G.R. No.
87479 June 4, 1990
NATIONAL POWER CORPORATION, petitioner,
vs.
THE PROVINCE OF ALBAY, ALBAY GOVERNOR ROMEO R.
SALALIMA, and ALBAY PROVINCIAL TREASURER ABUNDIO M.
NUÑEZ, respondents.
Romulo L. Ricafort and Jesus R. Cornago for respondents.
SARMIENTO, J.:
The National Power Corporation (NAPOCOR) questions the power of the provincial government of Albay
to collect real property taxes on its properties located at Tiwi, Albay, amassed between June 11, 1984
up to March 10, 1987.
It appears that on March 14 and 15, 1989, the respondents caused the
publication of a notice of auction sale involving the properties of
NAPOCOR and the Philippine Geothermal Inc. consisting of buildings,
machines, and similar improvements standing on their offices at Tiwi,
Albay. The amounts to be realized from this advertised auction sale are
supposed to be applied to the tax delinquencies claimed, as and for, as we
said, real property taxes. The back taxes NAPOCOR has supposedly
accumulated were computed at P214,845,184.76.
NAPOCOR opposed the sale, interposing in support of its non-liability
Resolution No. 17-87, of the Fiscal Incentives Review Board (FIRB), which
provides as follows:
BE IT RESOLVED, AS IT IS HEREBY RESOLVED, That
the tax and duty exemption privileges of the National Power
Corporation, including those pertaining to its domestic
purchases of petroleum and petroleum products, granted
under the terms and conditions of Commonwealth Act No.
120 (Creating the National Power Corporation, defining its
powers, objectives and functions, and for other purposes),
as amended, are restored effective March 10, 1987,
subject to the following conditions: 1
as well as the Memorandum of Executive Secretary Catalino Macaraig,
which also states thus:
Pursuant to Sections 1 (f) and 2 (e) of Executive Order No.
93, series of 1986, FIRB Resolution No. 17-87, series of
1987, restoring, subject to certain conditions prescribed
therein, the tax and duty exemption privileges of NPC as
provided under Commonwealth Act No. 120, as amended,
effective March 10, 1987, is hereby confirmed and
approved. 2
On March 10, 1989, the Court resolved to issue a temporary restraining
order directing the Albay provincial government "to CEASE AND DESIST
from selling and disposing of the NAPOCOR properties subject matter of
this petition. 3 It appears, however, that "the temporary restraining order
failed to reach respondents before the scheduled bidding at 10:00 a.m. on
March 30, 1989 ... [h]ence, the respondents proceeded with the bidding
wherein the Province of Albay was the highest bidder. 4
The Court gathers from the records that:
(1) Under Section 13, of Republic Act No. 6395, amending Commonwealth
Act No. 120 (charter of NAPOCOR):
Section 13. Non-profit Character of the Corporation;
Exemption from All Taxes, Duties, Fees, Imposts and
Other Charges by the Government and Government
Instrumentalities. The Corporation shall be non-profit and
shall devote all its returns from its capital investment as
well as excess revenues from its operation, for expansion,
To enable the Corporation to pay its indebtedness and
obligations and in furtherance and effective implementation
of the policy enunciated in Section One of this Act, the
Corporation, including its subsidiaries, is hereby declared
exempt from the payment of all forms of taxes, duties, fees,
imposts as well as costs and service fees including filing
fees, appeal bonds, supersedeas bonds, in any court or
administrative proceedings. 5
Page 1 of 70
(2) On August 24, 1975, Presidential Decree No. 776 was promulgated,
creating the Fiscal Incentives Review Board (FIRB). Among other things,
the Board was tasked as follows:
Section 2. A Fiscal Incentives Review Board is hereby
created for the purpose of determining what subsidies and
tax exemptions should be modified, withdrawn, revoked or
suspended, which shall be composed of the following
officials:
Chairman - Secretary of Finance
Members - Secretary of Industry
- Director General of the National Economic and
Development Authority
- Commissioner of Internal Revenue
- Commissioner of Customs
The Board may recommend to the President of the
Philippines and for reasons of compatibility with the
declared economic policy, the withdrawal, modification,
