Police Power PDF

POLICE POWER
1. SOUTHERN LUZON DRUG CORP V. DSWD
G.R. No. 199669 April 25, 2017
SOUTHERN LUZON DRUG CORPORATION, Petitioner,

vs.
THE DEPARTMENT OF SOCIAL WELFARE AND DEVELOPMENT, THE NATIONAL COUNCIL FOR THE WELFARE OF
DISABLED PERSONS, THE DEPARTMENT OF FINANCE, and THE BUREAU OF INTERNAL REVENUE, Respondents
DECISION
REYES, J.:
Before the Court is a Petition for Review on Certiorari1under Rule 45 of the Rules of Court, assailing the Decision2dated June
17, 2011, and Resolution3 dated November 25, 2011 of the Court of Appeals (CA) in CA-G.R. SP No. 102486, which dismissed
the petition for prohibition filed by Southern Luzon Drug Corporation (petitioner) against the Department of1 Social Welfare and
Development (DSWD), the National Council for the Welfare of Disabled Persons (NCWDP) (now National Council on Disability
Affairs or NCDA), the Department of Finance (DOF) and the Bureau of: Internal Revenue (collectively, the respondents), which
sought to prohibit the implementation of Section 4(a) of Republic Act (R.A.) No. 9257, otherwise known as the "Expanded
Senior Citizens Act of 2003" and Section 32 of R.A. No. 9442, which amends the "Magna Carta for Disabled
Persons," particularly the granting of 20% discount on the purchase of medicines by senior citizens and persons with disability
(PWD),: respectively, and treating them as tax deduction.
The petitioner is a domestic corporation engaged in the business of: drugstore operation in the Philippines while the respondents
are government' agencies, office and bureau tasked to monitor compliance with R.A. Nos. 9257 and 9442, promulgate
implementing rules and regulations for their effective implementation, as well as prosecute and revoke licenses of erring1
establishments.
Factual Antecedents
On April 23, 1992, R.A. No. 7432, entitled "An Act to Maximize the Contribution of Senior Citizens to Nation-Building, Grant
Benefits and Special Privileges and For Other Purposes," was enacted. Under the said law, a senior citizen, who must be at
least 60 years old and has an annual income of not more than P60,000.00,4 may avail of the privileges provided in Section 4
thereof, one of which is 20% discount on the purchase of medicines. The said provision states:
Sec. 4. Privileges for the Senior Citizen. - x x x:
a) the grant of twenty percent (20%) discount from all establishments relative to utilization of transportation services, hotels and
similar lodging establishment, restaurants and recreation centers and purchase of medicine anywhere in the country:
Provided, That private establishments may claim the cost as tax credit[.]
x x x x (Emphasis ours)
To recoup the amount given as discount to qualified senior citizens, covered establishments can claim an equal amount as tax
credit which can be applied against the income tax due from them.
On February 26, 2004, then President Gloria Macapagal-Arroyo signed R.A. No. 9257, amending some provisions of R.A. No.
7432. The new law retained the 20% discount on the purchase of medicines but removed the annual income ceiling thereby
qualifying all senior citizens to the privileges under the law. Further, R.A. No. 9257 modified the tax treatment of the discount
granted to senior citizens, from tax credit to tax deduction from gross income, computed based on the net cost of goods sold
or services rendered. The pertinent provision, as amended by R.A. No. 9257, reads as follows:
SEC. 4. Privileges for the Senior Citizens. - The senior citizens shall be entitled to the following:
(a) the grant of twenty percent (20%) discount from all establishments relative to the utilization of services in hotels and similar
lodging establishments, restaurants and recreation centers, and purchase of medicines in all establishments for the exclusive
use or enjoyment of senior citizens, including funeral and burial services for the death of senior citizens;
xxxx
The establishment may claim the discounts granted under (a), (f), (g) and (h) as tax deduction based on the net cost
of the goods sold or services rendered: Provided, That the cost of the discount shall be allowed as deduction from
gross income for the same taxable year that the discount is granted. Provided, further, That the total amount of the claimed
tax deduction net of value-added tax if applicable, shall be included in their gross sales receipts for tax purposes and shall be
subject to proper documentation and to the provisions of the National Internal Revenue Code, as amended. (Emphasis ours)
On May 28, 2004, the DSWD issued the Implementing Rules and Regulations (IRR) of R.A. No. 9257. Article 8 of Rule VI of
the said IRR provides:
Article 8. Tax Deduction of Establishments. - The establishment may claim the discounts granted under Rule V, Section 4 -
Discounts for Establishments; Section 9, Medical and Dental Services in Private Facilities and Sections 10 and 11 -Air, Sea
and Land Transportation as tax deduction based on the net cost of the goods sold or services rendered. Provided, That the
cost of the discount shall be allowed as deduction from gross income for the same taxable year that the discount is
granted; Provided, further, That the total amount of the claimed tax deduction net of value-added tax if applicable, shall be
included in their gross sales receipts for tax purposes and shall be subject to proper documentation and to the provisions of the
National Internal Revenue Code, as amended; Provided, finally, that the implementation of the tax deduction shall be subject
to the Revenue Regulations to be issued by the Bureau of Internal Revenue (BIR) and approved by the Department of Finance
(DOF). (Emphasis ours)
The change in the tax treatment of the discount given to senior citizens did not sit well with some drug store owners and
corporations, claiming it affected the profitability of their business. Thus, on January 13, 2005, I Carlos Superdrug Corporation
(Carlos Superdrug), together with other. corporation and proprietors operating drugstores in the Philippines, filed a Petition for
Prohibition with Prayer for Temporary Restraining Order (TRO) I and/or Preliminary Injunction before this Court, entitled Carlos
Superdrug I Corporation v. DSWD,5docketed as G.R. No. 166494, assailing the constitutionality of Section 4(a) of R.A. No.
9257 primarily on the ground that it amounts to taking of private property without payment of just compensation. In a Decision
dated June 29, 2007, the Court upheld the constitutionality of the assailed provision, holding that the same is a legitimate
exercise of police power. The relevant portions of the decision read, thus:
The law is a legitimate exercise of police power which, similar to the power of eminent domain, has general welfare for its
object. Police power is not capable of an exact definition, but has been purposely veiled in general terms to underscore its
comprehensiveness to meet all exigencies and provide enough room for an efficient and flexible response to conditions and
circumstances, thus assuring the greatest benefits. Accordingly, it has been described as "the most essential, insistent and the
least limitable of powers, extending as it does to all the great public needs." It is "[t]he power vested in the legislature by the
constitution to make, ordain, and establish all manner of wholesome and reasonable laws, statutes, and ordinances, either with
penalties or without, not repugnant to the constitution, as they shall judge to be for the good and welfare of the commonwealth,
and of the subjects of the same."
For this reason, when the conditions so demand as determined by the legislature, property rights must bow to the primacy of
police power because property rights, though sheltered by due process, must yield to general welfare.
xxxx
Moreover, the right to property has a social dimension. While Article XIII of the Constitution provides the precept for the
protection of property, various laws and jurisprudence, particularly on agrarian reform and the regulation of contracts and public
utilities, continuously serve as a reminder that the right to property can be relinquished upon the command of the State for the
promotion of public good. Undeniably, the success of the senior citizens program rests largely on the support imparted by
petitioners and the other private establishments concerned. This being the case, the means employed in invoking the active
participation of the private sector, in order to achieve the purpose or objective of the law, is reasonably and directly related.
Without sufficient proof that Section 4(a) of RA. No. 9257 is arbitrary, and that the continued implementation of the same would
be unconscionably detrimental to petitioners, the Court will refrain from quashing a legislative act.
WHEREFORE, the petition is DISMISSED for lack of merit.6 (Citations omitted)
On August 1, 2007, Carlos Superdrug filed a motion for reconsideration of the foregoing decision. Subsequently, the Court
issued Resolution dated August 21, 2007, denying the said motion with finality. 7
Meanwhile, on March 24, 1992, R.A. No. 7277 pertaining to the "Magna Carta for Disabled Persons" was enacted, codifying
the rights and privileges of PWDs. Thereafter, on April 30, 2007, R.A. No. 9442 was enacted, amending R.A. No. 7277. One of
the salient amendments in the law is the insertion of Chapter 8 in Title 2 thereof, which enumerates the other privileges and
incentives of PWDs, including the grant of 20% discount on the purchase of medicines. Similar to R.A. No. 9257, covered
establishments shall claim the discounts given to PWDs as tax deductions from the gross income, based on the net cost of
goods sold or services rendered. Section 32 ofR.A. No. 9442 reads:
CHAPTER 8. Other Privileges and Incentives
SEC. 32. Persons with disability shall be entitled to the following:
xxxx
(c) At least twenty percent (20%) discount for the purchase of medicines in all drugstores for the exclusive use or enjoyment of
persons with disability;
xxxx
The establishments may claim the discounts granted in subsections (a), (b), (c), (e), (t) and (g) as taxdeductions based
on the net cost of the goods sold or services rendered: Provided, however, That the cost of the discount shall be allowed
as deduction from gross income for the same taxable year that the discount is granted: Provided, further, That the total amount
of the claimed tax deduction net of value-added tax if applicable, shall be included in their gross sales receipts for tax purposes
and shall be subject to proper documentation and to the provisions of the National Internal Revenue Code (NIRC), as amended.
(Emphasis ours)
Pursuant to the foregoing, the IRR of R.A. No. 9442 was promulgated by the DSWD, Department of Education, DOF,
Department of Tourism and the Department of Transportation and Communications.8Sections 5 .1 and 6.1.d thereof provide:
Sec. 5. Definition of Terms. For purposes of these Rules and Regulations, these terms are defined as follows:
5.1. Persons with Disability are those individuals defined under Section 4 of RA 7277, "An Act Providing for
the Rehabilitation, Self-Development and Self-Reliance of Persons with Disability as amended and their
integration into the Mainstream of Society and for Other Purposes." This is defined as a person suffering from
restriction or different abilities, as a result of a mental, physical or sensory impairment, to perform an activity in
a manner or within the range considered normal for human being. Disability shall mean: (1) a physical or mental
impairment that substantially limits one or more psychological, physiological or anatomical function of an
individual or activities of such individual; (2) a record of such an impairment; or (3) being regarded as having
such an impairment.
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6.1.d Purchase of Medicine - At least twenty percent (20%) discount on the purchase of medicine for the
exclusive use and enjoyment of persons with disability. All drug stores, hospital, pharmacies, clinics and other
similar establishments selling medicines are required to provide at least twenty percent (20%) discount subject
to the guidelines issued by DOH and PHILHEALTH.
On February 26, 2008, the petitioner filed a Petition for Prohibition with Application for TRO and/or Writ of Preliminary Injunction9
with the CA, seeking to declare as unconstitutional (a) Section 4(a) of R.A. No. 9257, and (b) Section 32 of R.A. No. 9442 and
Section 5.1 of its IRR, insofar as these provisions only allow tax deduction on the gross income based on the net cost of goods
sold or services rendered as compensation to private establishments for the 20% discount that they are required to grant to
senior citizens and PWDs. Further, the petitioner prayed that the respondents be permanently enjoined from implementing the
assailed provisions.
Ruling of the CA
On June 17, 2011, the CA dismissed the petition, reiterating the ruling of the Court in Carlos Superdrug10particularly that Section
4(a) of R.A. No. 9257 was a valid exercise of police power. Moreover, the CA held that considering that the same question had
been raised by parties similarly situated and was resolved in Carlos Superdrug, the rule of stare decisis stood as a hindrance
to any further attempt to relitigate the same issue. It further noted that jurisdictional considerations also compel the dismissal
of the action. It particularly emphasized that it has no original or appellate jurisdiction to pass upon the constitutionality of the
assailed laws, 11 the same pertaining to the Regional Trial Court (RTC). Even assuming that it had concurrent jurisdiction with
the RTC, the principle of hierarchy of courts mandates that the case be commenced and heard by the lower court. 12 The CA
further ruled that the petitioner resorted to the wrong remedy as a petition for prohibition will not lie to restrain the actions of the
respondents for the simple reason that they do not exercise judicial, quasi-judicial or ministerial duties relative to the issuance
or implementation of the questioned provisions. Also, the petition was wanting of the allegations of the specific acts committed
by the respondents that demonstrate the exercise of these powers which may be properly challenged in a petition for
prohibition.13
14
The petitioner filed its Motion for Reconsideration of the Decision dated June 17, 2011 of the CA, but the same was denied
in a Resolution 15 dated November 25, 2011.
Unyielding, the petitioner filed the instant petition, raising the following assignment of errors, to wit:
THE CA SERIOUSLY ERRED WHEN IT RULED THAT A PETITION FOR PROHIBITION FILED WITH THE CA IS AN
IMPROPER REMEDY TO ASSAIL THE CONSTITUTIONALITY OF THE 20%, SALES DISCOUNT FOR SENIOR CITIZENS
AND PWDs;
II
THE CA SERIOUSLY ERRED WHEN IT HELD THAT THE SUPREME COURT'S RULING IN CARLOS
SUPERDRUG CONSTITUTES STARE DECISIS;
III
THE CA SERIOUSLY ERRED ON A QUESTION OF SUBSTANCE WHEN IT RULED THAT THE 20%, SALES DISCOUNT
FOR SENIOR CITIZENS AND PWDs IS A VALID EXERCISE OF POLICE POWER. ON THE CONTRARY, IT IS AN INVALID
EXERCISE OF THE POWER OF EMINENT DOMAIN BECAUSE IT FAILS TO PROVIDE JUST COMPENSATION TO THE
PETITIONER AND OTHER SIMILARLY SITUATED DRUGSTORES;
IV
THE CA SERIOUSLY ERRED ON A QUESTION OF SUBSTANCE WHEN IT RULED THAT THE 20°/o SALES DISCOUNT
FOR SENIOR CITIZENS AND PWDs DOES NOT VIOLATE THE PETITIONER'S RIGHT TO EQUAL PROTECTION OF THE
LAW; and
V
THE CA SERIOUSLY ERRED ON A QUESTION OF SUBSTANCE WHEN IT RULED THAT THE DEFINITIONS OF
DISABILITIES AND PWDs ARE NOT VAGUE AND DO NOT VIOLATE THE PETITIONER'S RIGHT TO DUE PROCESS OF
LAW.16
Ruling of the Court
Prohibition may be filed to question

the constitutionality of a law
In the assailed decision, the CA noted that the action, although denominated as one for prohibition, seeks the declaration of
the unconstitutionality of Section 4(a) of R.A. No. 9257 and Section 32 of R.A. No.9442. It held that in such a case, the proper
remedy is not a special civil 1 action but a petition for declaratory relief, which falls under the exclusive original jurisdiction of
the RTC, in the first instance, and of the Supreme Court, on appeal. 17
The Court clarifies.
Generally, the office of prohibition is to prevent the unlawful and oppressive exercise of authority and is directed against
proceedings that are done without or in excess of jurisdiction, or with grave abuse of discretion, there being no appeal or other
plain, speedy, and adequate remedy in the ordinary course of law. It is the remedy to prevent inferior courts, corporations,
boards, or persons from usurping or exercising a jurisdiction or power with which they have not been vested by law. 18 This is,
however, not the lone office of an action for prohibition. In Diaz, et al. v. The Secretary of Finance, et al., 19 prohibition was also
recognized as a proper remedy to prohibit or nullify acts of executive officials that amount to usurpation of legislative
authority. 20 And, in a number of jurisprudence, prohibition was allowed as a proper action to assail the constitutionality of a law
or prohibit its implementation.
In Social Weather Stations, Inc. v. Commission on Elections,21therein petitioner filed a petition for prohibition to assail the
constitutionality of Section 5.4 of R.A. No. 9006, or the "Fair Elections Act," which prohibited the publication of surveys within
15 days before an election for national candidates, and seven days for local candidates. Included in the petition is a prayer to
prohibit the Commission on Elections from enforcing the said provision. The Court granted the Petition and struck down the
assailed provision for being unconstitutional. 22
In Social Justice Society (SJS) v. Dangerous Drugs Board, et al.,23 therein petitioner assailed the constitutionality of paragraphs
(c ), (d), (f) and (g) of Section 36 of R.A. No. 9165, otherwise known as the "Comprehensive Dangerous Drugs Act of 2002," on
the ground that they constitute undue delegation of legislative power for granting unbridled discretion to schools and private
employers in determining the manner of drug 'testing of their employees, and that the law constitutes a violation of the right
against unreasonable searches and seizures. It also sought to enjoin the Dangerous Drugs Board and the Philippine Drug
Enforcement Agency from enforcing the challenged provision.24The Court partially granted the petition by declaring Section
36(f) and (g) of R.A. No. 9165 unconstitutional, and permanently enjoined the concerned agencies from implementing them. 25
In another instance, consolidated petitions for prohibitions26 questioning the constitutionality of the Priority Development
Assistance Fund were deliberated upon by this Court which ultimately granted the same.
Clearly, prohibition has been found an appropriate remedy to challenge the constitutionality of various laws, rules, and
regulations.
There is also no question regarding the jurisdiction of the CA to hear and decide a petition for prohibition. By express provision
of the law, particularly Section 9(1) of Batas Pambansa Bilang 129,27 the CA was granted "original jurisdiction to issue writs
of mandamus, prohibition, certiorari, habeas corpus, and quo warranto, and auxiliary writs or I processes, whether or not in aid
of its appellate jurisdiction." This authority· the CA enjoys concurrently with RTCs and this Court.
In the same manner, the supposed violation of the principle of the ·. hierarchy of courts does not pose any hindrance to the full
deliberation of the issues at hand. It is well to remember that "the judicial hierarchy of courts is not an iron-clad rule. It generally
applies to cases involving warring factual allegations. For this reason, litigants are required to [refer] to the trial courts at the
first instance to determine the truth or falsity of these contending allegations on the basis of the evidence of the parties. Cases
which depend on disputed facts for decision cannot be brought immediately before appellate courts as they are not triers of
facts. Therefore, a strict application of the rule of hierarchy of courts is not necessary when the cases brought before the
appellate courts do not involve factual but legal questions."28
Moreover, the principle of hierarchy of courts may be set aside for special and important reasons, such as when dictated by
public welfare and ' the advancement of public policy, or demanded by the broader interest of justice.29Thus, when based on
the good judgment of the court, the urgency and significance of the issues presented calls for its intervention, it should not
hesitate to exercise its duty to resolve.
The instant petition presents an exception to the principle as it basically raises a legal question on the constitutionality of the
mandatory discount and the breadth of its rightful beneficiaries. More importantly, the resolution of the issues will redound to
the benefit of the public as it will put to rest the questions on the propriety of the granting of discounts to senior citizens and
PWDs amid the fervent insistence of affected establishments that the measure transgresses their property rights. The Court,
therefore, finds it to the best interest of justice that the instant petition be resolved.
The instant case is not barred by

stare decisis
The petitioner contends that the CA erred in holding that the ruling in Carlos Superdrug constitutes as stare decisis or law of
the case which bars the relitigation of the issues that had been resolved therein and had been raised anew in the instant petition.
It argues that there are substantial differences between Carlos Superdrug and the circumstances in the instant case which take
it out from the operation of the doctrine of stare decisis. It cites that in Carlos Superdrug, the Court denied the petition because
the petitioner therein failed to prove the confiscatory effect of the tax deduction scheme as no proof of actual loss was submitted.
It believes that its submission of financial statements for the years 2006 and 2007 to prove the confiscatory effect of the law is
a material fact that distinguishes the instant case from that of Carlos Superdrug. 30
The Court agrees that the ruling in Carlos Superdrug does not constitute stare decisis to the instant case, not because of the
petitioner's submission of financial statements which were wanting in the first case, but because it had the good sense of
including questions that had not been raised or deliberated in the former case of Carlos Superdrug, i.e., validity of the 20%
discount granted to PWDs, the supposed vagueness of the provisions of R.A. No. 9442 and violation of the equal protection
clause.
Nonetheless, the Court finds nothing in the instant case that merits a reversal of the earlier ruling of the Court in Carlos
Superdrug. Contrary to the petitioner's claim, there is a very slim difference between the issues in Carlos Superdrug and the
instant case with respect to the nature of the senior citizen discount. A perfunctory reading of the circumstances of the two
cases easily discloses marked similarities in the issues and the arguments raised by the petitioners in both cases that semantics
nor careful play of words can hardly obscure.
In both cases, it is apparent that what the petitioners are ultimately questioning is not the grant of the senior citizen discount per
se, but the manner by which they were allowed to recoup the said discount. In particular, they are protesting the change in the
tax treatment of the senior citizen discount from tax credit to being merely a deduction from gross income which they claimed
to have significantly reduced their profits.
This question had been settled in Carlos Superdrug, where the Court ruled that the change in the tax treatment of the discount
was a valid exercise of police power, thus:
Theoretically, the treatment of the discount as a deduction reduces the net income of the private establishments concerned.
The discounts given would have entered the coffers and formed part of the gross sales of the private establishments, were it
not for R.A. No. 9257.
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A tax deduction does not offer full reimbursement of the senior citizen discount. As such, it would not meet the definition of just
compensation.
Having said that, this raises the question of whether the State, in promoting the health and welfare of a special group of citizens,
can impose upon private establishments the burden of partly subsidizing a government program.
The Court believes so.
The Senior Citizens Act was enacted primarily to maximize the contribution of senior citizens to nation-building, and to grant
benefits and privileges to them for their improvement and well-being as the State considers them an integral part of our society.
The priority given to senior citizens finds its basis in the Constitution as set forth in the law itself. Thus, the Act provides:
SEC. 2. [R.A.] No. 7432 is hereby amended to read as follows:
SEC. 1. Declaration of Policies and Objectives.- Pursuant to Article XV, Section 4 of the Constitution, it is the duty of the family
to take care of its elderly members while the State may design programs of social security for them. In addition to this, Section
10 in the Declaration of Principles and State Policies provides: "The State shall provide social justice in all phases of national
development." Further, Article XIII, Section 11, provides: "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."
Consonant with these constitutional principles the following are the declared policies of this Act:
xxxx
(f) To recognize the important role of the private sector in the improvement of the welfare of senior citizens and to
actively seek their partnership.
To implement the above policy, the law grants a twenty percent discount to senior citizens for medical and dental services, and
diagnostic and laboratory fees; admission fees charged by theaters, concert halls, circuses, carnivals, and other similar places
of culture, leisure and amusement; fares for domestic land, air and sea travel; utilization of services in hotels and similar lodging
establishments, restaurants and recreation centers; and purchases of medicines for the exclusive use or enjoyment of senior
citizens. As a form of reimbursement, the law provides that business establishments extending the twenty percent discount to
senior citizens may claim the discount as a tax deduction.
circumstances, thus assuring the greatest benefits. Accordingly, it has been described as "the most essential, insistent and the
least limitable of powers, extending as it does to all the great public needs." It is "[t]he power vested in the legislature by the
constitution to make, ordain, and establish all manner of wholesome and reasonable laws, statutes, and ordinances, either with
penalties or without, not repugnant to the constitution, as they shall judge to be for the good and welfare of the commonwealth,
and of the subjects of the same."
police power because proper rights, though sheltered by due process, must yield to general welfare. 31 (Citations omitted and
emphasis in the original)
Verily, it is the bounden duty of the State to care for the elderly as they reach the point in their lives when the vigor of their youth
has diminished and resources have become scarce. Not much because of choice, they become needing of support from the
society for whom they presumably spent their productive days and for whose betterment they' exhausted their energy, know-
how and experience to make our days better to live.
In the same way, providing aid for the disabled persons is an equally important State responsibility. Thus, the State is obliged
to give full support to the improvement of the total well-being of disabled persons and their integration into the mainstream of
society. 32This entails the creation of opportunities for them and according them privileges if only to balance the playing field
which had been unduly tilted against them because of their limitations.
The duty to care for the elderly and the disabled lies not only upon the State, but also on the community and even private
entities. As to the State, the duty emanates from its role as parens patriae which holds it under obligation to provide protection
and look after the welfare of its people especially those who cannot tend to themselves. Parens patriae means parent of his or
her country, and refers to the State in its role as "sovereign", or the State in its capacity as a provider of protection to those
unable to care for themselves. 33 In fulfilling this duty, the State may resort to the exercise of its inherent powers: police power,
eminent domain and power of taxation.
In Gerochi v. Department of Energy,34the Court passed upon one of the inherent powers of the state, the police power, where
it emphasized, thus:
[P]olice power is the power of the state to promote public welfare by restraining and regulating the use of liberty and property.
It is the most pervasive, the least limitable, and the most demanding of the three fundamental powers of the State. The
justification is found in the Latin maxim salus populi est suprema lex (the welfare of the people is the supreme law) and sic
utere tuo ut alienum non laedas (so use your property as not to injure the property of others). As an inherent attribute of
sovereignty which virtually extends to all public needs, police power grants a wide panoply of instruments through which the
State, as parens patriae, gives effect to a host of its regulatory powers. We have held that the power to "regulate" means the
power to protect, foster, promote, preserve, and control, with due regard for the interests, first and foremost, of the public, then
of the utility and of its patrons. 35 (Citations omitted)
It is in the exercise of its police power that the Congress enacted R.A. Nos. 9257 and 9442, the laws mandating a 20% discount
on purchases of medicines made by senior citizens and PWDs. It is also in further exercise of this power that the legislature
opted that the said discount be claimed as tax deduction, rather than tax credit, by covered establishments.
The petitioner, however, claims that the change in the tax treatment of the discount is illegal as it constitutes taking without just
compensation. It even submitted financial statements for the years 2006 and 2007 to support its claim of declining profits when
the change in the policy was implemented.
The Court is not swayed.
To begin with, the issue of just compensation finds no relevance in the instant case as it had already been made clear in Carlos
Superdrug that the power being exercised by the State in the imposition of senior citizen discount was its police power. Unlike
in the exercise of the power of eminent domain, just compensation is not required in wielding police power. This is precisely
because there is no taking involved, but only an imposition of burden.
In Manila Memorial Park, Inc., et al. v. Secretary of the DSWD, et al., 36 the Court ruled that by examining the nature and the
effects of R.A. No. 9257, it becomes apparent that the challenged governmental act was an exercise of police power. It was
held, thus:
[W]e now look at the nature and effects of the 20% discount to determine if it constitutes an exercise of police power or eminent
domain.
The 20% discount is intended to improve the welfare of senior citizens who, at their age, are less likely to be gainfully employed,
more prone to illnesses and other disabilities, and, thus, in need of subsidy in purchasing basic commodities. It may not be
amiss to mention also that the discount serves to honor senior citizens who presumably spent the productive years of their lives
on contributing to the development and progress of the nation. This distinct cultural Filipino practice of honoring the elderly is
an integral part of this law.
As to its nature and effects, the 20% discount is a regulation affecting the ability of private establishments to price their products
and services relative to a special class of individuals, senior citizens, for which the Constitution affords preferential concern. In
turn, this affects the amount of profits or income/gross sales that a private establishment can derive from senior citizens. In
other words, the subject regulation affects the pricing, and, hence, the profitability of a private establishment. However, it does
not purport to appropriate or burden specific properties, used in the operation or conduct of the business of private
establishments, for the use or benefit of the public, or senior citizens for that matter, but merely regulates the pricing of goods
and services relative to, and the amount of profits or income/gross sales that such private establishments may derive from,
senior citizens.
The subject regulation may be said to be similar to, but with substantial distinctions from, price control or rate of 'return on
investment control laws which are traditionally regarded as police power measures. x x x.37 (Citations omitted)
In the exercise of police power, "property rights of private individuals are subjected to restraints and burdens in order to secure
the general comfort, health, and prosperity of the State."38 Even then, the State's claim of police power cannot be arbitrary or
unreasonable. After all, the overriding purpose of the exercise of the power is to promote general welfare, public health and
safety, among others. It is a measure, which by sheer necessity, the State exercises, even to the point of interfering with
personal liberties or property rights in order to advance common good. To warrant such interference, two requisites must concur:
(a) the interests of the public generally, as distinguished from those of a particular class, require the interference of the! State;
and (b) the means employed are reasonably necessary to the: attainment of the object sought to be accomplished and not
unduly oppressive upon individuals. In other words, the proper exercise of the police power requires the concurrence of a lawful
subject and a lawful method.39
The subjects of R.A. Nos. 9257 and 9442, i.e., senior citizens and PWDs, are individuals whose well-being is a recognized
public duty. As a public duty, the responsibility for their care devolves upon the concerted efforts of the State, the family and
the community. In Article XIII, Section 1 of the Constitution, the State is mandated to give highest priority to the enactment of
measures that protect and enhance the right of all the people to human dignity, reduce social, economic, and political
inequalities, and remove cultural inequities by equitably diffusing wealth and political power1 for the common good. The more
apparent manifestation of these social inequities is the unequal distribution or access to healthcare services. To: abet in
alleviating this concern, the State is committed to 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,
with priority for the needs of the underprivileged sick, elderly, disabled, women, and children.40
In the same manner, the family and the community have equally significant duties to perform in reducing social inequality. The
family as the basic social institution has the foremost duty to care for its elderly members.41 On the other hand, the community,
which include the private sector, is recognized as an active partner of the State in pursuing greater causes. The private sector,
being recipients of the privilege to engage business in our land, utilize our goods as well as the services of our people for
proprietary purposes, it is only fitting to expect their support in measures that contribute to common good. Moreover, their right
to own, establish and operate economic enterprises is always subject to the duty of the State to promote distributive justice and
to intervene when the common good so demands.42
The Court also entertains no doubt on the legality of the method taken by the legislature to implement the declared policies of
the subject laws, that is, to impose discounts on the medical services and purchases of senior citizens and PWDs and to treat
the said discounts as tax deduction rather than tax credit. The measure is fair and reasonable and no credible proof was
presented to prove the claim that it was confiscatory. To be considered confiscatory, there must be taking of property without
just compensation.
Illuminating on this point is the discussion of the Court on the concept of taking in City of Manila v. Hon. Laguio, Jr.,43viz.:
There are two different types of taking that can be identified. A "possessory" taking occurs when the government confiscates
or physically occupies property. A "regulatory" taking occurs when the government's regulation leaves no reasonable
economically viable use of the property.
xxxx
No formula or rule can be devised to answer the questions of what is too far and when regulation becomes a taking.
In Mahon, Justice Holmes recognized that it was "a question of degree and therefore cannot be disposed of by general
propositions." On many other occasions as well, the U.S. Supreme Court has said that the issue of when regulation constitutes
a taking is a matter of considering the facts in each case. x x x.
What is crucial in judicial consideration of regulatory takings is that government regulation is a taking if it leaves no reasonable
economically viable use of property in a manner that interferes with reasonable expectations for use. A regulation that
permanently denies all economically beneficial or productive use of land is, from the owner's point of view, equivalent to a
"taking" unless principles of nuisance or property law that existed when the owner acquired the land make the use prohibitable.
When the owner of real property has been called upon to sacrifice all economically beneficial uses in the name of the common
good, that is, to leave his property economically idle, he has suffered a taking.
xxxx
A restriction on use of property may also constitute a "taking" if not reasonably necessary to the effectuation of a substantial
public purpose or if it has an unduly harsh impact on the distinct investment-backed expectations of the owner.44 (Citations
omitted)
The petitioner herein attempts to prove its claim that the pertinent provisions of R.A. Nos. 9257 and 9442 amount to taking by
presenting financial statements purportedly showing financial losses incurred by them due to the adoption of the tax deduction
scheme.
For the petitioner's clarification, the presentation of the financial statement is not of compelling significance in justifying its claim
for just compensation. What is imperative is for it to establish that there was taking in the constitutional sense or that, in the
imposition of the mandatory discount, the power exercised by the state was eminent domain.
According to Republic of the Philippines v. Vda. de Castellvi,45five circumstances must be present in order to qualify "taking"
as an exercise of eminent domain. First, the expropriator must enter a private property. Second, the entrance into private
property must be for more than a momentary period. Third, the entry into the property should be under warrant or color of legal
authority. Fourth, the property must be devoted to a public use or otherwise informally appropriated or injuriously
affected. Fifth, the utilization of the property for public use must be in such a way as to oust the owner and deprive him of all
beneficial enjoyment of the property. 46
The first requirement speaks of entry into a private property which clearly does not obtain in this case. There is no private
property that is; invaded or appropriated by the State. As it is, the petitioner precipitately deemed future profits as private
property and then proceeded to argue that the State took it away without full compensation. This seemed preposterous
considering that the subject of what the petitioner supposed as taking was not even earned profits but merely an expectation
of profits, which may not even occur. For obvious reasons, there cannot be taking of a contingency or of a mere possibility
because it lacks physical existence that is necessary before there could be any taking. Further, it is impossible to quantify the
compensation for the loss of supposed profits before it is earned.
The supposed taking also lacked the characteristics of permanence 47 and consistency.The presence of these characteristics
is significant because they can establish that the effect of the questioned provisions is the same on all establishments and
those losses are indeed its unavoidable consequence. But apparently these indications are wanting in this case. The reason is
that the impact on the establishments varies depending on their response to the changes brought about by the subject
provisions. To be clear, establishments, are not prevented from adjusting their prices to accommodate the effects of the granting
of the discount and retain their profitability while being fully compliant to the laws. It follows that losses are not inevitable because
establishments are free to take business measures to accommodate the contingency. Lacking in permanence and consistency,
there can be no taking in the constitutional sense. There cannot be taking in one establishment and none in another, such that
the former can claim compensation but the other may not. Simply told, there is no taking to justify compensation; there is only
poor business decision to blame.
There is also no ousting of the owner or deprivation of ownership. Establishments are neither divested of ownership of any of
their properties nor is anything forcibly taken from them. They remain the owner of their goods and their profit or loss still
depends on the performance of their sales.
Apart from the foregoing, covered establishments are also provided with a mechanism to recoup the amount of discounts they
grant the senior citizens and PWDs. It is provided in Section 4(a) of R.A. No. 9257 and Section 32 of R.A. No. 9442 that
establishments may claim the discounts as "tax deduction based on the net cost of the goods sold or services rendered."
Basically, whatever amount was given as discount, covered establishments may claim an equal amount as an expense or tax
deduction. The trouble is that the petitioner, in protesting the change in the tax treatment of the discounts, apparently seeks tax
incentive and not merely a return of the amount given as discounts. It premised its interpretation of financial losses in terms of
the effect of the change in the tax treatment of the discount on its tax liability; hence, the claim that the measure was
confiscatory. However, as mentioned earlier in the discussion, loss of profits is not the inevitable result of the change in tax
treatment of the discounts; it is more appropriately a consequence of poor business decision.
It bears emphasizing that the law does not place a cap on the amount of mark up that covered establishments may impose on
their items. This rests on the discretion of the establishment which, of course, is expected to put in the price of the overhead
costs, expectation of profits and other considerations into the selling price of an item. In a simple illustration, here is Drug A, with
acquisition cost of ₱8.00, and selling price of ₱10.00. Then comes a law that imposes 20% on senior citizens and PWDs, which
affected Establishments 1, 2 and 3. Let us suppose that the approximate number of patrons who purchases Drug A is 100, half
of which are senior citizens and PWDs. Before the passage of the law, all of the establishments are earning the same amount
from profit from the sale of Drug A, viz.:
Before the passage of the law:
Drug A
Acquisition cost ₱8.00

Selling price ₱10.00
Number of patrons 100
Sales:
100 x ₱10.00 = ₱1,000.00
Profit: ₱200
After the passage of the law, the three establishments reacted differently. Establishment 1 was passive and maintained the
price of Drug A at ₱8.00 which understandably resulted in diminution of profits.
Establishment 1
Drug A

Selling price ;₱10.00

Senior Citizens/PWD 50
Sales
100 x ₱10.00 = ₱1,000.00
Deduction: ₱100.00
Profit: ₱100.00
On the other hand, Establishment 2, mindful that the new law will affect the profitability of the business, made a calculated
decision by increasing the mark up of Drug A to ₱3.20, instead of only ₱2.00. This brought a positive result to the earnings of
the company.
Establishment 2
Drug A
Acquisition cost ;₱8.00
Number of patron 100

Senior Citizens/PWDs 50
Sales
100 x ₱10.00 = ₱1,000.00
Profit: ₱208.00
For its part, Establishment 3 raised the mark up on Drug A to only ₱3.00 just to even out the effect of the law. This measure
left a negligible effect on its profit, but Establishment 3 took it as a social duty: to share in the cause being promoted by the
government while still maintaining profitability.
Establishment 3
Drug A


