsideration" filed by
petitioner
National
Power
Corporation-Small Power Utilities
Group (NPC-SPUG) is hereby
GRANTED. Accordingly, the
Decision dated June 26, 2003 is
hereby modified accordingly.
Relative thereto, NPC-SPUG is

directed to submit a quarterly
report on the following:
1. Projects for CY
undertaken;
2002
2. Location
3. Actual amount utilized to
complete the project;
4. Period of completion;
5. Start of Operation; and
6. Explanation
of
the
reallocation of UC-ME
funds, if any.
SO ORDERED. 15
Meanwhile, on April 2, 2003, ERC decided
ERC Case No. 2002-194, authorizing the NPC
to draw up to P70,000,000.00 from PSALM
for its 2003 Watershed Rehabilitation Budget
subject to the availability of funds for the
Environmental Fund component of the
Universal Charge. 16
On the basis of the said ERC decisions,
respondent Panay Electric Company, Inc.
(PECO) charged petitioner Romeo P. Gerochi
and all other end-users with the Universal
Charge as reflected in their respective electric
bills starting from the month of July 2003. 17
Hence, this original action.
Petitioners submit that the assailed provision
of law and its IRR which sought to implement
the same are unconstitutional on the following
grounds:
GMTALVAREZ 402
1) The universal charge provided

for under Sec. 34 of
the EPIRA and sought to be
implemented under Sec. 2,
Rule 18 of the IRR of the
said law is a tax which is to
be collected from all electric
end-users and self-generating
entities. The power to tax is
strictly a legislative function
and as such, the delegation of
said power to any executive
or administrative agency like
the ERC is unconstitutional,
giving the same unlimited
authority.
The
assailed
provision clearly provides
that the Universal Charge is
to be determined, fixed and
approved by the ERC, hence
leaving to the latter complete
discretionary
legislative
authority.
2) The ERC is also empowered to
approve and determine where
the funds collected should be
used.
3) The imposition of the Universal
Charge on all end-users is
oppressive and confiscatory
and amounts to taxation
without representation as the
consumers were not given a
chance to be heard and
represented. 18
61
Petitioners contend that the Universal Charge

has the characteristics of a tax and is collected
to fund the operations of the NPC. They argue
that the cases 19 invoked by the respondents
clearly show the regulatory purpose of the
charges imposed therein, which is not so in the
case at bench. In said cases, the respective
funds 20 were created in order to balance and
stabilize the prices of oil and sugar, and to act
as buffer to counteract the changes and
adjustments in prices, peso devaluation, and
other variables which cannot be adequately
and timely monitored by the legislature. Thus,
there was a need to delegate powers to
administrative bodies. 21 Petitioners posit that
the Universal Charge is imposed not for a
similar purpose.
On the other hand, respondent PSALM
through the Office of the Government
Corporate Counsel (OGCC) contends that
unlike a tax which is imposed to provide
income for public purposes, such as support of
the government, administration of the law, or
payment of public expenses, the assailed
Universal Charge is levied for a specific
regulatory purpose, which is to ensure the
viability of the country's electric power
industry. Thus, it is exacted by the State in the
exercise of its inherent police power. On this
premise, PSALM submits that there is no
undue delegation of legislative power to the
ERC since the latter merely exercises a limited
authority or discretion as to the execution and
implementation of the provisions of
the EPIRA. 22
Respondents Department of Energy (DOE),

ERC, and NPC, through the Office of the
Solicitor General (OSG), share the same view
that the Universal Charge is not a tax because
it is levied for a specific regulatory purpose,
which is to ensure the viability of the country's
electric power industry, and is, therefore, an
exaction in the exercise of the State's police
power. Respondents further contend that said
Universal Charge does not possess the
essential characteristics of a tax, that its
imposition would redound to the benefit of the
electric power industry and not to the public,
and that its rate is uniformly levied on
electricity end-users, unlike a tax which is
imposed based on the individual taxpayer's
ability to pay. Moreover, respondents deny
that there is undue delegation of legislative
power to the ERC since the EPIRA sets forth
sufficient determinable standards which would
guide the ERC in the exercise of the powers
granted to it. Lastly, respondents argue that the
imposition of the Universal Charge is not
oppressive and confiscatory since it is an
exercise of the police power of the State and it
complies with the requirements of due
process. 23
On its part, respondent PECO argues that it is
duty-bound to collect and remit the amount
pertaining to the Missionary Electrification
and Environmental Fund components of the
Universal Charge, pursuant to Sec. 34 of
theEPIRA and the Decisions in ERC Case
Nos. 2002-194 and 2002-165. Otherwise,
PECO could be held liable under Sec. 46 24 of
GMTALVAREZ 402
the EPIRA, which imposes fines and penalties

for any violation of its provisions or its
IRR. 25
The Issues
The ultimate issues in the case at bar are:
1) Whether or not, the Universal
Charge imposed under Sec.
34 of the EPIRA is a tax; and
2) Whether or not there is undue
delegation of legislative
power to tax on the part of
the ERC. 26
Before we discuss the issues, the Court shall
first deal with an obvious procedural lapse.
Petitioners filed before us an original action
particularly denominated as a Complaint
assailing the constitutionality of Sec. 34 of
the EPIRA imposing the Universal Charge and
Rule 18 of the EPIRA's IRR. No doubt,
petitioners have locus standi. They impugn the
constitutionality
of
Sec.
34
of
the EPIRA because they sustained a direct
injury as a result of the imposition of the
Universal Charge as reflected in their electric
bills.
However, petitioners violated the doctrine of
hierarchy of courts when they filed this
"Complaint" directly with us. Furthermore, the
Complaint is bereft of any allegation of grave
abuse of discretion on the part of the ERC or
any of the public respondents, in order for the
Court to consider it as a petition
for certiorari or prohibition.
62
Article VIII, Section 5 (1) and (2) of the

1987 Constitution 27 categorically provides
that:
SECTION 5. The Supreme
Court
shall
have
the
following powers:
1. Exercise original
jurisdiction over
cases
affecting ambassadors, other
public ministers and consuls,
and
over petitions
for
certiorari,
prohibition,
mandamus, quo warranto,
and habeas corpus.
2. Review, revise, reverse, modify,
or affirm on appeal or
certiorari, as the law or the
rules of court may provide,
final judgments and orders of
lower courts in:
(a) All cases in which
the constitutionality or
validity of any treaty,
international
or
executive
agreement, law,
presidential
decree,
proclamation,
order,
instruction, ordinance,
or regulation is in
question.
But this Court's jurisdiction to issue writs
of certiorari, prohibition, mandamus, quo
warranto, and habeas corpus, while
concurrent with that of the regional trial
courts and the Court of Appeals, does not

give litigants unrestrained freedom of choice
of forum from which to seek such
relief. 28 It has long been established that
this Court will not entertain direct resort to it
unless the redress desired cannot be obtained
in the appropriate courts, or where
exceptional and compelling circumstances
justify availment of a remedy within and call
for the exercise of our primary
jurisdiction. 29 This circumstance alone
warrants the outright dismissal of the present
action.
This procedural infirmity notwithstanding, we
opt to resolve the constitutional issue raised
herein. We are aware that if the
constitutionality of Sec. 34 of the EPIRA is
not resolved now, the issue will certainly
resurface in the near future, resulting in a
repeat of this litigation, and probably
involving the same parties. In the public
interest and to avoid unnecessary delay, this
Court renders its ruling now.
The instant complaint is bereft of merit.
The First Issue
To resolve the first issue, it is necessary to
distinguish the State's power of taxation from
the police power.
The power to tax is an incident of sovereignty
and is unlimited in its range, acknowledging in
its very nature no limits, so that security
against its abuse is to be found only in the
responsibility of the legislature which imposes
the tax on the constituency that is to pay
it. 30 It is based on the principle that taxes are
GMTALVAREZ 402
the lifeblood of the government, and their

prompt and certain availability is an imperious
need. 31 Thus, the theory behind the exercise
of the power to tax emanates from necessity;
without taxes, government cannot fulfill its
mandate of promoting the general welfare and
well-being of the people. 32
On the other hand, police power is the power
of the state to promote public welfare by
restraining and regulating the use of liberty
and property. 33 It is the most pervasive, the
least limitable, and the most demanding of the
three fundamental powers of the State. The
justification is found in the Latin
maxims salus populi est suprema lex (the
welfare of the people is the supreme law)
and sic utere tuo ut alienum non laedas (so use
your property as not to injure the property of
others). As an inherent attribute of sovereignty
which virtually extends to all public needs,
police power grants a wide panoply of
instruments through which the State,
as parens patriae, gives effect to a host of its
regulatory powers. 34 We have held that the
power to "regulate" means the power to
protect, foster, promote, preserve, and control,
with due regard for the interests, first and
foremost, of the public, then of the utility and
of its patrons. 35
The conservative and pivotal distinction
between these two powers rests in the purpose
for which the charge is made. If generation of
revenue is the primary purpose and regulation
is merely incidental, the imposition is a tax;
but if regulation is the primary purpose, the
63
fact that revenue is incidentally raised does

not make the imposition a tax. 36
In exacting the assailed Universal Charge
through Sec. 34 of the EPIRA, the State's
police power, particularly its regulatory
dimension, is invoked. Such can be deduced
from Sec. 34 which enumerates the purposes
for which the Universal Charge is
imposed 37 and which can be amply discerned
as
regulatory
in
character.
The EPIRA resonates
such
regulatory
purposes, thus:
SECTION
2. Declaration
of
Policy. It is hereby declared the
policy of the State:
(a) To ensure and accelerate the
total electrification of the
country;
(b) To
ensure
the
quality,
reliability,
security
and
affordability of the supply of
electric power;
(c) To ensure transparent and
reasonable
prices
of
electricity in a regime of free
and fair competition and full
public
accountability
to
achieve greater operational
and economic efficiency and
enhance the competitiveness
of Philippine products in the
global market;
(d) To enhance the inflow of
private capital and broaden
the ownership base of the

power
generation,
transmission and distribution
sectors;
(e) To ensure fair and nondiscriminatory treatment of
public and private sector
entities in the process of
restructuring the electric
power industry;
(f) To protect the public interest as
it is affected by the rates and
services of electric utilities
and other providers of
electric power;
(g) To assure socially and
environmentally compatible
energy
sources
and
infrastructure;
(h) To promote the utilization of
indigenous and new and
renewable energy resources
in power generation in order
to reduce dependence on
imported energy;
(i) To provide for an orderly and
transparent privatization of
the assets and liabilities of
the
National
Power
Corporation (NPC);
(j) To establish a strong and purely
independent regulatory body
and system to ensure
consumer protection and
GMTALVAREZ 402
enhance the competitive

