TAX

CONSTITUTIONAL LIMITATIONS
A. Due Process clause
B. Equal Protection
ASSOCIATION OF CUSTOMS BROKERS, INC. and G. MANLAPIT, INC., petitionersappellants, vs. THE MUNICIPALITY BOARD, THE CITY TREASURER, THE CITY
ASSESSOR and THE CITY MAYOR, all of the City of Manila, respondents-appellees.
This is a petition for declaratory relief to test the validity of Ordinance No. 3379 passed by the
Municipal Board of the City of Manila on March 24, 1950.
The Association of Customs Brokers, Inc., which is composed of all brokers and public service
operators of motor vehicles in the City of Manila, and G. Manlapit, Inc., a member of said
association, also a public service operator of the trucks in said City, challenge the validity of said
ordinance on the ground that (1) while it levies a so-called property tax it is in reality a license
tax which is beyond the power of the Municipal Board of the City of Manila; (2) said ordinance
offends against the rule of uniformity of taxation; and (3) it constitutes double taxation.
The respondents, represented by the city fiscal, contend on their part that the challenged
ordinance imposes a property tax which is within the power of the City of Manila to impose
under its Revised Charter [Section 18 (p) of Republic Act No. 409], and that the tax in question
does not violate the rule of uniformity of taxation, nor does it constitute double taxation.
The issues having been joined, the Court of First Instance of Manila sustained the validity of the
ordinance and dismissed the petition. Hence this appeal.
The disputed ordinance was passed by the Municipal Board of the City of Manila under the
authority conferred by section 18 (p) of Republic Act No. 409. Said section confers upon the
municipal board the power "to tax motor and other vehicles operating within the City of Manila
the provisions of any existing law to the contrary notwithstanding." It is contended that this
power is broad enough to confer upon the City of Manila the power to enact an ordinance
imposing the property tax on motor vehicles operating within the city limits.
In the deciding the issue before us it is necessary to bear in mind the pertinent provisions of the
Motor Vehicles Law, as amended, (Act No. 3992) which has a bearing on the power of the
municipal corporation to impose tax on motor vehicles operating in any highway in the
Philippines. The pertinent provisions are contained in section 70 (b) which provide in part:
No further fees than those fixed in this Act shall be exacted or demanded by any public highway,
bridge or ferry, or for the exercise of the profession of chauffeur, or for the operation of any
motor vehicle by the owner thereof: Provided, however, That nothing in this Act shall be
construed to exempt any motor vehicle from the payment of any lawful and equitable insular,
local or municipal property tax imposed thereupon. . . .

Note that under the above section no fees may be exacted or demanded for the operation of any
motor vehicle other than those therein provided, the only exception being that which refers to the
property tax which may be imposed by a municipal corporation. This provision is all-inclusive in
that sense that it applies to all motor vehicles. In this sense, this provision should be construed as
limiting the broad grant of power conferred upon the City of Manila by its Charter to impose
taxes. When section 18 of said Charter provides that the City of Manila can impose a tax on
motor vehicles operating within its limit, it can only refers to property tax as a different
interpretation would make it repugnant to the Motor Vehicle Law.
Coming now to the ordinance in question, we find that its title refers to it as "An Ordinance
Levying a Property Tax on All Motor Vehicles Operating Within the City of Manila", and that in
its section 1 it provides that the tax should be 1 per cent ad valorem per annum. It also provides
that the proceeds of the tax "shall accrue to the Streets and Bridges Funds of the City and shall be
expended exclusively for the repair, maintenance and improvement of its streets and bridges."
Considering the wording used in the ordinance in the light in the purpose for which the tax is
created, can we consider the tax thus imposed as property tax, as claimed by respondents?
While as a rule an ad valorem tax is a property tax, and this rule is supported by some
authorities, the rule should not be taken in its absolute sense if the nature and purpose of the tax
as gathered from the context show that it is in effect an excise or a license tax. Thus, it has been
held that "If a tax is in its nature an excise, it does not become a property tax because it is
proportioned in amount to the value of the property used in connection with the occupation,
privilege or act which is taxed. Every excise necessarily must finally fall upon and be paid by
property and so may be indirectly a tax upon property; but if it is really imposed upon the
performance of an act, enjoyment of a privilege, or the engaging in an occupation, it will be
considered an excise." (26 R. C. L., 35-36.) It has also been held that
The character of the tax as a property tax or a license or occupation tax must be determined by its
incidents, and from the natural and legal effect of the language employed in the act or ordinance,
and not by the name by which it is described, or by the mode adopted in fixing its amount. If it is
clearly a property tax, it will be so regarded, even though nominally and in form it is a license or
occupation tax; and, on the other hand, if the tax is levied upon persons on account of their
business, it will be construed as a license or occupation tax, even though it is graduated
according to the property used in such business, or on the gross receipts of the business. (37 C.J.,
172)
The ordinance in question falls under the foregoing rules. While it refers to property tax and it is
fixed ad valorem yet we cannot reject the idea that it is merely levied on motor vehicles
operating within the City of Manila with the main purpose of raising funds to be expended
exclusively for the repair, maintenance and improvement of the streets and bridges in said city.
This is precisely what the Motor Vehicle Law (Act No. 3992) intends to prevent, for the reason
that, under said Act, municipal corporation already participate in the distribution of the proceeds
that are raised for the same purpose of repairing, maintaining and improving bridges and public

highway (section 73 of the Motor Vehicle Law). This prohibition is intended to prevent
duplication in the imposition of fees for the same purpose. It is for this reason that we believe
that the ordinance in question merely imposes a license fee although under the cloak of an ad
valorem tax to circumvent the prohibition above adverted to.
It is also our opinion that the ordinance infringes the rule of the uniformity of taxation ordained
by our Constitution. Note that the ordinance exacts the tax upon all motor vehicles operating
within the City of Manila. It does not distinguish between a motor vehicle for hire and one which
is purely for private use. Neither does it distinguish between a motor vehicle registered in the
City of Manila and one registered in another place but occasionally comes to Manila and uses its
streets and public highways. The distinction is important if we note that the ordinance intends to
burden with the tax only those registered in the City of Manila as may be inferred from the word
"operating" used therein. The word "operating" denotes a connotation which is akin to a
registration, for under the Motor Vehicle Law no motor vehicle can be operated without previous
payment of the registration fees. There is no pretense that the ordinance equally applies to motor
vehicles who come to Manila for a temporary stay or for short errands, and it cannot be denied
that they contribute in no small degree to the deterioration of the streets and public highway. The
fact that they are benefited by their use they should also be made to share the corresponding
burden. And yet such is not the case. This is an inequality which we find in the ordinance, and
which renders it offensive to the Constitution.
Wherefore, reversing the decision appealed from, we hereby declare the ordinance null and void.
THE SHELL CO. OF P.I., LTD., plaintiff-appellant,
vs.
E. E. VAO, as Municipal Treasurer of the Municipality of Cordova, Province of Cebu,
defendant-appellee.
C.J. Johnston and A.P. Deen for appellant.Provincial Fiscal Jose C. Borromeo and Assistant
Provincial Fiscal Ananias V. Maribao for appellee.
PADILLA, J.:
The Municipal Council of Cordova, Province of Cebu, adopted the following ordinances: No. 10,
series of 1946, which imposes an annual tax of P150 on occupation or the exercise of the
privilege of installation manager; No. 9, series of 1947, which imposes an annual tax of P40 for
local deposits in drums of combustible and inflammable materials and an annual tax of P200 for
tin can factories; and No. 11, series of 1948, which imposes an annual tax of P150 on tin can
factories having a maximum output capacity of 30,000 tin cans. The Shell Co. of P.I. Ltd., a
foreign corporation, filed suit for the refund of the taxes paid by it, on the ground that the
ordinances imposing such taxes are ultra vires. The defendant denies that they are so. The
controversy was submitted for judgment upon stipulation of facts which reads as follows:
Come now the parties in the above-entitled case by their undersigned attorneys and hereby agree

to the following stipulation of facts:

1. That the parties admit the allegations contained in Paragraph 1 of the Amended Complaint
referring to residence, personality, and capacity of the parties except the fact that E.E. Vao is
now replaced by F.A. Corbo as Municipal Treasurer of Cordova, Cebu;
2. That the parties admit the allegations contained in paragraph 2 of the Amended Complaint.
Official Receipts Nos. A-1280606, A-37607422, A-3769852 and A-21030388 are herein marked
as Exhibits A, B, C, and D, respectively for the plaintiff;
3. That the parties admit that payments made under Exhibits B, C, and D were all under protest
and plaintiff admits that Exhibit A was not paid under protest;
4. That the parties admit that Official Receipt No. A-1280606 for P40 and Official Receipt No.
A-3760742 for P200 were collected by the defendant by virtue of Ordinance No. 9, (Secs. E-4
and E-6, respectively) under Resolution No. 31, series of 1947, enacted December 15, 1947,
approved by the Provincial Board of Cebu in its Resolution No. 644, series of 1948. Copy of said
Ordinance No. 9, series of 1947, is herein marked as Exhibit "E" for the plaintiff, and as Exhibit
"I" for the defendant;
5. That the parties admit that Official Receipt No. A-3760852 for P150 was paid for taxes
imposed on Installation Managers, collected by the defendant by virtue of Ordinance No. 10
(section 3, E-12) under Resolution No. 38, series of 1946, approved by the Provincial Board of
Cebu in its Resolution No. 1070, series of 1946. Copy of .said Ordinance No. 10, series of 1946
is marked as Exhibit "F" for the plaintiff and as Exhibit "2" for the defendant;
6. That the parties admit that Official Receipt No. A-21030388 for P5,450 was paid by plaintiff
and that said amount was collected by defendant by virtue of Ordinance No. 11, series of 1948
(under Resolution No. 46) enacted August 31, 1948 and approved by the Provincial Board of
Cebu in its Resolution No. 115, series of 1949, and same was approved by the Honorable
Secretary of Finance under the provisions of section 4 of Commonwealth Act No. 472. Copy of
said Ordinance No. 11, series of 1948 is herein marked as Exhibit "G" for the plaintiff, and
Exhibit "3" for the defendant. Copy of the approval of the Honorable Secretary of Finance of the
same Ordinance is herein marked as Exhibit "4" for the defendant.
The parties reserved the right to introduce parole evidence but no such evidence was submitted
by either party. From the judgment holding the ordinances valid and dismissing the complaint the
plaintiff has appealed.
It is contended that as the municipal ordinance imposing an annual tax of P40 for "minor local
deposit in drums of combustible and inflammable materials," and of P200 "for tin factory" was
adopted under and pursuant to section 2244 of the Revised Administrative Code, which provides
that the municipal council in the exercise of the regulative authority may require any person
engaged in any business or occupation, such as "storing combustible or explosive materials" or
"the conducting of any other business of an unwholesome, obnoxious, offensive, or dangerous

character," to obtain a permit for which a reasonable fee, in no case to exceed P10 per annum,
may be charged, the annual tax of P40 and P200 are unauthorized and illegal. The permit and the
fee referred to may be required and charged by the Municipal Council of Cordova in the exercise
of its regulative authority, whereas the ordinance which imposes the taxes in question was
adopted under and pursuant to the provisions of Commonwealth Act No. 472, which authorizes
municipal councils and municipal district councils "to impose license taxes upon persons
engaged in any occupation or business, or exercising privileges in the municipality or municipal
district, by requiring them to secure licenses at rates fixed by the municipal council or municipal
district council," which shall be just and uniform but not "percentage taxes and taxes on specified
articles." Likewise, Ordinance No. 10, series of 1946, which imposes an annual tax of P150 on
"installation manager" comes under the provisions of Commonwealth Act No. 472. But it is
claimed that "installation manager" is a designation made by the plaintiff and such designation
cannot be deemed to be a "calling" as defined in section 178 of the National Internal Revenue
Code (Com. Act No. 466), and that the installation manager employed by the plaintiff is a
salaried employee which may not be taxed by the municipal council under the provisions of
Commonwealth Act No. 472. This contention is without merit, because even if the installation
manager is a salaried employee of the plaintiff, still it is an occupation "and one occupation or
line of business does not become exempt by being conducted with some other occupation or
business for which such tax has been paid'1 and the occupation tax must be paid "by each
individual engaged in a calling subject thereto."2 And pursuant to section 179 of the National
Internal Revenue Code, "The payment of . . . occupation tax shall not exempt any person from
any tax, . . . provided by law or ordinance in places where such . . . occupation in . . . regulated
by municipal law, nor shall the payment of any such tax be held to prohibit any municipality
from placing a tax upon the same . . . occupation, for local purposes, where the imposition of
such tax is authorized by law." It is true that, according to the stipulation of facts, Ordinance No.
10, series of 1946, was approved by the Provincial Board of Cebu in its Resolution No. 1070,
series of 1946, and that it does not appear that it was approved by the Department of Finance, as
provided for and required in section 4, paragraph 2, of Commonwealth Act No. 472, the rate of
municipal tax being in excess of P50 per annum. But at this point on the approval of the
Department of Finance was not raised in the court below, it cannot be raised for the first time on
appeal. The issue joined by the parties in their pleadings and the point raised by the plaintiff is
that the municipal council was not empowered to adopt the ordinance and not that it was not
approved by the Department of Finance. The fact that it was not stated in the stipulation of facts
justifies the presumption that the ordinance was approved in accordance with law.
The contention that the ordinance is discriminatory and hostile because there is no other person
in the locality who exercises such "designation" or occupation is also without merit, because the
fact that there is no other person in the locality who exercises such a "designation" or calling
does not make the ordinance discriminatory and hostile, inasmuch as it is and will be applicable
to any person or firm who exercises such calling or occupation named or designated as
"installation manager."

Lastly, Ordinance No. 11, series of 1948, which imposes a municipal tax of P150 on tin can
factories having a maximum annual output capacity of 30,000 tin cans which, according to the
stipulation of facts, was approved by the Provincial Board of Cebu and the Department of
Finance, is valid and lawful, because it is neither a percentage tax nor one on specified articles
which are the only exceptions provided in section 1, Commonwealth Act No. 472. Neither does it
fall under any of the prohibitions provided for in section 3 of the same Act. Specific taxes
enumerated in the National Internal Revenue Code are those that are imposed upon "things
manufactured or produced in the Philippines for domestic sale or consumption" and upon "things
imported from the United States and foreign countries," such as distilled spirits, domestic
denatured alcohol, fermented liquors, products of tobacco, cigars and cigarettes, matches,
mechanical lighters, firecrackers, skimmed milk, manufactured oils and other fuels, coal, bunker
fuel oil, diesel fuel oil, cinematographic films, playing cards, sacharine. 3 And it is not a
percentage tax because it is tax on business and the maximum annual output capacity is not a
percentage, because it is not a share or a tax based on the amount of the proceeds realized out of
the sale of the tin cans manufactured therein but on the business of manufacturing tin cans
having a maximum annual output capacity of 30,000 tin cans.
In an action for refund of municipal taxes claimed to have been paid and collected under an
illegal ordinance, the real party in interest is not the municipal treasurer but the municipality
concerned that is empowered to sue and be sued.4
The judgment appealed from is hereby affirmed, with costs against the appellant.
MAYOR ANTONIO J. VILLEGAS, petitioner, vs. HIU CHIONG TSAI PAO HO and
JUDGE FRANCISCO ARCA, respondents.
FERNANDEZ, J.:
This is a petition for certiorari to review tile decision dated September 17, 1968 of respondent
Judge Francisco Arca of the Court of First Instance of Manila, Branch I, in Civil Case No.
72797, the dispositive portion of winch reads.
Wherefore, judgment is hereby rendered in favor of the petitioner and against the respondents,
declaring Ordinance No. 6 37 of the City of Manila null and void. The preliminary injunction is
made permanent. No pronouncement as to cost.
SO ORDERED.
Manila, Philippines, September 17, 1968.
(SGD.) FRANCISCO ARCA
Judge 1
The controverted Ordinance No. 6537 was passed by the Municipal Board of Manila on
February 22, 1968 and signed by the herein petitioner Mayor Antonio J. Villegas of Manila on
March 27, 1968. 2

City Ordinance No. 6537 is entitled:

AN ORDINANCE MAKING IT UNLAWFUL FOR ANY PERSON NOT A CITIZEN OF THE
PHILIPPINES TO BE EMPLOYED IN ANY PLACE OF EMPLOYMENT OR TO BE
ENGAGED IN ANY KIND OF TRADE, BUSINESS OR OCCUPATION WITHIN THE CITY
OF MANILA WITHOUT FIRST SECURING AN EMPLOYMENT PERMIT FROM THE
MAYOR OF MANILA; AND FOR OTHER PURPOSES. 3
Section 1 of said Ordinance No. 6537 4 prohibits aliens from being employed or to engage or
participate in any position or occupation or business enumerated therein, whether permanent,
temporary or casual, without first securing an employment permit from the Mayor of Manila and
paying the permit fee of P50.00 except persons employed in the diplomatic or consular missions
of foreign countries, or in the technical assistance programs of both the Philippine Government
and any foreign government, and those working in their respective households, and members of
religious orders or congregations, sect or denomination, who are not paid monetarily or in kind.
Violations of this ordinance is punishable by an imprisonment of not less than three (3) months
to six (6) months or fine of not less than P100.00 but not more than P200.00 or both such fine
and imprisonment, upon conviction. 5
On May 4, 1968, private respondent Hiu Chiong Tsai Pao Ho who was employed in Manila, filed
a petition with the Court of First Instance of Manila, Branch I, denominated as Civil Case No.
72797, praying for the issuance of the writ of preliminary injunction and restraining order to stop
the enforcement of Ordinance No. 6537 as well as for a judgment declaring said Ordinance No.
6537 null and void. 6
In this petition, Hiu Chiong Tsai Pao Ho assigned the following as his grounds for wanting the
ordinance declared null and void:
1) As a revenue measure imposed on aliens employed in the City of Manila, Ordinance No. 6537
is discriminatory and violative of the rule of the uniformity in taxation;
2) As a police power measure, it makes no distinction between useful and non-useful
occupations, imposing a fixed P50.00 employment permit, which is out of proportion to the cost
of registration and that it fails to prescribe any standard to guide and/or limit the action of the
Mayor, thus, violating the fundamental principle on illegal delegation of legislative powers:
3) It is arbitrary, oppressive and unreasonable, being applied only to aliens who are thus,
deprived of their rights to life, liberty and property and therefore, violates the due process and
equal protection clauses of the Constitution. 7
On May 24, 1968, respondent Judge issued the writ of preliminary injunction and on September
17, 1968 rendered judgment declaring Ordinance No. 6537 null and void and making permanent
the writ of preliminary injunction. 8
Contesting the aforecited decision of respondent Judge, then Mayor Antonio J. Villegas filed the
present petition on March 27, 1969. Petitioner assigned the following as errors allegedly
7

committed by respondent Judge in the latter's decision of September 17,1968: 9

I
THE RESPONDENT JUDGE COMMITTED A SERIOUS AND PATENT ERROR OF LAW IN
RULING THAT ORDINANCE NO. 6537 VIOLATED THE CARDINAL RULE OF
UNIFORMITY OF TAXATION.
II
RESPONDENT JUDGE LIKEWISE COMMITTED A GRAVE AND PATENT ERROR OF
LAW IN RULING THAT ORDINANCE NO. 6537 VIOLATED THE PRINCIPLE AGAINST
UNDUE DESIGNATION OF LEGISLATIVE POWER.
III
RESPONDENT JUDGE FURTHER COMMITTED A SERIOUS AND PATENT ERROR OF
LAW IN RULING THAT ORDINANCE NO. 6537 VIOLATED THE DUE PROCESS AND
EQUAL PROTECTION CLAUSES OF THE CONSTITUTION.
Petitioner Mayor Villegas argues that Ordinance No. 6537 cannot be declared null and void on
the ground that it violated the rule on uniformity of taxation because the rule on uniformity of
taxation applies only to purely tax or revenue measures and that Ordinance No. 6537 is not a tax
or revenue measure but is an exercise of the police power of the state, it being principally a
regulatory measure in nature.
The contention that Ordinance No. 6537 is not a purely tax or revenue measure because its
principal purpose is regulatory in nature has no merit. While it is true that the first part which
requires that the alien shall secure an employment permit from the Mayor involves the exercise
of discretion and judgment in the processing and approval or disapproval of applications for
employment permits and therefore is regulatory in character the second part which requires the
payment of P50.00 as employee's fee is not regulatory but a revenue measure. There is no logic
or justification in exacting P50.00 from aliens who have been cleared for employment. It is
obvious that the purpose of the ordinance is to raise money under the guise of regulation.
The P50.00 fee is unreasonable not only because it is excessive but because it fails to consider
valid substantial differences in situation among individual aliens who are required to pay it.
Although the equal protection clause of the Constitution does not forbid classification, it is
imperative that the classification should be based on real and substantial differences having a
reasonable relation to the subject of the particular legislation. The same amount of P50.00 is
being collected from every employed alien whether he is casual or permanent, part time or full
time or whether he is a lowly employee or a highly paid executive
Ordinance No. 6537 does not lay down any criterion or standard to guide the Mayor in the
exercise of his discretion. It has been held that where an ordinance of a municipality fails to state
any policy or to set up any standard to guide or limit the mayor's action, expresses no purpose to
be attained by requiring a permit, enumerates no conditions for its grant or refusal, and entirely
8

