Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. L-53851 July 9, 1991
CHUA HUAT, ONG CHOAN, DOMINADOR FELINO, RUFINO CLEMENTE, TEODORA
CLEMENTE, and LOURDES MEMPIN, petitioners,
vs.
THE HONORABLE COURT OF APPEALS, JUDGE ELVIRO PERALTA, SHERIFF OF
MANILA, and THE ROMAN CATHOLIC ARCHBISHOP OF MANILA, and MANUEL UY
AND SONS, INC., respondents.
G.R. No. L-63863 July 9, 1991
CHUA HUAT, LOURDES MEMPIN, RUFINO CLEMENTE, DOMINADOR FELINO,
MARIA GAMBOA, and ONG CHOAN, petitioners,
vs.
HON. RAMON D. BAGATSING, City Mayor of Manila; ROMULO M. DEL ROSARIO, City
Engineer and Building Official, City of Manila; and MANUEL UY AND SONS,
INC., respondents.
DAVIDE, JR., J.:p
In the resolution of 9 January 1984, this Court resolved to consolidate these cases as they are
related.
The first case, G.R. No. 53851, is a petition for review on certiorari of the decision of the Court
of Appeals of 29 February 1980 in C.A.-G.R. No. 09251 SP 1 and its resolutions of 30 April
1980 and 8 July 1980 denying, respectively, petitioners' first and second motions for the
reconsideration of said decision.
The second case, G.R. No. 63863, 2 is a petition for prohibition, with prayer for preliminary
injunction and/or restraining order, directed against the notices of condemnation and the
demolition orders issued by the respondent City Engineer, upon authority of the respondent City
Mayor, concerning the buildings occupied by petitioners at 1271 to 1277 Pedro Gil St. and 1553
to 1557 Paz St., Paco, Manila.
For sheer lack of merit, these cases must be dismissed.
The antecedent facts and proceedings are not disputed.
On 31 May 1972, a decision was rendered in Civil Case No. 74634 3 by the Court of First
Instance, Branch XVII, then presided by Honorable Judge now Associate Justice of this Court
Ameurfina Melencio-Herrera, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered, a) sentencing defendant Dominador
Felino, Lourdes Mempin, Chua Huat, Ong Choan, Francisco, Rufino and Teodora,
all surnamed Clemente, to pay plaintiff UY the following monthly sums set out
after their respective names beginning January 1, 1963, until the date they have
vacated the property, with interest at 6% per annum from the date of this Decision
as to the amounts due on May 31, 1972:
DOMINADOR FELINO P 25.00/month
LOURDES MEMPIN P 30.00/ "
Page 1 of 97

CHUA HUAT P 100.00/ "

portion subleased by Gamboa P 38.00/ "
portion subleased by Kho Chong P 110.00/ "
portion subleased by Chua Chia P 55.00/ "
ONG CHOAN P 100.00/ "
FRANCISCO, RUFINO and
TEODORA CLEMENTE P 25.00/ "
b) Ordering said defendants, including Maximo Yambao or anyone claiming
under him, to vacate the hands respectively occupied by them and to surrender the
same to plaintiff UY; to remove their improvements thereon or to abandon them
within sixty (60) days from receipt of this judgment. After the lapse of said sixty
days, plaintiff can submit the corresponding motion under Section 14, Rule 39;
c) On Ong Choan's Third-Party Complaint, sentencing third-party defendant SY
PUT to reimburse the former for whatever amount he shall pay to UY pursuant to
this judgment, with interest at the legal rate on the total amount from the date of
payment until fully paid. SY PUT shall either remove all the improvements he has
constructed on the land, or abandon them in favor of plaintiff within sixty (60)
days from receipt of this judgment.
Costs against defendants proportionately.
SO ORDERED.
Not satisfied with the said decision, herein petitioners, as defendants therein, appealed therefrom
to the Court of Appeals which docketed it as C.A.-G.R. No. 51337-R. In its decision of 19
January 1977, the Court of Appeals affirmed in toto the aforesaid decision. 4 Petitioners, except
Ong Choan, filed a Petition for Review on certiorari with this Court (G.R. No. L-47603) on 8
February 1978 to set aside the decision of the Court of Appeals. Petitioner Ong Choan separately
filed a similar petition with this Court (G.R. No. L-48649), arguing that: "the case was actually
an unlawful detainer case and therefore, the Court of First Instance had no jurisdiction over it,
making the decision null and void."
Both petitions for review on certiorari were denied by this Court. 5
On 15 November 1978, after the decision in Civil Case No. 74634 became final and executory,
the plaintiffs (private respondents herein) filed a motion to execute the same, which was granted
by the trial court (Branch XXVII) on 20 November 1978. 6
Re: G.R. No. 53851
On 21 November 1978, petitioner Chua Huat filed with the Court of First Instance of Manila a
complaint for the annulment of the judgment in Civil Case No. 74634. This complaint was
docketed as Civil Case No. 119751 and was assigned to Branch XXII. Petitioner Ong Choan and
others also filed a separate complaint for annulment of judgment which was docketed as Civil
Case No. 119884. Both complaints were based on the ground that the Court of First Instance of
Manila had no jurisdiction over Civil Case No. 74634 because the said action was one for
ejectment and not for recovery of possession (accion publiciana) which was, therefore,
cognizable by the City Court of Manila; hence, the decision in said Civil Case No. 74634 is null
and void.

Page 2 of 97

On 23 February 1979, despite the filing of the above cases for annulment of judgment, the Court
of First Instance of Manila ordered the execution of the judgment in Civil Case No. 74634.
Petitioners field a motion for reconsideration of the said order and to suspend proceedings in
Civil Case No. 74634 pending termination of the annulment case which was, however, denied by
the trial court in its Order of 5 April 1979, which reads:
All the points raised in defendants' motion for reconsideration and to suspend
proceedings are already thoroughly covered in the order of February 23, 1979
which in effect holds that Branch XXII, a coordinate court, cannot interfere with
this branch in its prerogative to carry out its decision, long final and affirmed by
the higher courts, into effect, and said motion is hereby denied. It is only the
superior court which can prohibit this branch from executing its decision.
The Sheriff of Manila, unless restrained by either the Supreme Court or the Court
of Appeals, shall immediately implement the writ of execution upon the
expiration of thirty (30) days from receipt by the defendants of a copy of the
order, if to give them time to bring the incident up on certiorari to said superior
courts. 7
Petitioners then filed a Petition for Certiorari and Prohibition with the Court of Appeals,
docketed as C.A.-G.R. No. 09251 SP, to set aside the order of execution of judgment, and to
prohibit the respondents from executing the judgment until Civil Case No. 119751 pending in
Branch XXII of the Court of First Instance of Manila is finally decided and terminated.
In the Decision promulgated on 29 February 1980, the Court of Appeals denied the petition for
lack of merit, stating inter alia:
The instant petition must be denied for lack of merit.
1. The judgment in Civil Case No. 74634 is undisputedly final and executory. As
such, the issuance of a writ of execution thereof becomes the ministerial duty of
the respondent judge. . . .
2. Civil Case No. 119751 filed by petitioners herein to annul the judgment in Civil
Case No. 74634 cannot stop the execution thereof because of finality of judgment
or res judicata. A cursory reading of the questioned judgment, Civil Case No.
74634, discloses that the issue raised in the annulment of judgment case, C.C. No.
119751, has been decided in the prior case when the court then presided by now
Supreme Court Justice Ameurfina Melencio-Herrera who penned the said
decision stated, as follows:
A. This is an accion publiciana and not one for unlawful detainer,
for which reason, it was rightfully brought before this Court. What
is involved is not the recovery of physical possession only but the
recovery of the right to possess.
We find application in the following doctrines:
A party may not, by changing the form of a lawsuit or adopting a
different method of presenting the matter, escape the application of
the principle that the same cause of action may not be litigated
twice between the same parties. (Paz vs. Indanan, 76 Phil. 608;
Pascual vs. Palermo, L-2185, April 29, 1950, 47 O.G. 6184;
Francisco vs. Blas, L-5078, May 4, 1953; Barrera vs. Del Rosario,
L-8928, April 28, 1956).
Another aspect of the doctrine is that once an issue has been raised
and finally decided by a court of competent jurisdiction, generally
speaking it becomes res judicata or can be made the basis of a plea
Page 3 of 97

of estoppel by judgment as between the parties to that litigation, no

matter in what manner it was raised and Official or not it was the
principal issue or merely an incidental one. (Eugenio vs. Tiangco
L-2804, Sept. 20, 1949; Robis vs. Caspe, L-6166, Sept. 28, 1964.).
WHEREFORE, there being no finding of a capricious and whimsical exercise of
judgment by the respondent court equivalent to lack of jurisdiction which may be
the subject of a writ of certiorari, the instant petition is hereby DENIED, with
costs against petitioners. 8
The first and second motions for reconsideration filed by the petitioners were denied on 30 April
1980 and 8 July 1980, respectively, for the reason that the ground relied upon was already
discussed, taken up and passed upon by the Court. 9
Hence, this petition which was filed on 7 August 1980.
Petitioners claim that respondent Court of Appeals erred in holding that Civil Case No. 119751
cannot stop the execution of the judgment in Civil Case No. 74634 because of the finality of such
judgment, or on the ground ofres judicata, and it was the court's ministerial duty to execute it;
and in not finding that the pendency of Civil Case No. 119751 to annul the judgment in Civil
Case No. 74634 on the ground of lack of jurisdiction justifies the stay of execution of said
judgment.
In the resolution of 3 September 1980, We required respondents to comment on the petition
which private respondents complied with on 14 October 1980. 10 To this comment, petitioners
filed a reply on 29 October 1980. 11
On 19 November 1980, We gave due course to the petition and required the parties to submit
simultaneously their memoranda which petitioners complied with on 12 January 1981 and the
private respondents on 20 January 1981.
It further appears that Civil Case No. 119751 aforestated was dismissed by the trial court in its
Order of 24 September 1979. Herein petitioner Chua Huat appealed from said Order to the
Intermediate Appellate Court which docketed the same as A.C.-GR CV No. 66303. 12 In its
Decision of 12 March 1984, 13 the Intermediate Appellate Court affirmed in toto the questioned
order holding:
Plaintiff-appellant contends that the principle of res judicata does not apply in the
case at bar because "although there may be identity of parties and of subject
matter between Civil Case No. 74634" (which is for recovery of possession) "and
Civil Case No. 119751" (which is for annulment of judgment) "there is no Identity
of causes of action between these two cases."
While there is, certainly on the face of the argument, merit in the contention that
there is no identity of causes of action between Civil Case No. 74634 and this
instant case, upon closer scrutiny, however, of the records of the said two cases,
We find the same to be utterly devoid of merit.
The records of the aforesaid two cases will bear it out that the issue of lack of
jurisdiction (which is the cause of action in Civil Case No. 119751) has been
squarely ruled upon, not only by the trial court in Civil Case No. 74634 but also
by the Court of Appeals and by the Supreme Court.
Plaintiff-appellant further contends that since the issue of jurisdiction in Civil
Case No. 74634 was raised in their motion for reconsideration before the Court of
Appeals in CA-G.R. No. 51337-R, the Appellate Court did not, in its resolution
denying said motion, pass on the same and on appeal by petition for review to the
Supreme Court in L-47603 and L-48649, where the same issue among others was
raised, the High Court in its minutes' (sic) did not rule squarely on said issue, "the
Page 4 of 97

court a quo should have proceeded with the hearing of this case on the judgments
and thereafter decide (sic) the same based on the evidence adduced by the
parties". We find the same likewise untenable.
Issues raised by the parties in their brief and passed upon
subsilencio by the appellate court in a decision which has become
final and executory are considered closed and can no longer be
revived by the parties in a subsequent litigation without doing
violence to the principle of res judicata. (Corda vs. Maglinti, G.R.
No. L-17476, Nov. 30, 1961).
What more, neither the Supreme Court nor the Appellate Court is duty bound to
discuss the pros and cons of appellant's argument.
Lastly, in Kabigting vs. Acting Director of Prisons (116 Phil. 589; 1962) the
Supreme Court pointed out: "It need not be stated that the Supreme Court, being
the court of last resort, is the final arbiter of all legal questions properly brought
before it and that its decision in any given case constitutes the law of that
particular case. Once its judgment becomes final, it is binding on all inferior
courts, and hence beyond their power and authority to alter or modify". The High
Tribunal further pointed out that "Nor is it to be lost sight of that such principle
does not apply only to the express terms of decision, but likewise to what is
therein implicit, which must be implemented faithfully, no circumvention or
evasion being allowed". (Sanchez vs. Court of Industrial Relations, L-26932, 27
SCRA 490).
Petitioners made no attempt to inform the Court of the dismissal of Civil Case No. 119751 and of
the above action of the Intermediate Appellate Court.
Re: G.R. No. 63863
On 14 September 1982, Manuel Uy and Sons, Inc., respondent in G.R. No. 53851, requested
Romulo M. del Rosario the City Engineer and Building Officials, of Manila, to condemn the
dilapidated structures located at 1271 to 1277 Pedro Gil St. and 1553 to 1557 Paz St., Paco,
Manila, all occupied by petitioners. 14
On 17 November 1982, said official issued notices of condemnation addressed to petitioners
Chua Huat, Maria Gamboa, Lourdes Mempin, Dominador Felino, Ong Choan, Rufino Clements,
and several other persons. The condemnation orders stated that the subject buildings were found
to be in dangerous condition and therefore condemned, subject to the confirmation of the Mayor
as required by Section 276 of the Compilation of Ordinances of the City of Manila. It further
stated that the notice is not an order to demolish as the findings of the City Engineer is (sic) still
subject to the approval of the Mayor. 15 The orders were based on the inspection reports made
by Architect Oscar D. Andres and the Memorandum-Reports made by the Evaluation Committee
of the Office of the City Engineer, which all showed that the subject buildings suffer from
structural deterioration by more than 50% and as much as 80%. 16
On 19 January 1983, Civil Engineer Romulo C. Molas, a private practitioner, inspected the
abovementioned structures upon the request of petitioners herein. In his evaluation report dated
21 January 1983, he stated that although the buildings are old, they are still structurally sound
and have a remaining economic life of at least eight years. 17
On 22 February 1983, or three months after the notices of condemnation were issued, petitioners
formally protested against said notices of condemnation on the ground that the buildings are still
in good physical condition and are structurally sound based on the abovementioned certification
of Civil Engineer Romulo C. Molas dated 21 January 1983. 18

Page 5 of 97

On 26 April 1983, Maria Gamboa, one of the petitioners herein, was informed of the issuance by
the City Engineer of the demolition order with respect to the building located at 1565 Paz St.,
Paco, Manila, and was told to vacate the premises within 15 days from notice. 19
On 2 May 1983, petitioners filed the instant Petition for Prohibition, with Preliminary Injunction
and/or Restraining Order, against City Mayor Ramon Bagatsing, City Engineer and Building
Officer Romulo del Rosario and Manuel Uy and Sons, Inc., praying that a restraining order or
preliminary injunction be issued enjoining respondents from proceeding with the announced
demolition of the subject buildings, this petition be given due course, and after hearing,
respondents be prohibited from demolishing said buildings. 20 They allege in their petition that:
RESPONDENTS COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OF JURISDICTION IN ISSUING THE
CONDEMNATION ORDERS.
THERE IS NO APPEAL OR ANY OTHER PLAIN, SPEEDY AND ADEQUATE
REMEDY.
On 9 May 1983, this Court directed respondents to comment on the petition and issued a
Temporary Restraining Order against the respondents City Mayor and City Engineer restraining
them from enforcing and/or carrying out the demolition order on the building occupied by Maria
Gamboa at 1565 Paz Street. 21
On 6 July 1983, the respondent Mayor of Manila confirmed the rest of the condemnation orders
issued by the respondent City Engineer. Pursuant thereto, the respondent City Engineer, on 12
September 1983, issued demolition orders addressed to Chua Huat, Ong Choan, Dominador
Felino and Lourdes Mempin, whereby they were ordered to vacate and commence the demolition
and/or removal of the buildings occupied by them after fifteen days from receipt of the order. 22
On 18 May 1983, respondents City Mayor and City Engineer filed their Comment 23 praying
that the petition be dismissed on the following grounds: (a) that it involves questions of facts
which should be ventilated before the Regional Trial Court of Manila; (b) the subject buildings
were condemned and ordered removed after it was established that they had suffered from
defects or deterioration thereby posing perils to the lives and limbs not only of petitioners but
also to the public in general; (c) the power to condemn buildings and structures in the City of
Manila falls within the exclusive domain of the City Engineer pursuant to Sections 275 and 276
of its Compilation of Ordinances (also Revised Ordinances 1600); (d) the power to condemn and
remove buildings and structures is an exercise of the police power granted the City of Manila to
promote public safety; and (e) administrative decisions falling within the executive jurisdiction
cannot be set aside by courts of justice except on proof of grave abuse of discretion, fraud or
error of law.
On 20 May 1983, private respondent Manuel Uy and Sons, Inc. filed its Comment 24 wherein it
contends that the petition is premature, unreasonable and deserves no consideration as petitioners
have not exhausted readily-available administrative remedies and that the validity of the
questioned condemnation and demolition orders entails questions of facts not entertainable in
this petition. It alleges that the condemnation orders were not immediately executory, as the
finding of the City Engineer/Building Officials, is still subject to the approval of the Mayor per
Section 276 of the Compilation of Ordinances of the City of Manila. Moreover, under Section
5.3, Rule VII of the Implementing Rules and Regulations of P.D. No. 1096, the owner of a
building may appeal to the Secretary of Public Works and Communications, whose decision is
final, the finding or declaration of the Building Officials, and ask that a re-inspection or reinvestigation of the building or structure be made; for not availing of this remedy, petitioners
failed to exhaust administrative remedies.
Petitioners filed a Reply on 3 October 1983, 25 to Which respondents filed a rejoinder on 14
November 1983. 26
On 4 January 1984, this case was consolidated with G.R. No. 53851.
Page 6 of 97

On 30 July 1986, We gave due course to this petition and required the parties to submit their
respective memoranda. 27 Private respondent filed its Memorandum on 3 October 1986, while
petitioners filed theirs on 3 November 1986. 28
On 18 January 1987, petitioners filed a rejoinder 29 to the Memorandum of private respondents.
We now resolve these petitions.
A. The first, G.R. No. 53851, is frivolous and is dismally bereft of merit. The antecedent facts
stated above unmistakably disclose a clear pattern to make a mockery of the judicial process, or
to abuse it. The decision of the trial court in Civil Case No. 74634 of 31 May 1972, which was
affirmed, first, by the Court of Appeals in its decision of 19 January 1977 (C.A.-G.R. No. 51337R) and second, by this Court (G.R. No. L-47603 and G.R. No. L-48649), had long become firm
and final. To maliciously stop its execution pursuant to the Order of 20 March 1978, petitioner
Chua Huat filed with the trial court Civil Case No. 119751 to annul the decision, reviving therein
issues which he had squarely raised in C.A.-G.R. No. 51337-R. Then, he filed a motion in Civil
Case No. 74634 to set aside the order of execution and to suspend proceedings therein in view of
the pendency of the annulment case.
Unfazed by his failure to hold the trial court hostage to his scheme, he went to the Court of
Appeals (C.A.-G.R. No. 09251 SP) to question the denial by the trial court of his aforesaid
motion, and when he failed again, he came to this Court via this petition with issues which, as his
counsel fully knew, had long been laid to rest.
At the same time, when Civil Case No. 119751 was dismissed on 24 September 1979, petitioner
went to the Court of Appeals (A.C.-G.R. CV No. 66303), also raising the same issues. He,
however, deliberately chose not to inform this Court of the unfavorable decision of the
Intermediate Appellate Court of 12 March 1984. The reason of course is all too obvious, and in
the light of his remarkable effort to frustrate or subvert the ends of justice, petitioner cannot be
expected to do so.
We find, therefore, the challenged decision of the respondent Court of Appeals to be in full
accord with law and jurisprudence But this should not be the end of this case. We must state here
for the petitioners and their counsel and on all others similarly inclined to resort to the same or
related scheme or stratagem that this Court cannot condone or tolerate any abuse of the judicial
process. We must, once again, remind counsel and litigants, as We did in Cantelang, et
al. vs. Medina, et al., 30 that "this Court win ever be vigilant to nip in the bud any dilatory
maneuver calculated to defeat or frustrate the ends of justice, fair play and the prompt
implementation of final and executory judgments." And, more particularly for lawyers,
in Banogon, et al. vs. Zerna, et al., 31 We said in no uncertain terms:
As officers of the court, lawyers have a responsibility to assist in the proper
administration of justice. They do not discharge this duty by filing pointless
petitions that only add to the workload of the judiciary, especially this Court,
which is burdened enough as it is. A judicious study of the facts and the law
should advise them when a case, such as this, should not be permitted to be flied
to merely clutter the already congested judicial dockets. They do not advance the
cause of law or their clients by commencing litigations that for sheer lack of merit
do not deserve the attention of the courts.
In another portion of said decision, We said:
This Court has repeatedly reminded litigants and lawyers alike:
Litigation must end and terminate sometime and somewhere, and it
is essential to an effective and efficient administration of justice
that, once a judgment has become final, the winning party be not,
through a mere subterfuge, deprived of the fruits of the verdict.
Courts must therefore guard against any scheme calculated to bring
Page 7 of 97

about that result. Constituted as they are to put an end to

controversies, courts should frown upon any attempt to prolong
them. 32
There should be a greater awareness on the part of litigants that the
time of the judiciary, much more so of this Court, is too valuable to
be wasted or frittered away by efforts, far from commendable, to
evade the operation of a decision final and executory, especially so,
where, as shown in this case, the clear and manifest absence of any
right calling for vindication, is quite obvious and indisputable. 33
This appeal, moreover, should fail, predicated as it is on an
insubstantial (sic) objection bereft of any persuasive force.
Defendants had to display ingenuity to conjure a technicality.
From Alonso v. Villamor, a 1910 decision, we have left no doubt
as to our disapproval of such a practice. The aim of a lawsuit is to
render justice to the parties according to law. Procedural rules are
precisely designed to accomplish such a worthy objective.
Necessarily, therefore, any attempt to pervert the ends for which
they are intended deserves condemnation. We have done so before.
We do so again. 34
B. G.R. No. 63863 must equally fall. It is patently obvious that petitioners have no valid
grievance for the remedy of certiorari under Rule 65 of the Rules of Court to be available to
them. It is explicitly clear from Section 1 of Rule 65 of the Rules of Court that for certiorari to be
available: (a) a tribunal, board or office exercising judicial function acted without or in excess of
its or his jurisdiction, or with grave abuse of discretion, and (b) that there is no appeal, nor any
plain, speedy, and adequate remedy in the ordinary course of law. Petitioners failed to show the
presence of both elements. The power to condemn buildings and structures in the City of Manila
falls within the exclusive jurisdiction of the City Engineer, who is at the same time the Building
Officials, (Sec. 206, P.D. 1096). Sections 275 and 276 of the Compilation of Ordinances of the
City of Manila (also Revised Ordinances 1600), provide:
Sec. 275. Deterioration and Defects. All buildings or parts of buildings which
show defects in any essential parts shall be repaired and put in safe condition at
once, or if the deterioration be greater than fifty per centum of the value of the
building, as estimated by the city engineer, they shall be removed.
Sec. 276. Condemnation Proceeding. Whenever in the judgment of the City
Engineer any building or portion of building has been damaged by any cause to
such an extent as to be dangerous for use, he may condemn the same and shall
immediately notify the owner and the Mayor of his action. If the owner or his
agent be not willing to abide by this order of condemnation, he may make formal
objection within the period of seven days following such notification. The Mayor
shall hear the owner or his agent and his experts and also the city engineer,
deciding the case on the evidence presented. If the Mayor confirms the action of
the city engineer, the owner or his agent shall immediately proceed to remove the
building within fifteen days from the date on which he was notified of such final
action. Should the owner or his agent not comply with the decision of the Mayor
the building shall be removed at his expense and the city will proceed to recover
against him for the amount expended.
Section 215 of P.D. 1096, otherwise known as the National Building Code, also states the
authority of the Building Officials, with respect to dangerous buildings, to wit:
When any building or structure is found or declared to be dangerous or ruinous,
the Building Officials, shall order its repair, vacation or demolition depending
upon the degree of danger to life, health, or safety. This is without prejudice to
Page 8 of 97

further action that may be taken under the provisions of Articles 482 and 694 to
707 of the Civil Code of the Philippines.
From the abovementioned provisions, it is unquestionable that the Building Officials, has the
authority to order the condemnation and demolition of buildings which are found to be in a
dangerous or ruinous condition. It is also clear from the Compilation of Ordinances of the City of
Manila that the Mayor has the power to confirm or deny the action taken by the Building
Officials, with respect to the dangerous or ruinous buildings.
Respondent City Engineer and Building Official, Romulo M. del Rosario, can, therefore, validly
issue the questioned condemnation and demolition orders. This is also true with the respondent
Mayor who can approve or deny the condemnation orders as provided in Section 276 of the
Compilation of Ordinances of the City of Manila.
The only issue then is Official or not said officials committed grave abuse of discretion in the
exercise of their aforesaid powers.
It is a settled doctrine that there is grave abuse of discretion amounting to lack of jurisdiction
"when there is a capricious and whimsical exercise of judgment as is equivalent to lack of
jurisdiction, such as where the power is exercised in an arbitrary or despotic manner by reason of
passion or personal hostility, and it must be so patent and gross so as to amount to an evasion of
positive duty or to a virtual refusal to perform the duty enjoined or to act at all in contemplation
of law." 35
We find no grave abuse of discretion on the part of the respondent City Engineer because the
orders were made only after thorough ocular inspections were conducted by the City's Building
Inspectors. The results of the inspections were set forth in a memorandum dated 16 November
1982 where it was shown that all the buildings had architectural, structural, sanitary, plumbing
and electrical defects of up to 80%. 36
The respondent Mayor's act of approving the condemnation orders was likewise done in
accordance with law. The protest made by petitioners was submitted only on 22 February 1983,
or three months after the notices of condemnation were issued, and clearly beyond the seven
days prescribed under Section 276 of the Compilation of Ordinances of the City of Manila.
Moreover, appeal was likewise available to petitioners. As correctly contended by private
respondents, the Implementing Rules and Regulations promulgated by the then Ministry of
Public Works to implement P.D. No. 1096, under the title Abatement/Demolition of Buildings,
provide:
5. Procedure for Demolition of Buildings. The following steps shall be
observed in the abatement/demolition of buildings under this Rule:
5.1. There must be a finding or declaration by the Building Officials, that the
building or structure is a nuisance, ruinous or dangerous,
...
5.3. Within the fifteen-day period the owner may if he so desires, appeal to the
Secretary the finding or declaration of the Building Official and ask that a reinspection or re-investigation of the building or structure be made. . . .
5.6. The decision of the Secretary on the appeal shall be final. (emphasis
supplied).
Certiorari will not he then because petitioners failed to exhaust all the administrative remedies.
This Court has long upheld the doctrine of exhaustion of administrative remedies because it rests
on the assumption that the administrative body, board or officer, if given the chance to correct
its/his mistake or error, may amend its/his decision on a given matter. 37 Where the enabling
statute indicates a procedure for administrative review, and provides a system of administrative
Page 9 of 97

appeal, or reconsideration, the courts, for reasons of law, comity and convenience, will not
entertain a case unless the available administrative remedies have been resorted to and the
appropriate authorities have been given opportunity to act and correct the errors committed in the
administrative forum. 38 There are, of course, exceptions to this rule, 39 but none is available to
petitioners.
IN THE LIGHT OF ALL THE FOREGOING, judgment is hereby rendered DISMISSING these
cases for lack of merit with treble costs against petitioners.
SO ORDERED.
Gutierrez, Jr. and Bidin, JJ., concur.
Fernan, C.J., Feliciano, J., took no part.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 40243 March 11, 1992
CELESTINO TATEL, petitioner,
vs.
MUNICIPALITY OF VIRAC, SALVADOR A. SURTIDA, in his capacity as Mayor of Virac,
Catanduanes; GAVINO V. GUERRERO, in his capacity as Vice-Mayor of Virac, Catanduanes;
JOSE T. BUEBOS, in his capacity as Councilor of Virac, Catanduanes; ANGELES TABLIZO, in
his capacity as Councilor of Virac, Catanduanes; ELPIDIO T. ZAFE, in his capacity as Councilor
of Virac, Catanduanes; MARIANO ALBERTO, in his capacity as Councilor of Virac,
Catanduanes; JULIA A. GARCIA, in her capacity as Councilor of Virac, Catanduanes; and
PEDRO A. GUERRERO, in his capacity as Councilor of Virac, Catanduanes,respondents.
NOCON, J.:
This is a Petition for Prohibition with Preliminary Injunction with the Court of First Instance of
Catanduanes filed by appellant, Celestino Tatel, a businessman engaged in the import and export
of abaca and other products against the Municipal Council of Virac, Catanduanes and its
municipal officials enjoining them from enforcing Resolution No 29 1 of the Council, declaring
the warehouse of petitioner in barrio Sta. Elena of the said municipality a public nuisance within
the purview of Article 694 of the Civil Code of the Philippines and directing the petitioner to
remove and transfer said warehouse to a more suitable place within two (2) months from receipt
of the said resolution.
It appears from the records that on the basis of complaints received from the residents of barrio
Sta. Elena on March 18, 1966 against the disturbance caused by the operation of the abaca
bailing machine inside the warehouse of petitioner which affected the peace and tranquility of
Page 10 of 97

the neighborhood due to the smoke, obnoxious odor and dust emitted by the machine, a
committee was appointed by the municipal council of Virac to investigate the matter. The
committee noted the crowded nature of the neighborhood with narrow roads and the surrounding
residential houses, so much so that an accidental fire within the warehouse of the petitioner
occasioned by the continuance of the activity inside the warehouse and the storing of
inflammable materials created a danger to the lives and properties of the people within the
neighborhood.
Resultantly, Resolution No. 29 was passed by the Municipal Council of Virac on April 22, 1966
declaring the warehouse owned and operated by petitioner a public nuisance within the purview
of Article 694 of the New Civil Code. 2
His motion for reconsideration having been denied by the Municipal Council of Virac, petitioner
instituted the present petition for prohibition with preliminary injunction.
Respondent municipal officials contend that petitioner's warehouse was constructed in violation
of Ordinance No. 13, series of 1952, prohibiting the construction of warehouses near a block of
houses either in the poblacion or barrios without maintaining the necessary distance of 200
meters from said block of houses to avoid loss of lives and properties by accidental fire.
On the other hand, petitioner contends that said ordinance is unconstitutional, contrary to the due
process and equal protection clause of the Constitution and null and void for not having been
passed in accordance with law.
The issue then boils down on whether petitioner's warehouse is a nuisance within the meaning of
Article 694 of the Civil Code and whether Ordinance No. 13, S. 1952 of the Municipality of
Virac is unconstitutional and void.
In a decision dated September 18, 1969, the court a quo ruled as follows:
1. The warehouse in question was legally constructed under a valid permit issued
by the municipality of Virac in accordance with existing regulations and may not
be destroyed or removed from its present location;
2. Ordinance No. 13, series of 1952, is a legitimate and valid exercise of police
power by the Municipal Council of Virac is not (sic) unconstitutional and void as
claimed by the petitioner;
3. The storage by the petitioner of abaca and copra in the warehouse is not only in
violation of the provisions of the ordinance but poses a grave danger to the safety
of the lives and properties of the residents of the neighborhood due to accidental
fire and constitutes a public nuisance under the provisions of Article 694 of the
New Civil code of the Philippines and may be abated;
4. Accordingly, the petitioner is hereby directed to remove from the said
warehouse all abaca and copra and other inflammable articles stored therein
which are prohibited under the provisions of Ordinance No. 13, within a period of
two (2) months from the time this decision becomes final and that henceforth, the
petitioner is enjoined from storing such prohibited articles in the warehouse. With
costs against petitioner.
Seeking appellate review, petitioner raised as errors of the court a quo:
1. In holding that Ordinance No. 13, series of 1952, of the Municipality of Virac,
Catanduanes, is a legitimate and valid exercise of police power of the Municipal
Council, and therefore, constitutional;
2. In giving the ordinance a meaning other than and different from what
it provided by declaring that petitioner violated the same by using the warehouse
Page 11 of 97

for storage of abaca and copra when what is prohibited and penalized by the
ordinance is the construction of warehouses.
3. In refusing to take judicial notice of the fact that in the municipality, there are
numerous establishments similarly situated as appellants' warehouses but which
are not prosecuted.
We find no merit in the Petition.
Ordinance No. 13, series of 1952, was passed by the Municipal Council of Virac in the exercise
of its police power. It is a settled principle of law that municipal corporations are agencies of the
State for the promotion and maintenance of local self-government and as such are endowed with
the police powers in order to effectively accomplish and carry out the declared objects of their
creation. 3 Its authority emanates from the general welfare clause under the Administrative Code,
which reads:
The municipal council shall enact such ordinances and make such regulations, not
repugnant to law, as may be necessary to carry into effect and discharge the
powers and duties conferred upon it by law and such as shall seem necessary and
proper to provide for the health and safety, promote the prosperity, improve the
morals, peace, good order, comfort and convenience of the municipality and the
inhabitants thereof, and for the protection of property therein. 4
For an ordinance to be valid, it must not only be within the corporate powers of the municipality
to enact but must also be passed according to the procedure prescribed by law, and must be in
consonance with certain well established and basic principles of a substantive nature. These
principles require that a municipal ordinance (1) must not contravene the Constitution or any
statute (2) must not be unfair or oppressive (3) must not be partial or discriminatory (4) must not
prohibit but may regulate trade (5) must be general and consistent with public policy, and (6)
must not be unreasonable. 5 Ordinance No. 13, Series of 1952, meets these criteria.
As to the petitioner's second assignment of error, the trial court did not give the ordinance in
question a meaning other than what it says. Ordinance No. 13 passed by the Municipal Council
of Virac on December 29, 1952, 6reads:
AN ORDINANCE STRICTLY PROHIBITING THE CONSTRUCTION OF
WAREHOUSE IN ANY FORM NEAR A BLOCK OF HOUSES EITHER IN
POBLACION OR BARRIO WITH NECESSARY DISTANCE TO AVOID
GREAT LOSSES OF PROPERTY AND LIVES BY FIRE ACCIDENT.
Section 1 provides:
It is strictly prohibited to construct warehouses in any form to any person,
persons, entity, corporation or merchants, wherein to keep or store copra, hemp,
gasoline, petroleum, alcohol, crude oil, oil of turpentine and the like products or
materials if not within the distance of 200 meters from a block of houses either in
the poblacion or barrios to avoid great losses of properties inclusive lives by fire
accident.
Section 2 provides: 7
Owners of warehouses in any form, are hereby given advice to remove their said
warehouses this ordinance by the Municipal Council, provided however, that if
those warehouses now in existence should no longer be utilized as such
warehouse for the above-described products in Section 1 of this ordinance after a
lapse of the time given for the removal of the said warehouses now in existence,
same warehouses shall be exempted from the spirit of the provision of section 1 of
this ordinance,provided further, that these warehouses now in existence, shall in
the future be converted into non-inflammable products and materials warehouses.
Page 12 of 97