operation of the electricity
market; and
(k) To encourage the efficient use
of
energy
and
other
modalities of demand side
management.
From the aforementioned purposes, it can be
gleaned that the assailed Universal Charge is
not a tax, but an exaction in the exercise of the
State's police power. Public welfare is surely
promoted.
Moreover, it is a well-established doctrine that
the taxing power may be used as an implement
of police power. 38 In Valmonte v. Energy
Regulatory Board, et al. 39 and in Gaston v.
Republic Planters Bank, 40 this Court held
that the Oil Price Stabilization Fund (OPSF)
and the Sugar Stabilization Fund (SSF) were
exactions made in the exercise of the police
power. The doctrine was reiterated in Osmea
v. Orbos 41 with respect to the OPSF. Thus,
we disagree with petitioners that the instant
case is different from the aforementioned
cases. With the Universal Charge, a Special
Trust Fund (STF) is also created under the
administration of PSALM. 42 The STF has
some notable characteristics similar to the
OPSF and the SSF, viz.:
1)In
the implementation of
stranded cost recovery, the
ERC shall conduct a review
to determine whether there is
under-recovery
or
over
recovery and adjust (true-up)
64
the level of the stranded cost

recovery charge. In case of an
over-recovery, the ERC shall
ensure that any excess
amount shall be remitted to
the STF. A separate account
shall be created for these
amounts which shall be held
in trust for any future claims
of distribution utilities for
stranded cost recovery. At the
end of the stranded cost
recovery
period,
any
remaining amount in this
account shall be used to
reduce the electricity rates to
the end-users. 43
2) With respect to the assailed
Universal Charge, if the total
amount collected for the
same is greater than the
actual availments against it,
the PSALM shall retain the
balance within the STF to
pay for periods where a
shortfall occurs. 44
3) Upon expiration of the term of
PSALM, the administration
of the STF shall be
transferred to the DOF or any
of the DOF attached agencies
as designated by the DOF
Secretary. 45
The OSG is in point when it asseverates:
Evidently, the establishment and

maintenance of the Special Trust
Fund, under the last paragraph of
Section 34, R.A. No. 9136, is well
within the pervasive and nonwaivable power and responsibility
of the government to secure the
physical and economic survival
and well-being of the community,
that comprehensive sovereign
authority we designate as the
police power of the State. 46
This feature of the Universal Charge further
boosts the position that the same is an exaction
imposed primarily in pursuit of the State's
police objectives. The STF reasonably serves
and assures the attainment and perpetuity of
the purposes for which the Universal Charge is
imposed, i.e., to ensure the viability of the
country's electric power industry.
The Second Issue
The principle of separation of powers ordains
that each of the three branches of government
has exclusive cognizance of and is supreme in
matters falling within its own constitutionally
allocated sphere. A logical corollary to the
doctrine of separation of powers is the
principle of non-delegation of powers, as
expressed in the Latin maxim potestas
delegata non delegari potest (what has been
delegated cannot be delegated). This is based
on the ethical principle that such delegated
power constitutes not only a right but a duty to
be performed by the delegate through the
GMTALVAREZ 402
instrumentality of his own judgment and not

through the intervening mind of another. 47
In the face of the increasing complexity of
modern life, delegation of legislative power to
various specialized administrative agencies is
allowed
as
an
exception
to
this
principle. 48 Given the volume and variety of
interactions in today's society, it is doubtful if
the legislature can promulgate laws that will
deal adequately with and respond promptly to
the minutiae of everyday life. Hence, the need
to delegate to administrative bodies the
principal agencies tasked to execute laws in
their specialized fields the authority to
promulgate rules and regulations to implement
a given statute and effectuate its policies. All
that is required for the valid exercise of this
power of subordinate legislation is that the
regulation be germane to the objects and
purposes of the law and that the regulation be
not in contradiction to, but in conformity with,
the standards prescribed by the law. These
requirements are denominated as the
completeness test and the sufficient standard
test.
Under the first test, the law must be complete
in all its terms and conditions when it leaves
the legislature such that when it reaches the
delegate, the only thing he will have to do is to
enforce it. The second test mandates adequate
guidelines or limitations in the law to
determine the boundaries of the delegate's
authority and prevent the delegation from
running riot. 49
The Court finds that the EPIRA, read and
appreciated in its entirety, in relation to Sec.
65
34 thereof, is complete in all its essential

terms and conditions, and that it contains
sufficient standards.
Although Sec. 34 of the EPIRA merely
provides that "within one (1) year from the
effectivity thereof, a Universal Charge to be
determined, fixed and approved by the ERC,
shall be imposed on all electricity end-users,"
and therefore, does not state the specific
amount to be paid as Universal Charge, the
amount nevertheless is made certain by the
legislative parameters provided in the law
itself. For one, Sec. 43 (b) (ii) of
the EPIRA provides:
SECTION 43. Functions of the
ERC. The ERC shall promote
competition, encourage market
development, ensure customer
choice and penalize abuse of
market power in the restructured
electricity industry. In appropriate
cases, the ERC is authorized to
issue cease and desist order after
due notice and hearing. Towards
this end, it shall be responsible for
the following key functions in the
restructured industry:
xxx xxx xxx
(b) Within six (6) months from the
effectivity of this Act, promulgate
and enforce, in accordance with
law, a National Grid Code and a
Distribution Code which shall
include, but not limited to the
following:
xxx xxx xxx

(ii) Financial capability standards
for the generating companies, the
TRANSCO, distribution utilities
and suppliers: Provided, That in
the formulation of the financial
capability standards, the nature
and function of the entity shall be
considered: Provided, further, That
such standards are set to ensure
that the electric power industry
participants meet the minimum
financial standards to protect the
public interest. Determine, fix, and
approve, after due notice and
public hearings the universal
charge, to be imposed on all
electricity end-users pursuant to
Section 34 hereof;
Moreover, contrary to the petitioners'
contention, the ERC does not enjoy a wide
latitude of discretion in the determination of
the Universal Charge. Sec. 51 (d) and (e) of
the EPIRA 50 clearly provides:
SECTION 51. Powers. The
PSALM Corp. shall, in the
performance of its functions
and for the attainment of its
objective, have the following
powers:
xxx xxx xxx
(d) To calculate the amount of the
stranded debts and stranded
contract costs of NPC
which shall form the basis
GMTALVAREZ 402
for
ERC
in
determination
of
universal charge;
the
the
(e) To liquidate the NPC stranded

contract costs, utilizing the
proceeds from sales and
other property contributed to
it, including the proceeds
from the universal charge.
Thus, the law is complete and passes the first
test for valid delegation of legislative power.
As to the second test, this Court had, in the
past, accepted as sufficient standards the
following:
"interest
of
law
and
order;" 51 "adequate
and
efficient
instruction;" 52 "public interest;" 53 "justice
and equity;" 54 "public convenience and
welfare;" 55 "simplicity,
economy
and
efficiency;" 56 "standardization and regulation
of medical education;" 57 and "fair and
equitable
employment
practices." 58 Provisions of the EPIRA such
as, among others, "to ensure the total
electrification of the country and the quality,
reliability, security and affordability of the
supply of electric power" 59 and "watershed
rehabilitation and management" 60 meet the
requirements for valid delegation, as they
provide the limitations on the ERC's power to
formulate the IRR. These are sufficient
standards.
It may be noted that this is not the first time
that the ERC's conferred powers were
challenged. In Freedom from Debt Coalition v.
66
Energy Regulatory Commission, 61 the Court

had occasion to say:
In determining the extent of
powers possessed by the ERC, the
provisions of the EPIRA must not
be read in separate parts. Rather,
the law must be read in its entirety,
because a statute is passed as a
whole, and is animated by one
general purpose and intent. Its
meaning cannot to be extracted
from any single part thereof but
from a general consideration of
the statute as a whole. Considering
the intent of Congress in enacting
the EPIRA and reading the statute
in its entirety, it is plain to see that
the law has expanded the
jurisdiction of the regulatory body,
the ERC in this case, to enable the
latter to implement the reforms
sought to be accomplished by
the EPIRA. When the legislators
decided to broaden the jurisdiction
of the ERC, they did not intend to
abolish or reduce the powers
already conferred upon ERC's
predecessors. To sustain the view
that the ERC possesses only the
powers and functions listed under
Section 43 of the EPIRA is to
frustrate the objectives of the law.
In
his
Concurring
and
Dissenting
Opinion 62 in the same case, then Associate
Justice, now Chief Justice, Reynato S. Puno
described the immensity of police power in
relation to the delegation of powers to the

ERC and its regulatory functions over electric
power as a vital public utility, to wit:
Over the years, however, the range
of police power was no longer
limited to the preservation of
public health, safety and morals,
which used to be the primary
social
interests
in
earlier
times. Police power now requires
the State to "assume an
affirmative duty to eliminate the
excesses and injustices that are
the
concomitants
of
an
unrestrained industrial economy."
Police power is now exerted "to
further the public welfare a
concept as vast as the good of
society itself." Hence, "police
power is but another name for the
governmental authority to further
the welfare of society that is the
basic
end
of
all
government." When police power
is delegated to administrative
bodies with regulatory functions,
its exercise should be given a wide
latitude. Police power takes on an
even broader dimension in
developing countries such as ours,
where the State must take a more
active role in balancing the many
conflicting interests in society. The
Questioned Order was issued by
the ERC, acting as an agent of the
State in the exercise of police
power.
We
should
have
GMTALVAREZ 402
exceptionally good grounds to

curtail its exercise. This approach
is more compelling in the field of
rate-regulation of electric power
rates. Electric power generation
and distribution is a traditional
instrument of economic growth
that affects not only a few but the
entire nation. It is an important
factor in encouraging investment
and promoting business. The
engines of progress may come to a
screeching halt if the delivery of
electric power is impaired.
Billions of pesos would be lost as
a result of power outages or
unreliable electric power services.
The State thru the ERC should be
able to exercise its police power
with great flexibility, when the
need arises.
This was reiterated in National Association of
Electricity Consumers for Reforms v. Energy
Regulatory Commission 63 where the Court
held that the ERC, as regulator, should have
sufficient power to respond in real time to
changes wrought by multifarious factors
affecting public utilities.
From the foregoing disquisitions, we therefore
hold that there is no undue delegation of
legislative power to the ERC.
Petitioners failed to pursue in their
Memorandum the contention in the Complaint
that the imposition of the Universal Charge on
all end-users is oppressive and confiscatory,
and
amounts
to
taxation
without
67
representation. Hence, such contention is