lacks standard, thus conferring upon the Mayor arbitrary and unrestricted power to grant or deny
the issuance of building permits, such ordinance is invalid, being an undefined and unlimited
delegation of power to allow or prevent an activity per se lawful. 10
In Chinese Flour Importers Association vs. Price Stabilization Board, 11 where a law granted a
government agency power to determine the allocation of wheat flour among importers, the
Supreme Court ruled against the interpretation of uncontrolled power as it vested in the
administrative officer an arbitrary discretion to be exercised without a policy, rule, or standard
from which it can be measured or controlled.
It was also held in Primicias vs. Fugoso 12 that the authority and discretion to grant and refuse
permits of all classes conferred upon the Mayor of Manila by the Revised Charter of Manila is
not uncontrolled discretion but legal discretion to be exercised within the limits of the law.
Ordinance No. 6537 is void because it does not contain or suggest any standard or criterion to
guide the mayor in the exercise of the power which has been granted to him by the ordinance.
The ordinance in question violates the due process of law and equal protection rule of the
Constitution.
Requiring a person before he can be employed to get a permit from the City Mayor of Manila
who may withhold or refuse it at will is tantamount to denying him the basic right of the people
in the Philippines to engage in a means of livelihood. While it is true that the Philippines as a
State is not obliged to admit aliens within its territory, once an alien is admitted, he cannot be
deprived of life without due process of law. This guarantee includes the means of livelihood. The
shelter of protection under the due process and equal protection clause is given to all persons,
both aliens and citizens. 13
The trial court did not commit the errors assigned.
WHEREFORE, the decision appealed from is hereby affirmed, without pronouncement as to
costs.
SO ORDERED.
Separate Opinions
TEEHANKEE, J., concurring:
I concur in the decision penned by Mr. Justice Fernandez which affirms the lower court's
judgment declaring Ordinance No. 6537 of the City of Manila null and void for the reason that
the employment of aliens within the country is a matter of national policy and regulation, which
properly pertain to the national government officials and agencies concerned and not to local
governments, such as the City of Manila, which after all are mere creations of the national
government.
The national policy on the matter has been determined in the statutes enacted by the legislature,
viz, the various Philippine nationalization laws which on the whole recognize the right of aliens

to obtain gainful employment in the country with the exception of certain specific fields and
areas. Such national policies may not be interfered with, thwarted or in any manner negated by
any local government or its officials since they are not separate from and independent of the
national government.
As stated by the Court in the early case of Phil. Coop. Livestock Ass'n. vs. Earnshaw, 59 Phil.
129: "The City of Manila is a subordinate body to the Insular (National Government ...). When
the Insular (National) Government adopts a policy, a municipality is without legal authority to
nullify and set at naught the action of the superior authority." Indeed, "not only must all
municipal powers be exercised within the limits of the organic laws, but they must be consistent
with the general law and public policy of the particular state ..." (I McQuillin, Municipal
Corporations, 2nd sec. 367, P. 1011).
With more reason are such national policies binding on local governments when they involve our
foreign relations with other countries and their nationals who have been lawfully admitted here,
since in such matters the views and decisions of the Chief of State and of the legislature must
prevail over those of subordinate and local governments and officials who have no authority
whatever to take official acts to the contrary.
C. Non-Impairment of Contracts
ART. III. Section 10. No law impairing the obligation of contracts shall be passed.
ART. XII. Section 11. The State shall adopt an integrated and comprehensive approach to health
development which shall endeavor to make essential goods, health and other social services
available to all the people at affordable cost. There shall be priority for the needs of the underprivileged, sick, elderly, disabled, women, and children. The State shall endeavor to provide free
medical care to paupers.
CAGAYAN ELECTRIC POWER & LIGHT CO., INC., vs COMMISSIONER OF
INTERNAL REVENUE and COURT OF APPEALS, respondents.
This is about the liability of petitioner Cagayan Electric Power & Light Co., Inc. for income tax
amounting to P75,149.73 for the more than seven-month period of the year 1969 in addition to
franchise tax.
The petitioner is the holder of a legislative franchise, Republic Act No. 3247, under which its
payment of 3% tax on its gross earnings from the sale of electric current is "in lieu of all taxes
and assessments of whatever authority upon privileges, earnings, income, franchise, and poles,
wires, transformers, and insulators of the grantee, from which taxes and assessments the grantee
is hereby expressly exempted" (Sec. 3).
On June 27, 1968, Republic Act No. 5431 amended section 24 of the Tax Code by making liable
for income tax all corporate taxpayers not specifically exempt under paragraph (c) (1) of said
section and section 27 of the Tax Code notwithstanding the "provisions of existing special or
general laws to the contrary". Thus, franchise companies were subjected to income tax in

10

addition to franchise tax.

However, in petitioner's case, its franchise was amended by Republic Act No. 6020, effective
August 4, 1969, by authorizing the petitioner to furnish electricity to the municipalities of
Villanueva and Jasaan, Misamis Oriental in addition to Cagayan de Oro City and the
municipalities of Tagoloan and Opol. The amendment reenacted the tax exemption in its original
charter or neutralized the modification made by Republic Act No. 5431 more than a year before.
By reason of the amendment to section 24 of the Tax Code, the Commissioner of Internal
Revenue in a demand letter dated February 15, 1973 required the petitioner to pay deficiency
income taxes for 1968-to 1971. The petitioner contested the assessments. The Commissioner
cancelled the assessments for 1970 and 1971 but insisted on those for 1968 and 1969.
The petitioner filed a petition for review with the Tax Court, which on February 26, 1982 held
the petitioner liable only for the income tax for the period from January 1 to August 3, 1969 or
before the passage of Republic Act No. 6020 which reiterated its tax exemption. The petitioner
appealed to this Court.
It contends that the Tax Court erred (1) in not holding that the franchise tax paid by the petitioner
is a commutative tax which already includes the income tax; (2) in holding that Republic Act No.
5431 as amended, altered or repealed petitioner's franchise; (3) in holding that petitioner's
franchise is a contract which can be impaired by an implied repeal and (4) in not holding that
section 24(d) of the Tax Code should be construed strictly against the Government.
We hold that Congress could impair petitioner's legislative franchise by making it liable for
income tax from which heretofore it was exempted by virtue of the exemption provided for in
section 3 of its franchise.
The Constitution provides that a franchise is subject to amendment, alteration or repeal by the
Congress when the public interest so requires (Sec. 8, Art. XIV, 1935 Constitution; Sec. 5, Art.
XIV, 1973 Constitution),
Section 1 of petitioner's franchise, Republic Act No. 3247, provides that it is subject to the
provisions of the Constitution and to the terms and conditions established in Act No. 3636 whose
section 12 provides that the franchise is subject to amendment, alteration or repeal by Congress.
Republic Act No. 5431, in amending section 24 of the Tax Code by subjecting to income tax all
corporate taxpayers not expressly exempted therein and in section 27 of the Code, had the effect
of withdrawing petitioner's exemption from income tax.
The Tax Court acted correctly in holding that the exemption was restored by the subsequent
enactment on August 4, 1969 of Republic Act No. 6020 which reenacted the said tax exemption.
Hence, the petitioner is liable only for the income tax for the period from January 1 to August 3,
1969 when its tax exemption was modified by Republic Act No. 5431.
It is relevant to note that franchise companies, like the Philippine Long Distance Telephone
Company, have been paying income tax in addition to the franchise tax.
11

However, it cannot be denied that the said 1969 assessment appears to be highly controversial.
The Commissioner at the outset was not certain as to petitioner's income tax liability. It had
reason not to pay income tax because of the tax exemption in its franchise.
For this reason, it should be liable only for tax proper and should not be held liable for the
surcharge and interest. (Advertising Associates, Inc. vs. Commissioner of Internal Revenue and
Court of Tax Appeals, G. R. No. 59758, December 26, 1984,133 SCRA 765; Imus Electric Co.,
Inc. vs. Commissioner of Internal Revenue, 125 Phil. 1024; C.M. Hoskins & Co., Inc. vs.
Commissioner of Internal Revenue, L-28383, June 22, 1976, 71 SCRA 511.)
WHEREFORE, the judgment of the Tax Court is affirmed with the modification that the
petitioner is liable only for the tax proper and that it should not pay the delinquency penalties. No
costs.
SO ORDERED.
D. Non Imprisonment for non-payment of poll tax
ART. III. Section 20. No person shall be imprisoned for debt or non-payment of a poll tax.
E. Origin of Revenue Bill Article VI Section 24
ARTURO M. TOLENTINO, petitioner, vs.THE SECRETARY OF FINANCE and THE
COMMISSIONER OF INTERNAL REVENUE, \
The value-added tax (VAT) is levied on the sale, barter or exchange of goods and properties as
well as on the sale or exchange of services. It is equivalent to 10% of the gross selling price or
gross value in money of goods or properties sold, bartered or exchanged or of the gross receipts
from the sale or exchange of services. Republic Act No. 7716 seeks to widen the tax base of the
existing VAT system and enhance its administration by amending the National Internal Revenue
Code.
These are various suits for certiorari and prohibition, challenging the constitutionality of
Republic Act No. 7716 on various grounds summarized in the resolution of July 6, 1994 of this
Court, as follows:
I. Procedural Issues:
A. Does Republic Act No. 7716 violate Art. VI, sec. 24 of the Constitution?
These questions will be dealt in the order they are stated above. As will presently be explained
not all of these questions are judicially cognizable, because not all provisions of the Constitution
are self executing and, therefore, judicially enforceable. The other departments of the
government are equally charged with the enforcement of the Constitution, especially the
provisions relating to them.
I. PROCEDURAL ISSUES
The contention of petitioners is that in enacting Republic Act No. 7716, or the Expanded Value-

12

Added Tax Law, Congress violated the Constitution because, although H. No. 11197 had
originated in the House of Representatives, it was not passed by the Senate but was simply
consolidated with the Senate version (S. No. 1630) in the Conference Committee to produce the
bill which the President signed into law. The following provisions of the Constitution are cited in
support of the proposition that because Republic Act No. 7716 was passed in this manner, it did
not originate in the House of Representatives and it has not thereby become a law:
Art. VI, 24: All appropriation, revenue or tariff bills, bills authorizing increase of the public
debt, bills of local application, and private bills shall originate exclusively in the House of
Representatives, but the Senate may propose or concur with amendments.
It appears that on various dates between July 22, 1992 and August 31, 1993, several bills 1 were
introduced in the House of Representatives seeking to amend certain provisions of the National
Internal Revenue Code relative to the value-added tax or VAT. These bills were referred to the
House Ways and Means Committee which recommended for approval a substitute measure, H.
No. 11197, entitled
AN ACT RESTRUCTURING THE VALUE-ADDED TAX (VAT) SYSTEM TO WIDEN ITS
TAX BASE AND ENHANCE ITS ADMINISTRATION, AMENDING FOR THESE
PURPOSES SECTIONS 99, 100, 102, 103, 104, 105, 106, 107, 108 AND 110 OF TITLE IV,
112, 115 AND 116 OF TITLE V, AND 236, 237 AND 238 OF TITLE IX, AND REPEALING
SECTIONS 113 AND 114 OF TITLE V, ALL OF THE NATIONAL INTERNAL REVENUE
CODE, AS AMENDED
The bill (H. No. 11197) was considered on second reading starting November 6, 1993 and, on
November 17, 1993, it was approved by the House of Representatives after third and final
reading.
It was sent to the Senate on November 23, 1993 and later referred by that body to its Committee
on Ways and Means.
On February 7, 1994, the Senate Committee submitted its report recommending approval of S.
No. 1630, entitled
AN ACT RESTRUCTURING THE VALUE-ADDED TAX (VAT) SYSTEM TO WIDEN ITS
TAX BASE AND ENHANCE ITS ADMINISTRATION, AMENDING FOR THESE
PURPOSES SECTIONS 99, 100, 102, 103, 104, 105, 107, 108, AND 110 OF TITLE IV, 112 OF
TITLE V, AND 236, 237, AND 238 OF TITLE IX, AND REPEALING SECTIONS 113, 114 and
116 OF TITLE V, ALL OF THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED,
AND FOR OTHER PURPOSES
It was stated that the bill was being submitted "in substitution of Senate Bill No. 1129, taking
into consideration P.S. Res. No. 734 and H.B. No. 11197."
On February 8, 1994, the Senate began consideration of the bill (S. No. 1630). It finished debates
on the bill and approved it on second reading on March 24, 1994. On the same day, it approved

13

the bill on third reading by the affirmative votes of 13 of its members, with one abstention.
H. No. 11197 and its Senate version (S. No. 1630) were then referred to a conference committee
which, after meeting four times (April 13, 19, 21 and 25, 1994), recommended that "House Bill
No. 11197, in consolidation with Senate Bill No. 1630, be approved in accordance with the
attached copy of the bill as reconciled and approved by the conferees."
The Conference Committee bill, entitled "AN ACT RESTRUCTURING THE VALUE-ADDED
TAX (VAT) SYSTEM, WIDENING ITS TAX BASE AND ENHANCING ITS
ADMINISTRATION AND FOR THESE PURPOSES AMENDING AND REPEALING THE
RELEVANT PROVISIONS OF THE NATIONAL INTERNAL REVENUE CODE, AS
AMENDED, AND FOR OTHER PURPOSES," was thereafter approved by the House of
Representatives on April 27, 1994 and by the Senate on May 2, 1994. The enrolled bill was then
presented to the President of the Philippines who, on May 5, 1994, signed it. It became Republic
Act No. 7716. On May 12, 1994, Republic Act No. 7716 was published in two newspapers of
general circulation and, on May 28, 1994, it took effect, although its implementation was
suspended until June 30, 1994 to allow time for the registration of business entities. It would
have been enforced on July 1, 1994 but its enforcement was stopped because the Court, by the
vote of 11 to 4 of its members, granted a temporary restraining order on June 30, 1994.
First. Petitioners' contention is that Republic Act No. 7716 did not "originate exclusively" in the
House of Representatives as required by Art. VI, 24 of the Constitution, because it is in fact the
result of the consolidation of two distinct bills, H. No. 11197 and S. No. 1630. In this connection,
petitioners point out that although Art. VI, SS 24 was adopted from the American Federal
Constitution, 2 it is notable in two respects: the verb "shall originate" is qualified in the
Philippine Constitution by the word "exclusively" and the phrase "as on other bills" in the
American version is omitted. This means, according to them, that to be considered as having
originated in the House, Republic Act No. 7716 must retain the essence of H. No. 11197.
This argument will not bear analysis. To begin with, it is not the law but the revenue bill
which is required by the Constitution to "originate exclusively" in the House of Representatives.
It is important to emphasize this, because a bill originating in the House may undergo such
extensive changes in the Senate that the result may be a rewriting of the whole. The possibility of
a third version by the conference committee will be discussed later. At this point, what is
important to note is that, as a result of the Senate action, a distinct bill may be produced. To insist
that a revenue statute and not only the bill which initiated the legislative process culminating
in the enactment of the law must substantially be the same as the House bill would be to deny
the Senate's power not only to "concur with amendments" but also to "propose amendments." It
would be to violate the coequality of legislative power of the two houses of Congress and in fact
make the House superior to the Senate.
The contention that the constitutional design is to limit the Senate's power in respect of revenue
bills in order to compensate for the grant to the Senate of the treaty-ratifying power 3 and thereby
equalize its powers and those of the House overlooks the fact that the powers being compared are
14

different. We are dealing here with the legislative power which under the Constitution is vested
not in any particular chamber but in the Congress of the Philippines, consisting of "a Senate and
a House of Representatives." 4 The exercise of the treaty-ratifying power is not the exercise of
legislative power. It is the exercise of a check on the executive power. There is, therefore, no
justification for comparing the legislative powers of the House and of the Senate on the basis of
the possession of such nonlegislative power by the Senate. The possession of a similar power by
the U.S. Senate 5 has never been thought of as giving it more legislative powers than the House
of Representatives.
In the United States, the validity of a provision ( 37) imposing an ad valorem tax based on the
weight of vessels, which the U.S. Senate had inserted in the Tariff Act of 1909, was upheld
against the claim that the provision was a revenue bill which originated in the Senate in
contravention of Art. I, 7 of the U.S. Constitution. 6 Nor is the power to amend limited to
adding a provision or two in a revenue bill emanating from the House. The U.S. Senate has gone
so far as changing the whole of bills following the enacting clause and substituting its own
versions. In 1883, for example, it struck out everything after the enacting clause of a tariff bill
and wrote in its place its own measure, and the House subsequently accepted the amendment.
The U.S. Senate likewise added 847 amendments to what later became the Payne-Aldrich Tariff
Act of 1909; it dictated the schedules of the Tariff Act of 1921; it rewrote an extensive tax
revision bill in the same year and recast most of the tariff bill of 1922. 7 Given, then, the power
of the Senate to propose amendments, the Senate can propose its own version even with respect
to bills which are required by the Constitution to originate in the House.
It is insisted, however, that S. No. 1630 was passed not in substitution of H. No. 11197 but of
another Senate bill (S. No. 1129) earlier filed and that what the Senate did was merely to "take
[H. No. 11197] into consideration" in enacting S. No. 1630. There is really no difference between
the Senate preserving H. No. 11197 up to the enacting clause and then writing its own version
following the enacting clause (which, it would seem, petitioners admit is an amendment by
substitution), and, on the other hand, separately presenting a bill of its own on the same subject
matter. In either case the result are two bills on the same subject.
Indeed, what the Constitution simply means is that the initiative for filing revenue, tariff, or tax
bills, bills authorizing an increase of the public debt, private bills and bills of local application
must come from the House of Representatives on the theory that, elected as they are from the
districts, the members of the House can be expected to be more sensitive to the local needs and
problems. On the other hand, the senators, who are elected at large, are expected to approach the
same problems from the national perspective. Both views are thereby made to bear on the
enactment of such laws.
Nor does the Constitution prohibit the filing in the Senate of a substitute bill in anticipation of its
receipt of the bill from the House, so long as action by the Senate as a body is withheld pending
receipt of the House bill. The Court cannot, therefore, understand the alarm expressed over the
fact that on March 1, 1993, eight months before the House passed H. No. 11197, S. No. 1129 had

15

been filed in the Senate. After all it does not appear that the Senate ever considered it. It was only
after the Senate had received H. No. 11197 on November 23, 1993 that the process of legislation
in respect of it began with the referral to the Senate Committee on Ways and Means of H. No.
11197 and the submission by the Committee on February 7, 1994 of S. No. 1630. For that matter,
if the question were simply the priority in the time of filing of bills, the fact is that it was in the
House that a bill (H. No. 253) to amend the VAT law was first filed on July 22, 1992. Several
other bills had been filed in the House before S. No. 1129 was filed in the Senate, and H. No.
11197 was only a substitute of those earlier bills.
Second. Enough has been said to show that it was within the power of the Senate to propose S.
No. 1630. We now pass to the next argument of petitioners that S. No. 1630 did not pass three
readings on separate days as required by the Constitution 8 because the second and third readings
were done on the same day, March 24, 1994. But this was because on February 24, 1994 9 and
again on March 22, 1994, 10 the President had certified S. No. 1630 as urgent. The presidential
certification dispensed with the requirement not only of printing but also that of reading the bill
on separate days. The phrase "except when the President certifies to the necessity of its
immediate enactment, etc." in Art. VI, 26(2) qualifies the two stated conditions before a bill
can become a law: (i) the bill has passed three readings on separate days and (ii) it has been
printed in its final form and distributed three days before it is finally approved.
In other words, the "unless" clause must be read in relation to the "except" clause, because the
two are really coordinate clauses of the same sentence. To construe the "except" clause as simply
dispensing with the second requirement in the "unless" clause (i.e., printing and distribution three
days before final approval) would not only violate the rules of grammar. It would also negate the
very premise of the "except" clause: the necessity of securing the immediate enactment of a bill
which is certified in order to meet a public calamity or emergency. For if it is only the printing
that is dispensed with by presidential certification, the time saved would be so negligible as to be
of any use in insuring immediate enactment. It may well be doubted whether doing away with
the necessity of printing and distributing copies of the bill three days before the third reading
would insure speedy enactment of a law in the face of an emergency requiring the calling of a
special election for President and Vice-President. Under the Constitution such a law is required
to be made within seven days of the convening of Congress in emergency session. 11
That upon the certification of a bill by the President the requirement of three readings on separate
days and of printing and distribution can be dispensed with is supported by the weight of
legislative practice. For example, the bill defining the certiorari jurisdiction of this Court which,
in consolidation with the Senate version, became Republic Act No. 5440, was passed on second
and third readings in the House of Representatives on the same day (May 14, 1968) after the bill
had been certified by the President as urgent. 12
There is, therefore, no merit in the contention that presidential certification dispenses only with
the requirement for the printing of the bill and its distribution three days before its passage but
not with the requirement of three readings on separate days, also.