Senior Citizens/PWD 50
Sales
100 x ₱10.00 = ₱1,000.00
Profit: ₱190.00
The foregoing demonstrates that it is not the law per se which occasioned the losses in the covered establishments but bad
business I judgment. One of the main considerations in making business decisions is the law because its effect is widespread
and inevitable. Literally, anything can be a subject of legislation. It is therefore incumbent upon business managers to cover
this contingency and consider it in making business strategies. As shown in the illustration, the better responses were
exemplified by Establishments 2 and 3 which promptly put in the additional costs brought about by the law into the price of Drug
A. In doing so, they were able to maintain the profitability of the business, even earning some more, while at the same time
being fully compliant with the law. This is not to mention that the illustration is even too simplistic and not' the most ideal since
it dealt only with a single drug being purchased by both regular patrons and senior citizens and PWDs. It did not consider the
accumulated profits from the other medical and non-medical products being sold by the establishments which are expected to
further curb the effect of the granting of the discounts in the business.
It is therefore unthinkable how the petitioner could have suffered losses due to the mandated discounts in R.A. Nos. 9257 and
9442, when a fractional increase in the prices of items could bring the business standing at a balance even with the introduction
of the subject laws. A level adjustment in the pricing of items is a reasonable business measure to take in order to adapt to the
contingency. This could even make establishments earn more, as shown in the illustration, since every fractional increase in
the price of covered items translates to a wider cushion to taper off the effect of the granting of discounts and ultimately results
to additional profits gained from the purchases of the same items by regular patrons who are not entitled to the discount. Clearly,
the effect of the subject laws in the financial standing of covered companies depends largely on how they respond and forge a
balance between profitability and their sense of social responsibility. The adaptation is entirely up to them and they are not
powerless to make adjustments to accommodate the subject legislations.
Still, the petitioner argues that the law is confiscatory in the sense that the State takes away a portion of its supposed profits
which could have gone into its coffers and utilizes it for public purpose. The petitioner claims that the action of the State amounts
to taking for which it should be compensated.
To reiterate, the subject provisions only affect the petitioner's right to profit, and not earned profits. Unfortunately for the
petitioner, the right to profit is not a vested right or an entitlement that has accrued on the person or entity such that its invasion
or deprivation warrants compensation. Vested rights are "fixed, unalterable, or irrevocable."48 More extensively, they are
depicted as follows:
Rights which have so completely and definitely accrued to or settled in a person that they are not subject to be defeated or
cancelled by the act of any other private person, and which it is right and equitable that the government should recognize and
protect, as being lawful in themselves, and settled according to the then current rules of law, and of which the individual could
not be deprived arbitrarily without injustice, or of which he could not justly be deprived otherwise than by the established
methods of procedure and for the public welfare. x x x A right is not 'vested' unless it is more than a mere expectation based
on the anticipated continuance of present laws; it must be an established interest in property, not open to doubt. x x x To be
vested in its accurate legal sense, a right must be complete and consummated, and one of which the person to whom it belongs
cannot be divested without his consent.x x x.49 (Emphasis ours)
Right to profits does not give the petitioner the cause of action to ask for just compensation, it being only an inchoate right or
one that has not fully developed50 and therefore cannot be claimed as one's own. An inchoate right is a mere expectation, which
may or may not come into existence. It is contingent as it only comes "into existence on an event or condition which may not
happen or be performed until some other event may prevent their vesting."51Certainly, the petitioner cannot claim confiscation
or taking of something that has yet to exist. It cannot claim deprivation of profit before the consummation of a sale and the
purchase by a senior citizen or PWD.
Right to profit is not an accrued right; it is not fixed, absolute nor indefeasible. It does not come into being until the occurrence
or realization of a condition precedent. It is a mere "contingency that might never eventuate into a right. It stands for a mere
possibility of profit but nothing might ever be payable under it."52
The inchoate nature of the right to profit precludes the possibility of compensation because it lacks the quality or characteristic
which is necessary before any act of taking or expropriation can be effected. Moreover, there is no yardstick fitting to quantify
a contingency or to determine compensation for a mere possibility. Certainly, "taking" presupposes the existence of a subject
that has a quantifiable or determinable value, characteristics which a mere contingency does not possess.
Anent the question regarding the shift from tax credit to tax deduction, suffice it is to say that it is within the province of Congress
to do so in the exercise of its legislative power. It has the authority to choose the subject of legislation, outline the effective
measures to achieve its declared policies and even impose penalties in case of non-compliance. It has the sole discretion to
decide which policies to pursue and devise means to achieve them, and courts often do not interfere in this exercise for as long
as it does not transcend constitutional limitations. "In performing this duty, the legislature has no guide but its judgment and
discretion and the wisdom of experience."53 In Carter v. Carter Coal Co.,54legislative discretion has been described as follows:
Legislative congressional discretion begins with the choice of means, and ends with the adoption of methods and details to
carry the delegated powers into effect. x x x [W]hile the powers are rigidly limited to the enumerations of the Constitution, the
means which may be employed to carry the powers into effect are not restricted, save that they must be appropriate, plainly
adapted to the end, and not prohibited by, but consistent with, the letter and spirit of the Constitution. x x x. 55 (Emphasis ours)
Corollary, whether to treat the discount as a tax deduction or tax credit is a matter addressed to the wisdom of the legislature.
After all, it is within its prerogative to enact laws which it deems sufficient to address a specific public concern. And, in the
process of legislation, a bill goes through rigorous tests of validity, necessity and sufficiency in both houses of Congress before
enrolment. It undergoes close scrutiny of the members of Congress and necessarily had to surpass the arguments hurled
against its passage. Thus, the presumption of validity that goes with every law as a form of deference to the process it had
gone through and also to the legislature's exercise of discretion. Thus, in lchong, etc., et al. v. Hernandez) etc., and
Sarmiento,56the Court emphasized, thus:
It must not be overlooked, in the first place, that the legislature, which is the constitutional repository of police power and
exercises the prerogative of determining the policy of the State, is by force of circumstances primarily the judge of necessity,
adequacy or reasonableness and wisdom, of any law promulgated in the exercise of the police power, or of the
measures adopted to implement the public policy or to achieve public interest.x x x.57 (Emphasis ours)
The legislature may also grant rights and impose additional burdens: It may also regulate industries, in the exercise of police
power, for the protection of the public. R.A. Nos. 9257 and 9442 are akin to regulatory laws, the issuance of which is within the
ambit of police power. The minimum wage law, zoning ordinances, price control laws, laws regulating the operation of motels
and hotels, laws limiting the working hours to eight, and the like fall under this category. 58
Indeed, regulatory laws are within the category of police power measures from which affected persons or entities cannot claim
exclusion or compensation. For instance, private establishments cannot protest that the imposition of the minimum wage is
confiscatory since it eats up a considerable chunk of its profits or that the mandated remuneration is not commensurate for the
work done. The compulsory nature of the provision for minimum wages underlies the effort of the State; as R.A. No.
672759 expresses it, to promote productivity-improvement and gain-sharing measures to ensure a decent standard of living for
the workers and their families; to guarantee the rights of labor to its just share in the fruits of production; to enhance employment
generation in the countryside through industry dispersal; and to allow business and industry reasonable returns on investment,
expansion and growth, and as the Constitution expresses it, to affirm labor as a primary social economic force. 60
Similarly, the imposition of price control on staple goods in R.A. No. 758161 is likewise a valid exercise of police power and
affected establishments cannot argue that the law was depriving them of supposed gains. The law seeks to ensure the
availability of basic necessities and prime commodities at reasonable prices at all times without denying legitimate business a
fair return on investment. It likewise aims to provide effective and sufficient protection to consumers against hoarding,
profiteering and cartels with respect to the supply, distribution, marketing and pricing of said goods, especially during periods
of calamity, emergency, widespread illegal price manipulation and other similar situations.62
More relevantly, in Manila Memorial Park, Inc.,63it was ruled that it is within the bounds of the police power of the state to impose
burden on private entities, even if it may affect their profits, such as in the imposition of price control measures. There is no
compensable taking but only a recognition of the fact that they are subject to the regulation of the State and that all personal or
private interests must bow down to the more paramount interest of the State.
This notwithstanding, the regulatory power of the State does not authorize the destruction of the business. While a business
may be regulated, such regulation must be within the bounds of reason, i.e., the regulatory ordinance must be reasonable, and
its provision cannot be oppressive amounting to an arbitrary interference with the business or calling subject of regulation. A
lawful business or calling may not, under the guise of regulation, be unreasonably interfered with even by the exercise of police
power. 64 After all, regulation only signifies control or restraint, it does not mean suppression or absolute prohibition. Thus,
in Philippine Communications Satellite Corporation v. Alcuaz, 65the Court emphasized:
The power to regulate is not the power to destroy useful and harmless enterprises, but is the power to protect, foster, promote,
preserve, and control with due regard for the interest, first and foremost, of the public, then of the utility and of its patrons. Any
regulation, therefore, which operates as an effective confiscation of private property or constitutes an arbitrary or unreasonable
infringement of property rights is void, because it is repugnant to the constitutional guaranties of due process and equal
protection of the laws. 66 (Citation omitted)
Here, the petitioner failed to show that R.A. Nos. 9257 and 9442, under the guise of regulation, allow undue interference in an
otherwise legitimate business.1avvphi1 On the contrary, it was shown that the questioned laws do not meddle in the business
or take anything from it but only regulate its realization of profits.
The subject laws do not violate the

equal protection clause
The petitioner argues that R.A. Nos. 9257 and 9442 are violative of the equal protection clause in that it failed to distinguish
between those who have the capacity to pay and those who do not, in granting the 20% discount. R.A. No. 9257, in particular,
removed the income qualification in R.A. No. 7432 of'₱60,000.00 per annum before a senior citizen may be entitled to the 20o/o
discount.
The contention lacks merit.
The petitioner's argument is dismissive of the reasonable qualification on which the subject laws were based. In City of
Manila v. Hon. Laguio, Jr., 67 the Court emphasized:
Equal protection requires that all persons or things similarly situated should be treated alike, both as to rights conferred and
responsibilities imposed. Similar subjects, in other words, should not be treated differently, so as to give undue favor to some
and unjustly discriminate against others. The guarantee means that no person or class of persons shall be denied the same
protection of laws which is enjoyed by other persons or other classes in like circumstances.68 (Citations omitted)
"The equal protection clause is not infringed by legislation which applies only to those persons falling within a specified class.
If the groupings are characterized by substantial distinctions that make real differences, one class may be treated and regulated
differently from another."69 For a classification to be valid, (1) it must be based upon substantial distinctions, (2) it must be
germane to the purposes of the law, (3) it must not be limited to existing conditions only, and (4) it must apply equally to all
members of the same class. 70
To recognize all senior citizens as a group, without distinction as to income, is a valid classification. The Constitution itself
considered the elderly as a class of their own and deemed it a priority to address their needs. When the Constitution declared
its intention to prioritize the predicament of the underprivileged sick, elderly, disabled, women, and children, 71 it did not make
any reservation as to income, race, religion or any other personal circumstances. It was a blanket privilege afforded the group
of citizens in the enumeration in view of the vulnerability of their class.
R.A. No. 9257 is an implementation of the avowed policy of the Constitution to enact measures that protect and enhance the
right of all the people to human dignity, reduce social, economic, and political inequalities. 72 Specifically, it caters to the welfare
of all senior citizens. The classification is based on age and therefore qualifies all who have attained the age of 60. Senior
citizens are a class of their own, who are in need and should be entitled to government support, and the fact that they may still
be earning for their own sustenance should not disqualify them from the privilege.
It is well to consider that our senior citizens have already reached the age when work opportunities have dwindled concurrently
as their physical health.They are no longer expected to work, but there are still those who continue to work and contribute what
they can to the country. Thus, to single them out and take them out of the privileges of the law for continuing to strive and earn
income to fend for themselves is inimical to a welfare state that the Constitution envisions. It is tantamount to penalizing them
for their persistence. It is commending indolence rather than rewarding diligence. It encourages them to become wards of the
State rather than productive partners.
Our senior citizens were the laborers, professionals and overseas contract workers of the past. While some may be well to do
or may have the capacity to support their sustenance, the discretion to avail of the privileges of the law is up to them. But to
instantly tag them. as undeserving of the privilege would be the height of ingratitude; it is an outright discrimination.
The same ratiocination may be said of the recognition of PWDs as a class in R.A. No. 9442 and in granting them discounts. It
needs no further explanation that PWDs have special needs which, for most,' last their entire lifetime. They constitute a class
of their own, equally deserving of government support as our elderlies. While some of them maybe willing to work and earn
income for themselves, their disability deters them from living their full potential. Thus, the need for assistance from the
government to augment the reduced income or productivity brought about by their physical or intellectual limitations.
There is also no question that the grant of mandatory discount is germane to the purpose of R.A. Nos. 9257 and 9442, that is,
to adopt an integrated and comprehensive approach to health development and make essential goods and other social services
available to all the people at affordable cost, with special priority given to the elderlies and the disabled, among others. The
privileges granted by the laws ease their concerns and allow them to live more comfortably.
The subject laws also address a continuing concern of the government for the welfare of the senior citizens and PWDs. It is not
some random predicament but an actual, continuing and pressing concern that requires preferential attention. Also, the laws
apply to all senior citizens and PWDs, respectively, without further distinction or reservation. Without a doubt, all the elements
for a valid classification were met.
The definitions of "disabilities" and
"PWDs" are clear and unequivocal
Undeterred, the petitioner claims that R.A. No. 9442 is ambiguous particularly in defining the terms "disability" and "PWDs,"
such that it lack comprehensible standards that men of common intelligence must guess at its meaning. It likewise bewails the
futility of the given safeguards to prevent abuse since government officials who are neither experts nor practitioners of medicine
are given the authority to issue identification cards that authorizes the granting of the privileges under the law.
The Court disagrees.
Section 4(a) of R.A. No. 7277, the precursor of R.A. No. 94421 defines "disabled persons" as follows:
(a) Disabled persons are those suffering from restriction or different abilities, as a result of a mental, physical or sensory
impairment, to perform an activity in the manner or within the range considered normal for a human being[.]
On the other hand, the term "PWDs" is defined in Section 5.1 of the IRR of R.A. No. 9442 as follows:
5.1. PersonswithDisability are those individuals defined under Section 4 of [R.A. No.] 7277 [or] An Act Providing for the
Rehabilitation, Self-Development and Self-Reliance of Persons with Disability as amended and their integration into the
Mainstream of Society and for Other Purposes. This is defined as a person suffering from restriction or different abilities, as a
result of a mental, physical or sensory impairment, to perform an activity in a manner or within the range considered normal for
human being. Disability shall mean (1) a physical 1or mental impairment that substantially limits one or more psychological,
physiological or anatomical function of an individual or activities of such individual; (2) a record of such an impairment; or (3)
being regarded as having such an impairment.
The foregoing definitions have a striking conformity with the definition of "PWDs" in Article 1 of the United Nations Convention
on the Rights of Persons with Disabilities which reads:
Persons with disabilities include those who have long-term physical, mental, intellectual or sensory impairments which in
interaction with various barriers may hinder their full and effective participation in society on an equal basis with others.
(Emphasis and italics ours)
The seemingly broad definition of the terms was not without good reasons. It recognizes that "disability is an evolving
concept"73 and appreciates the "diversity of PWDs."74 The terms were given comprehensive definitions so as to accommodate
the various forms of disabilities, and not confine it to a particular case as this would effectively exclude other forms of physical,
intellectual or psychological impairments.
Moreover, in Estrada v. Sandiganbayan, 75 it was declared, thus:
A statute is not rendered uncertain and void merely because general terms are used therein, or because of the employment of
terms without defining them; much less do we have to define every word we use. Besides, there is no positive constitutional or
statutory command requiring the legislature to define each and every word in an enactment. Congress is not restricted in the
form of expression of its will, and its inability to so define the words employed in a statute will not necessarily result in the
vagueness or ambiguity of the law so long as the legislative will is clear, or at least, can be gathered from the whole act x x
x.76 (Citation omitted)
At any rate, the Court gathers no ambiguity in the provisions of R.A. No. 9442. As regards the petitioner's claim that the law
lacked reasonable standards in determining the persons entitled to the discount, Section 32 thereof is on point as it identifies
who may avail of the privilege and the manner of its availment. It states:
Sec. 32. x x x
The abovementioned privileges are available only to persons with disability who are Filipino citizens upon submission of any of
the following as proof of his/her entitlement thereto:
(I) An identification card issued by the city or municipal mayor or the barangay captain of the place where the
persons with disability resides;
(II) The passport of the persons with disability concerned; or
(III) Transportation discount fare Identification Card (ID) issued by the National Council for the Welfare of
Disabled Persons (NCWDP).
It is, however, the petitioner's contention that the foregoing authorizes government officials who had no medical background to
exercise discretion in issuing identification cards to those claiming to be PWDs. It argues that the provision lends to the
indiscriminate availment of the privileges even by those who are not qualified.
The petitioner's apprehension demonstrates a superficial understanding of the law and its implementing rules. To be clear, the
issuance of identification cards to PWDs does not depend on the authority of the city or municipal mayor, the DSWD or officials
of the NCDA (formerly NCWDP). It is well to remember that what entitles a person to the privileges of the law is his disability, the
fact of which he must prove to qualify. Thus, in NCDA Administrative Order (A.O.) No. 001, series of 2008, 77 it is required that
the person claiming disability must submit the following requirements before he shall be issued a PWD Identification Card:
1. Two "1 x l" recent ID pictures with the names, and signatures or thumb marks at the back of the picture.
2. One (1) Valid ID
3. Document to confirm the medical or disability condition 78
To confirm his disability, the person must obtain a medical certificate or assessment, as the case maybe, issued by a licensed
private or government physician, licensed teacher or head of a business establishment attesting to his impairment. The issuing
entity depends on whether the disability is apparent or non-apparent. NCDAA.O. No. 001 further provides:79
DISABILITY DOCUMENT ISSUING ENTITY
Apparent Medical Licensed Private or

Disability Certificate Government Physician
School Licensed Teacher duly

Assessment signed by the School
Principal
Certificate of  Head of the Business

Disability Establishment
 Head of Non-
Government
Organization
Non-Apparent Medical Licensed Private or

Disability Certificate Government Physician
To provide further safeguard, the Department of Health issued A.O. No. 2009-0011, providing guidelines for the availment of
the 20% discount on the purchase of medicines by PWDs. In making a purchase, the individual must present the documents
enumerated in Section VI(4)(b ), to wit:
i. PWD identification card x x x

ii. Doctor's prescription stating the name of the PWD, age, sex, address, date, generic name of the medicine, dosage
form, dosage strength, quantity, signature over printed name of physician, physician's address, contact number of
physician or dentist, professional license number, professional tax receipt number and narcotic license number, if
applicable. To safeguard the health of PWDs and to prevent abuse of [R.A. No.] 9257, a doctor's prescription is required
in the purchase of over-the-counter medicines. x x x.
iii. Purchase booklet issued by the local social/health office to PWDs for free containing the following basic information:
a) PWD ID number
b) Booklet control number
c) Name of PWD
d) Sex
e) Address
f) Date of Birth
g) Picture
h) Signature of PWD
i) Information of medicine purchased:
i.1 Name of medicine
i.2 Quantity
i.3 Attending Physician
i.4 License Number
i.5 Servicing drug store name
i.6 Name of dispensing pharmacist
j) Authorization letter of the PWD x x x in case the medicine is bought by the representative or caregiver
of the PWD.
The PWD identification card also has a validity period of only three years which facilitate in the monitoring of those who may
need continued support and who have been relieved of their disability, and therefore may be taken out of the coverage of the
law.
At any rate, the law has penal provisions which give concerned establishments the option to file a case against those abusing
the privilege Section 46(b) of R.A. No. 9442 provides that "[a]ny person who abuses the privileges granted herein shall be
punished with imprisonment of not less than six months or a fine of not less than Five Thousand pesos (₱5,000.00), but not
more than Fifty Thousand pesos (₱50,000.00), or both, at the discretion of the court." Thus, concerned establishments, together
with the proper government agencies, must actively participate in monitoring compliance with the law so that only the intended
beneficiaries of the law can avail of the privileges.
Indubitably, the law is clear and unequivocal, and the petitioner claim of vagueness to cast uncertainty in the validity of the law
does not stand.
WHEREFORE, in view of the foregoing disquisition, Section 4(a) of Republic Act No. 9257 and Section 32 of Republic Act No.
9442 are hereby declared CONSTITUTIONAL.
SO ORDERED.
2. SOCIAL JUSTICE SOCIETY V. ATIENZA
G.R. No. 156052 March 7, 2007
SOCIAL JUSTICE SOCIETY (SJS), VLADIMIR ALARIQUE T. CABIGAO, and BONIFACIO S. TUMBOKON, Petitioners,
vs.
HON. JOSE L. ATIENZA, JR., in his capacity as Mayor of the City of Manila, Respondent.
DECISION
CORONA, J.:
In this original petition for mandamus,1 petitioners Social Justice Society (SJS), Vladimir Alarique T. Cabigao and Bonifacio S.
Tumbokon seek to compel respondent Hon. Jose L. Atienza, Jr., mayor of the City of Manila, to enforce Ordinance No. 8027.
The antecedents are as follows.
On November 20, 2001, the Sangguniang Panlungsod of Manila enacted Ordinance No. 8027.2 Respondent mayor approved
the ordinance on November 28, 2001.3 It became effective on December 28, 2001, after its publication.4
Ordinance No. 8027 was enacted pursuant to the police power delegated to local government units, a principle described as
the power inherent in a government to enact laws, within constitutional limits, to promote the order, safety, health, morals and
general welfare of the society.5 This is evident from Sections 1 and 3 thereof which state:
SECTION 1. For the purpose of promoting sound urban planning and ensuring health, public safety, and general welfare of the
residents of Pandacan and Sta. Ana as well as its adjoining areas, the land use of [those] portions of land bounded by the Pasig
River in the north, PNR Railroad Track in the east, Beata St. in the south, Palumpong St. in the southwest, and Estero de
Pancacan in the west[,] PNR Railroad in the northwest area, Estero de Pandacan in the [n]ortheast, Pasig River in the southeast
and Dr. M.L. Carreon in the southwest. The area of Punta, Sta. Ana bounded by the Pasig River, Marcelino Obrero St., Mayo
28 St., and F. Manalo Street, are hereby reclassified from Industrial II to Commercial I.
xxx xxx xxx
SEC. 3. Owners or operators of industries and other businesses, the operation of which are no longer permitted under Section
1 hereof, are hereby given a period of six (6) months from the date of effectivity of this Ordinance within which to cease and
desist from the operation of businesses which are hereby in consequence, disallowed.
Ordinance No. 8027 reclassified the area described therein from industrial to commercial and directed the owners and operators
of businesses disallowed under Section 1 to cease and desist from operating their businesses within six months from the date
of effectivity of the ordinance. Among the businesses situated in the area are the so-called "Pandacan Terminals" of the oil
companies Caltex (Philippines), Inc., Petron Corporation and Pilipinas Shell Petroleum Corporation.
However, on June 26, 2002, the City of Manila and the Department of Energy (DOE) entered into a memorandum of
understanding (MOU)6 with the oil companies in which they agreed that "the scaling down of the Pandacan Terminals [was] the
most viable and practicable option." Under the MOU, the oil companies agreed to perform the following:
Section 1. - Consistent with the objectives stated above, the OIL COMPANIES shall, upon signing of this MOU, undertake a
program to scale down the Pandacan Terminals which shall include, among others, the immediate removal/decommissioning
process of TWENTY EIGHT (28) tanks starting with the LPG spheres and the commencing of works for the creation of safety
buffer and green zones surrounding the Pandacan Terminals. xxx
Section 2. – Consistent with the scale-down program mentioned above, the OIL COMPANIES shall establish joint operations
and management, including the operation of common, integrated and/or shared facilities, consistent with international and
domestic technical, safety, environmental and economic considerations and standards. Consequently, the joint operations of
the OIL COMPANIES in the Pandacan Terminals shall be limited to the common and integrated areas/facilities. A separate
agreement covering the commercial and operational terms and conditions of the joint operations, shall be entered into by the
OIL COMPANIES.
Section 3. - The development and maintenance of the safety and green buffer zones mentioned therein, which shall be taken
from the properties of the OIL COMPANIES and not from the surrounding communities, shall be the sole responsibility of the
OIL COMPANIES.
The City of Manila and the DOE, on the other hand, committed to do the following:
Section 1. - The City Mayor shall endorse to the City Council this MOU for its appropriate action with the view of implementing
the spirit and intent thereof.
Section 2. - The City Mayor and the DOE shall, consistent with the spirit and intent of this MOU, enable the OIL COMPANIES
to continuously operate in compliance with legal requirements, within the limited area resulting from the joint operations and
the scale down program.
Section 3. - The DOE and the City Mayor shall monitor the OIL COMPANIES’ compliance with the provisions of this MOU.
Section 4. - The CITY OF MANILA and the national government shall protect the safety buffer and green zones and shall exert
all efforts at preventing future occupation or encroachment into these areas by illegal settlers and other unauthorized parties.
The Sangguniang Panlungsod ratified the MOU in Resolution No. 97.7 In the same resolution, the Sangguniandeclared that the
MOU was effective only for a period of six months starting July 25, 2002.8 Thereafter, on January 30, 2003,
the Sanggunian adopted Resolution No. 139 extending the validity of Resolution No. 97 to April 30, 2003 and authorizing Mayor
Atienza to issue special business permits to the oil companies. Resolution No. 13, s. 2003 also called for a reassessment of
the ordinance.10
Meanwhile, petitioners filed this original action for mandamus on December 4, 2002 praying that Mayor Atienza be compelled
to enforce Ordinance No. 8027 and order the immediate removal of the terminals of the oil companies.11
The issues raised by petitioners are as follows:
1. whether respondent has the mandatory legal duty to enforce Ordinance No. 8027 and order the removal of the
Pandacan Terminals, and
2. whether the June 26, 2002 MOU and the resolutions ratifying it can amend or repeal Ordinance No. 8027.12
Petitioners contend that respondent has the mandatory legal duty, under Section 455 (b) (2) of the Local Government Code
(RA 7160),13 to enforce Ordinance No. 8027 and order the removal of the Pandacan Terminals of the oil companies. Instead,
he has allowed them to stay.
Respondent’s defense is that Ordinance No. 8027 has been superseded by the MOU and the resolutions. 14However, he also
confusingly argues that the ordinance and MOU are not inconsistent with each other and that the latter has not amended the
former. He insists that the ordinance remains valid and in full force and effect and that the MOU did not in any way prevent him
from enforcing and implementing it. He maintains that the MOU should be considered as a mere guideline for its full
implementation.15
Under Rule 65, Section 316 of the Rules of Court, a petition for mandamus may be filed when any tribunal, corporation, board,
officer or person unlawfully neglects the performance of an act which the law specifically enjoins as a duty resulting from an
office, trust or station. Mandamus is an extraordinary writ that is employed to compel the performance, when refused, of a
ministerial duty that is already imposed on the respondent and there is no other plain, speedy and adequate remedy in the
ordinary course of law. The petitioner should have a well-defined, clear and certain legal right to the performance of the act and
it must be the clear and imperative duty of respondent to do the act required to be done.17
Mandamus will not issue to enforce a right, or to compel compliance with a duty, which is questionable or over which a
substantial doubt exists. The principal function of the writ of mandamus is to command and to expedite, not to inquire and to
adjudicate; thus, it is neither the office nor the aim of the writ to secure a legal right but to implement that which is already
established. Unless the right to the relief sought is unclouded, mandamus will not issue.18
To support the assertion that petitioners have a clear legal right to the enforcement of the ordinance, petitioner SJS states that
it is a political party registered with the Commission on Elections and has its offices in Manila. It claims to have many members
who are residents of Manila. The other petitioners, Cabigao and Tumbokon, are allegedly residents of Manila.
We need not belabor this point. We have ruled in previous cases that when a mandamus proceeding concerns a public right
and its object is to compel a public duty, the people who are interested in the execution of the laws are regarded as the real
parties in interest and they need not show any specific interest.19 Besides, as residents of Manila, petitioners have a direct
interest in the enforcement of the city’s ordinances. Respondent never questioned the right of petitioners to institute this
proceeding.
On the other hand, the Local Government Code imposes upon respondent the duty, as city mayor, to "enforce all laws and
ordinances relative to the governance of the city."20 One of these is Ordinance No. 8027. As the chief executive of the city, he
has the duty to enforce Ordinance No. 8027 as long as it has not been repealed by the Sanggunian or annulled by the
courts.21 He has no other choice. It is his ministerial duty to do so. In Dimaporo v. Mitra, Jr., we stated the reason for this:
These officers cannot refuse to perform their duty on the ground of an alleged invalidity of the statute imposing the duty. The
reason for this is obvious. It might seriously hinder the transaction of public business if these officers were to be permitted in all
cases to question the constitutionality of statutes and ordinances imposing duties upon them and which have not judicially been
declared unconstitutional. Officers of the government from the highest to the lowest are creatures of the law and are bound to
obey it.
The question now is whether the MOU entered into by respondent with the oil companies and the subsequent resolutions
passed by the Sanggunian have made the respondent’s duty to enforce Ordinance No. 8027 doubtful, unclear or uncertain.
This is also connected to the second issue raised by petitioners, that is, whether the MOU and Resolution Nos. 97, s. 2002 and
13, s. 2003 of the Sanggunian can amend or repeal Ordinance No. 8027.
We need not resolve this issue. Assuming that the terms of the MOU were inconsistent with Ordinance No. 8027, the resolutions
which ratified it and made it binding on the City of Manila expressly gave it full force and effect only until April 30, 2003. Thus,
at present, there is nothing that legally hinders respondent from enforcing Ordinance No. 8027.
Ordinance No. 8027 was enacted right after the Philippines, along with the rest of the world, witnessed the horror of the
September 11, 2001 attack on the Twin Towers of the World Trade Center in New York City. The objective of the ordinance is
to protect the residents of Manila from the catastrophic devastation that will surely occur in case of a terrorist attack on the
Pandacan Terminals. No reason exists why such a protective measure should be delayed.
WHEREFORE, the petition is hereby GRANTED. Respondent Hon. Jose L. Atienza, Jr., as mayor of the City of Manila, is
directed to immediately enforce Ordinance No. 8027.
SO ORDERED.
3. CARLOS SUPERDRUG CORP. V. DSWD
G.R. No. 166494 June 29, 2007
CARLOS SUPERDRUG CORP., doing business under the name and style "Carlos Superdrug," ELSIE M. CANO, doing
business under the name and style "Advance Drug," Dr. SIMPLICIO L. YAP, JR., doing business under the name and
style "City Pharmacy," MELVIN S. DELA SERNA, doing business under the name and style "Botica dela Serna," and
LEYTE SERV-WELL CORP., doing business under the name and style "Leyte Serv-Well Drugstore," petitioners,
vs.
DEPARTMENT OF SOCIAL WELFARE and DEVELOPMENT (DSWD), DEPARTMENT OF HEALTH (DOH), DEPARTMENT
OF FINANCE (DOF), DEPARTMENT OF JUSTICE (DOJ), and DEPARTMENT OF INTERIOR and LOCAL GOVERNMENT
(DILG), respondents.
DECISION
AZCUNA, J.:
This is a petition1 for Prohibition with Prayer for Preliminary Injunction assailing the constitutionality of Section 4(a) of Republic
Act (R.A.) No. 9257,2 otherwise known as the "Expanded Senior Citizens Act of 2003."
Petitioners are domestic corporations and proprietors operating drugstores in the Philippines.
Public respondents, on the other hand, include the Department of Social Welfare and Development (DSWD), the Department
of Health (DOH), the Department of Finance (DOF), the Department of Justice (DOJ), and the Department of Interior and Local
Government (DILG) which have been specifically tasked to monitor the drugstores’ compliance with the law; promulgate the
implementing rules and regulations for the effective implementation of the law; and prosecute and revoke the licenses of erring
drugstore establishments.
The antecedents are as follows:
On February 26, 2004, R.A. No. 9257, amending R.A. No. 7432,3 was signed into law by President Gloria Macapagal-Arroyo
and it became effective on March 21, 2004. Section 4(a) of the Act states:
SEC. 4. Privileges for the Senior Citizens. – The senior citizens shall be entitled to the following:
...
The establishment may claim the discounts granted under (a), (f), (g) and (h) as tax deduction based on the net cost of the
goods sold or services rendered: Provided, That the cost of the discount shall be allowed as deduction from gross income for
the same taxable year that the discount is granted. Provided, further, That the total amount of the claimed tax deduction net of
value added tax if applicable, shall be included in their gross sales receipts for tax purposes and shall be subject to proper
documentation and to the provisions of the National Internal Revenue Code, as amended.4
On May 28, 2004, the DSWD approved and adopted the Implementing Rules and Regulations of R.A. No. 9257, Rule VI, Article
8 of which states:
Article 8. Tax Deduction of Establishments. – The establishment may claim the discounts granted under Rule V, Section 4 –
Discounts for Establishments;5 Section 9, Medical and Dental Services in Private Facilities[,]6 and Sections 107 and 118 – Air,
Sea and Land Transportation as tax deduction based on the net cost of the goods sold or services rendered. Provided, That
the cost of the discount shall be allowed as deduction from gross income for the same taxable year that the discount is
granted; Provided, further, That the total amount of the claimed tax deduction net of value added tax if applicable, shall be
included in their gross sales receipts for tax purposes and shall be subject to proper documentation and to the provisions of the
National Internal Revenue Code, as amended; Provided, finally, that the implementation of the tax deduction shall be subject
to the Revenue Regulations to be issued by the Bureau of Internal Revenue (BIR) and approved by the Department of Finance
(DOF).9
On July 10, 2004, in reference to the query of the Drug Stores Association of the Philippines (DSAP) concerning the meaning
of a tax deduction under the Expanded Senior Citizens Act, the DOF, through Director IV Ma. Lourdes B. Recente, clarified as
follows:
1) The difference between the Tax Credit (under the Old Senior Citizens Act) and Tax Deduction (under the Expanded Senior
Citizens Act).
1.1. The provision of Section 4 of R.A. No. 7432 (the old Senior Citizens Act) grants twenty percent (20%) discount from all
establishments relative to the utilization of transportation services, hotels and similar lodging establishment, restaurants and
recreation centers and purchase of medicines anywhere in the country, the costs of which may be claimed by the private
establishments concerned as tax credit.
Effectively, a tax credit is a peso-for-peso deduction from a taxpayer’s tax liability due to the government of the amount of
discounts such establishment has granted to a senior citizen. The establishment recovers the full amount of discount given to
a senior citizen and hence, the government shoulders 100% of the discounts granted.
It must be noted, however, that conceptually, a tax credit scheme under the Philippine tax system, necessitates that prior
payments of taxes have been made and the taxpayer is attempting to recover this tax payment from his/her income tax due.
The tax credit scheme under R.A. No. 7432 is, therefore, inapplicable since no tax payments have previously occurred.
1.2. The provision under R.A. No. 9257, on the other hand, provides that the establishment concerned may claim the discounts
under Section 4(a), (f), (g) and (h) as tax deduction from gross income, based on the net cost of goods sold or services
rendered.
Under this scheme, the establishment concerned is allowed to deduct from gross income, in computing for its tax liability, the
amount of discounts granted to senior citizens. Effectively, the government loses in terms of foregone revenues an amount
equivalent to the marginal tax rate the said establishment is liable to pay the government. This will be an amount equivalent to
32% of the twenty percent (20%) discounts so granted. The establishment shoulders the remaining portion of the granted
discounts.
It may be necessary to note that while the burden on [the] government is slightly diminished in terms of its percentage share
on the discounts granted to senior citizens, the number of potential establishments that may claim tax deductions, have
however, been broadened. Aside from the establishments that may claim tax credits under the old law, more establishments
were added under the new law such as: establishments providing medical and dental services, diagnostic and laboratory
services, including professional fees of attending doctors in all private hospitals and medical facilities, operators of domestic air
and sea transport services, public railways and skyways and bus transport services.
A simple illustration might help amplify the points discussed above, as follows:
Tax Deduction Tax Credit
Gross Sales x x x x x x x x x x x x
Less : Cost of goods sold x x x x x x x x x x
Net Sales x x x x x x x x x x x x
Less: Operating Expenses:

Tax Deduction on Discounts x x x x --
Other deductions: x x x x x x x x
Net Taxable Income x x x x x x x x x x
Tax Due x x x x x x
Less: Tax Credit -- ______x x
Net Tax Due -- x x
As shown above, under a tax deduction scheme, the tax deduction on discounts was subtracted from Net Sales together
with other deductions which are considered as operating expenses before the Tax Due was computed based on the Net Taxable
Income. On the other hand, under a tax credit scheme, the amount of discounts which is the tax credit item, was deducted
directly from the tax due amount.10
Meanwhile, on October 1, 2004, Administrative Order (A.O.) No. 171 or the Policies and Guidelines to Implement the Relevant
Provisions of Republic Act 9257, otherwise known as the "Expanded Senior Citizens Act of 2003"11was issued by the DOH,
providing the grant of twenty percent (20%) discount in the purchase of unbranded generic medicines from all establishments
dispensing medicines for the exclusive use of the senior citizens.
On November 12, 2004, the DOH issued Administrative Order No 17712 amending A.O. No. 171. Under A.O. No. 177, the
twenty percent discount shall not be limited to the purchase of unbranded generic medicines only, but shall extend to both
prescription and non-prescription medicines whether branded or generic. Thus, it stated that "[t]he grant of twenty percent
(20%) discount shall be provided in the purchase of medicines from all establishments dispensing medicines for the exclusive
use of the senior citizens."
Petitioners assail the constitutionality of Section 4(a) of the Expanded Senior Citizens Act based on the following grounds:13
1) The law is confiscatory because it infringes Art. III, Sec. 9 of the Constitution which provides that private property shall not
be taken for public use without just compensation;
2) It violates the equal protection clause (Art. III, Sec. 1) enshrined in our Constitution which states that "no person shall be
deprived of life, liberty or property without due process of law, nor shall any person be denied of the equal protection of the
laws;" and
3) The 20% discount on medicines violates the constitutional guarantee in Article XIII, Section 11 that makes "essential goods,
health and other social services available to all people at affordable cost."14
Petitioners assert that Section 4(a) of the law is unconstitutional because it constitutes deprivation of private property.
Compelling drugstore owners and establishments to grant the discount will result in a loss of profit
and capital because 1) drugstores impose a mark-up of only 5% to 10% on branded medicines; and 2) the law failed to provide
a scheme whereby drugstores will be justly compensated for the discount.
Examining petitioners’ arguments, it is apparent that what petitioners are ultimately questioning is the validity of the tax
deduction scheme as a reimbursement mechanism for the twenty percent (20%) discount that they extend to senior citizens.
Based on the afore-stated DOF Opinion, the tax deduction scheme does not fully reimburse petitioners for the discount privilege
accorded to senior citizens. This is because the discount is treated as a deduction, a tax-deductible expense that is subtracted
from the gross income and results in a lower taxable income. Stated otherwise, it is an amount that is allowed by law15 to reduce
the income prior to the application of the tax rate to compute the amount of tax which is due.16 Being a tax deduction, the
discount does not reduce taxes owed on a peso for peso basis but merely offers a fractional reduction in taxes owed.
Theoretically, the treatment of the discount as a deduction reduces the net income of the private establishments concerned.
The discounts given would have entered the coffers and formed part of the gross sales of the private establishments, were it
not for R.A. No. 9257.
The permanent reduction in their total revenues is a forced subsidy corresponding to the taking of private property for public
use or benefit.17 This constitutes compensable taking for which petitioners would ordinarily become entitled to a just
compensation.
Just compensation is defined as the full and fair equivalent of the property taken from its owner by the expropriator. The measure
is not the taker’s gain but the owner’s loss. The word just is used to intensify the meaning of the word compensation, and to
convey the idea that the equivalent to be rendered for the property to be taken shall be real, substantial, full and ample.18
A tax deduction does not offer full reimbursement of the senior citizen discount. As such, it would not meet the definition of just
compensation.19
Having said that, this raises the question of whether the State, in promoting the health and welfare of a special group of citizens,
can impose upon private establishments the burden of partly subsidizing a government program.
The Court believes so.
The Senior Citizens Act was enacted primarily to maximize the contribution of senior citizens to nation-building, and to grant
benefits and privileges to them for their improvement and well-being as the State considers them an integral part of our society.20
The priority given to senior citizens finds its basis in the Constitution as set forth in the law itself. Thus, the Act provides:
SEC. 2. Republic Act No. 7432 is hereby amended to read as follows:
SECTION 1. Declaration of Policies and Objectives. – Pursuant to Article XV, Section 4 of the Constitution, it is the duty of the
family to take care of its elderly members while the State may design programs of social security for them. In addition to this,
Section 10 in the Declaration of Principles and State Policies provides: "The State shall provide social justice in all phases of
national development." Further, Article XIII, Section 11, provides: "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." Consonant with these constitutional principles the following are the declared policies of this Act:
...
(f) To recognize the important role of the private sector in the improvement of the welfare of senior citizens and to
actively seek their partnership.21
senior citizens may claim the discount as a tax deduction.
circumstances, thus assuring the greatest benefits. 22 Accordingly, it has been described as "the most essential, insistent and
the least limitable of powers, extending as it does to all the great public needs."23 It is "[t]he power vested in the legislature by
the constitution to make, ordain, and establish all manner of wholesome and reasonable laws, statutes, and ordinances, either
with penalties or without, not repugnant to the constitution, as they shall judge to be for the good and welfare of the
commonwealth, and of the subjects of the same."24
police power because property rights, though sheltered by due process, must yield to general welfare.25
Police power as an attribute to promote the common good would be diluted considerably if on the mere plea of petitioners that
they will suffer loss of earnings and capital, the questioned provision is invalidated. Moreover, in the absence of evidence
demonstrating the alleged confiscatory effect of the provision in question, there is no basis for its nullification in view of the
presumption of validity which every law has in its favor.26
Given these, it is incorrect for petitioners to insist that the grant of the senior citizen discount is unduly oppressive to their
business, because petitioners have not taken time to calculate correctly and come up with a financial report, so that they have
not been able to show properly whether or not the tax deduction scheme really works greatly to their disadvantage.27
In treating the discount as a tax deduction, petitioners insist that they will incur losses because, referring to the DOF Opinion,
for every ₱1.00 senior citizen discount that petitioners would give, ₱0.68 will be shouldered by them as only ₱0.32 will be
refunded by the government by way of a tax deduction.
To illustrate this point, petitioner Carlos Super Drug cited the anti-hypertensive maintenance drug Norvasc as an example.
According to the latter, it acquires Norvasc from the distributors at ₱37.57 per tablet, and retails it at ₱39.60 (or at a margin of
5%). If it grants a 20% discount to senior citizens or an amount equivalent to ₱7.92, then it would have to sell Norvasc at ₱31.68
which translates to a loss from capital of ₱5.89 per tablet. Even if the government will allow a tax deduction, only ₱2.53 per
tablet will be refunded and not the full amount of the discount which is ₱7.92. In short, only 32% of the 20% discount will be
reimbursed to the drugstores.28
Petitioners’ computation is flawed. For purposes of reimbursement, the law states that the cost of the discount shall be deducted
from gross income,29 the amount of income derived from all sources before deducting allowable expenses, which will result in
net income. Here, petitioners tried to show a loss on a per transaction basis, which should not be the case. An income statement,
showing an accounting of petitioners’ sales, expenses, and net profit (or loss) for a given period could have accurately reflected
the effect of the discount on their income. Absent any financial statement, petitioners cannot substantiate their claim that they
will be operating at a loss should they give the discount. In addition, the computation was erroneously based on the assumption
that their customers consisted wholly of senior citizens. Lastly, the 32% tax rate is to be imposed on income, not on the amount
of the discount.
Furthermore, it is unfair for petitioners to criticize the law because they cannot raise the prices of their medicines given the
cutthroat nature of the players in the industry. It is a business decision on the part of petitioners to peg the mark-up at 5%.
Selling the medicines below acquisition cost, as alleged by petitioners, is merely a result of this decision. Inasmuch as pricing
is a property right, petitioners cannot reproach the law for being oppressive, simply because they cannot afford to raise their
prices for fear of losing their customers to competition.
The Court is not oblivious of the retail side of the pharmaceutical industry and the competitive pricing component of the business.
While the Constitution protects property rights, petitioners must accept the realities of business and the State, in the exercise
of police power, can intervene in the operations of a business which may result in an impairment of property rights in the
process.
promotion of public good.30
Undeniably, the success of the senior citizens program rests largely on the support imparted by petitioners and the other private
establishments concerned. This being the case, the means employed in invoking the active participation of the private sector,
in order to achieve the purpose or objective of the law, is reasonably and directly related. Without sufficient proof that Section
4(a) of R.A. No. 9257 is arbitrary, and that the continued implementation of the same would be unconscionably detrimental to
petitioners, the Court will refrain from quashing a legislative act.31
WHEREFORE, the petition is DISMISSED for lack of merit.