In spite of its fractured syntax, basically, what is regulated by the ordinance is the construction of
warehouses wherein inflammable materials are stored where such warehouses are located at a
distance of 200 meters from a block of houses and not the construction per se of a warehouse.
The purpose is to avoid the loss of life and property in case of fire which is one of the primordial
obligation of the government.
This was also the observation of the trial court:
A casual glance of the ordinance at once reveals a manifest disregard of the
elemental rules of syntax. Experience, however, will show that this is not
uncommon in law making bodies in small towns where local authorities and in
particular the persons charged with the drafting and preparation of municipal
resolutions and ordinances lack sufficient education and training and are not well
grounded even on the basic and fundamental elements of the English language
commonly used throughout the country in such matters. Nevertheless, if one
scrutinizes the terms of the ordinance, it is clear that what is prohibited is the
construction of warehouses by any person, entity or corporation wherein copra,
hemp, gasoline and other inflammable products mentioned in Section 1 may be
stored unless at a distance of not less than 200 meters from a block of houses
either in the poblacion or barrios in order to avoid loss of property and life due to
fire. Under Section 2, existing warehouses for the storage of the prohibited
articles were given one year after the approval of the ordinance within which to
remove them but were allowed to remain in operation if they had ceased to store
such prohibited articles.
The ambiguity therefore is more apparent than real and springs from simple error
in grammatical construction but otherwise, the meaning and intent is clear that
what is prohibited is the construction or maintenance of warehouses for the
storage of inflammable articles at a distance within 200 meters from a block of
houses either in the poblacion or in the barrios. And the purpose of the ordinance
is to avoid loss of life and property in case of accidental fire which is one of the
primordial and basic obligation of any government. 8
Clearly, the lower court did NOT add meaning other than or differrent from what
was provided in the ordinance in question. It merely stated the purpose of the ordinance and what
it intends to prohibit to accomplish its purpose.
As to the third assignment of error, that warehouses similarly situated as that of the petitioner
were not prosecuted, suffice it to say that the mere fact that the municipal authorities of Virac
have not proceeded against other warehouses in the municipality allegedly violating Ordinance
No. 13 is no reason to claim that the ordinance is discriminatory. A distinction must be made
between the law itself and the manner in which said law is implemented by the agencies in
charge with its administration and enforcement. There is no valid reason for the petitioner to
complain, in the absence of proof that the other bodegas mentioned by him are operating in
violation of the ordinance and that the complaints have been lodged against the bodegas
concerned without the municipal authorities doing anything about it.
The objections interposed by the petitioner to the validity of the ordinance have not been
substantiated. Its purpose is well within the objectives of sound government. No undue restraint
is placed upon the petitioner or for anybody to engage in trade but merely a prohibition from
storing inflammable products in the warehouse because of the danger of fire to the lives and
properties of the people residing in the vicinity. As far as public policy is concerned, there can be
no better policy than what has been conceived by the municipal government.
As to petitioner's contention of want of jurisdiction by the lower court we find no merit in the
same. The case is a simple civil suit for abatement of a nuisance, the original jurisdiction of
which falls under the then Court of First Instance.
WHEREFORE, for lack of merit, the petition is hereby DISMISSED. Costs against petitioner.
Page 13 of 97

SO ORDERED.
Melencio-Herrera, Paras, Padilla and Regalado, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 169838

April 25, 2006

BAYAN, KARAPATAN, KILUSANG MAGBUBUKID NG PILIPINAS (KMP), GABRIELA, Fr. Jose

Dizon, Renato Constantino, Jr., Froyel Yaneza, and Fahima Tajar, Petitioners,
vs.
EDUARDO ERMITA, in his capacity as Executive Secretary, Manila City Mayor LITO
ATIENZA, Chief of the Philippine National Police, Gen. ARTURO M. LOMIBAO, NCRPO
Chief Maj. Gen. VIDAL QUEROL, and Western Police District Chief Gen. PEDRO
BULAONG, Respondents.
DECISION
AZCUNA, J.:
Petitioners come in three groups.
The first petitioners, Bayan, et al., in G.R. No. 169838,1 allege that they are
citizens and taxpayers of the Philippines and that their rights as organizations and
individuals were violated when the rally they participated in on October 6, 2005 was
violently dispersed by policemen implementing Batas Pambansa (B.P.) No. 880.
The second group consists of 26 individual petitioners, Jess del Prado, et al., in G.R.
No. 169848,2 who allege that they were injured, arrested and detained when a
peaceful mass action they held on September 26, 2005 was preempted and
violently dispersed by the police. They further assert that on October 5, 2005, a
group they participated in marched to Malacaang to protest issuances of the
Palace which, they claim, put the country under an "undeclared" martial rule, and
the protest was likewise dispersed violently and many among them were arrested
and suffered injuries.
The third group, Kilusang Mayo Uno (KMU), et al., petitioners in G.R. No.
169881,3 allege that they conduct peaceful mass actions and that their rights as
organizations and those of their individual members as citizens, specifically the
right to peaceful assembly, are affected by Batas Pambansa No. 880 and the policy
of "Calibrated Preemptive Response" (CPR) being followed to implement it.
KMU, et al., claim that on October 4, 2005, a rally KMU co-sponsored was to be
conducted at the Mendiola bridge but police blocked them along C.M. Recto and
Lepanto Streets and forcibly dispersed them, causing injuries to several of their
members. They further allege that on October 6, 2005, a multi-sectoral rally which
KMU also co-sponsored was scheduled to proceed along Espaa Avenue in front of
the University of Santo Tomas and going towards Mendiola bridge. Police officers
Page 14 of 97

blocked them along Morayta Street and prevented them from proceeding further.
They were then forcibly dispersed, causing injuries on one of them.4 Three other
rallyists were arrested.
All petitioners assail Batas Pambansa No. 880, some of them in toto and others only
Sections 4, 5, 6, 12, 13(a), and 14(a), as well as the policy of CPR. They seek to stop
violent dispersals of rallies under the "no permit, no rally" policy and the CPR policy
recently announced.
B.P. No. 880, "The Public Assembly Act of 1985," provides:
Batas Pambansa Blg. 880
An Act Ensuring The Free Exercise By The People Of Their Right Peaceably To
Assemble And Petition The Government [And] For Other Purposes
Be it enacted by the Batasang Pambansa in session assembled:
Section 1. Title. This Act shall be known as "The Public Assembly Act of 1985."
Sec. 2. Declaration of policy. The constitutional right of the people peaceably to
assemble and petition the government for redress of grievances is essential and
vital to the strength and stability of the State. To this end, the State shall ensure the
free exercise of such right without prejudice to the rights of others to life, liberty and
equal protection of the law.
Sec. 3. Definition of terms. For purposes of this Act:
(a) "Public assembly" means any rally, demonstration, march, parade,
procession or any other form of mass or concerted action held in a public
place for the purpose of presenting a lawful cause; or expressing an opinion
to the general public on any particular issue; or protesting or influencing any
state of affairs whether political, economic or social; or petitioning the
government for redress of grievances.
The processions, rallies, parades, demonstrations, public meetings and
assemblages for religious purposes shall be governed by local
ordinances; Provided, however, That the declaration of policy as provided in
Section 2 of this Act shall be faithfully observed.
The definition herein contained shall not include picketing and other
concerted action in strike areas by workers and employees resulting from a
labor dispute as defined by the Labor Code, its implementing rules and
regulations, and by the Batas Pambansa Bilang 227.
(b) "Public place" shall include any highway, boulevard, avenue, road, street,
bridge or other thoroughfare, park, plaza, square, and/or any open space of
public ownership where the people are allowed access.
(c) "Maximum tolerance" means the highest degree of restraint that the
military, police and other peace keeping authorities shall observe during a
public assembly or in the dispersal of the same.
(d) "Modification of a permit" shall include the change of the place and time
of the public assembly, rerouting of the parade or street march, the volume of
loud-speakers or sound system and similar changes.
Sec. 4. Permit when required and when not required. A written permit shall be
required for any person or persons to organize and hold a public assembly in a
public place. However, no permit shall be required if the public assembly shall be
done or made in a freedom park duly established by law or ordinance or in private
property, in which case only the consent of the owner or the one entitled to its legal
Page 15 of 97

possession is required, or in the campus of a government-owned and operated

educational institution which shall be subject to the rules and regulations of said
educational institution. Political meetings or rallies held during any election
campaign period as provided for by law are not covered by this Act.
Sec. 5. Application requirements. All applications for a permit shall comply with
the following guidelines:
(a) The applications shall be in writing and shall include the names of the
leaders or organizers; the purpose of such public assembly; the date, time
and duration thereof, and place or streets to be used for the intended
activity; and the probable number of persons participating, the transport and
the public address systems to be used.
(b) The application shall incorporate the duty and responsibility of the
applicant under Section 8 hereof.
(c) The application shall be filed with the office of the mayor of the city or
municipality in whose jurisdiction the intended activity is to be held, at least
five (5) working days before the scheduled public assembly.
(d) Upon receipt of the application, which must be duly acknowledged in
writing, the office of the city or municipal mayor shall cause the same to
immediately be posted at a conspicuous place in the city or municipal
building.
Sec. 6. Action to be taken on the application.
(a) It shall be the duty of the mayor or any official acting in his behalf to issue
or grant a permit unless there is clear and convincing evidence that the
public assembly will create a clear and present danger to public order, public
safety, public convenience, public morals or public health.
(b) The mayor or any official acting in his behalf shall act on the application
within two (2) working days from the date the application was filed, failing
which, the permit shall be deemed granted. Should for any reason the mayor
or any official acting in his behalf refuse to accept the application for a
permit, said application shall be posted by the applicant on the premises of
the office of the mayor and shall be deemed to have been filed.
(c) If the mayor is of the view that there is imminent and grave danger of a
substantive evil warranting the denial or modification of the permit, he shall
immediately inform the applicant who must be heard on the matter.
(d) The action on the permit shall be in writing and served on the applica[nt]
within twenty-four hours.
(e) If the mayor or any official acting in his behalf denies the application or
modifies the terms thereof in his permit, the applicant may contest the
decision in an appropriate court of law.
(f) In case suit is brought before the Metropolitan Trial Court, the Municipal
Trial Court, the Municipal Circuit Trial Court, the Regional Trial Court, or the
Intermediate Appellate court, its decisions may be appealed to the
appropriate court within forty-eight (48) hours after receipt of the same. No
appeal bond and record on appeal shall be required. A decision granting such
permit or modifying it in terms satisfactory to the applicant shall be
immediately executory.
(g) All cases filed in court under this section shall be decided within twentyfour (24) hours from date of filing. Cases filed hereunder shall be immediately
endorsed to the executive judge for disposition or, in his absence, to the next
in rank.
Page 16 of 97

(h) In all cases, any decision may be appealed to the Supreme Court.
(i) Telegraphic appeals to be followed by formal appeals are hereby allowed.
Sec. 7. Use of Public throroughfare. Should the proposed public assembly involve
the use, for an appreciable length of time, of any public highway, boulevard,
avenue, road or street, the mayor or any official acting in his behalf may, to prevent
grave public inconvenience, designate the route thereof which is convenient to the
participants or reroute the vehicular traffic to another direction so that there will be
no serious or undue interference with the free flow of commerce and trade.
Sec. 8. Responsibility of applicant. It shall be the duty and responsibility of the
leaders and organizers of a public assembly to take all reasonable measures and
steps to the end that the intended public assembly shall be conducted peacefully in
accordance with the terms of the permit. These shall include but not be limited to
the following:
(a) To inform the participants of their responsibility under the permit;|
avvphi|.net
(b) To police the ranks of the demonstrators in order to prevent nondemonstrators from disrupting the lawful activities of the public assembly;
(c) To confer with local government officials concerned and law enforcers to
the end that the public assembly may be held peacefully;
(d) To see to it that the public assembly undertaken shall not go beyond the
time stated in the permit; and
(e) To take positive steps that demonstrators do not molest any person or do
any act unduly interfering with the rights of other persons not participating in
the public assembly.
Sec. 9. Non-interference by law enforcement authorities. Law enforcement
agencies shall not interfere with the holding of a public assembly. However, to
adequately ensure public safety, a law enforcement contingent under the command
of a responsible police officer may be detailed and stationed in a place at least one
hundred (100) meters away from the area of activity ready to maintain peace and
order at all times.
Sec. 10. Police assistance when requested. It shall be imperative for law
enforcement agencies, when their assistance is requested by the leaders or
organizers, to perform their duties always mindful that their responsibility to provide
proper protection to those exercising their right peaceably to assemble and the
freedom of expression is primordial. Towards this end, law enforcement agencies
shall observe the following guidelines:
(a) Members of the law enforcement contingent who deal with the
demonstrators shall be in complete uniform with their nameplates and units
to which they belong displayed prominently on the front and dorsal parts of
their uniform and must observe the policy of "maximum tolerance" as herein
defined;
(b) The members of the law enforcement contingent shall not carry any kind
of firearms but may be equipped with baton or riot sticks, shields, crash
helmets with visor, gas masks, boots or ankle high shoes with shin guards;
(c) Tear gas, smoke grenades, water cannons, or any similar anti-riot device
shall not be used unless the public assembly is attended by actual violence or
serious threats of violence, or deliberate destruction of property.

Page 17 of 97

Sec. 11. Dispersal of public assembly with permit. No public assembly with a
permit shall be dispersed. However, when an assembly becomes violent, the police
may disperse such public assembly as follows:
(a) At the first sign of impending violence, the ranking officer of the law
enforcement contingent shall call the attention of the leaders of the public
assembly and ask the latter to prevent any possible disturbance;
(b) If actual violence starts to a point where rocks or other harmful objects
from the participants are thrown at the police or at the non-participants, or at
any property causing damage to such property, the ranking officer of the law
enforcement contingent shall audibly warn the participants that if the
disturbance persists, the public assembly will be dispersed;
(c) If the violence or disturbance prevailing as stated in the preceding
subparagraph should not stop or abate, the ranking officer of the law
enforcement contingent shall audibly issue a warning to the participants of
the public assembly, and after allowing a reasonable period of time to lapse,
shall immediately order it to forthwith disperse;
(d) No arrest of any leader, organizer or participant shall also be made during
the public assembly unless he violates during the assembly a law, statute,
ordinance or any provision of this Act. Such arrest shall be governed by
Article 125 of the Revised Penal Code, as amended;
(e) Isolated acts or incidents of disorder or breach of the peace during the
public assembly shall not constitute a ground for dispersal.
Sec. 12. Dispersal of public assembly without permit. When the public assembly is
held without a permit where a permit is required, the said public assembly may be
peacefully dispersed.
Sec. 13. Prohibited acts. The following shall constitute violations of the Act:
(a) The holding of any public assembly as defined in this Act by any leader or
organizer without having first secured that written permit where a permit is
required from the office concerned, or the use of such permit for such
purposes in any place other than those set out in said permit: Provided,
however, That no person can be punished or held criminally liable for
participating in or attending an otherwise peaceful assembly;
(b) Arbitrary and unjustified denial or modification of a permit in violation of
the provisions of this Act by the mayor or any other official acting in his
behalf;
(c) The unjustified and arbitrary refusal to accept or acknowledge receipt of
the application for a permit by the mayor or any official acting in his behalf;
(d) Obstructing, impeding, disrupting or otherwise denying the exercise of the
right to peaceful assembly;
(e) The unnecessary firing of firearms by a member of any law enforcement
agency or any person to disperse the public assembly;
(f) Acts in violation of Section 10 hereof;
(g) Acts described hereunder if committed within one hundred (100) meters
from the area of activity of the public assembly or on the occasion thereof:
1. the carrying of a deadly or offensive weapon or device such as
firearm, pillbox, bomb, and the like;
Page 18 of 97

2. the carrying of a bladed weapon and the like;

3. the malicious burning of any object in the streets or thoroughfares;
4. the carrying of firearms by members of the law enforcement unit;
5. the interfering with or intentionally disturbing the holding of a public
assembly by the use of a motor vehicle, its horns and loud sound
systems.
Sec. 14. Penalties. Any person found guilty and convicted of any of the prohibited
acts defined in the immediately preceding section shall be punished as follows:
(a) violation of subparagraph (a) shall be punished by imprisonment of one
month and one day to six months;
(b) violations of subparagraphs (b), (c), (d), (e), (f), and item 4, subparagraph
(g) shall be punished by imprisonment of six months and one day to six
years;
(c) violation of item 1, subparagraph (g) shall be punished by imprisonment
of six months and one day to six years without prejudice to prosecution under
Presidential Decree No. 1866;
(d) violations of item 2, item 3, or item 5 of subparagraph (g) shall be
punished by imprisonment of one day to thirty days.
Sec. 15. Freedom parks. Every city and municipality in the country shall within six
months after the effectivity of this Act establish or designate at least one suitable
"freedom park" or mall in their respective jurisdictions which, as far as practicable,
shall be centrally located within the poblacion where demonstrations and meetings
may be held at any time without the need of any prior permit.
In the cities and municipalities of Metropolitan Manila, the respective mayors shall
establish the freedom parks within the period of six months from the effectivity this
Act.
Sec. 16. Constitutionality. Should any provision of this Act be declared invalid or
unconstitutional, the validity or constitutionality of the other provisions shall not be
affected thereby.
Sec. 17. Repealing clause. All laws, decrees, letters of instructions, resolutions,
orders, ordinances or parts thereof which are inconsistent with the provisions of this
Act are hereby repealed, amended, or modified accordingly.
Sec. 18. Effectivity. This Act shall take effect upon its approval.
Approved, October 22, 1985.
CPR, on the other hand, is a policy set forth in a press release by Malacaang dated
September 21, 2005, shown in Annex "A" to the Petition in G.R. No. 169848, thus:
Malacaang Official
Manila, Philippines NEWS
Release No. 2 September 21, 2005
STATEMENT OF EXECUTIVE SECRETARY EDUARDO ERMITA
On Unlawful Mass Actions
Page 19 of 97

In view of intelligence reports pointing to credible plans of anti-government groups

to inflame the political situation, sow disorder and incite people against the duly
constituted authorities, we have instructed the PNP as well as the local government
units to strictly enforce a "no permit, no rally" policy, disperse groups that run afoul
of this standard and arrest all persons violating the laws of the land as well as
ordinances on the proper conduct of mass actions and demonstrations.
The rule of calibrated preemptive response is now in force, in lieu of maximum
tolerance. The authorities will not stand aside while those with ill intent are herding
a witting or unwitting mass of people and inciting them into actions that are inimical
to public order, and the peace of mind of the national community.
Unlawful mass actions will be dispersed. The majority of law-abiding citizens have
the right to be protected by a vigilant and proactive government.
We appeal to the detractors of the government to engage in lawful and peaceful
conduct befitting of a democratic society.
The Presidents call for unity and reconciliation stands, based on the rule of law.
Petitioners Bayan, et al., contend that Batas Pambansa No. 880 is clearly a violation
of the Constitution and the International Covenant on Civil and Political Rights and
other human rights treaties of which the Philippines is a signatory.5
They argue that B.P. No. 880 requires a permit before one can stage a public
assembly regardless of the presence or absence of a clear and present danger. It
also curtails the choice of venue and is thus repugnant to the freedom of expression
clause as the time and place of a public assembly form part of the message for
which the expression is sought. Furthermore, it is not content-neutral as it does not
apply to mass actions in support of the government. The words "lawful cause,"
"opinion," "protesting or influencing" suggest the exposition of some cause not
espoused by the government. Also, the phrase "maximum tolerance" shows that the
law applies to assemblies against the government because they are being tolerated.
As a content-based legislation, it cannot pass the strict scrutiny test.
Petitioners Jess del Prado, et al., in turn, argue that B.P. No. 880 is unconstitutional
as it is a curtailment of the right to peacefully assemble and petition for redress of
grievances because it puts a condition for the valid exercise of that right. It also
characterizes public assemblies without a permit as illegal and penalizes them and
allows their dispersal. Thus, its provisions are not mere regulations but are actually
prohibitions.
Furthermore, the law delegates powers to the Mayor without providing clear
standards. The two standards stated in the laws (clear and present danger and
imminent and grave danger) are inconsistent.
Regarding the CPR policy, it is void for being an ultra vires act that alters the
standard of maximum tolerance set forth in B.P. No. 880, aside from being void for
being vague and for lack of publication.
Finally, petitioners KMU, et al., argue that the Constitution sets no limits on the right
to assembly and therefore B.P. No. 880 cannot put the prior requirement of securing
a permit. And even assuming that the legislature can set limits to this right, the
limits provided are unreasonable: First, allowing the Mayor to deny the permit on
clear and convincing evidence of a clear and present danger is too comprehensive.
Second, the five-day requirement to apply for a permit is too long as certain events
require instant public assembly, otherwise interest on the issue would possibly
wane.
As to the CPR policy, they argue that it is preemptive, that the government takes
action even before the rallyists can perform their act, and that no law, ordinance or
executive order supports the policy. Furthermore, it contravenes the maximum
Page 20 of 97

tolerance policy of B.P. No. 880 and violates the Constitution as it causes a chilling
effect on the exercise by the people of the right to peaceably assemble.
Respondents in G.R. No. 169838 are Eduardo Ermita, as Executive Secretary, Manila
City Mayor Lito Atienza, Chief, of the Philippine National Police (PNP) Gen. Arturo
Lomibao, National Capital Region Police Office (NCRPO) Chief, PNP Maj. Gen. Vidal
Querol, and Manila Police District (MPD) Chief Gen. Pedro Bulaong.
Respondents in G.R. No. 169848 are Eduardo Ermita as Executive Secretary and in
his personal capacity;Angelo Reyes, as Secretary of the Interior and Local
Governments; Arturo Lomibao, as Chief Vidal Querol, as Chief, NCRPO; Pedro
Bulaong, as Chief, MPD, and all other public officers and private individuals acting
under their control, supervision and instruction.
Respondents in G.R. No. 169881 are the Honorable Executive Secretary,
PNP Director General Arturo Lomibao, the Honorable Mayor Joselito Atienza, and PNP
MPD Chief Pedro Bulaong.
Respondents argue that:
1. Petitioners have no standing because they have not presented evidence
that they had been "injured, arrested or detained because of the CPR," and
that "those arrested stand to be charged with violating Batas Pambansa [No.]
880 and other offenses."
2. Neither B.P. No. 880 nor CPR is void on its face. Petitioners cannot honestly
claim that the time, place and manner regulation embodied in B.P. No. 880
violates the three-pronged test for such a measure, to wit: (a) B.P. No. 880 is
content-neutral, i.e., it has no reference to content of regulated speech; (b)
B.P. No. 880 is narrowly tailored to serve a significant governmental
interest, i.e., the interest cannot be equally well served by a means that is
less intrusive of free speech interests; and (c) B.P. No. 880 leaves open
alternative channels for communication of the information.6
3. B.P. No. 880 is content-neutral as seen from the text of the law. Section 5
requires the statement of the public assemblys time, place and manner of
conduct. It entails traffic re-routing to prevent grave public inconvenience
and serious or undue interference in the free flow of commerce and trade.
Furthermore, nothing in B.P. No. 880 authorizes the denial of a permit on the
basis of a rallys program content or the statements of the speakers therein,
except under the constitutional precept of the "clear and present danger
test." The status of B.P. No. 880 as a content-neutral regulation has been
recognized in Osmea v. Comelec.7
4. Adiong v. Comelec8 held that B.P. No. 880 is a content-neutral regulation
of the time, place and manner of holding public assemblies and the law
passes the test for such regulation, namely, these regulations need only a
substantial governmental interest to support them.
5. Sangalang v. Intermediate Appellate Court9 held that a local chief
executive has the authority to exercise police power to meet "the demands of
the common good in terms of traffic decongestion and public convenience."
Furthermore, the discretion given to the mayor is narrowly circumscribed by
Sections 5 (d), and 6 (a), (b), (c), (d), (e), 13 and 15 of the law.
6. The standards set forth in the law are not inconsistent. "Clear and
convincing evidence that the public assembly will create a clear and present
danger to public order, public safety, public convenience, public morals or
public health" and "imminent and grave danger of a substantive evil" both
express the meaning of the "clear and present danger test."10
7. CPR is simply the responsible and judicious use of means allowed by
existing laws and ordinances to protect public interest and restore public
Page 21 of 97

order. Thus, it is not accurate to call it a new rule but rather it is a more proactive and dynamic enforcement of existing laws, regulations and ordinances
to prevent chaos in the streets. It does not replace the rule of maximum
tolerance in B.P. No. 880.
Respondent Mayor Joselito Atienza, for his part, submitted in his Comment that the
petition in G.R. No. 169838 should be dismissed on the ground that Republic Act No.
7160 gives the Mayor power to deny a permit independently of B.P. No. 880; that his
denials of permits were under the "clear and present danger" rule as there was a
clamor to stop rallies that disrupt the economy and to protect the lives of other
people; that J. B. L. Reyes v. Bagatsing,11 Primicias v. Fugoso,12 and Jacinto v.
CA,13 have affirmed the constitutionality of requiring a permit; that the permit is for
the use of a public place and not for the exercise of rights; and that B.P. No. 880 is
not a content-based regulation because it covers all rallies.
The petitions were ordered consolidated on February 14, 2006. After the submission
of all the Comments, the Court set the cases for oral arguments on April 4,
2006,14 stating the principal issues, as follows:
1. On the constitutionality of Batas Pambansa No. 880, specifically Sections 4,
5, 6, 12 13(a) and 14(a) thereof, and Republic Act No. 7160:
(a) Are these content-neutral or content-based regulations?
(b) Are they void on grounds of overbreadth or vagueness?
(c) Do they constitute prior restraint?
(d) Are they undue delegations of powers to Mayors?
(e) Do they violate international human rights treaties and the
Universal Declaration of Human Rights?
2. On the constitutionality and legality of the policy of Calibrated Preemptive
Response (CPR):
(a) Is the policy void on its face or due to vagueness?
(b) Is it void for lack of publication?
(c) Is the policy of CPR void as applied to the rallies of September 26
and October 4, 5 and 6, 2005?
During the course of the oral arguments, the following developments took place and
were approved and/or noted by the Court:
1. Petitioners, in the interest of a speedy resolution of the petitions, withdrew
the portions of their petitions raising factual issues, particularly those raising
the issue of whether B.P. No. 880 and/or CPR is void as applied to the rallies
of September 20, October 4, 5 and 6, 2005.
2. The Solicitor General agreed with the observation of the Chief Justice that
CPR should no longer be used as a legal term inasmuch as, according to
respondents, it was merely a "catchword" intended to clarify what was
thought to be a misunderstanding of the maximum tolerance policy set forth
in B.P. No. 880 and that, as stated in the affidavit executed by Executive
Secretary Eduardo Ermita and submitted to the Ombudsman, it does not
replace B.P. No. 880 and the maximum tolerance policy embodied in that law.
The Court will now proceed to address the principal issues, taking into account the
foregoing developments.
Page 22 of 97

Petitioners standing cannot be seriously challenged. Their right as citizens to

engage in peaceful assembly and exercise the right of petition, as guaranteed by
the Constitution, is directly affected by B.P. No. 880 which requires a permit for all
who would publicly assemble in the nations streets and parks. They have, in fact,
purposely engaged in public assemblies without the required permits to press their
claim that no such permit can be validly required without violating the
Constitutional guarantee. Respondents, on the other hand, have challenged such
action as contrary to law and dispersed the public assemblies held without the
permit.
Section 4 of Article III of the Constitution provides:
Sec. 4. No law shall be passed abridging the freedom of speech, of expression, or of
the press, or the right of the people peaceably to assemble and petition the
government for redress of grievances.
The first point to mark is that the right to peaceably assemble and petition for
redress of grievances is, together with freedom of speech, of expression, and of the
press, a right that enjoys primacy in the realm of constitutional protection. For these
rights constitute the very basis of a functional democratic polity, without which all
the other rights would be meaningless and unprotected. As stated in Jacinto v.
CA,15 the Court, as early as the onset of this century, in U.S. v.
Apurado,16 already upheld the right to assembly and petition, as follows:
There is no question as to the petitioners rights to peaceful assembly to petition
the government for a redress of grievances and, for that matter, to organize or form
associations for purposes not contrary to law, as well as to engage in peaceful
concerted activities. These rights are guaranteed by no less than the Constitution,
particularly Sections 4 and 8 of the Bill of Rights, Section 2(5) of Article IX, and
Section 3 of Article XIII. Jurisprudence abounds with hallowed pronouncements
defending and promoting the peoples exercise of these rights. As early as the onset
of this century, this Court in U.S. vs. Apurado, already upheld the right to assembly
and petition and even went as far as to acknowledge:
"It is rather to be expected that more or less disorder will mark the public assembly
of the people to protest against grievances whether real or imaginary, because on
such occasions feeling is always wrought to a high pitch of excitement, and the
greater, the grievance and the more intense the feeling, the less perfect, as a rule
will be the disciplinary control of the leaders over their irresponsible followers. But if
the prosecution be permitted to seize upon every instance of such disorderly
conduct by individual members of a crowd as an excuse to characterize the
assembly as a seditious and tumultuous rising against the authorities, then the right
to assemble and to petition for redress of grievances would become a delusion and
a snare and the attempt to exercise it on the most righteous occasion and in the
most peaceable manner would expose all those who took part therein to the
severest and most unmerited punishment, if the purposes which they sought to
attain did not happen to be pleasing to the prosecuting authorities. If instances of
disorderly conduct occur on such occasions, the guilty individuals should be sought
out and punished therefor, but the utmost discretion must be exercised in drawing
the line between disorderly and seditious conduct and between an essentially
peaceable assembly and a tumultuous uprising."
Again, in Primicias v. Fugoso,17 the Court likewise sustained the primacy of
freedom of speech and to assembly and petition over comfort and convenience in
the use of streets and parks.
Next, however, it must be remembered that the right, while sacrosanct, is not
absolute. In Primicias, this Court said:
The right to freedom of speech, and to peacefully assemble and petition the
government for redress of grievances, are fundamental personal rights of the
people recognized and guaranteed by the constitutions of democratic countries. But
it is a settled principle growing out of the nature of well-ordered civil societies that
Page 23 of 97

the exercise of those rights is not absolute for it may be so regulated that it shall
not be injurious to the equal enjoyment of others having equal rights, nor injurious
to the rights of the community or society. The power to regulate the exercise of such
and other constitutional rights is termed the sovereign "police power," which is the
power to prescribe regulations, to promote the health, morals, peace, education,
good order or safety, and general welfare of the people. This sovereign police power
is exercised by the government through its legislative branch by the enactment of
laws regulating those and other constitutional and civil rights, and it may be
delegated to political subdivisions, such as towns, municipalities and cities by
authorizing their legislative bodies called municipal and city councils to enact
ordinances for the purpose.18
Reyes v. Bagatsing19 further expounded on the right and its limits, as follows:
1. It is thus clear that the Court is called upon to protect the exercise of the
cognate rights to free speech and peaceful assembly, arising from the denial
of a permit. The Constitution is quite explicit: "No law shall be passed
abridging the freedom of speech, or of the press, or the right of the people
peaceably to assemble and petition the Government for redress of
grievances." Free speech, like free press, may be identified with the liberty to
discuss publicly and truthfully any matter of public concern without
censorship or punishment. There is to be then no previous restraint on the
communication of views or subsequent liability whether in libel suits,
prosecution for sedition, or action for damages, or contempt proceedings
unless there be a "clear and present danger of a substantive evil that [the
State] has a right to prevent." Freedom of assembly connotes the right of the
people to meet peaceably for consultation and discussion of matters of public
concern. It is entitled to be accorded the utmost deference and respect. It is
not to be limited, much less denied, except on a showing, as is the case with
freedom of expression, of a clear and present danger of a substantive evil
that the state has a right to prevent. Even prior to the 1935 Constitution,
Justice Malcolm had occasion to stress that it is a necessary consequence of
our republican institutions and complements the right of free speech. To
paraphrase the opinion of Justice Rutledge, speaking for the majority of the
American Supreme Court in Thomas v. Collins, it was not by accident or
coincidence that the rights to freedom of speech and of the press were
coupled in a single guarantee with the rights of the people peaceably to
assemble and to petition the government for redress of grievances. All these
rights, while not identical, are inseparable. In every case, therefore, where
there is a limitation placed on the exercise of this right, the judiciary is called
upon to examine the effects of the challenged governmental actuation. The
sole justification for a limitation on the exercise of this right, so fundamental
to the maintenance of democratic institutions, is the danger, of a character
both grave and imminent, of a serious evil to public safety, public morals,
public health, or any other legitimate public interest.
2. Nowhere is the rationale that underlies the freedom of expression and
peaceable assembly better expressed than in this excerpt from an opinion of
Justice Frankfurter: "It must never be forgotten, however, that the Bill of
Rights was the child of the Enlightenment. Back of the guaranty of free
speech lay faith in the power of an appeal to reason by all the peaceful
means for gaining access to the mind. It was in order to avert force and
explosions due to restrictions upon rational modes of communication that the
guaranty of free speech was given a generous scope. But utterance in a
context of violence can lose its significance as an appeal to reason and
become part of an instrument of force. Such utterance was not meant to be
sheltered by the Constitution." What was rightfully stressed is the
abandonment of reason, the utterance, whether verbal or printed, being in a
context of violence. It must always be remembered that this right likewise
provides for a safety valve, allowing parties the opportunity to give vent to
their views, even if contrary to the prevailing climate of opinion. For if the
peaceful means of communication cannot be availed of, resort to nonpeaceful means may be the only alternative. Nor is this the sole reason for
the expression of dissent. It means more than just the right to be heard of the
Page 24 of 97