16

It is nonetheless urged that the certification of the bill in this case was invalid because there was
no emergency, the condition stated in the certification of a "growing budget deficit" not being an
unusual condition in this country.
It is noteworthy that no member of the Senate saw fit to controvert the reality of the factual basis
of the certification. To the contrary, by passing S. No. 1630 on second and third readings on
March 24, 1994, the Senate accepted the President's certification. Should such certification be
now reviewed by this Court, especially when no evidence has been shown that, because S. No.
1630 was taken up on second and third readings on the same day, the members of the Senate
were deprived of the time needed for the study of a vital piece of legislation?
The sufficiency of the factual basis of the suspension of the writ of habeas corpus or declaration
of martial law under Art. VII, 18, or the existence of a national emergency justifying the
delegation of extraordinary powers to the President under Art. VI, 23(2), is subject to judicial
review because basic rights of individuals may be at hazard. But the factual basis of presidential
certification of bills, which involves doing away with procedural requirements designed to insure
that bills are duly considered by members of Congress, certainly should elicit a different standard
of review.
Petitioners also invite attention to the fact that the President certified S. No. 1630 and not H. No.
11197. That is because S. No. 1630 was what the Senate was considering. When the matter was
before the House, the President likewise certified H. No. 9210 the pending in the House.
Third. Finally it is contended that the bill which became Republic Act No. 7716 is the bill which
the Conference Committee prepared by consolidating H. No. 11197 and S. No. 1630. It is
claimed that the Conference Committee report included provisions not found in either the House
bill or the Senate bill and that these provisions were "surreptitiously" inserted by the Conference
Committee. Much is made of the fact that in the last two days of its session on April 21 and 25,
1994 the Committee met behind closed doors. We are not told, however, whether the provisions
were not the result of the give and take that often mark the proceedings of conference
committees.
Nor is there anything unusual or extraordinary about the fact that the Conference Committee met
in executive sessions. Often the only way to reach agreement on conflicting provisions is to meet
behind closed doors, with only the conferees present. Otherwise, no compromise is likely to be
made. The Court is not about to take the suggestion of a cabal or sinister motive attributed to the
conferees on the basis solely of their "secret meetings" on April 21 and 25, 1994, nor read
anything into the incomplete remarks of the members, marked in the transcript of stenographic
notes by ellipses. The incomplete sentences are probably due to the stenographer's own
limitations or to the incoherence that sometimes characterize conversations. William Safire noted
some such lapses in recorded talks even by recent past Presidents of the United States.
In any event, in the United States conference committees had been customarily held in executive
sessions with only the conferees and their staffs in attendance. 13 Only in November 1975 was a

17

new rule adopted requiring open sessions. Even then a majority of either chamber's conferees
may vote in public to close the meetings. 14
As to the possibility of an entirely new bill emerging out of a Conference Committee, it has been
explained:
Under congressional rules of procedure, conference committees are not expected to make any
material change in the measure at issue, either by deleting provisions to which both houses have
already agreed or by inserting new provisions. But this is a difficult provision to enforce. Note
the problem when one house amends a proposal originating in either house by striking out
everything following the enacting clause and substituting provisions which make it an entirely
new bill. The versions are now altogether different, permitting a conference committee to draft
essentially a new bill. . . . 15
The result is a third version, which is considered an "amendment in the nature of a substitute,"
the only requirement for which being that the third version be germane to the subject of the
House and Senate bills. 16
Indeed, this Court recently held that it is within the power of a conference committee to include
in its report an entirely new provision that is not found either in the House bill or in the Senate
bill. 17 If the committee can propose an amendment consisting of one or two provisions, there is
no reason why it cannot propose several provisions, collectively considered as an "amendment in
the nature of a substitute," so long as such amendment is germane to the subject of the bills
before the committee. After all, its report was not final but needed the approval of both houses of
Congress to become valid as an act of the legislative department. The charge that in this case the
Conference Committee acted as a third legislative chamber is thus without any basis. 18
Nonetheless, it is argued that under the respective Rules of the Senate and the House of
Representatives a conference committee can only act on the differing provisions of a Senate bill
and a House bill, and that contrary to these Rules the Conference Committee inserted provisions
not found in the bills submitted to it. The following provisions are cited in support of this
contention:
Rules of the Senate
Rule XII:
26. In the event that the Senate does not agree with the House of Representatives on the
provision of any bill or joint resolution, the differences shall be settled by a conference
committee of both Houses which shall meet within ten days after their composition.
The President shall designate the members of the conference committee in accordance with
subparagraph (c), Section 3 of Rule III.
Each Conference Committee Report shall contain a detailed and sufficiently explicit statement of
the changes in or amendments to the subject measure, and shall be signed by the conferees.

18

The consideration of such report shall not be in order unless the report has been filed with the
Secretary of the Senate and copies thereof have been distributed to the Members.
(Emphasis added)
Rules of the House of Representatives
Rule XIV:
85. Conference Committee Reports. In the event that the House does not agree with the
Senate on the amendments to any bill or joint resolution, the differences may be settled by
conference committees of both Chambers.
The consideration of conference committee reports shall always be in order, except when the
journal is being read, while the roll is being called or the House is dividing on any question. Each
of the pages of such reports shall be signed by the conferees. Each report shall contain a
detailed, sufficiently explicit statement of the changes in or amendments to the subject measure.
The consideration of such report shall not be in order unless copies thereof are distributed to the
Members: Provided, That in the last fifteen days of each session period it shall be deemed
sufficient that three copies of the report, signed as above provided, are deposited in the office of
the Secretary General.
(Emphasis added)
To be sure, nothing in the Rules limits a conference committee to a consideration of conflicting
provisions. But Rule XLIV, 112 of the Rules of the Senate is cited to the effect that "If there is
no Rule applicable to a specific case the precedents of the Legislative Department of the
Philippines shall be resorted to, and as a supplement of these, the Rules contained in Jefferson's
Manual." The following is then quoted from the Jefferson's Manual:
The managers of a conference must confine themselves to the differences committed to them. . .
and may not include subjects not within disagreements, even though germane to a question in
issue.
Note that, according to Rule XLIX, 112, in case there is no specific rule applicable, resort must
be to the legislative practice. The Jefferson's Manual is resorted to only as supplement. It is
common place in Congress that conference committee reports include new matters which,
though germane, have not been committed to the committee. This practice was admitted by
Senator Raul S. Roco, petitioner in G.R. No. 115543, during the oral argument in these cases.
Whatever, then, may be provided in the Jefferson's Manual must be considered to have been
modified by the legislative practice. If a change is desired in the practice it must be sought in
Congress since this question is not covered by any constitutional provision but is only an internal
rule of each house. Thus, Art. VI, 16(3) of the Constitution provides that "Each House may
determine the rules of its proceedings. . . ."
This observation applies to the other contention that the Rules of the two chambers were likewise

19

disregarded in the preparation of the Conference Committee Report because the Report did not
contain a "detailed and sufficiently explicit statement of changes in, or amendments to, the
subject measure." The Report used brackets and capital letters to indicate the changes. This is a
standard practice in bill-drafting. We cannot say that in using these marks and symbols the
Committee violated the Rules of the Senate and the House. Moreover, this Court is not the
proper forum for the enforcement of these internal Rules. To the contrary, as we have already
ruled, "parliamentary rules are merely procedural and with their observance the courts have no
concern." 19 Our concern is with the procedural requirements of the Constitution for the
enactment of laws. As far as these requirements are concerned, we are satisfied that they have
been faithfully observed in these cases.
Nor is there any reason for requiring that the Committee's Report in these cases must have
undergone three readings in each of the two houses. If that be the case, there would be no end to
negotiation since each house may seek modifications of the compromise bill. The nature of the
bill, therefore, requires that it be acted upon by each house on a "take it or leave it" basis, with
the only alternative that if it is not approved by both houses, another conference committee must
be appointed. But then again the result would still be a compromise measure that may not be
wholly satisfying to both houses.
Art. VI, 26(2) must, therefore, be construed as referring only to bills introduced for the first
time in either house of Congress, not to the conference committee report. For if the purpose of
requiring three readings is to give members of Congress time to study bills, it cannot be gainsaid
that H. No. 11197 was passed in the House after three readings; that in the Senate it was
considered on first reading and then referred to a committee of that body; that although the
Senate committee did not report out the House bill, it submitted a version (S. No. 1630) which it
had prepared by "taking into consideration" the House bill; that for its part the Conference
Committee consolidated the two bills and prepared a compromise version; that the Conference
Committee Report was thereafter approved by the House and the Senate, presumably after
appropriate study by their members. We cannot say that, as a matter of fact, the members of
Congress were not fully informed of the provisions of the bill. The allegation that the Conference
Committee usurped the legislative power of Congress is, in our view, without warrant in fact and
in law.
Fourth. Whatever doubts there may be as to the formal validity of Republic Act No. 7716 must
be resolved in its favor. Our cases 20 manifest firm adherence to the rule that an enrolled copy of
a bill is conclusive not only of its provisions but also of its due enactment. Not even claims that a
proposed constitutional amendment was invalid because the requisite votes for its approval had
not been obtained 21 or that certain provisions of a statute had been "smuggled" in the printing of
the bill 22 have moved or persuaded us to look behind the proceedings of a coequal branch of the
government. There is no reason now to depart from this rule.
No claim is here made that the "enrolled bill" rule is absolute. In fact in one case 23 we "went
behind" an enrolled bill and consulted the Journal to determine whether certain provisions of a

20

statute had been approved by the Senate in view of the fact that the President of the Senate
himself, who had signed the enrolled bill, admitted a mistake and withdrew his signature, so that
in effect there was no longer an enrolled bill to consider.
But where allegations that the constitutional procedures for the passage of bills have not been
observed have no more basis than another allegation that the Conference Committee
"surreptitiously" inserted provisions into a bill which it had prepared, we should decline the
invitation to go behind the enrolled copy of the bill. To disregard the "enrolled bill" rule in such
cases would be to disregard the respect due the other two departments of our government.
Fifth. An additional attack on the formal validity of Republic Act No. 7716 is made by the
Philippine Airlines, Inc., petitioner in G.R. No. 11582, namely, that it violates Art. VI, 26(1)
which provides that "Every bill passed by Congress shall embrace only one subject which shall
be expressed in the title thereof." It is contended that neither H. No. 11197 nor S. No. 1630
provided for removal of exemption of PAL transactions from the payment of the VAT and that
this was made only in the Conference Committee bill which became Republic Act No. 7716
without reflecting this fact in its title.
The title of Republic Act No. 7716 is:
AN ACT RESTRUCTURING THE VALUE- ADDED TAX (VAT) SYSTEM, WIDENING ITS
TAX BASE AND ENHANCING ITS ADMINISTRATION, AND FOR THESE PURPOSES
AMENDING AND REPEALING THE RELEVANT PROVISIONS OF THE NATIONAL
INTERNAL REVENUE CODE, AS AMENDED, AND FOR OTHER PURPOSES.
Among the provisions of the NIRC amended is 103, which originally read:
103. Exempt transactions. The following shall be exempt from the value-added tax:
....
(q) Transactions which are exempt under special laws or international agreements to which the
Philippines is a signatory. Among the transactions exempted from the VAT were those of PAL
because it was exempted under its franchise (P.D. No. 1590) from the payment of all "other taxes
. . . now or in the near future," in consideration of the payment by it either of the corporate
income tax or a franchise tax of 2%.
As a result of its amendment by Republic Act No. 7716, 103 of the NIRC now provides:
103. Exempt transactions. The following shall be exempt from the value-added tax:
....
(q) Transactions which are exempt under special laws, except those granted under Presidential
Decree Nos. 66, 529, 972, 1491, 1590. . . .
The effect of the amendment is to remove the exemption granted to PAL, as far as the VAT is
concerned.

21

The question is whether this amendment of 103 of the NIRC is fairly embraced in the title of
Republic Act No. 7716, although no mention is made therein of P.D. No. 1590 as among those
which the statute amends. We think it is, since the title states that the purpose of the statute is to
expand the VAT system, and one way of doing this is to widen its base by withdrawing some of
the exemptions granted before. To insist that P.D. No. 1590 be mentioned in the title of the law,
in addition to 103 of the NIRC, in which it is specifically referred to, would be to insist that the
title of a bill should be a complete index of its content.
The constitutional requirement that every bill passed by Congress shall embrace only one subject
which shall be expressed in its title is intended to prevent surprise upon the members of Congress
and to inform the people of pending legislation so that, if they wish to, they can be heard
regarding it. If, in the case at bar, petitioner did not know before that its exemption had been
withdrawn, it is not because of any defect in the title but perhaps for the same reason other
statutes, although published, pass unnoticed until some event somehow calls attention to their
existence. Indeed, the title of Republic Act No. 7716 is not any more general than the title of
PAL's own franchise under P.D. No. 1590, and yet no mention is made of its tax exemption. The
title of P.D. No. 1590 is:
AN ACT GRANTING A NEW FRANCHISE TO PHILIPPINE AIRLINES, INC. TO
ESTABLISH, OPERATE, AND MAINTAIN AIR-TRANSPORT SERVICES IN THE
PHILIPPINES AND BETWEEN THE PHILIPPINES AND OTHER COUNTRIES.
The trend in our cases is to construe the constitutional requirement in such a manner that courts
do not unduly interfere with the enactment of necessary legislation and to consider it sufficient if
the title expresses the general subject of the statute and all its provisions are germane to the
general subject thus expressed. 24
It is further contended that amendment of petitioner's franchise may only be made by special law,
in view of 24 of P.D. No. 1590 which provides:
This franchise, as amended, or any section or provision hereof may only be modified, amended,
or repealed expressly by a special law or decree that shall specifically modify, amend, or repeal
this franchise or any section or provision thereof.
This provision is evidently intended to prevent the amendment of the franchise by mere
implication resulting from the enactment of a later inconsistent statute, in consideration of the
fact that a franchise is a contract which can be altered only by consent of the parties. Thus in
Manila Railroad Co. v.Rafferty, 25 it was held that an Act of the U.S. Congress, which provided
for the payment of tax on certain goods and articles imported into the Philippines, did not amend
the franchise of plaintiff, which exempted it from all taxes except those mentioned in its
franchise. It was held that a special law cannot be amended by a general law.
In contrast, in the case at bar, Republic Act No. 7716 expressly amends PAL's franchise (P.D. No.
1590) by specifically excepting from the grant of exemptions from the VAT PAL's exemption
under P.D. No. 1590. This is within the power of Congress to do under Art. XII, 11 of the
22

Constitution, which provides that the grant of a franchise for the operation of a public utility is
subject to amendment, alteration or repeal by Congress when the common good so requires.
B. Claims of Regressivity, Denial of Due Process, Equal Protection, and Impairmentof Contracts
There is basis for passing upon claims that on its face the statute violates the guarantees of
freedom of speech, press and religion. The possible "chilling effect" which it may have on the
essential freedom of the mind and conscience and the need to assure that the channels of
communication are open and operating importunately demand the exercise of this Court's power
of review.
There is, however, no justification for passing upon the claims that the law also violates the rule
that taxation must be progressive and that it denies petitioners' right to due process and that equal
protection of the laws. The reason for this different treatment has been cogently stated by an
eminent authority on constitutional law thus: "[W]hen freedom of the mind is imperiled by law, it
is freedom that commands a momentum of respect; when property is imperiled it is the
lawmakers' judgment that commands respect. This dual standard may not precisely reverse the
presumption of constitutionality in civil liberties cases, but obviously it does set up a hierarchy of
values within the due process clause." 41
Indeed, the absence of threat of immediate harm makes the need for judicial intervention less
evident and underscores the essential nature of petitioners' attack on the law on the grounds of
regressivity, denial of due process and equal protection and impairment of contracts as a mere
academic discussion of the merits of the law. For the fact is that there have even been no notices
of assessments issued to petitioners and no determinations at the administrative levels of their
claims so as to illuminate the actual operation of the law and enable us to reach sound judgment
regarding so fundamental questions as those raised in these suits.
Thus, the broad argument against the VAT is that it is regressive and that it violates the
requirement that "The rule of taxation shall be uniform and equitable [and] Congress shall evolve
a progressive system of taxation." 42 Petitioners in G.R. No. 115781 quote from a paper, entitled
"VAT Policy Issues: Structure, Regressivity, Inflation and Exports" by Alan A. Tait of the
International Monetary Fund, that "VAT payment by low-income households will be a higher
proportion of their incomes (and expenditures) than payments by higher-income households.
That is, the VAT will be regressive." Petitioners contend that as a result of the uniform 10% VAT,
the tax on consumption goods of those who are in the higher-income bracket, which before were
taxed at a rate higher than 10%, has been reduced, while basic commodities, which before were
taxed at rates ranging from 3% to 5%, are now taxed at a higher rate.
Just as vigorously as it is asserted that the law is regressive, the opposite claim is pressed by
respondents that in fact it distributes the tax burden to as many goods and services as possible
particularly to those which are within the reach of higher-income groups, even as the law
exempts basic goods and services. It is thus equitable. The goods and properties subject to the
VAT are those used or consumed by higher-income groups. These include real properties held