No costs.
SO ORDERED.
4. MANILA MEMORIAL PARK V. DSWD
G.R. No. 175356 December 3, 2013
MANILA MEMORIAL PARK, INC. AND LA FUNERARIA PAZ-SUCAT, INC., Petitioners,

vs.
SECRETARY OF THE DEPARTMENT OF SOCIAL WELFARE AND DEVELOPMENT and THE SECRETARY OF THE
DEPARTMENT OF FINANCE, Respondents.
DECISION
DEL CASTILLO, J.:
When a party challeges the constitutionality of a law, the burden of proof rests upon him.
Before us is a Petition for Prohibition2 under Rule 65 of the Rules of Court filed by petitioners Manila Memorial Park, Inc. and
La Funeraria Paz-Sucat, Inc., domestic corporations engaged in the business of providing funeral and burial services, against
public respondents Secretaries of the Department of Social Welfare and Development (DSWD) and the Department of Finance
(DOF).
Petitioners assail the constitutionality of Section 4 of Republic Act (RA) No. 7432, 3 as amended by RA 9257,4 and the
implementing rules and regulations issued by the DSWD and DOF insofar as these allow business establishments to claim the
20% discount given to senior citizens as a tax deduction.
Factual Antecedents
On April 23, 1992, RA 7432 was passed into law, granting senior citizens the following privileges:
SECTION 4. Privileges for the Senior Citizens. – The senior citizens shall be entitled to the following:
a) the grant of twenty percent (20%) discount from all establishments relative to utilization of transportation services,
hotels and similar lodging establishment[s], restaurants and recreation centers and purchase of medicine anywhere in
the country: Provided, That private establishments may claim the cost as tax credit;
b) a minimum of twenty percent (20%) discount on admission fees charged by theaters, cinema houses and concert
halls, circuses, carnivals and other similar places of culture, leisure, and amusement;
c) exemption from the payment of individual income taxes: Provided, That their annual taxable income does not exceed
the property level as determined by the National Economic and Development Authority (NEDA) for that year;
d) exemption from training fees for socioeconomic programs undertaken by the OSCA as part of its work;
e) free medical and dental services in government establishment[s] anywhere in the country, subject to guidelines to
be issued by the Department of Health, the Government Service Insurance System and the Social Security System;
f) to the extent practicable and feasible, the continuance of the same benefits and privileges given by the Government
Service Insurance System (GSIS), Social Security System (SSS) and PAG-IBIG, as the case may be, as are enjoyed
by those in actual service.
On August 23, 1993, Revenue Regulations (RR) No. 02-94 was issued to implement RA 7432. Sections 2(i) and 4 of RR No.
02-94 provide:
Sec. 2. DEFINITIONS. – For purposes of these regulations: i. Tax Credit – refers to the amount representing the 20% discount
granted to a qualified senior citizen by all establishments relative to their utilization of transportation services, hotels and similar
lodging establishments, restaurants, drugstores, recreation centers, theaters, cinema houses, concert halls, circuses, carnivals
and other similar places of culture, leisure and amusement, which discount shall be deducted by the said establishments from
their gross income for income tax purposes and from their gross sales for value-added tax or other percentage tax purposes. x
x x x Sec. 4. RECORDING/BOOKKEEPING REQUIREMENTS FOR PRIVATE ESTABLISHMENTS. – Private establishments,
i.e., transport services, hotels and similar lodging establishments, restaurants, recreation centers, drugstores, theaters, cinema
houses, concert halls, circuses, carnivals and other similar places of culture[,] leisure and amusement, giving 20% discounts to
qualified senior citizens are required to keep separate and accurate record[s] of sales made to senior citizens, which shall
include the name, identification number, gross sales/receipts, discounts, dates of transactions and invoice number for every
transaction. The amount of 20% discount shall be deducted from the gross income for income tax purposes and from gross
sales of the business enterprise concerned for purposes of the VAT and other percentage taxes.
In Commissioner of Internal Revenue v. Central Luzon Drug Corporation,5 the Court declared Sections 2(i) and 4 of RR No.
02-94 as erroneous because these contravene RA 7432,6 thus:
RA 7432 specifically allows private establishments to claim as tax credit the amount of discounts they grant. In turn, the
Implementing Rules and Regulations, issued pursuant thereto, provide the procedures for its availment. To deny such credit,
despite the plain mandate of the law and the regulations carrying out that mandate, is indefensible. First, the definition given by
petitioner is erroneous. It refers to tax credit as the amount representing the 20 percent discount that "shall be deducted by the
said establishments from their gross income for income tax purposes and from their gross sales for value-added tax or other
percentage tax purposes." In ordinary business language, the tax credit represents the amount of such discount. However, the
manner by which the discount shall be credited against taxes has not been clarified by the revenue regulations. By ordinary
acceptation, a discount is an "abatement or reduction made from the gross amount or value of anything." To be more precise,
it is in business parlance "a deduction or lowering of an amount of money;" or "a reduction from the full amount or value of
something, especially a price." In business there are many kinds of discount, the most common of which is that affecting the
income statement or financial report upon which the income tax is based.
xxxx
Sections 2.i and 4 of Revenue Regulations No. (RR) 2-94 define tax credit as the 20 percent discount deductible from gross
income for income tax purposes, or from gross sales for VAT or other percentage tax purposes. In effect, the tax credit benefit
under RA 7432 is related to a sales discount. This contrived definition is improper, considering that the latter has to be deducted
from gross sales in order to compute the gross income in the income statement and cannot be deducted again, even for
purposes of computing the income tax. When the law says that the cost of the discount may be claimed as a tax credit, it means
that the amount — when claimed — shall be treated as a reduction from any tax liability, plain and simple. The option to avail
of the tax credit benefit depends upon the existence of a tax liability, but to limit the benefit to a sales discount — which is not
even identical to the discount privilege that is granted by law — does not define it at all and serves no useful purpose. The
definition must, therefore, be stricken down.
Laws Not Amended by Regulations
Second, the law cannot be amended by a mere regulation. In fact, a regulation that "operates to create a rule out of harmony
with the statute is a mere nullity;" it cannot prevail. It is a cardinal rule that courts "will and should respect the contemporaneous
construction placed upon a statute by the executive officers whose duty it is to enforce it x x x." In the scheme of judicial tax
administration, the need for certainty and predictability in the implementation of tax laws is crucial. Our tax authorities fill in the
details that "Congress may not have the opportunity or competence to provide." The regulations these authorities issue are
relied upon by taxpayers, who are certain that these will be followed by the courts. Courts, however, will not uphold these
authorities’ interpretations when clearly absurd, erroneous or improper. In the present case, the tax authorities have given the
term tax credit in Sections 2.i and 4 of RR 2-94 a meaning utterly in contrast to what RA 7432 provides. Their interpretation has
muddled x x x the intent of Congress in granting a mere discount privilege, not a sales discount. The administrative agency
issuing these regulations may not enlarge, alter or restrict the provisions of the law it administers; it cannot engraft additional
requirements not contemplated by the legislature.
In case of conflict, the law must prevail. A "regulation adopted pursuant to law is law." Conversely, a regulation or any portion
thereof not adopted pursuant to law is no law and has neither the force nor the effect of law.7
On February 26, 2004, RA 92578 amended certain provisions of RA 7432, to wit:
xxxx
The establishment may claim the discounts granted under (a), (f), (g) and (h) as tax deduction based on the net cost of the
goods sold or services rendered: Provided, That the cost of the discount shall be allowed as deduction from gross income for
the same taxable year that the discount is granted. Provided, further, That the total amount of the claimed tax deduction net of
value added tax if applicable, shall be included in their gross sales receipts for tax purposes and shall be subject to proper
documentation and to the provisions of the National Internal Revenue Code, as amended.
To implement the tax provisions of RA 9257, the Secretary of Finance issued RR No. 4-2006, the pertinent provision of which
provides:
SEC. 8. AVAILMENT BY ESTABLISHMENTS OF SALES DISCOUNTS AS DEDUCTION FROM GROSS INCOME. –