deemed
waived
or
abandoned
per
Resolution 64 of
August
3,
2004. 65 Moreover, the determination of
whether or not a tax is excessive, oppressive
or confiscatory is an issue which essentially
involves questions of fact, and thus, this Court
is precluded from reviewing the same. 66
As a penultimate statement, it may be well to
recall what this Court said of EPIRA:
One of the landmark pieces of
legislation enacted by Congress in
recent years is the EPIRA. It
established a new policy, legal
structure
and
regulatory
framework for the electric power
industry. The new thrust is to tap
private capital for the expansion
and improvement of the industry
as the large government debt and
the
highly
capital-intensive
character of the industry itself
have long been acknowledged as
the critical constraints to the
program. To attract private
investment, largely foreign, the
jaded structure of the industry had
to be addressed. While the
generation
and
transmission
sectors were centralized and
monopolistic, the distribution side
was fragmented with over 130
utilities, mostly small and
uneconomic. The pervasive flaws
have caused a low utilization of
existing
generation
capacity;
extremely high and uncompetitive
power rates; poor quality of
service to consumers; dismal to
forgettable performance of the
government power sector; high
system losses; and an inability to
develop a clear strategy for
overcoming these shortcomings.
Thus,
the EPIRA provides
a
framework for the restructuring of
the industry, including the
privatization of the assets of the
National
Power
Corporation
(NPC), the transition to a
competitive structure, and the
delineation of the roles of various
government agencies and the
private entities. The law ordains
the division of the industry into
four (4) distinct sectors, namely:
generation,
transmission,
distribution
and
supply.
Corollarily, the NPC generating
plants have to privatized and its
transmission business spun off and
privatized thereafter. 67
Finally, every law has in its favor the
presumption of constitutionality, and to justify
its nullification, there must be a clear and
unequivocal breach of the Constitution and not
one that is doubtful, speculative, or
argumentative.68 Indubitably,
petitioners
failed to overcome this presumption in favor
of the EPIRA. We find no clear violation of
the Constitution which would warrant a
GMTALVAREZ 402
pronouncement that Sec. 34 of the EPIRA and

Rule 18 of its IRR are unconstitutional and
void.
WHEREFORE, the instant case is hereby
DISMISSED for lack of merit.
SO ORDERED.
||| (Gerochi v. DOE , G.R. No. 159796, [July
17, 2007], 554 PHIL 563-590)
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
[G.R. No. L-4817. May 26, 1954.]

SILVESTRE M. PUNSALAN, ET
AL., plaintiffs-appellants, vs.
THE
MUNICIPAL BOARD OF THE CITY OF
MANILA, ET AL., defendants-appellants.
Calanog & Alafriz for plaintiffs and
appellants.
City Fiscal Eugenio Angeles and Assistant
Fiscal Eulogio S. Serreno for defendants and
appellants.
SYLLABUS
1. TAXATION;
LEGISLATIVE
DEPARTMENT DETERMINES WHAT
ENTITIES SHOULD BE EMPOWERED
TO IMPOSE OCCUPATION TAX. It is
not for the courts to judge what particular
cities or municipalities should be
empowered to impose occupation taxes in
addition to those imposed by the national
Government. That matter is peculiarly
within the domain of the political
68
departments and the courts would do well

not to encroach upon it.
2. ID.; DOUBLE TAXATION.
There is double taxation where one tax is
imposed by the state and the other is
imposed by the city, it being widely
recognized that there is nothing inherently
obnoxious in the requirement that license
fees or taxes be enacted with respect to the
same occupation, calling or activity by
both the state and the political
subdivisions thereof. (Citing 1 Cooley on
Taxation, 4th ed., p. 492 and 51 Am. Jur.,
341.)
DECISION
REYES, J p:
This suit was commenced in the
Court of First Instance of Manila by two
lawyers, a medical practitioner, a public
accountant, a dental surgeon and a
pharmacist, purportedly "in their own
behalf and in behalf of other professionals
practicing in the City of Manila who may
desire to join it." Object of the suit is the
annulment of Ordinance No. 3398 of the
City of Manila together with the provision
of the Manila charter authorizing it and the
refund of taxes collected under the
ordinance but paid under protest.
The ordinance in question, which
was approved by the municipal board of
the City of Manila on July 25, 1950,
imposes a municipal occupation tax on
persons exercising various professions in
the city and penalizes non-payment of the
tax "by a fine of not more than two

hundred pesos or by imprisonment of not
more than six months, or by both such fine
and imprisonment in the discretion of the
court." Among the professions taxed were
those to which plaintiffs belong. The
ordinance was enacted pursuant to
paragraph (1) of section 18 of the Revised
Charter of the City of Manila (as amended
by Republic Act No. 409), which
empowers the Municipal Board of said
city to impose a municipal occupation tax,
not to exceed P50 per annum, on persons
engaged in the various professions above
referred to.
Having
already
paid
their
occupation tax under section 201 of the
National Internal Revenue Code, plaintiffs,
upon being required to pay the additional
tax prescribed in the ordinance, paid the
same under protest and then brought the
present suit for the purpose already stated.
The lower court upheld the validity of the
provision of law authorizing the enactment
of the ordinance but declared the
ordinance itself illegal and void on the
ground that the penalty therein provided
for non-payment of the tax was not legally
authorized. From this decision both parties
appealed to this Court, and the only
question they have presented for our
determination is whether this ruling is
correct or not, for though the decision is
silent on the refund of taxes paid plaintiffs
make no assignment of error on this point.
To begin with defendants' appeal,
we find that the lower court was in error in
GMTALVAREZ 402
saying that the imposition of the penalty

provided for in the ordinance was without
the authority of law. The last paragraph
(kk) of the very section that authorizes the
enactment of this tax ordinance (section 18
of the Manila Charter) in express terms
also empowers the Municipal Board "to
fix penalties for the violation of
ordinances which shall not exceed to (sic)
two hundred pesos fine or six months'
imprisonment, or both such fine and
imprisonment, for a single offense."
Hence, the pronouncement below that the
ordinance in question is illegal and void
because it imposes a penalty not
authorized by law is clearly without basis.
As to plaintiffs' appeal, the
contention in substance is that this
ordinance and the law authorizing it
constitute class legislation, are unjust and
oppressive, and authorize what amounts to
double taxation.
In raising the hue and cry of "class
legislation", the burden of plaintiffs'
complaint is not that the professions to
which they respectively belong have been
singled out for the imposition of this
municipal occupation tax; and in any
event, the Legislature may, in its
discretion, select what occupations shall
be taxed, and in the exercise of that
discretion it may tax all, or it may select
for taxation certain classes and leave the
others untaxed. (Cooley on Taxation, Vol.
4, 4th ed., pp. 3393-3395.) Plaintiffs'
complaint is that while the law has
authorized the City of Manila to impose
69
the said tax, it has withheld that authority

from other chartered cities, not to mention
municipalities. We do not think it is for the
courts to judge what particular cities or
municipalities should be empowered to
impose occupation taxes in addition to
those
imposed
by
the
National
Government. That matter is peculiarly
within the domain of the political
departments and the courts would do well
not to encroach upon it. Moreover, as the
seat of the National Government and with
a population and volume of trade many
times that of any other Philippine city or
municipality, Manila, no doubt, offers a
more lucrative field for the practice of the
professions, so that it is but fair that the
professionals in Manila be made to pay a
higher occupation tax than their brethren
in the provinces.
Plaintiffs brand the ordinance
unjust and oppressive because they say
that it creates discrimination within a class
in that while professionals with offices in
Manila have to pay the tax, outsiders who
have no offices in the city but practice
their profession therein are not subject to
the tax. Plaintiffs make a distinction that is
not found in the ordinance. The ordinance
imposes the tax upon every person
"exercising" or "pursuing" in the City
of Manila naturally any one of the
occupations named, but does not say that
such person must have his office in
Manila. What constitutes exercise or
pursuit of a profession in the city is a
matter of judicial determination.
The argument against double

taxation may not be invoked where one tax
is imposed by the state and the other is
imposed by the city (1 Cooley on
Taxation, 4th ed., p. 492), it being widely
recognized that there is nothing inherently
obnoxious in the requirement that license
fees or taxes be exacted with respect to the
same occupation, calling or activity by
both the state and the political
subdivisions thereof. (51 Am. Jur., 341.)
In view of the foregoing, the
judgment appealed from is reversed in so
far as it declares Ordinance No. 3398 of
the City of Manila illegal and void and
affirmed in so far as it holds the validity of
the provision of the Manila charter
authorizing it. With costs against
plaintiffs-appellants.
Pablo,
Bengzon, Montemayor,
Jugo,
Bautista
Angelo,
Labrador and Concepcion, JJ., concur.
Separate Opinions
PARAS, C.J., dissenting:
I am constrained to dissent from
the decision of the majority upon the
ground that the Municipal Board of
Manila cannot outlaw what Congress of
the Philippines has already authorized. The
plaintiffs- appellants two lawyers, a
physician, an accountant, a dentist and a
pharmacist had already paid the
occupation tax under section 201 of the
National Internal Revenue Code and are
thereby duly licensed to practice their
GMTALVAREZ 402
respective professions throughout the

Philippines; and yet they had been
required to pay another occupation tax
under Ordinance No. 3398 for practising
in the City of Manila. This is a glaring
example of contradiction the license
granted by the National Government is in
effect withdrawn by the City in case of
non-payment of the tax under the
ordinance. If it be argued that the national
occupation tax is collected to allow the
professional residing in Manila to pursue
his calling in other places in the
Philippines, it should then be exacted only
from
professionals
practising
simultaneously in and outside of Manila.
At any rate, we are confronted with the
following
situation:
Whereas
the
professionals elsewhere pay only one
occupation tax, in the City of Manila they
have to pay two, although all are on equal
footing insofar as opportunities for earning
money out of their pursuits are concerned.
The statement that practice in Manila is
more lucrative than in the provinces, may
be true perhaps with reference only to a
limited few, but certainly not to the
general mass of practitioners in any field.
Again, provincial residents who have
occasional or isolated practice in Manila
may have to pay the city tax. This obvious
discrimination or lack of uniformity
cannot be brushed aside or justified by any
trite pronouncement that double taxation is
legitimate or that legislation may validly
affect certain classes.
70
My position is that a professional

who has paid the occupation tax under the
National Internal Revenue Code should be
allowed to practice in Manila even without
paying the similar tax imposed by
Ordinance No. 3398. The City cannot give
what said professional already has. I
would not say that this Ordinance, enacted
by the Municipal Board pursuant to
paragraph 1 of section 18 of the Revised
Charter of Manila, as amended byRepublic
Act No. 409, empowering the Board to
impose a municipal occupation tax not to
exceed P50 per annum, is invalid; but that
only one tax, either under the Internal
Revenue Code or under Ordinance No.
3398, should be imposed upon a
practitioner in Manila.
||| (Punsalan v. Municipal Board of the City
of Manila, G.R. No. L-4817, [May 26,
1954], 95 PHIL 46-51)
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
[G.R. No. L-9637. April 30, 1957.]