23

primarily for sale to customers or held for lease in the ordinary course of business, the right or
privilege to use industrial, commercial or scientific equipment, hotels, restaurants and similar
places, tourist buses, and the like. On the other hand, small business establishments, with annual
gross sales of less than P500,000, are exempted. This, according to respondents, removes from
the coverage of the law some 30,000 business establishments. On the other hand, an occasional
paper 43 of the Center for Research and Communication cities a NEDA study that the VAT has
minimal impact on inflation and income distribution and that while additional expenditure for the
lowest income class is only P301 or 1.49% a year, that for a family earning P500,000 a year or
more is P8,340 or 2.2%.
Lacking empirical data on which to base any conclusion regarding these arguments, any
discussion whether the VAT is regressive in the sense that it will hit the "poor" and middleincome group in society harder than it will the "rich," as the Cooperative Union of the
Philippines (CUP) claims in G.R. No. 115873, is largely an academic exercise. On the other
hand, the CUP's contention that Congress' withdrawal of exemption of producers cooperatives,
marketing cooperatives, and service cooperatives, while maintaining that granted to electric
cooperatives, not only goes against the constitutional policy to promote cooperatives as
instruments of social justice (Art. XII, 15) but also denies such cooperatives the equal
protection of the law is actually a policy argument. The legislature is not required to adhere to a
policy of "all or none" in choosing the subject of taxation. 44
Nor is the contention of the Chamber of Real Estate and Builders Association (CREBA),
petitioner in G.R. 115754, that the VAT will reduce the mark up of its members by as much as
85% to 90% any more concrete. It is a mere allegation. On the other hand, the claim of the
Philippine Press Institute, petitioner in G.R. No. 115544, that the VAT will drive some of its
members out of circulation because their profits from advertisements will not be enough to pay
for their tax liability, while purporting to be based on the financial statements of the newspapers
in question, still falls short of the establishment of facts by evidence so necessary for
adjudicating the question whether the tax is oppressive and confiscatory.
Indeed, regressivity is not a negative standard for courts to enforce. What Congress is required
by the Constitution to do is to "evolve a progressive system of taxation." This is a directive to
Congress, just like the directive to it to give priority to the enactment of laws for the
enhancement of human dignity and the reduction of social, economic and political inequalities
(Art. XIII, 1), or for the promotion of the right to "quality education" (Art. XIV, 1). These
provisions are put in the Constitution as moral incentives to legislation, not as judicially
enforceable rights.
At all events, our 1988 decision in Kapatiran 45 should have laid to rest the questions now raised
against the VAT. There similar arguments made against the original VAT Law (Executive Order
No. 273) were held to be hypothetical, with no more basis than newspaper articles which this
Court found to be "hearsay and [without] evidentiary value." As Republic Act No. 7716 merely
expands the base of the VAT system and its coverage as provided in the original VAT Law,

24

further debate on the desirability and wisdom of the law should have shifted to Congress.
Only slightly less abstract but nonetheless hypothetical is the contention of CREBA that the
imposition of the VAT on the sales and leases of real estate by virtue of contracts entered into
prior to the effectivity of the law would violate the constitutional provision that "No law
impairing the obligation of contracts shall be passed." It is enough to say that the parties to a
contract cannot, through the exercise of prophetic discernment, fetter the exercise of the taxing
power of the State. For not only are existing laws read into contracts in order to fix obligations as
between parties, but the reservation of essential attributes of sovereign power is also read into
contracts as a basic postulate of the legal order. The policy of protecting contracts against
impairment presupposes the maintenance of a government which retains adequate authority to
secure the peace and good order of society. 46
In truth, the Contract Clause has never been thought as a limitation on the exercise of the State's
power of taxation save only where a tax exemption has been granted for a valid consideration. 47
Such is not the case of PAL in G.R. No. 115852, and we do not understand it to make this claim.
Rather, its position, as discussed above, is that the removal of its tax exemption cannot be made
by a general, but only by a specific, law.
The substantive issues raised in some of the cases are presented in abstract, hypothetical form
because of the lack of a concrete record. We accept that this Court does not only adjudicate
private cases; that public actions by "non-Hohfeldian" 48 or ideological plaintiffs are now
cognizable provided they meet the standing requirement of the Constitution; that under Art. VIII,
1, 2 the Court has a "special function" of vindicating constitutional rights. Nonetheless the
feeling cannot be escaped that we do not have before us in these cases a fully developed factual
record that alone can impart to our adjudication the impact of actuality 49 to insure that decisionmaking is informed and well grounded. Needless to say, we do not have power to render
advisory opinions or even jurisdiction over petitions for declaratory judgment. In effect we are
being asked to do what the Conference Committee is precisely accused of having done in these
cases to sit as a third legislative chamber to review legislation.
We are told, however, that the power of judicial review is not so much power as it is duty
imposed on this Court by the Constitution and that we would be remiss in the performance of
that duty if we decline to look behind the barriers set by the principle of separation of powers.
Art. VIII, 1, 2 is cited in support of this view:
Judicial power includes the duty of the courts of justice to settle actual controversies involving
rights which are legally demandable and enforceable, and to determine whether or not there has
been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any
branch or instrumentality of the Government.
To view the judicial power of review as a duty is nothing new. Chief Justice Marshall said so in
1803, to justify the assertion of this power in Marbury v. Madison:
It is emphatically the province and duty of the judicial department to say what the law is. Those
25

who apply the rule to particular cases must of necessity expound and interpret that rule. If two
laws conflict with each other, the courts must decide on the operation of each. 50
Justice Laurel echoed this justification in 1936 in Angara v. Electoral Commission:
And when the judiciary mediates to allocate constitutional boundaries, it does not assert any
superiority over the other departments; it does not in reality nullify or invalidate an act of the
legislature, but only asserts the solemn and sacred obligation assigned to it by the Constitution to
determine conflicting claims of authority under the Constitution and to establish for the parties in
an actual controversy the rights which that instrument secures and guarantees to them. 51
This conception of the judicial power has been affirmed in several
cases 52 of this Court following Angara.
It does not add anything, therefore, to invoke this "duty" to justify this Court's intervention in
what is essentially a case that at best is not ripe for adjudication. That duty must still be
performed in the context of a concrete case or controversy, as Art. VIII, 5(2) clearly defines our
jurisdiction in terms of "cases," and nothing but "cases." That the other departments of the
government may have committed a grave abuse of discretion is not an independent ground for
exercising our power. Disregard of the essential limits imposed by the case and controversy
requirement can in the long run only result in undermining our authority as a court of law. For, as
judges, what we are called upon to render is judgment according to law, not according to what
may appear to be the opinion of the day.
In the preceeding pages we have endeavored to discuss, within limits, the validity of Republic
Act No. 7716 in its formal and substantive aspects as this has been raised in the various cases
before us. To sum up, we hold:
(1) That the procedural requirements of the Constitution have been complied with by Congress in
the enactment of the statute;
(2) That judicial inquiry whether the formal requirements for the enactment of statutes beyond
those prescribed by the Constitution have been observed is precluded by the principle of
separation of powers;
(3) That the law does not abridge freedom of speech, expression or the press, nor interfere with
the free exercise of religion, nor deny to any of the parties the right to an education; and
(4) That, in view of the absence of a factual foundation of record, claims that the law is
regressive, oppressive and confiscatory and that it violates vested rights protected under the
Contract Clause are prematurely raised and do not justify the grant of prospective relief by writ
of prohibition.
WHEREFORE, the petitions in these cases are DISMISSED.
VIOLATIONS OF SECTION 24, ARTICLE VI
OF THE CONSTITUTION:
26

First violation. Since R.A. No. 7716 is a revenue measure, it must originate exclusively in the
House not in the Senate. As correctly asserted by petitioner Tolentino, on the face of the
enrolled copy of R.A. No. 7716, it is a "CONSOLIDATION OF HOUSE BILL NO. 11197 AND
SENATE BILL NO. 1630." In short, it is an illicit marriage of a bill which originated in the
House and a bill which originated in the Senate. Therefore, R.A. No. 7716 did not originate
exclusively in the House.
The only bill which could serve as a valid basis for R.A. No. 7716 is House Bill (HB) No. 11197.
This bill, which is the substitute bill recommended by the House Committee on Ways and Means
in substitution of House Bills Nos. 253, 771, 2450, 7033, 8086, 9030, 9210, 9397, 10012, and
10100, and covered by its Committee Report No. 367, 14 was approved on third reading by the
House on 17 November 1993. 15 Interestingly, HB No. 9210, 16 which was filed by
Representative Exequiel B. Javier on 19 May 1993, was certified by the President in his letter to
Speaker Jose de Venecia, Jr. of 1 June 1993. 17 Yet, HB No. 11197, which substituted HB No.
9210 and the others above-stated, was not. Its certification seemed to have been entirely
forgotten.
On 18 November 1993, the Secretary-General of the House, pursuant to Section 83, Rule XIV of
the Rules of the House, transmitted to the President of the Senate HB No. 11197 and requested
the concurrence of the Senate therewith. 18
However, HB No. 11197 had passed only its first reading in that Senate by its referral to its
Committee on Ways and Means. That Committee never deliberated on HB No. 11197 as it should
have. It acted only on Senate Bill (SB) No. 1129 19 introduced by Senator Ernesto F. Herrera on 1
March 1993. It then prepared and proposed SB No. 1630, and in its Committee Report No.
349 20 which was submitted to the Senate on 7 February 1994, 21 it recommended that SB No.
1630 be approved "in substitution of S.B. No. 1129, taking into consideration P.S. Res. No. 734
and H.B. No. 11197." 22 It must be carefully noted that SB No. 1630 was proposed and submitted
for approval by the Senate in SUBSTITUTION of SB No. 1129, and not HB No. 11197.
Obviously, the principal measure which the Committee deliberated on and acted upon was SB
No. 1129 and not HB No. 11197. The latter, instead of being the only measure to be taken up,
deliberated upon, and reported back to the Senate for its consideration on second reading and,
eventually, on third reading, was, at the most, merely given by the Committee a passing glance.
This specific unequivocal action of the Senate Committee on Ways and Means, i.e., proposing
and recommending approval of SB No. 1630 as a substitute for or in substitution of SB No. 1129
demolishes at once the thesis of the Solicitor General that:
Assuming that SB 1630 is distinct from HB 11197, amendment by substitution is within the
purview of Section 24, Article VI of the Constitution.
because, according to him, (a) "Section 68, Rule XXIX of the Rules of the Senate authorizes an
amendment by substitution and the only condition required is that "the text thereof is submitted
in writing"; and (b) "[I]n Flint vs. Stone Tracy Co. (220 U.S. 107) the United Stated Supreme
27

Court, interpreting the provision in the United States Constitution similar to Section 24, Article
VI of the Philippine Constitution, stated that the power of the Senate to amend a revenue bill
includes substitution of an entirely new measure for the one originally proposed by the House of
Representatives." 23
This thesis is utterly without merit. In the first place, it reads into the Committee Report
something which it had not contemplated, that is, to propose SB No. 1630 in substitution of HB
No. 11197; or speculates that the Committee may have committed an error in stating that it is SB
No. 1129, and not HB No. 11197, which is to be substituted by SB No. 1630. Either, of course, is
unwarranted because the words of the Report, solemnly signed by the Chairman, Vice-Chairman
(who dissented), seven members, and three ex-officiomembers, 24 leave no room for doubt that
although SB No. 1129, P.S. Res No. 734, and HB No. 11197 were referred to and considered by
the Committee, it had prepared the attached SB No. 1630 which it recommends for approval "in
substitution of S.B. No. 11197, taking into consideration P.S. No. 734 and H.B. No. 11197 with
Senators Herrera, Angara, Romulo, Sotto, Ople and Shahani as authors." To do as suggested
would be to substitute the judgment of the Committee with another that is completely
inconsistent with it, or, simply, to capriciously ignore the facts.
In the second place, the Office of the Solicitor General intentionally made it appear, to mislead
rather than to persuade us, that in Flint vs. Stone TracyCo. 25 The U.S. Supreme Court ruled, as
quoted by it in the Consolidated Memorandum for Respondents, as follows: 26
The Senate has the power to amend a revenue bill. This power to amend is not confined to the
elimination of provisions contained in the original act, but embraces as well the addition of such
provisions thereto as may render the original act satisfactory to the body which is called upon to
support it. It has, in fact, been held that the substitution of an entirely new measure for the one
originally proposed can be supported as a valid amendment.
The Senate has the power to amend a revenue bill. This power to amend is not confined to the
elimination of provisions contained in the original act, but embraces as well the addition of such
provisions thereto as may render the original act satisfactory to the body which is called upon to
support it. It has, in fact, been held that the substitution of an entirely new measure for the one
originally proposed can be supported as a valid amendment.
In the third place, a Senate amendment by substitution with an entirely new bill of a bill, which
under Section 24, Article VI of the Constitution can only originate exclusively in the House, is
not authorized by said Section 24. Flint vs. Stone Tracy Co. cannot be invoked in favor of such a
view. As pointed out by Mr. Justice Florenz D. Regalado during the oral arguments of these cases
and during the initial deliberations thereon by the Court, Flint involves a Senate amendment to a
revenue bill which, under the United States Constitution, should originate from the House of
Representatives. The amendment consisted of the substitution of a corporation tax in lieu of the
plan of inheritance taxation contained in a general bill for the collection of revenue as it came
from the House of Representatives where the bill originated. The constitutional provision in
question is Section 7, Article I of the United States Constitution which reads:
28

Sec. 7. Bills and Resolutions. All Bills for raising Revenue shall originate in the House of
Representatives; but the Senate may propose or concur with Amendments, as on other Bills.
This provision, contrary to the misleading claim of the Solicitor General, is not similar to Section
24, Article VI of our Constitution, which for easy comparison is hereunder quoted again:
All appropriation, revenue or tariff bills, bills authorizing increase of the public debt, bills of
local application, and private bills shall originate exclusively in the House of Representatives,
but the Senate may propose or concur with amendments.
Note that in the former the word exclusively does not appear. And, in the latter, the phrase "as on
other Bill," which is found in the former, does not appear. These are very significant in
determining the authority of the upper chamber over the bills enumerated in Section 24. Since
the origination is not exclusively vested in the House of Representatives of the United States, the
Senate's authority to propose or concur with amendments is necessarily broader. That broader
authority is further confirmed by the phrase "as on other Bills," i.e., its power to propose or
concur with amendments thereon is the same as in ordinary bills. The absence of this phrase in
our Constitution was clearly intended to restrict or limit the Philippine Senate's power to propose
or concur with amendments. In the light of the exclusivity of origination and the absence of the
phrase "as on other Bills," the Philippine Senate cannot amend by substitution with an entirely
new bill of its own any bill covered by Section 24 of Article VI which the House of
Representatives transmitted to it because such substitution would indirectly violate Section 24.
These obvious substantive differences between Section 7, Article I of the U.S. Constitution and
Section 24, Article VI of our Constitution are enough reasons why this Court should neither
allow itself to be misled by Flint vs. Stone nor be awed by Rainey vs. United States 27 and the
opinion of Messrs. Ogg and Ray 28 which the majority cites to support the view that the power of
the U.S. Senate to amend a revenue measure is unlimited. Rainey concerns the Tariff Act of 1909
of the United States of America and specifically involved was its Section 37 which was an
amendment introduced by the U.S. Senate. It was claimed by the petitioners that the said section
is a revenue measure which should originate in the House of Representatives. The U.S. Supreme
Court, however, adopted and approved the finding of the court a quo that:
the section in question is not void as a bill for raising revenue originating in the Senate, and not
in the House of Representatives. It appears that the section was proposed by the Senate as an
amendment to a bill for raising revenue which originated in the House. That is sufficient.
Messrs. Ogg and Ray, who are professors emeritus of political science, based their statement not
even on a case decided by the U.S. Supreme Court but on their perception of what Section 7,
Article I of the U.S. Constitution permits. In the tenth edition (1951) of their work, they state:
Any bill may make its first appearance in either house, except only that bills for raising revenue
are required by the constitution to "originate" in the House of Representatives. Indeed, through
its right to amend revenue bills, even to the extent of substituting new ones, the Senate may, in
effect, originate them also. 29
29

Their "in effect" conclusion is, of course, logically correct because the word exclusively does not
appear in said Section 7, Article I of the U.S. Constitution.
Neither can I find myself in agreement with the view of the majority that the Constitution does
not prohibit the filing in the Senate of a substitute bill in anticipation of its receipt of the bill
from the House so long as action by the Senate as a body is withheld pending receipt of the
House bill, thereby stating, in effect, that S.B. No. 1129 was such an anticipatory substitute bill,
which, nevertheless, does not seem to have been considered by the Senate except only after its
receipt of H.B. No. 11179 on 23 November 1993 when the process of legislation in respect of it
began with a referral to the Senate Committee on Ways and Means. Firstly, to say that the
Constitution does not prohibit it is to render meaningless Section 24 of Article VI or to sanction
its blatant disregard through the simple expedient of filing in the Senate of a so-called
anticipatory substitute bill. Secondly, it suggests that S.B. No. 1129 was filed as an anticipatory
measure to substitute for H.B. No. 11179. This is a speculation which even the author of S.B. No.
1129 may not have indulged in. S.B. No. 1129 was filed in the Senate by Senator Herrera on 1
March 1993. H.B. No. 11197 was approved by the House on third reading only on 17 November
1993. Frankly, I cannot believe that Senator Herrera was able to prophesy that the House would
pass any VAT bill, much less to know its provisions. That "it does not seem that the Senate even
considered" the latter not until after its receipt of H.B. No. 11179 is another speculation. As
stated earlier, S.B. No. 1129 was filed in the Senate on 1 March 1993, while H.B. No. 11197 was
transmitted to the Senate only on 18 November 1993. There is no evidence on record to show
that both were referred to the Senate Committee on Ways and Means at the same time. Finally, in
respect of H.B. No. 11197, its legislative process did not begin with its referral to the Senate's
Ways and Means Committee. It began upon its filing, as a Committee Bill of the House of
Committee on Ways and Means, in the House.
Second violation. Since SB No. 1129 is a revenue measure, it could not even be validly
introduced or initiated in the Senate. It follows too, that the Senate cannot validly act thereon.
Third violation. Since SB No. 1129 could not have been validly introduced in the Senate and
could not have been validly acted on by the Senate, then it cannot be substituted by another
revenue measure, SB No. 1630, which the Senate Committee on Ways and Means introduced in
substitution of SB No. 1129. The filing or introduction in the Senate of SB No. 1630 also
violated Section 24, Article VI of the Constitution.
ARTICLE VI, SECTION 24
Some petitioners assail the constitutionality of Republic Act No. 7716 as being in violation of
Article VI, Section 24 of the Constitution which provides:
All appropriation, revenue or tariff bills, bills authorizing increase of the public debt, bills of
local application, and private bills, shall originate exclusively in the House of Representatives,
but the Senate may propose or concur with amendments.
In G.R. Nos. 115455 and 115781, petitioners argue:
30

(a) The bill which became Republic Act No. 7716 did not originate exclusively in the House of
Representatives. The Senate, after receiving H.B. No. 11197, submitted its own bill, S.B. No.
1630, and proceeded to vote and approve the same after second and third readings.
(b) The Senate exceeded its authority to "propose or concur with amendments" when it submitted
its own bill, S.B. No. 1630, recommending its approval "in substitution of S.B. No. 1129, taking
into consideration P.S. Res. No. 734 and H.B. No. 11197."
(c) H.B. No. 11197 was not deliberated upon by the Senate. Neither was it voted upon by the
Senate on second and third readings, as what was voted upon was S.B. No. 1630.
Article VI, Section 24 is taken word for word from Article VI, Section 18 of the 1935
Constitution which was, in turn, patterned after Article I, Section 7 (1) of the Constitution of the
United States, which states:
All bills for raising revenue shall originate in the House of Representatives, but the Senate may
propose or concur with amendments as on other bills.
The historical precedent for requiring revenue bills to originate in Congress is explained in the
U.S. case of Morgan v. Murray. 24
The constitutional requirement that all bills for raising revenue shall originate in the House of
Representatives stemmed from a remedial outgrowth of the historic conflict between Parliament
(i.e., Commons) and the Crown, whose ability to dominate the monarchially appointive and
hereditary Lords was patent. See 1 Story, Constitution, S 875 et seq., 5th Ed.; 1 Cooley,
Constitutional Limitations, pp. 267, 268, 8th Ed., 1 Sutherland, Statutory Construction, S 806, 3d
Ed. There was a measure of like justification for the insertion of the provision of article I, S 7, cl.
1, of the Federal Constitution. At that time (1787) and thereafter until the adoption (in 1913) of
the Seventeenth Amendment providing for the direct election of senators, the members of the
United States Senate were elected for each state by the joint vote of both houses of the
Legislature of the respective states, and hence, were removed from the people . . .
The legislative authority under the 1935 Constitution being unicameral, in the form of the
National Assembly, it served no purpose to include the subject provision in the draft submitted
by the 1934 Constitutional Convention to the Filipino people for ratification.
In 1940, however, the Constitution was amended to establish a bicameral Congress of the
Philippines composed of a House of Representatives and a Senate.
In the wake of the creation of a new legislative machinery, new provisions were enacted
regarding the law-making power of Congress. The National Assembly explained how the final
formulation of the subject provision came about:
The concurrence of both houses would be necessary to the enactment of a law. However, all
appropriation, revenue or tariff bills, bills authorizing an increase of the public debt, bills of local
application, and private bills, should originate exclusively in the House of Representatives,
although the Senate could propose or concur with amendments.
31