person who feels aggrieved or who is dissatisfied with things as they are. Its
value may lie in the fact that there may be something worth hearing from the
dissenter. That is to ensure a true ferment of ideas. There are, of course, welldefined limits. What is guaranteed is peaceable assembly. One may not
advocate disorder in the name of protest, much less preach rebellion under
the cloak of dissent. The Constitution frowns on disorder or tumult attending
a rally or assembly. Resort to force is ruled out and outbreaks of violence to
be avoided. The utmost calm though is not required. As pointed out in an
early Philippine case, penned in 1907 to be precise, United States v. Apurado:
"It is rather to be expected that more or less disorder will mark the public
assembly of the people to protest against grievances whether real or
imaginary, because on such occasions feeling is always wrought to a high
pitch of excitement, and the greater the grievance and the more intense the
feeling, the less perfect, as a rule, will be the disciplinary control of the
leaders over their irresponsible followers." It bears repeating that for the
constitutional right to be invoked, riotous conduct, injury to property, and
acts of vandalism must be avoided. To give free rein to ones destructive
urges is to call for condemnation. It is to make a mockery of the high estate
occupied by intellectual liberty in our scheme of values.
There can be no legal objection, absent the existence of a clear and present
danger of a substantive evil, on the choice of Luneta as the place where the
peace rally would start. The Philippines is committed to the view expressed in
the plurality opinion, of 1939 vintage, of Justice Roberts in Hague v. CIO:
"Whenever the title of streets and parks may rest, they have immemorially
been held in trust for the use of the public and, time out of mind, have been
used for purposes of assembly, communicating thoughts between citizens,
and discussing public questions. Such use of the streets and public places
has, from ancient times, been a part of the privileges, immunities, rights and
liberties of citizens. The privilege of a citizen of the United States to use the
streets and parks for communication of views on national questions may be
regulated in the interest of all; it is not absolute, but relative, and must be
exercised in subordination to the general comfort and convenience, and in
consonance with peace and good order; but must not, in the guise of
regulation, be abridged or denied." The above excerpt was quoted with
approval in Primicias v. Fugoso. Primicias made explicit what was implicit in
Municipality of Cavite v. Rojas, a 1915 decision, where this Court categorically
affirmed that plazas or parks and streets are outside the commerce of man
and thus nullified a contract that leased Plaza Soledad of plaintiffmunicipality. Reference was made to such plaza "being a promenade for
public use," which certainly is not the only purpose that it could serve. To
repeat, there can be no valid reason why a permit should not be granted for
the proposed march and rally starting from a public park that is the Luneta.
4. Neither can there be any valid objection to the use of the streets to the
gates of the US embassy, hardly two blocks away at the Roxas Boulevard.
Primicias v. Fugoso has resolved any lurking doubt on the matter. In holding
that the then Mayor Fugoso of the City of Manila should grant a permit for a
public meeting at Plaza Miranda in Quiapo, this Court categorically declared:
"Our conclusion finds support in the decision in the case of Willis Cox v. State
of New Hampshire, 312 U.S., 569. In that case, the statute of New Hampshire
P.L. chap. 145, section 2, providing that no parade or procession upon any
ground abutting thereon, shall be permitted unless a special license therefor
shall first be obtained from the selectmen of the town or from licensing
committee, was construed by the Supreme Court of New Hampshire as not
conferring upon the licensing board unfettered discretion to refuse to grant
the license, and held valid. And the Supreme Court of the United States, in its
decision (1941) penned by Chief Justice Hughes affirming the judgment of the
State Supreme Court, held that a statute requiring persons using the public
streets for a parade or procession to procure a special license therefor from
the local authorities is not an unconstitutional abridgment of the rights of
assembly or of freedom of speech and press, where, as the statute is
construed by the state courts, the licensing authorities are strictly limited, in
the issuance of licenses, to a consideration of the time, place, and manner of
Page 25 of 97

the parade or procession, with a view to conserving the public convenience

and of affording an opportunity to provide proper policing, and are not
invested with arbitrary discretion to issue or refuse license, * * *. "Nor should
the point made by Chief Justice Hughes in a subsequent portion of the
opinion be ignored: "Civil liberties, as guaranteed by the Constitution, imply
the existence of an organized society maintaining public order without which
liberty itself would be lost in the excesses of unrestricted abuses. The
authority of a municipality to impose regulations in order to assure the safety
and convenience of the people in the use of public highways has never been
regarded as inconsistent with civil liberties but rather as one of the means of
safeguarding the good order upon which they ultimately depend. The control
of travel on the streets of cities is the most familiar illustration of this
recognition of social need. Where a restriction of the use of highways in that
relation is designed to promote the public convenience in the interest of all, it
cannot be disregarded by the attempted exercise of some civil right which in
other circumstances would be entitled to protection."
xxx
6. x x x The principle under American doctrines was given utterance by Chief
Justice Hughes in these words: "The question, if the rights of free speech and
peaceable assembly are to be preserved, is not as to the auspices under
which the meeting is held but as to its purpose; not as to the relations of the
speakers, but whether their utterances transcend the bounds of the freedom
of speech which the Constitution protects." There could be danger to public
peace and safety if such a gathering were marked by turbulence. That would
deprive it of its peaceful character. Even then, only the guilty parties should
be held accountable. It is true that the licensing official, here respondent
Mayor, is not devoid of discretion in determining whether or not a permit
would be granted. It is not, however, unfettered discretion. While prudence
requires that there be a realistic appraisal not of what may possibly occur but
of what mayprobably occur, given all the relevant circumstances, still the
assumption especially so where the assembly is scheduled for a specific
public place is that the permit must be for the assembly being held there.
The exercise of such a right, in the language of Justice Roberts, speaking for
the American Supreme Court, is not to be "abridged on the plea that it may
be exercised in some other place."
xxx
8. By way of a summary. The applicants for a permit to hold an assembly
should inform the licensing authority of the date, the public place where and
the time when it will take place. If it were a private place, only the consent of
the owner or the one entitled to its legal possession is required. Such
application should be filed well ahead in time to enable the public official
concerned to appraise whether there may be valid objections to the grant of
the permit or to its grant but at another public place. It is an indispensable
condition to such refusal or modification that the clear and present danger
test be the standard for the decision reached. If he is of the view that there is
such an imminent and grave danger of a substantive evil, the applicants
must be heard on the matter. Thereafter, his decision, whether favorable or
adverse, must be transmitted to them at the earliest opportunity. Thus if so
minded, they can have recourse to the proper judicial authority. Free speech
and peaceable assembly, along with the other intellectual freedoms, are
highly ranked in our scheme of constitutional values. It cannot be too strongly
stressed that on the judiciary, -- even more so than on the other departments
rests the grave and delicate responsibility of assuring respect for and
deference to such preferred rights. No verbal formula, no sanctifying phrase
can, of course, dispense with what has been so felicitiously termed by Justice
Holmes "as the sovereign prerogative of judgment." Nonetheless, the
presumption must be to incline the weight of the scales of justice on the side
of such rights, enjoying as they do precedence and primacy. x x x.
Page 26 of 97

B.P. No. 880 was enacted after this Court rendered its decision in Reyes.
The provisions of B.P. No. 880 practically codify the ruling in Reyes:

Reyes v. Bagatsing

B.P. No. 880

(G.R. No. L-65366, November 9, 1983,

Sec. 4. Permit when required and when

not required.-- A written permit shall be
required for any person or persons to
organize and hold a public assembly in
a public place. However, no permit
shall be required if the public assembly
shall be done or made in a freedom
park duly established by law or
ordinance or in private property, in
which case only the consent of the
owner or the one entitled to its legal
possession is required, or in the
campus of a government-owned and
operated educational institution which
shall be subject to the rules and
regulations
of
said
educational
institution. Political meetings or rallies
held during any election campaign
period as provided for by law are not
covered by this Act.

125 SCRA 553, 569)

8. By way of a summary. The
applicants for a permit to hold an
assembly should inform the licensing
authority of the date, the public
placewhere and the time when it will
take place. If it were a private place,
only the consent of the owner or the
one entitled to its legal possession is
required. Such application should be
filed well ahead in time to enable the
public official concerned to appraise
whether there may be valid objections
to the grant of the permit or to its
grant but at another public place. It is
an indispensable condition to such
refusal or modification that the clear
and present danger test be the
standard for the decision reached. If he
is of the view that there is such an
imminent and grave danger of a
substantive evil, the applicants must
be heard on the matter. Thereafter, his
decision, whether favorable or adverse,
must be transmitted to them at the
earliest opportunity. Thus if so minded,
they can have recourse to the proper
judicial authority.

Sec. 5. Application requirements.-- All

applications for a permit shall comply
with the following guidelines:
(a) The applications shall be in
writing and shall include the
names of the leaders or
organizers; the purpose of such
public assembly; the date, time
and duration thereof, and place
or streets to be used for the
intended
activity;
and
the
probable number of persons
participating, the transport and
the public address systems to be
used.
(b)
The
application
shall
incorporate
the
duty
and
responsibility of applicant under
Section 8 hereof.
(c) The application shall be filed
with the office of the mayor of
the city or municipality in whose
jurisdiction the intended activity
is to be held, at least five (5)
working
days
before
the
scheduled public assembly.
(d)
Upon
receipt
of
the
application, which must be duly
acknowledged in writing, the
office of the city or municipal
Page 27 of 97

mayor shall cause the same to

immediately be posted at a
conspicuous place in the city or
municipal building.
Sec. 6. Action to be taken on the
application.
(a) It shall be the duty of the
mayor or any official acting in
his behalf to issue or grant a
permit unless there is clear and
convincing evidence that the
public assembly will create a
clear and present danger to
public order, public safety,
public
convenience,
public
morals or public health.
(b) The mayor or any official
acting in his behalf shall act on
the application within two (2)
working days from the date the
application was filed, failing
which, the permit shall be
deemed granted. Should for any
reason the mayor or any official
acting in his behalf refuse to
accept the application for a
permit, said application shall be
posted by the applicant on the
premises of the office of the
mayor and shall be deemed to
have been filed.
(c) If the mayor is of the view
that there is imminent and grave
danger of a substantive evil
warranting
the
denial
or
modification of the permit, he
shall immediately inform the
applicant who must be heard on
the matter.
(d) The action on the permit
shall be in writing and served on
the applica[nt] within twentyfour hours.
(e) If the mayor or any official
acting in his behalf denies the
application or modifies the terms
thereof in his permit, the
applicant may contest the
decision in an appropriate court
of law.
(f) In case suit is brought before
the Metropolitan Trial Court, the
Municipal
Trial
Court,
the
Page 28 of 97

Municipal Circuit Trial Court, the

Regional Trial Court, or the
Intermediate Appellate Court, its
decisions may be appealed to
the appropriate court within
forty-eight (48) hours after
receipt of the same. No appeal
bond and record on appeal shall
be required. A decision granting
such permit or modifying it in
terms
satisfactory
to
the
applicant shall be immediately
executory.
(g) All cases filed in court under
this section shall be decided
within twenty-four (24) hours
from date of filing. Cases filed
hereunder shall be immediately
endorsed to the executive judge
for disposition or, in his absence,
to the next in rank.
(h) In all cases, any decision
may be appealed to the
Supreme Court.
(i) Telegraphic appeals to be
followed by formal appeals are
hereby allowed.

It is very clear, therefore, that B.P. No. 880 is not an absolute ban of public
assemblies but a restriction that simply regulates the time, place and manner of the
assemblies. This was adverted to in Osmea v. Comelec,20 where the Court
referred to it as a "content-neutral" regulation of the time, place, and manner of
holding public assemblies.21
A fair and impartial reading of B.P. No. 880 thus readily shows that it refers
to all kinds of public assemblies22 that would use public places. The reference to
"lawful cause" does not make it content-based because assemblies really have to be
for lawful causes, otherwise they would not be "peaceable" and entitled to
protection. Neither are the words "opinion," "protesting" and "influencing" in the
definition of public assembly content based, since they can refer to any subject. The
words "petitioning the government for redress of grievances" come from the
wording of the Constitution, so its use cannot be avoided. Finally, maximum
tolerance is for the protection and benefit of all rallyists and is independent of
the content of the expressions in the rally.
Furthermore, the permit can only be denied on the ground of clear and present
danger to public order, public safety, public convenience, public morals or public
health. This is a recognized exception to the exercise of the right even under the
Universal Declaration of Human Rights and the International Covenant on Civil and
Political Rights, thus:
Universal Declaration of Human Rights
Article 20
1. Everyone has the right to freedom of peaceful assembly and association.
Page 29 of 97

xxx
Article 29
1. Everyone has duties to the community in which alone the free and full
development of his personality is possible.
2. In the exercise of his rights and freedoms, everyone shall be subject only
to such limitations as are determined by law solely for the purpose of
securing due recognition and respect for the rights and freedoms of others
and of meeting the just requirements of morality, public order and the
general welfare in a democratic society.
3. These rights and freedoms may in no case be exercised contrary to the
purposes and principles of the United Nations.
The International Covenant on Civil and Political Rights
Article 19.
1. Everyone shall have the right to hold opinions without interference.
2. Everyone shall have the right to freedom of expression; this right shall
include freedom to seek, receive and impart information and ideas of all
kinds, regardless of frontiers, either orally, in writing or in print, in the form of
art, or through any other media of his choice.
3. The exercise of the rights provided for in paragraph 2 of this article carries
with it special duties and responsibilities. It may therefore be subject to
certain restrictions, but these shall only be such as are provided by law and
are necessary:
(a) For respect of the rights or reputations of others;
(b) For the protection of national security or of public order (ordre
public), or of public health or morals.
Contrary to petitioners claim, the law is very clear and is nowhere vague in its
provisions. "Public" does not have to be defined. Its ordinary meaning is well-known.
Websters Dictionary defines it, thus:23
public, n, x x x 2a: an organized body of people x x x 3: a group of people
distinguished by common interests or characteristics x x x.
Not every expression of opinion is a public assembly. The law refers to "rally,
demonstration, march, parade, procession or any other form of mass or concerted
action held in a public place." So it does not cover any and all kinds of gatherings.
Neither is the law overbroad. It regulates the exercise of the right to peaceful
assembly and petition only to the extent needed to avoid a clear and present
danger of the substantive evils Congress has the right to prevent.
There is, likewise, no prior restraint, since the content of the speech is not relevant
to the regulation.
As to the delegation of powers to the mayor, the law provides a precise and
sufficient standard the clear and present danger test stated in Sec. 6(a). The
reference to "imminent and grave danger of a substantive evil" in Sec. 6(c)
substantially means the same thing and is not an inconsistent standard. As to
whether respondent Mayor has the same power independently under Republic Act
No. 716024 is thus not necessary to resolve in these proceedings, and was not
pursued by the parties in their arguments.
Page 30 of 97

Finally, for those who cannot wait, Section 15 of the law provides for an alternative
forum through the creation of freedom parks where no prior permit is needed for
peaceful assembly and petition at any time:
Sec. 15. Freedom parks. Every city and municipality in the country shall within six
months after the effectivity of this Act establish or designate at least one suitable
"freedom park" or mall in their respective jurisdictions which, as far as practicable,
shall be centrally located within the poblacion where demonstrations and meetings
may be held at any time without the need of any prior permit.
In the cities and municipalities of Metropolitan Manila, the respective mayors shall
establish the freedom parks within the period of six months from the effectivity this
Act.
This brings up the point, however, of compliance with this provision.
The Solicitor General stated during the oral arguments that, to his knowledge, only
Cebu City has declared a freedom park Fuente Osmea.
That of Manila, the Sunken Gardens, has since been converted into a golf course, he
added.
If this is so, the degree of observance of B.P. No. 880s mandate that every city and
municipality set aside a freedom park within six months from its effectivity in
1985, or 20 years ago, would be pathetic and regrettable. The matter appears to
have been taken for granted amidst the swell of freedom that rose from the
peaceful revolution of 1986.
Considering that the existence of such freedom parks is an essential part of the
laws system of regulation of the peoples exercise of their right to peacefully
assemble and petition, the Court is constrained to rule that after thirty (30) days
from the finality of this Decision, no prior permit may be required for the exercise of
such right in any public park or plaza of a city or municipality until that city or
municipality shall have complied with Section 15 of the law. For without such
alternative forum, to deny the permit would in effect be to deny the right. Advance
notices should, however, be given to the authorities to ensure proper coordination
and orderly proceedings.
The Court now comes to the matter of the CPR. As stated earlier, the Solicitor
General has conceded that the use of the term should now be discontinued, since it
does not mean anything other than the maximum tolerance policy set forth in B.P.
No. 880. This is stated in the Affidavit of respondent Executive Secretary Eduardo
Ermita, submitted by the Solicitor General, thus:
14. The truth of the matter is the policy of "calibrated preemptive response" is in
consonance with the legal definition of "maximum tolerance" under Section 3 (c) of
B.P. Blg. 880, which is the "highest degree of restraint that the military, police and
other peacekeeping authorities shall observe during a public assembly or in the
dispersal of the same." Unfortunately, however, the phrase "maximum tolerance"
has acquired a different meaning over the years. Many have taken it to mean
inaction on the part of law enforcers even in the face of mayhem and serious
threats to public order. More so, other felt that they need not bother secure a permit
when holding rallies thinking this would be "tolerated." Clearly, the popular
connotation of "maximum tolerance" has departed from its real essence under B.P.
Blg. 880.
15. It should be emphasized that the policy of maximum tolerance is provided under
the same law which requires all pubic assemblies to have a permit, which allows the
dispersal of rallies without a permit, and which recognizes certain instances when
water cannons may be used. This could only mean that "maximum tolerance" is not
in conflict with a "no permit, no rally policy" or with the dispersal and use of water
cannons under certain circumstances for indeed, the maximum amount of tolerance
required is dependent on how peaceful or unruly a mass action is. Our law enforcers
Page 31 of 97

should calibrate their response based on the circumstances on the ground with the
view to preempting the outbreak of violence.
16. Thus, when I stated that calibrated preemptive response is being enforced in
lieu of maximum tolerance I clearly was not referring to its legal definition but to the
distorted and much abused definition that it has now acquired. I only wanted to
disabuse the minds of the public from the notion that law enforcers would shirk their
responsibility of keeping the peace even when confronted with dangerously
threatening behavior. I wanted to send a message that we would no longer be lax in
enforcing the law but would henceforth follow it to the letter. Thus I said, "we have
instructed the PNP as well as the local government units to strictly enforce a no
permit, no rally policy . . . arrest all persons violating the laws of the land . . .
unlawful mass actions will be dispersed." None of these is at loggerheads with the
letter and spirit of Batas Pambansa Blg. 880. It is thus absurd for complainants to
even claim that I ordered my co-respondents to violate any law.25
At any rate, the Court rules that in view of the maximum tolerance mandated by
B.P. No. 880, CPR serves no valid purpose if it means the same thing as maximum
tolerance and is illegal if it means something else. Accordingly, what is to be
followed is and should be that mandated by the law itself, namely, maximum
tolerance, which specifically means the following:
Sec. 3. Definition of terms. For purposes of this Act:
xxx
(c) "Maximum tolerance" means the highest degree of restraint that the military,
police and other peace keeping authorities shall observe during a public assembly
or in the dispersal of the same.
xxx
Sec. 9. Non-interference by law enforcement authorities. Law enforcement
agencies shall not interfere with the holding of a public assembly. However, to
adequately ensure public safety, a law enforcement contingent under the command
of a responsible police officer may be detailed and stationed in a place at least one
hundred (100) meters away from the area of activity ready to maintain peace and
order at all times.
Sec. 10. Police assistance when requested. It shall be imperative for law
enforcement agencies, when their assistance is requested by the leaders or
organizers, to perform their duties always mindful that their responsibility to provide
proper protection to those exercising their right peaceably to assemble and the
freedom of expression is primordial.1avvphil.net Towards this end, law enforcement
agencies shall observe the following guidelines:
(a) Members of the law enforcement contingent who deal with the
demonstrators shall be in complete uniform with their nameplates and units
to which they belong displayed prominently on the front and dorsal parts of
their uniform and must observe the policy of "maximum tolerance" as herein
defined;
(b) The members of the law enforcement contingent shall not carry any kind
of firearms but may be equipped with baton or riot sticks, shields, crash
helmets with visor, gas masks, boots or ankle high shoes with shin guards;
(c) Tear gas, smoke grenades, water cannons, or any similar anti-riot device
shall not be used unless the public assembly is attended by actual violence or
serious threats of violence, or deliberate destruction of property.
Sec. 11. Dispersal of public assembly with permit. No public assembly with a
permit shall be dispersed. However, when an assembly becomes violent, the police
may disperse such public assembly as follows:
Page 32 of 97

(a) At the first sign of impending violence, the ranking officer of the law
enforcement contingent shall call the attention of the leaders of the public
assembly and ask the latter to prevent any possible disturbance;
(b) If actual violence starts to a point where rocks or other harmful objects
from the participants are thrown at the police or at the non-participants, or at
any property causing damage to such property, the ranking officer of the law
enforcement contingent shall audibly warn the participants that if the
disturbance persists, the public assembly will be dispersed;
(c) If the violence or disturbance prevailing as stated in the preceding
subparagraph should not stop or abate, the ranking officer of the law
enforcement contingent shall audibly issue a warning to the participants of
the public assembly, and after allowing a reasonable period of time to lapse,
shall immediately order it to forthwith disperse;
(d) No arrest of any leader, organizer or participant shall also be made during
the public assembly unless he violates during the assembly a law, statute,
ordinance or any provision of this Act. Such arrest shall be governed by
Article 125 of the Revised Penal Code, as amended;
(d) Isolated acts or incidents of disorder or breach of the peace during the
public assembly shall not constitute a ground for dispersal.
xxx
Sec. 12. Dispersal of public assembly without permit. When the public assembly is
held without a permit where a permit is required, the said public assembly may be
peacefully dispersed.
Sec. 13. Prohibited acts. The following shall constitute violations of the Act:
(e) Obstructing, impeding, disrupting or otherwise denying the exercise of the right
to peaceful assembly;
(f) The unnecessary firing of firearms by a member of any law enforcement agency
or any person to disperse the public assembly;
(g) Acts described hereunder if committed within one hundred (100) meters from
the area of activity of the public assembly or on the occasion thereof:
xxx
4. the carrying of firearms by members of the law enforcement unit;
5. the interfering with or intentionally disturbing the holding of a public assembly by
the use of a motor vehicle, its horns and loud sound systems.
Furthermore, there is need to address the situation adverted to by petitioners where
mayors do not act on applications for a permit and when the police demand a
permit and the rallyists could not produce one, the rally is immediately dispersed. In
such a situation, as a necessary consequence and part of maximum tolerance,
rallyists who can show the police an application duly filed on a given date can, after
two days from said date, rally in accordance with their application without the need
to show a permit, the grant of the permit being then presumed under the law, and it
will be the burden of the authorities to show that there has been a denial of the
application, in which case the rally may be peacefully dispersed following the
procedure of maximum tolerance prescribed by the law.
In sum, this Court reiterates its basic policy of upholding the fundamental rights of
our people, especially freedom of expression and freedom of assembly. In several
policy addresses, Chief Justice Artemio V. Panganiban has repeatedly vowed to
Page 33 of 97

uphold the liberty of our people and to nurture their prosperity. He said that "in
cases involving liberty, the scales of justice should weigh heavily against the
government and in favor of the poor, the oppressed, the marginalized, the
dispossessed and the weak. Indeed, laws and actions that restrict fundamental
rights come to the courts with a heavy presumption against their validity. These
laws and actions are subjected toheightened scrutiny."26
For this reason, the so-called calibrated preemptive response policy has no place in
our legal firmament and must be struck down as a darkness that shrouds freedom.
It merely confuses our people and is used by some police agents to justify abuses.
On the other hand, B.P. No. 880 cannot be condemned as unconstitutional; it does
not curtail or unduly restrict freedoms; it merely regulates the use of public places
as to the time, place and manner of assemblies. Far from being insidious,
"maximum tolerance" is for the benefit of rallyists, not the government. The
delegation to the mayors of the power to issue rally "permits" is valid because it is
subject to the constitutionally-sound "clear and present danger" standard.
In this Decision, the Court goes even one step further in safeguarding liberty by
giving local governments a deadline of 30 days within which to designate specific
freedom parks as provided under B.P. No. 880. If, after that period, no such parks
are so identified in accordance with Section 15 of the law, all public parks and
plazas of the municipality or city concerned shall in effect be deemed freedom
parks; no prior permit of whatever kind shall be required to hold an assembly
therein. The only requirement will be written notices to the police and the mayors
office to allow proper coordination and orderly activities.
WHEREFORE, the petitions are GRANTED in part, and respondents, more particularly
the Secretary of the Interior and Local Governments, are DIRECTED to take all
necessary steps for the immediate compliance with Section 15 of Batas Pambansa
No. 880 through the establishment or designation of at least one suitable freedom
park or plaza in every city and municipality of the country. After thirty (30) days
from the finality of this Decision, subject to the giving of advance notices, no prior
permit shall be required to exercise the right to peaceably assemble and petition in
the public parks or plazas of a city or municipality that has not yet complied with
Section 15 of the law. Furthermore, Calibrated Preemptive Response (CPR), insofar
as it would purport to differ from or be in lieu of maximum tolerance,
is NULL and VOID and respondents are ENJOINED to REFRAIN from using it and
to STRICTLY OBSERVE the requirements of maximum tolerance. The petitions
are DISMISSED in all other respects, and the constitutionality of Batas Pambansa No.
880 is SUSTAINED.
No costs.
SO ORDERED.

Page 34 of 97

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 175241

February 24, 2010

INTEGRATED BAR OF THE PHILIPPINES represented by its National President, Jose

Anselmo I. Cadiz, H. HARRY L. ROQUE, and JOEL RUIZ BUTUYAN, Petitioners,
vs.
HONORABLE MANILA MAYOR JOSE "LITO" ATIENZA, Respondent.
DECISION
CARPIO MORALES, J.:
Petitioners Integrated Bar of the Philippines1 (IBP) and lawyers H. Harry L. Roque and Joel R.
Butuyan appeal the June 28, 2006 Decision2 and the October 26, 2006 Resolution3 of the Court
of Appeals that found no grave abuse of discretion on the part of respondent Jose "Lito" Atienza,
the then mayor of Manila, in granting a permit to rally in a venue other than the one applied for
by the IBP.
On June 15, 2006, the IBP, through its then National President Jose Anselmo Cadiz (Cadiz), filed
with the Office of the City Mayor of Manila a letter application4 for a permit to rally at the foot
Page 35 of 97

of Mendiola Bridge on June 22, 2006 from 2:30 p.m. to 5:30 p.m. to be participated in by IBP
officers and members, law students and multi-sectoral organizations.
Respondent issued a permit5 dated June 16, 2006 allowing the IBP to stage a rally on given date
but indicated therein Plaza Miranda as the venue, instead of Mendiola Bridge, which permit the
IBP received on June 19, 2006.
Aggrieved, petitioners filed on June 21, 2006 before the Court of Appeals a petition for certiorari
docketed as CA-G.R. SP No. 94949.6 The petition having been unresolved within 24 hours from
its filing, petitioners filed before this Court on June 22, 2006 a petition for certiorari docketed as
G.R. No. 172951 which assailed the appellate courts inaction or refusal to resolve the petition
within the period provided under the Public Assembly Act of 1985.7
The Court, by Resolutions of July 26, 2006, August 30, 2006 and November 20, 2006,
respectively, denied the petition for being moot and academic, denied the relief that the petition
be heard on the merits in view of the pendency of CA-G.R. SP No. 94949, and denied the motion
for reconsideration.
The rally pushed through on June 22, 2006 at Mendiola Bridge, after Cadiz discussed with
P/Supt. Arturo Paglinawan whose contingent from the Manila Police District (MPD) earlier
barred petitioners from proceeding thereto. Petitioners allege that the participants voluntarily
dispersed after the peaceful conduct of the program.
The MPD thereupon instituted on June 26, 2006 a criminal action,8 docketed as I.S. No. 06I12501, against Cadiz for violating the Public Assembly Act in staging a rally at a venue not
indicated in the permit, to which charge Cadiz filed a Counter-Affidavit of August 3, 2006.
In the meantime, the appellate court ruled, in CA-G.R. SP No. 94949, by the first assailed
issuance, that the petition became moot and lacked merit. The appellate court also denied
petitioners motion for reconsideration by the second assailed issuance.
Hence, the filing of the present petition for review on certiorari, to which respondent filed his
Comment of November 18, 2008 which merited petitioners Reply of October 2, 2009.
The main issue is whether the appellate court erred in holding that the modification of the venue
in IBPs rally permit does not constitute grave abuse of discretion.
Petitioners assert that the partial grant of the application runs contrary to the Pubic Assembly Act
and violates their constitutional right to freedom of expression and public assembly.
The Court shall first resolve the preliminary issue of mootness.
Undoubtedly, the petition filed with the appellate court on June 21, 2006 became moot upon the
passing of the date of the rally on June 22, 2006.
A moot and academic case is one that ceases to present a justiciable controversy by virtue of
supervening events, so that a declaration thereon would be of no practical use or value.
Generally, courts decline jurisdiction over such case or dismiss it on ground of mootness.
However, even in cases where supervening events had made the cases moot, this Court did not
hesitate to resolve the legal or constitutional issues raised to formulate controlling principles to
guide the bench, bar and public. Moreover, as an exception to the rule on mootness, courts will
decide a question otherwise moot if it is capable of repetition, yet evading review.9
In the present case, the question of the legality of a modification of a permit to rally will arise
each time the terms of an intended rally are altered by the concerned official, yet it evades
review, owing to the limited time in processing the application where the shortest allowable
period is five days prior to the assembly. The susceptibility of recurrence compels the Court to
definitively resolve the issue at hand.
Page 36 of 97

Respecting petitioners argument that the issues presented in CA-G.R. SP No. 94949 pose a
prejudicial question to the criminal case against Cadiz, the Court finds it improper to resolve the
same in the present case.
Under the Rules,10 the existence of a prejudicial question is a ground in a petition to suspend
proceedings in a criminal action. Since suspension of the proceedings in the criminal action may
be made only upon petition and not at the instance of the judge or the investigating
prosecutor,11 the latter cannot take cognizance of a claim of prejudicial question without a
petition to suspend being filed. Since a petition to suspend can be filed only in the criminal
action,12 the determination of the pendency of a prejudicial question should be made at the first
instance in the criminal action, and not before this Court in an appeal from the civil action.
In proceeding to resolve the petition on the merits, the appellate court found no grave abuse of
discretion on the part of respondent because the Public Assembly Act does not categorically
require respondent to specify in writing the imminent and grave danger of a substantive evil
which warrants the denial or modification of the permit and merely mandates that the action
taken shall be in writing and shall be served on respondent within 24 hours. The appellate court
went on to hold that respondent is authorized to regulate the exercise of the freedom of
expression and of public assembly which are not absolute, and that the challenged permit is
consistent with Plaza Mirandas designation as a freedom park where protest rallies are allowed
without permit.
The Court finds for petitioners.
Section 6 of the Public Assembly Act reads:
Section 6. Action to be taken on the application (a) It shall be the duty of the mayor or any official acting in his behalf to issue or grant a
permit unless there is clear and convincing evidence that the public assembly will create a
clear and present danger to public order, public safety, public convenience, public morals
or public health.
(b) The mayor or any official acting in his behalf shall act on the application within two
(2) working days from the date the application was filed, failing which, the permit shall
be deemed granted. Should for any reason the mayor or any official acting in his behalf
refuse to accept the application for a permit, said application shall be posted by the
applicant on the premises of the office of the mayor and shall be deemed to have been
filed.
(c) If the mayor is of the view that there is imminent and grave danger of a substantive
evil warranting the denial or modification of the permit, he shall immediately inform the
applicant who must be heard on the matter.
(d) The action on the permit shall be in writing and served on the application [sic] within
twenty-four hours.
(e) If the mayor or any official acting in his behalf denies the application or modifies the
terms thereof in his permit, the applicant may contest the decision in an appropriate court
of law.
(f) In case suit is brought before the Metropolitan Trial Court, the Municipal Trial Court,
the Municipal Circuit Trial Court, the Regional Trial Court, or the Intermediate Appellate
Court, its decisions may be appealed to the appropriate court within forty-eight (48) hours
after receipt of the same. No appeal bond and record on appeal shall be required. A
decision granting such permit or modifying it in terms satisfactory to the applicant shall,
be immediately executory.