AMERICAN BIBLE SOCIETY, plaintiffappellant, vs.
CITY
OF
MANILA, defendant-appellee.
City Fiscal Eugenio Angeles and Juan
Nabong for appellant.
Assistant City Fiscal Arsenio Naawa for
appellee.
SYLLABUS
1. STATUTES; SIMULTANEOUS
REPEAL
AND
RE-ENACTMENT;
EFFECT OF REPEAL UPON RIGHTS
AND LIABILITIES WHICH ACCRUED
UNDER THE ORIGINAL STATUTE.
Where the old statute is repealed in its
entirety and by the same enactment re-enacts
all or certain portions of the pre-existing
law, the majority view holds that the rights
and liabilities which have accrued under the
original statute are preserved and may be
enforced, since the re-enactment neutralizes
the repeal, therefore continuing the law in
force without interruption. (Crawford,
Statutory Construction, Sec. 322). In the
case at bar, Ordinances Nos. 2529 and 3000
of the City of Manila were enacted by the
Municipal Board of the City of Manila by
virtue of the power granted to it by section
2444, Subsection (m-2) of the Revised
Administrative Code, superseded on June
13, 1949, by section 13, Subsection (o)
of Republic Act No. 409, known as the
Revised Charter of the City of Manila. The
only essential difference between these two
provisions is that while Subsection (m-2)
prescribes that the combined total tax of any
dealer or manufacturer, or both, enumerated
under Subsections (m-1) and (m-2), whether
dealing in one or all of the articles
mentioned therein, shall not be in excess of
P500 per annum, the corresponding Section
18, subsection (o) of Republic Act No. 409,
does not contain any limitation as to the
amount of tax or license fee that the retail
dealer has to pay per annum. Hence, and in
accordance with the weight of authorities
GMTALVAREZ 402
aforementioned, City ordinances Nos. 2529

and 3000 are still in force and effect.
2. MUNICIPAL TAX; RETAIL
DEALERS
IN
GENERAL
MERCHANDISE;
ORDINANCE
PRESCRIBING TAX NEED NOT BE
APPROVED BY THE PRESIDENT TO BE
EFFECTIVE. The business of "retail
dealers in general merchandise" is expressly
enumerated in subsection (o), section 18
of Republic Act No. 409: hence, an
ordinance prescribing a municipal tax on
said business does not have to be approved
by the President to be effective, as it is not
among those businesses referred to in
subsection (ii) Section 18 of the same Act
subject to the approval of the President.
3. CONSTITUTIONAL
LAW;
RELIGIOUS
FREEDOM;
DISSEMINATION
OF
RELIGIOUS
INFORMATION, WHEN MAY BE
RESTRAINED; PAYMENT OF LICENSE
FEE, IMPAIRS FREE EXERCISE OF
RELIGION. The constitutional guaranty
of the free exercise and enjoyment of
religious profession and worship carries with
it the right to disseminate religious
information. Any restraint of such right can
only be justified like other restraints of
freedom of expression on the grounds that
there is a clear and present danger of any
substantive evil which the State has the right
to prevent." (Taada and Fernando on the
Constitution of the Philippines, Vol. I, 4th
ed., p. 297). In the case at bar, plaintiff is
71
engaged in the distribution and sales of

bibles and religious articles. The City
Treasurer of Manila informed the plaintiff
that it was conducting the business of
general merchandise without providing itself
with the necessary Mayor's permit and
municipal license, in violation of Ordinance
No. 3000, as amended, and Ordinance No.
2529, as amended, and required plaintiff to
secure the corresponding permit and license.
Plaintiff protested against this requirement
and claimed that it never made any profit
from the sale of its bibles. Held: It is true the
price asked for the religious articles was in
some instances a little bit higher than the
actual cost of the same, but this cannot mean
that plaintiff was engaged in the business or
occupation of selling said "merchandise" for
profit. For this reasons, the provisions of
City Ordinance No. 2529, as amended,
which requires the payment of license fee
for conducting the business of general
merchandise, cannot be applied to plaintiff
society, for in doing so, it would impair its
free exercise and enjoyment of its religious
profession and worship, as well as its rights
of dissemination of religious beliefs. Upon
the other hand, City Ordinance No. 3000, as
amended, which requires the obtention of
the Mayor's permit before any person can
engage in any of the businesses, trades or
occupations enumerated therein, does not
impose any charge upon the enjoyment of a
right granted by the Constitution, nor tax the
exercise of religious practices. Hence, it
cannot be considered unconstitutional, even
if applied to plaintiff Society. But as
Ordinance No. 2529 is not applicable to

plaintiff and the City of Manila is powerless
to license or tax the business of plaintiff
society involved herein, for the reasons
above stated, Ordinance No. 3000 is also
inapplicable to said business, trade or
occupation of the plaintiff.
DECISION
FELIX, J p:
Plaintiff-appellant is a foreign,
non-stock,
non-profit,
religious,
missionary corporation duly registered and
doing business in the Philippines through
its Philippine agency established in Manila
in November, 1898, with its principal
office at 636 Isaac Peral in said City. The
defendant-appellee
is
a
municipal
corporation with powers that are to be
exercised in conformity with the
provisions of Republic Act No. 409,
known as the Revised Charter of the City
of Manila.
In the course of its ministry,
plaintiff's Philippine agency has been
distributing and selling bibles and/or
gospel portions thereof (except during the
Japanese occupation) throughout the
Philippines and translating the same into
several Philippine dialects. On May 29,
1953, the acting City Treasurer of the City
of Manila informed plaintiff that it was
conducting the business of general
merchandise since November, 1945,
without providing itself with the necessary
Mayor's permit and municipal license, in
GMTALVAREZ 402
violation of Ordinance No. 3000, as

amended, and Ordinances Nos. 2529, 3028
and 3364, and required plaintiff to secure,
within three days, the corresponding
permit and license fees, together with
compromise covering the period from the
4th quarter of 1945 to the 2nd quarter of
1953, in the total sum of P5,821.45
(Annex A).
Plaintiff protested against this
requirement, but the City Treasurer
demanded that plaintiff deposit and pay
under protest the sum of P5,891.45, if suit
was to be taken in court regarding the
same (Annex B). To avoid the closing of
its business as well as further fines and
penalties in the premises, on October 24,
1953, plaintiff paid to the defendant under
protest the said permit and license fees in
the aforementioned amount, giving at the
same time notice to the City Treasurer that
suit would be taken in court to question
the legality of the ordinances under which
the said fees were being collected (Annex
C), which was done on the same date by
filing the complaint that gave rise to this
action. In its complaint plaintiff prays that
judgment be rendered declaring the said
Municipal Ordinance No. 3000, as
amended, and Ordinances Nos. 2529, 3028
and 3364 illegal and unconstitutional, and
that the defendant be ordered to refund to
the plaintiff the sum of P5,891.45 paid
under protest, together with legal interest
thereon, and the costs, plaintiff further
praying for such other relief and remedy as
the court may deem just and equitable.
72
Defendant answered the complaint,

maintaining in turn that said ordinances
were enacted by the Municipal Board of
the City of Manila by virtue of the power
granted to it by section 2444, subsection
(m-2) of the Revised Administrative Code,
superseded on June 18, 1949, by section
18, subsection (1) of Republic Act No.
409, known as the Revised Charter of the
City of Manila, and praying that the
complaint be dismissed, with costs against
plaintiff. This answer was replied by the
plaintiff reiterating the unconstitutionality
of the often- repeated ordinances.
Before trial the parties submitted
the following stipulation of facts:
"COME NOW the parties in the
above-entitled case, thru their
undersigned
attorneys
and
respectfully submit the following
stipulation of facts:
1. That the plaintiff sold for the
use of the purchasers at its principal
office at 636 Isaac Peral, Manila,
Bibles, New Testaments, bible
portions and bible concordance in
English and other foreign languages
imported by it from the United States
as well as Bibles, New Testaments
and bible portions in the local
dialects imported and/or purchased
locally; that from the fourth quarter
of 1945 to the first quarter of 1953
inclusive the sales made by the
plaintiff were as follows:
Quarter Amount of Sales
4th
quarter
P1,244.21
1st
quarter
2,206.85
2nd
quarter
1,950.38
3rd
quarter
2,235.99
4th
quarter
3,256.04
1st
quarter
13,241.07
2nd
quarter
15,774.55
3rd
quarter
14,654.13
4th
quarter
12,590.94
1st
quarter
11,143.90
2nd
quarter
14,715.26
3rd
quarter
38,333.83
4th
quarter
16,179.90
1st
quarter
23,975.10
2nd
quarter
17,802.08
3rd
quarter
16,640.79
4th
quarter
15,961.38
1st
quarter
18,562.46
2nd
quarter
1945
1946
1946
1946
1946
1947
1947
1947
1947
1948
1948
1948
1948
1949
1949
1949
1949
1950
1950
GMTALVAREZ 402
21,816.32
3rd
quarter
1950
25,004.55
4th
quarter
1950
45,287.92
1st
quarter
1951
37,841.21
2nd
quarter
1951
29,103.98
3rd
quarter
1951
20,181.10
4th
quarter
1951
22,968.91
1st
quarter
1952
23,002.65
2nd
quarter
1952
17,626.96
3rd
quarter
1952
17,921.01
4th
quarter
1952
24,180.72
1st
quarter
1953
29,516.21
2. That the parties hereby
reserve the right to present evidence
of other facts not herein stipulated.
WHEREFORE,
it
is
respectfully prayed that this case be
set for hearing so that the parties
may present further evidence on their
behalf (Record on Appeal, pp. 1516)".
When the case was set for hearing,
plaintiff proved, among other things, that it
has been in existence in the Philippines
since 1899, and that its parent society is in
73
New York, United States of America; that

its contiguous real properties located at
Isaac Peral are exempt from real estate
taxes; and that it was never required to pay
any municipal license fee or tax before the
war, nor does the American Bible Society
in the United States pay any license fee or
sales tax for the sale of bible therein.
Plaintiff further tried to establish that it
never made any profit from the sale of its
bibles, which are disposed of for as low as
one third of the cost, and that in order to
maintain its operating cost it obtains
substantial remittances from its New York
office and voluntary contributions and
gifts from certain churches, both in the
United States and in the Philippines, which
are interested in its missionary work.
Regarding plaintiff's contention of lack of
profit in the sale of bibles, defendant
retorts that the admissions of plaintiffappellant's lone witness who testified on
cross-examination that bibles bearing the
price of 70 cents each from plaintiffappellant's New York office are sold here
by plaintiff- appellant at P1.30 each; those
bearing the price of $4.50 each are sold
here at P10 each; those bearing the price
of $7 each are sold here at P15 each; and
those bearing the price of $11 each are
sold here at P22 each, clearly show that
plaintiff's contention that it never makes
any profit from the sale of its bible, is
evidently untenable.
GMTALVAREZ 402
After hearing the Court rendered

judgment, the last part of which is as
follows:
1. In holding that Ordinances Nos.