In one of the first drafts of the amendments, it was proposed to give both houses equal powers in
lawmaking. There was, however, much opposition on the part of several members of the
Assembly. In another draft; the following provision, more restrictive than the present provision
in the amendment, was proposed and for sometime was seriously considered:
All bills appropriating public funds, revenue or tariff bills, bills of local application, and private
bills shall originate exclusively in the Assembly, but the Senate may propose or concur with
amendments. In case of disapproval by the Senate of any such bills, the Assembly may repass the
same by a two-thirds vote of all its members, and thereupon, the bill so repassed shall be deemed
enacted and may be submitted to the President for corresponding action. In the event that the
Senate should fail to finally act on any such bills, the Assembly may, after thirty days from the
opening of the next regular sessions of the same legislative term, reapprove the same with a vote
of two-thirds of all the members of the Assembly. And upon such reapproval, the bill shall be
deemed enacted and may be submitted to the president for corresponding action.
However, the special committee voted finally to report the present amending provision as it is
now worded; and in that form it was approved by the National Assembly with the approval of
Resolution No. 38 and later of Resolution No. 73. 25 (Emphasis supplied)
Thus, the present Constitution is identically worded as its 1935 precursor: "All appropriation,
revenue or tariff bills, bills authorizing increase of the public debt, bills of local application, and
private bills, shall originate exclusively in the House of Representatives, but the Senate may
propose or concur with amendments." (Emphasis supplied)
That all revenue bills, such as Republic Act No. 7716, should "originate exclusively in the House
of Representatives" logically flows from the more representative and broadly-based character of
this Chamber.
It is said that the House of Representatives being the more popular branch of the legislature,
being closer to the people, and having more frequent contacts with them than the Senate, should
have the privilege of taking the initiative in the proposals of revenue and tax project, the disposal
of the people's money, and the contracting of public indebtedness.
These powers of initiative in the raising and spending of public funds enable the House of
Representatives not only to implement but even to determine the fiscal policies of the
government. They place on its shoulders much of the responsibility of solving the financial
problems of the government, which are so closely related to the economic life of the country, and
of deciding on the proper distribution of revenues for such uses as may best advance public
interests. 26
The popular nature of the Lower House has been more pronounced with the inclusion of
Presidentially-appointed sectoral representatives, as provided in Article VI, Section 5 (2), of the
Constitution, thus: "The party-list representatives shall constitute twenty per centum of the total
number of representatives including those under the party list. For three consecutive terms after
the ratification of this Constitution, one-half of the seats allocated to party-list representatives
32

shall be filled, as provided by law, by selection or election from the labor, peasant, urban poor,
indigenous cultural communities, women, youth, and such other sectors as may be provided by
law, except the religious sector." (Emphasis supplied)
This novel provision which was implemented in the Batasang Pambansa during the martial law
regime 27 was eventually incorporated in the present Constitution in order to give those from the
marginalized and often deprived sector, an opportunity to have their voices heard in the halls of
the Legislature, thus giving substance and meaning to the concept of "people empowerment."
That the Congressmen indeed have access to, and consult their constituencies has been
demonstrated often enough by the fact that even after a House bill has been transmitted to the
Senate for concurrence, some Congressmen have been known to express their desire to change
their earlier official position or reverse themselves after having heard their constituents' adverse
reactions to their representations.
In trying to determine whether the mandate of the Constitution with regard to the initiation of
revenue bills has been preserved inviolate, we have recourse to the tried and tested method of
definition of terms. The term "originate" is defined by Webster's New International Dictionary
(3rd Edition, 1986) as follows: "v.i., to come into being; begin; to start."
On the other hand, the word "exclusively" is defined by the same Webster's Dictionary as "in an
exclusive manner; to the exclusion of all others; only; as, it is his, exclusively." Black's Law
Dictionary has this definition: "apart from all others; only; solely; substantially all or for the
greater part. To the exclusion of all other; without admission of others to participation; in a
manner to exclude. Standard Oil Co. of Texas v. State, Tex. Civ. App., 142 S.W. 2d 519, 521,
522, 523."
This Court had occasion to define the term "exclusive" as follows:
. . . In its usual and generally accepted sense, the term means possessed to the exclusion of
others; appertaining to the subject alone; not including, admitting or pertaining to another or
others; undivided, sole. 28
When this writer, during the oral argument of July 7, 1994, asked the petitioner in G.R. No.
115455 whether he considers the word "exclusively" to be synonymous with "solely," he replied
in the affirmative. 29
A careful examination of the legislative history traced earlier in this decision shows that the
original VAT law, Executive Order No. 273, was sought to be amended by ten House bills which
finally culminated in House Bill No. 11197, as well as two Senate bills. It is to be noted that the
first House Bill No. 253 was filed on July 22, 1992, and two other House bills followed in quick
succession on August 10 and September 9, 1992 before a Senate Resolution, namely, Senate Res.
No. 734, was filed on September 10, 1992 and much later, a Senate Bill proper, viz., Senate Bill
No. 1129 on March 1, 1993. Undoubtedly, therefore, these bills originated or had their start in the
House and before any Senate bill amending the VAT law was filed. In point of time and venue,

33

the conclusion is ineluctable that Republic Act No. 7716, which is indisputably a revenue
measure, originated in the House of Representatives in the form of House Bill No. 253, the first
EVAT bill.
Additionally, the content and substance of the ten amendatory House Bills filed over the roughly
one-year period from July 1992 to August 1993 reenforce the position that these revenue bills,
pertaining as they do, to Executive Order No. 273, the prevailing VAT law, originated in the
Lower House.
House Bill Nos. 253, 771, 2450, 7033, 8086, 9030, 9210, 9297, 10012 and 10100 were intended
to restructure the VAT system by exempting or imposing the tax on certain items or otherwise
introducing reforms in the mechanics of implementation. 30 Of these, House Bill No. 9210 was
favored with a Presidential certification on the need for its immediate enactment to meet a public
emergency. Easily the most comprehensive, it noted that the revenue performance of the VAT,
being far from satisfactory since the collections have always fallen short of projections, "the
system is rendered inefficient, inequitable and less comprehensive." Hence, the Bill proposed
several amendments designed to widen the tax base of the VAT and enhance its administration. 31
That House Bill No. 11197 being a revenue bill, originated from the Lower House was
acknowledged, in fact was virtually taken for granted, by the Chairmen of the Committee on
Ways and Means of both the House of Representatives and the Senate. Consequently, at the April
19, 1994 meeting of the Bicameral Conference Committee, the Members agreed to make the
House Bill as the "frame of reference" or "base" of the discussions of the Bicameral Conference
Committee with the "amendments" or "insertions to emanate from the Senate." 32
As to whether the bills originated exclusively in the Lower House is altogether a different matter.
Obviously, bills amendatory of VAT did not originate solely in the House to the exclusion of all
others for there were P.S. Res. No. 734 filed in the Senate on September 10, 1992 followed by
Senate Bill No. 1129 which was filed on March 1, 1993. About a year later, this was substituted
by Senate Bill No. 1630 that eventually became the EVAT law, namely, Republic Act No. 7716.
Adverting to the passage of the amendatory VAT bills in the Lower House, it is to be noted that
House Bill No. 11197 which substituted all the prior bills introduced in said House complied
with the required readings, that is, the first reading consisting of the reading of the title and
referral to the appropriate Committee, approval on second reading on November 11, 1993 and on
third reading on November 17, 1993 before being finally transmitted to the Senate. In the Senate,
its identity was preserved and its provisions were taken into consideration when the Senate
Committee on Ways and Means submitted Com. Report No. 349 which recommended for
approval "S.B. No. 1630 in substitution of S.B. No. 1129, taking into consideration P.S. Res. No.
734 and H.B. No. 11197." At this stage, the subject bill may be considered to have passed first
reading in the Senate with the submission of said Committee Report No. 349 by the Senate
Committee on Ways and Means to which it had been referred earlier. What remained, therefore,
was no longer House Bill No. 11197 but Senate Bill No. 1630. Thence, the Senate, instead of
transmitting the bill to the Lower House for its concurrence and amendments, if any, took a
34

"shortcut," bypassed the Lower House and instead, approved Senate Bill No. 1630 on both
second and third readings on the same day, March 24, 1994.
The first irregularity, that is, the failure to return Senate Bill No. 1630 to the Lower House for its
approval is fatal inasmuch as the other chamber of legislature was not afforded the opportunity to
deliberate and make known its views. It is no idle dictum that no less than the Constitution
ordains: "The legislative power shall be vested in the Congress of the Philippines which shall
consist of a Senate and a House of Representatives . . ." 33 (Emphasis supplied)
It is to be pointed out too, that inasmuch as Senate Bill No. 1630 which had "taken into
consideration" House Bill No. 11197 was not returned to the Lower House for deliberation, the
latter Chamber had no opportunity at all to express its views thereon or to introduce any
amendment. The customary practice is, after the Senate has considered the Lower House Bill, it
returns the same to the House of origin with its amendments. In the event that there may be any
differences between the two, the same shall then be referred to a Conference Committee
composed of members from both Chambers which shall then proceed to reconcile said
differences.
In the instant case, the Senate transmitted to the Lower House on March 24, 1994, a letter
informing the latter that it had "passed S. No. 1630
entitled . . . (and) in view of the disagreeing provisions of said bill and House Bill No. 11197,
entitled . . . the Senate requests a conference . . ." This, in spite of the fact that Com. Report No.
349 of the Senate Committee on Ways and Means had already recommended for approval on
February 7, 1994 "S.B. No. 1630 . . . taking into consideration H.B. No. 11197." Clearly, the
Conference Committee could only have acted upon Senate Bill No. 1630, for House Bill No.
11197 had already been fused into the former.
At the oral hearing of July 7, 1994, petitioner in G.R. No. 115455 admitted, in response to this
writer's query, that he had attempted to rectify some of the perceived irregularities by presenting
a motion in the Senate to recall the bill from the Conference Committee so that it could revert to
the period of amendment, but he was outvoted, in fact "slaughtered." 34
In accordance with the Rules of the House of Representatives and the Senate, Republic Act No.
7716 was duly authenticated after it was signed by the President of the Senate and the Speaker of
the House of Representatives followed by the certifications of the Secretary of the Senate and the
Acting Secretary General of the House of Representatives. 35 With the signature of President
Fidel V. Ramos under the words "Approved: 5 May 1994," it was finally promulgated.
Its legislative journey ended, Republic Act No. 7716 attained the status of an enrolled bill which
is defined as one "which has been duly introduced, finally passed by both houses, signed by the
proper officers of each, approved by the governor (or president) and filed by the secretary of
state." 36
Stated differently:

35

It is a declaration by the two houses, through their presiding officers, to the president, that a bill,
thus attested, has received in due form, the sanction of the legislative branch of the government,
and that it is delivered to him in obedience to the constitutional requirement that all bills which
pass Congress shall be presented to him. And when a bill, thus attested, receives his approval,
and is deposited in the public archives, its authentication as a bill that has passed Congress
should be deemed complete and unimpeachable. As the President has no authority to approve a
bill not passed by Congress, an enrolled Act in the custody of the Secretary of State, and having
the official attestations of the Speaker of the House of Representatives, of the President of the
Senate, and of the President of the United States, carries, on its face, a solemn assurance by the
legislative and executive departments of the government, charged, respectively, with the duty of
enacting and executing the laws, that it was passed by Congress. The respect due to coequal and
independent departments requires the judicial department to act upon that assurance, and to
accept, as having passed Congress, all bills authenticated in the manner stated; leaving the courts
to determine, when the question properly arises, whether the Act, so authenticated, is in
conformity with the Constitution. 37
The enrolled bill assumes importance when there is some variance between what actually
transpired in the halls of Congress, as reflected in its journals, and as shown in the text of the law
as finally enacted. But suppose the journals of either or both Houses fail to disclose that the law
was passed in accordance with what was certified to by their respective presiding officers and the
President. Or that certain constitutional requirements regarding its passage were not observed, as
in the instant case. Which shall prevail: the journal or the enrolled bill?
A word on the journal.
The journal is the official record of the acts of a legislative body. It should be a true record of the
proceedings arranged in chronological order. It should be a record of what is done rather than
what is said. The journal should be a clear, concise, unembellished statement of all proposals
made and all actions taken complying with all requirements of constitutions, statutes, charters or
rules concerning what is to be recorded and how it is to be recorded. 38
Article VI, Section 16 (4) of the Constitution ordains:
Each house shall keep a Journal of its proceedings, and from time to time publish the same,
excepting such parts as may, in its judgment, affect national security; and the yeas and nays on
any question shall, at the request of one-fifth of the Members present, be entered in the Journal.
Each House shall also keep a Record of its proceedings." (Emphasis supplied)
The rationale behind the above provision and of the "journal entry rule" is as follows:
It is apparent that the object of this provision is to make the legislature show what it has done,
leaving nothing whatever to implication. And, when the legislature says what it has done, with
regard to the passage of any bill, it negatives the idea that it has done anything else in regard
thereto. Silence proves nothing where one is commanded to speak . . . . Our constitution

36

commands certain things to be done in regard to the passage of a bill, and says that no bill shall
become a law unless these things are done. It seems a travesty upon our supreme law to say that
it guaranties to the people the right to have their laws made in this manner only, and that there is
no way of enforcing this right, or for the court to say that this is law when the constitution says it
is not law. There is one safe course which is in harmony with the constitution, and that is to
adhere to the rule that the legislature must show, as commanded by the constitution, that it has
done everything required by the constitution to be done in the serious and important matter of
making laws. This is the rule of evidence provided by the constitution. It is not presumptuous in
the courts, nor disrespectful to the legislature, to judge the acts of the legislature by its own
evidence. 39
Confronted with a discrepancy between the journal proceedings and the law as duly enacted,
courts have indulged in different theories. The "enrolled bill" and "journal entry" rules, being
rooted deep in the Parliamentary practices of England where there is no written constitution, and
then transplanted to the United States, it may be instructive to examine which rule prevails in the
latter country through which, by a process of legislative osmosis, we adopted them in turn.
There seems to be three distinct and different rules as applicable to the enrolled bill recognized
by the various courts of this country. The first of these rules appears to be that the enrolled bill is
the ultimate proof and exclusive and conclusive evidence that the bill passed the legislature in
accordance with the provisions of the Constitution. Such has been the holding in California,
Georgia, Kentucky, Texas, Washington, New Mexico, Mississippi, Indiana, South Dakota, and
may be some others.
The second of the rules seems to be that the enrolled bill is a verity and resort cannot be had to
the journals of the Legislature to show that the constitutional mandates were not complied with
by the Legislature, except as to those provisions of the Constitution, compliance with which is
expressly required to be shown on the journal. This rule has been adopted in South Carolina,
Montana, Oklahoma, Utah, Ohio, New Jersey, United States Supreme Court, and others.
The third of the rules seems to be that the enrolled bill raises only a prima facie presumption that
the mandatory provisions of the Constitution have been complied with and that resort may be
had to the journals to refute that presumption, and if the constitutional provision is one,
compliance with which is expressly required by the Constitution to be shown on the journals,
then the mere silence of the journals to show a compliance therewith will refute the presumption.
This rule has been adopted in Illinois, Florida, Kansas, Louisiana, Tennessee, Arkansas, Idaho,
Minnesota, Nebraska, Arizona, Oregon, New Jersey, Colorado, and others. 40
In the 1980 case of D & W Auto Supply v. Department of Revenue, the Supreme Court of
Kentucky which had subscribed in the past to the first of the three theories, made the
pronouncement that it had shifted its stand and would henceforth adopt the third. It justified its
changed stance, thus:
We believe that a more reasonable rule is the one which Professor Sutherland describes as the

37

"extrinsic evidence" rule . . . . Under this approach there is a prima facie presumption that an
enrolled bill is valid, but such presumption may be overcome by clear satisfactory and
convincing evidence establishing that constitutional requirements have not been met. 41
What rule, if any, has been adopted in this jurisdiction?
Advocates of the "journal entry rule" cite the 1916 decision in U.S. v. Pons 42 where this Court
placed reliance on the legislative journals to determine whether Act No. 2381 was passed on
February 28, 1914 which is what appears in the Journal, or on March 1, 1914 which was closer
to the truth. The confusion was caused by the adjournment sine die at midnight of February 28,
1914 of the Philippine Commission.
A close examination of the decision reveals that the Court did not apply the "journal entry rule"
vis-a-vis the "enrolled bill rule" but the former as against what are "behind the legislative
journals."
Passing over the question of whether the printed Act (No. 2381), published by authority of law, is
conclusive evidence as to the date when it was passed, we will inquire whether the courts may go
behind the legislative journals for the purpose of determining the date of adjournment when such
journals are clear and explicit. 43
It is to be noted from the above that the Court "passed over" the probative value to be accorded
to the enrolled bill.
Opting for the journals, the Court proceeded to explain:
From their very nature and object, the records of the Legislature are as important as those of the
judiciary, and to inquire into the veracity of the journals of the Philippine Legislature, when they
are, as we have said clear and explicit, would be to violate both the letter and the spirit of the
organic laws by which the Philippine Government was brought into existence, to invade a
coordinate and independent department of the Government, and to interfere with the legitimate
powers and functions of the Legislature. 44
Following the courts in the United States since the Constitution of the Philippine Government is
modeled after that of the Federal Government, the Court did not hesitate to follow the courts in
said country, i.e., to consider the journals decisive of the point at issue. Thus: "The journals say
that the Legislature adjourned at 12 midnight on February 28, 1914. This settles the question and
the court did not err in declining to go behind these journals." 45
The Court made a categorical stand for the "enrolled bill rule" for the first time in the 1947 case
of Mabanag v. Lopez Vito 46 where it held that an enrolled bill imports absolute verity and is
binding on the courts. This Court held itself bound by an authenticated resolution, despite the
fact that the vote of three-fourths of the Members of the Congress (as required by the
Constitution to approve proposals for constitutional amendments) was not actually obtained on
account of the suspension of some members of the House of Representatives and the Senate. In
this connection, the Court invoked the "enrolled bill rule" in this wise: "If a political question

38

conclusively binds the judges out of respect to the political departments, a duly certified law or
resolution also binds the judges under the 'enrolled bill rule' born of that respect." 47
Mindful that the U.S. Supreme Court is on the side of those who favor the rule and for no other
reason than that it conforms to the expressed policy of our law making body (i.e., Sec. 313 of the
old Code of Civil Procedure, as amended by Act No. 2210), the Court said that "duly certified
copies shall be conclusive proof of the provisions of such Acts and of the due enactment
thereof." Without pulling the legal underpinnings from U.S. v. Pons, it justified its position by
saying that if the Court at the time looked into the journals, "in all probability, those were the
documents offered in evidence" and that "even if both the journals and authenticated copy of the
Act had been presented, the disposal of the issue by the Court on the basis of the journals does
not imply rejection of the enrolled theory; for as already stated, the due enactment of a law may
be proved in either of the two ways specified in Section 313 of Act No. 190 as amended." 48
Three Justices voiced their dissent from the majority decision.
Again, the Court made its position plain in the 1963 case of Casco Philippine Chemical Co., Inc.
v. Gimenez 49 when a unanimous Court ruled that: "The enrolled bill is conclusive upon the courts
as regards the tenor of the measure passed by Congress and approved by the President. If there
has been any mistake in the printing of a bill before it was certified by the officers of Congress
and approved by the Executive, the remedy is by amendment or curative legislation not by
judicial decree." According to Webster's New 20th Century Dictionary, 2nd ed., 1983, the word
"tenor" means, among others, "the general drift of something spoken or written; intent, purport,
substance."
Thus, the Court upheld the respondent Auditor General's interpretation that Republic Act No.
2609 really exempted from the margin fee on foreign exchange transactions "urea formaldehyde"
as found in the law and not "urea and formaldehyde" which petitioner insisted were the words
contained in the bill and were so intended by Congress.
In 1969, the Court similarly placed the weight of its authority behind the conclusiveness of the
enrolled bill. In denying the motion for reconsideration, the Court ruled in Morales v. Subido that
"the enrolled Act in the office of the legislative secretary of the President of the Philippines
shows that Section 10 is exactly as it is in the statute as officially published in slip form by the
Bureau of Printing . . . Expressed elsewise, this is a matter worthy of the attention not of an
Oliver Wendell Holmes but of a Sherlock Holmes." 50 The alleged omission of a phrase in the
final Act was made, not at any stage of the legislative proceedings, but only in the course of the
engrossment of the bill, more specifically in the proofreading thereof.
But the Court did include a caveat that qualified the absoluteness of the "enrolled bill" rule
stating:
By what we have essayed above we are not of course to be understood as holding that in all cases
the journals must yield to the enrolled bill. To be sure there are certain matters which the
Constitution (Art. VI, secs. 10 [4], 20 [1], and 21 [1]) expressly requires must be entered on the