Establishments enumerated in subparagraph (6) hereunder granting sales discounts to senior citizens on the sale of goods
and/or services specified thereunder are entitled to deduct the said discount from gross income subject to the following
conditions:
(1) Only that portion of the gross sales EXCLUSIVELY USED, CONSUMED OR ENJOYED BY THE SENIOR CITIZEN
shall be eligible for the deductible sales discount.
(2) The gross selling price and the sales discount MUST BE SEPARATELY INDICATED IN THE OFFICIAL RECEIPT
OR SALES INVOICE issued by the establishment for the sale of goods or services to the senior citizen.
(3) Only the actual amount of the discount granted or a sales discount not exceeding 20% of the gross selling price can
be deducted from the gross income, net of value added tax, if applicable, for income tax purposes, and from gross sales
or gross receipts of the business enterprise concerned, for VAT or other percentage tax purposes.
(4) The discount can only be allowed as deduction from gross income for the same taxable year that the discount is
granted.
(5) The business establishment giving sales discounts to qualified senior citizens is required to keep separate and
accurate record[s] of sales, which shall include the name of the senior citizen, TIN, OSCA ID, gross sales/receipts,
sales discount granted, [date] of [transaction] and invoice number for every sale transaction to senior citizen.
(6) Only the following business establishments which granted sales discount to senior citizens on their sale of goods
and/or services may claim the said discount granted as deduction from gross income, namely:
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(i) Funeral parlors and similar establishments – The beneficiary or any person who shall shoulder the funeral and burial
expenses of the deceased senior citizen shall claim the discount, such as casket, embalmment, cremation cost and other
related services for the senior citizen upon payment and presentation of [his] death certificate.
The DSWD likewise issued its own Rules and Regulations Implementing RA 9257, to wit:
RULE VI DISCOUNTS AS TAX DEDUCTION OF ESTABLISHMENTS
Article 8. Tax Deduction of Establishments. – The establishment may claim the discounts granted under Rule V, Section 4 –
Discounts for Establishments, Section 9, Medical and Dental Services in Private Facilities and Sections 10 and 11 – Air, Sea
and Land Transportation as tax deduction based on the net cost of the goods sold or services rendered.
Provided, That the cost of the discount shall be allowed as deduction from gross income for the same taxable year that the
discount is granted; Provided, further, That the total amount of the claimed tax deduction net of value added tax if applicable,
shall be included in their gross sales receipts for tax purposes and shall be subject to proper documentation and to the provisions
of the National Internal Revenue Code, as amended; Provided, finally, that the implementation of the tax deduction shall be
subject to the Revenue Regulations to be issued by the Bureau of Internal Revenue (BIR) and approved by the Department of
Finance (DOF).
Feeling aggrieved by the tax deduction scheme, petitioners filed the present recourse, praying that Section 4 of RA 7432, as
amended by RA 9257, and the implementing rules and regulations issued by the DSWD and the DOF be declared
unconstitutional insofar as these allow business establishments to claim the 20% discount given to senior citizens as a tax
deduction; that the DSWD and the DOF be prohibited from enforcing the same; and that the tax credit treatment of the 20%
discount under the former Section 4 (a) of RA 7432 be reinstated.
Issues
Petitioners raise the following issues:
A.
WHETHER THE PETITION PRESENTS AN ACTUAL CASE OR CONTROVERSY.
B.
WHETHER SECTION 4 OF REPUBLIC ACT NO. 9257 AND X X X ITS IMPLEMENTING RULES AND REGULATIONS,
INSOFAR AS THEY PROVIDE THAT THE TWENTY PERCENT (20%) DISCOUNT TO SENIOR CITIZENS MAY BE CLAIMED
AS A TAX DEDUCTION BY THE PRIVATE ESTABLISHMENTS, ARE INVALID AND UNCONSTITUTIONAL. 9
Petitioners’ Arguments
Petitioners emphasize that they are not questioning the 20% discount granted to senior citizens but are only assailing the
constitutionality of the tax deduction scheme prescribed under RA 9257 and the implementing rules and regulations issued by
the DSWD and the DOF.10
Petitioners posit that the tax deduction scheme contravenes Article III, Section 9 of the Constitution, which provides that:
"[p]rivate property shall not be taken for public use without just compensation."11
In support of their position, petitioners cite Central Luzon Drug Corporation,12 where it was ruled that the 20% discount privilege
constitutes taking of private property for public use which requires the payment of just compensation,13 and Carlos Superdrug
Corporation v. Department of Social Welfare and Development,14 where it was acknowledged that the tax deduction scheme
does not meet the definition of just compensation.15
Petitioners likewise seek a reversal of the ruling in Carlos Superdrug Corporation16 that the tax deduction scheme adopted by
the government is justified by police power.17
They assert that "[a]lthough both police power and the power of eminent domain have the general welfare for their object, there
are still traditional distinctions between the two"18 and that "eminent domain cannot be made less supreme than police power."19
Petitioners further claim that the legislature, in amending RA 7432, relied on an erroneous contemporaneous construction that
prior payment of taxes is required for tax credit.20
Petitioners also contend that the tax deduction scheme violates Article XV, Section 4 21 and Article XIII, Section 1122of the
Constitution because it shifts the State’s constitutional mandate or duty of improving the welfare of the elderly to the private
sector.23
Under the tax deduction scheme, the private sector shoulders 65% of the discount because only 35%24 of it is actually returned
by the government.25
Consequently, the implementation of the tax deduction scheme prescribed under Section 4 of RA 9257 affects the businesses
of petitioners.26
Thus, there exists an actual case or controversy of transcendental importance which deserves judicious disposition on the
merits by the highest court of the land.27
Respondents’ Arguments
Respondents, on the other hand, question the filing of the instant Petition directly with the Supreme Court as this disregards
the hierarchy of courts.28
They likewise assert that there is no justiciable controversy as petitioners failed to prove that the tax deduction treatment is not
a "fair and full equivalent of the loss sustained" by them.29
As to the constitutionality of RA 9257 and its implementing rules and regulations, respondents contend that petitioners failed to
overturn its presumption of constitutionality.30
More important, respondents maintain that the tax deduction scheme is a legitimate exercise of the State’s police power.31
Our Ruling
The Petition lacks merit.
There exists an actual case or controversy.
We shall first resolve the procedural issue. When the constitutionality of a law is put in issue, judicial review may be availed of
only if the following requisites concur: "(1) the existence of an actual and appropriate case; (2) the existence of personal and
substantial interest on the part of the party raising the [question of constitutionality]; (3) recourse to judicial review is made at
the earliest opportunity; and (4) the [question of constitutionality] is the lis mota of the case."32
In this case, petitioners are challenging the constitutionality of the tax deduction scheme provided in RA 9257 and the
implementing rules and regulations issued by the DSWD and the DOF. Respondents, however, oppose the Petition on the
ground that there is no actual case or controversy. We do not agree with respondents. An actual case or controversy exists
when there is "a conflict of legal rights" or "an assertion of opposite legal claims susceptible of judicial resolution."33
The Petition must therefore show that "the governmental act being challenged has a direct adverse effect on the individual
challenging it."34
In this case, the tax deduction scheme challenged by petitioners has a direct adverse effect on them. Thus, it cannot be denied
that there exists an actual case or controversy.
The validity of the 20% senior citizen discount and tax deduction scheme under RA 9257, as an exercise of police power of the
State, has already been settled in Carlos Superdrug Corporation.
Petitioners posit that the resolution of this case lies in the determination of whether the legally mandated 20% senior citizen
discount is an exercise of police power or eminent domain. If it is police power, no just compensation is warranted. But if it is
eminent domain, the tax deduction scheme is unconstitutional because it is not a peso for peso reimbursement of the 20%
discount given to senior citizens. Thus, it constitutes taking of private property without payment of just compensation. At the
outset, we note that this question has been settled in Carlos Superdrug Corporation.35
In that case, we ruled:
Compelling drugstore owners and establishments to grant the discount will result in a loss of profit and capital because 1)
drugstores impose a mark-up of only 5% to 10% on branded medicines; and 2) the law failed to provide a scheme whereby
drugstores will be justly compensated for the discount. Examining petitioners’ arguments, it is apparent that what petitioners
are ultimately questioning is the validity of the tax deduction scheme as a reimbursement mechanism for the twenty percent
(20%) discount that they extend to senior citizens. Based on the afore-stated DOF Opinion, the tax deduction scheme does not
fully reimburse petitioners for the discount privilege accorded to senior citizens. This is because the discount is treated as a
deduction, a tax-deductible expense that is subtracted from the gross income and results in a lower taxable income. Stated
otherwise, it is an amount that is allowed by law to reduce the income prior to the application of the tax rate to compute the
amount of tax which is due. Being a tax deduction, the discount does not reduce taxes owed on a peso for peso basis but
merely offers a fractional reduction in taxes owed. Theoretically, the treatment of the discount as a deduction reduces the net
income of the private establishments concerned. The discounts given would have entered the coffers and formed part of the
gross sales of the private establishments, were it not for R.A. No. 9257. The permanent reduction in their total revenues is a
forced subsidy corresponding to the taking of private property for public use or benefit. This constitutes compensable taking for
which petitioners would ordinarily become entitled to a just compensation. Just compensation is defined as the full and fair
equivalent of the property taken from its owner by the expropriator. The measure is not the taker’s gain but the owner’s loss.
The word just is used to intensify the meaning of the word compensation, and to convey the idea that the equivalent to be
rendered for the property to be taken shall be real, substantial, full and ample. A tax deduction does not offer full reimbursement
of the senior citizen discount. As such, it would not meet the definition of just compensation. Having said that, this raises the
question of whether the State, in promoting the health and welfare of a special group of citizens, can impose upon private
establishments the burden of partly subsidizing a government program. The Court believes so. The Senior Citizens Act was
enacted primarily to maximize the contribution of senior citizens to nation-building, and to grant benefits and privileges to them
for their improvement and well-being as the State considers them an integral part of our society. The priority given to senior
citizens finds its basis in the Constitution as set forth in the law itself. Thus, the Act provides: SEC. 2. Republic Act No. 7432 is
hereby amended to read as follows:
SECTION 1. Declaration of Policies and Objectives. — Pursuant to Article XV, Section 4 of the Constitution, it is the duty of the
family to take care of its elderly members while the State may design programs of social security for them. In addition to this,
Section 10 in the Declaration of Principles and State Policies provides: "The State shall provide social justice in all phases of
national development." Further, Article XIII, Section 11, provides: "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." Consonant with these constitutional principles the following are the declared policies of this Act:
xxx xxx xxx
(f) To recognize the important role of the private sector in the improvement of the welfare of senior citizens and to actively seek
their partnership.
senior citizens may claim the discount as a tax deduction. The law is a legitimate exercise of police power which, similar to the
power of eminent domain, has general welfare for its object. Police power is not capable of an exact definition, but has been
purposely veiled in general terms to underscore its comprehensiveness to meet all exigencies and provide enough room for an
efficient and flexible response to conditions and circumstances, thus assuring the greatest benefits. Accordingly, it has been
described as "the most essential, insistent and the least limitable of powers, extending as it does to all the great public needs."
It is "[t]he power vested in the legislature by the constitution to make, ordain, and establish all manner of wholesome and
reasonable laws, statutes, and ordinances, either with penalties or without, not repugnant to the constitution, as they shall judge
to be for the good and welfare of the commonwealth, and of the subjects of the same." For this reason, when the conditions so
demand as determined by the legislature, property rights must bow to the primacy of police power because property rights,
though sheltered by due process, must yield to general welfare. Police power as an attribute to promote the common good
would be diluted considerably if on the mere plea of petitioners that they will suffer loss of earnings and capital, the questioned
provision is invalidated. Moreover, in the absence of evidence demonstrating the alleged confiscatory effect of the provision in
question, there is no basis for its nullification in view of the presumption of validity which every law has in its favor. Given these,
it is incorrect for petitioners to insist that the grant of the senior citizen discount is unduly oppressive to their business, because
petitioners have not taken time to calculate correctly and come up with a financial report, so that they have not been able to
show properly whether or not the tax deduction scheme really works greatly to their disadvantage. In treating the discount as a
tax deduction, petitioners insist that they will incur losses because, referring to the DOF Opinion, for every ₱1.00 senior citizen
discount that petitioners would give, P0.68 will be shouldered by them as only P0.32 will be refunded by the government by
way of a tax deduction. To illustrate this point, petitioner Carlos Super Drug cited the anti-hypertensive maintenance drug
Norvasc as an example. According to the latter, it acquires Norvasc from the distributors at ₱37.57 per tablet, and retails it at
₱39.60 (or at a margin of 5%). If it grants a 20% discount to senior citizens or an amount equivalent to ₱7.92, then it would
have to sell Norvasc at ₱31.68 which translates to a loss from capital of ₱5.89 per tablet. Even if the government will allow a
tax deduction, only ₱2.53 per tablet will be refunded and not the full amount of the discount which is ₱7.92. In short, only 32%
of the 20% discount will be reimbursed to the drugstores. Petitioners’ computation is flawed. For purposes of reimbursement,
the law states that the cost of the discount shall be deducted from gross income, the amount of income derived from all sources
before deducting allowable expenses, which will result in net income. Here, petitioners tried to show a loss on a per transaction
basis, which should not be the case. An income statement, showing an accounting of petitioners' sales, expenses, and net
profit (or loss) for a given period could have accurately reflected the effect of the discount on their income. Absent any financial
statement, petitioners cannot substantiate their claim that they will be operating at a loss should they give the discount. In
addition, the computation was erroneously based on the assumption that their customers consisted wholly of senior citizens.
Lastly, the 32% tax rate is to be imposed on income, not on the amount of the discount.
Furthermore, it is unfair for petitioners to criticize the law because they cannot raise the prices of their medicines given the
cutthroat nature of the players in the industry. It is a business decision on the part of petitioners to peg the mark-up at 5%.
Selling the medicines below acquisition cost, as alleged by petitioners, is merely a result of this decision. Inasmuch as pricing
is a property right, petitioners cannot reproach the law for being oppressive, simply because they cannot afford to raise their
prices for fear of losing their customers to competition. The Court is not oblivious of the retail side of the pharmaceutical industry
and the competitive pricing component of the business. While the Constitution protects property rights, petitioners must accept
the realities of business and the State, in the exercise of police power, can intervene in the operations of a business which may
result in an impairment of property rights in the process.
utilities, continuously serve as x x x reminder[s] that the right to property can be relinquished upon the command of the State
for the promotion of public good. Undeniably, the success of the senior citizens program rests largely on the support imparted
by petitioners and the other private establishments concerned. This being the case, the means employed in invoking the active
participation of the private sector, in order to achieve the purpose or objective of the law, is reasonably and directly related.
Without sufficient proof that Section 4 (a) of R.A. No. 9257 is arbitrary, and that the continued implementation of the same
would be unconscionably detrimental to petitioners, the Court will refrain from quashing a legislative act.36 (Bold in the original;
underline supplied)
We, thus, found that the 20% discount as well as the tax deduction scheme is a valid exercise of the police power of the State.
No compelling reason has been proffered to overturn, modify or abandon the ruling in Carlos Superdrug Corporation.
Petitioners argue that we have previously ruled in Central Luzon Drug Corporation37 that the 20% discount is an exercise of the
power of eminent domain, thus, requiring the payment of just compensation. They urge us to re-examine our ruling in Carlos
Superdrug Corporation38 which allegedly reversed the ruling in Central Luzon Drug Corporation.39
They also point out that Carlos Superdrug Corporation40 recognized that the tax deduction scheme under the assailed law does
not provide for sufficient just compensation. We agree with petitioners’ observation that there are statements in Central Luzon
Drug Corporation41 describing the 20% discount as an exercise of the power of eminent domain, viz.:
[T]he privilege enjoyed by senior citizens does not come directly from the State, but rather from the private establishments
concerned. Accordingly, the tax credit benefit granted to these establishments can be deemed as their just compensation for
private property taken by the State for public use. The concept of public use is no longer confined to the traditional notion of
use by the public, but held synonymous with public interest, public benefit, public welfare, and public convenience. The discount
privilege to which our senior citizens are entitled is actually a benefit enjoyed by the general public to which these citizens
belong. The discounts given would have entered the coffers and formed part of the gross sales of the private establishments
concerned, were it not for RA 7432. The permanent reduction in their total revenues is a forced subsidy corresponding to the
taking of private property for public use or benefit. As a result of the 20 percent discount imposed by RA 7432, respondent
becomes entitled to a just compensation. This term refers not only to the issuance of a tax credit certificate indicating the correct
amount of the discounts given, but also to the promptness in its release. Equivalent to the payment of property taken by the
State, such issuance — when not done within a reasonable time from the grant of the discounts — cannot be considered as
just compensation. In effect, respondent is made to suffer the consequences of being immediately deprived of its revenues
while awaiting actual receipt, through the certificate, of the equivalent amount it needs to cope with the reduction in its revenues.
Besides, the taxation power can also be used as an implement for the exercise of the power of eminent domain. Tax measures
are but "enforced contributions exacted on pain of penal sanctions" and "clearly imposed for a public purpose." In recent years,
the power to tax has indeed become a most effective tool to realize social justice, public welfare, and the equitable distribution
of wealth. While it is a declared commitment under Section 1 of RA 7432, social justice "cannot be invoked to trample on the
rights of property owners who under our Constitution and laws are also entitled to protection. The social justice consecrated in
our [C]onstitution [is] not intended to take away rights from a person and give them to another who is not entitled thereto." For
this reason, a just compensation for income that is taken away from respondent becomes necessary. It is in the tax credit that
our legislators find support to realize social justice, and no administrative body can alter that fact. To put it differently, a private
establishment that merely breaks even — without the discounts yet — will surely start to incur losses because of such discounts.
The same effect is expected if its mark-up is less than 20 percent, and if all its sales come from retail purchases by senior
citizens. Aside from the observation we have already raised earlier, it will also be grossly unfair to an establishment if the
discounts will be treated merely as deductions from either its gross income or its gross sales. Operating at a loss through no
fault of its own, it will realize that the tax credit limitation under RR 2-94 is inutile, if not improper. Worse, profit-generating
businesses will be put in a better position if they avail themselves of tax credits denied those that are losing, because no taxes
are due from the latter.42 (Italics in the original; emphasis supplied)
The above was partly incorporated in our ruling in Carlos Superdrug Corporation43 when we stated preliminarily that—
Compelling drugstore owners and establishments to grant the discount will result in a loss of profit and capital because 1)
drugstores impose a mark-up of only 5% to 10% on branded medicines; and 2) the law failed to provide a scheme whereby
drugstores will be justly compensated for the discount. Examining petitioners’ arguments, it is apparent that what petitioners
are ultimately questioning is the validity of the tax deduction scheme as a reimbursement mechanism for the twenty percent
(20%) discount that they extend to senior citizens. Based on the afore-stated DOF Opinion, the tax deduction scheme does not
fully reimburse petitioners for the discount privilege accorded to senior citizens. This is because the discount is treated as a
deduction, a tax-deductible expense that is subtracted from the gross income and results in a lower taxable income. Stated
otherwise, it is an amount that is allowed by law to reduce the income prior to the application of the tax rate to compute the
amount of tax which is due. Being a tax deduction, the discount does not reduce taxes owed on a peso for peso basis but
merely offers a fractional reduction in taxes owed. Theoretically, the treatment of the discount as a deduction reduces the net
income of the private establishments concerned. The discounts given would have entered the coffers and formed part of the
gross sales of the private establishments, were it not for R.A. No. 9257. The permanent reduction in their total revenues is a
forced subsidy corresponding to the taking of private property for public use or benefit. This constitutes compensable taking for
which petitioners would ordinarily become entitled to a just compensation. Just compensation is defined as the full and fair
equivalent of the property taken from its owner by the expropriator. The measure is not the taker’s gain but the owner’s loss.
The word just is used to intensify the meaning of the word compensation, and to convey the idea that the equivalent to be
rendered for the property to be taken shall be real, substantial, full and ample. A tax deduction does not offer full reimbursement
of the senior citizen discount. As such, it would not meet the definition of just compensation. Having said that, this raises the
question of whether the State, in promoting the health and welfare of a special group of citizens, can impose upon private
establishments the burden of partly subsidizing a government program. The Court believes so.44
This, notwithstanding, we went on to rule in Carlos Superdrug Corporation45 that the 20% discount and tax deduction scheme
is a valid exercise of the police power of the State. The present case, thus, affords an opportunity for us to clarify the above-
quoted statements in Central Luzon Drug Corporation46 and Carlos Superdrug Corporation.47
First, we note that the above-quoted disquisition on eminent domain in Central Luzon Drug Corporation48 is obiter dicta and,
thus, not binding precedent. As stated earlier, in Central Luzon Drug Corporation,49 we ruled that the BIR acted ultra vires when
it effectively treated the 20% discount as a tax deduction, under Sections 2.i and 4 of RR No. 2-94, despite the clear wording
of the previous law that the same should be treated as a tax credit. We were, therefore, not confronted in that case with the
issue as to whether the 20% discount is an exercise of police power or eminent domain. Second, although we adverted to
Central Luzon Drug Corporation50 in our ruling in Carlos Superdrug Corporation,51 this referred only to preliminary matters. A
fair reading of Carlos Superdrug Corporation52would show that we categorically ruled therein that the 20% discount is a valid
exercise of police power. Thus, even if the current law, through its tax deduction scheme (which abandoned the tax credit
scheme under the previous law), does not provide for a peso for peso reimbursement of the 20% discount given by private
establishments, no constitutional infirmity obtains because, being a valid exercise of police power, payment of just
compensation is not warranted. We have carefully reviewed the basis of our ruling in Carlos Superdrug Corporation 53 and we
find no cogent reason to overturn, modify or abandon it. We also note that petitioners’ arguments are a mere reiteration of those
raised and resolved in Carlos Superdrug Corporation.54 Thus, we sustain Carlos Superdrug Corporation.55
Nonetheless, we deem it proper, in what follows, to amplify our explanation in Carlos Superdrug Corporation 56 as to why the
20% discount is a valid exercise of police power and why it may not, under the specific circumstances of this case, be considered
as an exercise of the power of eminent domain contrary to the obiter in Central Luzon Drug Corporation.57
Police power versus eminent domain.
Police power is the inherent power of the State to regulate or to restrain the use of liberty and property for public welfare.58
The only limitation is that the restriction imposed should be reasonable, not oppressive.59
In other words, to be a valid exercise of police power, it must have a lawful subject or objective and a lawful method of
accomplishing the goal.60
Under the police power of the State, "property rights of individuals may be subjected to restraints and burdens in order to fulfill
the objectives of the government."61
The State "may interfere with personal liberty, property, lawful businesses and occupations to promote the general welfare [as
long as] the interference [is] reasonable and not arbitrary."62
Eminent domain, on the other hand, is the inherent power of the State to take or appropriate private property for public use.63
The Constitution, however, requires that private property shall not be taken without due process of law and the payment of just
compensation.64
Traditional distinctions exist between police power and eminent domain. In the exercise of police power, a property right is
impaired by regulation,65 or the use of property is merely prohibited, regulated or restricted66 to promote public welfare. In such
cases, there is no compensable taking, hence, payment of just compensation is not required. Examples of these regulations
are property condemned for being noxious or intended for noxious purposes (e.g., a building on the verge of collapse to be
demolished for public safety, or obscene materials to be destroyed in the interest of public morals)67 as well as zoning
ordinances prohibiting the use of property for purposes injurious to the health, morals or safety of the community (e.g., dividing
a city’s territory into residential and industrial areas).68
It has, thus, been observed that, in the exercise of police power (as distinguished from eminent domain), although the regulation
affects the right of ownership, none of the bundle of rights which constitute ownership is appropriated for use by or for the
benefit of the public.69
On the other hand, in the exercise of the power of eminent domain, property interests are appropriated and applied to some
public purpose which necessitates the payment of just compensation therefor. Normally, the title to and possession of the
property are transferred to the expropriating authority. Examples include the acquisition of lands for the construction of public
highways as well as agricultural lands acquired by the government under the agrarian reform law for redistribution to qualified
farmer beneficiaries. However, it is a settled rule that the acquisition of title or total destruction of the property is not essential
for "taking" under the power of eminent domain to be present.70
Examples of these include establishment of easements such as where the land owner is perpetually deprived of his proprietary
rights because of the hazards posed by electric transmission lines constructed above his property71 or the compelled
interconnection of the telephone system between the government and a private company.72
In these cases, although the private property owner is not divested of ownership or possession, payment of just compensation
is warranted because of the burden placed on the property for the use or benefit of the public.
The 20% senior citizen discount is an exercise of police power.
It may not always be easy to determine whether a challenged governmental act is an exercise of police power or eminent
domain. The very nature of police power as elastic and responsive to various social conditions73 as well as the evolving meaning
and scope of public use74 and just compensation75 in eminent domain evinces that these are not static concepts. Because of
the exigencies of rapidly changing times, Congress may be compelled to adopt or experiment with different measures to
promote the general welfare which may not fall squarely within the traditionally recognized categories of police power and
eminent domain. The judicious approach, therefore, is to look at the nature and effects of the challenged governmental act and
decide, on the basis thereof, whether the act is the exercise of police power or eminent domain. Thus, we now look at the nature
and effects of the 20% discount to determine if it constitutes an exercise of police power or eminent domain. The 20% discount
is intended to improve the welfare of senior citizens who, at their age, are less likely to be gainfully employed, more prone to
illnesses and other disabilities, and, thus, in need of subsidy in purchasing basic commodities. It may not be amiss to mention
also that the discount serves to honor senior citizens who presumably spent the productive years of their lives on contributing
to the development and progress of the nation. This distinct cultural Filipino practice of honoring the elderly is an integral part
of this law. As to its nature and effects, the 20% discount is a regulation affecting the ability of private establishments to price
their products and services relative to a special class of individuals, senior citizens, for which the Constitution affords preferential
concern.76
In turn, this affects the amount of profits or income/gross sales that a private establishment can derive from senior citizens. In
other words, the subject regulation affects the pricing, and, hence, the profitability of a private establishment. However, it does
not purport to appropriate or burden specific properties, used in the operation or conduct of the business of private
establishments, for the use or benefit of the public, or senior citizens for that matter, but merely regulates the pricing of goods
and services relative to, and the amount of profits or income/gross sales that such private establishments may derive from,
senior citizens. The subject regulation may be said to be similar to, but with substantial distinctions from, price control or rate
of return on investment control laws which are traditionally regarded as police power measures.77
These laws generally regulate public utilities or industries/enterprises imbued with public interest in order to protect consumers
from exorbitant or unreasonable pricing as well as temper corporate greed by controlling the rate of return on investment of
these corporations considering that they have a monopoly over the goods or services that they provide to the general public.
The subject regulation differs therefrom in that (1) the discount does not prevent the establishments from adjusting the level of
prices of their goods and services, and (2) the discount does not apply to all customers of a given establishment but only to the
class of senior citizens. Nonetheless, to the degree material to the resolution of this case, the 20% discount may be properly
viewed as belonging to the category of price regulatory measures which affect the profitability of establishments subjected
thereto. On its face, therefore, the subject regulation is a police power measure. The obiter in Central Luzon Drug
Corporation,78 however, describes the 20% discount as an exercise of the power of eminent domain and the tax credit, under
the previous law, equivalent to the amount of discount given as the just compensation therefor. The reason is that (1) the
discount would have formed part of the gross sales of the establishment were it not for the law prescribing the 20% discount,
and (2) the permanent reduction in total revenues is a forced subsidy corresponding to the taking of private property for public
use or benefit. The flaw in this reasoning is in its premise. It presupposes that the subject regulation, which impacts the pricing
and, hence, the profitability of a private establishment, automatically amounts to a deprivation of property without due process
of law. If this were so, then all price and rate of return on investment control laws would have to be invalidated because they
impact, at some level, the regulated establishment’s profits or income/gross sales, yet there is no provision for payment of just
compensation. It would also mean that overnment cannot set price or rate of return on investment limits, which reduce the
profits or income/gross sales of private establishments, if no just compensation is paid even if the measure is not confiscatory.
The obiter is, thus, at odds with the settled octrine that the State can employ police power measures to regulate the pricing of
goods and services, and, hence, the profitability of business establishments in order to pursue legitimate State objectives for
the common good, provided that the regulation does not go too far as to amount to "taking."79
In City of Manila v. Laguio, Jr.,80 we recognized that— x x x a taking also could be found if government regulation of the use of
property went "too far." When regulation reaches a certain magnitude, in most if not in all cases there must be an exercise of
eminent domain and compensation to support the act. While property may be regulated to a certain extent, if regulation goes
too far it will be recognized as a taking. No formula or rule can be devised to answer the questions of what is too far and when
regulation becomes a taking. In Mahon, Justice Holmes recognized that it was "a question of degree and therefore cannot be
disposed of by general propositions." On many other occasions as well, the U.S. Supreme Court has said that the issue of
when regulation constitutes a taking is a matter of considering the facts in each case. The Court asks whether justice and
fairness require that the economic loss caused by public action must be compensated by the government and thus borne by
the public as a whole, or whether the loss should remain concentrated on those few persons subject to the public action.81
The impact or effect of a regulation, such as the one under consideration, must, thus, be determined on a case-to-case basis.
Whether that line between permissible regulation under police power and "taking" under eminent domain has been crossed
must, under the specific circumstances of this case, be subject to proof and the one assailing the constitutionality of the
regulation carries the heavy burden of proving that the measure is unreasonable, oppressive or confiscatory. The time-honored
rule is that the burden of proving the unconstitutionality of a law rests upon the one assailing it and "the burden becomes heavier
when police power is at issue."82
The 20% senior citizen discount has not been shown to be unreasonable, oppressive or confiscatory.
In Alalayan v. National Power Corporation,83 petitioners, who were franchise holders of electric plants, challenged the validity
of a law limiting their allowable net profits to no more than 12% per annum of their investments plus two-month operating
expenses. In rejecting their plea, we ruled that, in an earlier case, it was found that 12% is a reasonable rate of return and that
petitioners failed to prove that the aforesaid rate is confiscatory in view of the presumption of constitutionality.84
We adopted a similar line of reasoning in Carlos Superdrug Corporation85 when we ruled that petitioners therein failed to prove
that the 20% discount is arbitrary, oppressive or confiscatory. We noted that no evidence, such as a financial report, to establish
the impact of the 20% discount on the overall profitability of petitioners was presented in order to show that they would be
operating at a loss due to the subject regulation or that the continued implementation of the law would be unconscionably
detrimental to the business operations of petitioners. In the case at bar, petitioners proceeded with a hypothetical computation
of the alleged loss that they will suffer similar to what the petitioners in Carlos Superdrug Corporation86 did. Petitioners went
directly to this Court without first establishing the factual bases of their claims. Hence, the present recourse must, likewise, fail.
Because all laws enjoy the presumption of constitutionality, courts will uphold a law’s validity if any set of facts may be conceived
to sustain it.87
On its face, we find that there are at least two conceivable bases to sustain the subject regulation’s validity absent clear and
convincing proof that it is unreasonable, oppressive or confiscatory. Congress may have legitimately concluded that business
establishments have the capacity to absorb a decrease in profits or income/gross sales due to the 20% discount without
substantially affecting the reasonable rate of return on their investments considering (1) not all customers of a business
establishment are senior citizens and (2) the level of its profit margins on goods and services offered to the general public.
Concurrently, Congress may have, likewise, legitimately concluded that the establishments, which will be required to extend
the 20% discount, have the capacity to revise their pricing strategy so that whatever reduction in profits or income/gross sales
that they may sustain because of sales to senior citizens, can be recouped through higher mark-ups or from other products not
subject of discounts. As a result, the discounts resulting from sales to senior citizens will not be confiscatory or unduly
oppressive. In sum, we sustain our ruling in Carlos Superdrug Corporation88 that the 20% senior citizen discount and tax
deduction scheme are valid exercises of police power of the State absent a clear showing that it is arbitrary, oppressive or
confiscatory.
Conclusion
In closing, we note that petitioners hypothesize, consistent with our previous ratiocinations, that the discount will force
establishments to raise their prices in order to compensate for its impact on overall profits or income/gross sales. The general
public, or those not belonging to the senior citizen class, are, thus, made to effectively shoulder the subsidy for senior citizens.
This, in petitioners’ view, is unfair.
As already mentioned, Congress may be reasonably assumed to have foreseen this eventuality. But, more importantly, this
goes into the wisdom, efficacy and expediency of the subject law which is not proper for judicial review. In a way, this law
pursues its social equity objective in a non-traditional manner unlike past and existing direct subsidy programs of the
government for the poor and marginalized sectors of our society. Verily, Congress must be given sufficient leeway in formulating
welfare legislations given the enormous challenges that the government faces relative to, among others, resource adequacy
and administrative capability in implementing social reform measures which aim to protect and uphold the interests of those
most vulnerable in our society. In the process, the individual, who enjoys the rights, benefits and privileges of living in a
democratic polity, must bear his share in supporting measures intended for the common good. This is only fair. In fine, without
the requisite showing of a clear and unequivocal breach of the Constitution, the validity of the assailed law must be sustained.
Refutation of the Dissent
The main points of Justice Carpio’s Dissent may be summarized as follows: (1) the discussion on eminent domain in Central
Luzon Drug Corporation89 is not obiter dicta ; (2) allowable taking, in police power, is limited to property that is destroyed or
placed outside the commerce of man for public welfare; (3) the amount of mandatory discount is private property within the
ambit of Article III, Section 990 of the Constitution; and (4) the permanent reduction in a private establishment’s total revenue,
arising from the mandatory discount, is a taking of private property for public use or benefit, hence, an exercise of the power of
eminent domain requiring the payment of just compensation. I We maintain that the discussion on eminent domain in Central
Luzon Drug Corporation91 is obiter dicta. As previously discussed, in Central Luzon Drug Corporation,92 the BIR, pursuant to
Sections 2.i and 4 of RR No. 2-94, treated the senior citizen discount in the previous law, RA 7432, as a tax deduction instead
of a tax credit despite the clear provision in that law which stated –
a) The grant of twenty percent (20%) discount from all establishments relative to utilization of transportation services,
hotels and similar lodging establishment, restaurants and recreation centers and purchase of medicines anywhere in
the country: Provided, That private establishments may claim the cost as tax credit; (Emphasis supplied)
Thus, the Court ruled that the subject revenue regulation violated the law, viz:
The 20 percent discount required by the law to be given to senior citizens is a tax credit, not merely a tax deduction from the
gross income or gross sale of the establishment concerned. A tax credit is used by a private establishment only after the tax
has been computed; a tax deduction, before the tax is computed. RA 7432 unconditionally grants a tax credit to all covered
entities. Thus, the provisions of the revenue regulation that withdraw or modify such grant are void. Basic is the rule that
administrative regulations cannot amend or revoke the law.93
As can be readily seen, the discussion on eminent domain was not necessary in order to arrive at this conclusion. All that was
needed was to point out that the revenue regulation contravened the law which it sought to implement. And, precisely, this was
done in Central Luzon Drug Corporation94 by comparing the wording of the previous law vis-à-vis the revenue regulation;
employing the rules of statutory construction; and applying the settled principle that a regulation cannot amend the law it seeks
to implement. A close reading of Central Luzon Drug Corporation95 would show that the Court went on to state that the tax
credit "can be deemed" as just compensation only to explain why the previous law provides for a tax credit instead of a tax
deduction. The Court surmised that the tax credit was a form of just compensation given to the establishments covered by the
20% discount. However, the reason why the previous law provided for a tax credit and not a tax deduction was not necessary
to resolve the issue as to whether the revenue regulation contravenes the law. Hence, the discussion on eminent domain
is obiter dicta.
A court, in resolving cases before it, may look into the possible purposes or reasons that impelled the enactment of a particular
statute or legal provision. However, statements made relative thereto are not always necessary in resolving the actual
controversies presented before it. This was the case in Central Luzon Drug Corporation96resulting in that unfortunate statement
that the tax credit "can be deemed" as just compensation. This, in turn, led to the erroneous conclusion, by deductive reasoning,
that the 20% discount is an exercise of the power of eminent domain. The Dissent essentially adopts this theory and reasoning
which, as will be shown below, is contrary to settled principles in police power and eminent domain analysis. II The Dissent
discusses at length the doctrine on "taking" in police power which occurs when private property is destroyed or placed outside
the commerce of man. Indeed, there is a whole class of police power measures which justify the destruction of private property
in order to preserve public health, morals, safety or welfare. As earlier mentioned, these would include a building on the verge
of collapse or confiscated obscene materials as well as those mentioned by the Dissent with regard to property used in violating
a criminal statute or one which constitutes a nuisance. In such cases, no compensation is required. However, it is equally true
that there is another class of police power measures which do not involve the destruction of private property but merely regulate
its use. The minimum wage law, zoning ordinances, price control laws, laws regulating the operation of motels and hotels, laws
limiting the working hours to eight, and the like would fall under this category. The examples cited by the Dissent, likewise, fall
under this category: Article 157 of the Labor Code, Sections 19 and 18 of the Social Security Law, and Section 7 of the Pag-
IBIG Fund Law. These laws merely regulate or, to use the term of the Dissent, burden the conduct of the affairs of business
establishments. In such cases, payment of just compensation is not required because they fall within the sphere of permissible
police power measures. The senior citizen discount law falls under this latter category. III The Dissent proceeds from the theory
that the permanent reduction of profits or income/gross sales, due to the 20% discount, is a "taking" of private property for
public purpose without payment of just compensation. At the outset, it must be emphasized that petitioners never presented
any evidence to establish that they were forced to suffer enormous losses or operate at a loss due to the effects of the assailed
law. They came directly to this Court and provided a hypothetical computation of the loss they would allegedly suffer due to the
operation of the assailed law. The central premise of the Dissent’s argument that the 20% discount results in a permanent
reduction in profits or income/gross sales, or forces a business establishment to operate at a loss is, thus, wholly unsupported
by competent evidence. To be sure, the Court can invalidate a law which, on its face, is arbitrary, oppressive or confiscatory.97
But this is not the case here.
In the case at bar, evidence is indispensable before a determination of a constitutional violation can be made because of the
following reasons. First, the assailed law, by imposing the senior citizen discount, does not take any of the properties used by
a business establishment like, say, the land on which a manufacturing plant is constructed or the equipment being used to
produce goods or services. Second, rather than taking specific properties of a business establishment, the senior citizen
discount law merely regulates the prices of the goods or services being sold to senior citizens by mandating a 20% discount.
Thus, if a product is sold at ₱10.00 to the general public, then it shall be sold at ₱8.00 ( i.e., ₱10.00 less 20%) to senior citizens.
Note that the law does not impose at what specific price the product shall be sold, only that a 20% discount shall be given to
senior citizens based on the price set by the business establishment. A business establishment is, thus, free to adjust the prices
of the goods or services it provides to the general public. Accordingly, it can increase the price of the above product to ₱20.00
but is required to sell it at ₱16.00 (i.e. , ₱20.00 less 20%) to senior citizens. Third, because the law impacts the prices of the
goods or services of a particular establishment relative to its sales to senior citizens, its profits or income/gross sales are
affected. The extent of the impact would, however, depend on the profit margin of the business establishment on a particular
good or service. If a product costs ₱5.00 to produce and is sold at ₱10.00, then the profit98 is ₱5.0099 or a profit margin100 of
50%.101
Under the assailed law, the aforesaid product would have to be sold at ₱8.00 to senior citizens yet the business would still earn
₱3.00102 or a 30%103 profit margin. On the other hand, if the product costs ₱9.00 to produce and is required to be sold at ₱8.00
to senior citizens, then the business would experience a loss of ₱1.00.104
But note that since not all customers of a business establishment are senior citizens, the business establishment may continue
to earn ₱1.00 from non-senior citizens which, in turn, can offset any loss arising from sales to senior citizens.
Fourth, when the law imposes the 20% discount in favor of senior citizens, it does not prevent the business establishment from
revising its pricing strategy.
By revising its pricing strategy, a business establishment can recoup any reduction of profits or income/gross sales which would
otherwise arise from the giving of the 20% discount. To illustrate, suppose A has two customers: X, a senior citizen, and Y, a
non-senior citizen. Prior to the law, A sells his products at ₱10.00 a piece to X and Y resulting in income/gross sales of ₱20.00
(₱10.00 + ₱10.00). With the passage of the law, A must now sell his product to X at ₱8.00 (i.e., ₱10.00 less 20%) so that his
income/gross sales would be ₱18.00 (₱8.00 + ₱10.00) or lower by ₱2.00. To prevent this from happening, A decides to increase
the price of his products to ₱11.11 per piece. Thus, he sells his product to X at ₱8.89 (i.e. , ₱11.11 less 20%) and to Y at
₱11.11. As a result, his income/gross sales would still be ₱20.00105 (₱8.89 + ₱11.11). The capacity, then, of business
establishments to revise their pricing strategy makes it possible for them not to suffer any reduction in profits or income/gross
sales, or, in the alternative, mitigate the reduction of their profits or income/gross sales even after the passage of the law. In
other words, business establishments have the capacity to adjust their prices so that they may remain profitable even under
the operation of the assailed law.
The Dissent, however, states that – The explanation by the majority that private establishments can always increase their prices
to recover the mandatory discount will only encourage private establishments to adjust their prices upwards to the prejudice of
customers who do not enjoy the 20% discount. It was likewise suggested that if a company increases its prices, despite the
application of the 20% discount, the establishment becomes more profitable than it was before the implementation of R.A. 7432.
Such an economic justification is self-defeating, for more consumers will suffer from the price increase than will benefit from
the 20% discount. Even then, such ability to increase prices cannot legally validate a violation of the eminent domain clause.106
But, if it is possible that the business establishment, by adjusting its prices, will suffer no reduction in its profits or income/gross
sales (or suffer some reduction but continue to operate profitably) despite giving the discount, what would be the basis to strike
down the law? If it is possible that the business establishment, by adjusting its prices, will not be unduly burdened, how can
there be a finding that the assailed law is an unconstitutional exercise of police power or eminent domain? That there may be
a burden placed on business establishments or the consuming public as a result of the operation of the assailed law is not, by
itself, a ground to declare it unconstitutional for this goes into the wisdom and expediency of the law.
The cost of most, if not all, regulatory measures of the government on business establishments is ultimately passed on to the
consumers but that, by itself, does not justify the wholesale nullification of these measures. It is a basic postulate of our
democratic system of government that the Constitution is a social contract whereby the people have surrendered their sovereign
powers to the State for the common good.107
All persons may be burdened by regulatory measures intended for the common good or to serve some important governmental
interest, such as protecting or improving the welfare of a special class of people for which the Constitution affords preferential
concern. Indubitably, the one assailing the law has the heavy burden of proving that the regulation is unreasonable, oppressive
or confiscatory, or has gone "too far" as to amount to a "taking." Yet, here, the Dissent would have this Court nullify the law
without any proof of such nature.
Further, this Court is not the proper forum to debate the economic theories or realities that impelled Congress to shift from the
tax credit to the tax deduction scheme. It is not within our power or competence to judge which scheme is more or less
burdensome to business establishments or the consuming public and, thereafter, to choose which scheme the State should
use or pursue. The shift from the tax credit to tax deduction scheme is a policy determination by Congress and the Court will
respect it for as long as there is no showing, as here, that the subject regulation has transgressed constitutional limitations.
Unavoidably, the lack of evidence constrains the Dissent to rely on speculative and hypothetical argumentation when it states
that the 20% discount is a significant amount and not a minimal loss (which erroneously assumes that the discount automatically
results in a loss when it is possible that the profit margin is greater than 20% and/or the pricing strategy can be revised to
prevent or mitigate any reduction in profits or income/gross sales as illustrated above),108 and not all private establishments
make a 20% profit margin (which conversely implies that there are those who make more and, thus, would not be greatly
affected by this regulation).109
In fine, because of the possible scenarios discussed above, we cannot assume that the 20% discount results in a permanent
reduction in profits or income/gross sales, much less that business establishments are forced to operate at a loss under the
assailed law. And, even if we gratuitously assume that the 20% discount results in some degree of reduction in profits or
income/gross sales, we cannot assume that such reduction is arbitrary, oppressive or confiscatory. To repeat, there is no actual
proof to back up this claim, and it could be that the loss suffered by a business establishment was occasioned through its fault
or negligence in not adapting to the effects of the assailed law. The law uniformly applies to all business establishments covered
thereunder. There is, therefore, no unjust discrimination as the aforesaid business establishments are faced with the same
constraints. The necessity of proof is all the more pertinent in this case because, as similarly observed by Justice Velasco in
his Concurring Opinion, the law has been in operation for over nine years now. However, the grim picture painted by petitioners
on the unconscionable losses to be indiscriminately suffered by business establishments, which should have led to the closure
of numerous business establishments, has not come to pass. Verily, we cannot invalidate the assailed law based on
assumptions and conjectures. Without adequate proof, the presumption of constitutionality must prevail. IV At this juncture, we
note that the Dissent modified its original arguments by including a new paragraph, to wit:
Section 9, Article III of the 1987 Constitution speaks of private property without any distinction. It does not state that there
should be profit before the taking of property is subject to just compensation. The private property referred to for purposes of
taking could be inherited, donated, purchased, mortgaged, or as in this case, part of the gross sales of private establishments.
They are all private property and any taking should be attended by corresponding payment of just compensation. The 20%
discount granted to senior citizens belong to private establishments, whether these establishments make a profit or suffer a
loss. In fact, the 20% discount applies to non-profit establishments like country, social, or golf clubs which are open to the public
and not only for exclusive membership. The issue of profit or loss to the establishments is immaterial.110
Two things may be said of this argument. First, it contradicts the rest of the arguments of the Dissent. After it states that the
issue of profit or loss is immaterial, the Dissent proceeds to argue that the 20% discount is not a minimal loss111 and that the
20% discount forces business establishments to operate at a loss.112
Even the obiter in Central Luzon Drug Corporation,113 which the Dissent essentially adopts and relies on, is premised on the
permanent reduction of total revenues and the loss that business establishments will be forced to suffer in arguing that the 20%
discount constitutes a "taking" under the power of eminent domain. Thus, when the Dissent now argues that the issue of profit
or loss is immaterial, it contradicts itself because it later argues, in order to justify that there is a "taking" under the power of
eminent domain in this case, that the 20% discount forces business establishments to suffer a significant loss or to operate at
a loss. Second, this argument suffers from the same flaw as the Dissent's original arguments. It is an erroneous characterization
of the 20% discount. According to the Dissent, the 20% discount is part of the gross sales and, hence, private property belonging
to business establishments. However, as previously discussed, the 20% discount is not private property actually owned and/or
used by the business establishment. It should be distinguished from properties like lands or buildings actually used in the
operation of a business establishment which, if appropriated for public use, would amount to a "taking" under the power of
eminent domain. Instead, the 20% discount is a regulatory measure which impacts the pricing and, hence, the profitability of
business establishments. At the time the discount is imposed, no particular property of the business establishment can be said
to be "taken." That is, the State does not acquire or take anything from the business establishment in the way that it takes a
piece of private land to build a public road. While the 20% discount may form part of the potential profits or income/gross
sales114 of the business establishment, as similarly characterized by Justice Bersamin in his Concurring Opinion, potential
profits or income/gross sales are not private property, specifically cash or money, already belonging to the business
establishment. They are a mere expectancy because they are potential fruits of the successful conduct of the business. Prior
to the sale of goods or services, a business establishment may be subject to State regulations, such as the 20% senior citizen
discount, which may impact the level or amount of profits or income/gross sales that can be generated by such establishment.
For this reason, the validity of the discount is to be determined based on its overall effects on the operations of the business
establishment.
Again, as previously discussed, the 20% discount does not automatically result in a 20% reduction in profits, or, to align it with
the term used by the Dissent, the 20% discount does not mean that a 20% reduction in gross sales necessarily results. Because
(1) the profit margin of a product is not necessarily less than 20%, (2) not all customers of a business establishment are senior
citizens, and (3) the establishment may revise its pricing strategy, such reduction in profits or income/gross sales may be
prevented or, in the alternative, mitigated so that the business establishment continues to operate profitably. Thus, even if we
gratuitously assume that some degree of reduction in profits or income/gross sales occurs because of the 20% discount, it does
not follow that the regulation is unreasonable, oppressive or confiscatory because the business establishment may make the
necessary adjustments to continue to operate profitably. No evidence was presented by petitioners to show otherwise. In fact,
no evidence was presented by petitioners at all. Justice Leonen, in his Concurring and Dissenting Opinion, characterizes
"profits" (or income/gross sales) as an inchoate right. Another way to view it, as stated by Justice Velasco in his Concurring
Opinion, is that the business establishment merely has a right to profits. The Constitution adverts to it as the right of an enterprise
to a reasonable return on investment.115
Undeniably, this right, like any other right, may be regulated under the police power of the State to achieve important
governmental objectives like protecting the interests and improving the welfare of senior citizens. It should be noted though that
potential profits or income/gross sales are relevant in police power and eminent domain analyses because they may, in
appropriate cases, serve as an indicia when a regulation has gone "too far" as to amount to a "taking" under the power of
eminent domain. When the deprivation or reduction of profits or income/gross sales is shown to be unreasonable, oppressive
or confiscatory, then the challenged governmental regulation may be nullified for being a "taking" under the power of eminent
domain. In such a case, it is not profits or income/gross sales which are actually taken and appropriated for public use. Rather,
when the regulation causes an establishment to incur losses in an unreasonable, oppressive or confiscatory manner, what is
actually taken is capital and the right of the business establishment to a reasonable return on investment. If the business losses
are not halted because of the continued operation of the regulation, this eventually leads to the destruction of the business and
the total loss of the capital invested therein. But, again, petitioners in this case failed to prove that the subject regulation is
unreasonable, oppressive or confiscatory.
V.
The Dissent further argues that we erroneously used price and rate of return on investment control laws to justify the senior
citizen discount law. According to the Dissent, only profits from industries imbued with public interest may be regulated because
this is a condition of their franchises. Profits of establishments without franchises cannot be regulated permanently because
there is no law regulating their profits. The Dissent concludes that the permanent reduction of total revenues or gross sales of
business establishments without franchises is a taking of private property under the power of eminent domain. In making this
argument, it is unfortunate that the Dissent quotes only a portion of the ponencia – The subject regulation may be said to be
similar to, but with substantial distinctions from, price control or rate of return on investment control laws which are traditionally
regarded as police power measures. These laws generally regulate public utilities or industries/enterprises imbued with public
interest in order to protect consumers from exorbitant or unreasonable pricing as well as temper corporate greed by controlling
the rate of return on investment of these corporations considering that they have a monopoly over the goods or services that
they provide to the general public. The subject regulation differs therefrom in that (1) the discount does not prevent the
establishments from adjusting the level of prices of their goods and services, and (2) the discount does not apply to all customers
of a given establishment but only to the class of senior citizens. x x x116
The above paragraph, in full, states –
The subject regulation may be said to be similar to, but with substantial distinctions from, price control or rate of return on
investment control laws which are traditionally regarded as police power measures. These laws generally regulate public utilities
or industries/enterprises imbued with public interest in order to protect consumers from exorbitant or unreasonable pricing as
well as temper corporate greed by controlling the rate of return on investment of these corporations considering that they have
a monopoly over the goods or services that they provide to the general public. The subject regulation differs therefrom in that
(1) the discount does not prevent the establishments from adjusting the level of prices of their goods and services, and (2) the
discount does not apply to all customers of a given establishment but only to the class of senior citizens.
Nonetheless, to the degree material to the resolution of this case, the 20% discount may be properly viewed as belonging to
the category of price regulatory measures which affects the profitability of establishments subjected thereto. (Emphasis
supplied)
The point of this paragraph is to simply show that the State has, in the past, regulated prices and profits of business
establishments. In other words, this type of regulatory measures is traditionally recognized as police power measures so that
the senior citizen discount may be considered as a police power measure as well. What is more, the substantial distinctions
between price and rate of return on investment control laws vis-à-vis the senior citizen discount law provide greater reason to
uphold the validity of the senior citizen discount law. As previously discussed, the ability to adjust prices allows the establishment
subject to the senior citizen discount to prevent or mitigate any reduction of profits or income/gross sales arising from the giving
of the discount. In contrast, establishments subject to price and rate of return on investment control laws cannot adjust prices
accordingly. Certainly, there is no intention to say that price and rate of return on investment control laws are the justification
for the senior citizen discount law. Not at all. The justification for the senior citizen discount law is the plenary powers of
Congress. The legislative power to regulate business establishments is broad and covers a wide array of areas and subjects.
It is well within Congress’ legislative powers to regulate the profits or income/gross sales of industries and enterprises, even
those without franchises. For what are franchises but mere legislative enactments? There is nothing in the Constitution that
prohibits Congress from regulating the profits or income/gross sales of industries and enterprises without franchises. On the
contrary, the social justice provisions of the Constitution enjoin the State to regulate the "acquisition, ownership, use, and
disposition" of property and its increments.117
This may cover the regulation of profits or income/gross sales of all businesses, without qualification, to attain the objective of
diffusing wealth in order to protect and enhance the right of all the people to human dignity.118
Thus, under the social justice policy of the Constitution, business establishments may be compelled to contribute to uplifting
the plight of vulnerable or marginalized groups in our society provided that the regulation is not arbitrary, oppressive or
confiscatory, or is not in breach of some specific constitutional limitation. When the Dissent, therefore, states that the "profits of
private establishments which are non-franchisees cannot be regulated permanently, and there is no such law regulating their
profits permanently,"119 it is assuming what it ought to prove. First, there are laws which, in effect, permanently regulate profits
or income/gross sales of establishments without franchises, and RA 9257 is one such law. And, second, Congress can regulate
such profits or income/gross sales because, as previously noted, there is nothing in the Constitution to prevent it from doing
so. Here, again, it must be emphasized that petitioners failed to present any proof to show that the effects of the assailed law
on their operations has been unreasonable, oppressive or confiscatory. The permanent regulation of profits or income/gross
sales of business establishments, even those without franchises, is not as uncommon as the Dissent depicts it to be. For
instance, the minimum wage law allows the State to set the minimum wage of employees in a given region or geographical
area. Because of the added labor costs arising from the minimum wage, a permanent reduction of profits or income/gross sales
would result, assuming that the employer does not increase the prices of his goods or services. To illustrate, suppose it costs
a company ₱5.00 to produce a product and it sells the same at ₱10.00 with a 50% profit margin. Later, the State increases the
minimum wage. As a result, the company incurs greater labor costs so that it now costs ₱7.00 to produce the same product.
The profit per product of the company would be reduced to ₱3.00 with a profit margin of 30%. The net effect would be the same
as in the earlier example of granting a 20% senior citizen discount. As can be seen, the minimum wage law could, likewise,
lead to a permanent reduction of profits. Does this mean that the minimum wage law should, likewise, be declared
unconstitutional on the mere plea that it results in a permanent reduction of profits? Taking it a step further, suppose the
company decides to increase the price of its product in order to offset the effects of the increase in labor cost; does this mean
that the minimum wage law, following the reasoning of the Dissent, is unconstitutional because the consuming public is
effectively made to subsidize the wage of a group of laborers, i.e., minimum wage earners? The same reasoning can be adopted
relative to the examples cited by the Dissent which, according to it, are valid police power regulations. Article 157 of the Labor
Code, Sections 19 and 18 of the Social Security Law, and Section 7 of the Pag-IBIG Fund Law would effectively increase the
labor cost of a business establishment. This would, in turn, be integrated as part of the cost of its goods or services. Again, if
the establishment does not increase its prices, the net effect would be a permanent reduction in its profits or income/gross
sales. Following the reasoning of the Dissent that "any form of permanent taking of private property (including profits or
income/gross sales)120 is an exercise of eminent domain that requires the State to pay just compensation,"121 then these
statutory provisions would, likewise, have to be declared unconstitutional. It does not matter that these benefits are deemed
part of the employees’ legislated wages because the net effect is the same, that is, it leads to higher labor costs and a permanent
reduction in the profits or income/gross sales of the business establishments.122
The point then is this – most, if not all, regulatory measures imposed by the State on business establishments impact, at some
level, the latter’s prices and/or profits or income/gross sales.123
If the Court were to sustain the Dissent’s theory, then a wholesale nullification of such measures would inevitably result. The
police power of the State and the social justice provisions of the Constitution would, thus, be rendered nugatory. There is
nothing sacrosanct about profits or income/gross sales. This, we made clear in Carlos Superdrug Corporation:124
presumption of validity which every law has in its favor.
xxxx
While the Constitution protects property rights petitioners must the realities of business and the State, in the exercise of police
power, can intervene in the operations of a business which may result in an impairment of property rights in the process.
Moreover, the right to property has a social dimension. While Article XIII of the Constitution provides the percept for the
utilities, continously serve as a reminder for the promotion of public good.
Undeniably, the success of the senior citizens program rests largely on the support imparted by petitioners and the other private
establishments concerned. This being the case, the means employed in invoking the active participation of the private sector,
in order to achieve the purpose or objective of the law, is reasonably and directly related. Without sufficient proof that Section
4(a) of R.A. No. 9257 is arbitrary, and that the continued implementation of the same would be unconscionably detrimental to
petitioners, the Court will refrain form quashing a legislative act.125
In conclusion, we maintain that the correct rule in determining whether the subject regulatory measure has amounted to a
"taking" under the power of eminent domain is the one laid down in Alalayan v. National Power Corporation126 and followed
in Carlos Superdurg Corporation127 consistent with long standing principles in police power and eminent domain analysis. Thus,
the deprivation or reduction of profits or income. Gross sales must be clearly shown to be unreasonable, oppressive or
confiscatory. Under the specific circumstances of this case, such determination can only be made upon the presentation of
competent proof which petitioners failed to do. A law, which has been in operation for many years and promotes the welfare of
a group accorded special concern by the Constitution, cannot and should not be summarily invalidated on a mere allegation
that it reduces the profits or income/gross sales of business establishments.
WHEREFORE, the Petition is hereby DISMISSED for lack of merit.
SO ORDERED.
5. DRUGSTORE ASSO. OF THE PHILIPPINES V. NATIONAL COUNCIL ON DISADNILITY AFFAIRS
G.R. No. 194561 September 14, 2016
DRUGSTORES ASSOCIATION OF THE PHILIPPINES, INC. AND NORTHERN LUZON DRUG CORPORATION, Petitioners,
vs.
NATIONAL COUNCIL ON DISABILITY AFFAIRS; DEPARTMENT OF HEALTH; DEPARTMENT OF FINANCE; BUREAU OF INTERNAL
REVENUE; DEPARTMENT OF THE INTERIOR AND LOCAL GOVERNMENT; AND DEPARTMENT OF SOCIAL WELFARE AND
DEVELOPMENT, Respondents
DECISION
PERALTA, J.:
Before us is a Petition for Review on Certiorari[1] with a Prayer for a Temporary Restraining Order and/or Writ of Preliminary
Injunction which seeks to annul and set aside the Decision[2] dated July 26, 2010, and the Resolution[3] dated November 19,
2010 of the Court of Appeals (CA) in CA-G.R. SP No. 109903. The CA dismissed petitioners' Petition for Prohibition [4] and
upheld the constitutionality of the mandatory twenty percent (20%) discount on the purchase of medicine by persons with
disability (PWD).
The antecedents are as follows:
On March 24, 1992, Republic Act (R.A.) No. 7277, entitled "An Act Providing for the Rehabilitation, Self-Development and Self-
Reliance of Disabled Persons and their Integration into the Mainstream of Society and for Other Purposes," otherwise known
as the "Magna Carta for Disabled Persons," was passed into law.[5] The law defines "disabled persons", "impairment" and
"disability" as follows:
SECTION 4. Definition of Terms. - For purposes of this Act, these terms are defined as follows:
(a) Disabled Persons are those suffering from restriction of different abilities, as a result of a mental, physical or sensory
impairment, to perform an activity in the manner or within the range considered normal for a human being;
(b) Impairment is any loss, diminution or aberration of psychological, physiological, or anatomical structure of function;
(c) Disability shall mean (1) a physical or mental impairment that substantially limits one or more psychological, physiological
or anatomical function of an individual or activities of such individual; (2) a record of such an impairment; or (3) being regarded
as having such an impairment.[6]
On April 30, 2007, Republic Act No. 9442[7] was enacted amending R.A. No. 7277. The Title of R.A. No. 7277 was amended to
read as "Magna Carta for Persons with Disability" and all references on the law to "disabled persons" were amended to read
as "persons with disability" (PWD).[8] Specifically, R.A. No. 9442 granted the PWDs a twenty (20) percent discount on the
purchase of medicine, and a tax deduction scheme was adopted wherein covered establishments may deduct the discount
granted from gross income based on the net cost of goods sold or services rendered:
CHAPTER 8. Other Privileges and Incentives. SEC. 32. Persons with disability shall be entitled to the following:
x x x x
At least twenty percent (20%) discount for the purchase of medicines in all drugstores for the exclusive use or enjoyment
(d)
of persons with disability;
x x x x
The abovementioned privileges are available only to persons with disability who are Filipino citizens upon submission of any of
the following as proof of his/her entitlement thereto:
An identification card issued by the city or municipal mayor or the barangay captain of the place where
(i)
the person with disability resides;
(ii) The passport of the person with disability concerned; or
Transportation discount fare Identification Card (ID) issued by the National Council for the Welfare of
(ii)
Disabled Persons (NCWDP).
x x x x
The establishments may claim the discounts granted in subsections (a), (b), (c), (f) and (g) as tax deductions based on the net
cost of the goods sold or services rendered: Provided, however, That the cost of the discount shall be allowed as deduction
from gross income for the same taxable year that the discount is granted: Provided, further, That the total amount of the claimed
tax deduction net of value-added tax if applicable, shall be included in their gross sales receipts for tax purposes and shall be
subject to proper documentation and to the provisions of the National Internal Revenue Code (NIRC), as amended.[9]
The Implementing Rules and Regulations (IRR) of R.A. No. 9442[10] was jointly promulgated by the Department of Social
Welfare and Development (DSWD), Department of Education, Department of Finance (DOF), Department of Tourism,
Department of Transportation and Communication, Department of the Interior and Local Government (DILG) and Department
of Agriculture. Insofar as pertinent to this petition, the salient portions of the IRR are hereunder quoted:[11]
RULE III. DEFINITION OF TERMS
Section 5. Definition of Terms. For purposes of these Rules and Regulations, these terms are defined as follows:
5.1. Persons with Disability - are those individuals defined under Section 4 of RA 7277 "An Act Providing for the Rehabilitation,
Self-Development and Self-Reliance of Persons with Disability as amended and their integration into the Mainstream of Society
and for Other Purposes". This is defined as a person suffering from restriction or different abilities, as a result of a mental,
physical or sensory impairment, to perform an activity in a manner or within the range considered normal for human being.
Disability shall mean (1) a physical or mental impairment that substantially limits one or more psychological, physiological or
anatomical function of an individual or activities of such individual; (2) a record of such an impairment; or (3) being regarded as
having such an impairment.
x x x x
RULE IV. PRIVILEGES AND INCENTIVES FOR THE PERSONS WITH DISABILITY
Section 6. Other Privileges and Incentives. Persons with disability shall be entitled to the following:
x x x x
6.1.d. Purchase of Medicine - at least twenty percent (20%) discount on the purchase of medicine for the exclusive use and
enjoyment of persons with disability. All drugstores, hospital, pharmacies, clinics and other similar establishments selling
medicines are required to provide at least twenty percent (20%) discount subject to the guidelines issued by DOH and
PHILHEALTH
x x x x
6.11 The abovementioned privileges are available only to persons with disability who are Filipino citizens upon submission of
any of the following as proof of his/her entitlement thereto subject to the guidelines issued by the NCWDP in coordination with
DSWD, DOH and DILG.
6.11.1 An identification card issued by the city or municipal mayor or the barangay captain of the place where the person with
disability resides;
6.11.2 The passport of the persons with disability concerned; or
6.11.3 Transportation discount fare Identification Card (ID) issued by the National Council for the Welfare of Disabled Persons
(NCWDP). However, upon effectivity of this Implementing Rules and Regulations, NCWDP will already adopt the Identification
Card issued by the Local Government Unit for purposes of uniformity in the implementation. NCWDP will provide the design
and specification of the identification card that will be issued by the Local Government Units.[13]
6.14. Availmenl of Tax Deductions by Establishment Granting Twenty Percent. 20% Discount - The establishments may claim
the discounts granted in sub-sections (6.1), (6.2), (6.4), (6.5) and (6.6) as tax deductions based on the net cost of the goods
sold or services rendered: Provided, however, that the cost of the discount shall be allowed as deduction from gross income
for the same taxable year that the discount is granted: Provided, further, That the total amount of the claimed tax deduction net
of value-added tax if applicable, shall be included in their gross sales receipts for tax purposes and shall be subject to proper
documentation and to the provisions of the National Internal Revenue Code, as amended.
On April 23, 2008, the National Council on Disability Affairs (NCDA)[14] issued Administrative Order (A.O.) No. 1, Series of
2008,[15]prescribing guidelines which should serve as a mechanism for the issuance of a PWD Identification Card (IDC) which
shall be the basis for providing privileges and discounts to bona fide PWDs in accordance with R.A. 9442:
IV. INSTITUTIONAL ARRANGEMENTS

A. The Local Government Unit of the City or Municipal Office shall implement these guidelines in the issuance of the PWD-
IDC
x x x x
D. Issuance of the appropriate document to confirm the medical condition of the applicant is as follows:
Disability Document Issuing Entity

Apparent Disability Medical Certificate Licensed Private or Government Physician
Licensed Teacher duly signed by the School
School Assessment
Principal
Head of the Business Establishment or
Certificate of Disability
Head of Non-Government Organization
Non-Apparent Disability Medical Certificate Licensed Private or Government Physician
E. PWD Registration Forms and ID Cards shall be issued and signed by the City or Municipal Mayor, or Barangay Captain.
xxxx
V. IMPLEMENTING GUIDELINES AND PROCEDURES
Any bonafide person with permanent disability can apply for the issuance of the PWD-IDC. His/her caregiver can assist in the
application process. Procedures for the issuance of the ID Cards are as follows:
A. Completion of the Requirements. Complete and/or make available the following requirements:
1. Two "1x1" recent ID pictures with the names, and signatures or thumbmarks at the back of the picture
2. One (1) Valid ID
3. Document to confirm the medical or disability condition (See Section IV, D for the required document).
On December 9, 2008, the DOF issued Revenue Regulations No. 1-2009[16] prescribing rules and regulations to implement
R.A. 9442 relative to the tax privileges of PWDs and tax incentives for establishments granting the discount. Section 4 of
Revenue Regulations No. 001-09 states that drugstores can only deduct the 20% discount from their gross income subject to
some conditions.[17]
On May 20, 2009, the DOH issued A.O. No. 2009-0011[18] specifically stating that the grant of 20% discount shall be provided
in the purchase of branded medicines and unbranded generic medicines from all establishments dispensing medicines for the
exclusive use of the PWDs.[19] It also detailed the guidelines for the provision of medical and related discounts and special
privileges to PWDs pursuant to R.A. 9442.[20]
On July 28, 2009, petitioners filed a Petition for Prohibition with application for a Temporary Restraining Order and/or a Writ of
Preliminary Injunction[21] before the Court of Appeals to annul and enjoin the implementation of the following laws:
1) Section 32 of R.A. No. 7277 as amended by R.A. No. 9442;
2) Section 6, Rule IV of the Implementing Rules and Regulations of R.A. No. 9442;
3) NCDA A.O. No. 1;
4) DOF Revenue Regulation No. 1-2009;
5) DOH A.O. No. 2009-0011.