revocation or suspension of the enforceability of any of the
abovestated statutory subsidies or tax exemption grants,
except those granted by the Constitution. To attain its
objectives, the Board may require the assistance of any
appropriate government agency or entity. The Board shall
meet once a month, or oftener at the call of the Secretary
of Finance. 6
(3) On June 11, 1984, Presidential Decree No. 1931 was
promulgated, prescribing, among other things, that:
Section 1. The provisions of special or general law to the
contrary notwithstanding, all exemptions from the payment
of duties, taxes, fees, impost and other charges heretofore
granted in favor of government-owned or controlled
corporations including their subsidiaries are hereby
withdrawn. 7
(4) Meanwhile, FIRB Resolution No. 10-85 was issued, "restoring"
NAPOCOR's tax exemption effective June 11, 1984 to June 30, 1985;
Page 2 of 70
(5) Thereafter, FIRB Resolution No. 1-86 was issued, granting tax
exemption privileges to NAPOCOR from July 1, 1985 and indefinitely
thereafter;
(6) Likewise, FIRB Resolution No. 17-87 was promulgated, giving
NAPOCOR tax exemption privileges effective until March 10, 1987; 8
(7) On December 17, 1986, Executive Order No. 93 was promulgated by
President Corazon Aquino, providing, among other things, as follows:
SECTION 1. The provisions of any general or special law
to the contrary notwithstanding, all tax and duty incentives
granted to government and private entities are hereby
withdrawn, except. 9
and
SECTION 2. The Fiscal Incentives Review Board created
under Presidential Decree No. 776, as amended, is hereby
authorized to:
a) restore tax and/or duty exemptions withdrawn hereunder
in whole or in part;
b) revise the scope and coverage of tax and/or duty
exemption that may be restored;
c) impose conditions for the restoration of tax and/or duty
exemption;
d) prescribe the date or period of effectivity of the
restoration of tax and/or duty exemption;
e) formulate and submit to the President for approval, a
complete system for the grant of subsidies to deserving
beneficiaries, in lieu of or in combination with the
restoration of tax and duty exemptions or preferential
treatment in taxation, indicating the source of funding
therefor, eligible beneficiaries and the terms and conditions
for the grant thereof taking into consideration the
 international commitments of the Philippines and the
necessary precautions such that the grant of subsidies
does not become the basis for countervailing action. 10
(8) On October 5, 1987, the Office of the President issued the
Memorandum, confirming NAPOCOR's tax exemption aforesaid. 11
The provincial government of Albay now defends the auction sale in
question on the theory that the various FIRB issuances constitute an undue
delegation of the taxing Power and hence, null and void, under the
Constitution. It is also contended that, insofar as Executive Order No. 93
authorizes the FIRB to grant tax exemptions, the same is of no force and
effect under the constitutional provision allowing the legislature alone to
accord tax exemption privileges.
It is to be pointed out that under Presidential Decree No. 776, the power of
the FIRB was merely to "recommend to the President of the Philippines
and for reasons of compatibility with the declared economic policy, the
withdrawal, modification, revocation or suspension of the enforceability of
any of the above-cited statutory subsidies or tax exemption grants, except
those granted by the Constitution." It has no authority to impose taxes or
revoke existing ones, which, after all, under the Constitution, only the
legislature may accomplish. 12 The question therefore is whether or not the
various tax exemptions granted by virtue of FIRB Resolutions Nos. 10-85,
1-86, and 17-87 are valid and constitutional.
We shall deal with FIRB No. 17-87 later, but with respect to FIRB
Resolutions Nos. 10- 85 and 1-86, we sustain the provincial government
of Albay.
As we said, the FIRB, under its charter, Presidential Decree No. 776, had
been empowered merely to "recommend" tax exemptions. By itself, it could
not have validly prescribed exemptions or restore taxability. Hence, as of
June 11, 1984 (promulgation of Presidential Decree No. 1931), NAPOCOR
had ceased to enjoy tax exemption privileges.