39

journal of each house. To what extent the validity of a legislative act may be affected by a failure
to have such matters entered on the journal, is a question which we do not now decide (Cf. e.g.,
Wilkes Country Comm'rs. v. Coler, 180 U.S. 506 [1900]). All we hold is that with respect to
matters not expressly required to be entered on the journal, the enrolled bill prevails in the event
of any discrepancy. 51
More recently, in the 1993 case of Philippine Judges Association v. Prado, 52 this Court, in ruling
on the unconstitutionality of Section 35 of Republic Act No. 7354 withdrawing the franking
privilege from the entire hierarchy of courts, did not so much adhere to the enrolled bill rule
alone as to both "enrolled bill and legislative journals." Through Mr. Justice Isagani A. Cruz, we
stated: "Both the enrolled bill and the legislative journals certify that the measure was duly
enacted, i.e., in accordance with Article VI, Sec. 26(2) of the Constitution. We are bound by such
official assurances from a coordinate department of the government, to which we owe, at the
very least, a becoming courtesy."
Aware of the shifting sands on which the validity and continuing relevance of the "enrolled bill"
theory rests, I have taken pains to trace the history of its applicability in this jurisdiction, as
influenced in varying degrees by different Federal rulings.
As applied to the instant petition, the issue posed is whether or not the procedural irregularities
that attended the passage of House Bill No. 11197 and Senate Bill No. 1630, outside of the
reading and printing requirements which were exempted by the Presidential certification, may no
longer be impugned, having been "saved" by the conclusiveness on us of the enrolled bill. I see
no cogent reason why we cannot continue to place reliance on the enrolled bill, but only with
respect to matters pertaining to the procedure followed in the enactment of bills in Congress and
their subsequent engrossment, printing errors, omission of words and phrases and similar
relatively minor matters relating more to form and factual issues which do not materially alter
the essence and substance of the law itself.
Certainly, "courts cannot claim greater ability to judge procedural legitimacy, since constitutional
rules on legislative procedure are easily mastered. Procedural disputes are over facts whether
or not the bill had enough votes, or three readings, or whatever not over the meaning of the
constitution. Legislators, as eyewitnesses, are in a better position than a court to rule on the facts.
The argument is also made that legislatures would be offended if courts examined legislative
procedure. 53
Such a rationale, however, cannot conceivably apply to substantive changes in a bill introduced
towards the end of its tortuous trip through Congress, catching both legislators and the public
unawares and altering the same beyond recognition even by its sponsors.
This issue I wish to address forthwith.
F. Delegation of Legislative authority to the President
ARTICLE VI Section 28 (2) The Congress may, by law, authorize the President to fix within

40

specified limits, and subject to such limitations and restrictions as it may impose, tariff rates,
import and export quotas, tonnage and wharfage dues, and other duties or imposts within the
framework of the national development program of the Government.
(3) All money collected on any tax levied for a special purpose shall be treated as a special fund
and paid out for such purpose only. If the purpose for which a special fund was created has been
fulfilled or abandoned, the balance, if any, shall be transferred to the general funds of the
Government.
G. Exemption of churches and educational institutions
ABRA VALLEY COLLEGE, INC., represented by PEDRO V. BORGONIA, petitioner, vs.
HON. JUAN P. AQUINO
IN VIEW OF ALL THE FOREGOING, the Court hereby declares:
That the distraint seizure and sale by the Municipal Treasurer of Bangued, Abra, the Provincial
Treasurer of said province against the lot and building of the Abra Valley Junior College, Inc.,
represented by Director Pedro Borgonia located at Bangued, Abra, is valid;
That since the school is not exempt from paying taxes, it should therefore pay all back taxes in
the amount of P5,140.31 and back taxes and penalties from the promulgation of this decision;
That the amount deposited by the plaintaff him the sum of P60,000.00 before the trial, be
confiscated to apply for the payment of the back taxes and for the redemption of the property in
question, if the amount is less than P6,000.00, the remainder must be returned to the Director of
Pedro Borgonia, who represents the plaintiff herein;
That the deposit of the Municipal Treasurer in the amount of P6,000.00 also before the trial must
be returned to said Municipal Treasurer of Bangued, Abra;
And finally the case is hereby ordered dismissed with costs against the plaintiff.
SO ORDERED. (Rollo, pp. 22-23)
Petitioner, an educational corporation and institution of higher learning duly incorporated with
the Securities and Exchange Commission in 1948, filed a complaint (Annex "1" of Answer by
the respondents Heirs of Paterno Millare; Rollo, pp. 95-97) on July 10, 1972 in the court a quo to
annul and declare void the "Notice of Seizure' and the "Notice of Sale" of its lot and building
located at Bangued, Abra, for non-payment of real estate taxes and penalties amounting to
P5,140.31. Said "Notice of Seizure" of the college lot and building covered by Original
Certificate of Title No. Q-83 duly registered in the name of petitioner, plaintiff below, on July 6,
1972, by respondents Municipal Treasurer and Provincial Treasurer, defendants below, was
issued for the satisfaction of the said taxes thereon. The "Notice of Sale" was caused to be served
upon the petitioner by the respondent treasurers on July 8, 1972 for the sale at public auction of
said college lot and building, which sale was held on the same date. Dr. Paterno Millare, then

41

Municipal Mayor of Bangued, Abra, offered the highest bid of P6,000.00 which was duly
accepted. The certificate of sale was correspondingly issued to him.
On August 10, 1972, the respondent Paterno Millare (now deceased) filed through counstel a
motion to dismiss the complaint.
On August 23, 1972, the respondent Provincial Treasurer and Municipal Treasurer, through then
Provincial Fiscal Loreto C. Roldan, filed their answer (Annex "2" of Answer by the respondents
Heirs of Patemo Millare; Rollo, pp. 98-100) to the complaint. This was followed by an amended
answer (Annex "3," ibid, Rollo, pp. 101-103) on August 31, 1972.
On September 1, 1972 the respondent Paterno Millare filed his answer (Annex "5," ibid; Rollo,
pp. 106-108).
On October 12, 1972, with the aforesaid sale of the school premises at public auction, the
respondent Judge, Hon. Juan P. Aquino of the Court of First Instance of Abra, Branch I, ordered
(Annex "6," ibid; Rollo, pp. 109-110) the respondents provincial and municipal treasurers to
deliver to the Clerk of Court the proceeds of the auction sale. Hence, on December 14, 1972,
petitioner, through Director Borgonia, deposited with the trial court the sum of P6,000.00
evidenced by PNB Check No. 904369.
On April 12, 1973, the parties entered into a stipulation of facts adopted and embodied by the
trial court in its questioned decision. Said Stipulations reads:
STIPULATION OF FACTS
COME NOW the parties, assisted by counsels, and to this Honorable Court respectfully enter
into the following agreed stipulation of facts:
1. That the personal circumstances of the parties as stated in paragraph 1 of the complaint is
admitted; but the particular person of Mr. Armin M. Cariaga is to be substituted, however, by
anyone who is actually holding the position of Provincial Treasurer of the Province of Abra;
2. That the plaintiff Abra Valley Junior College, Inc. is the owner of the lot and buildings thereon
located in Bangued, Abra under Original Certificate of Title No. 0-83;
3. That the defendant Gaspar V. Bosque, as Municipal treasurer of Bangued, Abra caused to be
served upon the Abra Valley Junior College, Inc. a Notice of Seizure on the property of said
school under Original Certificate of Title No. 0-83 for the satisfaction of real property taxes
thereon, amounting to P5,140.31; the Notice of Seizure being the one attached to the complaint
as Exhibit A;
4. That on June 8, 1972 the above properties of the Abra Valley Junior College, Inc. was sold at
public auction for the satisfaction of the unpaid real property taxes thereon and the same was
sold to defendant Paterno Millare who offered the highest bid of P6,000.00 and a Certificate of
Sale in his favor was issued by the defendant Municipal Treasurer.
5. That all other matters not particularly and specially covered by this stipulation of facts will be

42

the subject of evidence by the parties.

WHEREFORE, it is respectfully prayed of the Honorable Court to consider and admit this
stipulation of facts on the point agreed upon by the parties.
Aside from the Stipulation of Facts, the trial court among others, found the following: (a) that the
school is recognized by the government and is offering Primary, High School and College
Courses, and has a school population of more than one thousand students all in all; (b) that it is
located right in the heart of the town of Bangued, a few meters from the plaza and about 120
meters from the Court of First Instance building; (c) that the elementary pupils are housed in a
two-storey building across the street; (d) that the high school and college students are housed in
the main building; (e) that the Director with his family is in the second floor of the main
building; and (f) that the annual gross income of the school reaches more than one hundred
thousand pesos.
From all the foregoing, the only issue left for the Court to determine and as agreed by the parties,
is whether or not the lot and building in question are used exclusively for educational purposes.
(Rollo, p. 20)
The succeeding Provincial Fiscal, Hon. Jose A. Solomon and his Assistant, Hon. Eustaquio Z.
Montero, filed a Memorandum for the Government on March 25, 1974, and a Supplemental
Memorandum on May 7, 1974, wherein they opined "that based on the evidence, the laws
applicable, court decisions and jurisprudence, the school building and school lot used for
educational purposes of the Abra Valley College, Inc., are exempted from the payment of taxes."
(Annexes "B," "B-1" of Petition; Rollo, pp. 24-49; 44 and 49).
Nonetheless, the trial court disagreed because of the use of the second floor by the Director of
petitioner school for residential purposes. He thus ruled for the government and rendered the
assailed decision.
After having been granted by the trial court ten (10) days from August 6, 1974 within which to
perfect its appeal (Per Order dated August 6, 1974; Annex "G" of Petition; Rollo, p. 57)
petitioner instead availed of the instant petition for review on certiorari with prayer for
preliminary injunction before this Court, which petition was filed on August 17, 1974 (Rollo,
p.2).
In the resolution dated August 16, 1974, this Court resolved to give DUE COURSE to the
petition (Rollo, p. 58). Respondents were required to answer said petition (Rollo, p. 74).
Petitioner raised the following assignments of error:
I
THE COURT A QUO ERRED IN SUSTAINING AS VALID THE SEIZURE AND SALE OF
THE COLLEGE LOT AND BUILDING USED FOR EDUCATIONAL PURPOSES OF THE
PETITIONER.

43

II
THE COURT A QUO ERRED IN DECLARING THAT THE COLLEGE LOT AND BUILDING
OF THE PETITIONER ARE NOT USED EXCLUSIVELY FOR EDUCATIONAL PURPOSES
MERELY BECAUSE THE COLLEGE PRESIDENT RESIDES IN ONE ROOM OF THE
COLLEGE BUILDING.
III
THE COURT A QUO ERRED IN DECLARING THAT THE COLLEGE LOT AND BUILDING
OF THE PETITIONER ARE NOT EXEMPT FROM PROPERTY TAXES AND IN ORDERING
PETITIONER TO PAY P5,140.31 AS REALTY TAXES.
IV
THE COURT A QUO ERRED IN ORDERING THE CONFISCATION OF THE P6,000.00
DEPOSIT MADE IN THE COURT BY PETITIONER AS PAYMENT OF THE P5,140.31
REALTY TAXES. (See Brief for the Petitioner, pp. 1-2)
The main issue in this case is the proper interpretation of the phrase "used exclusively for
educational purposes."
Petitioner contends that the primary use of the lot and building for educational purposes, and not
the incidental use thereof, determines and exemption from property taxes under Section 22 (3),
Article VI of the 1935 Constitution. Hence, the seizure and sale of subject college lot and
building, which are contrary thereto as well as to the provision of Commonwealth Act No. 470,
otherwise known as the Assessment Law, are without legal basis and therefore void.
On the other hand, private respondents maintain that the college lot and building in question
which were subjected to seizure and sale to answer for the unpaid tax are used: (1) for the
educational purposes of the college; (2) as the permanent residence of the President and Director
thereof, Mr. Pedro V. Borgonia, and his family including the in-laws and grandchildren; and (3)
for commercial purposes because the ground floor of the college building is being used and
rented by a commercial establishment, the Northern Marketing Corporation (See photograph
attached as Annex "8" (Comment; Rollo, p. 90]).
Due to its time frame, the constitutional provision which finds application in the case at bar is
Section 22, paragraph 3, Article VI, of the then 1935 Philippine Constitution, which expressly
grants exemption from realty taxes for "Cemeteries, churches and parsonages or convents
appurtenant thereto, and all lands, buildings, and improvements used exclusively for religious,
charitable or educational purposes ...
Relative thereto, Section 54, paragraph c, Commonwealth Act No. 470 as amended by Republic
Act No. 409, otherwise known as the Assessment Law, provides:
The following are exempted from real property tax under the Assessment Law:
xxx xxx xxx

44

(c) churches and parsonages or convents appurtenant thereto, and all lands, buildings, and
improvements used exclusively for religious, charitable, scientific or educational purposes.
xxx xxx xxx
In this regard petitioner argues that the primary use of the school lot and building is the basic and
controlling guide, norm and standard to determine tax exemption, and not the mere incidental use
thereof.
As early as 1916 in YMCA of Manila vs. Collector of lnternal Revenue, 33 Phil. 217 [1916], this
Court ruled that while it may be true that the YMCA keeps a lodging and a boarding house and
maintains a restaurant for its members, still these do not constitute business in the ordinary
acceptance of the word, but an institution used exclusively for religious, charitable and
educational purposes, and as such, it is entitled to be exempted from taxation.
In the case of Bishop of Nueva Segovia v. Provincial Board of Ilocos Norte, 51 Phil. 352 [1972],
this Court included in the exemption a vegetable garden in an adjacent lot and another lot
formerly used as a cemetery. It was clarified that the term "used exclusively" considers incidental
use also. Thus, the exemption from payment of land tax in favor of the convent includes, not
only the land actually occupied by the building but also the adjacent garden devoted to the
incidental use of the parish priest. The lot which is not used for commercial purposes but serves
solely as a sort of lodging place, also qualifies for exemption because this constitutes incidental
use in religious functions.
The phrase "exclusively used for educational purposes" was further clarified by this Court in the
cases of Herrera vs. Quezon City Board of assessment Appeals, 3 SCRA 186 [1961] and
Commissioner of Internal Revenue vs. Bishop of the Missionary District, 14 SCRA 991 [1965],
thus
Moreover, the exemption in favor of property used exclusively for charitable or educational
purposes is 'not limited to property actually indispensable' therefor (Cooley on Taxation, Vol. 2,
p. 1430), but extends to facilities which are incidental to and reasonably necessary for the
accomplishment of said purposes, such as in the case of hospitals, "a school for training nurses, a
nurses' home, property use to provide housing facilities for interns, resident doctors,
superintendents, and other members of the hospital staff, and recreational facilities for student
nurses, interns, and residents' (84 CJS 6621), such as "Athletic fields" including "a firm used for
the inmates of the institution. (Cooley on Taxation, Vol. 2, p. 1430).
The test of exemption from taxation is the use of the property for purposes mentioned in the
Constitution (Apostolic Prefect v. City Treasurer of Baguio, 71 Phil, 547 [1941]).
It must be stressed however, that while this Court allows a more liberal and non-restrictive
interpretation of the phrase "exclusively used for educational purposes" as provided for in Article
VI, Section 22, paragraph 3 of the 1935 Philippine Constitution, reasonable emphasis has always
been made that exemption extends to facilities which are incidental to and reasonably necessary

45

for the accomplishment of the main purposes. Otherwise stated, the use of the school building or
lot for commercial purposes is neither contemplated by law, nor by jurisprudence. Thus, while
the use of the second floor of the main building in the case at bar for residential purposes of the
Director and his family, may find justification under the concept of incidental use, which is
complimentary to the main or primary purposeeducational, the lease of the first floor thereof
to the Northern Marketing Corporation cannot by any stretch of the imagination be considered
incidental to the purpose of education.
It will be noted however that the aforementioned lease appears to have been raised for the first
time in this Court. That the matter was not taken up in the to court is really apparent in the
decision of respondent Judge. No mention thereof was made in the stipulation of facts, not even
in the description of the school building by the trial judge, both embodied in the decision nor as
one of the issues to resolve in order to determine whether or not said properly may be exempted
from payment of real estate taxes (Rollo, pp. 17-23). On the other hand, it is noteworthy that
such fact was not disputed even after it was raised in this Court.
Indeed, it is axiomatic that facts not raised in the lower court cannot be taken up for the first time
on appeal. Nonetheless, as an exception to the rule, this Court has held that although a factual
issue is not squarely raised below, still in the interest of substantial justice, this Court is not
prevented from considering a pivotal factual matter. "The Supreme Court is clothed with ample
authority to review palpable errors not assigned as such if it finds that their consideration is
necessary in arriving at a just decision." (Perez vs. Court of Appeals, 127 SCRA 645 [1984]).
Under the 1935 Constitution, the trial court correctly arrived at the conclusion that the school
building as well as the lot where it is built, should be taxed, not because the second floor of the
same is being used by the Director and his family for residential purposes, but because the first
floor thereof is being used for commercial purposes. However, since only a portion is used for
purposes of commerce, it is only fair that half of the assessed tax be returned to the school
involved.
PREMISES CONSIDERED, the decision of the Court of First Instance of Abra, Branch I, is
hereby AFFIRMED subject to the modification that half of the assessed tax be returned to the
petitioner.
SO ORDERED.
REV. FR. CASIMIRO LLADOC, petitioner, vs. The COMMISSIONER OF INTERNAL
REVENUE and The COURT of TAX APPEALS, respondents.
Sometime in 1957, the M.B. Estate, Inc., of Bacolod City, donated P10,000.00 in cash to Rev. Fr.
Crispin Ruiz, then parish priest of Victorias, Negros Occidental, and predecessor of herein
petitioner, for the construction of a new Catholic Church in the locality. The total amount was
actually spent for the purpose intended.
On March 3, 1958, the donor M.B. Estate, Inc., filed the donor's gift tax return. Under date of

46

April 29, 1960, the respondent Commissioner of Internal Revenue issued an assessment for
donee's gift tax against the Catholic Parish of Victorias, Negros Occidental, of which petitioner
was the priest. The tax amounted to P1,370.00 including surcharges, interests of 1% monthly
from May 15, 1958 to June 15, 1960, and the compromise for the late filing of the return.
Petitioner lodged a protest to the assessment and requested the withdrawal thereof. The protest
and the motion for reconsideration presented to the Commissioner of Internal Revenue were
denied. The petitioner appealed to the Court of Tax Appeals on November 2, 1960. In the petition
for review, the Rev. Fr. Casimiro Lladoc claimed, among others, that at the time of the donation,
he was not the parish priest in Victorias; that there is no legal entity or juridical person known as
the "Catholic Parish Priest of Victorias," and, therefore, he should not be liable for the donee's
gift tax. It was also asserted that the assessment of the gift tax, even against the Roman Catholic
Church, would not be valid, for such would be a clear violation of the provisions of the
Constitution.
After hearing, the CTA rendered judgment, the pertinent portions of which are quoted below:
... . Parish priests of the Roman Catholic Church under canon laws are similarly situated as its
Archbishops and Bishops with respect to the properties of the church within their parish. They
are the guardians, superintendents or administrators of these properties, with the right of
succession and may sue and be sued.
xxx

xxx

xxx

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

xxx

xxx

We saw no legal basis then as we see none now, to include within the Constitutional exemption,
taxes which partake of the nature of an excise upon the use made of the properties or upon the
exercise of the privilege of receiving the properties. (Phipps vs. Commissioner of Internal
Revenue, 91 F [2d] 627; 1938, 302 U.S. 742.)
It is a cardinal rule in taxation that exemptions from payment thereof are highly disfavored by
law, and the party claiming exemption must justify his claim by a clear, positive, or express
grant of such privilege by law. (Collector vs. Manila Jockey Club, G.R. No. L-8755, March 23,

47

1956; 53 O.G. 3762.)