2)
On July 26, 2010, the CA rendered a Decision upholding the constitutionality of R.A. 7277 as amended, as well as the assailed
administrative issuances. However, the CA suspended the effectivity of NCDA A.O. No. 1 pending proof of respondent NCDA's
compliance with filing of said administrative order with the Office of the National Administrative Register (ONAR) and its
publication in a newspaper of general circulation. The dispositive portion of the Decision states:
WHEREFORE, the petition is PARTLY GRANTED. The effectivity of NCDA Administrative Order No. 1 is hereby SUSPENDED
pending Respondent's compliance with the proof of filing of NCDA Administrative Order No. 1 with the Office of the National
Administrative Register and its publication in a newspaper of general circulation.
Respondent NCDA filed a motion for reconsideration before the CA to lift the suspension of the implementation of NCDA A.O.
No. 1 attaching thereto proof of its publication in the Philippine Star and Daily Tribune on August 12, 2010, as well as a
certification from the ONAR showing that the same was filed with the said office on October 22, 2009.[22] Likewise, petitioners
filed a motion for reconsideration of the CA Decision.
In a Resolution dated November 19, 2010, the CA dismissed petitioners' motion for reconsideration and lifted the suspension
of the effectivity of NCDA A.O. No. 1 considering the filing of the same with ONAR and its publication in a newspaper of general
circulation.
Hence, the instant petition raising the following issues:
I. THE CA SERIOUSLY ERRED ON A QUESTION OF SUBSTANCE WHEN IT RULED THAT THE MANDATED PWD
DISCOUNT IS A VALID EXERCISE OF POLICE POWER. ON THE CONTRARY, IT IS AN INVALID EXERCISE OF THE
POWER OF EMINENT DOMAIN BECAUSE IT FAILS TO PROVIDE JUST COMPENSATION TO PETITIONERS AND OTHER
SIMILARLY SITUATED DRUGSTORES;
II. THE CA SERIOUSLY ERRED WHEN IT RULED THAT SECTION 32 OF RA 7277 AS AMENDED BY RA 9442, NCDA AO
1 AND THE OTHER IMPLEMENTING REGULATIONS DID NOT VIOLATE THE DUE PROCESS CLAUSE;
III. THE CA SERIOUSLY ERRED WHEN IT RULED THAT THE DEFINITIONS OF DISABILITIES UNDER SECTION 4(A),
SECTION 4(B) AND SECTION 4(C) OF RA 7277 AS AMENDED BY RA 9442, RULE 1 OF THE IMPLEMENTING RULES AND
REGULATIONS[23] OF RA 7277, SECTION 5.1 OF THE IMPLEMENTING RULES AND REGULATIONS OF RA 9442, NCDA
AO 1 AND DOH AO 2009-11 ARE NOT VAGUE, AMBIGUOUS AND UNCONSTITUTIONAL;
IV. THE CA SERIOUSLY ERRED WHEN IT RULED THAT THE MANDATED PWD DISCOUNT DOES NOT VIOLATE THE
EQUAL PROTECTION CLAUSE.
We deny the petition.
The CA is correct when it applied by analogy the case of Carlos Superdrug Corporation et al. v. DSWD, et al.[24] wherein We
pronouced that Section 4 of R.A. No. 9257 which grants 20% discount on the purchase of medicine of senior citizens is a
legitimate exercise of police power:
circumstances, thus assuring the greatest benefits.[25] Accordingly, it has been described as the most essential, insistent and
the least limitable of powers, extending as it does to all the great public needs.[26] It is [t]he power vested in the legislature by
the constitution to make, ordain, and establish all manner of wholesome and reasonable laws, statutes, and ordinances, either
with penalties or without, not repugnant to the constitution, as they shall judge to be for the good and welfare of the
commonwealth, and of the subjects of the same.[27]
police power because property rights, though sheltered by due process, must yield to general welfare.[28]
presumption of validity which every law has in its favor.[29]
Police power is the power of the state to promote public welfare by restraining and regulating the use of liberty and property.
On the other hand, the power of eminent domain is the inherent right of the state (and of those entities to which the power has
been lawfully delegated) to condemn private property to public use upon payment of just compensation. In the exercise of police
power, property rights of private individuals are subjected to restraints and burdens in order to secure the general comfort,
health, and prosperity of the state.[30] A legislative act based on the police power requires the concurrence of a lawful subject
and a lawful method. In more familiar words, (a) the interests of the public generally, as distinguished from those of a particular
class, should justify the interference of the state; and (b) the means employed are reasonably necessary for the accomplishment
of the purpose and not unduly oppressive upon individuals.[31]
R.A. No. 7277 was enacted primarily to provide full support to the improvement of the total well-being of PWDs and their
integration into the mainstream of society. The priority given to PWDs finds its basis in the Constitution:
ARTICLE XII
NATIONAL ECONOMY AND PATRIMONY
xxxx
Section 6. The use of property bears a social function, and all economic agents shall contribute to the common good. Individuals
and private groups, including corporations, cooperatives, and similar collective organizations, shall have the right to own,
establish, and operate economic enterprises, subject to the duty of the State to promote distributive justice and to intervene
when the common good so demands.[32]
ARTICLE XIII
SOCIAL JUSTICE AND HUMAN RIGHTS
xxxx
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.[33]
Thus, R.A. No. 7277 provides:
SECTION 2. Declaration of Policy. The grant of the rights and privileges for disabled persons shall be guided by the following
principles:
(a). Disabled persons are part of the Philippine society, thus the Senate shall give full support to the improvement of the total
well-being of disabled persons and their integration into the mainstream of society.
Toward this end, the State shall adopt policies ensuring the rehabilitation, self-development and self-reliance of disabled
persons.
It shall develop their skills and potentials to enable them to compete favorably for available opportunities.
(b). Disabled persons have the same rights as other people to take their proper place in society. They should be able to live
freely and as independently as possible. This must be the concern of everyone - the family, community and all government and
non-government organizations.
Disabled person's rights must never be perceived as welfare services by the Government.
x x x x
(d). The State also recognizes the role of the private sector in promoting the welfare of disabled persons and shall encourage
partnership in programs that address their needs and concerns.[34]
To implement the above policies, R.A. No. 9442 which amended R.A. No. 7277 grants incentives and benefits including a
twenty percent (20%) discount to PWDs in the purchase of medicines; fares for domestic air, sea and land travels including
public railways and skyways; recreation and amusement centers including theaters, food chains and restaurants.[35] This is
specifically stated in Section 4 of the IRR of R.A. No. 9442:
Section 4. Policies and Objectives - It is the objective of Republic Act No. 9442 to provide persons with disability, the
opportunity to participate fully into the mainstream of society by granting them at least twenty percent (20%) discount
in all basic services. It is a declared policy of RA 7277 that persons with disability are part of Philippine society, and thus the
State shall give full support to the improvement of their total wellbeing and their integration into the mainstream of
society. They have the same rights as other people to take their proper place in society. They should be able to live freely and
as independently as possible. This must be the concern of everyone the family, community and all government and non-
government organizations. Rights of persons with disability must never be perceived as welfare services. Prohibitions on verbal,
non-verbal ridicule and vilification against persons with disability shall always be observed at all times.[36]
Hence, the PWD mandatory discount on the purchase of medicine is supported by a valid objective or purpose as
aforementioned. It has a valid subject considering that the concept of public use is no longer confined to the traditional notion
of use by the public, but held synonymous with public interest, public benefit, public welfare, and public convenience. As in the
case of senior citizens,[37] the discount privilege to which the PWDs are entitled is actually a benefit enjoyed by the general
public to which these citizens belong. The means employed in invoking the active participation of the private sector, in order to
achieve the purpose or objective of the law, is reasonably and directly related.[38] Also, the means employed to provide a fair,
just and quality health care to PWDs are reasonably related to its accomplishment, and are not oppressive, considering that as
a form of reimbursement, the discount extended to PWDs in the purchase of medicine can be claimed by the establishments
as allowable tax deductions pursuant to Section 32 of R.A. No. 9442 as implemented in Section 4 of DOF Revenue Regulations
No. 1-2009. Otherwise stated, the discount reduces taxable income upon which the tax liability of the establishments is
computed.
Further, petitioners aver that Section 32 of R.A. No. 7277 as amended by R.A. No. 9442 is unconstitutional and void for violating
the due process clause of the Constitution since entitlement to the 20% discount is allegedly merely based on any of the three
documents mentioned in the provision, namely: (i) an identification card issued by the city or municipal mayor or the barangay
captain of the place where the PWD resides; (ii) the passport of the PWD; or (iii) transportation discount fare identification card
issued by NCDA. Petitioners, thus, maintain that none of the said documents has any relation to a medical finding of disability,
and the grant of the discount is allegedly without any process for the determination of a PWD in accordance with law.
Section 32 of R.A. No. 7277, as amended by R.A. No. 9442, must be read with its IRR which stated that upon its effectivity,
NCWDP (which is the government agency tasked to ensure the implementation of RA 7277), would adopt the IDC issued by
the local government units for purposes of uniformity in the implementation.[39] Thus, NCDA A.O. No. 1 provides the reasonable
guidelines in the issuance of IDCs to PWDs as proof of their entitlement to the privileges and incentives under the law[40] and
fills the details in the implementation of the law.
As stated in NCDA A.O. No. 1, before an IDC is issued by the city or municipal mayor or the barangay captain, [41] or the
Chairman of the NCDA,[42] the applicant must first secure a medical certificate issued by a licensed private or government
physician that will confirm his medical or disability condition. If an applicant is an employee with apparent disability, a "certificate
of disability" issued by the head of the business establishment or the head of the non-governmental organization is needed for
him to be issued a PWD-IDC. For a student with apparent disability, the "school assessment" issued by the teacher and signed
by the school principal should be presented to avail of a PWD-ID.
Petitioners' insistence that Part IV (D) of NCDA Administrative Order No. 1 is void because it allows allegedly non-competent
persons like teachers, head of establishments and heads of Non-Governmental Organizations (NGOs) to confirm the medical
condition of the applicant is misplaced. It must be stressed that only for apparent disabilities can the teacher or head of a
business establishment validly issue the mentioned required document because, obviously, the disability is easily seen or
clearly visible. It is, therefore, not an unqualified grant of authority for the said non-medical persons as it is simply limited to
apparent disabilities. For a non-apparent disability or a disability condition that is not easily seen or clearly visible, the disability
can only be validated by a licensed private or government physician, and a medical certificate has to be presented in the
procurement of an IDC. Relative to this issue, the CA validly ruled, thus:
We agree with the Office of the Solicitor General's (OSG) ratiocination that teachers, heads of business establishments and
heads of NGOs can validly confirm the medical condition of their students/employees with apparent disability for obvious
reasons as compared to non-apparent disability which can only be determined by licensed physicians. Under the Labor
Code, disabled persons are eligible as apprentices or learners provided that their handicap are not as much as to effectively
impede the performance of their job. We find that heads of business establishments can validly issue certificates of disability of
their employees because aside from the fact that they can obviously validate the disability, they also have medical records of
the employees as a pre-requisite in the hiring of employees. Hence, Part IV (D) of NCDA AO No. 1 is logical and valid.[43]
Furthermore, DOH A.O. No. 2009-11 prescribes additional guidelines for the 20% discount in the purchase of all medicines for
the exclusive use of PWD.[44] To avail of the discount, the PWD must not only present his I.D. but also the doctor's prescription
stating, among others, the generic name of the medicine, the physician's address, contact number and professional license
number, professional tax receipt number and narcotic license number, if applicable. A purchase booklet issued by the local
social/health office is also required in the purchase of over-the-counter medicines. Likewise, any single dispensing of medicine
must be in accordance with the prescription issued by the physician and should not exceed a one (1) month supply. Therefore,
as correctly argued by the respondents, Section 32 of R.A. No. 7277 as amended by R.A. No. 9442 complies with the standards
of substantive due process.
We are likewise not persuaded by the argument of petitioners that the definition of "disabilities" under the subject laws is vague
and ambiguous because it is allegedly so general and broad that the person tasked with implementing the law will undoubtedly
arrive at different interpretations and applications of the law. Aside from the definitions of a "person with disability" or "disabled
persons" under Section 4 of R.A. No. 7277 as amended by R.A. No. 9442 and in the IRR of RA 9442, NCDA A.O. No. 1 also
provides:
4. Identification Cards shall be issued to any bonafide PWD with permanent disabilities due to any one or more of the
following conditions: psychosocial, chronic illness, learning, mental, visual, orthopedic, speech and hearing conditions.
This includes persons suffering from disabling diseases resulting to the person's limitations to do day to day activities
as normally as possible such as but not limited to those undergoing dialysis, heart disorders, severe cancer cases and
such other similar cases resulting to temporary or permanent disability.[45]
Similarly, DOH A.O. No. 2009-0011 defines the different categories of disability as follows:
Rule IV, Section 4, Paragraph B of the Implementing Rules and Regulations (IRR) of this Act required the Department of Health
to address the health concerns of seven (7) different categories of disability, which include the following: (1) Psychological and
behavioral disabilities (2) Chronic illness with disabilities (3)Learning(cognitive or intellectual) disabilities (4) Mental disabilities
(5) Visual/seeing disabilities (6) Orthopedic/moving, and (7) communication deficits.[46]
Elementary is the rule that when laws or rules are clear, when the law is unambiguous and unequivocal, application not
interpretation thereof is imperative. However, where the language of a statute is vague and ambiguous, an interpretation thereof
is resorted to. A law is deemed ambiguous when it is capable of being understood by reasonably well-informed persons in
either of two or more senses. The fact that a law admits of different interpretations is the best evidence that it is vague and
ambiguous.[47]
In the instant case, We do not find the aforestated definition of terms as vague and ambiguous. Settled is the rule that courts
will not interfere in matters which are addressed to the sound discretion of the government agency entrusted with the regulation
of activities coming under the special and technical training and knowledge of such agency.[48] As a matter of policy, We accord
great respect to the decisions and/or actions of administrative authorities not only because of the doctrine of separation of
powers but also for their presumed knowledge, ability, and expertise in the enforcement of laws and regulations entrusted to
their jurisdiction. The rationale for this rule relates not only to the emergence of the multifarious needs of a modern or
modernizing society and the establishment of diverse administrative agencies for addressing and satisfying those needs; it also
relates to the accumulation of experience and growth of specialized capabilities by the administrative agency charged with
implementing a particular statute.[49]
Lastly, petitioners contend that R.A. No. 7227, as amended by R.A. No. 9442, violates the equal protection clause of the
Constitution because it fairly singles out drugstores to bear the burden of the discount, and that it can hardly be said to
"rationally" meet a legitimate government objective which is the purpose of the law. The law allegedly targets only retailers such
as petitioners, and that the other enterprises in the drug industry are not imposed with similar burden. This same argument had
been raised in the case of Carlos Superdrug Corp., et al. v. DSWD, et al.,[50] and We reaffirm and apply the ruling therein in the
case at bar:
While the Constitution protects property rights, petitioners must accept the realities of business and the State, in the exercise
of police power, can intervene in the operations of a business which may result in an impairment of property rights in the
process.
promotion of public good.[51]
Under the equal protection clause, all persons or things similarly situated must be treated alike, both in the privileges conferred
and the obligations imposed. Conversely, all persons or things differently situated should be treated differently.[52] In the case
of ABAKADA Guro Party List, et al. v. Hon. Purisima, et al.,[53] We held:
Equality guaranteed under the equal protection clause is equality under the same conditions and among persons similarly
situated; it is equality among equals, not similarity of treatment of persons who are classified based on substantial differences
in relation to the object to be accomplished. When things or persons are different in fact or circumstance, they may be treated
in law differently. In Victoriano v. Elizalde Rope Workers' Union, this Court declared:
The guaranty of equal protection of the laws is not a guaranty of equality in the application of the laws upon all citizens of the
State. It is not, therefore, a requirement, in order to avoid the constitutional prohibition against inequality, that every man, woman
and child should be affected alike by a statute. Equality of operation of statutes does not mean indiscriminate operation on
persons merely as such, but on persons according to the circumstances surrounding them. It guarantees equality, not identity
of rights. The Constitution does not require that things which are different in fact be treated in law as though they were
the same. The equal protection clause does not forbid discrimination as to things that are different. It does not prohibit
legislation which is limited either in the object to which it is directed or by the territory within which it is to operate.
The equal protection of the laws clause of the Constitution allows classification. Classification in law, as in the other departments
of knowledge or practice, is the grouping of things in speculation or practice because they agree with one another in certain
particulars. A law is not invalid because of simple inequality. The very idea of classification is that of inequality, so that it goes
without saying that the mere fact of inequality in no manner determines the matter of constitutionality. All that is required of a
valid classification is that it be reasonable, which means that the classification should be based on substantial
distinctions which make for real differences, that it must be germane to the purpose of the law; that it must not be
limited to existing conditions only; and that it must apply equally to each member of the class. This Court has held
that the standard is satisfied if the classification or distinction is based on a reasonable foundation or rational basis
and is not palpably arbitrary.
In the exercise of its power to make classifications for the purpose of enacting laws over matters within its jurisdiction, the state
is recognized as enjoying a wide range of discretion. It is not necessary that the classification be based on scientific or marked
differences of things or in their relation. Neither is it necessary that the classification be made with mathematical nicety. Hence,
legislative classification may in many cases properly rest on narrow distinctions, for the equal protection guaranty does not
preclude the legislature from recognizing degrees of evil or harm, and legislation is addressed to evils as they may appear.
The equal protection clause recognizes a valid classification, that is, a classification that has a reasonable foundation or rational
basis and not arbitrary.[54] With respect to R.A. No. 9442, its expressed public policy is the rehabilitation, self-development and
self-reliance of PWDs. Persons with disability form a class separate and distinct from the other citizens of the country.
Indubitably, such substantial distinction is germane and intimately related to the purpose of the law. Hence, the classification
and treatment accorded to the PWDs fully satisfy the demands of equal protection. Thus, Congress may pass a law providing
for a different treatment to persons with disability apart from the other citizens of the country.
Subject to the determination of the courts as to what is a proper exercise of police power using the due process clause and the
equal protection clause as yardsticks, the State may interfere wherever the public interests demand it, and in this particular, a
large discretion is necessarily vested in the legislature to determine, not only what interests of the public require, but what
measures are necessary for the protection of such interests.[55] Thus, We are mindful of the fundamental criteria in cases of this
nature that all reasonable doubts should be resolved in favor of the constitutionality of a statute.[56] The burden of proof is on
him who claims that a statute is unconstitutional. Petitioners failed to discharge such burden of proof.
WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals dated July 26, 2010, and the Resolution dated
November 19, 2010, in CA-G.R. SP No. 109903 are AFFIRMED.
SO ORDERED.
6. MERALCO V. SPS. RAMOS
G.R. No. 195145 February 10, 2016
MANILA ELECTRIC COMPANY, Petitioner,

vs.
SPOUSES SULPICIO and PATRICIA RAMOS, Respondents.
DECISION
BRION, J.:
We resolve the petition for review on certiorari1assailing the July 30, 2010 decision2 of the Court of Appeals (CA) in CA-G.R.
CV No. 87843 entitled "Spouses Sulpicio and Patricia Ramos v. Manila Electric Company," that affirmed the Regional Trial
Couri' s (RTC) August 22, 2006 decision3 in Civil Case No. 99-95975.
The August 22, 2006 RTC decision ordered the Manila Electric Company (MERALCO) to restore the electric power connection
of Spouses Sulpicio and Patricia Ramos (respondents) and awarded them P2,000,000.00, with legal interest, in total damages.
The Factual Antecedents
MERALCO is a private corporation engaged in the business of selling and distributing electricity to its customers in Metro Manila
and other franchise areas. The respondents are registered customers of MERALCO under Service Identification
Number (SIN) 409076401.
MERALCO entered into a contract of service with the respondents agreeing to supply the latter with electric power in their
residence at 2760-B Molave St., Manuguit, Tondo, Manila. To measure the respondents’ electric consumption, it installed the
electric meter with serial number 330ZN43953 outside the front wall of the property occupied by Patricia’s brother, Isidoro Sales,
and his wife, Nieves Sales (Nieves), located beside the respondents’ house.
On November 5, 1999, MERALCO’s service inspector inspected the respondents’ electrical facilities and found an outside
connection attached to their electric meter. The service inspector traced the connection, an illegal one, to the residence and
appliances of Nieves. Nieves was the only one present during the inspection and she was the one who signed the Metering
Facilities Inspection Report.
Due to the discovery of the illegal connection, the service inspector disconnected the respondents’ electric services on the
same day. The inspection and disconnection were done without the knowledge of the respondents as they were not at home
and their house was closed at the time.
The respondents denied that they had been using an illegal electrical connection and they requested MERALCO to immediately
reconnect their electric services. Despite the respondents’ request, MERALCO instead demanded from them the payment of
P179,231.70 as differential billing.
On December 20, 1999, the respondents filed a complaint for breach of contract with preliminary mandatory injunction
and damages against MERALCO before the RTC, Branch 40, City of Manila. They prayed for the immediate reconnection of
their electric service and the award of actual, moral, and exemplary damages, attorney’s fees, and litigation expenses.
In a decision dated August 22, 2006, the RTC ordered MERALCO to reconnect the respondents’ electric service and awarded
damages as follows:
WHEREFORE, Judgment is rendered directing defendant MERALCO to permanently reconnect immediately the plaintiff’s
electric services, and for said defendant to pay the following:
1. P100,000.00 as actual or compensatory damages;
2. P1,500,000.00 as moral damages;
3. P300,000.00 as exemplary damages;
4. P100,000.00 as attorney’s fees; and,
5. Costs of suit;
with legal interest on the total damages of P2,000,000.00 from the date of this Judgment until fully paid.
SO ORDERED.4
MERALCO appealed the RTC’s decision to the CA.
In its assailed July 30, 2010 decision,5 the CA denied the appeal for lack of merit and affirmed the RTC’s order of reconnection
and award for payment of damages. The appellate court held that MERALCO failed to comply not only with its own contract of
service, but also with the requirements under Sections 4 and 6 of Republic Act No. 7832, or the Anti- Electricity and Electric
Transmission Lines/Materials Pilferage Act of 1994 (R.A. 7832), when it resorted to the immediate disconnection of the
respondents’ electric service without due notice. It also ruled that the respondents were not liable for the differential billing as it
had not been established that they knew or consented to the illegal connection or even benefited from it.
MERALCO moved for the reconsideration of the decision, but the CA denied its motion in a resolution6 dated January 3, 2011.
The present petition for review on certiorari7 was filed with this Court on March 4, 2011, as a consequence.
The Petition
MERALCO argues that under R.A. 7832, it had the right and authority to immediately disconnect the electric service of the
respondents after they were caught in flagrante delicto using a tampered electrical installation.
MERALCO also claims that by virtue of their contract of service, the respondents are liable to pay the differential billing
regardless of whether the latter benefited from the illegal electric service or not. It adds that this is true even if the respondents
did not personally tamper with the electrical facilities.
Finally, MERALCO contends that there is no basis for the award of damages as the disconnection of the respondents’ electric
service was done in good faith and in the lawful exercise of its rights as a public utility company.
The Respondents’ Comment
In their comment8 of June 29, 2011, the respondents pray for the denial of the present petition for lack of merit. They argue that
the discovery of an outside connection attached to their electric meter does not give MERALCO the right to automatically
disconnect their electric service as the law provides certain mandatory requirements that should be observed before a
disconnection could be effected. They claim that MERALCO failed to comply with these statutory requirements.
Also, the respondents contend that MERALCO breached its contractual obligations when its service inspector immediately
disconnected their electric service without notice. They claim that this breach of contract, coupled with MERALCO’s failure to
observe the requirements under R.A. 7832, entitled them to damages which were sufficiently established with evidence and
were rightfully awarded by the RTC and affirmed by the CA.
Lastly, the respondents argue that they are not liable to MERALCO for the differential billing as they were not the ones who
illegally consumed the unbilled electricity through the illegal connection.
The Court’s Ruling

We DENY the petition for review on certiorari as we find no reversible error committed by the CA in issuing its assailed
decision.
The core issue in this case is whether MERALCO had the right to immediately disconnect the electric service of the respondents
upon discovery of an outside connection attached to their electric meter.
The distribution of electricity is a basic necessity that is imbued with public interest. Its provider is considered as a public utility
subject to the strict regulation by the State in the exercise of its police power. Failure to comply with these regulations gives
rise to the presumption of bad faithor abuse of right.9
Nevertheless, the State also recognizes that electricity is the property of the service provider. R.A. 7832 was enacted by
Congress to afford electric service providers multiple remedies to protect themselves from electricity pilferage. These remedies
include the immediate disconnection of the electric service of an erring customer, criminal prosecution, and the imposition
of surcharges.10 However, the service provider must avail of any or all of these remedies within legal bounds, in strict compliance
with the requirements and/or conditions set forth by law.
Section 4(a) of R.A. 7832 provides that the discovery of an outside connection attached on the electric meter shall constitute
as prima facie evidence of illegal use of electricity by the person who benefits from the illegal use if the discovery is personally
witnessed and attested to by an officer of the law or a duly authorized representative of the Energy Regulatory
Board (ERB). With the presence of such prima facie evidence, the electric service provider is within its rights to immediately
disconnect the electric service of the consumer after due notice.
This Court has repeatedly stressed the significance of the presence of an authorized government representative during an
inspection of electric facilities, viz.:
The presence of government agents who may authorize immediate disconnections go into the essence of due process.
Indeed, we cannot allow respondent to act virtually as prosecutor and judge in imposing the penalty of disconnection
due to alleged meter tampering. That would not sit well in a democratic country. After all, Meralco is a monopoly that derives
its power from the government. Clothing it with unilateral authority to disconnect would be equivalent to giving it a license to
tyrannize its hapless customers.11 (emphasis supplied)
Additionally, Section 6 of R.A. 7832 affords a private electric utility the right and authority to immediately disconnect the electric
service of a consumer who has been caught in flagrante delicto doing any of the acts covered by Section 4(a). However, the
law clearly states that the disconnection may only be done after serving a written notice or warning to the consumer.
To reiterate, R.A. 7832 has two requisites for an electric service provider to be authorized to disconnect its customer’s electric
service on the basis of alleged electricity pilferage: first, an officer of the law or an authorized ERB representative must be
present during the inspection of the electric facilities; and second, even if there is prima facie evidence of illegal use of electricity
and the customer is caught in flagrante delicto committing the acts under Section 4(a), the customer must still be given due
notice prior to the disconnection.12
In its defense, MERALCO insists that it observed due process when its service inspector disconnected the respondents’ electric
service, viz.:
Under the present situation, there is no doubt that due process, as required by R.A. 7832, was observed [when] the petitioner
discontinued the electric supply of respondent: there was an inspection conducted in the premises of respondent with the
consent of their authorized representative; it was discovered during the said inspection that private respondents were using
outside connection; the nature of the violation was explained to private respondents’ representative; the inspection and
discovery was personally witnessed and attested to by private respondents’ representative; private respondents failed and
refused to pay the differential billing amounting to P179,231.70 before their electric service was
disconnected.13(emphasis supplied)
After a thorough examination of the records of the case, we find no proof that MERALCO complied with these two requirements
under R.A. 7832. MERALCO never even alleged in its submissions that an ERB representative or an officer of the law was
present during the inspection of the respondents’ electric meter. Also, it did not claim that the respondents were ever notified
beforehand of the impending disconnection of their electric service.
In view of MERALCO’s failure to comply with the strict requirements under Sections 4 and 6 of R. A. No. 7832, we hold that
MERALCO had no authority to immediately disconnect the respondents’ electric service. As a result, the immediate
disconnection of the respondents’ electric service is presumed to be in bad faith.
We point out, too, that MERALCO’s allegation that the respondents refused to pay the differential billing before the
disconnection of their electric service is an obvious falsity. MERALCO never disputed the fact that the respondents’ electric
service was disconnected on November 5, 1999 – the same day as when the electric meter was inspected. Also, MERALCO’s
demand letter for payment of the differential billing is dated December 4, 1999. Thus, there is no truth to the statement that the
respondents first failed to pay the differential billing and only then was their electric service disconnected.
The disconnection of respondents’

electric service is not supported by
MERALCO’s own Terms and
Conditions of Service.
In addition, we observe that MERALCO also failed to follow its own procedure for the discontinuance of service under its
contract of service with the respondents. We quote in this regard the relevant terms of service:
DISCONTINUANCE OF SERVICE:
The Company reserves the right to discontinue service in case the customer is in arrears in the payment of bills in those cases
where the meter stopped or failed to register the correct amount of energy consumed, or failure to comply with any of these
terms and conditions or in case of or to prevent fraud upon the Company. Before disconnection is made in case of or to
prevent fraud, the Company may adjust the bill of said customer accordingly and if the adjusted bill is not paid, the
Company may disconnect the same. In case of disconnection, the provisions of Revised Order No. 1 of the former Public
Service
Commission (now ERC) shall be observed. Any such suspension of service shall not terminate the contract between the
Company and the customer.14 (emphasis supplied)
There is nothing in its contract of service that gives MERALCO the authority to immediately disconnect a customer’s electric
connection. MERALCO’s contractual right to disconnect electric service arises only after the customer has been notified of his
adjusted bill and has been afforded the opportunity to pay the differential billing.
In this case, the disconnection of the respondents’ electric service happened on November 5, 1999, while the demand for the
payment of differential billing was made through a letter dated December 4, 1999. Thus, we hold that MERALCO breached
its contract of service with the respondents as it disconnected the latter’s electric service before they were ever
notified of the differential billing.
Differential billing
Section 6 of R.A. 7832 defines differential billing as "the amount to be charged to the person concerned for the unbilled electricity
illegally consumed by him." Clearly, the law provides that the person who actually consumed the electricity illegally shall be
liable for the differential billing. It does not ipso facto make liable for payment of the differential billing the registered customer
whose electrical facilities had been tampered with and utilized for the illegal use of electricity.
In this case, as the prima facie presumption afforded by Section 4 of R.A. 7832 does not apply, it falls upon MERALCO to first
prove that the respondents had actually installed the outside connection attached on their electric meter and that they had
benefited from the electricity consumed through the outside connection before it could hold them liable for the differential billing.
The records show that MERALCO presented no proof that it ever caught the respondents, or anyone acting in the respondents’
behalf, in the act of tampering with their electric meter. As the CA correctly held, the respondents could not have been caught in
flagrante delicto committing the tampering since they were not present during the inspection of the electric meter, nor were any
of their representatives at hand.15 Moreover, the presence of an outside connection attached to the electric meter operates only
as a prima facie evidence of electricity pilferage under R.A. 7832; it is not enough to declare the respondents in flagrante
delicto tampering with the electric meter.16In fact, MERALCO itself admitted in its submissions that Nieves was the illegal user
of the outside connection attached to the respondents’ electric meter.17
On this point, MERALCO argues that Nieves was an authorized representative of the respondents. However, the records are
bereft of any sufficient proof to support this claim. The fact that she is an occupant of the premises where the electric meter
was installed does not make her the respondents’ representative considering that the unit occupied by the respondents is
separate and distinct from the one occupied by Nieves and her family. Similarly, the fact that Nieves was able to show the
respondents’ latest electric bill does not make her the latter’s authorized representative.
While this Court recognizes the right of MERALCO as a public utility to collect system losses, the courts cannot and will not
blindly grant a public utility’s claim for differential billing if there is no sufficient evidence to prove entitlement.18 As MERALCO
failed to sufficiently prove its claim for payment of the differential billing, we rule that the respondents cannot be held
liable for the billed amount.
On the issue of damages
With MERALCO in bad faith for its failure to follow the strict requirements under R.A. 7832 in the disconnection of the
respondents’ electric service, we agree with the CA that the award of damages is in order. However, we deem it proper to
modify the award in accordance with prevailing jurisprudence.
First, actual damages pertain to such injuries or losses that are actually sustained and are susceptible of measurement. They
are intended not to enrich the injured party but to put him in the position in which he was in before he was injured.19
In Viron Transportation Co., Inc. v. Delos Santos,20 we explained that in order to recover actual damages, there must be
pleading and proof of the damages suffered, viz.:
Actual damages, to be recoverable, must not only be capable of proof, but must actually be proved with a reasonable degree
of certainty. Courts cannot simply rely on speculation, conjecture or guesswork in determining the fact and amount of damages.
To justify an award of actual damages, there must be competent proof of the actual amount of loss, credence can be
given only to claims which are duly supported by receipts. (emphasis supplied)
In this case, Patricia stated that her family’s food expenses doubled after MERALCO disconnected their electric services as
they could no longer cook at home. We note, however, that there is no sufficient proof presented to show the actual food
expenses that the respondents incurred. Nevertheless, Patricia also testified that they were forced to move to a new residence
after living without electricity for eight (8) months at their home in Tondo, Manila. They proved this allegation through the
presentation of a contract of lease and receipts for payment of monthly rentals for 42 months amounting to P210,000.00.
Thus, we find it proper to increase the award of actual damages from P100,000.00 to P210,000.00.
Second, moral damages are designed to compensate and alleviate the physical suffering, mental anguish, fright, serious
anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar harm unjustly caused to a
person.21 They may be properly awarded to persons who have been unjustly deprived of property without due process of law.22
In Regala v. Carin,23 we discussed the requisites for the award of moral damages, viz:
In fine, an award of moral damages calls for the presentation of 1) evidence of besmirched reputation or physical, mental or
psychological suffering sustained by the claimant; 2) a culpable act or omission factually established; 3) proof that the wrongful
act or omission of the defendant is the proximate cause of the damages sustained by the claimant; and 4) the proof that the act
is predicated on any of the instances expressed or envisioned by Article 2219 and Article 2220 of the Civil Code.
Applied to this case, after due consideration of the manner of disconnection of the respondents’ electric service and the length
of time that the respondents had to endure without electricity, we find the award of moral damages proper. Aside from having
to spend eight (8) months in the dark at their own residence, Patricia testified that they suffered extreme social humiliation,
embarrassment, and serious anxiety as they were subjected to gossip in their neighborhood of stealing electricity through the
use of an illegal connection. The damage to the respondents’ reputation and social standing was aggravated by their decision
to move to a new residence following the absolute refusal of MERALCO to restore their electric services.
However, we find the award of P1,500,000.00 in moral damages to be excessive. Moral damages are not intended to enrich
the complainant as a penalty for the defendant. It is awarded as a means to ease the moral suffering the complainant suffered
due to the defendant’s culpable action.24 While prevailing jurisprudence deems it appropriate to award P100,000.00 in moral
damages in cases where MERALCO wrongfully disconnected electric service,25 we hold that such amount is not commensurate
with the injury suffered by the respondents. Thus, in view of the specific circumstances present in this case, we reduce the
award of moral damages from P1,500,000.00 to P300,000.00.
Third, exemplary or corrective damages are imposed by way of example or correction for the public good, in addition to moral,
temperate, liquidated, or compensatory damages. The award of exemplary damages is allowed by law as a warning to the
public and as a deterrent against the repetition of socially deleterious actions.26
In numerous cases,27 this Court found that MERALCO failed to comply with the requirements under R.A. 7832 before a
disconnection of a customer’s electric service could be effected. In these cases, we aptly awarded exemplary damages against
MERALCO to serve as a warning against repeating the same actions.
In this case, MERALCO totally failed to comply with the two requirements under R.A. 7832 before disconnecting the
respondents’ electric service. While MERALCO insists that R.A. 7832 gives it the right to disconnect the respondents’ electric
service, nothing in the records indicates that it attempted to comply with the statutory requirements before effecting the
disconnection.
Under these circumstances, we find that the previous awards against MERALCO have not served their purpose as a means to
prevent the repetition of the same damaging actions that it has committed in the past. Therefore, we increase the award of
exemplary damages from P300,000.00 to P500,000.00 in the hope that this will persuade MERALCO to be more prudent and
responsible in its observance of the requirements under the law in disconnecting a customer’s electrical supply.
Lastly, in view of the award of exemplary damages, we find the award of attorney's fees proper, in accordance with Article
2208(1) of the Civil Code. We find the CA’s award of attorney’s fees in the amount of P100,000.00 just and reasonable
under the circumstances.
WHEREFORE, the petition is DENIED. The decision dated July 30, 2010 and resolution dated January 3, 2011 of the Court of
Appeals in CA-G.R. CV No. 87843 are AFFIRMED with the following modifications: MERALCO is ordered to pay respondents
Spouses Sulpicio and Patricia Ramos P210,000.00 as actual damages, P300,000.00 as moral damages, PS00,000.00 as
exemplary damages, and Pl00,000.00 as attorneys fees. Costs against Manila Electric Company.
SO ORDERED.
7. MMDA V. VIRON
G.R. No. 170656 August 15, 2007
THE METROPOLITAN MANILA DEVELOPMENT AUTHORITY and BAYANI FERNANDO as Chairman of the Metropolitan
Manila Development Authority, petitioners,
vs.
VIRON TRANSPORTATION CO., INC., respondent.
x --------------------------------------------- x
G.R. No. 170657 August 15, 2007
HON. ALBERTO G. ROMULO, Executive Secretary, the METROPOLITAN MANILA DEVELOPMENT AUTHORITY and
BAYANI FERNANDO as Chairman of the Metropolitan Manila Development Authority,petitioners,
vs.
MENCORP TRANSPORTATION SYSTEM, INC., respondent.
DECISION
CARPIO MORALES, J.:
The following conditions in 1969, as observed by this Court:
Vehicles have increased in number. Traffic congestion has moved from bad to worse, from tolerable to critical. The
number of people who use the thoroughfares has multiplied x x x,1
have remained unchecked and have reverberated to this day. Traffic jams continue to clog the streets of Metro Manila, bringing
vehicles to a standstill at main road arteries during rush hour traffic and sapping people’s energies and patience in the process.
The present petition for review on certiorari, rooted in the traffic congestion problem, questions the authority of the Metropolitan
Manila Development Authority (MMDA) to order the closure of provincial bus terminals along Epifanio de los Santos Avenue
(EDSA) and major thoroughfares of Metro Manila.
Specifically challenged are two Orders issued by Judge Silvino T. Pampilo, Jr. of the Regional Trial Court (RTC) of Manila,
Branch 26 in Civil Case Nos. 03-105850 and 03-106224.
The first assailed Order of September 8, 2005,2 which resolved a motion for reconsideration filed by herein respondents,
declared Executive Order (E.O.) No. 179, hereafter referred to as the E.O., "unconstitutional as it constitutes an unreasonable
exercise of police power." The second assailed Order of November 23, 20053 denied petitioners’ motion for reconsideration.
The following facts are not disputed:
President Gloria Macapagal Arroyo issued the E.O. on February 10, 2003, "Providing for the Establishment of Greater Manila
Mass Transport System," the pertinent portions of which read:
WHEREAS, Metro Manila continues to be the center of employment opportunities, trade and commerce of the
Greater Metro Manila area;
WHEREAS, the traffic situation in Metro Manila has affected the adjacent provinces of Bulacan, Cavite, Laguna,
and Rizal, owing to the continued movement of residents and industries to more affordable and economically
viable locations in these provinces;
WHEREAS, the Metropolitan Manila Development Authority (MMDA) is tasked to undertake measures to ease
traffic congestion in Metro Manila and ensure the convenient and efficient travel of commuters within its
jurisdiction;
WHEREAS, a primary cause of traffic congestion in Metro Manila has been the numerous buses plying the
streets that impedes [sic] the flow of vehicles and commuters due to the inefficient connectivity of the different
transport modes;
WHEREAS, the MMDA has recommended a plan to decongest traffic by eliminating the bus terminals now
located along major Metro Manila thoroughfares and providing more convenient access to the mass transport
system to the commuting public through the provision of mass transport terminal facilities that would integrate
the existing transport modes, namely the buses, the rail-based systems of the LRT, MRT and PNR and to
facilitate and ensure efficient travel through the improved connectivity of the different transport modes;
WHEREAS, the national government must provide the necessary funding requirements to immediately
implement and render operational these projects; and extent to MMDA such other assistance as may be
warranted to ensure their expeditious prosecution.
NOW, THEREFORE, I, GLORIA MACAPAGAL-ARROYO, President of the Philippines, by virtue of the powers
vested in me by law, do hereby order:
Section 1. THE PROJECT. – The project shall be identified as GREATER MANILA TRANSPORT SYSTEM
Project.
Section 2. PROJECT OBJECTIVES. – In accordance with the plan proposed by MMDA, the project aims to
develop four (4) interim intermodal mass transport terminals to integrate the different transport modes, as well
as those that shall hereafter be developed, to serve the commuting public in the northwest, north, east, south,
and southwest of Metro Manila. Initially, the project shall concentrate on immediately establishing the mass
transport terminals for the north and south Metro Manila commuters as hereinafter described.
Section 3. PROJECT IMPLEMENTING AGENCY. – The Metropolitan Manila Development Authority (MMDA),
is hereby designated as the implementing Agency for the project. For this purpose, MMDA is directed to
undertake such infrastructure development work as may be necessary and, thereafter, manage the project until
it may be turned-over to more appropriate agencies, if found suitable and convenient. Specifically, MMDA shall
have the following functions and responsibilities:
a) Cause the preparation of the Master Plan for the projects, including the designs and costing;
b) Coordinate the use of the land and/or properties needed for the project with the respective
agencies and/or entities owning them;
c) Supervise and manage the construction of the necessary structures and facilities;
d) Execute such contracts or agreements as may be necessary, with the appropriate