2529 and 3000, as respectively
amended, are not unconstitutional;
"As may be seen from the

repealed section (m-2) of the
Revised Administrative Code and the
repealing portions (o) of section 18
of Republic Act No. 409, although
they seemingly differ in the way the
legislative intent is expressed, yet
their meaning is practically the same
for the purpose of taxing the
merchandise mentioned in said legal
provisions, and that the taxes to be
levied by said ordinances is in the
nature of percentage graduated taxes
(Sec. 3 of Ordinance No. 3000, as
amended, and Sec. 1, Group 2, of
Ordinance No. 2529, as amended by
Ordinance No. 3364).
2. In holding that subsection m-2 of

Section 2444 of the Revised
Administrative Code under which
Ordinances Nos. 2529 and 3000
were promulgated, was not
repealed
by
Section
18
of Republic Act No. 409;
IN
VIEW
OF
THE
FOREGOING CONSIDERATIONS,
this Court is of the opinion and so
holds that this case should be
dismissed, as it is hereby dismissed,
for lack of merits, with costs against
the plaintiff."
Not satisfied with this verdict
plaintiff took up the matter to the Court of
Appeals which certified the case to Us for
the reason that the errors assigned to the
lower Court involved only questions of
law.
Appellant contends that the lower
Court erred:
3. In not holding that an ordinance

providing for percentage taxes
based on gross sales or receipts, in
order to be valid under the new
Charter of the City of Manila,
must first be approved by the
President of the Philippines; and
4. In holding that, as the sales made
by the plaintiff-appellant have
assumed commercial proportions,
it cannot escape from the
operation of said municipal
ordinances under the cloak of
religious privilege.
The issues. As may be seen
from the preceding statement of the case,
the issues involved in the present
controversy may be reduced to the
following: (1) whether or not the
ordinances of the City of Manila, Nos.
3000, as amended, and 2529, 3028 and
3364, are constitutional and valid; and (2)
whether the provisions of said ordinances
are applicable or not to the case at bar.
74
Section 1, subsection (7) of Article

III of the Constitution of the Republic of
the Philippines, provides that:
"(7) No law shall be made
respecting an establishment of
religion, or prohibiting the free
exercise thereof, and the free
exercise and enjoyment of religious
profession and worship, without
discrimination or preference, shall
forever be allowed. No religion test
shall be required for the exercise of
civil or political rights."
Predicated on this constitutional
mandate, plaintiff-appellant contends that
Ordinances Nos. 2529 and 3000, as
respectively amended, are unconstitutional
and illegal in so far as its society is
concerned, because they provide for
religious censorship and restrain the free
exercise and enjoyment of its religious
profession, to wit: the distribution and sale
of bibles and other religious literature to
the people of the Philippines.
Before entering into a discussion of
the constitutional aspect of the case, We
shall first consider the provisions of the
questioned ordinances in relation to their
application to the sale of bibles, etc. by
appellant. The records show that by letter
of May 29, 1953 (Annex A), the City
Treasurer required plaintiff to secure a
Mayor's permit in connection with the
society's alleged business of distributing
and selling bibles, etc. and to pay permit
dues in the sum of P35 for the period
covered in this litigation, plus the sum of

P35 for compromise on account of
plaintiff's failure to secure the permit
required by Ordinance No. 3000 of the
City of Manila, as amended. This
Ordinance is of general application and
not
particularly
directed
against
institutions like the plaintiff, and it does
not contain any provisions whatsoever
prescribing religious censorship nor
restraining the free exercise and enjoyment
of any religious profession. Section 1 of
Ordinance No. 3000 reads as follows:
"SEC.
1. PERMITS
NECESSARY. It shall be
unlawful for any person or entity to
conduct or engage in any of the
businesses,
trades,
or
occupations enumerated in Section 3
of this Ordinance or other
businesses, trades, or occupations
for which a permit is required for the
proper supervision and enforcement
of existing laws and ordinances
governing the sanitation, security,
and welfare of the public and the
health of the employees engaged in
the business specified in said section
3
hereof, WITHOUT
FIRST
HAVING OBTAINED A PERMIT
THEREFOR FROM THE MAYOR
AND THE NECESSARY LICENSE
FROM THE CITY TREASURER."
The business, trade or occupation
of the plaintiff involved in this case is not
particularly mentioned in Section 3 of the
Ordinance, and the record does not show
GMTALVAREZ 402
that a permit is required therefor under

existing laws and ordinances for the
proper supervision and enforcement of
their provisions governing the sanitation,
security and welfare of the public and the
health of the employees engaged in the
business of the plaintiff. However, section
3 of Ordinance 3000 contains item No. 79,
which reads as follows:
"79. All other businesses, trades
or occupations not mentioned in this
Ordinance, except those upon which
the City is not empowered to license
or to tax . . . P5.00".
Therefore, the necessity of the
permit is made to depend upon the power
of the City to license or tax said business,
trade or occupation.
As to the license fees that the
Treasurer of the City of Manila required
the society to pay from the 4th quarter of
1945 to the 1st quarter of 1953 in the sum
of P5,821.45, including the sum of P50 as
compromise, Ordinance No. 2529, as
amended by Ordinances Nos. 2779, 2821
and 3028 prescribes the following:
"SEC. 1. FEES. Subject to
the provisions of section 578 of the
Revised Ordinances of the City of
Manila, as amended, there shall be
paid to the City Treasurer for
engaging in any of the businesses or
occupations below enumerated,
quarterly, license fees based on gross
sales or receipts realized during the
preceding quarter in accordance with
75
the
rates
herein
prescribed:
PROVIDED, HOWEVER, That a
person engaged in any business or
occupation for the first time shall pay
the initial license fee based on the
probable gross sales or receipts for
the first quarter beginning from the
date of the opening of the business as
indicated
herein
for
the
corresponding
business
or
occupation.
xxx xxx xxx
GROUP 2. Retail dealers in
new (not yet used) merchandise,
which dealers are not yet subject to
the payment of any municipal tax,
such as (1) retail dealers in general
merchandise; (2)
retail
dealers
exclusively engaged in the sale
of . . . books, including stationery.
xxx xxx xxx
As may be seen, the license fees
required to be paid quarterly- in Section 1
of said Ordinance No. 2529, as amended,
are not imposed directly upon any
religious institution but upon those
engaged in any of the business or
occupations therein enumerated, such as
retail "dealers in general merchandise"
which, it is alleged, cover the business or
occupation of selling bibles, books, etc.
Chapter 60 of the Revised
Administrative Code which includes
section 2444, subsection (m-2) of said
legal body, as amended by Act No.
3659, approved
on
December
8,
GMTALVAREZ 402
1929, empowers the Municipal Board of

the City of Manila:
18, 1949, known as the Revised Manila

Charter.
"(M-2) To tax and fix the

license fee on (a) dealers in new
automobiles or accessories or both,
and (b) retail dealers in new (not yet
used) merchandise, which dealers are
not yet subject to the payment of any
municipal tax.
Passing upon this point the lower

Court categorically stated that Republic
Act No. 409 expressly repealed the
provisions of Chapter 60 of the Revised
Administrative Code but in the opinion of
the trial Judge, although Section 244 (m-2)
of the former Manila Charter and section
18 (o) of the new seemingly differ in the
way the legislative intent was expressed,
yet their meaning is practically the same
for the purpose of taxing the merchandise
mentioned in both legal provisions and,
consequently, Ordinances Nos. 2529 and
3000, as amended, are to be considered as
still in full force and effect uninterruptedly
up to the present.
"For the purpose of taxation,

these retail dealers shall be classified
as (1) retail dealers in general
merchandise, and (2) retail dealers
exclusively engaged in the sale of (a)
textiles . . . (e) books, including
stationery
paper
and
office
supplies . . . PROVIDED,
HOWEVER, That the combined
total tax of any debtor or
manufacturer, or both, enumerated
under these subsections (m-1) and
(m-2), whether dealing in one or all
of the articles mentioned herein,
SHALL NOT BE IN EXCESS OF
FIVE HUNDRED PESOS PER
ANNUM."
and appellee's counsel maintains that City
Ordinances Nos. 2529 and 3000, as
amended, were enacted in virtue of the
power that said Act No. 3669 conferred
upon the City of Manila. Appellant,
however, contends that said ordinances are
no longer in force and effect as the law
under which they were promulgated has
been expressly repealed by Section 102
of Republic Act No. 409 passed on June
"Often the legislature, instead of

simply amending the preexisting
statute, will repeal the old statute in
its entirety and by the same
enactment re-enact all or certain
portions of the preexisting law. Of
course, the problem created by this
sort of legislative action involves
mainly the effect of the repeal upon
rights and liabilities which accrued
under the original statute. Are those
rights and liabilities destroyed or
preserved? The authorities are
divided as to the effect of
simultaneous repeals and reenactments. Some adhere to the view
that the rights and liabilities accrued
under the repealed act are destroyed,
since the statutes from which they
76
sprang are actually terminated, even