The phrase "exempt from taxation" as employed in Section 22(3), Article VI of the Constitution
of the Philippines, should not be interpreted to mean exemption from all kinds of taxes. Statutes
exempting charitable and religious property from taxation should be construed fairly though
strictly and in such manner as to give effect to the main intent of the lawmakers. (Roman
Catholic Church vs. Hastrings 5 Phil. 701.)
xxx

xxx

xxx

WHEREFORE, in view of the foregoing considerations, the decision of the respondent

Commissioner of Internal Revenue appealed from, is hereby affirmed except with regard to the
imposition of the compromise penalty in the amount of P20.00 (Collector of Internal Revenue v.
U.S.T., G.R. No. L-11274, Nov. 28, 1958); ..., and the petitioner, the Rev. Fr. Casimiro Lladoc is
hereby ordered to pay to the respondent the amount of P900.00 as donee's gift tax, plus the
surcharge of five per centum (5%) as ad valorem penalty under Section 119 (c) of the Tax Code,
and one per centum (1%) monthly interest from May 15, 1958 to the date of actual payment. The
surcharge of 25% provided in Section 120 for failure to file a return may not be imposed as the
failure to file a return was not due to willful neglect.( ... ) No costs.
The above judgment is now before us on appeal, petitioner assigning two (2) errors allegedly
committed by the Tax Court, all of which converge on the singular issue of whether or not
petitioner should be liable for the assessed donee's gift tax on the P10,000.00 donated for the
construction of the Victorias Parish Church.
Section 22 (3), Art. VI of the Constitution of the Philippines, exempts from taxation cemeteries,
churches and parsonages or convents, appurtenant thereto, and all lands, buildings, and
improvements used exclusively for religious purposes. The exemption is only from the payment
of taxes assessed on such properties enumerated, as property taxes, as contra distinguished from
excise taxes. In the present case, what the Collector assessed was a donee's gift tax; the
assessment was not on the properties themselves. It did not rest upon general ownership; it was
an excise upon the use made of the properties, upon the exercise of the privilege of receiving the
properties (Phipps vs. Com. of Int. Rec. 91 F 2d 627). Manifestly, gift tax is not within the
exempting provisions of the section just mentioned. A gift tax is not a property tax, but an excise
tax imposed on the transfer of property by way of gift inter vivos, the imposition of which on
property used exclusively for religious purposes, does not constitute an impairment of the
Constitution. As well observed by the learned respondent Court, the phrase "exempt from
taxation," as employed in the Constitution (supra) should not be interpreted to mean exemption
from all kinds of taxes. And there being no clear, positive or express grant of such privilege by
law, in favor of petitioner, the exemption herein must be denied.
The next issue which readily presents itself, in view of petitioner's thesis, and Our finding that a
tax liability exists, is, who should be called upon to pay the gift tax? Petitioner postulates that he
should not be liable, because at the time of the donation he was not the priest of Victorias. We

48

note the merit of the above claim, and in order to put things in their proper light, this Court, in its
Resolution of March 15, 1965, ordered the parties to show cause why the Head of the Diocese to
which the parish of Victorias pertains, should not be substituted in lieu of petitioner Rev. Fr.
Casimiro Lladoc it appearing that the Head of such Diocese is the real party in interest. The
Solicitor General, in representation of the Commissioner of Internal Revenue, interposed no
objection to such a substitution. Counsel for the petitioner did not also offer objection thereto.
On April 30, 1965, in a resolution, We ordered the Head of the Diocese to present whatever legal
issues and/or defenses he might wish to raise, to which resolution counsel for petitioner, who
also appeared as counsel for the Head of the Diocese, the Roman Catholic Bishop of Bacolod,
manifested that it was submitting itself to the jurisdiction and orders of this Court and that it was
presenting, by reference, the brief of petitioner Rev. Fr. Casimiro Lladoc as its own and for all
purposes.
In view here of and considering that as heretofore stated, the assessment at bar had been properly
made and the imposition of the tax is not a violation of the constitutional provision exempting
churches, parsonages or convents, etc. (Art VI, sec. 22 [3], Constitution), the Head of the
Diocese, to which the parish Victorias Pertains, is liable for the payment thereof.
The decision appealed from should be, as it is hereby affirmed insofar as tax liability is
concerned; it is modified, in the sense that petitioner herein is not personally liable for the said
gift tax, and that the Head of the Diocese, herein substitute petitioner, should pay, as he is
presently ordered to pay, the said gift tax, without special, pronouncement as to costs.
JOSE V. HERRERA and ESTER OCHANGCO HERRERA, petitioners, vs.THE QUEZON
CITY BOARD OF ASSESSMENT APPEALS, respondent.
Angel A. Sison for petitioners. Jaime Agloro for respondent.
CONCEPCION, J.:
Appeal, by petitioners Jose V. Herrera and Ester Ochangco Herrera, from a decision of the Court
of Tax Appeals affirming that of the Board of Assessment Appeals of Quezon City, which held
that certain properties of said petitioners are subject to assessment for purposes of real estate tax.
The facts and the issue are set forth in the aforementioned decision of the Court of Tax Appeals,
from which we quote:
On July 24, 1952, the Director of the Bureau of Hospitals authorized the petitioners to establish
and operate the "St. Catherine's Hospital", located at 58 D. Tuazon, Sta. Mesa Heights, Quezon
City (Exhibit "F-1", p. 7, BIR rec.). On or about January 3, 1953, the petitioners sent a letter to
the Quezon City Assessor requesting exemption from payment of real estate tax on the lot,
building and other improvements comprising the hospital stating that the same was established
for charitable and humanitarian purposes and not for commercial gain (Exhibit "F-2", pp. 8-9,
49

BIR rec.). After an inspection of the

premises in question and after a careful study of the case, the exemption from real property taxes
was granted effective the years 1953, 1954 and 1955.
Subsequently, however, in a letter dated August 10, 1955 (Exhibit "E", p. 65, CTA rec.) the
Quezon City Assessor notified the petitioners that the aforesaid properties were re-classified
from exempt to "taxable" and thus assessed for real property taxes effective 1956, enclosing
therewith copies of Tax Declarations Nos. 19321 to 19322 covering the said properties. The
petitioners appealed the assessment to the Quezon City Board of Assessment Appeals, which, in
a decision dated March 31, 1956 and received by the former on May 17, 1956, affirmed the
decision of the City Assessor. A motion for reconsideration thereof was denied on March 8, 1957.
From this decision, the petitioners instituted the instant appeal.
The building involved in this case is principally used as a hospital. It is mainly a surgical and
orthopedic hospital with emphasis on obstetrical cases, the latter constituting 90% of the total
number of cases registered therein. The hospital has thirty-two (32) beds, of which twenty (20)
are for charity-patients and twelve (12) for pay-patients. From the evidence presented by
petitioners, it is made to appear that there are two kinds of charity patients (a) those who
come for consultation only ("out-charity patients"); and (b) those who remain in the hospital for
treatment ("lying-in-patients"). The out-charity patients are given free consultation and
prescription, although sometimes they are furnished with free medicines which are not costly like
aspirin, sulfatiazole, etc. The charity lying-in-patients are given free medical service and
medicine although the food served to the pay-patients is very much better than that given to the
former. Although no condition is imposed by the hospital on the admission of charity lying-inpatients, they however, usually give donations to the hospital. On the other hand, the pay-patients
are required to pay for hospital services ranging from the minimum charge of P5.00 to the
maximum of P40.00 for each day of stay in the hospital. The income realized from pay- patients
is spent for the improvement of the charity wards. The hospital personnel is composed of three
nurses, two graduate midwives, a resident
physician receiving a salary of P170.00 a month and the petitioner, Dr. Ester Ochangco Herrera,
as directress. As such directress, the latter does not receive any salary.
Petitioners also operate within the premises of the hospital the "St. Catherine's School of
Midwifery" which was granted government recognition by the Secretary of Education on
February 1, 1955 (Exhibit "F-3", p. 10, BIR rec.) This school has an enrollment of about two
hundred students. The students are charged a matriculation fee of P300.00 for 1-12 years, plus
P50.00 a month for board and lodging, which includes transportation to the St. Mary's Hospital.
The students practice in the St. Catherine's Hospital, as well as in the St. Mary's Hospital, which
is also owned by the petitioners. A separate set of accounting books is maintained by the school
for midwifery distinct from that kept by the hospital. The petitioners alleged that the accounts of
50

the school are not included in Exhibits "A", "A-1", "A-2", "B", "B-1", "B-2", "C", "C-1" and "C2" which relate to the hospital only. However, the petitioners have refused to submit a separate
statement of accounts of the school.
Aside from the St. Catherine and St. Mary hospitals, the petitioners declared that they also own
lands and coconut plantations in Quezon Province, and other real estate in the City of Manila
consisting of apartments for rent. The petitioner, Jose V. Herrera, is an architect, actively engaged
in the practice of his profession, with office at Tuason Building, Escolta, Manila. He was
formerly Chairman, Board of Examiners for Architects and Chairman, Board of Architects
connected with the United Nations. He was also connected with the Allied Technologists which
constructed the Veterans Hospital in Quezon City.
The only issue raised, is whether or not the lot, building and other improvements occupied by the
St. Catherine Hospital are exempt from the real property tax. The resolution of this question boils
down to the corollary issue as to whether or not the said properties are used exclusively for
charitable or educational purposes. (Petitioners' brief, pp. 24-29).
The Court of Tax Appeals decided the issue in the negative, upon the ground that the St.
Catherine's Hospital "has a pay ward for ... pay-patients, who are charged for the use of the
private rooms, operating room, laboratory room, delivery room, etc., like other hospitals operated
for profit" and that
"petitioners and their family occupy a portion of the building for their residence." With respect to
petitioners' claim for exemption based upon the operation of the school of midwifery, the Court
conceded that "the proposition might be proper if the property used for the school of midwifery
were separate and distinct from the hospital." It added, however, that, "in the instant case, the
portions of the building used for classrooms of the school of midwifery have not been shown to
be exclusively for school purposes"; that said portions "rather ... have a dual use, i.e., for
classroom and for hospital use, the latter not being a purpose that renders the property tax
exempt;" that part of the building and lot in question "is used as a hospital, part as residence of
the petitioners, part as garage, part as dormitory and part as school"; and that "the portion
dedicated to educational and charitable purposes can not be identified from those destined to
other uses; and the building is itself an indivisible unit of property."
It should be noted, however, that, according to the very statement of facts made in the decision
appealed from, of the thirty-two (32) beds in the hospital, twenty (20) are for charity-patients;
that "the income realized from pay- patients is spent for improvement of the charity wards;" and
that "petitioners, Dr. Ester Ochangco Herrera, as directress" of said hospital, "does not receive
any salary," although its resident physician gets a monthly salary of P170.00. It is well settled, in
this connection, that the admission of pay-patients does not detract from the charitable character
of a hospital, if all its funds are devoted "exclusively to the maintenance of the institution" as a
"public charity" (84 C.J.S., 617; see, also, 51 Am. Jur. 607; Cooley on Taxation, Vol. 2, p. 1562;
51

144 A.L.R., 1489-1492). "In other words, where rendering charity is its primary object, and the
funds derived from payments made by patients able to pay are devoted to the benevolent
purposes of the institution, the mere fact that a profit has been made will not deprive the hospital
of its benevolent character" (Prairie Du Chien Sanitarium Co. vs. City of Prairie Du Chien, 242
Wis. 262, 7 NW [2d] 832, 144 A.L.R. 1480).
Thus, we have held that the U.S.T. Hospital was not established for profit- making purposes,
although it had 140 paying beds maintained only to partly finance the expenses of the free wards,
containing 203 beds for charity patients (U.S.T. Hospital Employees Association vs. Sto. Tomas
University Hospital, L-6988, May 24, 1954), that St. Paul's Hospital of Iloilo, a corporation
organized for "charitable educational and religious purposes" can not be considered as engaged
in business merely because its pharmacy department charges paying patients the cost of their
medicine, plus 10% thereof, to partly offset the cost of medicines supplied free of charge to
charity patients (Collector of Internal Revenue vs. St. Paul's Hospital of Iloilo, L-12127, May 25,
1959), and that the amendment of the original articles of incorporation of the University of
Visayas to convert it from a non-stock to a stock corporation and the increase of its assets from
P9,000 to P50,000, distributed among the members of the original non-stock corporation in terms
of shares of stock, as well as the subsequent move of its board of trustees to double the stock
dividends of the corporation, in view of a gain of P200,000.00 in property, besides good-will,
which was not carried out, does not justify the inference that the corporation has become one for
business and profit, none of its profits having inured to the benefit of any stockholder or
individual (Collector of Internal Revenue vs. University of Visayas, L-13554, February 28,
1961).
Moreover, the exemption in favor of property used exclusively for charitable or educational
purposes is "not limited to property actually indispensable" therefor (Cooley on Taxation, Vol. 2,
p. 1430), but extends to facilities which are "incidental to and reasonably necessary for" the
accomplishment of said purposes, such as, in the case of hospitals, "a school for training nurses,
a nurses' home, property use to provide housing facilities for interns, resident doctors,
superintendents, and other members of the hospital staff, and recreational facilities for student
nurses, interns and residents" (84 C.J.S., 621), such as "athletic fields," including "a farm used
for the inmates of the institution" (Cooley on Taxation, Vol. 2, p. 1430).
Within the purview of the Constitutional exemption from taxation, the St. Catherine's Hospital is,
therefore, a charitable institution, and the fact that it admits pay-patients does not bar it from
claiming that it is devoted exclusively to benevolent purposes, it being admitted that the income
derived from pay- patients is devoted to the improvement of the charity wards, which represent
almost two-thirds (2/3) of the bed capacity of the hospital, aside from "out- charity patients" who
come only for consultation.
Again, the existence of "St. Catherine's School of Midwifery", with an enrollment of about 200

52

students, who practice partly in St. Catherine's Hospital and partly in St. Mary's Hospital, which,
likewise, belongs to petitioners herein, does not, and cannot, affect the exemption to which St.
Catherine's Hospital is entitled under our fundamental law. On the contrary, it furnishes another
ground for exemption. Seemingly, the Court of Tax Appeals was impressed by the fact that the
size of said enrollment and the matriculation fee charged from the students of midwifery, aside
from the amount they paid for board and lodging, including transportation to St. Mary's Hospital,
warrants the belief that petitioners derive a substantial profit from the operation of the school
aforementioned. Such factor is, however, immaterial to the issue in the case at bar, for "all lands,
building and improvements used exclusively for religious, charitable or educational purposes
shall be exempt from taxation," pursuant to the Constitution, regardless of whether or not
material profits are derived from the operation of the institutions in question. In other words,
Congress may, if it deems fit to do so, impose taxes upon such "profits", but said "lands,
buildings and improvements" are beyond its taxing power.
Similarly, the garage in the building above referred to which was obviously essential to the
operation of the school of midwifery, for the students therein enrolled practiced, not only in St.
Catherine's Hospital, but, also, in St. Mary's Hospital, and were entitled to transportation thereto
for Mrs. Herrera received no compensation as directress of St. Catherine's Hospital were
incidental to the operation of the latter and of said school, and, accordingly,
did not affect the charitable character of said hospital and the educational nature of said school.
WHEREFORE, the decision of the Court of Tax Appeals, as well as that of the Assessment
Board of Appeals of Quezon City, are hereby reversed and set aside, and another one entered
declaring that the lot, building and improvements constituting the St. Catherine's Hospital are
exempt from taxation under the provisions of the Constitution, without special pronouncement as
to costs. It is so ordered.
H. Voting requirement for granting tax exemptions
ARTICLE VI. Section 28. (4) No law granting any tax exemption shall be passed without the
concurrence of a majority of all the Members of the Congress.
I. Voting requirement for enacting an ordinary tax law
ARTICLE VI. Section 16 (2) A majority of each House shall constitute a quorum to do
business, but a smaller number may adjourn from day to day and may compel the attendance of
absent Members in such manner, and under such penalties, as such House may provide.
J. Limitation on revenue laws affecting religion
ARTICLE III. Section 5. No law shall be made respecting an establishment of religion, or
prohibiting the free exercise thereof. The free exercise and enjoyment of religious profession and
53

worship, without discrimination or preference, shall forever be allowed. No religious test shall be
required for the exercise of civil or political rights.
AMERICAN BIBLE SOCIETY, plaintiff-appellant, vs. CITY OF MANILA, defendantappellee.
FELIX, J.:
Plaintiff-appellant is a foreign, non-stock, non-profit, religious, missionary corporation duly
registered and doing business in the Philippines through its Philippine agency established in
Manila in November, 1898, with its principal office at 636 Isaac Peral in said City. The defendant
appellee is a municipal corporation with powers that are to be exercised in conformity with the
provisions of Republic Act No. 409, known as the Revised Charter of the City of Manila.
In the course of its ministry, plaintiff's Philippine agency has been distributing and selling bibles
and/or gospel portions thereof (except during the Japanese occupation) throughout the
Philippines and translating the same into several Philippine dialects. On May 29 1953, the acting
City Treasurer of the City of Manila informed plaintiff that it was conducting the business of
general merchandise since November, 1945, without providing itself with the necessary Mayor's
permit and municipal license, in violation of Ordinance No. 3000, as amended, and Ordinances
Nos. 2529, 3028 and 3364, and required plaintiff to secure, within three days, the corresponding
permit and license fees, together with compromise covering the period from the 4th quarter of
1945 to the 2nd quarter of 1953, in the total sum of P5,821.45 (Annex A).
Plaintiff protested against this requirement, but the City Treasurer demanded that plaintiff deposit
and pay under protest the sum of P5,891.45, if suit was to be taken in court regarding the same
(Annex B). To avoid the closing of its business as well as further fines and penalties in the
premises on October 24, 1953, plaintiff paid to the defendant under protest the said permit and
license fees in the aforementioned amount, giving at the same time notice to the City Treasurer
that suit would be taken in court to question the legality of the ordinances under which, the said
fees were being collected (Annex C), which was done on the same date by filing the complaint
that gave rise to this action. In its complaint plaintiff prays that judgment be rendered declaring
the said Municipal Ordinance No. 3000, as amended, and Ordinances Nos. 2529, 3028 and 3364
illegal and unconstitutional, and that the defendant be ordered to refund to the plaintiff the sum
of P5,891.45 paid under protest, together with legal interest thereon, and the costs, plaintiff
further praying for such other relief and remedy as the court may deem just equitable.
Defendant answered the complaint, maintaining in turn that said ordinances were enacted by the
Municipal Board of the City of Manila by virtue of the power granted to it by section 2444,
subsection (m-2) of the Revised Administrative Code, superseded on June 18, 1949, by section
18, subsection (1) of Republic Act No. 409, known as the Revised Charter of the City of Manila,
and praying that the complaint be dismissed, with costs against plaintiff. This answer was replied
by the plaintiff reiterating the unconstitutionality of the often-repeated ordinances.