Page 37 of 97

(g) All cases filed in court under this Section shall be decided within twenty-four (24)
hours from date of filing. Cases filed hereunder shall be immediately endorsed to the
executive judge for disposition or, in his absence, to the next in rank.
(h) In all cases, any decision may be appealed to the Supreme Court.
(i) Telegraphic appeals to be followed by formal appeals are hereby allowed.
(underscoring supplied)
In Bayan, Karapatan, Kilusang Magbubukid ng Pilipinas (KMP) v. Ermita,13 the Court
reiterated:
x x x Freedom of assembly connotes the right of the people to meet peaceably for consultation
and discussion of matters of public concern. It is entitled to be accorded the utmost deference
and respect. It is not to be limited, much less denied, except on a showing, as is the case with
freedom of expression, of a clear and present danger of a substantive evil that the state has a right
to prevent. Even prior to the 1935 Constitution, Justice Malcolm had occasion to stress that it is a
necessary consequence of our republican institutions and complements the right of free speech.
To paraphrase the opinion of Justice Rutledge, speaking for the majority of the American
Supreme Court in Thomas v. Collins, it was not by accident or coincidence that the rights to
freedom of speech and of the press were coupled in a single guarantee with the rights of the
people peaceably to assemble and to petition the government for redress of grievances. All these
rights, while not identical, are inseparable. In every case, therefore, where there is a limitation
placed on the exercise of this right, the judiciary is called upon to examine the effects of the
challenged governmental actuation. The sole justification for a limitation on the exercise of this
right, so fundamental to the maintenance of democratic institutions, is the danger, of a character
both grave and imminent, of a serious evil to public safety, public morals, public health, or any
other legitimate public interest.14 (emphasis supplied)
The Court in Bayan stated that the provisions of the Public Assembly Act of 1985 practically
codified the 1983 ruling in Reyes v. Bagatsing.15 In juxtaposing Sections 4 to 6 of the Public
Assembly Act with the pertinent portion of the Reyes case, the Court elucidated as follows:
x x x [The public official concerned shall] appraise whether there may be valid objections to the
grant of the permit or to its grant but at another public place. It is an indispensable condition to
such refusal or modification that the clear and present danger test be the standard for the decision
reached. If he is of the view that there is such an imminent and grave danger of a substantive
evil, the applicants must be heard on the matter. Thereafter, his decision, whether favorable or
adverse, must be transmitted to them at the earliest opportunity. Thus if so minded, they can have
recourse to the proper judicial authority.16 (italics and underscoring supplied)
In modifying the permit outright, respondent gravely abused his discretion when he did not
immediately inform the IBP who should have been heard first on the matter of his perceived
imminent and grave danger of a substantive evil that may warrant the changing of the venue. The
opportunity to be heard precedes the action on the permit, since the applicant may directly go to
court after an unfavorable action on the permit.1avvphi1
Respondent failed to indicate how he had arrived at modifying the terms of the permit against the
standard of a clear and present danger test which, it bears repeating, is an indispensable condition
to such modification. Nothing in the issued permit adverts to an imminent and grave danger of a
substantive evil, which "blank" denial or modification would, when granted imprimatur as the
appellate court would have it, render illusory any judicial scrutiny thereof.
It is true that the licensing official, here respondent Mayor, is not devoid of discretion in
determining whether or not a permit would be granted. It is not, however, unfettered discretion.
While prudence requires that there be a realistic appraisal not of what may possibly occur but of
what may probably occur, given all the relevant circumstances, still the assumption especially
so where the assembly is scheduled for a specific public place is that the permit must be for the
assembly being held there. The exercise of such a right, in the language of Justice Roberts,
Page 38 of 97

speaking for the American Supreme Court, is not to be "abridged on the plea that it may be
exercised in some other place."17 (emphasis and underscoring supplied)
Notably, respondent failed to indicate in his Comment any basis or explanation for his action. It
smacks of whim and caprice for respondent to just impose a change of venue for an assembly
that was slated for a specific public place. It is thus reversible error for the appellate court not to
have found such grave abuse of discretion and, under specific statutory
provision, not to have modified the permit "in terms satisfactory to the applicant."18
WHEREFORE, the assailed Decision and Resolution of the Court of Appeals in CA-G.R. SP No.
94949 areREVERSED. The Court DECLARES that respondent committed grave abuse of
discretion in modifying the rally permit issued on June 16, 2006 insofar as it altered the venue
from Mendiola Bridge to Plaza Miranda.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 122846

January 20, 2009

WHITE LIGHT CORPORATION, TITANIUM CORPORATION and STA. MESA TOURIST &
DEVELOPMENT CORPORATION, Petitioners,
vs.
CITY OF MANILA, represented by DE CASTRO, MAYOR ALFREDO S. LIM, Respondent.
DECISION
Tinga, J.:
With another city ordinance of Manila also principally involving the tourist district as subject,
the Court is confronted anew with the incessant clash between government power and individual
liberty in tandem with the archetypal tension between law and morality.
In City of Manila v. Laguio, Jr.,1 the Court affirmed the nullification of a city ordinance barring
the operation of motels and inns, among other establishments, within the Ermita-Malate area.
The petition at bar assails a similarly-motivated city ordinance that prohibits those same
establishments from offering short-time admission, as well as pro-rated or "wash up" rates for
such abbreviated stays. Our earlier decision tested the city ordinance against our sacred
constitutional rights to liberty, due process and equal protection of law. The same parameters
apply to the present petition.
This Petition2 under Rule 45 of the Revised Rules on Civil Procedure, which seeks the reversal
of the Decision3 in C.A.-G.R. S.P. No. 33316 of the Court of Appeals, challenges the validity of
Manila City Ordinance No. 7774 entitled, "An Ordinance Prohibiting Short-Time Admission,
Short-Time Admission Rates, and Wash-Up Rate Schemes in Hotels, Motels, Inns, Lodging
Houses, Pension Houses, and Similar Establishments in the City of Manila" (the Ordinance).
I.
The facts are as follows:
Page 39 of 97

On December 3, 1992, City Mayor Alfredo S. Lim (Mayor Lim) signed into law the
Ordinance.4 The Ordinance is reproduced in full, hereunder:
SECTION 1. Declaration of Policy. It is hereby the declared policy of the City Government to
protect the best interest, health and welfare, and the morality of its constituents in general and the
youth in particular.
SEC. 2. Title. This ordinance shall be known as "An Ordinance" prohibiting short time admission
in hotels, motels, lodging houses, pension houses and similar establishments in the City of
Manila.
SEC. 3. Pursuant to the above policy, short-time admission and rate [sic], wash-up rate or other
similarly concocted terms, are hereby prohibited in hotels, motels, inns, lodging houses, pension
houses and similar establishments in the City of Manila.
SEC. 4. Definition of Term[s]. Short-time admission shall mean admittance and charging of
room rate for less than twelve (12) hours at any given time or the renting out of rooms more than
twice a day or any other term that may be concocted by owners or managers of said
establishments but would mean the same or would bear the same meaning.
SEC. 5. Penalty Clause. Any person or corporation who shall violate any provision of this
ordinance shall upon conviction thereof be punished by a fine of Five Thousand (P5,000.00)
Pesos or imprisonment for a period of not exceeding one (1) year or both such fine and
imprisonment at the discretion of the court; Provided, That in case of [a] juridical person, the
president, the manager, or the persons in charge of the operation thereof shall be liable: Provided,
further, That in case of subsequent conviction for the same offense, the business license of the
guilty party shall automatically be cancelled.
SEC. 6. Repealing Clause. Any or all provisions of City ordinances not consistent with or
contrary to this measure or any portion hereof are hereby deemed repealed.
SEC. 7. Effectivity. This ordinance shall take effect immediately upon approval.
Enacted by the city Council of Manila at its regular session today, November 10, 1992.
Approved by His Honor, the Mayor on December 3, 1992.
On December 15, 1992, the Malate Tourist and Development Corporation (MTDC) filed a
complaint for declaratory relief with prayer for a writ of preliminary injunction and/or temporary
restraining order ( TRO)5 with the Regional Trial Court (RTC) of Manila, Branch 9 impleading
as defendant, herein respondent City of Manila (the City) represented by Mayor Lim.6 MTDC
prayed that the Ordinance, insofar as it includes motels and inns as among its prohibited
establishments, be declared invalid and unconstitutional. MTDC claimed that as owner and
operator of the Victoria Court in Malate, Manila it was authorized by Presidential Decree (P.D.)
No. 259 to admit customers on a short time basis as well as to charge customers wash up rates
for stays of only three hours.
On December 21, 1992, petitioners White Light Corporation (WLC), Titanium Corporation (TC)
and Sta. Mesa Tourist and Development Corporation (STDC) filed a motion to intervene and to
admit attached complaint-in-intervention7 on the ground that the Ordinance directly affects their
business interests as operators of drive-in-hotels and motels in Manila.8 The three companies are
components of the Anito Group of Companies which owns and operates several hotels and
motels in Metro Manila.9
On December 23, 1992, the RTC granted the motion to intervene.10 The RTC also notified the
Solicitor General of the proceedings pursuant to then Rule 64, Section 4 of the Rules of Court.
On the same date, MTDC moved to withdraw as plaintiff.11

Page 40 of 97

On December 28, 1992, the RTC granted MTDC's motion to withdraw.12 The RTC issued a
TRO on January 14, 1993, directing the City to cease and desist from enforcing the
Ordinance.13 The City filed an Answer dated January 22, 1993 alleging that the Ordinance is a
legitimate exercise of police power.14
On February 8, 1993, the RTC issued a writ of preliminary injunction ordering the city to desist
from the enforcement of the Ordinance.15 A month later, on March 8, 1993, the Solicitor
General filed his Comment arguing that the Ordinance is constitutional.
During the pre-trial conference, the WLC, TC and STDC agreed to submit the case for decision
without trial as the case involved a purely legal question.16 On October 20, 1993, the RTC
rendered a decision declaring the Ordinance null and void. The dispositive portion of the
decision reads:
WHEREFORE, in view of all the foregoing, [O]rdinance No. 7774 of the City of Manila is
hereby declared null and void.
Accordingly, the preliminary injunction heretofor issued is hereby made permanent.
SO ORDERED.17
The RTC noted that the ordinance "strikes at the personal liberty of the individual guaranteed and
jealously guarded by the Constitution."18 Reference was made to the provisions of the
Constitution encouraging private enterprises and the incentive to needed investment, as well as
the right to operate economic enterprises. Finally, from the observation that the illicit
relationships the Ordinance sought to dissuade could nonetheless be consummated by simply
paying for a 12-hour stay, the RTC likened the law to the ordinance annulled in Ynot v.
Intermediate Appellate Court,19 where the legitimate purpose of preventing indiscriminate
slaughter of carabaos was sought to be effected through an inter-province ban on the transport of
carabaos and carabeef.
The City later filed a petition for review on certiorari with the Supreme Court.20 The petition
was docketed as G.R. No. 112471. However in a resolution dated January 26, 1994, the Court
treated the petition as a petition forcertiorari and referred the petition to the Court of Appeals.21
Before the Court of Appeals, the City asserted that the Ordinance is a valid exercise of police
power pursuant to Section 458 (4)(iv) of the Local Government Code which confers on cities,
among other local government units, the power:
[To] regulate the establishment, operation and maintenance of cafes, restaurants, beerhouses,
hotels, motels, inns, pension houses, lodging houses and other similar establishments, including
tourist guides and transports.22
The Ordinance, it is argued, is also a valid exercise of the power of the City under Article III,
Section 18(kk) of the Revised Manila Charter, thus:
"to enact all ordinances it may deem necessary and proper for the sanitation and safety, the
furtherance of the prosperity and the promotion of the morality, peace, good order, comfort,
convenience and general welfare of the city and its inhabitants, and such others as be necessary
to carry into effect and discharge the powers and duties conferred by this Chapter; and to fix
penalties for the violation of ordinances which shall not exceed two hundred pesos fine or six
months imprisonment, or both such fine and imprisonment for a single offense.23
Petitioners argued that the Ordinance is unconstitutional and void since it violates the right to
privacy and the freedom of movement; it is an invalid exercise of police power; and it is an
unreasonable and oppressive interference in their business.
The Court of Appeals reversed the decision of the RTC and affirmed the constitutionality of the
Ordinance.24First, it held that the Ordinance did not violate the right to privacy or the freedom
Page 41 of 97

of movement, as it only penalizes the owners or operators of establishments that admit

individuals for short time stays. Second, the virtually limitless reach of police power is only
constrained by having a lawful object obtained through a lawful method. The lawful objective of
the Ordinance is satisfied since it aims to curb immoral activities. There is a lawful method since
the establishments are still allowed to operate. Third, the adverse effect on the establishments is
justified by the well-being of its constituents in general. Finally, as held in Ermita-Malate Motel
Operators Association v. City Mayor of Manila, liberty is regulated by law.
TC, WLC and STDC come to this Court via petition for review on certiorari.25 In their petition
and Memorandum, petitioners in essence repeat the assertions they made before the Court of
Appeals. They contend that the assailed Ordinance is an invalid exercise of police power.
II.
We must address the threshold issue of petitioners standing. Petitioners allege that as owners of
establishments offering "wash-up" rates, their business is being unlawfully interfered with by the
Ordinance. However, petitioners also allege that the equal protection rights of their clients are
also being interfered with. Thus, the crux of the matter is whether or not these establishments
have the requisite standing to plead for protection of their patrons' equal protection rights.
Standing or locus standi is the ability of a party to demonstrate to the court sufficient connection
to and harm from the law or action challenged to support that party's participation in the case.
More importantly, the doctrine of standing is built on the principle of separation of
powers,26 sparing as it does unnecessary interference or invalidation by the judicial branch of
the actions rendered by its co-equal branches of government.
The requirement of standing is a core component of the judicial system derived directly from the
Constitution.27 The constitutional component of standing doctrine incorporates concepts which
concededly are not susceptible of precise definition.28 In this jurisdiction, the extancy of "a
direct and personal interest" presents the most obvious cause, as well as the standard test for a
petitioner's standing.29 In a similar vein, the United States Supreme Court reviewed and
elaborated on the meaning of the three constitutional standing requirements of injury, causation,
and redressability in Allen v. Wright.30
Nonetheless, the general rules on standing admit of several exceptions such as the overbreadth
doctrine, taxpayer suits, third party standing and, especially in the Philippines, the doctrine of
transcendental importance.31
For this particular set of facts, the concept of third party standing as an exception and the
overbreadth doctrine are appropriate. In Powers v. Ohio,32 the United States Supreme Court
wrote that: "We have recognized the right of litigants to bring actions on behalf of third parties,
provided three important criteria are satisfied: the litigant must have suffered an injury-in-fact,
thus giving him or her a "sufficiently concrete interest" in the outcome of the issue in dispute; the
litigant must have a close relation to the third party; and there must exist some hindrance to the
third party's ability to protect his or her own interests."33 Herein, it is clear that the business
interests of the petitioners are likewise injured by the Ordinance. They rely on the patronage of
their customers for their continued viability which appears to be threatened by the enforcement
of the Ordinance. The relative silence in constitutional litigation of such special interest groups in
our nation such as the American Civil Liberties Union in the United States may also be construed
as a hindrance for customers to bring suit.34
American jurisprudence is replete with examples where parties-in-interest were allowed standing
to advocate or invoke the fundamental due process or equal protection claims of other persons or
classes of persons injured by state action. In Griswold v. Connecticut,35 the United States
Supreme Court held that physicians had standing to challenge a reproductive health statute that
would penalize them as accessories as well as to plead the constitutional protections available to
their patients. The Court held that:

Page 42 of 97

"The rights of husband and wife, pressed here, are likely to be diluted or adversely affected
unless those rights are considered in a suit involving those who have this kind of confidential
relation to them."36
An even more analogous example may be found in Craig v. Boren,37 wherein the United States
Supreme Court held that a licensed beverage vendor has standing to raise the equal protection
claim of a male customer challenging a statutory scheme prohibiting the sale of beer to males
under the age of 21 and to females under the age of 18. The United States High Court explained
that the vendors had standing "by acting as advocates of the rights of third parties who seek
access to their market or function."38
Assuming arguendo that petitioners do not have a relationship with their patrons for the former to
assert the rights of the latter, the overbreadth doctrine comes into play. In overbreadth analysis,
challengers to government actionare in effect permitted to raise the rights of third parties.
Generally applied to statutes infringing on the freedom of speech, the overbreadth doctrine
applies when a statute needlessly restrains even constitutionally guaranteed rights.39 In this
case, the petitioners claim that the Ordinance makes a sweeping intrusion into the right to liberty
of their clients. We can see that based on the allegations in the petition, the Ordinance suffers
from overbreadth.
We thus recognize that the petitioners have a right to assert the constitutional rights of their
clients to patronize their establishments for a "wash-rate" time frame.
III.
To students of jurisprudence, the facts of this case will recall to mind not only the recent City of
Manila ruling, but our 1967 decision in Ermita-Malate Hotel and Motel Operations Association,
Inc., v. Hon. City Mayor of Manila.40 Ermita-Malate concerned the City ordinance requiring
patrons to fill up a prescribed form stating personal information such as name, gender,
nationality, age, address and occupation before they could be admitted to a motel, hotel or
lodging house. This earlier ordinance was precisely enacted to minimize certain practices
deemed harmful to public morals. A purpose similar to the annulled ordinance in City of
Manila which sought a blanket ban on motels, inns and similar establishments in the ErmitaMalate area. However, the constitutionality of the ordinance in Ermita-Malate was sustained by
the Court.
The common thread that runs through those decisions and the case at bar goes beyond the
singularity of the localities covered under the respective ordinances. All three ordinances were
enacted with a view of regulating public morals including particular illicit activity in transient
lodging establishments. This could be described as the middle case, wherein there is no
wholesale ban on motels and hotels but the services offered by these establishments have been
severely restricted. At its core, this is another case about the extent to which the State can intrude
into and regulate the lives of its citizens.
The test of a valid ordinance is well established. A long line of decisions including City of
Manila has held that for an ordinance to be valid, it must not only be within the corporate powers
of the local government unit to enact and pass according to the procedure prescribed by law, it
must also conform to the following substantive requirements: (1) must not contravene the
Constitution or any statute; (2) must not be unfair or oppressive; (3) must not be partial or
discriminatory; (4) must not prohibit but may regulate trade; (5) must be general and consistent
with public policy; and (6) must not be unreasonable.41
The Ordinance prohibits two specific and distinct business practices, namely wash rate
admissions and renting out a room more than twice a day. The ban is evidently sought to be
rooted in the police power as conferred on local government units by the Local Government
Code through such implements as the general welfare clause.
A.
Page 43 of 97

Police power, while incapable of an exact definition, has been purposely veiled in general terms
to underscore its comprehensiveness to meet all exigencies and provide enough room for an
efficient and flexible response as the conditions warrant.42 Police power is based upon the
concept of necessity of the State and its corresponding right to protect itself and its
people.43 Police power has been used as justification for numerous and varied actions by the
State. These range from the regulation of dance halls,44 movie theaters,45 gas
stations46 and cockpits.47 The awesome scope of police power is best demonstrated by the
fact that in its hundred or so years of presence in our nations legal system, its use has rarely been
denied.
The apparent goal of the Ordinance is to minimize if not eliminate the use of the covered
establishments for illicit sex, prostitution, drug use and alike. These goals, by themselves, are
unimpeachable and certainly fall within the ambit of the police power of the State. Yet the
desirability of these ends do not sanctify any and all means for their achievement. Those means
must align with the Constitution, and our emerging sophisticated analysis of its guarantees to the
people. The Bill of Rights stands as a rebuke to the seductive theory of Macchiavelli, and,
sometimes even, the political majorities animated by his cynicism.
Even as we design the precedents that establish the framework for analysis of due process or
equal protection questions, the courts are naturally inhibited by a due deference to the co-equal
branches of government as they exercise their political functions. But when we are compelled to
nullify executive or legislative actions, yet another form of caution emerges. If the Court were
animated by the same passing fancies or turbulent emotions that motivate many political
decisions, judicial integrity is compromised by any perception that the judiciary is merely the
third political branch of government. We derive our respect and good standing in the annals of
history by acting as judicious and neutral arbiters of the rule of law, and there is no surer way to
that end than through the development of rigorous and sophisticated legal standards through
which the courts analyze the most fundamental and far-reaching constitutional questions of the
day.
B.
The primary constitutional question that confronts us is one of due process, as guaranteed under
Section 1, Article III of the Constitution. Due process evades a precise definition.48 The
purpose of the guaranty is to prevent arbitrary governmental encroachment against the life,
liberty and property of individuals. The due process guaranty serves as a protection against
arbitrary regulation or seizure. Even corporations and partnerships are protected by the guaranty
insofar as their property is concerned.
The due process guaranty has traditionally been interpreted as imposing two related but distinct
restrictions on government, "procedural due process" and "substantive due process." Procedural
due process refers to the procedures that the government must follow before it deprives a person
of life, liberty, or property.49 Procedural due process concerns itself with government action
adhering to the established process when it makes an intrusion into the private sphere. Examples
range from the form of notice given to the level of formality of a hearing.
If due process were confined solely to its procedural aspects, there would arise absurd situation
of arbitrary government action, provided the proper formalities are followed. Substantive due
process completes the protection envisioned by the due process clause. It inquires whether the
government has sufficient justification for depriving a person of life, liberty, or property.50
The question of substantive due process, moreso than most other fields of law, has reflected
dynamism in progressive legal thought tied with the expanded acceptance of fundamental
freedoms. Police power, traditionally awesome as it may be, is now confronted with a more
rigorous level of analysis before it can be upheld. The vitality though of constitutional due
process has not been predicated on the frequency with which it has been utilized to achieve a
liberal result for, after all, the libertarian ends should sometimes yield to the prerogatives of the
State. Instead, the due process clause has acquired potency because of the sophisticated
methodology that has emerged to determine the proper metes and bounds for its application.
Page 44 of 97

C.
The general test of the validity of an ordinance on substantive due process grounds is best tested
when assessed with the evolved footnote 4 test laid down by the U.S. Supreme Court in U.S. v.
Carolene Products.51 Footnote 4 of the Carolene Products case acknowledged that the
judiciary would defer to the legislature unless there is a discrimination against a "discrete and
insular" minority or infringement of a "fundamental right."52 Consequently, two standards of
judicial review were established: strict scrutiny for laws dealing with freedom of the mind or
restricting the political process, and the rational basis standard of review for economic
legislation.
A third standard, denominated as heightened or immediate scrutiny, was later adopted by the
U.S. Supreme Court for evaluating classifications based on gender53 and
legitimacy.54 Immediate scrutiny was adopted by the U.S. Supreme Court in Craig,55 after
the Court declined to do so in Reed v. Reed.56 While the test may have first been articulated in
equal protection analysis, it has in the United States since been applied in all substantive due
process cases as well.
We ourselves have often applied the rational basis test mainly in analysis of equal protection
challenges.57 Using the rational basis examination, laws or ordinances are upheld if they
rationally further a legitimate governmental interest.58 Under intermediate review,
governmental interest is extensively examined and the availability of less restrictive measures is
considered.59 Applying strict scrutiny, the focus is on the presence of compelling, rather than
substantial, governmental interest and on the absence of less restrictive means for achieving that
interest.
In terms of judicial review of statutes or ordinances, strict scrutiny refers to the standard for
determining the quality and the amount of governmental interest brought to justify the regulation
of fundamental freedoms.60 Strict scrutiny is used today to test the validity of laws dealing
with the regulation of speech, gender, or race as well as other fundamental rights as expansion
from its earlier applications to equal protection.61 The United States Supreme Court has
expanded the scope of strict scrutiny to protect fundamental rights such as suffrage,62 judicial
access63 and interstate travel.64
If we were to take the myopic view that an Ordinance should be analyzed strictly as to its effect
only on the petitioners at bar, then it would seem that the only restraint imposed by the law
which we are capacitated to act upon is the injury to property sustained by the petitioners, an
injury that would warrant the application of the most deferential standard the rational basis test.
Yet as earlier stated, we recognize the capacity of the petitioners to invoke as well the
constitutional rights of their patrons those persons who would be deprived of availing short
time access or wash-up rates to the lodging establishments in question.
Viewed cynically, one might say that the infringed rights of these customers were are trivial since
they seem shorn of political consequence. Concededly, these are not the sort of cherished rights
that, when proscribed, would impel the people to tear up their cedulas. Still, the Bill of Rights
does not shelter gravitas alone. Indeed, it is those "trivial" yet fundamental freedoms which the
people reflexively exercise any day without the impairing awareness of their constitutional
consequence that accurately reflect the degree of liberty enjoyed by the people. Liberty, as
integrally incorporated as a fundamental right in the Constitution, is not a Ten Commandmentsstyle enumeration of what may or what may not be done; but rather an atmosphere of freedom
where the people do not feel labored under a Big Brother presence as they interact with each
other, their society and nature, in a manner innately understood by them as inherent, without
doing harm or injury to others.
D.
The rights at stake herein fall within the same fundamental rights to liberty which we upheld in
City of Manila v. Hon. Laguio, Jr. We expounded on that most primordial of rights, thus:
Page 45 of 97

Liberty as guaranteed by the Constitution was defined by Justice Malcolm to include "the right to
exist and the right to be free from arbitrary restraint or servitude. The term cannot be dwarfed
into mere freedom from physical restraint of the person of the citizen, but is deemed to embrace
the right of man to enjoy the facilities with which he has been endowed by his Creator, subject
only to such restraint as are necessary for the common welfare."[65 ] In accordance with this
case, the rights of the citizen to be free to use his faculties in all lawful ways; to live and work
where he will; to earn his livelihood by any lawful calling; and to pursue any avocation are all
deemed embraced in the concept of liberty.[66 ]
The U.S. Supreme Court in the case of Roth v. Board of Regents, sought to clarify the meaning
of "liberty." It said:
While the Court has not attempted to define with exactness the liberty . . . guaranteed [by the
Fifth and Fourteenth Amendments], the term denotes not merely freedom from bodily restraint
but also the right of the individual to contract, to engage in any of the common occupations of
life, to acquire useful knowledge, to marry, establish a home and bring up children, to worship
God according to the dictates of his own conscience, and generally to enjoy those privileges long
recognized . . . as essential to the orderly pursuit of happiness by free men. In a Constitution for a
free people, there can be no doubt that the meaning of "liberty" must be broad
indeed.67 [Citations omitted]
It cannot be denied that the primary animus behind the ordinance is the curtailment of sexual
behavior. The City asserts before this Court that the subject establishments "have gained
notoriety as venue of prostitution, adultery and fornications in Manila since they provide the
necessary atmosphere for clandestine entry, presence and exit and thus became the ideal haven
for prostitutes and thrill-seekers."68 Whether or not this depiction of a mise-en-scene of vice
is accurate, it cannot be denied that legitimate sexual behavior among willing married or
consenting single adults which is constitutionally protected69 will be curtailed as well, as it
was in the City of Manila case. Our holding therein retains significance for our purposes:
The concept of liberty compels respect for the individual whose claim to privacy and interference
demands respect. As the case of Morfe v. Mutuc, borrowing the words of Laski, so very aptly
stated:
Man is one among many, obstinately refusing reduction to unity. His separateness, his isolation,
are indefeasible; indeed, they are so fundamental that they are the basis on which his civic
obligations are built. He cannot abandon the consequences of his isolation, which are, broadly
speaking, that his experience is private, and the will built out of that experience personal to
himself. If he surrenders his will to others, he surrenders himself. If his will is set by the will of
others, he ceases to be a master of himself. I cannot believe that a man no longer a master of
himself is in any real sense free.
Indeed, the right to privacy as a constitutional right was recognized in Morfe, the invasion of
which should be justified by a compelling state interest. Morfe accorded recognition to the right
to privacy independently of its identification with liberty; in itself it is fully deserving of
constitutional protection. Governmental powers should stop short of certain intrusions into the
personal life of the citizen.70
We cannot discount other legitimate activities which the Ordinance would proscribe or impair.
There are very legitimate uses for a wash rate or renting the room out for more than twice a day.
Entire families are known to choose pass the time in a motel or hotel whilst the power is
momentarily out in their homes. In transit passengers who wish to wash up and rest between trips
have a legitimate purpose for abbreviated stays in motels or hotels. Indeed any person or groups
of persons in need of comfortable private spaces for a span of a few hours with purposes other
than having sex or using illegal drugs can legitimately look to staying in a motel or hotel as a
convenient alternative.
E.
Page 46 of 97

That the Ordinance prevents the lawful uses of a wash rate depriving patrons of a product and the
petitioners of lucrative business ties in with another constitutional requisite for the legitimacy of
the Ordinance as a police power measure. It must appear that the interests of the public generally,
as distinguished from those of a particular class, require an interference with private rights and
the means must be reasonably necessary for the accomplishment of the purpose and not unduly
oppressive of private rights.71 It must also be evident that no other alternative for the
accomplishment of the purpose less intrusive of private rights can work. More importantly, a
reasonable relation must exist between the purposes of the measure and the means employed for
its accomplishment, for even under the guise of protecting the public interest, personal rights and
those pertaining to private property will not be permitted to be arbitrarily invaded.72
Lacking a concurrence of these requisites, the police measure shall be struck down as an
arbitrary intrusion into private rights. As held in Morfe v. Mutuc, the exercise of police power is
subject to judicial review when life, liberty or property is affected.73 However, this is not in
any way meant to take it away from the vastness of State police power whose exercise enjoys the
presumption of validity.74
Similar to the Comelec resolution requiring newspapers to donate advertising space to
candidates, this Ordinance is a blunt and heavy instrument.75 The Ordinance makes no
distinction between places frequented by patrons engaged in illicit activities and patrons engaged
in legitimate actions. Thus it prevents legitimate use of places where illicit activities are rare or
even unheard of. A plain reading of section 3 of the Ordinance shows it makes no classification
of places of lodging, thus deems them all susceptible to illicit patronage and subject them
without exception to the unjustified prohibition.
The Court has professed its deep sentiment and tenderness of the Ermita-Malate area, its
longtime home,76 and it is skeptical of those who wish to depict our capital city the Pearl of
the Orient as a modern-day Sodom or Gomorrah for the Third World set. Those still steeped in
Nick Joaquin-dreams of the grandeur of Old Manila will have to accept that Manila like all
evolving big cities, will have its problems. Urban decay is a fact of mega cities such as Manila,
and vice is a common problem confronted by the modern metropolis wherever in the world. The
solution to such perceived decay is not to prevent legitimate businesses from offering a
legitimate product. Rather, cities revive themselves by offering incentives for new businesses to
sprout up thus attracting the dynamism of individuals that would bring a new grandeur to Manila.
The behavior which the Ordinance seeks to curtail is in fact already prohibited and could in fact
be diminished simply by applying existing laws. Less intrusive measures such as curbing the
proliferation of prostitutes and drug dealers through active police work would be more effective
in easing the situation. So would the strict enforcement of existing laws and regulations
penalizing prostitution and drug use. These measures would have minimal intrusion on the
businesses of the petitioners and other legitimate merchants. Further, it is apparent that the
Ordinance can easily be circumvented by merely paying the whole day rate without any
hindrance to those engaged in illicit activities. Moreover, drug dealers and prostitutes can in fact
collect "wash rates" from their clientele by charging their customers a portion of the rent for
motel rooms and even apartments.
IV.
We reiterate that individual rights may be adversely affected only to the extent that may fairly be
required by the legitimate demands of public interest or public welfare. The State is a leviathan
that must be restrained from needlessly intruding into the lives of its citizens. However wellintentioned the Ordinance may be, it is in effect an arbitrary and whimsical intrusion into the
rights of the establishments as well as their patrons. The Ordinance needlessly restrains the
operation of the businesses of the petitioners as well as restricting the rights of their patrons
without sufficient justification. The Ordinance rashly equates wash rates and renting out a room
more than twice a day with immorality without accommodating innocuous intentions.
The promotion of public welfare and a sense of morality among citizens deserves the full
endorsement of the judiciary provided that such measures do not trample rights this Court is
Page 47 of 97

sworn to protect.77 The notion that the promotion of public morality is a function of the State
is as old as Aristotle.78 The advancement of moral relativism as a school of philosophy does
not de-legitimize the role of morality in law, even if it may foster wider debate on which
particular behavior to penalize. It is conceivable that a society with relatively little shared
morality among its citizens could be functional so long as the pursuit of sharply variant moral
perspectives yields an adequate accommodation of different interests.79
To be candid about it, the oft-quoted American maxim that "you cannot legislate morality" is
ultimately illegitimate as a matter of law, since as explained by Calabresi, that phrase is more
accurately interpreted as meaning that efforts to legislate morality will fail if they are widely at
variance with public attitudes about right and wrong.80 Our penal laws, for one, are founded
on age-old moral traditions, and as long as there are widely accepted distinctions between right
and wrong, they will remain so oriented.
Yet the continuing progression of the human story has seen not only the acceptance of the rightwrong distinction, but also the advent of fundamental liberties as the key to the enjoyment of life
to the fullest. Our democracy is distinguished from non-free societies not with any more
extensive elaboration on our part of what is moral and immoral, but from our recognition that the
individual liberty to make the choices in our lives is innate, and protected by the State.
Independent and fair-minded judges themselves are under a moral duty to uphold the
Constitution as the embodiment of the rule of law, by reason of their expression of consent to do
so when they take the oath of office, and because they are entrusted by the people to uphold the
law.81
Even as the implementation of moral norms remains an indispensable complement to
governance, that prerogative is hardly absolute, especially in the face of the norms of due process
of liberty. And while the tension may often be left to the courts to relieve, it is possible for the
government to avoid the constitutional conflict by employing more judicious, less drastic means
to promote morality.
WHEREFORE, the Petition is GRANTED. The Decision of the Court of Appeals
is REVERSED, and the Decision of the Regional Trial Court of Manila, Branch 9,
is REINSTATED. Ordinance No. 7774 is hereby declared UNCONSTITUTIONAL. No
pronouncement as to costs.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
Page 48 of 97

G.R. No. 91649 May 14, 1991

ATTORNEYS HUMBERTO BASCO, EDILBERTO BALCE, SOCRATES MARANAN AND
LORENZO SANCHEZ,petitioners,
vs.
PHILIPPINE AMUSEMENTS AND GAMING CORPORATION (PAGCOR), respondent.
PARAS, J.:p
A TV ad proudly announces:
"The new PAGCOR responding through responsible gaming."
But the petitioners think otherwise, that is why, they filed the instant petition seeking to annul the
Philippine Amusement and Gaming Corporation (PAGCOR) Charter PD 1869, because it is
allegedly contrary to morals, public policy and order, and because
A. It constitutes a waiver of a right prejudicial to a third person with a right
recognized by law. It waived the Manila City government's right to impose taxes
and license fees, which is recognized by law;
B. For the same reason stated in the immediately preceding paragraph, the law has
intruded into the local government's right to impose local taxes and license fees.
This, in contravention of the constitutionally enshrined principle of local
autonomy;
C. It violates the equal protection clause of the constitution in that it legalizes
PAGCOR conducted gambling, while most other forms of gambling are
outlawed, together with prostitution, drug trafficking and other vices;
D. It violates the avowed trend of the Cory government away from monopolistic
and crony economy, and toward free enterprise and privatization. (p. 2, Amended
Petition; p. 7, Rollo)
In their Second Amended Petition, petitioners also claim that PD 1869 is contrary to the declared
national policy of the "new restored democracy" and the people's will as expressed in the 1987
Constitution. The decree is said to have a "gambling objective" and therefore is contrary to
Sections 11, 12 and 13 of Article II, Sec. 1 of Article VIII and Section 3 (2) of Article XIV, of the
present Constitution (p. 3, Second Amended Petition; p. 21, Rollo).
The procedural issue is whether petitioners, as taxpayers and practicing lawyers (petitioner
Basco being also the Chairman of the Committee on Laws of the City Council of Manila), can
question and seek the annulment of PD 1869 on the alleged grounds mentioned above.
The Philippine Amusements and Gaming Corporation (PAGCOR) was created by virtue of P.D.
1067-A dated January 1, 1977 and was granted a franchise under P.D. 1067-B also dated January
1, 1977 "to establish, operate and maintain gambling casinos on land or water within the
territorial jurisdiction of the Philippines." Its operation was originally conducted in the well
known floating casino "Philippine Tourist." The operation was considered a success for it proved
to be a potential source of revenue to fund infrastructure and socio-economic projects, thus, P.D.
1399 was passed on June 2, 1978 for PAGCOR to fully attain this objective.
Subsequently, on July 11, 1983, PAGCOR was created under P.D. 1869 to enable the
Government to regulate and centralize all games of chance authorized by existing franchise or
permitted by law, under the following declared policy
Sec. 1. Declaration of Policy. It is hereby declared to be the policy of the State
to centralize and integrate all games of chance not heretofore authorized by
existing franchises or permitted by law in order to attain the following objectives:
Page 49 of 97