though for only a very short period
of time. Others, and they seem to be
in the majority, refuse to accept this
view of the situation, and
consequently maintain that all rights
and liabilities which have accrued
under the original statute are
preserved and may be enforced,
since the re-enactment neutralizes
the repeal, therefore continuing the
law
in
force
without
interruption". (Crawford-Statutory
Construction, Sec. 322).
Appellant's counsel states that
section 18 (o) of Republic Act No.
409 introduces a new and wider concept of
taxation and is so different from the
provisions of Section 2444(m-2) that the
former cannot be considered as a
substantial re-enactment of the provisions
of the latter. We have quoted above the
provisions of section 2444 (m-2) of the
Revised Administrative Code and We shall
now copy hereunder the provisions of
Section 18, subdivision (o) of Republic
Act No. 409, which reads as follows:
"(o) To tax and fix the license
fee
on
dealers
in
general
merchandise, including importers
and indentors, except those dealers
who may be expressly subject to the
payment of some other municipal tax
under the provisions of this section.
Dealers in general merchandise

shall be classified as (a) wholesale
dealers and (b) retail dealers. For
purposes of the tax on retail dealers,
general merchandise shall be
classified into four main classes:
namely (1) luxury articles, (2) semiluxury
articles,
(3)
essential
commodities, and (4) miscellaneous
articles. A separate license shall be
prescribed for each class but where
commodities of different classes are
sold in the same establishment, it
shall not be compulsory for the
owner to secure more than one
license if he pays the higher or
highest rate of tax prescribed by
ordinance. Wholesale dealers shall
pay the license tax as such, as may
be provided by ordinance.
For purposes of this section, the
term 'General merchandise' shall
include poultry and livestock,
agricultural products, fish and other
allied products."
The only essential difference that
We find between these two provisions that
may have any bearing on the case at bar, is
that while subsection (m-2) prescribes that
the combined total tax of any dealer or
manufacturer, or both, enumerated under
subsections (m-1) and (m- 2), whether
dealing in one or all of the articles
mentioned therein, shall not be in excess
of P500 per annum, the corresponding
section 18, subsection (o) of Republic Act
No. 409, does not contain any limitation as
GMTALVAREZ 402
to the amount of tax or license fee that the

retail dealer has to pay per annum. Hence,
and in accordance with the weight of the
authorities above referred to that maintain
that "all rights and liabilities which have
accrued under the original statute are
preserved and may be enforced, since the
reenactment neutralizes the repeal,
therefore continuing the law in force
without interruption", We hold that the
questioned ordinances of the City of
Manila are still in force and effect.
Plaintiff, however, argues that the
questioned ordinances, to be valid, must
first be approved by the President of the
Philippines as per section 18, subsection
(ii) of Republic Act No. 409, which reads
as follows:
"(ii) To tax, license and regulate
any business, trade or occupation
being conducted within the City of
Manila, not otherwise enumerated in
the preceding subsections, including
percentage taxes based on gross
sales or receipts, subject to the
approval of the PRESIDENT, except
amusement taxes."
but this requirement of the President's
approval was not contained in section
2444 of the former Charter of the City of
Manila under which Ordinance No. 2529
was promulgated. Anyway, as stated by
appellee's counsel, the business of "retail
dealers in general merchandise" is
expressly enumerated in subsection (o),
section 18 of Republic Act No. 409; hence,
77
an ordinance prescribing a municipal tax

on said business does not have to be
approved by the President to be effective,
as it is not among those referred to in said
subsection (ii). Moreover, the questioned
ordinances are still in force, having been
promulgated by the Municipal Board of
the City of Manila under the authority
granted to it by law.
The question that now remains to
be determined is whether said ordinances
are
inapplicable,
invalid
or
unconstitutional if applied to the alleged
business of distribution and sale of bibles
to the people of the Philippines by a
religious corporation like the American
Bible Society, plaintiff herein.
With regard to Ordinance No.
2529, as amended by Ordinances Nos.
2779, 2821 and 3028, appellant contends
that it is unconstitutional and illegal
because it restrains the free exercise and
enjoyment of the religious profession and
worship of appellant.
Article III, section 1, clause (7) of
the Constitution of the Philippines
aforequoted, guarantees the freedom of
religious
profession
and
worship.
"Religion has been spoken of as 'a
profession of faith to an active power that
binds and elevates man to its Creator'
(Aglipay vs. Ruiz, 64 Phil., 201). It has
reference to one's views of his relations to
His Creator and to the obligations they
impose of reverence to His being and
character, and obedience to His Will
(Davis vs. Beason, 133 U.S., 342). The

constitutional guaranty of the free exercise
and enjoyment of religious profession and
worship carries with it the right to
disseminate religious information. Any
restraint of such right can only be justified
like other restraints of freedom of
expression on the grounds that there is a
clear and present danger of any
substantive evil which the State has the
right to prevent". (Taada and Fernando on
the Constitution of the Philippines, Vol. I,
4th ed., p. 297). In the case at bar the
license fee herein involved is imposed
upon appellant for its distribution and sale
of bibles and other religious literature.
"In the case of Murdock vs.
Pennsylvania, it was held that an
ordinance requiring that a license be
obtained before a person could
canvass or solicit orders for goods,
paintings, pictures,
wares
or
merchandise cannot be made to
apply to members of Jehovah's
Witnesses who went about from door
to door distributing literature and
soliciting people to 'purchase' certain
religious books and pamphlets, all
published by the Watch Tower Bible
& Tract Society. The 'price' of the
books was twenty-five cents each,
the 'price' of the pamphlets five cents
each. It was shown that in making
the solicitations there was a request
for additional 'contribution' of
twenty-five cents each for the books
and five cents each for the
GMTALVAREZ 402
pamphlets. Lesser sum were

accepted, however, and books were
even donated in case interested
persons were without funds.
On the above facts the Supreme
Court held that it could not be said
that petitioners were engaged in
commercial rather than a religious
venture. Their activities could not be
described as embraced in the
occupation of selling books and
pamphlets.
Then
the
Court
continued:
'We do not mean to say that
religious groups and the press are
free from all financial burdens of
government.
See
Grosjean vs.
American Press Co., 297 U.S., 233,
250, 80 L. ed. 660, 668, 56 S. Ct.
444. We have here something quite
different, for example, from a tax on
the income of one who engages in
religious activities or a tax on
property used or employed in
connection with those activities. It is
one thing to impose a tax on the
income or property of a preacher. It
is quite another thing to exact a tax
from him for the privilege of
delivering a sermon. The tax
imposed by the City of Jeannette is a
flat license tax, payment of which is
a condition of the exercise of these
constitutional privileges. The power
to tax the exercise of a privilege is
the power to control or suppress its
enjoyment. . . . Those who can tax
78
the exercise of this religious practice

can make its exercise so costly as to
deprive it of the resources necessary
for its maintenance. Those who can
tax the privilege of engaging in this
form of missionary evangelism can
close all its doors to all 'those who
do not have a full purse. Spreading
religious beliefs in this ancient and
honorable manner would thus be
denied the needy. . . .
It is contended however that the
fact that the license tax can suppress
or control this activity is unimportant
if it does not do so. But that is to
disregard the nature of this tax. It is a
license tax a flat tax imposed on
the exercise of a privilege granted by
the Bill of Rights . . . The power to
impose a license tax on the exercise
of these freedoms is indeed as potent
as the power of censorship which
this Court has repeatedly struck
down. . . . It is not a nominal fee
imposed as a regulatory measure to
defray the expenses of policing the
activities in question. It is in no way
apportioned. It is flat license tax
levied and collected as a condition to
the pursuit of activities whose
enjoyment is guaranteed by the
constitutional liberties of press and
religion and inevitably tends to
suppress their exercise. That is
almost uniformly recognized as the
inherent vice and evil of this flat
license tax.'
Nor could dissemination of

religious information be conditioned
upon the approval of an official or
manager even if the town were
owned by a corporation as held in
the case of Marsh vs. State of
Alabama (326 U.S. 501) or by the
United States itself as held in the
case of Tucker vs. Texas (326 U.S.
517). In the former case the Supreme
Court expressed the opinion that the
right to enjoy freedom of the press
and religion occupies a preferred
position as against the constitutional
right of property owners.
'When
we
balance
the
constitutional rights of owners of
property against those of the people
to enjoy freedom of press and
religion, as we must here, we remain
mindful of the fact that the latter
occupy a preferred position. . . . In
our view the circumstance that the
property rights to the premises where
the deprivation of property here
involved, took place, were held by
others than the public, is not
sufficient to justify the State's
permitting a corporation to govern a
community of citizens so as to
restrict their fundamental liberties
and the enforcement of such restraint
by the application of a State statute.'"
(Taada and Fernando on the
Constitution of the Philippines, Vol.
I, 4th ed., p. 304-306).
GMTALVAREZ 402
Section 27 of Commonwealth Act

No. 466, otherwise known as the National
Internal Revenue Code, provides:
"SEC.
27. EXEMPTIONS
FROM TAX ON CORPORATIONS.
The following organizations shall
not be taxed under this Title in
respect to income received by them
as such
"(e) Corporations
or
associations organized and operated
exclusively for religious, charitable, .
. . or educational purposes, . .
Provided however, That the income
of whatever kind and character from
any of its properties, real or personal,
or from any activity conducted for
profit, regardless of the disposition
made of such income, shall be liable
to the tax imposed under this Code;"
Appellant's counsel claims that the
Collector of Internal Revenue has
exempted the plaintiff from this tax and
says that such exemption clearly indicates
that the act of distributing and selling
bibles, etc. is purely religious and does not
fall under the above legal provisions.
It may be true that in the case at
bar the price asked for the bibles and other
religious pamphlets was in some instances
a little bit higher than the actual cost of the
same, but this cannot mean that appellant
was engaged in the business or occupation
of selling said "merchandise" for profit.
For this reason We believe that the
79
provisions of City of Manila Ordinance