54

Before trial the parties submitted the following stipulation of facts:

COME NOW the parties in the above-entitled case, thru their undersigned attorneys and
respectfully submit the following stipulation of facts:
1. That the plaintiff sold for the use of the purchasers at its principal office at 636 Isaac Peral,
Manila, Bibles, New Testaments, bible portions and bible concordance in English and other
foreign languages imported by it from the United States as well as Bibles, New Testaments and
bible portions in the local dialects imported and/or purchased locally; that from the fourth quarter
of 1945 to the first quarter of 1953 inclusive the sales made by the plaintiff were as follows:
2. That the parties hereby reserve the right to present evidence of other facts not herein
stipulated.
WHEREFORE, it is respectfully prayed that this case be set for hearing so that the parties may
present further evidence on their behalf. (Record on Appeal, pp. 15-16).
When the case was set for hearing, plaintiff proved, among other things, that it has been in
existence in the Philippines since 1899, and that its parent society is in New York, United States
of America; that its, contiguous real properties located at Isaac Peral are exempt from real estate
taxes; and that it was never required to pay any municipal license fee or tax before the war, nor
does the American Bible Society in the United States pay any license fee or sales tax for the sale
of bible therein. Plaintiff further tried to establish that it never made any profit from the sale of
its bibles, which are disposed of for as low as one third of the cost, and that in order to maintain
its operating cost it obtains substantial remittances from its New York office and voluntary
contributions and gifts from certain churches, both in the United States and in the Philippines,
which are interested in its missionary work. Regarding plaintiff's contention of lack of profit in
the sale of bibles, defendant retorts that the admissions of plaintiff-appellant's lone witness who
testified on cross-examination that bibles bearing the price of 70 cents each from plaintiffappellant's New York office are sold here by plaintiff-appellant at P1.30 each; those bearing the
price of $4.50 each are sold here at P10 each; those bearing the price of $7 each are sold here at
P15 each; and those bearing the price of $11 each are sold here at P22 each, clearly show that
plaintiff's contention that it never makes any profit from the sale of its bible, is evidently
untenable.
After hearing the Court rendered judgment, the last part of which is as follows:
As may be seen from the repealed section (m-2) of the Revised Administrative Code and the
repealing portions (o) of section 18 of Republic Act No. 409, although they seemingly differ in
the way the legislative intent is expressed, yet their meaning is practically the same for the
purpose of taxing the merchandise mentioned in said legal provisions, and that the taxes to be
levied by said ordinances is in the nature of percentage graduated taxes (Sec. 3 of Ordinance No.
3000, as amended, and Sec. 1, Group 2, of Ordinance No. 2529, as amended by Ordinance No.
3364).

55

IN VIEW OF THE FOREGOING CONSIDERATIONS, this Court is of the opinion and so holds
that this case should be dismissed, as it is hereby dismissed, for lack of merits, with costs against
the plaintiff.
Not satisfied with this verdict plaintiff took up the matter to the Court of Appeals which certified
the case to Us for the reason that the errors assigned to the lower Court involved only questions
of law.
Appellant contends that the lower Court erred:
1. In holding that Ordinances Nos. 2529 and 3000, as respectively amended, are not
unconstitutional;
2. In holding that subsection m-2 of Section 2444 of the Revised Administrative Code under
which Ordinances Nos. 2592 and 3000 were promulgated, was not repealed by Section 18 of
Republic Act No. 409;
3. In not holding that an ordinance providing for taxes based on gross sales or receipts, in order
to be valid under the new Charter of the City of Manila, must first be approved by the President
of the Philippines; and
4. In holding that, as the sales made by the plaintiff-appellant have assumed commercial
proportions, it cannot escape from the operation of said municipal ordinances under the cloak of
religious privilege.
The issues. As may be seen from the proceeding statement of the case, the issues involved in
the present controversy may be reduced to the following: (1) whether or not the ordinances of the
City of Manila, Nos. 3000, as amended, and 2529, 3028 and 3364, are constitutional and valid;
and (2) whether the provisions of said ordinances are applicable or not to the case at bar.
Section 1, subsection (7) of Article III of the Constitution of the Republic of the Philippines,
provides that:
(7) No law shall be made respecting an establishment of religion, or prohibiting the free exercise
thereof, and the free exercise and enjoyment of religious profession and worship, without
discrimination or preference, shall forever be allowed. No religion test shall be required for the
exercise of civil or political rights.
Predicated on this constitutional mandate, plaintiff-appellant contends that Ordinances Nos. 2529
and 3000, as respectively amended, are unconstitutional and illegal in so far as its society is
concerned, because they provide for religious censorship and restrain the free exercise and
enjoyment of its religious profession, to wit: the distribution and sale of bibles and other
religious literature to the people of the Philippines.
Before entering into a discussion of the constitutional aspect of the case, We shall first consider
the provisions of the questioned ordinances in relation to their application to the sale of bibles,
etc. by appellant. The records, show that by letter of May 29, 1953 (Annex A), the City Treasurer

56

required plaintiff to secure a Mayor's permit in connection with the society's alleged business of
distributing and selling bibles, etc. and to pay permit dues in the sum of P35 for the period
covered in this litigation, plus the sum of P35 for compromise on account of plaintiff's failure to
secure the permit required by Ordinance No. 3000 of the City of Manila, as amended. This
Ordinance is of general application and not particularly directed against institutions like the
plaintiff, and it does not contain any provisions whatever prescribing religious censorship nor
restraining the free exercise and enjoyment of any religious profession. Section 1 of Ordinance
No. 3000 reads as follows:
SEC. 1. PERMITS NECESSARY. It shall be unlawful for any person or entity to conduct or
engage in any of the businesses, trades, or occupations enumerated in Section 3 of this
Ordinance or other businesses, trades, or occupations for which a permit is required for the
proper supervision and enforcement of existing laws and ordinances governing the sanitation,
security, and welfare of the public and the health of the employees engaged in the business
specified in said section 3 hereof, WITHOUT FIRST HAVING OBTAINED A PERMIT
THEREFOR FROM THE MAYOR AND THE NECESSARY LICENSE FROM THE CITY
TREASURER.
The business, trade or occupation of the plaintiff involved in this case is not particularly
mentioned in Section 3 of the Ordinance, and the record does not show that a permit is required
therefor under existing laws and ordinances for the proper supervision and enforcement of their
provisions governing the sanitation, security and welfare of the public and the health of the
employees engaged in the business of the plaintiff. However, sections 3 of Ordinance 3000
contains item No. 79, which reads as follows:
79. All other businesses, trades or occupations not
mentioned in this Ordinance, except those upon which the
City is not empowered to license or to tax P5.00
Therefore, the necessity of the permit is made to depend upon the power of the City to license or
tax said business, trade or occupation.
As to the license fees that the Treasurer of the City of Manila required the society to pay from the
4th quarter of 1945 to the 1st quarter of 1953 in the sum of P5,821.45, including the sum of P50
as compromise, Ordinance No. 2529, as amended by Ordinances Nos. 2779, 2821 and 3028
prescribes the following:
SEC. 1. FEES. Subject to the provisions of section 578 of the Revised Ordinances of the City
of Manila, as amended, there shall be paid to the City Treasurer for engaging in any of the
businesses or occupations below enumerated, quarterly, license fees based on gross sales or
receipts realized during the preceding quarter in accordance with the rates herein prescribed:
PROVIDED, HOWEVER, That a person engaged in any businesses or occupation for the first
time shall pay the initial license fee based on the probable gross sales or receipts for the first

57

quarter beginning from the date of the opening of the business as indicated herein for the
corresponding business or occupation.
xxx

xxx

xxx

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

xxx

xxx

As may be seen, the license fees required to be paid quarterly in Section 1 of said Ordinance No.
2529, as amended, are not imposed directly upon any religious institution but upon those
engaged in any of the business or occupations therein enumerated, such as retail "dealers in
general merchandise" which, it is alleged, cover the business or occupation of selling bibles,
books, etc.
Chapter 60 of the Revised Administrative Code which includes section 2444, subsection (m-2) of
said legal body, as amended by Act No. 3659, approved on December 8, 1929, empowers the
Municipal Board of the City of Manila:
(M-2) To tax and fix the license fee on (a) dealers in new automobiles or accessories or both, and
(b) retail dealers in new (not yet used) merchandise, which dealers are not yet subject to the
payment of any municipal tax.
For the purpose of taxation, these retail dealers shall be classified as (1) retail dealers in general
merchandise, and (2) retail dealers exclusively engaged in the sale of (a) textiles . . . (e) books,
including stationery, paper and office supplies, . . .: PROVIDED, HOWEVER, That the
combined total tax of any debtor or manufacturer, or both, enumerated under these subsections
(m-1) and (m-2), whether dealing in one or all of the articles mentioned herein, SHALL NOT BE
IN EXCESS OF FIVE HUNDRED PESOS PER ANNUM.
and appellee's counsel maintains that City Ordinances Nos. 2529 and 3000, as amended, were
enacted in virtue of the power that said Act No. 3669 conferred upon the City of Manila.
Appellant, however, contends that said ordinances are longer in force and effect as the law under
which they were promulgated has been expressly repealed by Section 102 of Republic Act No.
409 passed on June 18, 1949, known as the Revised Manila Charter.
Passing upon this point the lower Court categorically stated that Republic Act No. 409 expressly
repealed the provisions of Chapter 60 of the Revised Administrative Code but in the opinion of
the trial Judge, although Section 2444 (m-2) of the former Manila Charter and section 18 (o) of
the new seemingly differ in the way the legislative intent was expressed, yet their meaning is
practically the same for the purpose of taxing the merchandise mentioned in both legal
provisions and, consequently, Ordinances Nos. 2529 and 3000, as amended, are to be considered
as still in full force and effect uninterruptedly up to the present.
Often the legislature, instead of simply amending the pre-existing statute, will repeal the old
58

statute in its entirety and by the same enactment re-enact all or certain portions of the preexisting
law. Of course, the problem created by this sort of legislative action involves mainly the effect of
the repeal upon rights and liabilities which accrued under the original statute. Are those rights
and liabilities destroyed or preserved? The authorities are divided as to the effect of simultaneous
repeals and re-enactments. Some adhere to the view that the rights and liabilities accrued under
the repealed act are destroyed, since the statutes from which they sprang are actually terminated,
even though for only a very short period of time. Others, and they seem to be in the majority,
refuse to accept this view of the situation, and consequently maintain that all rights an liabilities
which have accrued under the original statute are preserved and may be enforced, since the reenactment neutralizes the repeal, therefore, continuing the law in force without interruption.
(Crawford-Statutory Construction, Sec. 322).
Appellant's counsel states that section 18 (o) of Republic Act No, 409 introduces a new and
wider concept of taxation and is different from the provisions of Section 2444(m-2) that the
former cannot be considered as a substantial re-enactment of the provisions of the latter. We have
quoted above the provisions of section 2444(m-2) of the Revised Administrative Code and We
shall now copy hereunder the provisions of Section 18, subdivision (o) of Republic Act No. 409,
which reads as follows:
(o) To tax and fix the license fee on dealers in general merchandise, including importers and
indentors, except those dealers who may be expressly subject to the payment of some other
municipal tax under the provisions of this section.
Dealers in general merchandise shall be classified as (a) wholesale dealers and (b) retail dealers.
For purposes of the tax on retail dealers, general merchandise shall be classified into four main
classes: namely (1) luxury articles, (2) semi-luxury articles, (3) essential commodities, and (4)
miscellaneous articles. A separate license shall be prescribed for each class but where
commodities of different classes are sold in the same establishment, it shall not be compulsory
for the owner to secure more than one license if he pays the higher or highest rate of tax
prescribed by ordinance. Wholesale dealers shall pay the license tax as such, as may be provided
by ordinance.
For purposes of this section, the term "General merchandise" shall include poultry and livestock,
agricultural products, fish and other allied products.
The only essential difference that We find between these two provisions that may have any
bearing on the case at bar, is that, while subsection (m-2) prescribes that the combined total tax
of any dealer or manufacturer, or both, enumerated under subsections (m-1) and (m-2), whether
dealing in one or all of the articles mentioned therein, shall not be in excess of P500 per annum,
the corresponding section 18, subsection (o) of Republic Act No. 409, does not contain any
limitation as to the amount of tax or license fee that the retail dealer has to pay per annum.
Hence, and in accordance with the weight of the authorities above referred to that maintain that
"all rights and liabilities which have accrued under the original statute are preserved and may be
enforced, since the reenactment neutralizes the repeal, therefore continuing the law in force
59

without interruption", We hold that the questioned ordinances of the City of Manila are still in
force and effect.
Plaintiff, however, argues that the questioned ordinances, to be valid, must first be approved by
the President of the Philippines as per section 18, subsection (ii) of Republic Act No. 409, which
reads as follows:
(ii) To tax, license and regulate any business, trade or occupation being conducted within the
City of Manila, not otherwise enumerated in the preceding subsections, including percentage
taxes based on gross sales or receipts, subject to the approval of the PRESIDENT, except
amusement taxes.
but this requirement of the President's approval was not contained in section 2444 of the former
Charter of the City of Manila under which Ordinance No. 2529 was promulgated. Anyway, as
stated by appellee's counsel, the business of "retail dealers in general merchandise" is expressly
enumerated in subsection (o), section 18 of Republic Act No. 409; hence, an ordinance
prescribing a municipal tax on said business does not have to be approved by the President to be
effective, as it is not among those referred to in said subsection (ii). Moreover, the questioned
ordinances are still in force, having been promulgated by the Municipal Board of the City of
Manila under the authority granted to it by law.
The question that now remains to be determined is whether said ordinances are inapplicable,
invalid or unconstitutional if applied to the alleged business of distribution and sale of bibles to
the people of the Philippines by a religious corporation like the American Bible Society, plaintiff
herein.
With regard to Ordinance No. 2529, as amended by Ordinances Nos. 2779, 2821 and 3028,
appellant contends that it is unconstitutional and illegal because it restrains the free exercise and
enjoyment of the religious profession and worship of appellant.
Article III, section 1, clause (7) of the Constitution of the Philippines aforequoted, guarantees the
freedom of religious profession and worship. "Religion has been spoken of as a profession of
faith to an active power that binds and elevates man to its Creator" (Aglipay vs. Ruiz, 64 Phil.,
201).It has reference to one's views of his relations to His Creator and to the obligations they
impose of reverence to His being and character, and obedience to His Will (Davis vs. Beason,
133 U.S., 342). The constitutional guaranty of the free exercise and enjoyment of religious
profession and worship carries with it the right to disseminate religious information. Any
restraints of such right can only be justified like other restraints of freedom of expression on the
grounds that there is a clear and present danger of any substantive evil which the State has the
right to prevent". (Taada and Fernando on the Constitution of the Philippines, Vol. 1, 4th ed., p.
297). In the case at bar the license fee herein involved is imposed upon appellant for its
distribution and sale of bibles and other religious literature:
In the case of Murdock vs. Pennsylvania, it was held that an ordinance requiring that a license be
obtained before a person could canvass or solicit orders for goods, paintings, pictures, wares or
60

merchandise cannot be made to apply to members of Jehovah's Witnesses who went about from
door to door distributing literature and soliciting people to "purchase" certain religious books and
pamphlets, all published by the Watch Tower Bible & Tract Society. The "price" of the books
was twenty-five cents each, the "price" of the pamphlets five cents each. It was shown that in
making the solicitations there was a request for additional "contribution" of twenty-five cents
each for the books and five cents each for the pamphlets. Lesser sum were accepted, however,
and books were even donated in case interested persons were without funds.
On the above facts the Supreme Court held that it could not be said that petitioners were engaged
in commercial rather than a religious venture. Their activities could not be described as embraced
in the occupation of selling books and pamphlets. Then the Court continued:
"We do not mean to say that religious groups and the press are free from all financial burdens of
government. See Grosjean vs. American Press Co., 297 U.S., 233, 250, 80 L. ed. 660, 668, 56 S.
Ct. 444. We have here something quite different, for example, from a tax on the income of one
who engages in religious activities or a tax on property used or employed in connection with
activities. It is one thing to impose a tax on the income or property of a preacher. It is quite
another to exact a tax from him for the privilege of delivering a sermon. The tax imposed by the
City of Jeannette is a flat license tax, payment of which is a condition of the exercise of these
constitutional privileges. The power to tax the exercise of a privilege is the power to control or
suppress its enjoyment. . . . Those who can tax the exercise of this religious practice can make its
exercise so costly as to deprive it of the resources necessary for its maintenance. Those who can
tax the privilege of engaging in this form of missionary evangelism can close all its doors to all
those who do not have a full purse. Spreading religious beliefs in this ancient and honorable
manner would thus be denied the needy. . . .
It is contended however that the fact that the license tax can suppress or control this activity is
unimportant if it does not do so. But that is to disregard the nature of this tax. It is a license tax
a flat tax imposed on the exercise of a privilege granted by the Bill of Rights . . . The power to
impose a license tax on the exercise of these freedom is indeed as potent as the power of
censorship which this Court has repeatedly struck down. . . . It is not a nominal fee imposed as a
regulatory measure to defray the expenses of policing the activities in question. It is in no way
apportioned. It is flat license tax levied and collected as a condition to the pursuit of activities
whose enjoyment is guaranteed by the constitutional liberties of press and religion and inevitably
tends to suppress their exercise. That is almost uniformly recognized as the inherent vice and evil
of this flat license tax."
Nor could dissemination of religious information be conditioned upon the approval of an official
or manager even if the town were owned by a corporation as held in the case of Marsh vs. State
of Alabama (326 U.S. 501), or by the United States itself as held in the case of Tucker vs. Texas
(326 U.S. 517). In the former case the Supreme Court expressed the opinion that the right to
enjoy freedom of the press and religion occupies a preferred position as against the constitutional
right of property owners.

61

"When we balance the constitutional rights of owners of property against those of the people to
enjoy freedom of press and religion, as we must here, we remain mindful of the fact that the
latter occupy a preferred position. . . . In our view the circumstance that the property rights to the
premises where the deprivation of property here involved, took place, were held by others than
the public, is not sufficient to justify the State's permitting a corporation to govern a community
of citizens so as to restrict their fundamental liberties and the enforcement of such restraint by
the application of a State statute." (Taada and Fernando on the Constitution of the Philippines,
Vol. 1, 4th ed., p. 304-306).
Section 27 of Commonwealth Act No. 466, otherwise known as the National Internal Revenue
Code, provides:
SEC. 27. EXEMPTIONS FROM TAX ON CORPORATIONS. The following organizations
shall not be taxed under this Title in respect to income received by them as such
(e) Corporations or associations organized and operated exclusively for religious, charitable, . . .
or educational purposes, . . .: Provided, however, That the income of whatever kind and character
from any of its properties, real or personal, or from any activity conducted for profit, regardless
of the disposition made of such income, shall be liable to the tax imposed under this Code;
Appellant's counsel claims that the Collector of Internal Revenue has exempted the plaintiff from
this tax and says that such exemption clearly indicates that the act of distributing and selling
bibles, etc. is purely religious and does not fall under the above legal provisions.
It may be true that in the case at bar the price asked for the bibles and other religious pamphlets
was in some instances a little bit higher than the actual cost of the same but this cannot mean that
appellant was engaged in the business or occupation of selling said "merchandise" for profit. For
this reason We believe that the provisions of City of Manila Ordinance No. 2529, as amended,
cannot be applied to appellant, for in doing so it would impair its free exercise and enjoyment of
its religious profession and worship as well as its rights of dissemination of religious beliefs.
With respect to Ordinance No. 3000, as amended, which requires the obtention the Mayor's
permit before any person can engage in any of the businesses, trades or occupations enumerated
therein, We do not find that it imposes any charge upon the enjoyment of a right granted by the
Constitution, nor tax the exercise of religious practices. In the case of Coleman vs. City of
Griffin, 189 S.E. 427, this point was elucidated as follows:
An ordinance by the City of Griffin, declaring that the practice of distributing either by hand or
otherwise, circulars, handbooks, advertising, or literature of any kind, whether said articles are
being delivered free, or whether same are being sold within the city limits of the City of Griffin,
without first obtaining written permission from the city manager of the City of Griffin, shall be
deemed a nuisance and punishable as an offense against the City of Griffin, does not deprive
defendant of his constitutional right of the free exercise and enjoyment of religious profession
and worship, even though it prohibits him from introducing and carrying out a scheme or
purpose which he sees fit to claim as a part of his religious system.
62

It seems clear, therefore, that Ordinance No. 3000 cannot be considered unconstitutional, even if
applied to plaintiff Society. But as Ordinance No. 2529 of the City of Manila, as amended, is not
applicable to plaintiff-appellant and defendant-appellee is powerless to license or tax the
business of plaintiff Society involved herein for, as stated before, it would impair plaintiff's right
to the free exercise and enjoyment of its religious profession and worship, as well as its rights of
dissemination of religious beliefs, We find that Ordinance No. 3000, as amended is also
inapplicable to said business, trade or occupation of the plaintiff.
Wherefore, and on the strength of the foregoing considerations, We hereby reverse the decision
appealed from, sentencing defendant return to plaintiff the sum of P5,891.45 unduly collected
from it. Without pronouncement as to costs. It is so ordered.

63