government agencies, entities, and/or private persons, in accordance with existing laws and
pertinent regulations, to facilitate the implementation of the project;
e) Accept, manage and disburse such funds as may be necessary for the construction and/or
implementation of the projects, in accordance with prevailing accounting and audit polices and
practice in government.
f) Enlist the assistance of any national government agency, office or department, including local
government units, government-owned or controlled corporations, as may be necessary;
g) Assign or hire the necessary personnel for the above purposes; and
h) Perform such other related functions as may be necessary to enable it to accomplish the
objectives and purposes of this Executive Order.4 (Emphasis in the original; underscoring
supplied)
As the above-quoted portions of the E.O. noted, the primary cause of traffic congestion in Metro Manila has been the numerous
buses plying the streets and the inefficient connectivity of the different transport modes;5 and the MMDA had "recommended a
plan to decongest traffic by eliminating the bus terminals now located along major Metro Manila thoroughfares and providing
more and convenient access to the mass transport system to the commuting public through the provision of mass transport
terminal facilities"6 which plan is referred to under the E.O. as the Greater Manila Mass Transport System Project (the Project).
The E.O. thus designated the MMDA as the implementing agency for the Project.
Pursuant to the E.O., the Metro Manila Council (MMC), the governing board and policymaking body of the MMDA, issued
Resolution No. 03-07 series of 20037 expressing full support of the Project. Recognizing the imperative to integrate the different
transport modes via the establishment of common bus parking terminal areas, the MMC cited the need to remove the bus
terminals located along major thoroughfares of Metro Manila.8
On February 24, 2003, Viron Transport Co., Inc. (Viron), a domestic corporation engaged in the business of public transportation
with a provincial bus operation,9 filed a petition for declaratory relief10 before the RTC11 of Manila.
In its petition which was docketed as Civil Case No. 03-105850, Viron alleged that the MMDA, through Chairman Fernando,
was "poised to issue a Circular, Memorandum or Order closing, or tantamount to closing, all provincial bus terminals along
EDSA and in the whole of the Metropolis under the pretext of traffic regulation."12 This impending move, it stressed, would mean
the closure of its bus terminal in Sampaloc, Manila and two others in Quezon City.
Alleging that the MMDA’s authority does not include the power to direct provincial bus operators to abandon their existing bus
terminals to thus deprive them of the use of their property, Viron asked the court to construe the scope, extent and limitation of
the power of the MMDA to regulate traffic under R.A. No. 7924, "An Act Creating the Metropolitan Manila Development Authority,
Defining its Powers and Functions, Providing Funds Therefor and For Other Purposes."
Viron also asked for a ruling on whether the planned closure of provincial bus terminals would contravene the Public Service
Act and related laws which mandate public utilities to provide and maintain their own terminals as a requisite for the privilege
of operating as common carriers.13
Mencorp Transportation System, Inc. (Mencorp), another provincial bus operator, later filed a similar petition for declaratory
relief14 against Executive Secretary Alberto G. Romulo and MMDA Chairman Fernando.
Mencorp asked the court to declare the E.O. unconstitutional and illegal for transgressing the possessory rights of owners and
operators of public land transportation units over their respective terminals.
Averring that MMDA Chairman Fernando had begun to implement a plan to close and eliminate all provincial bus terminals
along EDSA and in the whole of the metropolis and to transfer their operations to common bus terminals,15 Mencorp prayed for
the issuance of a temporary restraining order (TRO) and/or writ of preliminary injunction to restrain the impending closure of its
bus terminals which it was leasing at the corner of EDSA and New York Street in Cubao and at the intersection of Blumentritt,
Laon Laan and Halcon Streets in Quezon City. The petition was docketed as Civil Case No. 03-106224 and was raffled to
Branch 47 of the RTC of Manila.
Mencorp’s petition was consolidated on June 19, 2003 with Viron’s petition which was raffled to Branch 26 of the RTC, Manila.
Mencorp’s prayer for a TRO and/or writ of injunction was denied as was its application for the issuance of a preliminary
injunction.16
In the Pre-Trial Order17 issued by the trial court, the issues were narrowed down to whether 1) the MMDA’s power to regulate
traffic in Metro Manila included the power to direct provincial bus operators to abandon and close their duly established and
existing bus terminals in order to conduct business in a common terminal; (2) the E.O. is consistent with the Public Service Act
and the Constitution; and (3) provincial bus operators would be deprived of their real properties without due process of law
should they be required to use the common bus terminals.
Upon the agreement of the parties, they filed their respective position papers in lieu of hearings.
By Decision18 of January 24, 2005, the trial court sustained the constitutionality and legality of the E.O. pursuant to R.A. No.
7924, which empowered the MMDA to administer Metro Manila’s basic services including those of transport and traffic
management.
The trial court held that the E.O. was a valid exercise of the police power of the State as it satisfied the two tests of lawful
subject matter and lawful means, hence, Viron’s and Mencorp’s property rights must yield to police power.
On the separate motions for reconsideration of Viron and Mencorp, the trial court, by Order of September 8, 2005, reversed its
Decision, this time holding that the E.O. was "an unreasonable exercise of police power"; that the authority of the MMDA under
Section (5)(e) of R.A. No. 7924 does not include the power to order the closure of Viron’s and Mencorp’s existing bus terminals;
and that the E.O. is inconsistent with the provisions of the Public Service Act.
Petitioners’ motion for reconsideration was denied by Resolution of November 23, 2005.
Hence, this petition, which faults the trial court for failing to rule that: (1) the requisites of declaratory relief are not present, there
being no justiciable controversy in Civil Case Nos. 03-105850 and 03-106224; and (2) the President has the authority to
undertake or cause the implementation of the Project.19
Petitioners contend that there is no justiciable controversy in the cases for declaratory relief as nothing in the body of the E.O.
mentions or orders the closure and elimination of bus terminals along the major thoroughfares of Metro Manila. Viron and
Mencorp, they argue, failed to produce any letter or communication from the Executive Department apprising them of an
immediate plan to close down their bus terminals.
And petitioners maintain that the E.O. is only an administrative directive to government agencies to coordinate with the MMDA
and to make available for use government property along EDSA and South Expressway corridors. They add that the only
relation created by the E.O. is that between the Chief Executive and the implementing officials, but not between third persons.
The petition fails.
It is true, as respondents have pointed out, that the alleged deficiency of the consolidated petitions to meet the requirement of
justiciability was not among the issues defined for resolution in the Pre-Trial Order of January 12, 2004. It is equally true,
however, that the question was repeatedly raised by petitioners in their Answer to Viron’s petition,20 their Comment of April 29,
2003 opposing Mencorp’s prayer for the issuance of a TRO,21 and their Position Paper of August 23, 2004.22
In bringing their petitions before the trial court, both respondents pleaded the existence of the essential requisites for their
respective petitions for declaratory relief,23 and refuted petitioners’ contention that a justiciable controversy was lacking.24 There
can be no denying, therefore, that the issue was raised and discussed by the parties before the trial court.
The following are the essential requisites for a declaratory relief petition: (a) there must be a justiciable controversy; (b) the
controversy must be between persons whose interests are adverse; (c) the party seeking declaratory relief must have a legal
interest in the controversy; and (d) the issue invoked must be ripe for judicial determination.25
The requirement of the presence of a justiciable controversy is satisfied when an actual controversy or the ripening
seeds thereof exist between the parties, all of whom are sui juris and before the court, and the declaration sought will help in
ending the controversy.26 A question becomes justiciable when it is translated into a claim of right which is actually contested.27
In the present cases, respondents’ resort to court was prompted by the issuance of the E.O. The 4th Whereas clause of the
E.O. sets out in clear strokes the MMDA’s plan to "decongest traffic by eliminating the bus terminals now located along major
Metro Manila thoroughfares and providing more convenient access to the mass transport system to the commuting public
through the provision of mass transport terminal facilities x x x." (Emphasis supplied)
Section 2 of the E.O. thereafter lays down the immediate establishment of common bus terminals for north- and south-bound
commuters. For this purpose, Section 8 directs the Department of Budget and Management to allocate funds of not more than
one hundred million pesos (P100,000,000) to cover the cost of the construction of the north and south terminals. And the E.O.
was made effective immediately.
The MMDA’s resolve to immediately implement the Project, its denials to the contrary notwithstanding, is also evident from
telltale circumstances, foremost of which was the passage by the MMC of Resolution No. 03-07, Series of 2003 expressing its
full support of the immediate implementation of the Project.
Notable from the 5th Whereas clause of the MMC Resolution is the plan to "remove the bus terminals located along major
thoroughfares of Metro Manila and an urgent need to integrate the different transport modes." The 7th Whereas clause proceeds
to mention the establishment of the North and South terminals.
As alleged in Viron’s petition, a diagram of the GMA-MTS North Bus/Rail Terminal had been drawn up, and construction of the
terminal is already in progress. The MMDA, in its Answer28 and Position Paper,29 in fact affirmed that the government had
begun to implement the Project.
It thus appears that the issue has already transcended the boundaries of what is merely conjectural or anticipatory.lawphil
Under the circumstances, for respondents to wait for the actual issuance by the MMDA of an order for the closure of
respondents’ bus terminals would be foolhardy for, by then, the proper action to bring would no longer be for declaratory relief
which, under Section 1, Rule 6330 of the Rules of Court, must be brought before there is a breach or violation of rights.
As for petitioners’ contention that the E.O. is a mere administrative issuance which creates no relation with third persons, it
does not persuade. Suffice it to stress that to ensure the success of the Project for which the concerned government agencies
are directed to coordinate their activities and resources, the existing bus terminals owned, operated or leased by third persons
like respondents would have to be eliminated; and respondents would be forced to operate from the common bus terminals.
It cannot be gainsaid that the E.O. would have an adverse effect on respondents. The closure of their bus terminals would
mean, among other things, the loss of income from the operation and/or rentals of stalls thereat. Precisely, respondents claim
a deprivation of their constitutional right to property without due process of law.
Respondents have thus amply demonstrated a "personal and substantial interest in the case such that [they have] sustained,
or will sustain, direct injury as a result of [the E.O.’s] enforcement."31 Consequently, the established rule that the constitutionality
of a law or administrative issuance can be challenged by one who will sustain a direct injury as a result of its enforcement has
been satisfied by respondents.
On to the merits of the case.
Respondents posit that the MMDA is devoid of authority to order the elimination of their bus terminals under the E.O. which,
they argue, is unconstitutional because it violates both the Constitution and the Public Service Act; and that neither is the MMDA
clothed with such authority under R.A. No. 7924.
Petitioners submit, however, that the real issue concerns the President’s authority to undertake or to cause the implementation
of the Project. They assert that the authority of the President is derived from E.O. No. 125, "Reorganizing the Ministry of
Transportation and Communications Defining its Powers and Functions and for Other Purposes," her residual power and/or
E.O. No. 292, otherwise known as the Administrative Code of 1987. They add that the E.O. is also a valid exercise of the police
power.
E.O. No. 125,32 which former President Corazon Aquino issued in the exercise of legislative powers, reorganized the then
Ministry (now Department) of Transportation and Communications. Sections 4, 5, 6 and 22 of E.O. 125, as amended by E.O.
125-A,33 read:
SECTION 4. Mandate. — The Ministry shall be the primary policy, planning, programming, coordinating, implementing,
regulating and administrative entity of the Executive Branch of the government in the promotion, development and
regulation of dependable and coordinated networks of transportationand communication systems as well as in the fast,
safe, efficient and reliable postal, transportation and communications services.
To accomplish such mandate, the Ministry shall have the following objectives:
(a) Promote the development of dependable and coordinated networks of transportation and
communications systems;
(b) Guide government and private investment in the development of the country’s intermodal
transportation and communications systems in a most practical, expeditious, and orderly fashion for
maximum safety, service, and cost effectiveness; (Emphasis and underscoring supplied)
xxxx
SECTION 5. Powers and Functions. — To accomplish its mandate, the Ministry shall have the following powers and
functions:
(a) Formulate and recommend national policies and guidelines for the preparation and implementation
of integrated and comprehensive transportation and communications systems at the national, regional
and local levels;
(b) Establish and administer comprehensive and integrated programs for transportation and
communications, and for this purpose, may call on any agency, corporation, or organization, whether
public or private, whose development programs include transportation and communications as an
integral part thereof, to participate and assist in the preparation and implementation of such program;
(c) Assess, review and provide direction to transportation and communications research and
development programs of the government in coordination with other institutions concerned;
(d) Administer all laws, rules and regulations in the field of transportation and communications;
(Emphasis and underscoring supplied)
xxxx
SECTION 6. Authority and Responsibility. — The authority and responsibility for the exercise of the mandate of the
Ministry and for the discharge of its powers and functions shall be vested in the Minister of Transportation and
Communications, hereinafter referred to as the Minister, who shall have supervision and control over the Ministry and
shall be appointed by the President. (Emphasis and underscoring supplied)
SECTION 22. Implementing Authority of Minister. — The Minister shall issue such orders, rules, regulations and other
issuances as may be necessary to ensure the effective implementation of the provisions of this Executive Order.
(Emphasis and underscoring supplied)
It is readily apparent from the abovequoted provisions of E.O. No. 125, as amended, that the President, then possessed of and
exercising legislative powers, mandated the DOTC to be the primary policy, planning, programming, coordinating,
implementing, regulating and administrative entity to promote, develop and regulate networks of transportation and
communications. The grant of authority to the DOTC includes the power to establishand administer comprehensive and
integrated programs for transportation and communications.
As may be seen further, the Minister (now Secretary) of the DOTC is vested with the authority and responsibility to exercise the
mandate given to the department. Accordingly, the DOTC Secretary is authorized to issue such orders, rules, regulations and
other issuances as may be necessary to ensure the effective implementation of the law.
Since, under the law, the DOTC is authorized to establish and administer programs and projects for transportation, it follows
that the President may exercise the same power and authority to order the implementation of the Project, which admittedly is
one for transportation.
Such authority springs from the President’s power of control over all executive departments as well as the obligation for the
faithful execution of the laws under Article VII, Section 17 of the Constitution which provides:
SECTION 17. The President shall have control of all the executive departments, bureaus and offices. He shall ensure
that the laws be faithfully executed.
This constitutional provision is echoed in Section 1, Book III of the Administrative Code of 1987. Notably, Section 38, Chapter
37, Book IV of the same Code defines the President’s power of supervision and control over the executive departments, viz:
SECTION 38. Definition of Administrative Relationships. — Unless otherwise expressly stated in the Code or in other
laws defining the special relationships of particular agencies, administrative relationships shall be categorized and
defined as follows:
(1) Supervision and Control. — Supervision and control shall include authority to act directly whenever a specific
function is entrusted by law or regulation to a subordinate; direct the performance of duty; restrain the commission of
acts; review, approve, reverse or modify acts and decisions of subordinate officials or units; determine priorities in the
execution of plans and programs. Unless a different meaning is explicitly provided in the specific law governing the
relationship of particular agencies the word "control" shall encompass supervision and control as defined in this
paragraph. x x x (Emphasis and underscoring supplied)
Thus, whenever a specific function is entrusted by law or regulation to a subordinate, the President may act directly or merely
direct the performance of a duty.34
Respecting the President’s authority to order the implementation of the Project in the exercise of the police power of the State,
suffice it to stress that the powers vested in the DOTC Secretary to establish and administer comprehensive and integrated
programs for transportation and communications and to issue orders, rules and regulations to implement such mandate (which,
as previously discussed, may also be exercised by the President) have been so delegated for the good and welfare of the
people. Hence, these powers partake of the nature of police power.
Police power is the plenary power vested in the legislature to make, ordain, and establish wholesome and reasonable laws,
statutes and ordinances, not repugnant to the Constitution, for the good and welfare of the people.35 This power to prescribe
regulations to promote the health, morals, education, good order or safety, and general welfare of the people flows from the
recognition that salus populi est suprema lex ─ the welfare of the people is the supreme law.
While police power rests primarily with the legislature, such power may be delegated, as it is in fact increasingly being
delegated.36 By virtue of a valid delegation, the power may be exercised by the President and administrative boards37 as well
as by the lawmaking bodies of municipal corporations or local governments under an express delegation by the Local
Government Code of 1991.38
The authority of the President to order the implementation of the Project notwithstanding, the designation of the MMDA as the
implementing agency for the Project may not be sustained. It is ultra vires, there being no legal basis therefor.
It bears stressing that under the provisions of E.O. No. 125, as amended, it is the DOTC, and not the MMDA, which is authorized
to establish and implement a project such as the one subject of the cases at bar. Thus, the President, although authorized to
establish or cause the implementation of the Project, must exercise the authority through the instrumentality of the DOTC which,
by law, is the primary implementing and administrative entity in the promotion, development and regulation of networks of
transportation, and the one so authorized to establish and implement a project such as the Project in question.
By designating the MMDA as the implementing agency of the Project, the President clearly overstepped the limits of the
authority conferred by law, rendering E.O. No. 179 ultra vires.
In another vein, the validity of the designation of MMDA flies in the absence of a specific grant of authority to it under R.A. No.
7924.
To recall, R.A. No. 7924 declared the Metropolitan Manila area39 as a "special development and administrative region" and
placed the administration of "metro-wide" basic services affecting the region under the MMDA.
Section 2 of R.A. No. 7924 specifically authorizes the MMDA to perform "planning, monitoring and coordinative functions, and
in the process exercise regulatory and supervisory authority over the delivery of metro-wide services," including transport and
traffic management.40 Section 5 of the same law enumerates the powers and functions of the MMDA as follows:
(a) Formulate, coordinate and regulate the implementation of medium and long-term plans and programs for
the delivery of metro-wide services, land use and physical development within Metropolitan Manila, consistent
with national development objectives and priorities;
(b) Prepare, coordinate and regulate the implementation of medium-term investment programs for metro-wide
services which shall indicate sources and uses of funds for priority programs and projects, and which shall
include the packaging of projects and presentation to funding institutions;
(c) Undertake and manage on its own metro-wide programs and projects for the delivery of specific services
under its jurisdiction, subject to the approval of the Council. For this purpose, MMDA can create appropriate
project management offices;
(d) Coordinate and monitor the implementation of such plans, programs and projects in Metro Manila; identify
bottlenecks and adopt solutions to problems of implementation;
(e) The MMDA shall set the policies concerning traffic in Metro Manila, and shall coordinate and regulate the
implementation of all programs and projects concerning traffic management, specifically pertaining to
enforcement, engineering and education. Upon request, it shall be extended assistance and cooperation,
including but not limited to, assignment of personnel, by all other government agencies and offices concerned;
(f) Install and administer a single ticketing system, fix, impose and collect fines and penalties for all kinds of
violations of traffic rules and regulations, whether moving or non-moving in nature, and confiscate and suspend
or revoke drivers’ licenses in the enforcement of such traffic laws and regulations, the provisions of RA 4136
and PD 1605 to the contrary notwithstanding. For this purpose, the Authority shall impose all traffic laws and
regulations in Metro Manila, through its traffic operation center, and may deputize members of the PNP, traffic
enforcers of local government units, duly licensed security guards, or members of non-governmental
organizations to whom may be delegated certain authority, subject to such conditions and requirements as the
Authority may impose; and
(g) Perform other related functions required to achieve the objectives of the MMDA, including the undertaking
of delivery of basic services to the local government units, when deemed necessary subject to prior coordination
with and consent of the local government unit concerned." (Emphasis and underscoring supplied)
The scope of the function of MMDA as an administrative, coordinating and policy-setting body has been settled in Metropolitan
Manila Development Authority (MMDA) v. Bel-Air Village Association, Inc.41 In that case, the Court stressed:
Clearly, the scope of the MMDA’s function is limited to the delivery of the seven (7) basic services. One of these
is transport and traffic management which includes the formulation and monitoring of policies, standards and projects
to rationalize the existing transport operations, infrastructure requirements, the use of thoroughfares and promotion of
the safe movement of persons and goods. It also covers the mass transport system and the institution of a system of
road regulation, the administration of all traffic enforcement operations, traffic engineering services and traffic education
programs, including the institution of a single ticketing system in Metro Manila for traffic violations. Under this service,
the MMDA is expressly authorized to "to set the policies concerning traffic" and "coordinate and regulate the
implementation of all traffic management programs." In addition, the MMDA may install and administer a single ticketing
system," fix, impose and collect fines and penalties for all traffic violations.
It will be noted that the powers of the MMDA are limited to the following acts: formulation, coordination, regulation,
implementation, preparation, management, monitoring, setting of policies, installation of a system and administration.
There is no syllable in R.A. No. 7924 that grants the MMDA police power, let alone legislative power. Even the Metro
Manila Council has not been delegated any legislative power. Unlike the legislative bodies of the local government
units, there is no provision in R.A. No. 7924 that empowers the MMDA or its Council to ‘enact ordinances, approve
resolutions and appropriate funds for the general welfare’ of the inhabitants of Metro Manila. The MMDA is, as termed
in the charter itself, a ‘development authority.’ It is an agency created for the purpose of laying down
policies and coordinating with the various national government agencies, people’s organizations, non-governmental
organizations and the private sector for the efficient and expeditious delivery of basic services in the vast metropolitan
area. All its functions are administrative in nature and these are actually summed up in the charter itself, viz:
‘SECTION 2. Creation of the Metropolitan Manila Development Authority. — . . .
The MMDA shall perform planning, monitoring and coordinative functions, and in the process exercise
regulatory and supervisory authority over the delivery of metro-wide services within Metro Manila, without
diminution of the autonomy of the local government units concerning purely local matters.’ 42 (Emphasis and
underscoring supplied)
In light of the administrative nature of its powers and functions, the MMDA is devoid of authority to implement the Project as
envisioned by the E.O; hence, it could not have been validly designated by the President to undertake the Project. It follows
that the MMDA cannot validly order the elimination of respondents’ terminals.
Even the MMDA’s claimed authority under the police power must necessarily fail in consonance with the above-quoted ruling
in MMDA v. Bel-Air Village Association, Inc. and this Court’s subsequent ruling in Metropolitan Manila Development Authority
v. Garin43 that the MMDA is not vested with police power.
Even assuming arguendo that police power was delegated to the MMDA, its exercise of such power does not satisfy the two
tests of a valid police power measure, viz: (1) the interest of the public generally, as distinguished from that of a particular class,
requires its exercise; and (2) the means employed are reasonably necessary for the accomplishment of the purpose and not
unduly oppressive upon individuals.44 Stated differently, the police power legislation must be firmly grounded on public interest
and welfare and a reasonable relation must exist between the purposes and the means.
As early as Calalang v. Williams,45 this Court recognized that traffic congestion is a public, not merely a private, concern. The
Court therein held that public welfare underlies the contested statute authorizing the Director of Public Works to promulgate
rules and regulations to regulate and control traffic on national roads.
Likewise, in Luque v. Villegas,46 this Court emphasized that public welfare lies at the bottom of any regulatory measure designed
"to relieve congestion of traffic, which is, to say the least, a menace to public safety."47 As such, measures calculated to promote
the safety and convenience of the people using the thoroughfares by the regulation of vehicular traffic present a proper subject
for the exercise of police power.
Notably, the parties herein concede that traffic congestion is a public concern that needs to be addressed immediately. Indeed,
the E.O. was issued due to the felt need to address the worsening traffic congestion in Metro Manila which, the MMDA so
determined, is caused by the increasing volume of buses plying the major thoroughfares and the inefficient connectivity of
existing transport systems. It is thus beyond cavil that the motivating force behind the issuance of the E.O. is the interest of the
public in general.
Are the means employed appropriate and reasonably necessary for the accomplishment of the purpose. Are they not duly
oppressive?
With the avowed objective of decongesting traffic in Metro Manila, the E.O. seeks to "eliminate[e] the bus terminals now located
along major Metro Manila thoroughfares and provid[e] more convenient access to the mass transport system to the commuting
public through the provision of mass transport terminal facilities x x x."48 Common carriers with terminals along the major
thoroughfares of Metro Manila would thus be compelled to close down their existing bus terminals and use the MMDA-
designated common parking areas.
In Lucena Grand Central Terminal, Inc. v. JAC Liner, Inc.,49 two city ordinances were passed by the Sangguniang Panlungsod of
Lucena, directing public utility vehicles to unload and load passengers at the Lucena Grand Central Terminal, which was given
the exclusive franchise to operate a single common terminal. Declaring that no other terminals shall be situated, constructed,
maintained or established inside or within the city of Lucena, the sanggunian declared as inoperable all temporary terminals
therein.
The ordinances were challenged before this Court for being unconstitutional on the ground that, inter alia, the measures
constituted an invalid exercise of police power, an undue taking of private property, and a violation of the constitutional
prohibition against monopolies.
Citing De la Cruz v. Paras50 and Lupangco v. Court of Appeals,51 this Court held that the assailed ordinances were characterized
by overbreadth, as they went beyond what was reasonably necessary to solve the traffic problem in the city. And it found that
the compulsory use of the Lucena Grand Terminal was unduly oppressive because it would subject its users to fees, rentals
and charges.
The true role of Constitutional Law is to effect an equilibrium between authority and liberty so that rights are exercised
within the framework of the law and the laws are enacted with due deference to rights.
A due deference to the rights of the individual thus requires a more careful formulation of solutions to societal problems.
From the memorandum filed before this Court by petitioner, it is gathered that the Sangguniang Panlungsod had
identified the cause of traffic congestion to be the indiscriminate loading and unloading of passengers by buses on the
streets of the city proper, hence, the conclusion that the terminals contributed to the proliferation of buses obstructing
traffic on the city streets.
Bus terminals per se do not, however, impede or help impede the flow of traffic. How the outright proscription against
the existence of all terminals, apart from that franchised to petitioner, can be considered as reasonably necessary to
solve the traffic problem, this Court has not been enlightened. If terminals lack adequate space such that bus drivers
are compelled to load and unload passengers on the streets instead of inside the terminals, then reasonable
specifications for the size of terminals could be instituted, with permits to operate the same denied those which are
unable to meet the specifications.
In the subject ordinances, however, the scope of the proscription against the maintenance of terminals is so broad that
even entities which might be able to provide facilities better than the franchised terminal are barred from operating at
all. (Emphasis and underscoring supplied)
As in Lucena, this Court fails to see how the prohibition against the existence of respondents’ terminals can be considered a
reasonable necessity to ease traffic congestion in the metropolis. On the contrary, the elimination of respondents’ bus terminals
brings forth the distinct possibility and the equally harrowing reality of traffic congestion in the common parking areas, a case
of transference from one site to another.
Less intrusive measures such as curbing the proliferation of "colorum" buses, vans and taxis entering Metro Manila and using
the streets for parking and passenger pick-up points, as respondents suggest, might even be more effective in easing the traffic
situation. So would the strict enforcement of traffic rules and the removal of obstructions from major thoroughfares.
As to the alleged confiscatory character of the E.O., it need only to be stated that respondents’ certificates of public convenience
confer no property right, and are mere licenses or privileges.52 As such, these must yield to legislation safeguarding the interest
of the people.
Even then, for reasons which bear reiteration, the MMDA cannot order the closure of respondents’ terminals not only because
no authority to implement the Project has been granted nor legislative or police power been delegated to it, but also because
the elimination of the terminals does not satisfy the standards of a valid police power measure.
Finally, an order for the closure of respondents’ terminals is not in line with the provisions of the Public Service Act.
Paragraph (a), Section 13 of Chapter II of the Public Service Act (now Section 5 of Executive Order No. 202, creating the Land
Transportation Franchising and Regulatory Board or LFTRB) vested the Public Service Commission (PSC, now the LTFRB)
with "x x x jurisdiction, supervision and control over all public services and their franchises, equipment and other properties x x
x."
Consonant with such grant of authority, the PSC was empowered to "impose such conditions as to construction, equipment,
maintenance, service, or operation as the public interests and convenience may reasonably require"53 in approving any
franchise or privilege.
Further, Section 16 (g) and (h) of the Public Service Act54 provided that the Commission shall have the power, upon proper
notice and hearing in accordance with the rules and provisions of this Act, subject to the limitations and exceptions mentioned
and saving provisions to the contrary:
(g) To compel any public service to furnish safe, adequate, and proper service as regards the manner of furnishing the
same as well as the maintenance of the necessary material and equipment.
(h) To require any public service to establish, construct, maintain, and operate any reasonable extension of its existing
facilities, where in the judgment of said Commission, such extension is reasonable and practicable and will furnish
sufficient business to justify the construction and maintenance of the same and when the financial condition of the said
public service reasonably warrants the original expenditure required in making and operating such extension.(Emphasis
and underscoring supplied)
The establishment, as well as the maintenance of vehicle parking areas or passenger terminals, is generally considered a
necessary service to be provided by provincial bus operators like respondents, hence, the investments they have poured into
the acquisition or lease of suitable terminal sites. Eliminating the terminals would thus run counter to the provisions of the Public
Service Act.
This Court commiserates with the MMDA for the roadblocks thrown in the way of its efforts at solving the pestering problem of
traffic congestion in Metro Manila. These efforts are commendable, to say the least, in the face of the abominable traffic situation
of our roads day in and day out. This Court can only interpret, not change, the law, however. It needs only to be reiterated that it
is the DOTC ─ as the primary policy, planning, programming, coordinating, implementing, regulating and administrative entity
to promote, develop and regulate networks of transportation and communications ─ which has the power to establish and
administer a transportation project like the Project subject of the case at bar.
No matter how noble the intentions of the MMDA may be then, any plan, strategy or project which it is not authorized to
implement cannot pass muster.
WHEREFORE, the Petition is, in light of the foregoing disquisition, DENIED. E.O. No. 179 is declared NULL and VOID for
being ultra vires.
SO ORDERED.
8. ASSO. OF MEDICAL CLINIC FOR OVERSEAS WORKERS INC. V. GCCAPPROVED MEDICAL CENTER ASSO.
G.R. No. 207132 December 06, 2016
ASSOCIATION OF MEDICAL CLINICS FOR OVERSEAS WORKERS, INC., (AMCOW), REPRESENTED HEREIN BY ITS PRESIDENT, DR.
ROLANDO VILLOTE, Petitioner,
vs.
GCC APPROVED MEDICAL CENTERS ASSOCIATION, INC. AND CHRISTIAN CANGCO, Respondents.
G.R. No. 207205