No. 2529, as amended, cannot be applied
to appellant, for in doing so it would
impair its free exercise and enjoyment of
its religious profession and worship as
well as its rights of dissemination of
religious beliefs.
With respect to Ordinance No.
3000, as amended, which requires the
obtention of the Mayor's permit before any
person can engage in any of the
businesses,
trades
or
occupations
enumerated therein, We do not find that it
imposes any charge upon the enjoyment of
a right granted by the Constitution, nor tax
the exercise of religious practices. In the
case of Coleman vs. City of Griffin, 189
S.E. 427, this point was elucidated as
follows:
"An ordinance by the City of
Griffin, declaring that the practice of
distributing either by hand or
otherwise, circulars, handbooks,
advertising, or literature of any kind,
whether said articles are being
delivered free, or whether same are
being sold within the city limits of
the City of Griffin, without first
obtaining written permission from
the city manager of the City of
Griffin, shall be deemed a nuisance
and punishable as an offense against
the City of Griffin, does not deprive
defendant of his constitutional right
of the free exercise and enjoyment of
religious profession and worship,
even though it prohibits him from
introducing and carrying out a

scheme or purpose which he sees fit
to claim as a part of his religious
system."
It seems clear, therefore, that
Ordinance No. 3000 cannot be considered
unconstitutional, even if applied to
plaintiff Society. But as Ordinance No.
2529 of the City of Manila, as amended, is
not applicable to plaintiff-appellant and
defendant-appellee is powerless to license
or tax the business of plaintiff Society
involved herein for, as stated before, it
would impair plaintiff's right to the free
exercise and enjoyment of its religious
profession and worship, as well as its
rights of dissemination of religious beliefs,
We find that Ordinance No. 3000, as
amended, is also inapplicable to said
business, trade or occupation of the
plaintiff.
Wherefore, and on the strength of
the foregoing considerations, We hereby
reverse the decision appealed from,
sentencing defendant to return to plaintiff
the sum of P5,891.45 unduly collected
from it. Without pronouncement as to
costs. It is so ordered.
||| (American Bible Society v. City of Manila,
G.R. No. L-9637, [April 30, 1957], 101
PHIL 386-402)
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
[G.R. No. L-39086. June 15, 1988.]
GMTALVAREZ 402
ABRA VALLEY COLLEGE, INC.

represented
by
PEDRO
V.
BORGONIA, petitioner, vs. HON. JUAN
P. AQUINO, Judge, Court of First
Instance, Abra; ARMIN M. CARIAGA,
Provincial Treasurer, Abra; GASPAR V.
BOSQUE, Municipal Treasurer, Bangued,
Abra;
HEIRS
CF
PATERNO
MILLARE, respondents.
DECISION
PARAS, J p:
This is a petition for review on certiorari of
the decision ** of the defunct Court of First
Instance of Abra, Branch I, dated June 14,
1974, rendered in Civil Case No. 656,
entitled "Abra Valley Junior College, Inc.,
represented by Pedro V. Borgonia, plaintiff
vs. Armin M. Cariaga as Provincial
Treasurer of Abra, Gaspar V. Bosque as
Municipal Treasurer of Bangued, Abra and
Paterno Millare, defendants," the decretal
portion of which reads:
"IN VIEW OF ALL THE
FOREGOING, the Court hereby
declares:
"That the distraint seizure and sale
by the Municipal Treasurer of
Bangued, Abra, the Provincial
Treasurer of said province against
the lot and building of the Abra
Valley
Junior
College,
Inc.,
represented by Director Pedro
Borgonia located at Bangued, Abra,
is valid;
80
"That since the school is not exempt

from paying taxes, it should
therefore pay all back taxes in the
amount of P5,140.31 and back taxes
and penalties from the promulgation
of this decision;
"That the amount deposited by the
plaintiff in the sum of P6,000.00
before the trial, be confiscated to
apply for the payment of the back
taxes and for the redemption of the
property in question, if the amount is
less than P6,000.00, the remainder
must be returned to the Director of
Pedro Borgonia, who represents the
plaintiff herein;
"That the deposit of the Municipal
Treasurer in the amount of P6,000.00
also before the trial must be returned
to said Municipal Treasurer of
Bangued, Abra;
"And finally the case is hereby
ordered dismissed with costs against
the plaintiff.
"SO ORDERED." (Rollo, pp. 22-23)
Petitioner, an educational corporation and
institution of higher learning duly
incorporated with the Securities and
Exchange Commission in 1948, filed a
complaint (Annex "1" of Answer by the
respondents Heirs of Paterno Millare; Rollo,
pp. 95-97) on July 10, 1972 in the court a
quo to annul and declare void the "Notice of
Seizure" and the "Notice of Sale" of its lot
and building located at Bangued, Abra, for
non-payment of real estate taxes and

penalties amounting to P5,140.31. Said
"Notice of Seizure" of the college lot and
building covered by Original Certificate of
Title No. Q-83 duly registered in the name
of petitioner, plaintiff below, on July 6,
1972, by respondents Municipal Treasurer
and Provincial Treasurer, defendants below,
was issued for the satisfaction of the said
taxes thereon. The "Notice of Sale" was
caused to be served upon the petitioner by
the respondent treasurers on July 8, 1972 for
the sale at public auction of said college lot
and building, which sale was held on the
same date. Dr. Paterno Millare, then
Municipal Mayor of Bangued, Abra, offered
the highest bid of P6,000.00 which was duly
accepted. The certificate of sale was
correspondingly issued to him.
On August 10, 1972, the respondent Paterno
Millare (now deceased) filed through
counsel a motion to dismiss the complaint.
On August 23, 1972, the respondent
Provincial
Treasurer
and
Municipal
Treasurer, through then Provincial Fiscal
Loreto C. Roldan, filed their answer (Annex
"2" of Answer by the respondents Heirs of
Paterno Millare; Rollo, pp. 98-100) to the
complaint this was followed by an amended
answer (Annex "3," ibid; Rollo, pp. 101103) on August 31, 1972.
On September 1, 1972, the respondent
Paterno Millare filed his answer (Annex
"5," ibid; Rollo, pp. 106-108).
GMTALVAREZ 402
On October 12, 1972, with the aforesaid sale

of the school premises at public auction, the
respondent Judge, Hon. Juan P. Aquino of
the Court of First Instance of Abra, Branch I,
ordered (Annex "6," ibid; Rollo, pp. 109110) the respondents provincial and
municipal treasurers to deliver to the Clerk
of Court the proceeds of the auction sale.
Hence, on December 14, 1972, petitioner,
through Director Borgonia, deposited with
the trial court the sum of P6,000.00
evidenced by PNB Check No. 904369.
On April 12, 1973, the parties entered into a
stipulation of facts adopted and embodied by
the trial court in its questioned decision.
Said Stipulations reads:
"STIPULATION OF FACTS
"COME NOW the parties, assisted
by counsels, and to this Honorable
Court respectfully enter into the
following agreed stipulation of facts:
"1.That the personal circumstances
of the parties as stated in paragraph 1
of the complaint is admitted; but the
particular person of Mr. Armin M.
Cariaga is to be substituted, however,
by anyone who is actually holding
the position of Provincial Treasurer
of the Province of Abra;
"2.That the plaintiff Abra Valley
Junior College, Inc. is the owner of
the lot and buildings thereon located
in Bangued, Abra under Original
Certificate of Title No. 0-83;
81
"3.That the defendant Gaspar V.

Bosque, as Municipal Treasurer of
Bangued, Abra caused to be served
upon the Abra Valley Junior College,
Inc. a Notice of Seizure on the
property of said school under
Original Certificate of title No. 0-83
for the satisfaction of real property
taxes
thereon,
amounting
to
P5,140.31; the Notice of Seizure
being the one attached to the
complaint as Exhibit A;
"4.That on June 8, 1972 the above
properties of the Abra Valley Junior
College, Inc. was sold at public
auction for the satisfaction of the
unpaid real property taxes thereon
and the same was sold to defendant
Paterno Millare who offered the
highest bid of P6,000.00 and a
Certificate of Sale in his favor was
issued by the defendant Municipal
Treasurer.
"5.That all other matters not
particularly and specially covered by
this stipulation of facts will be the
subject of evidence by the parties.
WHEREFORE, it is respectfully
prayed of the Honorable Court to
consider and admit this stipulation of
facts on the point agreed upon by the
parties.
Bangued, Abra, April 12, 1973.
Sgd. Agripino Brillantes
Typ. AGRIPINO BRILLANTES
Attorney for Plaintiff

Sgd. Loreto Roldan
Typ. LORETO ROLDAN
Provincial Fiscal
Counsel for Defendants
Provincial Treasurer of
Abra and the Municipal
Treasurer of Bangued, Abra
Sgd. Demetrio V. Pre
Typ. DEMETRIO V. PRE
Attorney for Defendant
Paterno Millare"
(Rollo, pp. 17-18)
Aside from the Stipulation of Facts, the trial
court among others, found the following: (a)
that the school is recognized by the
government and is offering Primary, High
School and College Courses, and has a
school population of more than one
thousand students all in all; (b) that it is
located right in the heart of the town of
Bangued, a few meters from the plaza and
about 120 meters from the Court of First
Instance building; (c) that the elementary
pupils are housed in a two-storey building
across the street; (d) that the high school and
college students are housed in the main
building; (e) that the Director with his
family is in the second floor of the main
building; and (f) that the annual gross
income of the school reaches more than one
hundred thousand pesos.
From all the foregoing, the only issue left
for the Court to determine and as agreed by
the parties, is whether or not the lot and
GMTALVAREZ 402
building in question are used exclusively for

educational purposes. (Rollo, p. 20)
The succeeding Provincial Fiscal, Hon. Jose
A. Solomon and his Assistant, Hon.
Eustaquio Z. Montero, filed a Memorandum
for the Government on March 25, 1974, and
a Supplemental Memorandum on May 7,
1974, wherein they opined "that based on
the evidence, the laws applicable, court
decisions and jurisprudence, the school
building and school lot used for educational
purposes of the Abra Valley College, Inc.,
are exempted from the payment of taxes."
(Annexes "B," "B-1" of Petition; Rollo, pp.
24-49; 44 and 49).
Nonetheless, the trial court disagreed
because of the use of the second floor by the
Director of petitioner school for residential
purposes. He thus ruled for the government
and rendered the assailed decision.
After having been granted by the trial court
ten (10) days from August 6, 1974 within
which to perfect its appeal (Per Order dated
August 6, 1974; Annex "G" of Petition;
Rollo, p. 57) petitioner instead availed of the
instant petition for review on certiorari with
prayer for preliminary injunction before this
Court, which petition was filed on August
17, 1974 (Rollo, p. 2).
In the resolution dated August 16, 1974, this
Court resolved to give DUE COURSE to the
petition (Rollo, p. 58). Respondents were
required to answer said petition (Rollo, p.
74).
82
Petitioner raised the following assignments

of error:
I
THE COURT A QUO ERRED IN
SUSTAINING AS VALID THE
SEIZURE AND SALE OF THE
COLLEGE LOT AND BUILDING
USED
FOR
EDUCATIONAL
PURPOSES OF THE PETITIONER.
II
DECLARING
THAT
THE
OF THE PETITIONER ARE NOT
USED
EXCLUSIVELY
FOR
EDUCATIONAL
PURPOSES
MERELY
BECAUSE
THE
COLLEGE PRESIDENT RESIDES
IN ONE ROOM OF THE
COLLEGE BUILDING.
III
DECLARING
THAT
THE
OF THE PETITIONER ARE NOT
EXEMPT
FROM
PROPERTY
TAXES AND IN ORDERING
PETITIONER TO PAY P5,140.31
AS REALTY TAXES.
IV
ORDERING THE CONFISCATION
OF THE P6,000.00 DEPOSIT
MADE IN THE COURT BY