(a) To centralize and integrate the right and authority to operate and conduct
games of chance into one corporate entity to be controlled, administered and
supervised by the Government.
(b) To establish and operate clubs and casinos, for amusement and recreation,
including sports gaming pools, (basketball, football, lotteries, etc.) and such other
forms of amusement and recreation including games of chance, which may be
allowed by law within the territorial jurisdiction of the Philippines and which will:
(1) generate sources of additional revenue to fund infrastructure and socio-civic
projects, such as flood control programs, beautification, sewerage and sewage
projects, Tulungan ng Bayan Centers, Nutritional Programs, Population Control
and such other essential public services; (2) create recreation and integrated
facilities which will expand and improve the country's existing tourist attractions;
and (3) minimize, if not totally eradicate, all the evils, malpractices and
corruptions that are normally prevalent on the conduct and operation of gambling
clubs and casinos without direct government involvement. (Section 1, P.D. 1869)
To attain these objectives PAGCOR is given territorial jurisdiction all over the Philippines.
Under its Charter's repealing clause, all laws, decrees, executive orders, rules and regulations,
inconsistent therewith, are accordingly repealed, amended or modified.
It is reported that PAGCOR is the third largest source of government revenue, next to the Bureau
of Internal Revenue and the Bureau of Customs. In 1989 alone, PAGCOR earned P3.43 Billion,
and directly remitted to the National Government a total of P2.5 Billion in form of franchise tax,
government's income share, the President's Social Fund and Host Cities' share. In addition,
PAGCOR sponsored other socio-cultural and charitable projects on its own or in cooperation
with various governmental agencies, and other private associations and organizations. In its 3 1/2
years of operation under the present administration, PAGCOR remitted to the government a total
of P6.2 Billion. As of December 31, 1989, PAGCOR was employing 4,494 employees in its nine
(9) casinos nationwide, directly supporting the livelihood of Four Thousand Four Hundred
Ninety-Four (4,494) families.
But the petitioners, are questioning the validity of P.D. No. 1869. They allege that the same is
"null and void" for being "contrary to morals, public policy and public order," monopolistic and
tends toward "crony economy", and is violative of the equal protection clause and local
autonomy as well as for running counter to the state policies enunciated in Sections 11 (Personal
Dignity and Human Rights), 12 (Family) and 13 (Role of Youth) of Article II, Section 1 (Social
Justice) of Article XIII and Section 2 (Educational Values) of Article XIV of the 1987
Constitution.
This challenge to P.D. No. 1869 deserves a searching and thorough scrutiny and the most
deliberate consideration by the Court, involving as it does the exercise of what has been
described as "the highest and most delicate function which belongs to the judicial department of
the government." (State v. Manuel, 20 N.C. 144; Lozano v. Martinez, 146 SCRA 323).
As We enter upon the task of passing on the validity of an act of a co-equal and coordinate
branch of the government We need not be reminded of the time-honored principle, deeply
ingrained in our jurisprudence, that a statute is presumed to be valid. Every presumption must be
indulged in favor of its constitutionality. This is not to say that We approach Our task with
diffidence or timidity. Where it is clear that the legislature or the executive for that matter, has
over-stepped the limits of its authority under the constitution, We should not hesitate to wield the
axe and let it fall heavily, as fall it must, on the offending statute (Lozano v. Martinez, supra).
In Victoriano v. Elizalde Rope Workers' Union, et al, 59 SCRA 54, the Court thru Mr. Justice
Zaldivar underscored the
. . . thoroughly established principle which must be followed in all cases where
questions of constitutionality as obtain in the instant cases are involved. All
presumptions are indulged in favor of constitutionality; one who attacks a statute
Page 50 of 97

alleging unconstitutionality must prove its invalidity beyond a reasonable doubt;

that a law may work hardship does not render it unconstitutional; that if any
reasonable basis may be conceived which supports the statute, it will be upheld
and the challenger must negate all possible basis; that the courts are not concerned
with the wisdom, justice, policy or expediency of a statute and that a liberal
interpretation of the constitution in favor of the constitutionality of legislation
should be adopted. (Danner v. Hass, 194 N.W. 2nd 534, 539; Spurbeck v. Statton,
106 N.W. 2nd 660, 663; 59 SCRA 66; see also e.g. Salas v. Jarencio, 46 SCRA
734, 739 [1970]; Peralta v. Commission on Elections, 82 SCRA 30, 55 [1978];
and Heirs of Ordona v. Reyes, 125 SCRA 220, 241-242 [1983] cited in Citizens
Alliance for Consumer Protection v. Energy Regulatory Board, 162 SCRA 521,
540)
Of course, there is first, the procedural issue. The respondents are questioning the legal
personality of petitioners to file the instant petition.
Considering however the importance to the public of the case at bar, and in keeping with the
Court's duty, under the 1987 Constitution, to determine whether or not the other branches of
government have kept themselves within the limits of the Constitution and the laws and that they
have not abused the discretion given to them, the Court has brushed aside technicalities of
procedure and has taken cognizance of this petition. (Kapatiran ng mga Naglilingkod sa
Pamahalaan ng Pilipinas Inc. v. Tan, 163 SCRA 371)
With particular regard to the requirement of proper party as applied in the cases
before us, We hold that the same is satisfied by the petitioners and intervenors
because each of them has sustained or is in danger of sustaining an immediate
injury as a result of the acts or measures complained of. And even if, strictly
speaking they are not covered by the definition, it is still within the wide
discretion of the Court to waive the requirement and so remove the impediment to
its addressing and resolving the serious constitutional questions raised.
In the first Emergency Powers Cases, ordinary citizens and taxpayers were
allowed to question the constitutionality of several executive orders issued by
President Quirino although they were involving only an indirect and general
interest shared in common with the public. The Court dismissed the objection that
they were not proper parties and ruled that "the transcendental importance to the
public of these cases demands that they be settled promptly and definitely,
brushing aside, if we must technicalities of procedure." We have since then
applied the exception in many other cases. (Association of Small Landowners in
the Philippines, Inc. v. Sec. of Agrarian Reform, 175 SCRA 343).
Having disposed of the procedural issue, We will now discuss the substantive issues raised.
Gambling in all its forms, unless allowed by law, is generally prohibited. But the prohibition of
gambling does not mean that the Government cannot regulate it in the exercise of its police
power.
The concept of police power is well-established in this jurisdiction. It has been defined as the
"state authority to enact legislation that may interfere with personal liberty or property in order to
promote the general welfare." (Edu v. Ericta, 35 SCRA 481, 487) As defined, it consists of (1) an
imposition or restraint upon liberty or property, (2) in order to foster the common good. It is not
capable of an exact definition but has been, purposely, veiled in general terms to underscore its
all-comprehensive embrace. (Philippine Association of Service Exporters, Inc. v. Drilon, 163
SCRA 386).
Its scope, ever-expanding to meet the exigencies of the times, even to anticipate the future where
it could be done, provides enough room for an efficient and flexible response to conditions and
circumstances thus assuming the greatest benefits. (Edu v. Ericta, supra)
Page 51 of 97

It finds no specific Constitutional grant for the plain reason that it does not owe its origin to the
charter. Along with the taxing power and eminent domain, it is inborn in the very fact of
statehood and sovereignty. It is a fundamental attribute of government that has enabled it to
perform the most vital functions of governance. Marshall, to whom the expression has been
credited, refers to it succinctly as the plenary power of the state "to govern its citizens". (Tribe,
American Constitutional Law, 323, 1978). The police power of the State is a power co-extensive
with self-protection and is most aptly termed the "law of overwhelming necessity." (Rubi v.
Provincial Board of Mindoro, 39 Phil. 660, 708) It is "the most essential, insistent, and
illimitable of powers." (Smith Bell & Co. v. National, 40 Phil. 136) It is a dynamic force that
enables the state to meet the agencies of the winds of change.
What was the reason behind the enactment of P.D. 1869?
P.D. 1869 was enacted pursuant to the policy of the government to "regulate and centralize thru
an appropriate institution all games of chance authorized by existing franchise or permitted by
law" (1st whereas clause, PD 1869). As was subsequently proved, regulating and centralizing
gambling operations in one corporate entity the PAGCOR, was beneficial not just to the
Government but to society in general. It is a reliable source of much needed revenue for the cash
strapped Government. It provided funds for social impact projects and subjected gambling to
"close scrutiny, regulation, supervision and control of the Government" (4th Whereas Clause, PD
1869). With the creation of PAGCOR and the direct intervention of the Government, the evil
practices and corruptions that go with gambling will be minimized if not totally eradicated.
Public welfare, then, lies at the bottom of the enactment of PD 1896.
Petitioners contend that P.D. 1869 constitutes a waiver of the right of the City of Manila to
impose taxes and legal fees; that the exemption clause in P.D. 1869 is violative of the principle of
local autonomy. They must be referring to Section 13 par. (2) of P.D. 1869 which exempts
PAGCOR, as the franchise holder from paying any "tax of any kind or form, income or
otherwise, as well as fees, charges or levies of whatever nature, whether National or Local."
(2) Income and other taxes. a) Franchise Holder: No tax of any kind or form,
income or otherwise as well as fees, charges or levies of whatever nature, whether
National or Local, shall be assessed and collected under this franchise from the
Corporation; nor shall any form or tax or charge attach in any way to the earnings
of the Corporation, except a franchise tax of five (5%) percent of the gross
revenues or earnings derived by the Corporation from its operations under this
franchise. Such tax shall be due and payable quarterly to the National
Government and shall be in lieu of all kinds of taxes, levies, fees or assessments
of any kind, nature or description, levied, established or collected by any
municipal, provincial or national government authority (Section 13 [2]).
Their contention stated hereinabove is without merit for the following reasons:
(a) The City of Manila, being a mere Municipal corporation has no inherent right to impose taxes
(Icard v. City of Baguio, 83 Phil. 870; City of Iloilo v. Villanueva, 105 Phil. 337; Santos v.
Municipality of Caloocan, 7 SCRA 643). Thus, "the Charter or statute must plainly show an
intent to confer that power or the municipality cannot assume it" (Medina v. City of Baguio, 12
SCRA 62). Its "power to tax" therefore must always yield to a legislative act which is superior
having been passed upon by the state itself which has the "inherent power to tax" (Bernas, the
Revised [1973] Philippine Constitution, Vol. 1, 1983 ed. p. 445).
(b) The Charter of the City of Manila is subject to control by Congress. It should be stressed that
"municipal corporations are mere creatures of Congress" (Unson v. Lacson, G.R. No. 7909,
January 18, 1957) which has the power to "create and abolish municipal corporations" due to its
"general legislative powers" (Asuncion v. Yriantes, 28 Phil. 67; Merdanillo v. Orandia, 5 SCRA
541). Congress, therefore, has the power of control over Local governments (Hebron v. Reyes,
G.R. No. 9124, July 2, 1950). And if Congress can grant the City of Manila the power to tax
certain matters, it can also provide for exemptions or even take back the power.
Page 52 of 97

(c) The City of Manila's power to impose license fees on gambling, has long been revoked. As
early as 1975, the power of local governments to regulate gambling thru the grant of "franchise,
licenses or permits" was withdrawn by P.D. No. 771 and was vested exclusively on the National
Government, thus:
Sec. 1. Any provision of law to the contrary notwithstanding, the authority of
chartered cities and other local governments to issue license, permit or other form
of franchise to operate, maintain and establish horse and dog race tracks, jai-alai
and other forms of gambling is hereby revoked.
Sec. 2. Hereafter, all permits or franchises to operate, maintain and establish,
horse and dog race tracks, jai-alai and other forms of gambling shall be issued by
the national government upon proper application and verification of the
qualification of the applicant . . .
Therefore, only the National Government has the power to issue "licenses or permits" for the
operation of gambling. Necessarily, the power to demand or collect license fees which is a
consequence of the issuance of "licenses or permits" is no longer vested in the City of Manila.
(d) 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 stocks are owned by the National Government. In addition to its corporate
powers (Sec. 3, Title II, PD 1869) it also exercises regulatory powers thus:
Sec. 9. Regulatory Power. The Corporation shall maintain a Registry of the
affiliated entities, and shall exercise all the powers, authority and the
responsibilities vested in the Securities and Exchange Commission over such
affiliating entities mentioned under the preceding section, including, but not
limited to amendments of Articles of Incorporation and By-Laws, changes in
corporate term, structure, capitalization and other matters concerning the
operation of the affiliated entities, the provisions of the Corporation Code of the
Philippines to the contrary notwithstanding, except only with respect to original
incorporation.
PAGCOR has a dual role, to operate and to 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. (MC Culloch v.
Marland, 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 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).
Page 53 of 97

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.
(e) Petitioners also argue that the Local Autonomy Clause of the Constitution will be violated by
P.D. 1869. This is a pointless argument. Article X of the 1987 Constitution (on Local Autonomy)
provides:
Sec. 5. Each local government unit shall have the power to create its own source
of revenue and to levy taxes, fees, and other charges subject to such guidelines
and limitation as the congress may provide, consistent with the basic policy on
local autonomy. Such taxes, fees and charges shall accrue exclusively to the local
government. (emphasis supplied)
The power of local government to "impose taxes and fees" is always subject to "limitations"
which Congress may provide by law. Since PD 1869 remains an "operative" law until "amended,
repealed or revoked" (Sec. 3, Art. XVIII, 1987 Constitution), its "exemption clause" remains as
an exception to the exercise of the power of local governments to impose taxes and fees. It
cannot therefore be violative but rather is consistent with the principle of local autonomy.
Besides, the principle of local autonomy under the 1987 Constitution simply means
"decentralization" (III Records of the 1987 Constitutional Commission, pp. 435-436, as cited in
Bernas, The Constitution of the Republic of the Philippines, Vol. II, First Ed., 1988, p. 374). It
does not make local governments sovereign within the state or an "imperium in imperio."
Local Government has been described as a political subdivision of a nation or
state which is constituted by law and has substantial control of local affairs. In a
unitary system of government, such as the government under the Philippine
Constitution, local governments can only be an intra sovereign subdivision of one
sovereign nation, it cannot be an imperium in imperio. Local government in such
a system can only mean a measure of decentralization of the function of
government. (emphasis supplied)
As to what state powers should be "decentralized" and what may be delegated to local
government units remains a matter of policy, which concerns wisdom. It is therefore a political
question. (Citizens Alliance for Consumer Protection v. Energy Regulatory Board, 162 SCRA
539).
What is settled is that the matter of regulating, taxing or otherwise dealing with gambling is a
State concern and hence, it is the sole prerogative of the State to retain it or delegate it to local
governments.
As gambling is usually an offense against the State, legislative grant or express
charter power is generally necessary to empower the local corporation to deal
with the subject. . . . In the absence of express grant of power to enact, ordinance
provisions on this subject which are inconsistent with the state laws are void.
(Ligan v. Gadsden, Ala App. 107 So. 733 Ex-Parte Solomon, 9, Cals. 440, 27 PAC
757 following in re Ah You, 88 Cal. 99, 25 PAC 974, 22 Am St. Rep. 280, 11
LRA 480, as cited in Mc Quinllan Vol. 3 Ibid, p. 548, emphasis supplied)
Petitioners next contend that P.D. 1869 violates the equal protection clause of the Constitution,
because "it legalized PAGCOR conducted gambling, while most gambling are outlawed
together with prostitution, drug trafficking and other vices" (p. 82, Rollo).
We, likewise, find no valid ground to sustain this contention. The petitioners' posture ignores the
well-accepted meaning of the clause "equal protection of the laws." The clause does not preclude
classification of individuals who may be accorded different treatment under the law as long as
the classification is not unreasonable or arbitrary (Itchong v. Hernandez, 101 Phil. 1155). A law
Page 54 of 97

does not have to operate in equal force on all persons or things to be conformable to Article III,
Section 1 of the Constitution (DECS v. San Diego, G.R. No. 89572, December 21, 1989).
The "equal protection clause" does not prohibit the Legislature from establishing classes of
individuals or objects upon which different rules shall operate (Laurel v. Misa, 43 O.G. 2847).
The Constitution does not require situations which are different in fact or opinion to be treated in
law as though they were the same (Gomez v. Palomar, 25 SCRA 827).
Just how P.D. 1869 in legalizing gambling conducted by PAGCOR is violative of the equal
protection is not clearly explained in the petition. The mere fact that some gambling activities
like cockfighting (P.D 449) horse racing (R.A. 306 as amended by RA 983), sweepstakes,
lotteries and races (RA 1169 as amended by B.P. 42) are legalized under certain conditions, while
others are prohibited, does not render the applicable laws, P.D. 1869 for one, unconstitutional.
If the law presumably hits the evil where it is most felt, it is not to be overthrown
because there are other instances to which it might have been applied. (Gomez v.
Palomar, 25 SCRA 827)
The equal protection clause of the 14th Amendment does not mean that all
occupations called by the same name must be treated the same way; the state may
do what it can to prevent which is deemed as evil and stop short of those cases in
which harm to the few concerned is not less than the harm to the public that
would insure if the rule laid down were made mathematically exact. (Dominican
Hotel v. Arizona, 249 US 2651).
Anent petitioners' claim that PD 1869 is contrary to the "avowed trend of the Cory Government
away from monopolies and crony economy and toward free enterprise and privatization" suffice
it to state that this is not a ground for this Court to nullify P.D. 1869. If, indeed, PD 1869 runs
counter to the government's policies then it is for the Executive Department to recommend to
Congress its repeal or amendment.
The judiciary does not settle policy issues. The Court can only declare what the
law is and not what the law should be. Under our system of government, policy
issues are within the domain of the political branches of government and of the
people themselves as the repository of all state power. (Valmonte v. Belmonte, Jr.,
170 SCRA 256).
On the issue of "monopoly," however, the Constitution provides that:
Sec. 19. The State shall regulate or prohibit monopolies when public interest so
requires. No combinations in restraint of trade or unfair competition shall be
allowed. (Art. XII, National Economy and Patrimony)
It should be noted that, as the provision is worded, monopolies are not necessarily prohibited by
the Constitution. The state must still decide whether public interest demands that monopolies be
regulated or prohibited. Again, this is a matter of policy for the Legislature to decide.
On petitioners' allegation that P.D. 1869 violates Sections 11 (Personality Dignity) 12 (Family)
and 13 (Role of Youth) of Article II; Section 13 (Social Justice) of Article XIII and Section 2
(Educational Values) of Article XIV of the 1987 Constitution, suffice it to state also that these are
merely statements of principles and, policies. As such, they are basically not self-executing,
meaning a law should be passed by Congress to clearly define and effectuate such principles.
In general, therefore, the 1935 provisions were not intended to be self-executing
principles ready for enforcement through the courts. They were rather directives
addressed to the executive and the legislature. If the executive and the legislature
failed to heed the directives of the articles the available remedy was not judicial or
political. The electorate could express their displeasure with the failure of the
Page 55 of 97

executive and the legislature through the language of the ballot. (Bernas, Vol. II,
p. 2)
Every law has in its favor the presumption of constitutionality (Yu Cong Eng v. Trinidad, 47 Phil.
387; Salas v. Jarencio, 48 SCRA 734; Peralta v. Comelec, 82 SCRA 30; Abbas v. Comelec, 179
SCRA 287). Therefore, for PD 1869 to be nullified, it must be shown that there is a clear and
unequivocal breach of the Constitution, not merely a doubtful and equivocal one. In other words,
the grounds for nullity must be clear and beyond reasonable doubt. (Peralta v. Comelec, supra)
Those who petition this Court to declare a law, or parts thereof, unconstitutional must clearly
establish the basis for such a declaration. Otherwise, their petition must fail. Based on the
grounds raised by petitioners to challenge the constitutionality of P.D. 1869, the Court finds that
petitioners have failed to overcome the presumption. The dismissal of this petition is therefore,
inevitable. But as to whether P.D. 1869 remains a wise legislation considering the issues of
"morality, monopoly, trend to free enterprise, privatization as well as the state principles on
social justice, role of youth and educational values" being raised, is up for Congress to
determine.
As this Court held in Citizens' Alliance for Consumer Protection v. Energy Regulatory Board,
162 SCRA 521
Presidential Decree No. 1956, as amended by Executive Order No. 137 has, in
any case, in its favor the presumption of validity and constitutionality which
petitioners Valmonte and the KMU have not overturned. Petitioners have not
undertaken to identify the provisions in the Constitution which they claim to have
been violated by that statute. This Court, however, is not compelled to speculate
and to imagine how the assailed legislation may possibly offend some provision
of the Constitution. The Court notes, further, in this respect that petitioners have
in the main put in question the wisdom, justice and expediency of the
establishment of the OPSF, issues which are not properly addressed to this Court
and which this Court may not constitutionally pass upon. Those issues should be
addressed rather to the political departments of government: the President and the
Congress.
Parenthetically, We wish to state that gambling is generally immoral, and this is precisely so
when the gambling resorted to is excessive. This excessiveness necessarily depends not only on
the financial resources of the gambler and his family but also on his mental, social, and spiritual
outlook on life. However, the mere fact that some persons may have lost their material fortunes,
mental control, physical health, or even their lives does not necessarily mean that the same are
directly attributable to gambling. Gambling may have been the antecedent,but certainly not
necessarily the cause. For the same consequences could have been preceded by an overdose of
food, drink, exercise, work, and even sex.
WHEREFORE, the petition is DISMISSED for lack of merit.
SO ORDERED.
Fernan, C.J., Narvasa, Gutierrez, Jr., Cruz, Feliciano, Gancayco, Bidin, Sarmiento, GrioAquino, Medialdea, Regalado and Davide, Jr., JJ., concur.
Separate Opinions
PADILLA, J., concurring:
I concur in the result of the learned decision penned by my brother Mr. Justice Paras. This means
that I agree with the decision insofar as it holds that the prohibition, control, and regulation of the
entire activity known as gambling properly pertain to "state policy." It is, therefore, the political
departments of government, namely, the legislative and the executive that should decide on what
government should do in the entire area of gambling, and assume full responsibility to the people
for such policy.
Page 56 of 97

The courts, as the decision states, cannot inquire into the wisdom, morality or expediency of
policies adopted by the political departments of government in areas which fall within their
authority, except only when such policies pose a clear and present danger to the life, liberty or
property of the individual. This case does not involve such a factual situation.
However, I hasten to make of record that I do not subscribe to gambling in any form. It demeans
the human personality, destroys self-confidence and eviscerates one's self-respect, which in the
long run will corrode whatever is left of the Filipino moral character. Gambling has wrecked and
will continue to wreck families and homes; it is an antithesis to individual reliance and reliability
as well as personal industry which are the touchstones of real economic progress and national
development.
Gambling is reprehensible whether maintained by government or privatized. The revenues
realized by the government out of "legalized" gambling will, in the long run, be more than offset
and negated by the irreparable damage to the people's moral values.
Also, the moral standing of the government in its repeated avowals against "illegal gambling" is
fatally flawed and becomes untenable when it itself engages in the very activity it seeks to
eradicate.
One can go through the Court's decision today and mentally replace the activity referred to
therein as gambling, which is legal only because it is authorized by law and run by the
government, with the activity known asprostitution. Would prostitution be any less reprehensible
were it to be authorized by law, franchised, and "regulated" by the government, in return for the
substantial revenues it would yield the government to carry out its laudable projects, such as
infrastructure and social amelioration? The question, I believe, answers itself. I submit that the
sooner the legislative department outlaws all forms of gambling, as a fundamental state policy,
and the sooner the executive implements such policy, the better it will be for the nation.
Melencio-Herrera, J., concur.

Page 57 of 97

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 90776 June 3, 1991
PHILIPPINE PETROLEUM CORPORATION, petitioner,
vs.
MUNICIPALITY OF PILILLA, RIZAL, Represented by MAYOR NICOMEDES F.
PATENIA, respondent.
PARAS, J.:p
This is a petition for certiorari seeking to annul and set aside: (a) the March 17, 1989
decision * of the Regional Trial Court, Branch 80, Tanay, Rizal in Civil Case No. 057-T entitled,
"Municipality of Pililla, Rizal, represented by Mayor Nicomedes F. Patenia vs. Philippine
Petroleum Corporation", (PPC for short) upholding the legality of the taxes, fees and charges
being imposed in Pililla under Municipal Tax Ordinance No. 1 and directing the herein petitioner
to pay the amount of said taxes, fees and charges due the respondent: and (b) the November 2,
1989 resolution of the same court denying petitioner's motion for reconsideration of the said
decision.
The undisputed facts of the case are:
Petitioner, Philippine Petroleum Corporation (PPC for short) is a business enterprise engaged in
the manufacture of lubricated oil basestock which is a petroleum product, with its refinery plant
situated at Malaya, Pililla, Rizal, conducting its business activities within the territorial
jurisdiction of the Municipality of Pililla, Rizal and is in continuous operation up to the present
(Rollo p. 60). PPC owns and maintains an oil refinery including forty-nine storage tanks for its
petroleum products in Malaya, Pililla, Rizal (Rollo, p. 12).
Under Section 142 of the National Internal Revenue Code of 1939, manufactured oils and other
fuels are subject to specific tax.
On June 28, 1973, Presidential Decree No. 231, otherwise known as the Local Tax Code was
issued by former President Ferdinand E. Marcos governing the exercise by provinces, cities,
municipalities and barrios of their taxing and other revenue-raising powers. Sections 19 and 19
(a) thereof, provide among others, that the municipality may impose taxes on business, except on
those for which fixed taxes are provided on manufacturers, importers or producers of any article
of commerce of whatever kind or nature, including brewers, distillers, rectifiers, repackers, and
compounders of liquors, distilled spirits and/or wines in accordance with the schedule listed
therein.
Page 58 of 97

The Secretary of Finance issued Provincial Circular No. 26-73 dated December 27, 1973,
directed to all provincial, city and municipal treasurers to refrain from collecting any local tax
imposed in old or new tax ordinances in the business of manufacturing, wholesaling, retailing, or
dealing in petroleum products subject to the specific tax under the National Internal Revenue
Code (Rollo, p. 76).
Likewise, Provincial Circular No. 26 A-73 dated January 9, 1973 was issued by the Secretary of
Finance instructing all City Treasurers to refrain from collecting any local tax imposed in tax
ordinances enacted before or after the effectivity of the Local Tax Code on July 1, 1973, on the
businesses of manufacturing, wholesaling, retailing, or dealing in, petroleum products subject to
the specific tax under the National Internal Revenue Code (Rollo, p. 79).
Respondent Municipality of Pililla, Rizal, through Municipal Council Resolution No. 25, S-1974
enacted Municipal Tax Ordinance No. 1, S-1974 otherwise known as "The Pililla Tax Code of
1974" on June 14, 1974, which took effect on July 1, 1974 (Rollo, pp. 181-182). Sections 9 and
10 of the said ordinance imposed a tax on business, except for those for which fixed taxes are
provided in the Local Tax Code on manufacturers, importers, or producers of any article of
commerce of whatever kind or nature, including brewers, distillers, rectifiers, repackers, and
compounders of liquors, distilled spirits and/or wines in accordance with the schedule found in
the Local Tax Code, as well as mayor's permit, sanitary inspection fee and storage permit fee for
flammable, combustible or explosive substances (Rollo, pp. 183-187), while Section 139 of the
disputed ordinance imposed surcharges and interests on unpaid taxes, fees or charges (Ibid., p.
193).
On March 30, 1974, Presidential Decree No. 426 was issued amending certain provisions of P.D.
231 but retaining Sections 19 and 19 (a) with adjusted rates and 22(b).
On April 13, 1974, P.D. 436 was promulgated increasing the specific tax on lubricating oils,
gasoline, bunker fuel oil, diesel fuel oil and other similar petroleum products levied under
Sections 142, 144 and 145 of the National Internal Revenue Code, as amended, and granting
provinces, cities and municipalities certain shares in the specific tax on such products in lieu of
local taxes imposed on petroleum products.
The questioned Municipal Tax Ordinance No. 1 was reviewed and approved by the Provincial
Treasurer of Rizal on January 13, 1975 (Rollo, p. 143), but was not implemented and/or enforced
by the Municipality of Pililla because of its having been suspended up to now in view of
Provincial Circular Nos. 26-73 and 26 A-73.
Provincial Circular No. 6-77 dated March 13, 1977 was also issued directing all city and
municipal treasurers to refrain from collecting the so-called storage fee on flammable or
combustible materials imposed under the local tax ordinance of their respective locality, said fee
partaking of the nature of a strictly revenue measure or service charge.
On June 3, 1977, P.D. 1158 otherwise known as the National Internal Revenue Code of 1977 was
enacted, Section 153 of which specifically imposes specific tax on refined and manufactured
mineral oils and motor fuels.
Enforcing the provisions of the above-mentioned ordinance, the respondent filed a complaint on
April 4, 1986 docketed as Civil Case No. 057-T against PPC for the collection of the business tax
from 1979 to 1986; storage permit fees from 1975 to 1986; mayor's permit and sanitary
inspection fees from 1975 to 1984. PPC, however, have already paid the last-named fees starting
1985 (Rollo, p. 74).
After PPC filed its answer, a pre-trial conference was held on August 24, 1988 where the parties
thru their respective counsel, after coming up with certain admissions and stipulations agreed to
the submission of the case for decision based on documentary evidence offered with their
respective comments (Rollo, p. 41).

Page 59 of 97

On March 17, 1987, the trial court rendered a decision against the petitioner, the dispositive part
of which reads as follows:
WHEREFORE, premises considered, this Court hereby renders judgment in favor
of the plaintiffs as against the defendants thereby directing the defendants to 1)
pay the plaintiffs the amount of P5,301,385.00 representing the Tax on Business
due from the defendants under Sec. 9 (A) of the Municipal Tax Ordinance of the
plaintiffs for the period from 1979 to 1983 inclusive plus such amount of tax that
may accrue until final determination of case; 2) to pay storage permit fee in the
amount of P3,321,730.00 due from the defendants under Sec. 10, par. z (13) (b) (1
C) of the Municipal Tax Ordinance of the plaintiffs for the period from 1975 to
1986 inclusive plus such amount of fee that may accrue until final determination
of case; 3) to pay Mayor's Permit Fee due from the defendants under Sec. 10, par.
(P) (2) of the Municipal Tax Ordinance of the plaintiffs from 1975 to 1984
inclusive in the amount of P12,120.00 plus such amount of fee that may accrue
until final determination of the case; and 4) to pay sanitary inspection fee in the
amount of P1,010.00 for the period from 1975 to 1984 plus such amount that may
accrue until final determination of case and 5) to pay the costs of suit.
SO ORDERED. (Rollo, pp. 49-50)
PPC moved for reconsideration of the decision, but this was denied by the lower court in a
resolution of November 2, 1989, hence, the instant petition.
The Court resolved to give due course to the petition and required both parties to submit
simultaneous memoranda (June 21, 1990 Resolution; Rollo, p. 305).
PPC assigns the following alleged errors:
1. THE RTC ERRED IN ORDERING THE PAYMENT OF THE BUSINESS
TAX UNDER SECTION 9 (A) OF THE TAX ORDINANCE IN THE LIGHT OF
PROVINCIAL CIRCULARS NOS. 26-73 AND 26 A-73;.
2. THE RTC ERRED IN HOLDING THAT PETITIONER WAS LIABLE FOR
THE PAYMENT OF STORAGE PERMIT FEE UNDER SECTION 10 Z (13) (b)
(1-c) OF THE TAX ORDINANCE CONSIDERING THE ISSUANCE OF
PROVINCIAL CIRCULAR NO. 6-77;
3. THE RTC ERRED IN FAILING TO HOLD THAT RESPONDENTS
COMPUTATION OF TAX LIABILITY HAS ABSOLUTELY NO BASIS;
4. THE RTC ERRED IN ORDERING THE PAYMENT OF MAYOR'S PERMIT
AND SANITARY INSPECTION FEES CONSIDERING THAT THE SAME
HAS BEEN VALIDLY AND LEGALLY WAIVED BY THE MAYOR;
5. THE RTC ERRED IN FAILING TO HOLD THAT THE TAXES AND
DUTIES NOT COLLECTED FROM PETITIONER PRIOR TO THE FIVE (5)
YEAR PERIOD FROM THE FILING OF THIS CASE ON APRIL 4, 1986 HAS
ALREADY PRESCRIBED.
The crucial issue in this case is whether or not petitioner PPC whose oil products are subject to
specific tax under the NIRC, is still liable to pay (a) tax on business and (b) storage fees,
considering Provincial Circular No. 6-77; and mayor's permit and sanitary inspection fee unto
the respondent Municipality of Pililla, Rizal, based on Municipal Ordinance No. 1.
Petitioner PPC contends that: (a) Provincial Circular No. 2673 declared as contrary to national
economic policy the imposition of local taxes on the manufacture of petroleum products as they
are already subject to specific tax under the National Internal Revenue Code; (b) the above
declaration covers not only old tax ordinances but new ones, as well as those which may be
Page 60 of 97

enacted in the future; (c) both Provincial Circulars (PC) 26-73 and 26 A-73 are still effective,
hence, unless and until revoked, any effort on the part of the respondent to collect the suspended
tax on business from the petitioner would be illegal and unauthorized; and (d) Section 2 of P.D.
436 prohibits the imposition of local taxes on petroleum products.
PC No. 26-73 and PC No. 26 A-73 suspended the effectivity of local tax ordinances imposing a
tax on business under Section 19 (a) of the Local Tax Code (P.D. No. 231), with regard to
manufacturers, retailers, wholesalers or dealers in petroleum products subject to the specific tax
under the National Internal Revenue Code NIRC, in view of Section 22 (b) of the Code
regarding non-imposition by municipalities of taxes on articles, subject to specific tax under the
provisions of the NIRC.
There is no question that Pililla's Municipal Tax Ordinance No. 1 imposing the assailed taxes,
fees and charges is valid especially Section 9 (A) which according to the trial court "was lifted in
toto and/or is a literal reproduction of Section 19 (a) of the Local Tax Code as amended by P.D.
No. 426." It conforms with the mandate of said law.
But P.D. No. 426 amending the Local Tax Code is deemed to have repealed Provincial Circular
Nos. 26-73 and 26 A-73 issued by the Secretary of Finance when Sections 19 and 19 (a), were
carried over into P.D. No. 426 and no exemptions were given to manufacturers, wholesalers,
retailers, or dealers in petroleum products.
Well-settled is the rule that administrative regulations must be in harmony with the provisions of
the law. In case of discrepancy between the basic law and an implementing rule or regulation, the
former prevails (Shell Philippines, Inc. v. Central Bank of the Philippines, 162 SCRA 628
[1988]). As aptly held by the court a quo:
Necessarily, there could not be any other logical conclusion than that the framers
of P.D. No. 426 really and actually intended to terminate the effectivity and/or
enforceability of Provincial Circulars Nos. 26-73 and 26 A-73 inasmuch as clearly
these circulars are in contravention with Sec. 19 (a) of P.D. 426-the amendatory
law to P.D. No. 231. That intention to terminate is very apparent and in fact it is
expressed in clear and unequivocal terms in the effectivity and repealing clause of
P.D. 426 . . .
Furthermore, while Section 2 of P.D. 436 prohibits the imposition of local taxes on petroleum
products, said decree did not amend Sections 19 and 19 (a) of P.D. 231 as amended by P.D. 426,
wherein the municipality is granted the right to levy taxes on business of manufacturers,
importers, producers of any article of commerce of whatever kind or nature. A tax on business is
distinct from a tax on the article itself. Thus, if the imposition of tax on business of
manufacturers, etc. in petroleum products contravenes a declared national policy, it should have
been expressly stated in P.D. No. 436.
The exercise by local governments of the power to tax is ordained by the present Constitution. To
allow the continuous effectivity of the prohibition set forth in PC No. 26-73 (1) would be
tantamount to restricting their power to tax by mere administrative issuances. Under Section 5,
Article X of the 1987 Constitution, only guidelines and limitations that may be established by
Congress can define and limit such power of local governments. Thus:
Each local government unit shall have the power to create its own sources of
revenues and to levy taxes, fees, and charges subject to such guidelines and
limitations as the Congress may provide, consistent with the basic policy of local
autonomy . . .
Provincial Circular No. 6-77 enjoining all city and municipal treasurers to refrain from collecting
the so-called storage fee on flammable or combustible materials imposed in the local tax
ordinance of their respective locality frees petitioner PPC from the payment of storage permit
fee.
Page 61 of 97

The storage permit fee being imposed by Pililla's tax ordinance is a fee for the installation and
keeping in storage of any flammable, combustible or explosive substances. Inasmuch as said
storage makes use of tanks owned not by the municipality of Pililla, but by petitioner PPC, same
is obviously not a charge for any service rendered by the municipality as what is envisioned in
Section 37 of the same Code.
Section 10 (z) (13) of Pililla's Municipal Tax Ordinance No. 1 prescribing a permit fee is a
permit fee allowed under Section 36 of the amended Code.
As to the authority of the mayor to waive payment of the mayor's permit and sanitary inspection
fees, the trial court did not err in holding that "since the power to tax includes the power to
exempt thereof which is essentially a legislative prerogative, it follows that a municipal mayor
who is an executive officer may not unilaterally withdraw such an expression of a policy thru the
enactment of a tax." The waiver partakes of the nature of an exemption. It is an ancient rule that
exemptions from taxation are construed in strictissimi juris against the taxpayer and liberally in
favor of the taxing authority (Esso Standard Eastern, Inc. v. Acting Commissioner of Customs,
18 SCRA 488 [1966]). Tax exemptions are looked upon with disfavor (Western Minolco Corp. v.
Commissioner of Internal Revenue, 124 SCRA 121 [1983]). Thus, in the absence of a clear and
express exemption from the payment of said fees, the waiver cannot be recognized. As already
stated, it is the law-making body, and not an executive like the mayor, who can make an
exemption. Under Section 36 of the Code, a permit fee like the mayor's permit, shall be required
before any individual or juridical entity shall engage in any business or occupation under the
provisions of the Code.
However, since the Local Tax Code does not provide the prescriptive period for collection of
local taxes, Article 1143 of the Civil Code applies. Said law provides that an action upon an
obligation created by law prescribes within ten (10) years from the time the right of action
accrues. The Municipality of Pililla can therefore enforce the collection of the tax on business of
petitioner PPC due from 1976 to 1986, and NOT the tax that had accrued prior to 1976.
PREMISES CONSIDERED, with the MODIFICATION that business taxes accruing PRIOR to
1976 are not to be paid by PPC (because the same have prescribed) and that storage fees are not
also to be paid by PPC (for the storage tanks are owned by PPC and not by the municipality, and
therefore cannot be a charge for service by the municipality), the assailed DECISION is hereby
AFFIRMED.
SO ORDERED.
Melencio-Herrera, Padilla and Regalado, JJ., concur.
Sarmiento, J., is on leave.