HON. ENRIQUE T. ONA, IN HIS CAPACITY AS SECRETARY OF THE DEPARTMENT OF HEALTH, Petitioner,
vs.
GCC APPROVED MEDICAL CENTERS ASSOCIATION, INC. AND CHRISTIAN E. CANGCO, Respondents.
DECISION
BRION, J.:
In these consolidated petitions for review on certiorari[1] filed under Rule 45 of the Rules of Court, by the Association of
Medical Clinics for Overseas Workers, Inc. (AMCOW) in GR No. 207132, and by Secretary Enrique T. Ona (Secretary Ona) of
the Department of Health (DOH) in GR No. 207205, we resolve the challenge to the August 10, 2012 decision[2] and the April
12, 2013 order[3] of the Regional Trial Court (RTC) of Pasay City, Branch 108, in Sp. Civil Action No. R-PSY-10-04391-CV.[4]
The August 10, 2012 decision and April 12, 2013 order declared null and void ab initio the August 23, 2010 and November 2,
2010orders issued by the DOH directing respondent GCC Approved Medical Centers Association, Inc. (GAMCA) to cease and
desist from implementing the referral decking system (these orders shall be alternately referred to as DOH CDO letters).
I. The Antecedents
On March 8, 2001, the DOH issued Administrative Order No. 5, Series of 2001[5] (AO 5-01) which directed the decking or
equal distribution of migrant workers among the several clinics who are members of GAMCA.
AO 5-01 was issued to comply with the Gulf Cooperative Countries (GCC) States' requirement that only GCC-accredited
medical clinics/hospitals' examination results will be honored by the GCC States' respective embassies. It required an OFW
applicant to first go to a GAMCA Center which, in turn, will refer the applicant to a GAMCA clinic or hospital.
Subsequently, the DOH issued AO No. 106, Series of 2002[6] holding in abeyance the implementation of the referral
decking system. The DOH reiterated its directive suspending the referral decking system in AO No. 159, Series of
2004.[7]
In 2004, the DOH issued AO No. 167, Series of 2004[8] repealing AO 5-01, reasoning that the referral decking system did not
guarantee the migrant workers' right to safe and quality health service. AO 167-04 pertinently reads:
WHEREAS, after a meticulous and deliberate study, examination, and consultation about the GAMCA referral decking system,
the DOH believes that its mandate is to protect and promote the health of the Filipino people by ensuring the rights to safe and
quality health service and reliable medical examination results through the stricter regulation of medical clinics and other health
facilities, which the referral decking system neither assures nor guarantees.
NOW, THEREFORE, for and in consideration of the foregoing, the DOH hereby withdraws, repeals and/or revokes
Administrative Order No. 5, series of 2001, concerning the referral decking system. Hence, all other administrative issuances,
bureau circulars and memoranda related to A.O. No. 5, series of 2001, are hereby withdrawn, repealed and/revoked
accordingly.
In Department Memorandum No. 2008-0210,[9] dated September 26, 2008, then DOH Secretary Francisco T. Duque III
expressed his concern about the continued implementation of the referral decking system despite the DOH's prior suspension
directives. The DOH directed the "OFW clinics, duly accredited/licensed by the DOH and/or by the Philippine Health Insurance
Corporation (PHILHEALTH) belonging to and identified with GAMCA x x x to forthwith stop, terminate, withdraw or
otherwise end the x x x 'referral decking system.'"[10]
GAMCA questioned the DOH's Memorandum No. 2008-0210 before the Office of the President (OP). In a
decision[11] dated January 14, 2010, the OP nullified Memorandum No. 2008-0210.
On March 8, 2010, Republic Act (RA) No. 10022[12] lapsed into law without the President's signature. Section 16 of RA No.
10022 amended Section 23 of RA No. 8042, adding two new paragraphs - paragraphs (c) and (d). The pertinent portions of the
amendatory provisions read:
Section 16. Under Section 23 of Republic Act No. 8042, as amended, add new paragraphs (c) and (d) with their corresponding
subparagraphs to read as follows:
(c) Department of Health. - The Department of Health (DOH) shall regulate the activities and operations of all clinics
which conduct medical, physical, optical, dental, psychological and other similar examinations, hereinafter referred
to as health examinations, on Filipino migrant workers as requirement for their overseas employment.Pursuant to this,
the DOH shall ensure that:
(c.1) The fees for the health examinations are regulated, regularly monitored and duly published to ensure that the said fees
are reasonable and not exorbitant;
(c.2) The Filipino migrant worker shall only be required to undergo health examinations when there is reasonable certainty that
he or she will be hired and deployed to the jobsite and only those health examinations which are absolutely necessary for the
type of job applied for or those specifically required by the foreign employer shall be conducted;
(c.3) No group or groups of medical clinics shall have a monopoly of exclusively conducting health examinations on
migrant workers for certain receiving countries;
(c.4) Every Filipino migrant worker shall have the freedom to choose any of the DOH-accredited or DOH-operated
clinics that will conduct his/her health examinations and that his or her rights as a patient are respected. The decking practice,
which requires an overseas Filipino worker to go first to an office for registration and then farmed out to a medical
clinic located elsewhere, shall not be allowed;
(c.5) Within a period of three (3) years from the effectivity of this Act, all DOH regional and/or provincial hospitals shall establish
and operate clinics that can serve the health examination requirements of Filipino migrant workers to provide them easy access
to such clinics all over the country and lessen their transportation and lodging expenses; and
(c.6) All DOH-accredited medical clinics, including the DOH operated clinics, conducting health examinations for Filipino migrant
workers shall observe the same standard operating procedures and shall comply with internationally accepted standards in
their operations to conform with the requirements of receiving countries or of foreign employers/principals.
Any Foreign employer who does not honor the results of valid health examinations conducted by a DOH-accredited or DOH-
operated clinic shall be temporarily disqualified from participating in the overseas employment program, pursuant to POEA
rules and regulations.
In case an overseas Filipino worker is found to be not medically fit upon his/her immediate arrival in the country of destination,
the medical clinic that conducted the health examinations of such overseas Filipino worker shall pay for his or her repatriation
back to the Philippines and the cost of deployment of such worker.
Any government official or employee who violates any provision of this subsection shall be removed or dismissed from service
with disqualification to hold any appointive public office for five (5) years. Such penalty is without prejudice to any other liability
which he or she may have incurred under existing laws, rules or regulations. [emphases and underscoring supplied]
On August 13, 2010, the Implementing Rules and Regulations[13] (IRR) of RA No. 8042, as amended by RA No. 10022, took
effect.
Pursuant to Section 16 of RA No. 10022, the DOH, through its August 23, 2010 letter-order,[14] directed GAMCA to cease
and desist from implementing the referral decking system and to wrap up their operations within three (3) days from receipt
thereof. GAMCA received its copy of the August 23, 2010 letter-order on August 25, 2010.
On August 26, 2010, GAMCA filed with the RTC of Pasig City a petition for certiorari and prohibition with prayer for a writ of
preliminary injunction and/or temporary restraining order (GAMCA's petition).[15] It assailed: (1) the DOH's August 23, 2010
letter-order on the ground of grave abuse of discretion; and (2) paragraphs c.3 and c.4, Section 16 of RA No. 10022, as well
as Section 1 (c) and (d), Rule XI of the IRR, as unconstitutional.
Meanwhile, the DOH reiterated - through its November 2, 2010 order - its directive that GAMCA cease and desist from
implementing the referral decking system.[16]
On November 23, 2010, AMCOW filed an urgent motion for leave to intervene and to file an opposition-in-intervention, attaching
its opposition-in-intervention to its motion.[17] In the hearing conducted the following day, November 24, 2010, the RTC granted
AMCOW's intervention; DOH and GAMCA did not oppose AMCOW's motion.[18] AMCOW subsequently paid the docket fees
and submitted its memorandum.[19]
In an order[20] dated August 1, 2011, the RTC issued a writ of preliminary injunction [21] directing the DOH to cease and desist
from implementing its August 23, 2010 and November 2, 2010 orders. The RTC likewise issued an order denying the motion
for inhibition/disqualification filed by AMCOW.
On August 18, 2011, the DOH sought reconsideration of the RTC's August 1, 2011 order.
The assailed RTC rulings
In its August 10, 2012 decision,[22] the RTC granted GAMCA's certiorari petition and declared null and void ab initio the DOH
CDO letters. It also issued a writ of prohibition directing "the DOH Secretary and all persons acting on his behalf to cease and
desist from implementing the assailed Orders against the [GAMCA]."
The RTC upheld the constitutionality of Section 16 of RA No. 10022, amending Section 23 of RA No. 8042, but ruled that
Section 16 of RA No. 10022 does not apply to GAMCA.
The RTC reasoned out that the prohibition against the referral decking system under Section 16 of RA No. 10022 must be
interpreted as applying only to clinics that conduct health examination on migrant workers bound for countries that do not
require the referral decking system for the issuance of visas to job applicants.
It noted that the referral decking system is part of the application procedure in obtaining visas to enter the GCC States, a
procedure made in the exercise of the sovereign power of the GCC States to protect their nationals from health hazards, and
of their diplomatic power to regulate and screen entrants to their territories. Under the principle of sovereign equality and
independence of States, the Philippines cannot interfere with this system and, in fact, must respect the visa-granting procedures
of foreign states in the same way that they respect our immigration procedures.
Moreover, to restrain GAMCA which is a mere adjunct of HMC, the agent of GCC States, is to restrain the GCC States
themselves. To the RTC, the Congress was aware of this limitation, pursuant to the generally accepted principles of international
law under Article II, Section 2 of the 1987 Constitution, when it enacted Section 16 of RA No. 10022.
The DOH and AMCOW separately sought reconsideration of the RTC's August 10, 2012 decision, which motions the RTC
denied.[23] The DOH and AMCOW separately filed the present Rule 45 petitions.
On August 24, 2013, AMCOW filed a motion for consolidation[24] of the two petitions; the Court granted this motion and ordered
the consolidation of the two petitions in a resolution dated September 17, 2013. [25]
In the resolution[26] of April 14, 2015, the Court denied: (1) GAMCA's most urgent motion for issuance of temporary restraining
order/writ of preliminary injunction/status quo ante order (with request for immediate inclusion in the Honorable Court's agenda
of March 3, 2015, its motion dated March 2, 2015);[27] and (2) the most urgent reiterating motion for issuance of temporary
restraining order/writ of preliminary injunction/status quo ante order dated March 11, 2015.[28]
The Court also suspended the implementation of the permanent injunction issued by the RTC of Pasay City, Branch 108 in its
August 10, 2012 decision.
II. The Issues

The consolidated cases before us present the following issues:
First, whether the Regional Trial Court legally erred in giving due course to the petition for certiorari and prohibition against the
DOH CDO letters;
Second, whether the DOH CDO letters prohibiting GAMCA from implementing the referral decking system embodied under
Section 16 of Republic Act No. 10022 violates Section 3, Article II of the 1987 Constitution for being an undue taking of property;
Third, whether the application of Section 16 of Republic Act No.10022 to the GAMCA violates the international customary
principles of sovereign independence and equality.
III. Our Ruling
A. The RTC legally erred when it gave due course to GAMCA's petition for certiorari and prohibition.
The present case reached us through an appeal by certiorari (pursuant to Rule 45) of an RTC ruling, assailing the decision
based solely on questions of law. The RTC decision, on the other hand, involves the grant of the petitions for certiorari and
prohibition (pursuant to Rule 65) assailing the DOH CDO letters for grave abuse of discretion.
The question before us asks whether the RTC made a reversible error of law when it issued writs of certiorari and
prohibition against the DOH CDO letters.
AMCOW questions the means by which GAMCA raised the issue of the legality of RA No. 10022 before the RTC. AMCOW
posits that GAMCA availed of an improper remedy, as certiorari and prohibition lie only against quasi-judicial acts, and quasi-
judicial and ministerial acts, respectively. Since the disputed cease and desist order is neither, the RTC should have dismissed
the petition outright for being an improper remedy.
We agree with the petitioners' assertion that the RTC erred when it gave due course to GAMCA's petition for certiorari and
prohibition, but we do so for different reasons.
1. Certiorari under Rules of Court and under the courts' expanded jurisdiction under Art VIII, Section 1 of the
Constitution, as recognized by jurisprudence.
A.1.a. The Current Certiorari Situation
The use of petitions for certiorari and prohibition under Rule 65 is a remedy that judiciaries have used long before our Rules of
Court existed.[29] As footnoted below, these writs - now recognized and regulated as remedies under Rule 65 of our Rules of
Court - have been characterized a "supervisory writs" used by superior courts to keep lower courts within the confines of their
granted jurisdictions, thereby ensuring orderliness in lower courts' rulings.
We confirmed this characterization in Madrigal Transport v. Lapanday Holdings Corporation, when we held that a writ is founded
on the supervisory jurisdiction of appellate courts over inferior courts, and is issued to keep the latter within the bounds of their
jurisdiction. Thus, the writ corrects only errors of jurisdiction of judicial and quasi-judicial bodies, and cannot be used to correct
errors of law or fact. For these mistakes of judgment, the appropriate remedy is an appeal.[31]
This situation changed after 1987 when the new Constitution "expanded" the scope of judicial power by providing that -
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. (italics supplied)[32]
In Francisco v. The House of Representatives,[33] we recognized that this expanded jurisdiction was meant "to ensure the
potency of the power of judicial review to curb grave abuse of discretion by 'any branch or instrumentalities of government.'"
Thus, the second paragraph of Article VIII, Section 1 engraves, for the first time in its history, into black letter law the
"expanded certiorari jurisdiction" of this Court, whose nature and purpose had been provided in the sponsorship speech of its
proponent, former Chief Justice Constitutional Commissioner Roberto Concepcion:
xxxx
The first section starts with a sentence copied from former
Constitutions. It says:
The judicial power shall be vested in one Supreme Court and in such lower courts as may be established by law.
I suppose nobody can question it.
The next provision is new in our constitutional law. I will read it first and explain.
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.
Fellow Members of this Commission, this is actually a product of our experience during martial law. As a matter of fact, it has
some antecedents in the past, but the role of the judiciary during the deposed regime was marred considerably by the
circumstance that in a number of cases against the government, which then had no legal defense at all, the solicitor general
set up the defense of political question and got away with it. As a consequence, certain principles concerning particularly the
writ of habeas corpus, that is, the authority of courts to order the release of political detainees, and other matters related to the
operation and effect of martial law failed because the government set up the defense of political question. And the Supreme
Court said: "Well, since it is political, we have no authority to pass upon it." The Committee on the Judiciary feels that this was
not a proper solution of the questions involved. It did not merely request an encroachment upon the rights of the people, but it,
in effect, encouraged further violations thereof during the martial law regime. x x x
xxxx
Briefly stated, courts of justice determine the limits of power of the agencies and offices of the government as well as those of
its officers. In other words, the judiciary is the final arbiter on the question whether or not a branch of government or any of its
officials has acted without jurisdiction or in excess of jurisdiction, or so capriciously as to constitute an abuse of discretion
amounting to excess of jurisdiction or lack of jurisdiction. This is not only a judicial power but a duty to pass judgment on matters
of this nature.
This is the background of paragraph 2 of Section 1, which means that the courts cannot hereafter evade the duty to settle
matters of this nature, by claiming that such matters constitute a political question.[34] (italics in the original; emphasis and
underscoring supplied)
Meanwhile that no specific procedural rule has been promulgated to enforce this "expanded" constitutional definition of judicial
power and because of the commonality of "grave abuse of discretion" as a ground for review under Rule 65 and the courts
expanded jurisdiction, the Supreme Court based on its power to relax its rules[35] allowed Rule 65 to be used as the medium
for petitions invoking the courts' expanded jurisdiction based on its power to relax its Rules.[36] This is however an ad
hoc approach that does not fully consider the accompanying implications, among them, that Rule 65 is an essentially distinct
remedy that cannot simply be bodily lifted for application under the judicial power's expanded mode. The terms of Rule 65, too,
are not fully aligned with what the Court's expanded jurisdiction signifies and requires. [37]
On the basis of almost thirty years' experience with the courts' expanded jurisdiction, the Court should now fully recognize the
attendant distinctions and should be aware that the continued use of Rule 65 on an ad hoc basis as the operational remedy in
implementing its expanded jurisdiction may, in the longer term, result in problems of uneven, misguided, or even incorrect
application of the courts' expanded mandate.
The present case is a prime example of the misguided reading that may take place in constitutional litigation: the procedural
issues raised apparently spring from the lack of proper understanding of what a petition for certiorari assails under the traditional
and expanded modes, and the impact of these distinctions in complying with the procedural requirements for a valid petition.
2. The Basic Distinctions
A.2.a. Actual Case or Controversy
Basic in the exercise of judicial power whether under the traditional or in the expanded setting - is the presence of an actual
case or controversy. For a dispute to be justiciable, a legally demandable and enforceable right must exist as basis, and must
be shown to have been violated.[38]
Whether a case actually exists depends on the pleaded allegations, as affected by the elements of standing (translated in
civil actions as the status of being a "real-party-in-interest," in criminal actions as "offended party" and in special
proceedings as "interested party"),[39] ripeness,[40] prematurity, and the moot and academic principle that likewise
interact with one another. These elements and their interactions are discussed m greater detail below.
The Court's expanded jurisdiction - itself an exercise of judicial power - does not do away with the actual case or controversy
requirement in presenting a constitutional issue, but effectively simplifies this requirement by merely requiring a prima
facie showing of grave abuse of discretion in the assailed governmental act.
A.2.b. Actions Correctable by Certiorari
A basic feature of the expanded jurisdiction under the constitutional definition of judicial power, is the authority and command
for the courts to act on petitions involving the commission by any branch or instrumentality of government of grave abuse of
discretion amounting to lack or excess of jurisdiction.
This command distinctly contrasts with the terms of Rule 65 which confines court certiorari action solely to the review
of judicial and quasi-judicial acts.[41] These differing features create very basic distinctions that must necessarily result in
differences in the application of remedies.
While actions by lower courts do not pose a significant problem because they are necessarily acting judicially when they
adjudicate, a critical question comes up for the court acting on certiorari petitions when governmental agencies are involved
- under what capacity does the agency act?
This is a critical question as the circumstances of the present case show. When the government entity acts quasi-judicially, the
petition for certiorari challenging the action falls under Rule 65; in other instances, the petition must be filed based on the courts'
expanded jurisdiction.
A.2.c. Grave Abuse of Discretion
Another distinction, a seeming one as explained below, relates to the cited ground of a certiorari petition under Rule 65 which
speaks of lack or excess of jurisdiction or grave abuse of discretion amounting to lack or excess of jurisdiction, as against the
remedy under the courts' expanded jurisdiction which expressly only mentions grave abuse of discretion amounting to lack or
excess of jurisdiction.
This distinction is apparently not legally significant when it is considered that action outside of or in excess of the granted
authority necessarily involves action with grave abuse of discretion: no discretion is allowed in areas outside of an agency's
granted authority so that any such action would be a gravely abusive exercise of power. The constitutional grant of power, too,
pointedly addresses grave abuse of discretion when it amounts to lack or excess of jurisdiction,[42] thus establishing that the
presence of jurisdiction is the critical element; failure to comply with this requirement necessarily leads to the certiorari petition's
immediate dismissal.[43]
As an added observation on a point that our jurisprudence has not fully explored, the result of the action by a governmental
entity (e.g., a law or an executive order) can be distinguished from the perspective of its legality as tested against the terms of
the Constitution or of another law (where subordinate action like an executive order is involved), vis-a-vis the legality of the
resulting action where grave abuse of discretion attended the governmental action or the exercise of the governmental function.
In the former, the conclusion may be plain illegality or legal error that characterized the law or exec order (as tested, for example,
under the established rules of interpretation); no consideration is made of how the governmental entity exercised its function.
In the latter case, on the other hand, it is the governmental entity's exercise of its function that is examined and adjudged
independently of the result, with impact on the legality of the result of the gravely abusive action.
Where the dispute in a case relates to plain legal error, ordinary court action and traditional mode are called for and this must
be filed in the lower courts based on rules of jurisdiction while observing the hierarchy of courts.
Where grave abuse of discretion is alleged to be involved, the expanded jurisdiction is brought into play based on the express
wording of the Constitution and constitutional implications may be involved (such as grave abuse of discretion because of plain
oppression or discrimination), but this must likewise be filed with the lowest court of concurrent jurisdiction, unless the court
highest in the hierarchy grants exemption. Note that in the absence of express rules, it is only the highest court, the Supreme
Court, that can only grant exemptions.
From these perspectives, the use of grave abuse of discretion can spell the difference in deciding whether a case
filed directly with the Supreme Court has been properly filed.
A.2.d. Exhaustion of Available Remedies
A basic requirement under Rule 65 is that there be "no other plain, speedy and adequate remedy found in law,"[44] which
requirement the expanded jurisdiction provision does not expressly carry. Nevertheless, this requirement is not a significant
distinction in using the remedy of certiorari under the traditional and the expanded modes. The doctrine of exhaustion of
administrative remedies applies to a petition for certiorari, regardless of the act of the administrative agency concerned, i.e.,
whether the act concerns a quasi-judicial, or quasi-legislative function, or is purely regulatory.[45]
Consider in this regard that once an administrative agency has been empowered by Congress to undertake a sovereign
function, the agency should be allowed to perform its function to the full extent that the law grants. This full extent covers the
authority of superior officers in the administrative agencies to correct the actions of subordinates, or for collegial bodies to
reconsider their own decisions on a motion for reconsideration. Premature judicial intervention would interfere with this
administrative mandate, leaving administrative action incomplete; if allowed, such premature judicial action through a writ
of certiorari, would be a usurpation that violates the separation of powers principle that underlies our Constitution. [46]
In every case, remedies within the agency's administrative process must be exhausted before external remedies can be applied.
Thus, even if a governmental entity may have committed a grave abuse of discretion, litigants should, as a rule, first ask
reconsideration from the body itself, or a review thereof before the agency concerned. This step ensures that by the time the
grave abuse of discretion issue reaches the court, the administrative agency concerned would have fully exercised its
jurisdiction and the court can focus its attention on the questions of law presented before it.
Additionally, the failure to exhaust administrative remedies affects the ripeness to adjudicate the constitutionality of a
governmental act, which in turn affects the existence of the need for an actual case or controversy for the courts to
exercise their power of judicial review.[47] The need for ripeness - an aspect of the timing of a case or controversy does not
change regardless of whether the issue of constitutionality reaches the Court through the traditional means, or through the
Court's expanded jurisdiction. In fact, separately from ripeness, one other concept pertaining to judicial review is intrinsically
connected to it; the concept of a case being moot and academic.[48]
Both these concepts relate to the timing of the presentation of a controversy before the Court ripeness relates to its prematurity,
while mootness relates to a belated or unnecessary judgment on the issues. The Court cannot preempt the actions of the
parties, and neither should it (as a rule) render judgment after the issue has already been resolved by or through external
developments.
The importance of timing in the exercise of judicial review highlights and reinforces the need for an actual case or controversy
an act that may violate a party's right. Without any completed action or a concrete threat of injury to the petitioning party, the
act is not yet ripe for adjudication. It is merely a hypothetical problem. The challenged act must have been accomplished or
performed by either branch or instrumentality of government before a court may come into the picture, and the petitioner must
allege the existence of an immediate or threatened injury to itself as a result of the challenged action.
In these lights, a constitutional challenge, whether presented through the traditional route or through the Court's expanded
jurisdiction, requires compliance with the ripeness requirement. In the case of administrative acts, ripeness manifests itself
through compliance with the doctrine of exhaustion of administrative remedies.
In like manner, an issue that was once ripe for resolution but whose resolution, since then, has been rendered unnecessary,
needs no resolution from the Court, as it presents no actual case or controversy and likewise merely presents a hypothetical
problem. In simpler terms, a case is moot and academic when an event supervenes to render a judgment over the issues
unnecessary and superfluous.
Without the element of ripeness or a showing that the presented issue is moot and academic, petitions challenging the
constitutionality of a law or governmental act are vulnerable to dismissal.
Not to be forgotten is that jurisprudence also prohibits litigants from immediately seeking judicial relief without first exhausting
the available administrative remedies for practical reasons.[49]
From the perspective of practicality, immediate resort to the courts on issues that are within the competence of administrative
agencies to resolve, would unnecessarily clog the courts' dockets. These issues, too, usually involve technical considerations
that are within the agency's specific competence and which, for the courts, would require additional time and resources to study
and consider.[50] Of course, the Supreme Court cannot really avoid the issues that a petition for certiorari, filed with the lower
courts may present; the case may be bound ultimately to reach the Court, albeit as an appeal from the rulings of the lower
courts.
3. Situations Where a Petition for Certiorari May Be Used
There are two distinct situations where a writ of certiorari or prohibition may be sought. Each situation carries requirements,
peculiar to the nature of each situation, that lead to distinctions that should be recognized in the use of certiorari under Rule 65
and under the courts' expanded jurisdiction.
The two situations differ in the type of questions raised. The first is the constitutional situation where the constitutionality of
acts are questioned. The second is the non-constitutional situation where acts amounting to grave abuse of discretion are
challenged without raising constitutional questions or violations.
The process of questioning the constitutionality of a governmental action provides a notable area of comparison between the
use of certiorari in the traditional and the expanded modes.
Under the traditional mode, plaintiffs question the constitutionality of a governmental action through the cases they file before
the lower courts; the defendants may likewise do so when they interpose the defense of unconstitutionality of the law under
which they are being sued. A petition for declaratory relief may also be used to question the constitutionality or application of a
legislative (or quasi-legislative) act before the court.[51]
For quasi-judicial actions, on the other hand, certiorari is an available remedy, as acts or exercise of functions that violate the
Constitution are necessarily committed with grave abuse of discretion for being acts undertaken outside the contemplation of
the Constitution. Under both remedies, the petitioners should comply with the traditional requirements of judicial review,
discussed below.[52] In both cases, the decisions of these courts reach the Court through an appeal by certiorari under Rule 45.
In contrast, existing Court rulings in the exercise of its expanded jurisdiction have allowed the direct filing of petitions
for certiorariand prohibition with the Court to question, for grave abuse of discretion, actions or the exercise of a function that
violate the Constitution.[53] The governmental action may be questioned regardless of whether it is quasi-judicial, quasi-
legislative, or administrative in nature. The Court's expanded jurisdiction does not do away with the actual case or controversy
requirement for presenting a constitutional issue, but effectively simplifies this requirement by merely requiring a prima
facie showing of grave abuse of discretion in the exercise of the governmental act.[54]
To return to judicial review heretofore mentioned, in constitutional cases where the question of constitutionality of a
governmental action is raised, the judicial power the courts exercise is likewise identified as the power of judicial review - the
power to review the constitutionality of the actions of other branches of government.[55] As a rule, as required by the hierarchy
of courts principle, these cases are filed with the lowest court with jurisdiction over the matter. The judicial review that the
courts undertake requires:
1) there be an actual case or controversy calling for the exercise of judicial power;
the person challenging the act must have "Standing" to challenge; he must have a personal and substantial interest in
(2)
the case such that he has sustained, or will sustain, direct injury as a result of its enforcement;
(3) the question of constitutionality must be raised at the earliest possible opportunity; and
(4) the issue of constitutionality must be the very lis mota of the case.[56]
The lower court's decision under the constitutional situation reaches the Supreme Court through the appeal process,
interestingly, through a petition for review on certiorari under Rule 45 of the Rules of Court.
In the non-constitutional situation, the same requirements essentially apply, less the requirements specific to the
constitutional issues. In particular, there must be an actual case or controversy and the compliance with requirements of
standing, as affected by the hierarchy of courts, exhaustion of remedies, ripeness, prematurity, and the moot and academic
principles.
A.3.a. The "Standing" Requirement
Under both situations, the party bringing suit must have the necessary "standing." This means that this party has, in its favor,
the demandable and enforceable right or interest giving rise to a justiciable controversy after the right is violated by the offending
party.
The necessity of a person's standing to sue derives from the very definition of judicial power. Judicial power includes the duty
of the courts to settle actual controversies involving rights which are legally demandable and enforceable. Necessarily, the
person availing of a judicial remedy must show that he possesses a legal interest or right to it, otherwise, the issue presented
would be purely hypothetical and academic. This concept has been translated into the requirement to have "standing" in judicial
review,[57] or to be considered as a "real-party-in-interest" in civil actions,[58] as the "offended party" in criminal actions[59] and
the "interested party" in special proceedings.[60]
While the Court follows these terms closely in both non-constitutional cases and constitutional cases under the traditional mode,
it has relaxed the rule in constitutional cases harrdled under the expanded jurisdiction mode. in the latter case, a prima
facie showing that the questioned governmental act violated the Constitution, effectively disputably shows an injury to the
sovereign Filipino nation who approved the Constitution and endowed it with authority, such that the challenged act may be
questioned by any Philippine citizen before the Supreme Court.[61] In this manner, the "standing" requirement is relaxed
compared with the standard of personal stake or injury that the traditional petition requires.
The relaxation of the standing requirement has likewise been achieved through the application of the "transcendental
importance doctrine" under the traditional mode for constitutional cases.[62] (Under the traditional mode, "transcendental
importance" not only relaxes the standing requirement, but also allows immediate access to this Court, thus exempting the
petitioner from complying with the hierarchy of courts requirement.)[63]
More importantly perhaps, the prima facie showing of grave abuse of discretion in constitutional cases also implies that the
injury alleged is actual or imminent, and not merely hypothetical.
Through this approach, the Court's attention is directed towards the existence of an actual case or controversy - that is, whether
the government indeed violated the Constitution to the detriment of the Filipino people without the distractions of determining
the existence of transcendental importance indicators unrelated to the dispute and which do not at all determine whether the
Court properly exercises its power of judicial review.
Parenthetically, in the traditional mode, the determination of the transcendental importance of the issue presented,[64] aside
from simply relaxing the standing requirement, may result in the dilution of the actual case or controversy element because of
the inextricable link between standing and the existence of an actual case or controversy.
Consider, in this regard, that an actual case or controversy that calls for the exercise of judicial power necessarily requires that
the party presenting it possesses the standing to mount a challenge to a governmental act. A case or controversy exists when
there is an actual dispute between parties over their legal rights, which remains in conflict at the time the dispute is presented
before the court.[65]Standing, on the other hand, involves a personal and substantial interest in the case because the petitioner
has sustained, or will sustain, direct injury as a result of the violation of its right.[66]
With the element of "standing" (or the petitioner's personal or substantial stake or interest in the case) relaxed, the practical
effect is to dilute the need to show that an immediate actual dispute over legal rights did indeed take place and is now the
subject of the action before the court.[67]
In both the traditional and the expanded modes, this relaxation carries a ripple effect under established jurisprudential
rulings,[68]affecting not only the actual case or controversy requirement, but compliance with the doctrine of hierarchy of courts,
discussed in greater detail below.
A.3.b. The Hierarchy of Courts Principle
Another requirement that a certiorari petition carries, springs from the principle of "hierarchy of courts" which recognizes the
various levels of courts in the country as they are established under the Constitution and by law, their ranking and effect of their
rulings in relation with one another, and how these different levels of court interact with one another.[69] Since courts are
established and given their defined jurisdictions by law, the hierarchy of the different levels of courts should leave very little
opening for flexibility (and potential legal questions), but for the fact that the law creates courts at different and defined levels
but with concurrent jurisdictions.
The Constitution itself has partially determined the judicial hierarchy in the Philippine legal system by designating the Supreme
Court as the highest court with irreducible powers; its rulings serve as precedents that other courts must follow[70] because they
form part of the law of the land.[71] As a rule, the Supreme Court is not a trial court and rules only on questions of law, in contrast
with the Court of Appeals and other intermediate courts[72] which rule on both questions of law and of fact. At the lowest level
of courts are the municipal and the regional trial courts which handle questions of fact and law at the first instance according to
the jurisdiction granted to them by law.
Petitions for certiorari and prohibition fall under the concurrent jurisdiction of the regional trial courts and the higher courts, all
the way up to the Supreme Court. As a general rule, under the hierarchy of courts principle, the petition must be brought to the
lowest court with jurisdiction;[73] the petition brought to the higher courts may be dismissed based on the hierarchy principle.
Cases, of course, may ultimately reach the Supreme Court through the medium of an appeal.
The recognition of exceptions to the general rule is provided by the Supreme Court through jurisprudence, i.e., through the
cases that recognized the propriety of filing cases directly with the Supreme Court. This is possible as the Supreme Court has
the authority to relax the application of its own rules.[74]
As observed above, this relaxation waters down other principles affecting the remedy of certiorari. While the relaxation may
result in greater and closer supervision by the Court over the lower courts and quasi-judicial bodies under Rule 65, the effect
may not always be salutary in the long term when it is considered that this may affect the constitutional standards for the
exercise of judicial power, particularly the existence of an actual case or controversy.
The "transcendental importance" standard, in particular, is vague, open-ended and value-laden, and should be limited in its use
to exemptions from the application of the hierarchy of courts principle. It should not carry any ripple effect on the constitutional
requirement for the presence of an actual case or controversy.
4. The petition for certiorari and prohibition against the DOH Letter was filed before the wrong court.
In the present case, the act alleged to be unconstitutional refers to the cease and desist order that the DOH issued against
GAMCA's referral decking system. Its constitutionality was questioned through a petition for certiorari and prohibition before
the RTC. The case reached this Court through a Rule 45 appeal by certiorari under the traditional route.
In using a petition for certiorari and prohibition to assail the DOHCDO letters, GAMCA committed several procedural
lapses that rendered its petition readily dismissible by the RTC. Not only did the petitioner present a premature
challenge against an administrative act; it also committed the grave jurisdictional error of filing the petition before the wrong
court.
A.4.a. The DOH CDO letters were issued in the exercise of the DOH's quasi-judicial functions, and could be assailed
through Rule 65 on certiorari and prohibition.
A cease and desist order is quasi-judicial in nature, as it applies a legislative policy to an individual or group within the coverage
of the law containing the policy.
The Court, in Municipal Council of Lemery, Batangas v. Provincial Board of Batangas,[75] recognized the difficulty of d fining the
precise demarcation line between what are judicial and what are administrative or ministerial functions, as the exercise of
judicial functions may involve the performance of legislative or administrative duties, and the performance of administrative or
ministerial duties may, to some extent, involve the exercise of functions judicial in character. Thus, the Court held that the nature
of the act to be performed, rather than of the office, board, or body which performs it, should determine whether or not
an action is in the discharge of a judicial or a quasi-judicial function.[76]
Generally, the exercise of judicial functions involves the determination of what the law is, and what the legal rights of parties
are under this law with respect to a matter in controversy. Whenever an officer is clothed with this authority and undertakes to
determine those questions, he acts judicially.[77]
In the administrative realm, a government officer or body exercises a quasi-judicial function when it hears and determines
questions of fact to which the legislative policy is to apply, and decide, based on the law's standards, matters relating to the
enforcement and administration of the law.[78]
The DOH CDO letter directed GAMCA to cease and desist from engaging in the referral decking system practice within three
days from receipt of the letter. By issuing this CDO letter implementing Section 16 of RA No. 10022, the DOH (1) made the
finding of fact that GAMCA implements the referral decking system, and (2) applied Section 16 of RA No. 10022, to conclude
that GAMCA's practice is prohibited by law and should be stopped.
From this perspective, the DOH acted in a quasi-judicial capacity: its CDO letter determined a question of fact, and applied the
legislative policy prohibiting the referral decking system practice.
Notably, cease and desist orders have been described and treated as quasi-judicial acts in past cases, and had even been
described as similar to the remedy of injunction granted by the courts.[79]
A.4.b. The petitions for certiorari and prohibition against the DOH CDO letters fall within the jurisdiction of the Court
of Appeals.
Since the CDO Letter was a quasi-judicial act, the manner by which GAMCA assailed it before the courts of law had been
erroneous; the RTC should not have entertained GAMCA's petition.
First, acts or omissions by quasi-judicial agencies, regardless of whether the remedy involves a Rule 43 appeal or a Rule 65
petition for certiorari, is cognizable by the Court of Appeals. In particular, Section 4, Rule 65 of the Rules of Court provides:
Section 4. When and where petition filed. The petition shall be filed not later than sixty (60) days from notice of the judgment,
order or resolution. In case a motion for reconsideration or new trial is timely filed, whether such motion is required or not, the
sixty (60) day period shall be counted from notice of the denial of said motion.
The petition shall be filed in the Supreme Court or, if it relates to the acts or omissions of a lower court or of a corporation,
board, officer or person, in the Regional Trial Court exercising jurisdiction over the territorial area as defined by the Supreme
Court. It may also be filed in the Court of Appeals whether or not the same is in aid of its appellate jurisdiction, or in the
Sandiganbayan if it is in aid of its appellate jurisdiction. If it involves the acts or omissions of a quasi-judicial agency,
unless otherwise provided by law or these Rules, the petition shall be filed in and cognizable only by the Court of
Appeals.(emphasis, italics, and underscoring supplied)
Since the DOH is part of the Executive Department and has acted in its quasi-judicial capacity, the petition challenging its CDO
letter should have been filed before the Court of Appeals. The RTC thus did not have jurisdiction over the subject matter of the
petitions and erred in giving due course to the petition for certiorari and prohibition against the DOH CDO letters. In procedural
terms, petitions for certiorari and prohibition against a government agency are remedies avaiJable to assail its quasi-judicial
acts, and should thus have been filed before the CA.
The provision in Section 4, Rule 65 requiring that certiorari petitions challenging quasi-judicial acts to be filed with the CA is in
full accord with Section 9 of Batas Pambansa Blg. 129[80] on the same point. Section 9 provides:
Section 9. Jurisdiction.- The Court of Appeals shall exercise:
1. Original jurisdiction to issue writs of mandamus, prohibition, certiorari, habeas corpus, and quo warranto, and auxiliary
writs or processes, whether or not in aid of its appellate jurisdiction;
xxxx
3. Exclusive appellate jurisdiction over all final judgments, resolutions, orders or awards of Regional Trial Courts
and quasi-judicial agencies, instrumentalities, boards or commission, including the Securities and Exchange Commission,
the Social Security Commission, the Employees Compensation Commission and the Civil Service Commission, except those
falling within the appellate jurisdiction of the Supreme Court in accordance with the Constitution, the Labor Code of the
Philippines under Presidential Decree No. 442, as amended, the provisions of this Act, and of subparagraph (1) of the third
paragraph and subparagraph 4 of the fourth paragraph of Section 17 of the Judiciary Act of 1948.
xxxx
(emphases, italics, and underscoring supplied)
Thus, by law and by Supreme Court Rules, the CA is the court with the exclusive original jurisdiction to entertain petitions
for certiorariand prohibition against quasi-judicial agencies. In short, GAMCA filed its remedy with the wrong court.
A.4.c The petitions for certiorari and prohibition against the DOH CDO letters were premature challenges - they failed
to comply with the requirement that there be "no other plain, speedy and adequate remedy" and with the doctrine of
exhaustion of administrative remedies.
Second, the Regional Trial Court of Pasay City unduly disregarded the requirements that there be "no other plain, speedy and
adequate remedy at law" and the doctrine of exhaustion of administrative remedies, when it gave due course to the certiorari and
prohibition petition against the DOH's CDO.
Under Chapter 8, Book IV of Executive Order (EO) No. 292,[81] series of 1987, the DOH Secretary "shall have supervision and
control over the bureaus, offices, and agencies under him"[82] and "shall have authority over and responsibility for x x x operation"
of the Department.
Section 1, Chapter 1, Title I, Book III of EO No. 292 in relation with Article VII, Sections 1 and 17 of the Constitution, [83] on the
other hand, provides that the "President shall have control of all the executive departments, bureaus, and offices."
These provisions both signify that remedies internal to the Executive Branch exist before resorting to judicial remedies: GAMCA
could ask the DOH Secretary to reconsider or clarify its letter-order, after which it could appeal, should the ruling be unfavorable,
to the Office of the President.
Significantly, this was what GAMCA did in the past when the DOH issued Memorandum Order No. 2008-0210 that prohibited
the referral decking system. GAMCA then asked for the DOH Secretary's reconsideration, and subsequently appealed the
DOH's unfavorable decision with the Office of the President. The OP then reversed Memorandum Order No. 2008-0210 and
allowed the referral decking system to continue.
That GAMCA had earlier taken this course indicates that it was not unaware of the administrative remedies available to it; it
simply opted to disregard the doctrine of exhaustion of administrative remedies and the requirement that there be no other
plain, speedy, and adequate remedy in law when it immediately filed its petition for certiorari with the RTC.
This blatant disregard of the Rule 65 requirements clearly places GAMCA's petition outside the exceptions that we recognized
in the past in relaxing strict compliance with the exhaustion of administrative remedies requirement.
Jurisprudence[84] shows that this Court never hesitated in the past in relaxing the application of the rules of procedure to
accommodate exceptional circumstances when their strict application would result in injustice. These instances, founded as
they are on equitable considerations, do not include the undue disreiard of administrative remedies, particularly when they are
readily available.[85]
A.4.d. The petitions for certiorari and prohibition against the DOH CDO letters should have been dismissed outright,
as Rule 65 Petitions for Certiorari and Prohibition are extraordinary remedies given due course only upon compliance
with the formal and substantive requirements.
Note, at this point, that Rule 65 petitions for certiorari and prohibition are discretionary writs, and that the handling court
possesses the authority to dismiss them outright for failure to comply with the form and substance requirements. Section 6,
Rule 65 of the Rules of Court in this regard provides:
Section 6. Order to comment. - If the petition is sufficient in form and substance to justify suclr process, the court shall
issue an order requiring the respondent or respondents to comment on the petition within ten (10) days from receipt of a copy
thereof. Such order shall be served on the respondents in such manner as the court may direct together with a copy of the
petition and any annexes thereto. (emphasis, italics, and underscoring supplied)
Thus, even before requiring the DOH to comment, the RTC could have assessed the petition for certiorari and prohibition for
its compliance with the Rule 65 requirements. At that point, the petition for certiorari and prohibition should have been dismissed
outright, for failing to comply with Section 1 and Section 4 of Rule 65. When the court instead took cognizance of the petition,
it acted on a matter outside its jurisdiction.
Consequently, the RTC's resulting judgment is void and carries no legal effect. The decision exempting GAMCA from the
application of the referral decking system should equally have no legal effect.
Noncompliance with the Section 1, Rule 65 requirement that there be no other plain, speedy, and adequate remedy in law, on
the other hand, is more than just a pro-forma requirement in the present case. Since the petitions for certiorari and prohibition
challenge a governmental act - i.e. action under the DOH CDO letters, as well as the validity of the instruments under which
these letters were issued - compliance with Section 1, Rule 65 and the doctrine of exhaustion of administrative remedies that
judicial review requires is also mandatory. To recall a previous discussion, the exhaustion of administrative remedies is also an
aspect of ripeness in deciding a constitutional issue.
Thus, GAMCA's disregard of the Rules of Court not only renders the petition dismissible for failure to first exhaust administrative
remedies; the constitutional issues GAMCA posed before the RTC were not also ripe for adjudication.
5. The Regional Trial Court erred in finding grave abuse of discretion on the part of the DOH's issuance of the DOH
CDO letters.
On the merits, we find that the RTC of Pasay reversibly erred in law when it held that the DOH acted with grave abuse of
discretion m prohibiting GAMCA from implementing the referral decking system.
In exempting GAMCA from the referral decking system that RA No. 10022 prohibits, the RTC of Pasay City noted that the
regulation per se was not unconstitutional, but its application to GAMCA would violate the principle of sovereign equality and
independence.
While we agree with the RTC's ultimate conclusion upholding the constitutionality of the prohibition against the referral decking
system under RA No. 10022, our agreement proceeds from another reason; we disagree that the prohibition does not apply to
GAMCA and with the consequent ruling nullifying the DOH's CDO Letter.
A.5.a. The prohibition against the referral decking system under Section 16, RA No. 10022, is a valid exercise of police
power.
In its comment, GAMCA asserts that implementing the prohibition against the referral decking system would amount to an
undue taking of property that violates Article II, Section 2 of the 1987 Constitution.
It submits that the Securities and Exchange Commission had in fact approved its Articles of Incorporation and Bylaws that
embody the referral decking system; thus, the DOH cannot validly prohibit the implementation of this system.
GAMCA further claims that its members made substantial investments to upgrade their facilities and equipment. From this
perspective, the August 23, 2010 order constitutes taking of property without due process of law as its implementation would
deprive GAMCA members of their property.
AMCOW responded to these claims with the argument that the DOH CDO letters implementing RA No. 10022 are consistent
with the State's exercise of the police power to prescribe regulations to promote the health, safety, and general welfare of the
people. Public interest justifies the State's interference in health matters, since the welfare of migrant workers is a legitimate
public concern. The DOH thus merely performed its duty of upholding the migrant workers' freedom to consult their chosen
clinics for the conduct of health examinations.
We agree with AMCOW.
The State's police power[86] is vast and plenary[87] and the operation of a business,[88] especially one that is imbued with public
interest (such as healthcare services),[89] falls within the scope of governmental exercise of police power through regulation.
As defined, police power includes (1) the imposition of restraint on liberty or property, (2) in order to foster the common
good.[90] The exercise of police power involves the "state authority to enact legislation that may interfere with personal liberty
or property in order to promote the general welfare."[91]
By its very nature, the exercise of the State's police power limits individual rights and liberties, and subjects them to the "far
more overriding demands and requirements of the greater number."[92] Though vast and plenary, this State power also carries
limitations, specifically, it may not be exercised arbitrarily or unreasonably. Otherwise, it defeats the purpose for which it is
exercised, that is, the advancement of the public good.[93]
To be considered reasonable, the government's exercise of police power must satisfy the "valid object and valid means" method
of analysis: first, the interest of the public generally, as distinguished from those of a particular class, requires interference;
and second, the means employed are reasonably necessary to attain the objective sought and not unduly oppressive upon
individuals.[94]
These two elements of reasonableness are undeniably present in Section 16 of RA No. 10022. The prohibition against the
referral decking system is consistent with the State's exercise of the police power to prescribe regulations to promote the health,
safety, and general welfare of the people. Public interest demands State interference on health matters, since the welfare of
migrant workers is a legitimate public concern.
We note that RA No. 10022 expressly reflects the declared State policies to "uphold the dignity of its citizens whether in the
country or overseas, in general, and Filipino migrant workers," and to "afford full protection to labor, local and overseas,
organized and unorganized, and promote full employment and equality of employment opportunities for all. Towards this end,
the State shall provide adequate and timely social, economic and legal services to Filipino migrant workers." The prohibition
against the referral decking system in Section 16 of RA No. 10022 is an expression and implementation of these state policies.
The guarantee under Section 16 for OFWs to be given the option to choose a quality healthcare service provider as expressed
in Section 16 (c)[95] of RA No. 10022 is guaranteed by the prohibition against the decking practice and against monopoly
practices in OFW health examinations.[96]
Section 16 likewise requires employers to accept health examinations from any DOH-accredited health facility; a refusal could
lead to their temporary disqualification under pertinent rules to be formulated by the Philippine Overseas Employment Authority
(POEA).[97]
These rules are part of the larger legal framework to ensure the Overseas Filipino Workers' (OFW) access to quality healthcare
services, and to curb existing practices that limit their choices to specific clinics and facilities.
Separately from the Section 16 prohibition against the referral decking system, RA No. 10022 also prohibits and penalizes the
imposition of a compulsory exclusive arrangement requiring OFWs to undergo health examinations only from specifically
designated medical clinics, institutions, entities or persons. Section 5, in relation to Section 6 of RA No. 10022, penalizes
compulsory, exclusive arrangements[98] by imprisonment and fine and by the automatic revocation of the participating medical
clinic's license.
The DOH's role under this framework is to regulate the activities and operations of all clinics conducting health examinations
on Filipino migrant workers as a requirement for their overseas employment. The DOH is tasked to ensure that:
(c.3) No group or groups of medical clinics shall have a monopoly of exclusively conducting health examinations on migrant
workers for certain receiving countries;
(c.4) Every Filipino migrant worker shall have the freedom to choose any of the DOH-accredited or DOH-operated clinics that
will conduct his/her health examinations and that his or her rights as a patient are respected. The decking practice, which
requires an overseas Filipino worker to go first to an office for registration and then farmed out to a medical clinic located
elsewhere, shall not be allowed;[99]
While Section 16 of RA No. 10022 does not specifically define the consequences of violating the prohibition against the referral
decking system, Republic Act No. 4226 (Hospital Licensure Act), which governs the licensure and regulation of hospitals and
health facilities, authorizes the DOH to suspend, revoke, or refuse to renew the license of hospitals and clinics violating the
law.[100]
These consequences cannot but apply to the violation of the prohibition against the referral decking system under RA No.
10022. If, under the law, the DOH can suspend, revoke, or refuse to renew the license of these hospitals upon the finding that
they violated any provision of law (whether those found in RA No. 4226 or in RA No. 10022), it follows- as a necessarily included
lesser power - that the DOH can likewise order these clinics and their association to cease and desist from practices that the
law deems to be undesirable.
A.5.b. The DOH did not gravely abuse its discretion in issuing the assailed DOH CDO letters.
As discussed above, the letter-order implementing the prohibition against the referral decking system is quasi-judicial in nature.
This characteristic requires that procedural due process be observed - that is, that the clinics concerned be given the opportunity
to be heard before the standard found in the law can be applied to them.
Thus, prior to the issuance of the disputed CDO letter, the DOH should have given GAMCA the opportunity to be heard on
whether the prohibition applies to it. Lest this opportunity to be heard be misunderstood, this DOH obligation raises an issue
different from the question of whether Congress can, under the exercise of police power, prohibit the referral decking system;
this latter issue lies outside the scope of the DOH to pass upon. The required hearing before the DOH relates solely to whether
it properly implemented, based on the given standards under the law, the prohibition that Congress decreed under RA No.
10022.
Under normal circumstances, the issuance of a CDO without a prior hearing would violate GAMCA's procedural due process
rights, and would amount to more than a legal error, i.e., an error equivalent to action without jurisdiction. Rendering a decision
quasi-judicial in nature without providing the opportunity to be heard amounts to a grave abuse of discretion that divests a
quasi-judicial agency of its jurisdiction.
Factual circumstances unique to the present case, however, lead us to conclude that while it was an error of law for the DOH
to issue a CDO without complying with the requirements of procedural due process, its action did not amount to a grave abuse
of discretion.
Grave abuse of discretion amounts to more than an error of law; it refers to an act that is so capricious, arbitrary, and whimsical
that it amounts to a clear evasion of a positive duty or a virtual refusal to perform a duty enjoined by law, as where the power
is exercised in an arbitrary and despotic manner because of passion or hostility.[101]
Prior to the issuance of its CDO Letter, the DOH had more than sufficient basis to determine that GAMCA practices the
prohibited referral decking system under RA No. 10022. Notably, the DOH had earlier allowed and recognized the referral
decking system that GAMCA practiced through AO 5-01. This recognition was made with GAMCA's practice in mind. The
subsequent administrative orders and department memorandum suspending and terminating the referral decking system,
respectively, all pertain to the practice that the DOH had authorized under AO 5-01. Even the subject matter of these issuances
do not just pertain to any other referral decking system, but to the "GAMCA referral decking system."
GAMCA likewise had more than several opportunities to contest the suspension and eventual revocation of the referral decking
system initially pe1mitted under AO 5-01. Its appeal even reached the Office of the President, which overturned the DOH
Memorandum Order terminating the referral decking system.
That the referral decking system had been subsequently prohibited by law shows the intent of Congress to prevent and prohibit
the practice that GAMCA initiated and which the President had allowed. The President's duty under our political system is to
implement the law; hence, when Congress subsequently prohibited the practice that GAMCA initiated, the Executive - including
the President -has no choice but to implement it.
Based on these circumstances, while the DOH erred when it issued its CDO letters without first giving GAMCA the opportunity
to prove whether the practice conducted by GAMCA is the same practice prohibited under RA No. 10022, the DOH conclusion
to so act, in our view, did not constitute grave abuse of discretion that would have divested it of jurisdiction.
We note that the DOH had sufficient basis when it determined that the referral decking system prohibited under RA No. 10022
was the same decking system practiced by GAMCA. To reiterate, the referral decking system was not something new; it was
an old system that GAMCA practiced and was known to all in its scope and operating details. That GAMCA had previously
questioned the DOH prohibition and had been given ample opportunity to be heard when it filed an appeal before the OP,
negate the conclusion that GAMCA had been aggrieved by precipitate and unfair DOH action.
To be sure, these factual circumstances do not make the CDO letter compliant with procedural due process. They mitigate,
however, the error committed and render it less than the capricious, arbitrary, and patent refusal to comply with a positive legal
duty that characterizes an act committed with grave abuse of discretion.
The Court furthermore, in several instances,[102] has recognized that an administrative agency may issue an ex parte cease
and desist order, where vital public interests outweigh the need for procedural due process." In these instances, the Court noted
that the affected establishment may contest the ex parte order, upon which the administrative agency concerned must conduct
a hearing and allow the establishment to be heard. While jurisprudence has so far used the "vital public interests" standard to
pollution cases, it had not been a grave abuse of discretion on the part of the DOH to consider that GAMCA's referral decking
practice falls within this category. The DOH has long made the factual finding that the referral decking system hinders our
Filipino seafarers' access to quality and affordable healthcare in its A.O. No. 106, series of 2002.
These circumstances further mitigate whatever legal error the DOH has committed and render the conclusion that grave abuse
of discretion had taken place misplaced.
Since the writs of certiorari and prohibition do not issue against legal errors, but to acts of grave abuse of discretion, the RTC
erred in issuing these writs against the DOH CDO letters.
6. The prohibition against the referral decking system against GAMCA does not violate the principle of sovereign
equality and independence.
The RTC based its decision to grant the writs of certiorari and prohibition against the DOH letter-order on the principle of
sovereign equality and independence; applying the referral decking system prohibition against GAMCA violates this principle.
The RTC reasoned out that the prohibition against the referral decking system under Section 16 of RA No. 10022 must be
interpreted to apply only to clinics conducting health examinations on migrant workers bound for countries that do not require
the referral decking system for the issuance of visas to job applicants.
The RTC observed, too, that the refer al decking system is part of the application procedure in obtaining visas to enter the GCC
States, a procedure made in the exercise of the sovereign power of the GCC States to protect their nationals from health
hazards, and of their diplomatic power to regulate and screen entrants to their territories.
It also reasoned out that under the principle of sovereign equality and independence of States, the Philippines cannot interfere
with this system and in fact must respect the visa-granting procedures of foreign states in the same way that they respect our
immigration procedures. Moreover, to restrain GAMCA which is a mere adjunct of HMC (an agent of GCC States) is to restrain
the GCC States themselves.
AMCOW contests the RTC's conclusion, arguing that the principles of sovereign equality and independence of States do not
apply to the present case. According to AMCOW, the subject matter of this case pertains to a domestic concern as the law and
the regulations that GAMCA assails relate to the operation of medical clinics in the Philippines.
It points out that the Philippines gave GAMCA and its members the privilege of conducting their businesses domestically; hence,
their operations are governed by Philippine laws, specifically by RA No. 10022 which serves as one of the limitations on the
privilege granted to them. GAMCA's right to engage in business should yield to the State's exercise of police power. In legal
contemplation, therefore, the DOH CDO letters did not prejudice GAMCA's right to engage in business; nor did they hamper
the GAMCA members' business operations.
AMCOW further insists that the August 23, 2010 and November 2, 2010 orders are consistent with the State's exercise of the
police power to prescribe regulations to promote the health, safety, and general welfare of the people. Public interest demands
State interference on health matters, since the welfare of migrant workers is a legitimate public concern. The DOH thus merely
performed its duty of upholding the migrant workers' freedom to choose any of its accredited or operated clinics that will conduct
health examinations.
The DOH, for its part, adds that the implementation of RA No. 10022 cannot be defeated by agreements entered into by GAMCA
with the GCC States. The GCC States, the DOH points out, are not empowered to determine the Philippines' courses of action
with respect to the operation, within Philippine territory, of medical clinics; the conduct of health examinations; and the freedom
of choice of Filipino migrant workers.
GAMCA responds to these arguments by asserting that the referral decking system is a part of the application procedure for
obtaining visas to enter the GCC States. Hence, it is an exercise of the sovereign power of the GCC States to protect their
nationals from health hazards, and their diplomatic power to regulate and screen entrants to their territories. To restrain an
agent of the GCC States under the control and acting in accordance with the direction of these GCC States, restrains the GCC
States.
GAMCA also points out that the OFWs would suffer grave and irreparable damage and injury if the DOH CDO letters would be
implemented as the GCC States would not issue working visas without the GAMCA seal attesting that the OFWs had been
medically examined by GAMCA member clinics.
After considering all these arguments, we find that the RTC's decision misapplied the principle of sovereign independence and
equality to the present case. While the principles of sovereign independence and equality have been recognized in Philippine
jurisprudence, our recogmtmn of this principle does not extend to the exemption of States and their affiliates from compliance
with Philippine regulatory laws.
A.6. The principle of sovereign equality and independence of states does not exempt GAMCAfrom the referral decking
system prohibition under RA No. 10022.
In Republic of Indonesia v. Vinzon,[103] we recognized the principle of sovereign independence and equality as part of the law
of the land. We used this principle to justify the recognition of the principle of sovereign immunity which exempts the State -
both our Government and foreign governments - from suit. We held:
International law is founded largely upon the principles of reciprocity, comity, independence, and equality of States which were
adopted as part of the law of our land under Article II, Section 2 of the 1987 Constitution. The rule that a State may not be sued
without its consent is a necessary consequence of the principles of independence and equality of States. As enunciated in
Sanders v. Veridiano II, the practical justification for the doctrine of sovereign immunity is that there can be no legal right against
the authority that makes the law on which the right depends. In the case of foreign States, the rule is derived from the principle
of the sovereign equality of States, as expressed in the maxim par in parem non habet imperium. All states are sovereign
equals and cannot assert jurisdiction over one another. A contrary attitude would "unduly vex the peace of nations."
Our recognition of sovereign immunity, however, has never been unqualified. While we recognized the principles of
independence and equality of States to justify a State's sovereign immunity from suit, we also restricted state immunity to
acts jus imperii, or public acts. We said that once a State enters into commercial transactions (jus gestionis), then it descends
to the level of a private individual, and is thus not immune from the resulting liability and consequences of its actions. [104]
By this recognition, we acknowledge that a foreign government acting in its jus imperii function cannot be held liable in a
Philippine court. Philippine courts, as part of the Philippine government, cannot and should not take jurisdiction over cases
involving the public acts of a foreign government. Taking jurisdiction would amount to authority over a foreign government, and
would thus violate the principle of sovereign independence and equality.[105]
This recognition is altogether different from exempting governments whose agents are in the Philippines from complying with
our domestic laws.[106] We have yet to declare in a case that the principle of sovereign independence and equality exempts
agents of foreign governments from compliance with the application of Philippine domestic law.
In the present case, GAMCA has not adduced any evidence in the court below, nor has it presented any argument before us
showing that the principle of sovereign equality and independence has developed into an international custom shielding state
agents from compliance with another state's domestic laws. Under this situation, the Court is in no position to determine whether
the practice that GAMCA alleges has indeed crystallized into an international custom.
GAMCA has never proven in this case, too, that the GCC has extended its sovereign immunity to GAMCA. Sovereign immunity
belongs to the State, and it must first be extended to its agents before the latter may be considered to possess sovereign
immunity.
Significantly, the Court has even adopted a restrictive approach in recognizing state immunity, by distinguishing between a
State's jus imperii and jus gestionis. It is only when a State acts in its jus imperii function that we recognize state immunity.[107]
We point out furthermore that the prohibition against the referral decking system applies to hospitals and clinics, as well as to
OFW employers, and does not seek to interfere with the GCC's visa requirement processes. RA 10022 prohibits hospitals and
clinics in the Philippines from practicing the referral decking system, and employers from requiring OFWs to procure their
medical examinations from hospitals and clinics practicing the referral decking system.
The regulation applies to Philippine hospitals and clinics, as well as to employers of OFWs. It does not apply to the GCCs and
their visa processes. That the regulation could affect the OFWs' compliance with the visa requirements imposed by GCCs does
not place it outside the regulatory powers of the Philippine government.
In the same manner, GCC states continue to possess the prerogative to apply their visa requirements to any foreign national,
including our OFWs, who seeks to enter their territory; they may refuse to grant them entry for failure to comply with the referral
decking system, or they may adjust to the prohibition against the referral decking system that we have imposed. These
prerogatives lie with the GCC member-states and do not affect at all the legality of the prohibition against the referral decking
system.
Lastly, the effect of the prohibition against the referral decking system is beyond the authority of this Court to consider. The
wisdom of this prohibition has been decided by Congress, through the enactment of RA No. 10022. Our role in this case is
merely to determine whether our government has the authority to enact the law's prohibition against the referral decking system,
and whether this prohibition is being implemented legally. Beyond these lies the realm of policy that, under our Constitution's
separation of powers, this Court cannot cross.
WHEREFORE, in the light of these considerations, we hereby GRANT the petitions. Accordingly, we REVERSE and SET
ASIDE the orders dated August 10, 2012 and April 12, 2013 of the Regional Trial Court of Pasay City, Branch 108, in Sp. Civil
Action No. R-PSY-10-04391-CV.
Costs against respondent GAMCA.
SO ORDERED.
9. ST. LUKES MEDICAL CENTER EMPLOYEES ASSO. V. NLRC
G.R. No. 162053 March 7, 2007
ST. LUKE'S MEDICAL CENTER EMPLOYEE'S ASSOCIATION-AFW (SLMCEA-AFW) AND MARIBEL S.