PETITIONER AS PAYMENT OF
THE P5,140.31 REALTY TAXES.
(See Brief for the Petitioner, pp. 1-2)
The main issue in this case is the proper
interpretation of the phrase "used
exclusively for educational purposes."
Petitioner contends that the primary use of
the lot and building for educational
purposes, and not the incidental use thereof,
determines the exemption from property
taxes under Section 22 (3), Article VI of the
1935Constitution. Hence, the seizure and
sale of subject college lot and building,
which are contrary thereto as well as to the
provision of Commonwealth Act No. 470,
otherwise known as the Assessment Law,
are without legal basis and therefore void.
On the other hand, private respondents
maintain that the college lot and building in
question which were subjected to seizure
and sale to answer for the unpaid tax are
used: (1) for the educational purposes of the
college; (2) as the permanent residence of
the President and Director thereof, Mr.
Pedro V. Borgonia, and his family including
the in-laws and grandchildren; and (3) for
commercial purposes because the ground
floor of the college building is being used
and rented by a commercial establishment,
the Northern Marketing Corporation (See
photograph attached as Annex "8"
[Comment; Rollo, p. 90]).
GMTALVAREZ 402
Due to its time frame, the constitutional

provision which finds application in the case
at bar is Section 22, paragraph 3, Article VI,
of the then 1935 Philippine Constitution,
which expressly grants exemption from
realty taxes for "Cemeteries, churches and
parsonages or convents appurtenant thereto,
and all lands, buildings, and improvements
used exclusively for religious, charitable or
educational purposes . . . ."
Relative thereto, Section 54, paragraph c,
Commonwealth Act No. 470 as amended
by Republic Act No. 409, otherwise known
as the Assessment Law, provides:
"The following are exempted from
real property tax under the
Assessment Law:
xxx xxx xxx
(c)churches and parsonages or
convents appurtenant thereto, and all
lands,
buildings,
and
improvements used exclusively for
religious, charitable, scientific or
educational purposes.
xxx xxx xxx
In this regard petitioner argues that the
primary use of the school lot and building is
the basic and controlling guide, norm and
standard to determine tax exemption, and
not the mere incidental use thereof.
As early as 1916 in YMCA of Manila
vs. Collector of Internal Revenue, 33 Phil.
217 [1916], this Court ruled that while it
may be true that the YMCA keeps a lodging
83
and a boarding house and maintains a

restaurant for its members, still these do not
constitute business in the ordinary
acceptance of the word, but an institution
used exclusively for religious, charitable and
educational purposes, and as such, it is
entitled to be exempted from taxation. LLpr
In the case of Bishop of Nueva Segovia v.
Provincial Board of Ilocos Norte, 51 Phil.
352 [1972], this Court included in the
exemption a vegetable garden in an adjacent
lot and another lot formerly used as a
cemetery. It was clarified that the term "used
exclusively" considers incidental use also.
Thus, the exemption from payment of land
tax in favor of the convent includes, not only
the land actually occupied by the building
but also the adjacent garden devoted to the
incidental use of the parish priest. The lot
which is not used for commercial purposes
but serves solely as a sort of lodging place,
also qualifies for exemption because this
constitutes incidental use in religious
functions.
The phrase "exclusively used for educational
purposes" was further clarified by this Court
in the cases of Herrera vs. Quezon City
Board of Assessment Appeals, 3 SCRA 186
[1961] and Commissioner of Internal
Revenue vs. Bishop of the Missionary
District, 14 SCRA 991 [1965], thus
"Moreover, the exemption in favor of
property used exclusively for
charitable or educational purposes is
'not limited to property actually
indispensable' therefor (Cooley on
Taxation, Vol. 2, p. 1430), but

extends to facilities which are
incidental
to
and
reasonably
necessary for the accomplishment of
said purposes, such as in the case of
hospitals, 'a school for training
nurses, a nurses' home, property used
to provide housing facilities for
interns,
resident
doctors,
superintendents, and other members
of the hospital staff, and recreational
facilities for student nurses, interns,
and residents' (84 CJS 6621), such as
'athletic fields' including 'a farm used
for the inmates of the institution.'"
(Cooley on Taxation, Vol. 2, p.
1430).
The test of exemption from taxation is the
use of the property for purposes mentioned
in the Constitution (Apostolic Prefect v. City
Treasurer of Baguio, 71 Phil. 547 [1941]).
It must be stressed however, that while this
Court allows a more liberal and nonrestrictive interpretation of the phrase
"exclusively used for educational purposes"
as provided for in Article VI, Section 22,
paragraph
3
of
the
1935
Philippine Constitution,
reasonable
emphasis has always been made that
exemption extends to facilities which are
incidental to and reasonably necessary for
the accomplishment of the main purposes.
Otherwise stated, the use of the school
building or lot for commercial purposes is
neither contemplated by law, nor by
jurisprudence. Thus, while the use of the
GMTALVAREZ 402
second floor of the main building in the case

at bar for residential purposes of the
Director and his family, may find
justification under the concept of incidental
use, which is complimentary to the main or
primary purpose educational, the lease of
the first floor thereof to the Northern
Marketing Corporation cannot by any
stretch of the imagination be considered
incidental to the purpose of education.
It will be noted however that the
aforementioned lease appears to have been
raised for the first time in this Court. That
the matter was not taken up in the trial court
is really apparent in the decision of
respondent Judge. No mention thereof was
made in the stipulation of facts, not even in
the description of the school building by the
trial judge, both embodied in the decision
nor as one of the issues to resolve in order to
determine whether or not said property may
be exempted from payment of real estate
taxes (Rollo, pp. 17-23). On the other hand,
it is noteworthy that such fact was not
disputed even after it was raised in this
Court.
Indeed it is axiomatic that facts not raised in
the lower court cannot be taken up for the
first time on appeal. Nonetheless, as an
exception to the rule, this Court has held that
although a factual issue is not squarely
raised below, still in the interest of
substantial justice, this Court is not
prevented from considering a pivotal factual
matter. "The Supreme Court is clothed with
ample authority to review palpable errors
84
GMTALVAREZ 402
not assigned as such if it finds that their

consideration is necessary in arriving at a
just decision." (Perez vs. Court of Appeals,
127 SCRA 645 [1984]).
Under the 1935 Constitution, the trial court
correctly arrived at the conclusion that the
school building as well as the lot where it is
built, should be taxed, not because the
second floor of the same is being used by
the Director and his family for residential
purposes, but because the first floor thereof
is being used for commercial purposes.
However, since only a portion is used for
purposes of commerce, it is only fair that
half of the assessed tax be returned to the
school involved.
PREMISES CONSIDERED, the decision of
the Court of First Instance of Abra, Branch I,
is hereby AFFIRMED subject to the
modification that half of the assessed tax be
returned to the petitioner.
SO ORDERED.
||| (Abra Valley College, Inc. v. Aquino, G.R.
No. L-39086, [June 15, 1988], 245 PHIL
83-93)
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LIST OF CASES

July 17, 2000 of the Court of Appeals in

particularly described as Lot No. RP-3-B3A-1-B-1, SWO-04-000495, located at

CONSTITUTIONAL LAW 2 | ATTY. GALEON

their patients whom they charge for their

USC - COLLEGE OF LAW

from real property taxes. It averred that a

B. WHILE PETITIONER IS NOT

CONSTITUTIONAL LAW 2 | ATTY. GALEON

1823 does not exempt it from the payment

USC - COLLEGE OF LAW

its out-patients and 170 beds in the hospital

the Quezon Institute. Can such

CONSTITUTIONAL LAW 2 | ATTY. GALEON

or otherwise lessening the burden of

USC - COLLEGE OF LAW

which ailments are likely to increase

The purposes for which the petitioner was

CONSTITUTIONAL LAW 2 | ATTY. GALEON

demographic, social, economic,

USC - COLLEGE OF LAW

purpose of achieving a more

to dispose of and distribute the same

CONSTITUTIONAL LAW 2 | ATTY. GALEON

achieve; and no money inures to the private

USC - COLLEGE OF LAW

at all amongst the suffering classes,

presence or absence of material

CONSTITUTIONAL LAW 2 | ATTY. GALEON

are not actually, directly and exclusively

USC - COLLEGE OF LAW

provides that the petitioner shall enjoy the

should have been among the enumeration of

CONSTITUTIONAL LAW 2 | ATTY. GALEON

USC - COLLEGE OF LAW

The exemption must not be so enlarged by

SECTION 234. Exemptions from

. . . Under the 1935 Constitution:

CONSTITUTIONAL LAW 2 | ATTY. GALEON

others; debarred from participation or

USC - COLLEGE OF LAW

and P1,679,999.28 for 1992 from the said

[G.R. No. 155650. July 20, 2006.]

PARAAQUE, and CITY TREASURER

CONSTITUTIONAL LAW 2 | ATTY. GALEON

USC - COLLEGE OF LAW

withdrew the exemption from real estate tax

1992-1997 RPT was paid on Dec. 24, 1997

On 1 October 2001, MIAA filed with the

CONSTITUTIONAL LAW 2 | ATTY. GALEON

USC - COLLEGE OF LAW

before this Court an Urgent Ex-Parte and

Buildings is the Republic of the Philippines.

On 7 February 2003, this Court issued a

MIAA also points out that Section 21 of the

On 10 February 2003, this Court issued a

Respondents invoke Section 193 of the

assert that MIAA cannot claim that the

CONSTITUTIONAL LAW 2 | ATTY. GALEON

Philippines and thus exempt from real estate

USC - COLLEGE OF LAW

whether governmental or proprietary

Management and the Commission on

CONSTITUTIONAL LAW 2 | ATTY. GALEON