Footnotes

Page 62 of 97

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. L-46787 August 12, 1991
FLORO CEMENT CORPORATION, petitioner,
vs.
HON. BENJAMIN K. GOROSPE, Judge, CFI of Misamis Oriental, Branch I, and the
MUNICIPALITY OF LUGAIT, respondents.
BIDIN, J.:p
This is a petition for review on certiorari seeking to set aside and reverse the decision * of the
then Court of First Instance of Misamis Oriental in Civil Case No. 4867, entitled "Municipality
of Lugait, Misamis Oriental, (represented) by the Municipal Treasurer and Provincial Treasurer
vs. Floro Cement Corporation", ordering defendant to pay unto plaintiff the amount of
P161,875.00 as manufacturer's and exporter's taxes plus surcharges for the period from January
1, 1974 to September 30, 1975 and that herein petitioner Floro Cement Corporation be declared
exempted from the coverage of Ordinances Nos. 5 and 10 of the Municipality of Lugait and that
the taxes and fees it has paid pursuant to said ordinances be refunded.
The facts of the case, as summarized in the decision of the trial court, are as follows:
The municipality of Lugait, province of Misamis Oriental, represented jointly in
this action by its Municipal Treasurer and the Provincial Treasurer of the said
province, filed with this Court a verified complaint for collection of taxes against
the defendant Floro Cement Corporation, a domestic corporation duly organized
and existing under the laws of the Republic of the Philippines with business
establishment and office address at its compound in the aforementioned
municipality of Lugait. The taxes sought to be collected by the plaintiff
specifically refers to "manufacturers" and' exporter's "taxes for the period from
January 1, 1974 to September 30, 1975, inclusive, in the total amount of
P161,875.00 plus 25% thereof as surcharge. Plaintiff alleged that the imposition
and collection of these taxes" is based on its Municipal Ordinance No. 5,
otherwise known as the Municipal Revenue Code of 1974, which was passed
pursuant to Presidential Decree No. 231 dated June 28, 1973 and also Municipal
Ordinance No. 10 passed on June 11, 1974 pursuant to Presidential Decree No.
426 dated March 30,1974, amending Presidential Decree No. 231.
In its answer to the complaint, the defendant set up the defense that it is not liable
to pay manufacturer's and exporter's taxes alleging among others that the plaintiffs
power to levy and collect taxes, fees, rentals, royalties or charges of any kind
whatsoever on defendant has been limited or withdrawn by Section 52 of
Presidential Decree No. 463 which provides:
Sec. 52. Power to Levy Taxes on Mines, Mining Corporation and
Mineral Products.Any law to the contrary notwithstanding, no
province, city, municipality, barrio or municipal district shall levy
and collect taxes, fees, rentals, royalties or charges of any kind
whatsoever on mines, mining claims, mineral products, or on any
operation, process or activity connected therewith.
Defendant also set up several special/affirmative defenses, namely: (1) that
plaintiff has no legal capacity to sue; (2) that the complaint states no cause; (3)
that plaintiff has absolutely no cause of action against defendant; (4) that
defendant was granted by the Secretary of Agriculture and Natural Resources a
Page 63 of 97

Certificate of Qualification for Tax Exemption, CQTE No. 22, dated July 7, 1960,
entitling defendant to exemption for a period of five (5) years from April 30,1969
to April 29, 1974 from payment of all taxes, except income tax, and which
Certificate was amended on November 5, 1974 CQTE P.D. 463-22), entitling
defendant to exemption from all taxes, duties and fees except income tax, for five
(5) years from the first date of actual commercial production of saleable mineral
products that is from May 17, 1974 to January 1, 1978; and (5) that Republic Act
No. 3823, as implemented by Mines Administrative Order No. V-25, and P.D. No.
463 which are the basis for the exemption granted to defendant are special laws
whereas, the municipal ordinance mentioned in the complaint which are based on
P.D. No. 231 and P.D No. 426, respectively, are general laws; and that it is
axiomatic that a special law can not be amended and/or repealed by a general law
unless there is an express intent to repeal or abrogate the provisions of the special
law.
After the issues were joined, the parties submitted a written stipulation of facts
under date of May 21, 1976 the pertinent portion of which is quoted in full as
follows:
PLAINTIFF and DEFENDANT, by and through counsel, most
respectfully submit the following stipulation of facts:
1. That plaintiff is a political subdivision of the Republic of the
Philippines created pursuant to EXECUTIVE ORDER NO. 425,
entitled "CREATING THE MUNICIPALITY OF LUGAIT IN
THE PROVINCE OF MISAMIS ORIENTAL", a xerox copy of
said executive order is attached hereto marked ANNEX "A" and
made an integral part hereof;
2. That defendant is a corporation day organized and existing under
and by virtue of the laws of the Philippines; with plant and office
at Lugait, Misamis Oriental, and is engaged in the manufacture and
selling, including exporting, of cement, one of the essential
ingredients of which is limestone;
3. That defendant, as a mining operator of mineral land lands
situated at Lugait, Misamis Oriental, was granted by the Secretary
of Agriculture and Natural Resources a Certificate of Qualification
for Tax Exemption, CQTE No. 22, dated July 7, 1960, entitling
defendant to exemption for a period of five (5) years from April
30, 1969 to April 29, 1974, from the payment of all taxes, except
income tax, a xerox copy of which is attached marked ANNEX
"A" to defendant's answer and made an integral part hereof;
4. That the Certificate of Qualification for Tax Exemption
mentioned in the next preceding paragraph was amended on
November 5, 1974, when the Honorable Secretary of Natural
Resources, Mr. Jose J. Leido Jr., upon recommendation of the
Director of Mines, granted to defendant a Certificate of
Qualification for Tax Exemption, CQTE P.D. 463-22, which
entitled defendant to exemption from all taxes, duties, and fees,
except income tax, for five (5) years from May 17, 1974 to January
1, 1978, a xerox copy of which is attached marked ANNEX "B" to
defendant's answer and made an integral part hereof, and that a
copy of the Certificate of Qualification for Tax Exemption, CQTE
P.D. 463-22 was furnished the Municipal Treasurer of plaintiff on
November 12, 1974, as shown by a xerox copy of the letter of the
Assistant Director of the Bureau of Mines, Mr. Francisco A.
Page 64 of 97

Comsti, a copy of which is attached hereto marked ANNEX "B"

and made an integral part hereof;
5. That the Certificate of Qualification for Tax Exemption
mentioned in the next preceding paragraph was issued pursuant to
the provisions of Sec. 52, P.D. No. 463, which reads as follows:
Sec. 52. Power to Levy Taxes on Mines, Mining
Operations and Mineral Products.Any law to the
contrary notwithstanding, no province, City,
municipality, barrio or municipal district shall levy
and collect taxes, fees, rentals, royalties or charges
of any kind whatsoever on mines, mining claims,
mineral products, or on any operation, process, or
activity therewith.
6. That on or about July 3, 1974, plaintiff through its Municipal
Mayor, wired the Secretary of Finance, opposing the application of
defendant for the extension of its exemption from all forms of
taxation, including its application for extension of its exemption
from realty taxes, which opposition was not favorably acted upon
by the said Secretary of Finance, as evidenced by a xerox copy of
the letter of the Honorable Secretary of Finance, Mr. Cesar Virata,
attached hereto marked ANNEX "C" and made an integral part
hereof;
7. That plaintiff pursuant to P.D.No. 231 promulgated on June 28,
1973, passed Municipal Ordinance No. 5, otherwise known as
Municipal Revenue Code of 1974, effective January 1, 1974,
Section 3 of which is quoted in paragraph 2 of the complaint and
made integral part hereof by reference;
8. That plaintiff pursuant to P.D.No. 426 promulgated on March
30,1974, Municipal Revenue Ordinance No. 10, effective fifteen
(15) days after its passage, of which Section 4, Title I is quoted in
paragraph 3 of the complaint and made integral part hereof by
reference;
9. That pursuant(to)Municipal Ordinances Nos. 5 and 10,
mentioned in paragraphs 7 and 8 hereof, respectively, plaintiff
demanded of defendant the payment of the manufacturer's and
exporter's taxes including surcharge for the period covering
January 1, 1974 to September 30, 1975, broken down as shown in
paragraph 5 of the complaint and made integral part hereof by
reference; but defendant refused because of the allegations found
in paragraphs 1, 2, 3, 4, 5 and 6 hereof.
WHEREFORE, it is most respectfully prayed that the foregoing
stipulation of facts be made the basis of the judgment of this
Honorable Court, after the parties hereto have submitted their
respective memoranda.
Cagayan de Oro City, May 21,1976.
(CFI Decision, pp. 1-6; Rollo, pp. 54-59),
As aforementioned, the trial court rendered its decision on November 29, 1976, the dispositive
portion of which reads, as follows:
Page 65 of 97

WHEREFORE, premises considered, judgment is hereby rendered ordering

defendant Floro Cement Corporation to pay unto plaintiff the amount of
P161,875.00 as manufacturer's and exporter's taxes and surcharges for the period
from January 1, 1974 to September 30, 1975, inclusive, and to pay the costs.
SO ORDERED.
Hence, this appeal.
The petition was given due course by the First Division of this Court on January 6, 1978 and
both parties were required to submit their simultaneous memoranda. Respondent complied on
February 17,1978 while petitioner filed its memorandum on March 9,1978.
The principal issue in this case is whether or not Ordinances Nos. 5 and 10 of Lugait, Misamis
Oriental apply to petitioner Floro Corporation notwithstanding the limitation on the taxing power
of local government as provided for in Sec. 52 of P.D. 231 and Sec. 52 of P.D. 463.
Petitioner Floro Cement Corporation holds that since Ordinances Nos. 5 and 10 were enacted
pursuant to P.D. No. 231 and P.D. No. 426, respectively, said ordinances do not apply to its
business in view of the limitation on the taxing power of local government provided in Sec. 5m
of P.D. No. 231, which reads:
Sec. 5. Common Limitations on the Taxing Powers of Local Governments. The
exercise of taxing power of provinces, cities, municipalities and barrios shall not
extend to the imposition of the following:
xxx xxx xxx
(m) Taxes on mines, mining operations and mineral products and
their by-products when sold domestically by the operator.
Floro Cement Corporation likewise contends that cement is a mineral product, relying on the
case of Cebu Portland Cement Company vs. Commissioner of Internal Revenue, G.R. No.
L20563, October 29, 1968 (25 SCRA 789), and in the case of Philippine Pipes and
Merchandising Corporation vs. Commissioner of Internal Revenue, CTA Case No. 1858, dated
July 29, 1970 decided by the Court of Tax Appeals (Memorandum for the Petitioner, Rollo, pp.
89-90).
Petitioner further contends that the partial exemption aforementioned was rendered absolute by
Sec. 52 of P.D. No. 463 promulgated on May 17, 1974, which expressly prohibits the province,
city municipality, barrio and municipal district from levying and collecting taxes, fees, rentals,
royalties or charges of any kind whatsoever on mines, mining claims and mineral products, any
law to the contrary notwithstanding. Said prohibition includes any operation, process or activity
connected with its production. The manufacture of cement is a process inherently connected with
the mining operation undertaken by petitioner Floro Cement Corporation (Ibid., pp. 92-93).
On other hand, while respondent municipality admits that petitioner Floro Cement Corporation
undertakes exploration, development and exploitation of mineral products, the taxes sought to be
collected were not imposed on these activities in view of the mentioned prohibition under Sec.
52 of P.D. No. 463. Said taxes were levied on the corporation's business of manufacturing and
exporting cement. The business of manufacturing and exporting cement does not fall under
exploration, development nor exploitation of mineral resources as defined in Sec. 2 of P.D. No.
463, hence, it is outside the scope of application of Sec. 52 of said decree (Memorandum for
Respondent, p. 10; Rollo, p. 85).
The municipality's power to levy taxes on manufacturers and exporters is provided in Article 2,
Sec. 19 of P.D. No. 231, as amended by P.D. No. 426 which provides that "The municipality may
impose a tax on business except those for which fixed taxes are provided for in this Code:
Page 66 of 97

(a) On manufacturers, importers, or producers of any article of commerce of

whatever kind or nature, including brewers, distillers, rectifiers, repackers, and
compounders of liquors, distilled spirits and/ or wines in accordance with the
following schedule:
xxx xxx xxx
(a-1) On retailers, independent wholesalers and distributors in accordance with
the following schedule:
xxx xxx xxx
(Comment of the Respondent, Rollo, p. 72)
The petition is without merit.
On the question of whether or not cement is a mineral product, this Court has consistently held
that it is not a mineral product but rather a manufactured product (Commissioner of Internal
Revenue vs. Cebu Portland Cement Company, 156 SCRA 535 [1987]; Commissioner of Internal
Revenue vs. Philippine Pipes and Merchandising Corporation, 153 SCRA 113 [1987];
Commissioner of Internal Revenue vs. Republic Cement Corporation, 149 SCRA 487 [1987]).
while cement is composed of 80'7c minerals, it is not merely an admixture or blending of raw
materials, as lime, silica, shale and others. It is the result of a definite process-the crushing of
minerals, grinding, mixing, calcining adding of retarder or raw gypsum In short, before cement
reaches its saleable form, the minerals had already undergone a chemical change through
manufacturing process (Commissioner of Internal Revenue vs. Cebu Portland Cement
Company, supra, reiterating the ruling in Commissioner of Internal Revenue vs. Republic
Cement Corporation, 124 SCRA 46 [1983]). It appears evident that the foregoing cases overruled
the case of Cebu Portland Cement Company vs. Commissioner of Internal Revenue, 25 SCRA
789 [1969] which was cited by petitioner.
On the exemption claimed by petitioner, this Court has laid down the rule that as the power of
taxation is a high prerogative of sovereignty, the relinquishment is never presumed and any
reduction or diminution thereof with respect to its mode or its rate, must be strictly construed,
and the same must be coached in clear and unmistakable terms in order that it may be applied.
More specifically stated, the general rule is that any claim for exemption from the tax statute
should be strictly construed against the taxpayer (Luzon Stevedoring Corporation vs. Court of
Appeals, 163 SCRA 647 [1988]). He who claims an exemption must be able to point out some
provision of law creating the right; it cannot be allowed to exist upon a mere vague implication
or inference. It must be shown indubitably to exist, for every presumption is against it, and a
well-founded doubt is fatal to the claim (Manila Electric Company vs. Ver, 67 SCRA 351
[1975]). The petitioner failed to meet this requirement.
As held by the lower court, the exemption mentioned in Sec. 52 of P.D. No. 463 refers only to
machineries, equipment, tools for production, etc., as provided in Sec. 53 of the same decree.
The manufacture and the export of cement does not fall under the said provision for it is not a
mineral product (CFI Decision, Rollo, p. 62). It is not cement that is mined only the mineral
products composing the finished product (Commissioner of Internal Revenue vs. Republic
Cement Corporation, supra).
Furthermore, by the parties' own stipulation of facts submitted before the court a quo, it is
admitted that Floro Cement Corporation is engaged in the manufacturing and selling, including
exporting of cement (CFI Decision, Rollo, p. 57). As such, and since the taxes sought to be
collected were levied on these activities pursuant to Sec. 19 of P.D. No. 231, Ordinances Nos. 5
and 10, which were enacted pursuant to P.D. No. 231 and P.D. No. 426, respectively, properly
apply to petitioner Floro Cement Corporation.
WHEREFORE, the petition is DENIED for lack of merit and the decision dated November 29,
1976 of the then Court of First Instance of Misamis Oriental is Affirmed.
Page 67 of 97

SO ORDERED.
Fernan, C.J., (Chairman), Gutierrez, Jr., Feliciano and Davide, Jr., JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-23080

October 30, 1965

PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, petitioner,

vs.
CITY OF DAVAO and the PUBLIC SERVICE COMMISSION, respondents,
ITT PHILIPPINES, INC., intervenor.
R E S O L U T I O N*
BENGZON, J.P., J.:
The Philippine Legislature granted Philippine Long Distance Telephone Co., Inc. a special
franchise to establish and operate a telephone system throughout the country. It wisely provided
therein that the rights thereby granted shall not be exclusive.
Page 68 of 97

Answering the clamor of the inhabitants of Davao City, the Davao City Council provided for a
city-owned and operated telephone system.1 Congress itself thereafter expressly authorized the
establishment of such a telephone system therein.2
The executive, finding the legislation wisely taken, approved the same.
The Court, interpreting the broad powers granted to Davao City Council to legislate for the
general welfare, gave meaning and reality to the Resolutions and laws above-mentioned, in its
decision in this case promulgated September 20, 1965.
Petitioner filed a 53-page motion for reconsideration of said decision, presenting five
propositions.
The first proposition of movant is that Davao City's telephone system is proprietary in nature
and, therefore. cannot be undertaken under the general welfare clause. At the outset it is well to
remember that as stated inMendoza vs. De Leon, 33 Phil. 508, 515:
It often happens that the same agent or agency has both a governmental and a corporate
character. Such, for instance, are a municipal water system designed both for protection
against fire (a governmental function) and to supply water to the inhabitants for profit (a
corporate function) (Omaha Water Co. vs. Omaha, 12 L.R.A., N.S., 736; 77 C.C.A. 267,
147 Fed. 1; Judson vs. Borough of Winsted, 80 Conn. 384; 15 L.R.A., N. S., 91) ; a
municipal light plant both for righting the streets (a governmental function) and for
furnishing light to the inhabitants at a profit (a corporate function) (Fisher vs. New Bern,
140 N. C. 506; 111 Am. St. Rep 857).
The same case recognized that: "The preservation of the health and peace of its inhabitants and
fire protections afforded the property owner, are government functions." (Ibid., at 511-512.)
Davao City's telephone system is designed to perform such functions; to secure and regulate the
peace and order situation of one of the world's biggest cities; to safeguard the health and lives of
its inhabitants; to afford reliable equipment for the fighting and control of fires, floods and
epidemics; to assure these objectives by providing speedy and direct contact between Davao
City's outlying districts and its poblacion or seat of government. Such ends are undoubtedly
within the purview of the general welfare clause.
The fact that in thereby promoting the general welfare of its inhabitants, the means adopted by
the city would likewise serve the public in a proprietary manner is no argument that the city is
powerless to adopt said measure. For as stated, it frequently happens that from the same act both
governmental and corporate functions arise. An interpretation that would totally limit the general
welfare clause to such governmental functions only as are without proprietary aspects would
thereby often cripple local governments in the face of the very evils that said clause intended
them to remedy.
A restrictive view of the general welfare clause is not favored. The policy of Congress in this
regard has been expressly stated in Section 12 of Republic Act 2264, the Local Autonomy Act:
The general welfare clause shall be liberally interpreted in case of doubt so as to
give more power to local governments in promoting the economic condition, social
welfare and material progress of the people in the community.
The view of the movant that the scope of police power, and therefore of the general welfare
clause, has been fixed by traditional delineations is not quite accurate. Police power has not
received a full and complete definition; it is elastic and must be responsive to various social
conditions; it is not confined within the narrow circumscriptions of precedents resting on past
conditions; it must follow the legal progress of a democratic way of life. Accordingly, the Court
wisely said in Churchill vs. Rafferty, 32 Phil. 580, 603-605:
In Chamber vs. Greencastle (138 Ind. 339), it was said: "The police power of the State, so
far, has not received a full and complete definition." ...
Page 69 of 97

xxx

xxx

xxx

In People vs. Brazee ([Mich., 1914], 149 N. W. 1053), it was said: "it [the police power]
has for its object the improvement of social and economic conditions affecting the
community at large and collectively with a view to bring about "the greatest good of the
greatest number." Courts have consistently and wisely declined to set any fixed
limitations upon subjects calling for the exercise of this power. It is elastic and is
exercised from time to time as varying social conditions demand correction.
xxx

xxx

xxx

Finally, the Supreme Court of the United States has said in Noble State Bank vs.
Haskell (219 U.S. [1911] 575): "It may be said in a general way that the police power
extends to all the great public needs. It may be put forth in aid of what is sanctioned by
usage, or held by the prevailing morality or strong and preponderant opinion to be greatly
and immediately necessary to the public welfare."
xxx

xxx

xxx

It was said in Com. vs. Alger (7 Cush. 53, 85), per Shaw, C.J., that: "It is much easier to
perceive and realize the existence and sources of this police power than to mark its
boundaries, or to prescribe limits to its exercise." ...
CORPUS JURIS SECUNDUM states:
... The police power of a municipal corporation must be responsive, in the interest of
common welfare, to the changing conditions and developing needs of growing
communities, and is not confined within the narrow circumscription of precedents resting
on past conditions. That which may at one time be regarded as not within such power
may, at another time, by reason of changed conditions, be recognized as a legitimate
exercise for the exercise of the power. Also, that which may be regarded as within the
police power of one municipal corporation may not be so regarded as to another. ...3
Speaking thru Mr. Justice Malcolm, this Court explicitly said in U.S. vs. Salaveria, 39 Phil. 102,
109:
... the general welfare clause, delegates in statutory form the police power to a
municipality. As above stated, this clause has been given wide application by municipal
authorities and has in its relation to the particular circumstances of the case been liberally
construed by the courts. Such, it is well to recall, is the progressive view of Philippine
jurisprudence.
Advancing its second proposition, movant would find in the specific power of Davao City
to regulate telephone service (See. 14 (aa] of its Charter) an implied denial of power to operate
the same. People vs. Esguerra, 81 Phil. 33 is the authority relied upon for this. Said case ruled
that specific power to regulate implies withholding of power to prohibit. The reason therein
given is that by prohibiting, nothing would be left to regulate, thereby rendering the power to
regulate superfluous and nugatory. It is therefore different where, as in this case, there is no
suppression or prohibition but, on the contrary, creation or giving existence to something that
may be regulated.People vs. Esguerra, supra, is no authority against the latter.
Still movant would press the argument that at any rate the general welfare clause does not
enlarge, but merely makes effectual, the specific powers granted. Suffice it to say that in U.S. vs.
Salaveria, supra, at pp. 109-110, we ruled otherwise:
The general welfare clause has two branches. One branch attaches itself to the main trunk
of municipal authority, and relates to such ordinances and regulations as may be
necessary to carry into effect and discharge the powers and duties conferred upon the
municipal council by law. With this class we are not here directly concerned. The second
Page 70 of 97

branch of the clause is much more independent of the specific functions of the council
which are enumerated by law. It authorizes such ordinances "as shall seem necessary and
proper to provide for the health and safety, promote the prosperity, improve the morals,
peace, good order, comfort, and convenience of the municipality and the inhabitants
thereof, and for the protection of property therein."
The general welfare clause suffices in proper cases to authorize public improvements serving
governmental functions (Saunders vs. Mayor of Arlington, 147 Ga. 581, 94 SE 1022). Contrary
to movant's view, presence of the words "any public improvement" in the general welfare clause
is not indispensable for the purpose. Authorization in the clause, similar to that in Davao City's
Charter, to act for the "safety, benefit, convenience and advantage" of the city (Frederick vs.
Augusta, 5 Ga. 561) or "to do all things for the benefit of the city," (Heilbron vs. Cuthbert, 96
Ga. 312, 23 SE 206) was found sufficient for the purpose. As to the case of Hyatt vs.
Williams,148 Cal. 585, 84 P. 41, cited by movant as authoritative, the same did not involve a
general welfare clause.
In its third proposition movant alleges that the interpretation we followed would rewrite the
general welfare clause in all cities and municipalities into reservoirs of unlimited powers,
superior even to that of the State under the Constitution. As to this it must again be emphasized
that our decision was made in light of the special factual set-up obtaining in this case. For one
thing, the size of Davao City alone renders its situation unique and apart from our other cities
and municipalities. For another, as already pointed out, the scope of police power varies
according to different conditions and what is within the police power of one municipal
corporation may not be so regarded as to another. No "far-reaching", effects need therefore, be
feared by movant. Finally, we see no point in the contention that the State under the Constitution
would have lesser powers than we hold Davao City to have, for there is no doubt that under
Section 6 of Article XIII of the Constitution, the State may also, in the interest ofnational
welfare, establish and operate means of communication.4
Fourth of movant's propositions is that it has already installed facilities to take care of Davao
City's telephone needs. It is still admitted, however, that movant's telephone system and its plan
of expansion do not cover the outlying districts of the city. It cannot therefore be claimed that
movant has provided for the aforementioned needs or shown an immediate plan to supply
them adequately.
The fifth proposition is that any enabling provision in Davao City's Charter for the operation of a
telephone system is not enough; that a special legislative franchise is still required. Since
Congress has recently enacted Republic Act 4354 expressly providing that Davao City has power
to operate and maintain a telephone system, movant now takes the extreme view that still another
legislation, by way of a special franchise, is required. Such a view would render the enabling
provision's in Davao City's Charter useless. It should be noted that such enabling provisions are
granted as among the legislative powers of the Davao City Council. Accordingly, there has been
a delegation to said Council of the legislative power to issue a franchise in favor of the City.
The Philippine Commission's Act No. 667, invoked by movant, is an instance of delegation of
power to grant franchise. It provides that any person authorized to engage in operating a
telephone service has to obtain a franchise from the municipal council of the municipality
through which its lines will pass. Davao City does not have to follow the procedure in Act No.
667, for, as stated, it has been empowered under its charter to directly grant the franchise to
itself. A contrary view would be absurd: Davao City would have to file with its City Council an
application for a franchise after said Council had authorized it to operate the telephone system.
Finally, movant states that the competition between Davao City's telephone system and its own
would be economically wasteful. Sometimes, however, it is good for the public service to
provide room for a little competition. The fact that movant's own Charter, Act No. 3436, provides
in Section 14 that its right to operate a telephone system shall not be exclusive and reserves the
power to grant any other corporation, association or person franchise to operate a telephone
system shows that public policy is not always in favor of monopoly in public utilities. In Benitez
vs. Santos, L-12911-12 and Lopez vs. Santos, L- 13073-74, February 29, 1960, this Court had
Page 71 of 97

occasion to remark: "A monopolistic trend with its concomitant evils can only serve to prejudice
public interest, stifling as it does enthusiasm and initiative on the part of those eager to learn.
Prior experience, while itself useful, cannot create a vested right which could endanger the
economy." Republic Act 4354, in effect authorizing competition in the telephone service in
Davao City, conclusively shows the sense of Congress that under the prevailing conditions in
Davao City, the same will best inure to the public welfare therein. The public interest and welfare
should be paramount.
WHEREFORE, the motion for reconsideration is denied. So ordered.
Bengzon, C.J., Bautista Angelo, Dizon, Makalintal, and Zaldivar, JJ., concur.
Concepcion, J., concurs in the result.
Reyes, J.B.L., J., is on leave.
Regala, J., took no part.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 162015

March 6, 2006

THE CITY GOVERNMENT OF QUEZON CITY, AND THE CITY TREASURER OF

QUEZON CITY, DR. VICTOR B. ENRIGA, Petitioners,
vs.
BAYAN TELECOMMUNICATIONS, INC., Respondent.
DECISION
GARCIA,J.:
Before the Court, on pure questions of law, is this petition for review on certiorari under Rule 45
of the Rules of Court to nullify and set aside the following issuances of the Regional Trial Court
(RTC) of Quezon City, Branch 227, in its Civil Case No. Q-02-47292, to wit:
1) Decision1 dated June 6, 2003, declaring respondent Bayan Telecommunications, Inc. exempt
from real estate taxation on its real properties located in Quezon City; and
2) Order2 dated December 30, 2003, denying petitioners motion for reconsideration.
The facts:
Respondent Bayan Telecommunications, Inc.3 (Bayantel) is a legislative franchise holder under
Republic Act (Rep. Act) No. 32594 to establish and operate radio stations for domestic
telecommunications, radiophone, broadcasting and telecasting.
Of relevance to this controversy is the tax provision of Rep. Act No. 3259, embodied in Section
14 thereof, which reads:

Page 72 of 97

SECTION 14. (a) The grantee shall be liable to pay the same taxes on its real estate, buildings
and personal property, exclusive of the franchise, as other persons or corporations are now or
hereafter may be required by law to pay. (b) The grantee shall further pay to the Treasurer of the
Philippines each year, within ten days after the audit and approval of the accounts as prescribed
in this Act, one and one-half per centum of all gross receipts from the business transacted under
this franchise by the said grantee (Emphasis supplied).
On January 1, 1992, Rep. Act No. 7160, otherwise known as the "Local Government Code of
1991" (LGC), took effect. Section 232 of the Code grants local government units within the
Metro Manila Area the power to levy tax on real properties, thus:
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 hereinafter specifically exempted.
Complementing the aforequoted provision is the second paragraph of Section 234 of the same
Code which withdrew any exemption from realty tax heretofore granted to or enjoyed by all
persons, natural or juridical, to wit:
SEC. 234 - Exemptions from Real Property Tax. The following are exempted from payment of
the real property tax:
xxx xxx xxx
Except as provided herein, any exemption from payment of real property tax previously granted
to, or enjoyed by, all persons, whether natural or juridical, including government-owned-orcontrolled corporations is hereby withdrawn upon effectivity of this Code (Emphasis supplied).
On July 20, 1992, barely few months after the LGC took effect, Congress enacted Rep. Act No.
7633, amending Bayantels original franchise. The amendatory law (Rep. Act No. 7633)
contained the following tax provision:
SEC. 11. The grantee, its successors or assigns shall be liable to pay the same taxes on their real
estate, buildings and personal property, exclusive of this franchise, as other persons or
corporations are now or hereafter may be required by law to pay. In addition thereto, the grantee,
its successors or assigns shall pay a franchise tax equivalent to three percent (3%) of all gross
receipts of the telephone or other telecommunications businesses transacted under this franchise
by the grantee, its successors or assigns and the said percentage shall be in lieu of all taxes on
this franchise or earnings thereof. Provided, That the grantee, its successors or assigns shall
continue to be liable for income taxes payable under Title II of the National Internal Revenue
Code . xxx. [Emphasis supplied]
It is undisputed that within the territorial boundary of Quezon City, Bayantel owned several real
properties on which it maintained various telecommunications facilities. These real properties, as
hereunder described, are covered by the following tax declarations:
(a) Tax Declaration Nos. D-096-04071, D-096-04074, D-096-04072 and D-096-04073
pertaining to Bayantels Head Office and Operations Center in Roosevelt St., San
Francisco del Monte, Quezon City allegedly the nerve center of petitioners
telecommunications franchise operations, said Operation Center housing mainly
petitioners Network Operations Group and switching, transmission and related
equipment;
(b) Tax Declaration Nos. D-124-01013, D-124-00939, D-124-00920 and D-124-00941
covering Bayantels land, building and equipment in Maginhawa St., Barangay East
Teachers Village, Quezon City which houses telecommunications facilities; and
(c) Tax Declaration Nos. D-011-10809, D-011-10810, D-011-10811, and D-011-11540
referring to Bayantels Exchange Center located in Proj. 8, Brgy. Bahay Toro, Tandang
Page 73 of 97