SANTOS, Petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (NLRC) AND ST. LUKE'S MEDICAL CENTER, INC.,Respondents.
DECISION
AZCUNA, J.:
Challenged in this petition for review on certiorari is the Decision1 of the Court of Appeals (CA) dated January 29, 2004 in CA-
G.R. SP No. 75732 affirming the decision2 dated August 23, 2002 rendered by the National Labor Relations Commission
(NLRC) in NLRC CA No. 026225-00.
The antecedent facts are as follows:
Petitioner Maribel S. Santos was hired as X-Ray Technician in the Radiology department of private respondent St. Luke's
Medical Center, Inc. (SLMC) on October 13, 1984. She is a graduate of Associate in Radiologic Technology from The Family
Clinic Incorporated School of Radiologic Technology.
On April 22, 1992, Congress passed and enacted Republic Act No. 7431 known as the "Radiologic Technology Act of 1992."
Said law requires that no person shall practice or offer to practice as a radiology and/or x-ray technologist in the Philippines
without having obtained the proper certificate of registration from the Board of Radiologic Technology.
On September 12, 1995, the Assistant Executive Director-Ancillary Services and HR Director of private respondent SLMC
issued a final notice to all practitioners of Radiologic Technology to comply with the requirement of Republic Act No. 7431 by
December 31, 1995; otherwise, the unlicensed employee will be transferred to an area which does not require a license to
practice if a slot is available.
On March 4, 1997, the Director of the Institute of Radiology issued a final notice to petitioner Maribel S. Santos requiring the
latter to comply with Republic Act. No. 7431 by taking and passing the forthcoming examination scheduled in June 1997;
otherwise, private respondent SLMC may be compelled to retire her from employment should there be no other position
available where she may be absorbed.
On May 14, 1997, the Director of the Institute of Radiology, AED-Division of Ancillary Services issued a memorandum to
petitioner Maribel S. Santos directing the latter to submit her PRC Registration form/Examination Permit per Memorandum
dated March 4, 1997.
On March 13, 1998, the Director of the Institute of Radiology issued another memorandum to petitioner Maribel S. Santos
advising her that only a license can assure her of her continued employment at the Institute of Radiology of the private
respondent SLMC and that the latter is giving her the last chance to take and pass the forthcoming board examination
scheduled in June 1998; otherwise, private respondent SLMC shall be constrained to take action which may include her
separation from employment.
On November 23, 1998, the Director of the Institute of Radiology issued a notice to petitioner Maribel S. Santos informing the
latter that the management of private respondent SLMC has approved her retirement in lieu of separation pay.
On November 26, 1998, the Personnel Manager of private respondent SLMC issued a "Notice of Separation from the
Company" to petitioner Maribel S. Santos effective December 30, 1998 in view of the latter's refusal to accept private
respondent SLMC's offer for early retirement. The notice also states that while said private respondent exerted its efforts to
transfer petitioner Maribel S. Santos to other position/s, her qualifications do not fit with any of the present vacant positions in
the hospital.
In a letter dated December 18, 1998, a certain Jack C. Lappay, President of the Philippine Association of Radiologic
Technologists, Inc., wrote Ms. Judith Betita, Personnel Manager of private respondent SLMC, requesting the latter to give
"due consideration" to the organization's three (3) regular members of his organization (petitioner Maribel S. Santos included)
"for not passing yet the Board of Examination for X-ray Technology," "by giving them an assignment in any department of
your hospital awaiting their chance to pass the future Board Exam."
On January 6, 1999, the Personnel Manager of private respondent SLMC again issued a "Notice of Separation from the
Company" to petitioner Maribel S. Santos effective February 5, 1999 after the latter failed to present/ submit her appeal for
rechecking to the Professional Regulation Commission (PRC) of the recent board examination which she took and failed.
On March 2, 1999, petitioner Maribel S. Santos filed a complaint against private respondent SLMC for illegal dismissal and
non-payment of salaries, allowances and other monetary benefits. She likewise prayed for the award of moral and exemplary
damages plus attorney's fees.
In the meantime, petitioner Alliance of Filipino Workers (AFW), through its President and Legal Counsel, in a letter dated
September 22, 1999 addressed to Ms. Rita Marasigan, Human Resources Director of private respondent SLMC, requested
the latter to accommodate petitioner Maribel S. Santos and assign her to the vacant position of CSS Aide in the hospital
arising from the death of an employee more than two (2) months earlier.
In a letter dated September 24, 1999, Ms. Rita Marasigan replied thus:
Gentlemen:
Thank you for your letter of September 22, 1999 formally requesting to fill up the vacant regular position of a CSS Aide in Ms.
Maribel Santos' behalf.
The position is indeed vacant. Please refer to our Recruitment Policy for particulars especially on minimum requirements of
the job and the need to meet said requirements, as well as other pre-employment requirements, in order to be considered for
the vacant position. As a matter of fact, Ms. Santos is welcome to apply for any vacant position on the condition that she
possesses the necessary qualifications.
As to the consensus referred to in your letter, may I correct you that the agreement is, regardless of the vacant position Ms.
Santos decides to apply, she must go through the usual application procedures. The formal letter, I am afraid, will not suffice
for purposes of recruitment processing. As you know, the managers requesting to fill any vacancy has a say on the matter
and correctly so. The manager's inputs are necessarily factored into the standard recruitment procedures. Hence, the need to
undergo the prescribed steps.
Indeed we have gone through the mechanics to accommodate Ms. Santos' transfer while she was employed with SLMC
given the prescribed period. She was given 30 days from issuance of the notice of termination to look for appropriate
openings which incidentally she wittingly declined to utilize. She did this knowing fully well that the consequences would be
that her application beyond the 30-day period or after the effective date of her termination from SLMC would be considered a
re-application with loss of seniority and shall be subjected to the pertinent application procedures.
Needless to mention, one of the 3 X-ray Technologists in similar circumstances as Ms. Santos at the time successfully
managed to get herself transferred to E.R. because she opted to apply for the appropriate vacant position and qualified for it
within the prescribed 30-day period. The other X-ray Technologist, on the other hand, as you may recall, was eventually
terminated not just for his failure to comply with the licensure requirement of the law but for cause (refusal to serve a
customer).
Why Ms. Santos opted to file a complaint before the Labor Courts and not to avail of the opportunity given her, or assuming
she was not qualified for any vacant position even if she tried to look for one within the prescribed period, I simply cannot
understand why she also refused the separation pay offered by Management in an amount beyond the minimum required by
law only to re-apply at SLMC, which option would be available to her anyway even (if she) chose to accept the separation
pay!
Well, here's hoping that our Union can timely influence our employees to choose their options well as it has in the past.
(Signed)
RITA MARASIGAN
Subsequently, in a letter dated December 27, 1999, Ms. Judith Betita, Personnel Manager of private respondent SLMC wrote
Mr. Angelito Calderon, President of petitioner union as follows:
Dear Mr. Calderon:
This is with regard to the case of Ms. Maribel Santos. Please recall that last Oct. 8, 1999, Ms. Rita Marasigan, HR Director,
discussed with you and Mr. Greg Del Prado the terms regarding the re-hiring of Ms. Maribel Santos. Ms. Marasigan offered
Ms. Santos the position of Secretary at the Dietary Department. In that meeting, Ms. Santos replied that she would think
about the offer. To date, we still have no definite reply from her. Again, during the conference held on Dec. 14, 1999, Atty.
Martir promised to talk to Ms. Santos, and inform us of her reply by Dec. 21, 1999. Again we failed to hear her reply through
him.
Please be informed that said position is in need of immediate staffing. The Dietary Department has already been
experiencing serious backlog of work due to the said vacancy. Please note that more than 2 months has passed since Ms.
Marasigan offered this compromise. Management cannot afford to wait for her decision while the operation of the said
department suffers from vacancy.
Therefore, Management is giving Ms. Santos until the end of this month to give her decision. If we fail to hear from her or
from you as her representatives by that time, we will consider it as a waiver and we will be forced to offer the position to other
applicants so as not to jeopardize the Dietary Department's operation.
For your immediate action.
(Signed)
JUDITH BETITA
Personnel Manager
On September 5, 2000, the Labor Arbiter came out with a Decision ordering private respondent SLMC to pay petitioner
Maribel S. Santos the amount of One Hundred Fifteen Thousand Five Hundred Pesos (₱115,500.00) representing her
separation pay. All other claims of petitioner were dismissed for lack of merit.
Dissatisfied, petitioner Maribel S. Santos perfected an appeal with the public respondent NLRC.
On August 23, 2002, public respondent NLRC promulgated its Decision affirming the Decision of the Labor Arbiter. It likewise
denied the Motion for Reconsideration filed by petitioners in its Resolution promulgated on December 27, 2002.
Petitioner thereafter filed a petition for certiorari with the CA which, as previously mentioned, affirmed the decision of the
NLRC.
Hence, this petition raising the following issues:
I. Whether the CA overlooked certain material facts and circumstances on petitioners' legal claim in relation to the
complaint for illegal dismissal.
II. Whether the CA committed grave abuse of discretion and erred in not resolving with clarity the issues on the merit
of petitioner's constitutional right of security of tenure.3
For its part, private respondent St. Luke's Medical Center, Inc. (SLMC) argues in its comment4 that: 1) the petition should be
dismissed for failure of petitioners to file a motion for reconsideration; 2) the CA did not commit grave abuse of discretion in
upholding the NLRC and the Labor Arbiter's ruling that petitioner was legally dismissed; 3) petitioner was legally and validly
terminated in accordance with Republic Act Nos. 4226 and 7431; 4) private respondent's decision to terminate petitioner
Santos was made in good faith and was not the result of unfair discrimination; and 5) petitioner Santos' non-transfer to
another position in the SLMC was a valid exercise of management prerogative.
The petition lacks merit.
Generally, the Court has always accorded respect and finality to the findings of fact of the CA particularly if they coincide with
those of the Labor Arbiter and the NLRC and are supported by substantial evidence.5 True this rule admits of certain
exceptions as, for example, when the judgment is based on a misapprehension of facts, or the findings of fact are not
supported by the evidence on record6 or are so glaringly erroneous as to constitute grave abuse of discretion.7 None of these
exceptions, however, has been convincingly shown by petitioners to apply in the present case. Hence, the Court sees no
reason to disturb such findings of fact of the CA.
Ultimately, the issue raised by the parties boils down to whether petitioner Santos was illegally dismissed by private
respondent SLMC on the basis of her inability to secure a certificate of registration from the Board of Radiologic Technology.
The requirement for a certificate of registration is set forth under R.A. No. 74318 thus:
Sec. 15. Requirement for the Practice of Radiologic Technology and X-ray Technology. - Unless exempt from the
examinations under Sections 16 and 17 hereof, no person shall practice or offer to practice as a radiologic and/or x-ray
technologist in the Philippines without having obtained the proper certificate of registration from the Board.
It is significant to note that petitioners expressly concede that the sole cause for petitioner Santos' separation from work is her
failure to pass the board licensure exam for X-ray technicians, a precondition for obtaining the certificate of registration from
the Board. It is argued, though, that petitioner Santos' failure to comply with the certification requirement did not constitute just
cause for termination as it violated her constitutional right to security of tenure. This contention is untenable.
While the right of workers to security of tenure is guaranteed by the Constitution, its exercise may be reasonably regulated
pursuant to the police power of the State to safeguard health, morals, peace, education, order, safety, and the general
welfare of the people. Consequently, persons who desire to engage in the learned professions requiring scientific or technical
knowledge may be required to take an examination as a prerequisite to engaging in their chosen careers.9 The most concrete
example of this would be in the field of medicine, the practice of which in all its branches has been closely regulated by the
State. It has long been recognized that the regulation of this field is a reasonable method of protecting the health and safety
of the public to protect the public from the potentially deadly effects of incompetence and ignorance among those who would
practice medicine.10 The same rationale applies in the regulation of the practice of radiologic and x-ray technology. The clear
and unmistakable intention of the legislature in prescribing guidelines for persons seeking to practice in this field is embodied
in Section 2 of the law:
Sec. 2. Statement of Policy. - It is the policy of the State to upgrade the practice of radiologic technology in the Philippines for
the purpose of protecting the public from the hazards posed by radiation as well as to ensure safe and proper diagnosis,
treatment and research through the application of machines and/or equipment using radiation.11
In this regard, the Court quotes with approval the disquisition of public respondent NLRC in its decision dated August 23,
2002:
The enactment of R.A. (Nos.) 7431 and 4226 are recognized as an exercise of the State's inherent police power. It should be
noted that the police power embraces the power to prescribe regulations to promote the health, morals, educations, good
order, safety or general welfare of the people. The state is justified in prescribing the specific requirements for x-ray
technicians and/or any other professions connected with the health and safety of its citizens. Respondent-appellee being
engaged in the hospital and health care business, is a proper subject of the cited law; thus, having in mind the legal
requirements of these laws, the latter cannot close its eyes and [let] complainant-appellant's private interest override public
interest.
Indeed, complainant-appellant cannot insist on her "sterling work performance without any derogatory record" to make her
qualify as an x-ray technician in the absence of a proper certificate of Registration from the Board of Radiologic Technology
which can only be obtained by passing the required examination. The law is clear that the Certificate of Registration cannot
be substituted by any other requirement to allow a person to practice as a Radiologic Technologist and/or X-ray Technologist
(Technician).12
No malice or ill-will can be imputed upon private respondent as the separation of petitioner Santos was undertaken by it
conformably to an existing statute. It is undeniable that her continued employment without the required Board certification
exposed the hospital to possible sanctions and even to a revocation of its license to operate. Certainly, private respondent
could not be expected to retain petitioner Santos despite the inimical threat posed by the latter to its business. This
notwithstanding, the records bear out the fact that petitioner Santos was given ample opportunity to qualify for the position
and was sufficiently warned that her failure to do so would result in her separation from work in the event there were no other
vacant positions to which she could be transferred. Despite these warnings, petitioner Santos was still unable to comply and
pass the required exam. To reiterate, the requirement for Board certification was set by statute. Justice, fairness and due
process demand that an employer should not be penalized for situations where it had no participation or control.13
It would be unreasonable to compel private respondent to wait until its license is cancelled and it is materially injured before
removing the cause of the impending evil. Neither can the courts step in to force private respondent to reassign or transfer
petitioner Santos under these circumstances. Petitioner Santos is not in the position to demand that she be given a different
work assignment when what necessitated her transfer in the first place was her own fault or failing. The prerogative to
determine the place or station where an employee is best qualified to serve the interests of the company on the basis of the
his or her qualifications, training and performance belongs solely to the employer.14 The Labor Code and its implementing
Rules do not vest in the Labor Arbiters nor in the different Divisions of the NLRC (nor in the courts) managerial authority.15
While our laws endeavor to give life to the constitutional policy on social justice and the protection of labor, it does not mean
that every labor dispute will be decided in favor of the workers. The law also recognizes that management has rights which
are also entitled to respect and enforcement in the interest of fair play.16 Labor laws, to be sure, do not authorize interference
with the employer's judgment in the conduct of the latter's business. Private respondent is free to determine, using its own
discretion and business judgment, all elements of employment, "from hiring to firing" except in cases of unlawful
discrimination or those which may be provided by law. None of these exceptions is present in the instant case.
The fact that another employee, who likewise failed to pass the required exam, was allowed by private respondent to apply
for and transfer to another position with the hospital does not constitute unlawful discrimination. This was a valid exercise of
management prerogative, petitioners not having alleged nor proven that the reassigned employee did not qualify for the
position where she was transferred. In the past, the Court has ruled that an objection founded on the ground that one has
better credentials over the appointee is frowned upon so long as the latter possesses the minimum qualifications for the
position.17 Furthermore, the records show that Ms. Santos did not even seriously apply for another position in the company.
WHEREFORE, the petition is DENIED for lack of merit. Costs against petitioners.
SO ORDERED.

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POLICE POWER

1. SOUTHERN LUZON DRUG CORP V. DSWD

G.R. No. 199669 April 25, 2017

SOUTHERN LUZON DRUG CORPORATION, Petitioner,

Sec. 4. Privileges for the Senior Citizen. - x x x:

WHEREFORE, the petition is DISMISSED for lack of merit.6 (Citations omitted)

CHAPTER 8. Other Privileges and Incentives

SEC. 32. Persons with disability shall be entitled to the following:

Ruling of the Court

Prohibition may be filed to question

The Court clarifies.

The instant case is not barred by

The Court believes so.

SEC. 2. [R.A.] No. 7432 is hereby amended to read as follows:

The Court is not swayed.

Before the passage of the law:

Acquisition cost ₱8.00

Number of patrons 100

100 x ₱10.00 = ₱1,000.00

Acquisition cost ₱8.00

Number of patrons 100

100 x ₱10.00 = ₱1,000.00

Number of patron 100

100 x ₱10.00 = ₱1,000.00

Acquisition cost ₱8.00

Number of patrons 100

100 x ₱10.00 = ₱1,000.00

The subject laws do not violate the

The Court disagrees.

Moreover, in Estrada v. Sandiganbayan, 75 it was declared, thus:

(II) The passport of the persons with disability concerned; or

2. One (1) Valid ID

3. Document to confirm the medical or disability condition 78

DISABILITY DOCUMENT ISSUING ENTITY

Apparent Medical Licensed Private or

School Licensed Teacher duly

Certificate of  Head of the Business

Non-Apparent Medical Licensed Private or

i. PWD identification card x x x

b) Booklet control number

i) Information of medicine purchased:

i.1 Name of medicine

i.3 Attending Physician

i.4 License Number

i.5 Servicing drug store name

i.6 Name of dispensing pharmacist

2. SOCIAL JUSTICE SOCIETY V. ATIENZA

G.R. No. 156052 March 7, 2007

The antecedents are as follows.

xxx xxx xxx

The issues raised by petitioners are as follows:

G.R. No. 166494 June 29, 2007

The antecedents are as follows:

Tax Deduction Tax Credit

Less : Cost of goods sold x x x x x x x x x x

Less: Operating Expenses:

Net Taxable Income x x x x x x x x x x

Less: Tax Credit -- ______x x

Net Tax Due -- x x

The Court believes so.

SEC. 2. Republic Act No. 7432 is hereby amended to read as follows:

WHEREFORE, the petition is DISMISSED for lack of merit.

4. MANILA MEMORIAL PARK V. DSWD