The fact that under Executive Order No. 93, the FIRB has been given the
prerogative to "restore tax and/or duty exemptions withdrawn hereunder in
whole or in part," 13 and "impose conditions for ... tax and/or duty
exemption" 14is of no moment. These provisions are prospective in
character and can not affect the Board's past acts.
Page 3 of 70
The Court is aware that in its preamble, Executive Order No. 93 states:
WHEREAS, a number of affected entities, government and private were
able to get back their tax and duty exemption privileges through the review
mechanism implemented by the Fiscal Incentives Review Board
(FIRB); 15but by no means can we say that it has "ratified" the acts of FIRB.
It is to misinterpret the scope of FIRB's powers under Presidential Decree
No. 776 to say that it has. Apart from that, Section 2 of the Executive Order
was clearly intended to amend Presidential Decree No. 776, which
means, mutatis mutandis, that FIRB did not have the right, in the first place,
to grant tax exemptions or withdraw existing ones.
Does Executive Order No. 93 constitute an unlawful delegation of
legislative power? It is to be stressed that the provincial government of
Albay admits that as of March 10, 1987 (the date Resolution No. 17-87 was
affirmed by the Memorandum of the Office of the President, dated October
5, 1987), NAPOCOR's exemption had been validly restored. What it
questions is NAPOCOR's liability in the interregnum between June 11,
1984, the date its tax privileges were withdrawn, and March 10, 1987, the
date they were purportedly restored. To be sure, it objects to Executive
Order No. 93 as alledgedly a delegation of legislative power, but only
insofar as its (NAPOCOR's) June 11, 1984 to March 10, 1987 tax
accumulation is concerned. We therefore leave the issue of "delegation" to
the future and its constitutionality when the proper case arises. For the
nonce, we leave Executive Order No. 93 alone, and so also, its validity as
far as it grants tax exemptions (through the FIRB) beginning December 17,
1986, the date of its promulgation.
NAPOCOR must then be held liable for the intervening years aforesaid. So
it has been held:
xxx xxx xxx
The last issue to be resolved is whether or not the private-
respondent is liable for the fixed and deficiency percentage
taxes in the amount of P3,025.96 (i.e. for the period from
January 1, 1946 to February 29, 1948) before the approval
of its municipal franchises. As aforestated, the franchises
were approved by the President only on February 24,1948.
Therefore, before the said date, the private respondent was
liable for the payment of percentage and fixed taxes as
 seller of light, heat, and power which, as the petitioner
claims, amounted to P3,025.96. The legislative franchise
(R.A. No. 3843) exempted the grantee from all kinds of
taxes other than the 2% tax from the date the original
franchise was granted. The exemption, therefore, did not
cover the period before the franchise was granted, i.e.
before February 24, 1948. ... 16
Actually, the State has no reason to decry the taxation of NAPOCOR's
properties, as and by way of real property taxes. Real property taxes, after
all, form part and parcel of the financing apparatus of the Government in
development and nation-building, particularly in the local government level,
Thus:
SEC. 86. Distribution of proceeds. — (a) The proceeds of
the real property tax, except as otherwise provided in this
Code, shall accrue to the province, city or municipality
where the property subject to the tax is situated and shall
be applied by the respective local government unit for its
own use and benefit.
(b) Barrio shares in real property tax collections. — The
annual shares of the barrios in real property tax collections
shall be as follows:
(1) Five per cent of the real property tax collections of the
province and another five percent of the collections of the
municipality shall accrue to the barrio where the property
subject to the tax is situated.
(2) In the case of the city, ten per cent of the collections of
the tax shag likewise accrue to the barrio where the
property is situated.
Thirty per cent of the barrio shares herein referred to may be spent for
salaries or per diems of the barrio officials and other administrative
expenses, while the remaining seventy per cent shall be utilized for
development projects approved by the Secretary of Local Government and
Community Development or by such committee created, or
representatives designated, by him.