Sora, Quezon City which houses the Network Operations Group and cover switching,
transmission and other related equipment.
In 1993, the government of Quezon City, pursuant to the taxing power vested on local
government units by Section 5, Article X of the 1987 Constitution, infra, in relation to Section
232 of the LGC, supra, enacted City Ordinance No. SP-91, S-93, otherwise known as the Quezon
City Revenue Code (QCRC),5 imposing, under Section 5 thereof, a real property tax on all real
properties in Quezon City, and, reiterating in its Section 6, the withdrawal of exemption from
real property tax under Section 234 of the LGC, supra. Furthermore, much like the LGC, the
QCRC, under its Section 230, withdrew tax exemption privileges in general, as follows:
SEC. 230. 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 RA 6938, non-stock and non-profit hospitals and educational
institutions, business enterprises certified by the Board of Investments (BOI) as pioneer or nonpioneer for a period of six (6) and four (4) years, respectively, are hereby withdrawn effective
upon approval of this Code (Emphasis supplied).
Conformably with the Citys Revenue Code, new tax declarations for Bayantels real properties
in Quezon City were issued by the City Assessor and were received by Bayantel on August 13,
1998, except one (Tax Declaration No. 124-01013) which was received on July 14, 1999.
Meanwhile, on March 16, 1995, Rep. Act No. 7925,6 otherwise known as the "Public
Telecommunications Policy Act of the Philippines," envisaged to level the playing field among
telecommunications companies, took effect. Section 23 of the Act provides:
SEC. 23. Equality of Treatment in the Telecommunications Industry. Any advantage, favor,
privilege, exemption, or immunity granted under existing franchises, or may hereafter be
granted, shall ipso facto become part of previously granted telecommunications franchises and
shall be accorded immediately and unconditionally to the grantees of such franchises: Provided,
however, That the foregoing shall neither apply to nor affect provisions of telecommunications
franchises concerning territory covered by the franchise, the life span of the franchise, or the type
of service authorized by the franchise.
On January 7, 1999, Bayantel wrote the office of the City Assessor seeking the exclusion of its
real properties in the city from the roll of taxable real properties. With its request having been
denied, Bayantel interposed an appeal with the Local Board of Assessment Appeals (LBAA).
And, evidently on its firm belief of its exempt status, Bayantel did not pay the real property taxes
assessed against it by the Quezon City government.
On account thereof, the Quezon City Treasurer sent out notices of delinquency for the total
amount ofP43,878,208.18, followed by the issuance of several warrants of levy against
Bayantels properties preparatory to their sale at a public auction set on July 30, 2002.
Threatened with the imminent loss of its properties, Bayantel immediately withdrew its appeal
with the LBAA and instead filed with the RTC of Quezon City a petition for prohibition with an
urgent application for a temporary restraining order (TRO) and/or writ of preliminary injunction,
thereat docketed as Civil Case No. Q-02-47292, which was raffled to Branch 227 of the court.
On July 29, 2002, or in the eve of the public auction scheduled the following day, the lower court
issued a TRO, followed, after due hearing, by a writ of preliminary injunction via its order of
August 20, 2002.
And, having heard the parties on the merits, the same court came out with its challenged
Decision of June 6, 2003, the dispositive portion of which reads:
WHEREFORE, premises considered, pursuant to the enabling franchise under Section 11 of
Republic Act No. 7633, the real estate properties and buildings of petitioner [now, respondent
Page 74 of 97

Bayantel] which have been admitted to be used in the operation of petitioners franchise
described in the following tax declarations are hereby DECLARED exempt from real estate
taxation:
(1) Tax Declaration No. D-096-04071
(2) Tax Declaration No. D-096-04074
(3) Tax Declaration No. D-124-01013
(4) Tax Declaration No. D-011-10810
(5) Tax Declaration No. D-011-10811
(6) Tax Declaration No. D-011-10809
(7) Tax Declaration No. D-124-00941
(8) Tax Declaration No. D-124-00940
(9) Tax Declaration No. D-124-00939
(10) Tax Declaration No. D-096-04072
(11) Tax Declaration No. D-096-04073
(12) Tax Declaration No. D-011-11540
The preliminary prohibitory injunction issued in the August 20, 2002 Order of this Court is
hereby made permanent. Since this is a resolution of a purely legal issue, there is no
pronouncement as to costs.
SO ORDERED.
Their motion for reconsideration having been denied by the court in its Order dated December
30, 2003, petitioners elevated the case directly to this Court on pure questions of law, ascribing
to the lower court the following errors:
I. [I]n declaring the real properties of respondent exempt from real property taxes
notwithstanding the fact that the tax exemption granted to Bayantel in its original franchise had
been withdrawn by the [LGC] and that the said exemption was not restored by the enactment of
RA 7633.
II. [In] declaring the real properties of respondent exempt from real property taxes
notwithstanding the enactment of the [QCRC] which withdrew the tax exemption which may
have been granted by RA 7633.
III. [In] declaring the real properties of respondent exempt from real property taxes
notwithstanding the vague and ambiguous grant of tax exemption provided under Section 11 of
RA 7633.
IV. [In] declaring the real properties of respondent exempt from real property taxes
notwithstanding the fact that [it] had failed to exhaust administrative remedies in its claim for
real property tax exemption. (Words in bracket added.)
As we see it, the errors assigned may ultimately be reduced to two (2) basic issues, namely:
1. Whether or not Bayantels real properties in Quezon City are exempt from real
property taxes under its legislative franchise; and
Page 75 of 97

2. Whether or not Bayantel is required to exhaust administrative remedies before seeking

judicial relief with the trial court.
We shall first address the second issue, the same being procedural in nature.
Petitioners argue that Bayantel had failed to avail itself of the administrative remedies provided
for under the LGC, adding that the trial court erred in giving due course to Bayantels petition for
prohibition. To petitioners, the appeal mechanics under the LGC constitute Bayantels plain and
speedy remedy in this case.
The Court does not agree.
Petitions for prohibition are governed by the following provision of Rule 65 of the Rules of
Court:
SEC. 2. Petition for prohibition. When the proceedings of any tribunal, are without or in
excess of its or his jurisdiction, or with grave abuse of discretion amounting to lack or excess of
jurisdiction, and there is no appeal or any other plain, speedy, and adequate remedy in the
ordinary course of law, a person aggrieved thereby may file a verified petition in the proper
court, alleging the facts with certainty and praying that judgment be rendered commanding the
respondent to desist from further proceedings in the action or matter specified therein, or
otherwise, granting such incidental reliefs as law and justice may require.
With the reality that Bayantels real properties were already levied upon on account of its
nonpayment of real estate taxes thereon, the Court agrees with Bayantel that an appeal to the
LBAA is not a speedy and adequate remedy within the context of the aforequoted Section 2 of
Rule 65. This is not to mention of the auction sale of said properties already scheduled on July
30, 2002.
Moreover, one of the recognized exceptions to the exhaustion- of-administrative remedies rule is
when, as here, only legal issues are to be resolved. In fact, the Court, cognizant of the nature of
the questions presently involved, gave due course to the instant petition. As the Court has said in
Ty vs. Trampe:7
xxx. Although as a rule, administrative remedies must first be exhausted before resort to judicial
action can prosper, there is a well-settled exception in cases where the controversy does not
involve questions of fact but only of law. xxx.
Lest it be overlooked, an appeal to the LBAA, to be properly considered, required prior payment
under protest of the amount of P43,878,208.18, a figure which, in the light of the then prevailing
Asian financial crisis, may have been difficult to raise up. Given this reality, an appeal to the
LBAA may not be considered as a plain, speedy and adequate remedy. It is thus understandable
why Bayantel opted to withdraw its earlier appeal with the LBAA and, instead, filed its petition
for prohibition with urgent application for injunctive relief in Civil Case No. Q-02-47292. The
remedy availed of by Bayantel under Section 2, Rule 65 of the Rules of Court must be upheld.
This brings the Court to the more weighty question of whether or not Bayantels real properties
in Quezon City are, under its franchise, exempt from real property tax.
The lower court resolved the issue in the affirmative, basically owing to the phrase "exclusive of
this franchise" found in Section 11 of Bayantels amended franchise, Rep. Act No. 7633. To
petitioners, however, the language of Section 11 of Rep. Act No. 7633 is neither clear nor
unequivocal. The elaborate and extensive discussion devoted by the trial court on the meaning
and import of said phrase, they add, suggests as much. It is petitioners thesis that Bayantel was
in no time given any express exemption from the payment of real property tax under its
amendatory franchise.
There seems to be no issue as to Bayantels exemption from real estate taxes by virtue of the
term "exclusive of the franchise" qualifying the phrase "same taxes on its real estate, buildings
Page 76 of 97

and personal property," found in Section 14, supra, of its franchise, Rep. Act No. 3259, as
originally granted.
The legislative intent expressed in the phrase "exclusive of this franchise" cannot be construed
other than distinguishing between two (2) sets of properties, be they real or personal, owned by
the franchisee, namely, (a) those actually, directly and exclusively used in its radio or
telecommunications business, and (b) those properties which are not so used. It is worthy to note
that the properties subject of the present controversy are only those which are admittedly falling
under the first category.
To the mind of the Court, Section 14 of Rep. Act No. 3259 effectively works to grant or delegate
to local governments of Congress inherent power to tax the franchisees properties belonging to
the second group of properties indicated above, that is, all properties which, "exclusive of this
franchise," are not actually and directly used in the pursuit of its franchise. As may be recalled,
the taxing power of local governments under both the 1935 and the 1973 Constitutions solely
depended upon an enabling law. Absent such enabling law, local government units were without
authority to impose and collect taxes on real properties within their respective territorial
jurisdictions. While Section 14 of Rep. Act No. 3259 may be validly viewed as an implied
delegation of power to tax, the delegation under that provision, as couched, is limited to
impositions over properties of the franchisee which are not actually, directly and exclusively
used in the pursuit of its franchise. Necessarily, other properties of Bayantel directly used in the
pursuit of its business are beyond the pale of the delegated taxing power of local governments. In
a very real sense, therefore, real properties of Bayantel, save those exclusive of its franchise, are
subject to realty taxes. Ultimately, therefore, the inevitable result was that all realties which are
actually, directly and exclusively used in the operation of its franchise are "exempted" from any
property tax.
Bayantels franchise being national in character, the "exemption" thus granted under Section 14
of Rep. Act No. 3259 applies to all its real or personal properties found anywhere within the
Philippine archipelago.
However, with the LGCs taking effect on January 1, 1992, Bayantels "exemption" from real
estate taxes for properties of whatever kind located within the Metro Manila area was, by force
of Section 234 of the Code, supra, expressly withdrawn. But, not long thereafter, however, or on
July 20, 1992, Congress passed Rep. Act No. 7633 amending Bayantels original franchise.
Worthy of note is that Section 11 of Rep. Act No. 7633 is a virtual reenacment of the tax
provision, i.e., Section 14, supra, of Bayantels original franchise under Rep. Act No. 3259.
Stated otherwise, Section 14 of Rep. Act No. 3259 which was deemed impliedly repealed by
Section 234 of the LGC was expressly revived under Section 14 of Rep. Act No. 7633. In
concrete terms, the realty tax exemption heretofore enjoyed by Bayantel under its original
franchise, but subsequently withdrawn by force of Section 234 of the LGC, has been restored by
Section 14 of Rep. Act No. 7633.
The Court has taken stock of the fact that by virtue of Section 5, Article X of the 1987
Constitution,8 local governments are empowered to levy taxes. And pursuant to this
constitutional empowerment, juxtaposed with Section 2329 of the LGC, the Quezon City
government enacted in 1993 its local Revenue Code, imposing real property tax on all real
properties found within its territorial jurisdiction. And as earlier stated, the Citys Revenue Code,
just like the LGC, expressly withdrew, under Section 230 thereof, supra, all tax exemption
privileges in general.
This thus raises the question of whether or not the Citys Revenue Code pursuant to which the
city treasurer of Quezon City levied real property taxes against Bayantels real properties located
within the City effectively withdrew the tax exemption enjoyed by Bayantel under its franchise,
as amended.
Bayantel answers the poser in the negative arguing that once again it is only "liable to pay the
same taxes, as any other persons or corporations on all its real or personal properties, exclusive
of its franchise."
Page 77 of 97

Bayantels posture is well-taken. While the system of local government taxation has changed
with the onset of the 1987 Constitution, the power of local government units to tax is still
limited. As we explained in Mactan Cebu International Airport Authority:10
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 be 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. (at p. 680; Emphasis supplied.)
Clearly then, while a new slant on the subject of local taxation now prevails in the sense that the
former doctrine of local government units delegated power to tax had been effectively modified
with Article X, Section 5 of the 1987 Constitution now in place, .the basic doctrine on local
taxation remains essentially the same. For as the Court stressed in Mactan, "the power to tax is
[still] primarily vested in the Congress."
This new perspective is best articulated by Fr. Joaquin G. Bernas, S.J., himself a Commissioner
of the 1986 Constitutional Commission which crafted the 1987 Constitution, thus:
What is the effect of Section 5 on the fiscal position of municipal corporations? Section 5 does
not change the doctrine that municipal corporations do not possess inherent powers of taxation.
What it does is to confer municipal corporations a general power to levy taxes and otherwise
create sources of revenue. They no longer have to wait for a statutory grant of these powers. The
power of the legislative authority relative to the fiscal powers of local governments has been
reduced to the authority to impose limitations on municipal powers. Moreover, these limitations
must be "consistent with the basic policy of local autonomy." The important legal effect of
Section 5 is thus to reverse the principle that doubts are resolved against municipal corporations.
Henceforth, in interpreting statutory provisions on municipal fiscal powers, doubts will be
resolved in favor of municipal corporations. It is understood, however, that taxes imposed by
local government must be for a public purpose, uniform within a locality, must not be
confiscatory, and must be within the jurisdiction of the local unit to pass.11(Emphasis supplied).
In net effect, the controversy presently before the Court involves, at bottom, a clash between the
inherent taxing power of the legislature, which necessarily includes the power to exempt, and the
local governments delegated power to tax under the aegis of the 1987 Constitution.
Now to go back to the Quezon City Revenue Code which imposed real estate taxes on all real
properties within the citys territory and removed exemptions theretofore "previously granted to,
or presently enjoyed by all persons, whether natural or juridical .,"12 there can really be no
dispute that the power of the Quezon City Government to tax is limited by Section 232 of the
LGC which expressly provides that "a province or city or municipality within the Metropolitan
Manila Area may levy an annual ad valorem tax on real property such as land, building,
machinery, and other improvement not hereinafter specifically exempted." Under this law, the
Legislature highlighted its power to thereafter exempt certain realties from the taxing power of
local government units. An interpretation denying Congress such power to exempt would reduce
the phrase "not hereinafter specifically exempted" as a pure jargon, without meaning whatsoever.
Needless to state, such absurd situation is unacceptable.
For sure, in Philippine Long Distance Telephone Company, Inc. (PLDT) vs. City of
Davao,13 this Court has upheld the power of Congress to grant exemptions over the power of
local government units to impose taxes. There, the Court wrote:
Indeed, the grant of taxing powers to local government units under the Constitution and the LGC
does not affect the power of Congress to grant exemptions to certain persons, pursuant to a
declared national policy. The legal effect of the constitutional grant to local governments simply
means that in interpreting statutory provisions on municipal taxing powers, doubts must be
resolved in favor of municipal corporations. (Emphasis supplied.)
Page 78 of 97

As we see it, then, the issue in this case no longer dwells on whether Congress has the power to
exempt Bayantels properties from realty taxes by its enactment of Rep. Act No. 7633 which
amended Bayantels original franchise. The more decisive question turns on whether Congress
actually did exempt Bayantels properties at all by virtue of Section 11 of Rep. Act No. 7633.
Admittedly, Rep. Act No. 7633 was enacted subsequent to the LGC. Perfectly aware that the
LGC has already withdrawn Bayantels former exemption from realty taxes, Congress opted to
pass Rep. Act No. 7633 using, under Section 11 thereof, exactly the same defining phrase
"exclusive of this franchise" which was the basis for Bayantels exemption from realty taxes
prior to the LGC. In plain language, Section 11 of Rep. Act No. 7633 states that "the grantee, its
successors or assigns shall be liable to pay the same taxes on their real estate, buildings and
personal property, exclusive of this franchise, as other persons or corporations are now or
hereafter may be required by law to pay." The Court views this subsequent piece of legislation as
an express and real intention on the part of Congress to once again remove from the LGCs
delegated taxing power, all of the franchisees (Bayantels) properties that are actually, directly
and exclusively used in the pursuit of its franchise.
WHEREFORE, the petition is DENIED.
No pronouncement as to costs.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
Page 79 of 97

THIRD DIVISION
G.R. No. 168557

February 16, 2007

FELS ENERGY, INC., Petitioner,

vs.
THE PROVINCE OF BATANGAS and THE OFFICE OF THE PROVINCIAL ASSESSOR OF
BATANGAS, Respondents.
DECISION
CALLEJO, SR., J.:
Before us are two consolidated cases docketed as G.R. No. 168557 and G.R. No. 170628, which
were filed by petitioners FELS Energy, Inc. (FELS) and National Power Corporation (NPC),
respectively. The first is a petition for review on certiorari assailing the August 25, 2004
Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 67490 and its Resolution2 dated
June 20, 2005; the second, also a petition for review on certiorari, challenges the February 9,
2005 Decision3 and November 23, 2005 Resolution4 of the CA in CA-G.R. SP No. 67491. Both
petitions were dismissed on the ground of prescription.
The pertinent facts are as follows:
On January 18, 1993, NPC entered into a lease contract with Polar Energy, Inc. over 3x30 MW
diesel engine power barges moored at Balayan Bay in Calaca, Batangas. The contract,
denominated as an Energy Conversion Agreement5 (Agreement), was for a period of five years.
Article 10 reads:
10.1 RESPONSIBILITY. NAPOCOR shall be responsible for the payment of (a) all taxes,
import duties, fees, charges and other levies imposed by the National Government of the
Republic of the Philippines or any agency or instrumentality thereof to which POLAR may be or
become subject to or in relation to the performance of their obligations under this agreement
(other than (i) taxes imposed or calculated on the basis of the net income of POLAR and
Personal Income Taxes of its employees and (ii) construction permit fees, environmental permit
fees and other similar fees and charges) and (b) all real estate taxes and assessments, rates and
other charges in respect of the Power Barges.6
Subsequently, Polar Energy, Inc. assigned its rights under the Agreement to FELS. The NPC
initially opposed the assignment of rights, citing paragraph 17.2 of Article 17 of the Agreement.
On August 7, 1995, FELS received an assessment of real property taxes on the power barges
from Provincial Assessor Lauro C. Andaya of Batangas City. The assessed tax, which likewise
covered those due for 1994, amounted to P56,184,088.40 per annum. FELS referred the matter to
NPC, reminding it of its obligation under the Agreement to pay all real estate taxes. It then gave
NPC the full power and authority to represent it in any conference regarding the real property
assessment of the Provincial Assessor.
In a letter7 dated September 7, 1995, NPC sought reconsideration of the Provincial Assessors
decision to assess real property taxes on the power barges. However, the motion was denied on
September 22, 1995, and the Provincial Assessor advised NPC to pay the assessment.8 This
prompted NPC to file a petition with the Local Board of Assessment Appeals (LBAA) for the
setting aside of the assessment and the declaration of the barges as non-taxable items; it also
prayed that should LBAA find the barges to be taxable, the Provincial Assessor be directed to
make the necessary corrections.9
In its Answer to the petition, the Provincial Assessor averred that the barges were real property
for purposes of taxation under Section 199(c) of Republic Act (R.A.) No. 7160.

Page 80 of 97

Before the case was decided by the LBAA, NPC filed a Manifestation, informing the LBAA that
the Department of Finance (DOF) had rendered an opinion10 dated May 20, 1996, where it is
clearly stated that power barges are not real property subject to real property assessment.
On August 26, 1996, the LBAA rendered a Resolution11 denying the petition. The fallo reads:
WHEREFORE, the Petition is DENIED. FELS is hereby ordered to pay the real estate tax in the
amount ofP56,184,088.40, for the year 1994.
SO ORDERED.12
The LBAA ruled that the power plant facilities, while they may be classified as movable or
personal property, are nevertheless considered real property for taxation purposes because they
are installed at a specific location with a character of permanency. The LBAA also pointed out
that the owner of the bargesFELS, a private corporationis the one being taxed, not NPC. A
mere agreement making NPC responsible for the payment of all real estate taxes and assessments
will not justify the exemption of FELS; such a privilege can only be granted to NPC and cannot
be extended to FELS. Finally, the LBAA also ruled that the petition was filed out of time.
Aggrieved, FELS appealed the LBAAs ruling to the Central Board of Assessment Appeals
(CBAA).
On August 28, 1996, the Provincial Treasurer of Batangas City issued a Notice of Levy and
Warrant by Distraint13over the power barges, seeking to collect real property taxes amounting
to P232,602,125.91 as of July 31, 1996. The notice and warrant was officially served to FELS on
November 8, 1996. It then filed a Motion to Lift Levy dated November 14, 1996, praying that
the Provincial Assessor be further restrained by the CBAA from enforcing the disputed
assessment during the pendency of the appeal.
On November 15, 1996, the CBAA issued an Order14 lifting the levy and distraint on the
properties of FELS in order not to preempt and render ineffectual, nugatory and illusory any
resolution or judgment which the Board would issue.
Meantime, the NPC filed a Motion for Intervention15 dated August 7, 1998 in the proceedings
before the CBAA. This was approved by the CBAA in an Order16 dated September 22, 1998.
During the pendency of the case, both FELS and NPC filed several motions to admit bond to
guarantee the payment of real property taxes assessed by the Provincial Assessor (in the event
that the judgment be unfavorable to them). The bonds were duly approved by the CBAA.
On April 6, 2000, the CBAA rendered a Decision17 finding the power barges exempt from real
property tax. The dispositive portion reads:
WHEREFORE, the Resolution of the Local Board of Assessment Appeals of the Province of
Batangas is hereby reversed. Respondent-appellee Provincial Assessor of the Province of
Batangas is hereby ordered to drop subject property under ARP/Tax Declaration No. 018-00958
from the List of Taxable Properties in the Assessment Roll. The Provincial Treasurer of Batangas
is hereby directed to act accordingly.
SO ORDERED.18
Ruling in favor of FELS and NPC, the CBAA reasoned that the power barges belong to NPC;
since they are actually, directly and exclusively used by it, the power barges are covered by the
exemptions under Section 234(c) of R.A. No. 7160.19 As to the other jurisdictional issue, the
CBAA ruled that prescription did not preclude the NPC from pursuing its claim for tax
exemption in accordance with Section 206 of R.A. No. 7160. The Provincial Assessor filed a
motion for reconsideration, which was opposed by FELS and NPC.

Page 81 of 97

In a complete volte face, the CBAA issued a Resolution20 on July 31, 2001 reversing its earlier
decision. The fallo of the resolution reads:
WHEREFORE, premises considered, it is the resolution of this Board that:
(a) The decision of the Board dated 6 April 2000 is hereby reversed.
(b) The petition of FELS, as well as the intervention of NPC, is dismissed.
(c) The resolution of the Local Board of Assessment Appeals of Batangas is hereby
affirmed,
(d) The real property tax assessment on FELS by the Provincial Assessor of Batangas is
likewise hereby affirmed.
SO ORDERED.21
FELS and NPC filed separate motions for reconsideration, which were timely opposed by the
Provincial Assessor. The CBAA denied the said motions in a Resolution22 dated October 19,
2001.
Dissatisfied, FELS filed a petition for review before the CA docketed as CA-G.R. SP No. 67490.
Meanwhile, NPC filed a separate petition, docketed as CA-G.R. SP No. 67491.
On January 17, 2002, NPC filed a Manifestation/Motion for Consolidation in CA-G.R. SP No.
67490 praying for the consolidation of its petition with CA-G.R. SP No. 67491. In a
Resolution23 dated February 12, 2002, the appellate court directed NPC to re-file its motion for
consolidation with CA-G.R. SP No. 67491, since it is the ponente of the latter petition who
should resolve the request for reconsideration.
NPC failed to comply with the aforesaid resolution. On August 25, 2004, the Twelfth Division of
the appellate court rendered judgment in CA-G.R. SP No. 67490 denying the petition on the
ground of prescription. The decretal portion of the decision reads:
WHEREFORE, the petition for review is DENIED for lack of merit and the assailed Resolutions
dated July 31, 2001 and October 19, 2001 of the Central Board of Assessment Appeals are
AFFIRMED.
SO ORDERED.24
On September 20, 2004, FELS timely filed a motion for reconsideration seeking the reversal of
the appellate courts decision in CA-G.R. SP No. 67490.
Thereafter, NPC filed a petition for review dated October 19, 2004 before this Court, docketed as
G.R. No. 165113, assailing the appellate courts decision in CA-G.R. SP No. 67490. The petition
was, however, denied in this Courts Resolution25 of November 8, 2004, for NPCs failure to
sufficiently show that the CA committed any reversible error in the challenged decision. NPC
filed a motion for reconsideration, which the Court denied with finality in a Resolution26 dated
January 19, 2005.
Meantime, the appellate court dismissed the petition in CA-G.R. SP No. 67491. It held that the
right to question the assessment of the Provincial Assessor had already prescribed upon the
failure of FELS to appeal the disputed assessment to the LBAA within the period prescribed by
law. Since FELS had lost the right to question the assessment, the right of the Provincial
Government to collect the tax was already absolute.
NPC filed a motion for reconsideration dated March 8, 2005, seeking reconsideration of the
February 5, 2005 ruling of the CA in CA-G.R. SP No. 67491. The motion was denied in a
Resolution27 dated November 23, 2005.
Page 82 of 97

The motion for reconsideration filed by FELS in CA-G.R. SP No. 67490 had been earlier denied
for lack of merit in a Resolution28 dated June 20, 2005.
On August 3, 2005, FELS filed the petition docketed as G.R. No. 168557 before this Court,
raising the following issues:
A. Whether power barges, which are floating and movable, are personal properties and therefore,
not subject to real property tax.
B. Assuming that the subject power barges are real properties, whether they are exempt from real
estate tax under Section 234 of the Local Government Code ("LGC").
C. Assuming arguendo that the subject power barges are subject to real estate tax, whether or not
it should be NPC which should be made to pay the same under the law.
D. Assuming arguendo that the subject power barges are real properties, whether or not the same
is subject to depreciation just like any other personal properties.
E. Whether the right of the petitioner to question the patently null and void real property tax
assessment on the petitioners personal properties is imprescriptible.29
On January 13, 2006, NPC filed its own petition for review before this Court (G.R. No. 170628),
indicating the following errors committed by the CA:
I
THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE APPEAL TO THE
LBAA WAS FILED OUT OF TIME.
II
THE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING THAT THE POWER
BARGES ARE NOT SUBJECT TO REAL PROPERTY TAXES.
III
THE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING THAT THE
ASSESSMENT ON THE POWER BARGES WAS NOT MADE IN ACCORDANCE WITH
LAW.30
Considering that the factual antecedents of both cases are similar, the Court ordered the
consolidation of the two cases in a Resolution31 dated March 8, 2006.1awphi1.net
In an earlier Resolution dated February 1, 2006, the Court had required the parties to submit their
respective Memoranda within 30 days from notice. Almost a year passed but the parties had not
submitted their respective memoranda. Considering that taxesthe lifeblood of our economy
are involved in the present controversy, the Court was prompted to dispense with the said
pleadings, with the end view of advancing the interests of justice and avoiding further delay.
In both petitions, FELS and NPC maintain that the appeal before the LBAA was not time-barred.
FELS argues that when NPC moved to have the assessment reconsidered on September 7, 1995,
the running of the period to file an appeal with the LBAA was tolled. For its part, NPC posits
that the 60-day period for appealing to the LBAA should be reckoned from its receipt of the
denial of its motion for reconsideration.
Petitioners contentions are bereft of merit.
Section 226 of R.A. No. 7160, otherwise known as the Local Government Code of 1991,
provides:
Page 83 of 97

SECTION 226. Local Board of Assessment Appeals. Any owner or person having legal interest
in the property who is not satisfied with the action of the provincial, city or municipal assessor in
the assessment of his property may, within sixty (60) days from the date of receipt of the written
notice of assessment, appeal to the Board of Assessment Appeals of the province or city by filing
a petition under oath in the form prescribed for the purpose, together with copies of the tax
declarations and such affidavits or documents submitted in support of the appeal.
We note that the notice of assessment which the Provincial Assessor sent to FELS on August 7,
1995, contained the following statement:
If you are not satisfied with this assessment, you may, within sixty (60) days from the date of
receipt hereof, appeal to the Board of Assessment Appeals of the province by filing a petition
under oath on the form prescribed for the purpose, together with copies of ARP/Tax Declaration
and such affidavits or documents submitted in support of the appeal.32
Instead of appealing to the Board of Assessment Appeals (as stated in the notice), NPC opted to
file a motion for reconsideration of the Provincial Assessors decision, a remedy not sanctioned
by law.
The remedy of appeal to the LBAA is available from an adverse ruling or action of the
provincial, city or municipal assessor in the assessment of the property. It follows then that the
determination made by the respondent Provincial Assessor with regard to the taxability of the
subject real properties falls within its power to assess properties for taxation purposes subject to
appeal before the LBAA.33
We fully agree with the rationalization of the CA in both CA-G.R. SP No. 67490 and CA-G.R.
SP No. 67491. The two divisions of the appellate court cited the case of Callanta v. Office of the
Ombudsman,34 where we ruled that under Section 226 of R.A. No 7160,35 the last action of the
local assessor on a particular assessment shall be the notice of assessment; it is this last action
which gives the owner of the property the right to appeal to the LBAA. The procedure likewise
does not permit the property owner the remedy of filing a motion for reconsideration before the
local assessor. The pertinent holding of the Court in Callanta is as follows:
x x x [T]he same Code is equally clear that the aggrieved owners should have brought their
appeals before the LBAA. Unfortunately, despite the advice to this effect contained in their
respective notices of assessment, the owners chose to bring their requests for a
review/readjustment before the city assessor, a remedy not sanctioned by the law. To allow this
procedure would indeed invite corruption in the system of appraisal and assessment. It
conveniently courts a graft-prone situation where values of real property may be initially set
unreasonably high, and then subsequently reduced upon the request of a property owner. In the
latter instance, allusions of a possible covert, illicit trade-off cannot be avoided, and in fact can
conveniently take place. Such occasion for mischief must be prevented and excised from our
system.36
For its part, the appellate court declared in CA-G.R. SP No. 67491:
x x x. The Court announces: Henceforth, whenever the local assessor sends a notice to the owner
or lawful possessor of real property of its revised assessed value, the former shall no longer have
any jurisdiction to entertain any request for a review or readjustment. The appropriate forum
where the aggrieved party may bring his appeal is the LBAA as provided by law. It follows
ineluctably that the 60-day period for making the appeal to the LBAA runs without interruption.
This is what We held in SP 67490 and reaffirm today in SP 67491.37
To reiterate, if the taxpayer fails to appeal in due course, the right of the local government to
collect the taxes due with respect to the taxpayers property becomes absolute upon the
expiration of the period to appeal.38 It also bears stressing that the taxpayers failure to question
the assessment in the LBAA renders the assessment of the local assessor final, executory and
demandable, thus, precluding the taxpayer from questioning the correctness of the assessment, or
from invoking any defense that would reopen the question of its liability on the merits.39
Page 84 of 97

In fine, the LBAA acted correctly when it dismissed the petitioners appeal for having been filed
out of time; the CBAA and the appellate court were likewise correct in affirming the dismissal.
Elementary is the rule that the perfection of an appeal within the period therefor is both
mandatory and jurisdictional, and failure in this regard renders the decision final and
executory.40
In the Comment filed by the Provincial Assessor, it is asserted that the instant petition is barred
by res judicata; that the final and executory judgment in G.R. No. 165113 (where there was a
final determination on the issue of prescription), effectively precludes the claims herein; and that
the filing of the instant petition after an adverse judgment in G.R. No. 165113 constitutes forum
shopping.
FELS maintains that the argument of the Provincial Assessor is completely misplaced since it
was not a party to the erroneous petition which the NPC filed in G.R. No. 165113. It avers that it
did not participate in the aforesaid proceeding, and the Supreme Court never acquired
jurisdiction over it. As to the issue of forum shopping, petitioner claims that no forum shopping
could have been committed since the elements of litis pendentia or res judicata are not present.
We do not agree.
Res judicata pervades every organized system of jurisprudence and is founded upon two grounds
embodied in various maxims of common law, namely: (1) public policy and necessity, which
makes it to the interest of the
State that there should be an end to litigation republicae ut sit litium; and (2) the hardship on
the individual of being vexed twice for the same cause nemo debet bis vexari et eadem causa.
A conflicting doctrine would subject the public peace and quiet to the will and dereliction of
individuals and prefer the regalement of the litigious disposition on the part of suitors to the
preservation of the public tranquility and happiness.41 As we ruled in Heirs of Trinidad De Leon
Vda. de Roxas v. Court of Appeals:42
x x x An existing final judgment or decree rendered upon the merits, without fraud or
collusion, by a court of competent jurisdiction acting upon a matter within its authority is
conclusive on the rights of the parties and their privies. This ruling holds in all other actions or
suits, in the same or any other judicial tribunal of concurrent jurisdiction, touching on the points
or matters in issue in the first suit.
xxx
Courts will simply refuse to reopen what has been decided. They will not allow the same parties
or their privies to litigate anew a question once it has been considered and decided with finality.
Litigations must end and terminate sometime and somewhere. The effective and efficient
administration of justice requires that once a judgment has become final, the prevailing party
should not be deprived of the fruits of the verdict by subsequent suits on the same issues filed by
the same parties.
This is in accordance with the doctrine of res judicata which has the following elements: (1) the
former judgment must be final; (2) the court which rendered it had jurisdiction over the subject
matter and the parties; (3) the judgment must be on the merits; and (4) there must be between the
first and the second actions, identity of parties, subject matter and causes of action. The
application of the doctrine of res judicata does not require absolute identity of parties but merely
substantial identity of parties. There is substantial identity of parties when there is community of
interest or privity of interest between a party in the first and a party in the second case even if the
first case did not implead the latter.43
To recall, FELS gave NPC the full power and authority to represent it in any proceeding
regarding real property assessment. Therefore, when petitioner NPC filed its petition for review
docketed as G.R. No. 165113, it did so not only on its behalf but also on behalf of FELS.
Moreover, the assailed decision in the earlier petition for review filed in this Court was the
Page 85 of 97

decision of the appellate court in CA-G.R. SP No. 67490, in which FELS was the petitioner.
Thus, the decision in G.R. No. 165116 is binding on petitioner FELS under the principle of
privity of interest. In fine, FELS and NPC are substantially "identical parties" as to warrant the
application of res judicata. FELSs argument that it is not bound by the erroneous petition filed
by NPC is thus unavailing.
On the issue of forum shopping, we rule for the Provincial Assessor. Forum shopping exists
when, as a result of an adverse judgment in one forum, a party seeks another and possibly
favorable judgment in another forum other than by appeal or special civil action or certiorari.
There is also forum shopping when a party institutes two or more actions or proceedings
grounded on the same cause, on the gamble that one or the other court would make a favorable
disposition.44
Petitioner FELS alleges that there is no forum shopping since the elements of res judicata are not
present in the cases at bar; however, as already discussed, res judicata may be properly applied
herein. Petitioners engaged in forum shopping when they filed G.R. Nos. 168557 and 170628
after the petition for review in G.R. No. 165116. Indeed, petitioners went from one court to
another trying to get a favorable decision from one of the tribunals which allowed them to pursue
their cases.
It must be stressed that an important factor in determining the existence of forum shopping is the
vexation caused to the courts and the parties-litigants by the filing of similar cases to claim
substantially the same reliefs.45 The rationale against forum shopping is that a party should not
be allowed to pursue simultaneous remedies in two different fora. Filing multiple petitions or
complaints constitutes abuse of court processes, which tends to degrade the administration of
justice, wreaks havoc upon orderly judicial procedure, and adds to the congestion of the heavily
burdened dockets of the courts.46
Thus, there is forum shopping when there exist: (a) identity of parties, or at least such parties as
represent the same interests in both actions, (b) identity of rights asserted and relief prayed for,
the relief being founded on the same facts, and (c) the identity of the two preceding particulars is
such that any judgment rendered in the pending case, regardless of which party is successful,
would amount to res judicata in the other.47
Having found that the elements of res judicata and forum shopping are present in the
consolidated cases, a discussion of the other issues is no longer necessary. Nevertheless, for the
peace and contentment of petitioners, we shall shed light on the merits of the case.
As found by the appellate court, the CBAA and LBAA power barges are real property and are
thus subject to real property tax. This is also the inevitable conclusion, considering that G.R. No.
165113 was dismissed for failure to sufficiently show any reversible error. Tax assessments by
tax examiners are presumed correct and made in good faith, with the taxpayer having the burden
of proving otherwise.48 Besides, factual findings of administrative bodies, which have acquired
expertise in their field, are generally binding and conclusive upon the Court; we will not assume
to interfere with the sensible exercise of the judgment of men especially trained in appraising
property. Where the judicial mind is left in doubt, it is a sound policy to leave the assessment
undisturbed.49 We find no reason to depart from this rule in this case.
In Consolidated Edison Company of New York, Inc., et al. v. The City of New York, et al.,50 a
power company brought an action to review property tax assessment. On the citys motion to
dismiss, the Supreme Court of New York held that the barges on which were mounted gas
turbine power plants designated to generate electrical power, the fuel oil barges which supplied
fuel oil to the power plant barges, and the accessory equipment mounted on the barges were
subject to real property taxation.
Moreover, Article 415 (9) of the New Civil Code provides that "[d]ocks and structures which,
though floating, are intended by their nature and object to remain at a fixed place on a river, lake,
or coast" are considered immovable property. Thus, power barges are categorized as immovable
property by destination, being in the nature of machinery and other implements intended by the
Page 86 of 97

owner for an industry or work which may be carried on in a building or on a piece of land and
which tend directly to meet the needs of said industry or work.51
Petitioners maintain nevertheless that the power barges are exempt from real estate tax under
Section 234 (c) of R.A. No. 7160 because they are actually, directly and exclusively used by
petitioner NPC, a government- owned and controlled corporation engaged in the supply,
generation, and transmission of electric power.
We affirm the findings of the LBAA and CBAA that the owner of the taxable properties is
petitioner FELS, which in fine, is the entity being taxed by the local government. As stipulated
under Section 2.11, Article 2 of the Agreement:
OWNERSHIP OF POWER BARGES. POLAR shall own the Power Barges and all the fixtures,
fittings, machinery and equipment on the Site used in connection with the Power Barges which
have been supplied by it at its own cost. POLAR shall operate, manage and maintain the Power
Barges for the purpose of converting Fuel of NAPOCOR into electricity.52
It follows then that FELS cannot escape liability from the payment of realty taxes by invoking its
exemption in Section 234 (c) of R.A. No. 7160, which reads:
SECTION 234. Exemptions from Real Property Tax. The following are exempted from
payment of the real property tax:
xxx
(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 generation and transmission of electric power; x x x
Indeed, the law states that the machinery must be actually, directly and exclusively used by the
government owned or controlled corporation; nevertheless, petitioner FELS still cannot find
solace in this provision because Section 5.5, Article 5 of the Agreement provides:
OPERATION. POLAR undertakes that until the end of the Lease Period, subject to the supply of
the necessary Fuel pursuant to Article 6 and to the other provisions hereof, it will operate the
Power Barges to convert such Fuel into electricity in accordance with Part A of Article 7.53
It is a basic rule that obligations arising from a contract have the force of law between the
parties. Not being contrary to law, morals, good customs, public order or public policy, the
parties to the contract are bound by its terms and conditions.54
Time and again, the Supreme Court has stated that taxation is the rule and exemption is the
exception.55 The law does not look with favor on tax exemptions and the entity that would seek
to be thus privileged must justify it by words too plain to be mistaken and too categorical to be
misinterpreted.56 Thus, applying the rule of strict construction of laws granting tax exemptions,
and the rule that doubts should be resolved in favor of provincial corporations, we hold that
FELS is considered a taxable entity.
The mere undertaking of petitioner NPC under Section 10.1 of the Agreement, that it shall be
responsible for the payment of all real estate taxes and assessments, does not justify the
exemption. The privilege granted to petitioner NPC cannot be extended to FELS. The covenant
is between FELS and NPC and does not bind a third person not privy thereto, in this case, the
Province of Batangas.
It must be pointed out that the protracted and circuitous litigation has seriously resulted in the
local governments deprivation of revenues. The power to tax is an incident of sovereignty and is
unlimited in its magnitude, acknowledging in its very nature no perimeter 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 for it.57 The right of local government units to collect taxes due
Page 87 of 97

must always be upheld to avoid severe tax erosion. This consideration is consistent with the State
policy to guarantee the autonomy of local governments58 and the objective of the Local
Government Code that they enjoy genuine and meaningful local autonomy to empower them to
achieve their fullest development as self-reliant communities and make them effective partners in
the attainment of national goals.59
In conclusion, we reiterate that the power to tax is the most potent instrument to raise the needed
revenues to finance and support myriad activities of the 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.60
WHEREFORE, the Petitions are DENIED and the assailed Decisions and Resolutions
AFFIRMED.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G. R. No. 152534

February 23, 2007

DIGITAL TELECOMMUNICATIONS PHILIPPINES, INC., Petitioner,

vs.
PROVINCE OF PANGASINAN represented by RAMON A. CRISOSTOMO, Pangasinan
Provincial Treasurer,Respondent.
DECISION
CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, as amended,
seeking the reversal of the Decision1 dated 14 June 2001, and the Resolution2 dated 15 February
2002, both rendered by the Regional Trial Court (RTC) of Lingayen, Pangasinan, Branch 68 in
Civil Case No. 18037, with the latter ruling in favor of respondent Province of Pangasinan.
The present petition stemmed from a Complaint3 for Mandamus, Collection of Sum of Money
and Damages instituted by respondent Province of Pangasinan represented by its Provincial
Treasurer, Ramon A. Crisostomo, against petitioner Digital Telecommunications Philippines, Inc.
(DIGITEL) on 1 March 2000. Said complaint docketed as Civil Case No. 18037, was filed
before RTC, Br. 68 of Lingayen, Pangasinan.
Republic Act No. 7160, otherwise known as the Local Government Code of 1991, took effect on
1 January 1992. Of significance to the present petition are Sections 137 and 2324 of the Local
Government Code. Section 137 of the Local Government Code, in principle, withdrew any
exemption5 from the payment of a tax on businesses enjoying a franchise. Expressly, it
authorized local governments to impose a franchise tax on businesses enjoying a franchise within
its territorial jurisdiction, to wit:
Page 88 of 97

SECTION 137. Franchise Tax. Notwithstanding any exemption granted by any law or other
special law, the province may impose a tax on business enjoying a franchise, at the rate not
exceeding fifty percent (50%) of one percent (1%) of the gross annual receipts for the preceding
calendar year based on the income receipt, or realized, within its territorial jurisdiction.
(Emphasis supplied.)
Section 232 likewise authorizes the imposition of an ad valorem tax on real property by the local
government of a province, city or municipality within the Metropolitan Manila Area wherein the
land, building, machinery and other improvement not thereinafter specifically exempted. The
particular provision reads:
SECTION 232. Power to Levy Real Property Tax. A province or city or a municipality within the
Metropolitan Manila Arena may levy an annual ad valorem tax on real property such as land,
building, machinery, and other improvement not hereinafter specially exempted. (Emphasis
supplied.)
On 13 November 1992, petitioner DIGITEL was granted, under Provincial Ordinance No. 18-92,
a provincial franchise to install, maintain and operate a telecommunications system within the
territorial jurisdiction of respondent Province of Pangasinan. Under the said provincial franchise,
the grantee is required to pay franchise and real property taxes, viz:
SECTION 6. The grantee shall pay to the Province of Pangasinan the applicable franchise tax as
maybe provided by appropriate ordinances in accordance with the Local Government Code and
other existing laws. Except for the foregoing and the real estate tax on its land and building, it
shall be subject to no other tax. The telephone posts, apparatus, equipment and communication
facilities of the grantee are exempted from the real estate tax. (Emphasis supplied.)
Pursuant to the mandate of Sections 137 and 232 of the Local Government Code, the
Sangguniang Panlalawigan of respondent Province of Pangasinan enacted on 29 December 1992,
Provincial Tax Ordinance No. 1, entitled "The Real Property Tax Ordinance of 1992." Section 4
thereof imposed a real property tax on real properties located within the territorial jurisdiction of
the province. The particular provision, however, technically expanded the application of Sec. 6
of the provincial franchise of petitioner DIGITEL to include machineries and other
improvements, not thereinafter exempted, to wit:
Section 4. Imposition of Real Property Tax. There shall be levied an annual AD VALOREM
tax on real property such as land, building, machinery, and other improvement not hereinafter
specifically exempted, situated or located within the territorial jurisdiction of Pangasinan at the
rate of one percent (1%) of the assessed value of said real property. (Emphasis supplied.)6
On 10 September 1993, Provincial Tax Ordinance No. 4, otherwise known as "The Pangasinan
Franchising Ordinance of 1993," was similarly ratified. Sections 4, 5 and 6 thereof, positively
imposed a franchise tax on businesses enjoying a franchise within the territorial jurisdiction of
respondent Province of Pangasinan.
Thereafter, petitioner DIGITEL was granted by Republic Act No. 7678,7 a legislative franchise
authorizing the grantee to install, operate and maintain telecommunications systems, this time,
throughout the Philippines. Under its legislative franchise, particularly Sec. 5 thereof, petitioner
DIGITEL became liable for the payment of a franchise tax "as may be prescribed by law of all
gross receipts of the telephone or other telecommunications businesses transacted under it by the
grantee,"8 as well as real property tax "on its real estate, and buildings "exclusive of this
franchise." Sec. 5 reads in full that:
SECTION 5. Tax Provisions. The grantee shall be liable to pay the same taxes on its real estate,
buildings, and personal property exclusive of this franchise as other persons or corporations are
now or hereafter may be required by law to pay. In addition thereto, the grantee shall pay to the
Bureau of Internal Revenue each year, within thirty (30) days after the audit and approval of the
accounts, franchise tax as may be prescribed by law of all gross receipts of the telephone or other
telecommunications business transacted under this franchise by the grantee: Provided, that the
Page 89 of 97

grantee shall continue to be liable for income taxes payable under Title II of the National Internal
Revenue Code pursuant to Section 2 of Executive Order No. 72 unless the latter enactment is
amended or repealed, in which case the amendment or repeal shall be applicable thereto. The
grantee shall file the return with and pay the tax due thereon to the Commissioner of Internal
Revenue or his duly authorized representative in accordance with the National Internal Revenue
Code and the return shall be subject to audit by the Bureau of Internal Revenue. [Emphasis
supplied.]1awphi1.net
Later, respondent Province of Pangasinan, in its examination of its record found that petitioner
DIGITEL had a franchise tax deficiency for the years 1992, 1993 and 1994. It was alleged that
apart from the Php40,000.00 deposit representing the grantees acquiescence or acceptance of the
franchise, as required by respondent Province of Pangasinan, petitioner DIGITEL had never paid
any franchise tax to respondent Province of Pangasinan since the former started its operation in
1992. Accordingly, the Sangguniang Panlalawigan passed Resolution No. 364 on 14 October
1994, categorically directing petitioner DIGITEL to:
[C]ommunicate its conformity to Ordinance No. 40 to the Sanggunian thru the Sangguniang
Panlalawigan Secretary and to pay the necessary and overdue franchise taxes to the Provincial
Treasurer of Pangasinan within fifteen (15) days from receipt hereof otherwise its franchise shall
be declared in operative (sic) and its operations terminated;"
In the interregnum, on 16 March 1995, Congress passed Republic Act No. 7925, otherwise
known as "The Public Telecommunications Policy Act of the Philippines." Section 23 of this law
entitled Equality of Treatment in the Telecommunications Industry, provided for the ipso
facto application to any previously granted telecommunications franchises of any advantage,
favor, privilege, exemption or immunity granted under existing franchises, or those still to be
granted, to be accorded immediately and unconditionally to earlier grantees. Section 23 reads
below:
SECTION 23. Equality of Treatment in the Telecommunications Industry. Any advantage,
favor, privilege, exemption, or immunity granted under existing franchises, or may hereafter be
granted, shall ipso facto become part of previously granted telecommunications franchises and
shall be accorded immediately and unconditionally to the grantees of such franchises x x x.
(Emphasis supplied.)
The provincial franchise and real property taxes remained unpaid despite the foregoing measures
instituted. Consequently, in a letter9 dated 30 October 1998, the Provincial Legal Officer of
respondent Province of Pangasinan, Atty. Geraldine U. Baniqued, demanded from petitioner
DIGITEL compliance with Provincial Tax Ordinance No. 4., specifically the first paragraph of
Section 4 thereof but which was wittingly or unwittingly misquoted10 to read:
No persons shall establish and / or operate a public utility business enterprises (sic) within the
territorial jurisdiction of the Province of Pangasinan whether in one municipality or group of
municipalities, except by virtue of a franchise granted by the Sangguniang Panlalawigan of
Pangasinan.
On 17 November 1998, petitioner DIGITEL took exception to respondent Province of
Pangasinans claim on the ground that prior to the approval of its legislative franchise, its
operation of a telecommunications system was done under a Facilities Management Agreement it
had previously executed with the Department of Transportation and Communication (DOTC).
Such agreement was purportedly the result of a public bidding wherein petitioner DIGITEL was
"awarded the right to manage the operation, maintenance and development of government
telecommunications facilities under its Regional Telecommunications Development Project
Phases A and B x x x and National Telephone Program Phase I Tranche 1 x x x covering Regions
I to V."11 It clarified that since "the facilities in the Province of Pangasinan are just part of the
government owned facilities awarded to DIGITEL," not only did the DOTC retain ownership of
said facilities, the latter likewise "provided for the budget for (the) expenses under its allocation
from the government;" hence, "all revenues generated from the operation of the facilities inured
Page 90 of 97

to the DOTC;" and all the fees received by petitioner DIGITEL were purely for services
rendered.
Further, it argued that under its legislative franchise, the payment of a franchise tax to the Bureau
of Internal Revenue (BIR) would be "in lieu of all taxes" on said franchise or the earnings
therefrom.
Unconvinced, on 8 December 1998, respondent Province of Pangasinan countered12 the
provisions of its franchise were subject not only to the provisions of the Constitution, but to
"applicable laws, rules and regulations" as well; that among the applicable laws being referred to
were Sec. 137 of the Local Government Code, which authorizes it to "impose a tax on business
enjoying a franchise x x x;" and Sec. 6 of Provincial Ordinance No. 4, which similarly imposes a
tax on a business enjoying a franchise.
On 1 March 2000, no settlement having been made, respondent Province of Pangasinan,
represented by the latters Provincial Treasurer, Ramon A. Crisostomo, filed a Complaint13 for
Mandamus, Collection of Sum of Money and Damages before Branch 68 of the RTC of
Lingayen, Pangasinan, docketed as Civil Case No. 18037. The Complaint prayed that petitioner
DIGITEL be ordered:
1. to x x x open its books, records and other pertinent documents so that the provincial
government can make the proper assessment of the Taxes due.
2. after determination of the defendants capital investment and subsequent gross receipts,
to pay plaintiff the sum equivalent to 1/20th of one percent (1%) of the total capital
investment for the first year of its operation and thereafter, fifty percent (50%) of one
percent (1%) of the gross receipts realized during the preceding calendar year for the year
1993, 1994, 1995, 1996, 1997, 1998 and up to the present.
3. after determination of all of defendants real properties, to pay the Real Property Tax
due after its proper computation.
4. to pay legal interest of the amounts from the time it was due until the whole amount is
fully complied with.
5. to pay the cost of this suit.
On 14 June 2001, the court a quo rendered a Decision14 in favor of respondent Province of
Pangasinan, the dispositive part of which reads:
WHEREFORE, foregoing premises considered, judgment is hereby rendered in favor of the
plaintiff, as follows:
1. Ordering the defendant to open its books, records and other pertinent documents so
that the provincial government can make the proper assessment of the franchise tax and
real property tax due;
2. After the determination of the defendants capital investment and subsequent gross
receipts, to pay plaintiff the sum equivalent to 1/20th of one percent (1%) of the total
capital investment for the first year of its operation (1993), and thereafter, fifty percent
(50%) of one percent (1%) of the gross receipts realized during the preceding calendar
year 1993, 1994, 1995, 1996, 1997, 1998 and up to the present;
3. After determination of all of defendants real properties, to pay Real Property Tax due
after its proper computation, pursuant to Section 4 of the Real Property Tax Ordinance of
1992 of the plaintiff;
4. To pay 1) A surcharge of twenty-five percent of the amount of the franchise tax due or
a fraction thereof until the delinquent tax shall have been fully paid; 2) To pay an interest
Page 91 of 97

of two percent (2%) per month on the unpaid amount or a fraction thereof, until the
delinquent tax shall have been fully paid, but in no case shall the total interest on the
unpaid tax or proportion thereof exceed 36 months;
5. To pay the cost of this suit.
In ruling against the claimed exemption, the court a quo held that petitioner DIGITELs
legislative franchise does not work to exempt the latter from payment of provincial franchise and
real property taxes. The court a quo reasoned that the provincial and legislative franchises are
separate and distinct from each other; and, that prior to the grant of its legislative franchise,
petitioner DIGITEL had already benefited from the use of it. Moreover, it pointed out that
Section 137 of the Local Government Code had already withdrawn any exemption granted to
anyone; as such, the local government of a province may impose a tax on a business enjoying a
franchise.
On the other hand, petitioner DIGITEL maintains that its legislative franchise being an earlier
enactment, by virtue of Section 23 of Republic Act No. 7925, the ipso facto, immediate and
unconditional application to it of the tax exemption found in the franchises of Globe, Smart and
Bell, i.e., in Section 9 (b) of Republic Act No. 7229, Globes legislative franchise; in Section 9 of
Republic Act No. 7294, Smarts legislative franchise; and Section 9 of Republic Act No. 7294,
Bells legislative franchise, all basically or similarly containing the phrase "shall pay a franchise
tax equivalent to x x x of all gross receipts of the business transacted under this franchise by the
grantee, its successors or assigns and the said percentage shall be in lieu of all taxes on this
franchise or earnings thereof.
Stated simply, Section 23 of Republic Act No. 7925, in relation to the pertinent provisions of the
legislative franchises of Globe, Smart and Bell, "the national franchise tax for which petitioner
(DIGITEL) is liable to pay shall be in lieu of any and all taxes of any kind, nature or description
levied, established or collected by any authority whatsoever, municipal, provincial, or national,
from which the grantee is hereby expressly granted.
Petitioner DIGITELs Motion for Reconsideration was denied in a Resolution dated 15 February
2002.
As the controversy involves pure questions of law, this Petition for Review on Certiorari under
Rule 45 of the Rules of Court, as amended, was filed directly with this Court, predicated on the
following arguments:
I.
THE HONORABLE COURT ERRED IN DECLARING THAT THE LOCAL GOVERNMENT
CODE IS A SPECIAL LAW.
II.
THE LOWER COURT ERRED IN RULING THAT PETITIONER IS LIABLE TO PAY REAL
PROPERTY TAX AND FRANCHISE TAX.
III.
THE PROVISIONS OF THE LOCAL GOVERNMENT CODE MAY BE RECONCILED WITH
THOSE OF PETITIONERS LEGISLATIVE FRANCHISE.
IV.
THE HONORABLE COURT ERRED IN NOT RULING THAT PETITIONERS
LEGISLATIVE FRANCHISE, REPUBLIC ACT NO. 7678, IS IN CONFORMITY WITH THE
CONSTITUTION.
Page 92 of 97

V.
THE HONORABLE COURT ERRED IN RULING THAT THE NON-IMPAIRMENT CLAUSE
OF THE CONSTITUTION DOES NOT EXTEND TO NOR COVER FRANCHISES ISSUED
BY CONGRESS.
VI.
ASSUMING ARGUENDO THAT PETITIONER SHOULD BE HELD LIABLE TO PAY
FRANCHISE AND REAL PROPERTY TAXES, IT IS NONETHELESS STILL EXEMPT
FROM PAYMENT THEREOF IN VIEW OF ITS REGISTRATION WITH THE BOARD OF
INVESTMENTS AS A NON-PIONEER BUSINESS ENTERPRISE IN ACCORDANCE WITH
SECTION 133 (G) OF THE LOCAL GOVERNMENT CODE.
The plethora of arguments raised can be reduced to two basic but essential issues, namely: 1)
Whether or not petitioner DIGITEL is entitled to the exemption from the payment of provincial
franchise tax in view of Section 23 of Republic Act No. 7925,15 otherwise known as the "Public
Telecommunications Policy Act of the Philippines," in relation to the tax exemption provisions
found in the legislative franchises of Globe Mackay Cable and Radio Corporation, Smart
Information Technologies, Incorporated and Bell Telecommunication Philippines, Incorporated.
Stated otherwise, are the "in-lieu-of-all-taxes" clauses/provisos found in Republic Act No. 7229,
the legislative franchise of Globe; Republic Act No. 7294, the legislative franchise of Smart; and
Republic Act No. 7692, the legislative franchise of Bell, vis--vis Section 23 of Republic Act No.
7925, applicable to petitioner DIGITEL such that the latter is now exempt from the payment of
any other taxes except the national franchise and income taxes? lavvphi1.net
And, 2) if answered in the negative, whether or not petitioner DIGITELs real properties found
within the territorial jurisdiction of respondent Province of Pangasinan are exempt from the
payment of real property taxes by virtue of the phrase "exclusive of this franchise" found in
Section 5 of its legislative franchise, Republic Act No. 7678?
At the outset, worth noting is the fact that prior to the enactment and effectivity of its legislative
franchise, with only a provincial franchise to speak of, petitioner DIGITEL did not enjoy any
exemption from the payment of franchise and real property taxes. In fact, Provincial Ordinance
No. 18-92, its provincial franchise, categorically made it liable for the payment of such taxes. It
was only with the enactment of Republic Act No. 7925 in 1995 and succeeding legislative
franchises containing the "in-lieu-of-all-taxes" clauses/provisos that petitioner DIGITEL can
claim exemption to such tax liabilities.
The case at bar is actually not one of first impression. Indeed, as far back as 2001, this Court has
had the occasion to rule against the claim for tax exemption under Republic Act No. 7925. In the
case of Philippine Long Distance Telephone Company, Inc. v. City of Davao,16 we already
clarified the confusion brought about by the effect of Section 23 of Republic Act No. 7925 that
the word "exemption" as used in the statute refers or pertains merely to an exemption from
regulatory or reporting requirements of the DOTC or the NTC and not to the grantees tax
liability.
The issue in the PLDT v. City of Davao case was whether or not, by virtue of Section 23 of
Republic Act No. 7925 (Public Telecommunications Policy of the Philippines), PLDT is again
entitled to an exemption from the payment of local franchise tax in view of the grant of a tax
exemption to Globe and Smart telecommunications companies. Before the enactment of
Republic Act No. 7925 in 1995, the Congress of the Philippines granted in favor of Globe17 and
Smart18 franchises19 that contain "in-lieu-of-all-taxes" clauses or provisos. Then came Republic
Act No. 7925, particularly Section 23 thereof, providing, more or less, that any advantage, favor,
privilege, exemption, or immunity granted under existing franchises, or may hereafter be
granted, shall be made part of previously enacted franchises and made automatically applicable
to the grantees thereof. Subsequently, in "January 1999, when PLDT applied for a mayors
permit to operate its Davao Metro Exchange, it was required to pay the local franchise tax for the
Page 93 of 97

first to the fourth quarter of 1999 x x x. PLDT challenged the power of the city government to
collect the local franchise tax and demanded a refund of what it had paid as local franchise tax
for the year 1997 and for the first to the third quarters of 1998."20 The latter believed itself to be
exempt from payment of such tax even though Section 12 of its franchise (Republic Act No.
7082) containing the "in-lieu-of-all-taxes" proviso had already been withdrawn by the provisions
of the Local Government Code. Its belief was anchored on the effect of the above-mentioned
Section 23 of Republic Act No. 7925 that because the franchises of Globe and Smart contain
"in-lieu-of-all-taxes" clauses or provisos, the same grant of tax exemption must be regarded to
have become ipso facto part of PLDTs previously granted telecommunications franchise.
In denying PLDTs petition, this Court, speaking through Mr. Justice Vicente V. Mendoza, held
that in approving Section 23 of Republic Act No. 7925, Congress did not intend it to operate as a
blanket tax exemption to all telecommunications entities; thus, it cannot be considered as having
amended petitioner PLDTs franchise so as to entitle it to exemption from the imposition of local
franchise taxes. The ponencia went on further to elucidate that:
To begin with, tax exemptions are highly disfavored. x x x
The tax exemption must be expressed in the statute in clear language that leaves no doubt of the
intention of the legislature to grant such exemption. And, even if it is granted, the exemption
must be interpreted in strictissimi juris against the taxpayer and liberally in favor of the taxing
authority. (Citation omitted.)
In the present case, petitioner justifies its claim of tax exemption by strained inferences. First, it
cites R.A. No. 7925, otherwise known as the Public Telecommunications Policy Act of the
Philippines, 23 x x x
xxxx
Petitioner then claims that Smart and Globe enjoy exemption from the payment of the franchise
tax by virtue of their legislative franchises per opinion of the Bureau of Local Government
Finance of the Department of Finance. Finally, it argues that because Smart and Globe are
exempt from the franchise tax, it follows that it must likewise be exempt from the tax being
collected by the City of Davao because the grant of tax exemption to Smart and Globe ipso facto
extended the same exemption to it.
The acceptance of petitioner's theory would result in absurd consequences. To illustrate: In its
franchise, Globe is required to pay a franchise tax of only one and one-half percentum (1%) of
all gross receipts from its transactions while Smart is required to pay a tax of three percent (3%)
on all gross receipts from business transacted. Petitioner's theory would require that, to level the
playing field, any advantage, favor, privilege, exemption, or immunity granted to Globe must
be extended to all telecommunications companies, including Smart. If, later, Congress again
grants a franchise to another telecommunications company imposing, say, one percent (1%)
franchise tax, then all other telecommunications franchises will have to be adjusted to level the
playing field so to speak. This could not have been the intent of Congress in enacting 23 of
Rep. Act 7925. Petitioner's theory will leave the Government with the burden of having to keep
track of all granted telecommunications franchises, lest some companies be treated unequally. It
is different if Congress enacts a law specifically granting uniform advantages, favor, privilege,
exemption, or immunity to all telecommunications entities.
The fact is that the term "exemption" in 23 is too general. A cardinal rule in statutory
construction is that legislative intent must be ascertained from a consideration of the statute as a
whole and not merely of a particular provision. x x x Hence, a consideration of the law itself in
its entirety and the proceedings of both Houses of Congress is in order. [Citation omitted.]
xxxx

Page 94 of 97

Art. VIII, entitled Telecommunications Development, where 23 is found, provides for public
ownership of telecommunications entities, privatization of existing facilities, and the equality of
treatment provision. (Citation omitted.)
xxxx
R.A. No. 7925 is thus a legislative enactment designed to set the national policy on
telecommunications and provide the structures to implement it to keep up with the technological
advances in the industry and the needs of the public. The thrust of the law is to promote
gradually the deregulation of the entry, pricing, and operations of all public telecommunications
entities and thus promote a level playing field in the telecommunications industry(citation
omitted). There is nothing in the language of 23 nor in the proceedings of both the House of
Representatives and the Senate in enacting R.A. No. 7925 which shows that it contemplates the
grant of tax exemptions to all telecommunications entities, including those whose exemptions
had been withdrawn by the LGC.
x x x When exemption is claimed, it must be shown indubitably to exist. At the outset, every
presumption is against it. A well-founded doubt is fatal to the claim. It is only when the terms of
the concession are too explicit to admit fairly of any other construction that the proposition can
be supported. In this case, the word exemption in 23 of R.A. No. 7925 could contemplate
exemption from certain regulatory or reporting requirements, bearing in mind the policy of the
law x x x.21
From the preceding discourse, there is nothing more left to be argued. The issue has been settled.
The Courts pronouncement in the above-discussed case has been reiterated in a number of cases
concerning the import of Section 23 of Republic Act No. 7925. Therefore, this Court has no
recourse but to deny petitioner DIGITELs claim for exemption from payment of provincial
franchise tax.
The foregoing pronouncement notwithstanding, in view of the passage of Republic Act No.
7716,22 abolishing the franchise tax imposed on telecommunications companies effective 1
January 1996 and in its place is imposed a 10 percent Value-Added-Tax (VAT),23 the "in-lieu-ofall-taxes" clause/provision in the legislative franchises of Globe, Smart and Bell, among others,
has now become functus officio, made inoperative for lack of a franchise tax. Therefore, taking
into consideration the above, from 1 January 1996, petitioner DIGITEL ceased to be liable for
national franchise tax and in its stead is imposed a 10% VAT in accordance with Section 108 of
the Tax Code.
As to the issue relating to the claim of payment of real property taxes, of particular import is
Section 5 of Republic Act No. 7678, the legislative franchise of petitioner DIGITEL. Sec. 5 of
said law again states that:
SECTION 5. Tax Provisions. The grantee shall be liable to pay the same taxes on its real estate,
buildings, and personal property exclusive of this franchise as other persons or corporations are
now or hereafter may be required by law to pay x x x. (Emphasis supplied.)
Owing to the phrase "exclusive of this franchise," petitioner DIGITEL stands firm in its position
that it is equally exempt from the payment of real property tax. It maintains that said phrase
found in Section 5 above-quoted qualifies or delimits the scope of its liability respecting real
property tax that real property tax should only be imposed on its assets that are actually, directly
and exclusively used in the conduct of its business pursuant to its franchise.
According to respondent Province of Pangasinan, however, "the phrase exclusive (of this)
franchise in the legislative franchise of Petitioner Digitel did not specifically or categorically
express that such franchise grant intended to provide privilege to the extent of impliedly
repealing Republic Act No. 7160."

Page 95 of 97

Thus, the question is, whether or not petitioner DIGITELs real properties located within the
territorial jurisdiction of respondent Province of Pangasinan are exempt from real property taxes
by virtue of Section 5 of Republic Act No. 7678.
We rule in the affirmative. However, it is with the caveat that such exemption solely applies to
those real properties actually, directly and exclusively used by the grantee in its franchise.
The present issue actually boils down to a dispute between the inherent taxing power of
Congress and the delegated authority to tax of the local government borne by the 1987
Constitution. In the afore-quoted case of PLDT v. City of Davao, we already sustained the power
of Congress to grant exemptions over and above the power of the local governments delegated
taxing authority notwithstanding the source of such power. And fairly recently, in the case of The
City Government of Quezon City v. Bayan Telecommunications, Inc.,24 we again had the
opportunity to echo the ponencia of Mr. Justice Vicente V. Mendoza that:
Indeed, the grant of taxing powers to local government units under the Constitution and the LGC
does not affect the power of Congress to grant exemptions to certain persons, pursuant to a
declared national policy. The legal effect of the constitutional grant to local governments simply
means that in interpreting statutory provisions on municipal taxing powers, doubts must be
resolved in favor of municipal corporations. [Emphasis supplied.]
Succinctly put, had the Congress of the Philippines intended to tax each and every real property
of petitioner DIGITEL, regardless of whether or not it is used in the business or operation of its
franchise, it would not have incorporated a qualifying phrase, which such manifestation
admittedly is. And, to our minds, "the issue in this case no longer dwells on whether Congress
has the power to exempt"25 petitioner DIGITELs properties from realty taxes by its enactment
of Republic Act No. 7678 which contains the phrase "exclusive of this franchise," in the face of
the mandate of the Local Government Code. The more pertinent issue to consider is whether or
not, by passing Republic Act No. 7678, Congress intended to exempt petitioner DIGITELs real
properties actually, directly and exclusively used by the grantee in its franchise.
The fact that Republic Act No. 7678 was a later piece of legislation can be taken to mean that
Congress, knowing fully well that the Local Government Code had already withdrawn
exemptions from real property taxes, chose to restore such immunity even to a limited degree.
Accordingly:
The Court views this subsequent piece of legislation as an express and real intention on the part
of Congress to once again remove from the LGC's delegated taxing power, all of the franchisee's
x x x properties that are actually, directly and exclusively used in the pursuit of its franchise.26
In view of the unequivocal intent of Congress to exempt from real property tax those real
properties actually, directly and exclusively used by petitioner DIGITEL in the pursuit of its
franchise, respondent Province of Pangasinan can only levy real property tax on the remaining
real properties of the grantee located within its territorial jurisdiction not part of the above-stated
classification. Said exemption, however, merely applies from the time of the effectivity of
petitioner DIGITELs legislative franchise and not a moment sooner.
In fine, petitioner DIGITEL is found accountable to respondent Province of Pangasinan for the
following tax liabilities: 1) as to provincial franchise tax, from 13 November 1992 until actually
paid; and 2) as to real property tax, for the period starting from 13 November 1992 until 28
December 1992, it shall be imposed only on the lands and buildings of petitioner DIGITEL
located within the subject jurisdiction; for the period commencing from 29 December 1992 until
16 February 1994, in addition to the lands and buildings aforementioned, it shall similarly be
imposed on machineries and other improvements;27 and, by virtue of the National Franchise of
petitioner DIGITEL or Republic Act No. 7678, in accordance with the Courts ruling in the
abovementioned Bayantel case, from the date of effectivity on 17 February 1994 until the
present, it shall be imposed only on real properties NOTactually, directly and exclusively used in
the franchise of petitioner DIGITEL. In addition to the foregoing summary, pertinent provisions
Page 96 of 97

of law respecting interests, penalties and surcharges shall also be made to apply to herein subject
tax liabilities.
WHEREFORE, in view of the foregoing, the instant petition is DENIED. The
assailed Decision dated 14 June 2001, and the Resolution dated 15 February 2002, both rendered
by the RTC of Lingayen, Pangasinan, Branch 68 in Civil Case No. 18037, are hereby
AFFIRMED in so far as it finds petitioner DIGITEL liable for the payment of provincial
franchise and real property taxes. However, the amount of taxes owing to respondent Province of
Pangasinan must be recomputed in accordance with the foregoing discussion. No costs.
SO ORDERED.

Page 97 of 97