Page 4 of 70
SEC. 87. Application of proceeds. — (a) The proceeds of
the real property tax pertaining to the city and to the
municipality shall accrue entirely to their respective general
funds. In the case of the province, one-fourth thereof shall
accrue to its road and bridge fund and the remaining three-
fourths, to its general fund.
(b) The entire proceeds of the additional one per cent real
property tax levied for the Special Education Fund created
under R.A. No. 5447 collected in the province or city on real
property situated in their respective territorial jurisdictions
shall be distributed as follows:
(1) Collections in the provinces: Fifty per cent shall accrue
to the municipality where the property subject to the tax is
situated; twenty per cent shall accrue to the province; and
thirty per cent shall be remitted to the Treasurer of the
Philippines to be expended exclusively for stabilizing the
Special Education Fund in municipalities, cities and
provinces in accordance with the provisions of Section
seven of R.A. No. 5447.
(2) Collections in the cities: Sixty per cent shall be retained
by the city; and forty per cent shall be remitted to the
Treasurer of the Philippines to be expended exclusively for
stabilizing the special education fund in municipalities,
cities and provinces as provided under Section 7 of R.A.
No. 5447.
However, any increase in the shares of
provinces, cities and municipalities from
said additional tax accruing to their
respective local school boards
commencing with fiscal year 1973-74 over
what has been actually realized during the
fiscal year 1971-72 which, for purposes of
this Code, shall remain as the based year,
shall be divided equally between the
general fund and the special education
fund of the local government units
concerned. The Secretary of Finance may,
 however, at his discretion, increase to not
more than seventy-five per cent the amount
that shall accrue annually to the local
general fund.
(c) The proceeds of all delinquent taxes and penalties, as
well as the income realized from the use, lease or other
disposition of real property acquired by the province or city
at a public auction in accordance with the provisions of this
Code, and the proceeds of the sale of the delinquent real
property or, of the redemption thereof shall accrue to the
province, city or municipality in the same manner and
proportion as if the tax or taxes had been paid in regular
course.
(d) The proceeds of the additional real property tax on Idle
private lands shall accrue to the respective general funds
of the province, city and municipality where the land subject
to the tax is situated. 17
To all intents and purposes, real property taxes are funds taken by the
State with one hand and given to the other. In no measure can the
Government be said to have lost anything.
As a rule finally, claims of tax exemption are construed strongly against the
claimant. 18 They must also be shown to exist clearly and categorically, and
supported by clear legal provisions. 19
Taxes are the lifeblood of the nation. 20 Their primary purpose is to generate
funds for the State to finance the needs of the citizenry and to advance the
common weal.
WHEREFORE, the petition is DENIED. No costs. The auction sale of the
petitioner's properties to answer for real estate taxes accumulated between
June 11, 1984 through March 10, 1987 is hereby declared valid.
SO ORDERED.
Page 5 of 70
G.R. No. 92585 May 8, 1992
CALTEX PHILIPPINES, INC., petitioner,
vs.
THE HONORABLE COMMISSION ON AUDIT, HONORABLE
COMMISSIONER BARTOLOME C. FERNANDEZ and HONORABLE
COMMISSIONER ALBERTO P. CRUZ, respondents.
DAVIDE, JR., J.:
This is a petition erroneously brought under Rule 44 of the Rules of
Court 1 questioning the authority of the Commission on Audit (COA) in
disallowing petitioner's claims for reimbursement from the Oil Price
Stabilization Fund (OPSF) and seeking the reversal of said Commission's
decision denying its claims for recovery of financing charges from the Fund
and reimbursement of underrecovery arising from sales to the National
Power Corporation, Atlas Consolidated Mining and Development
Corporation (ATLAS) and Marcopper Mining Corporation (MAR-
COPPER), preventing it from exercising the right to offset its remittances
against its reimbursement vis-a-vis the OPSF and disallowing its claims
which are still pending resolution before the Office of Energy Affairs (OEA)
and the Department of Finance (DOF).
Pursuant to the 1987 Constitution, 2 any decision, order or ruling of the
Constitutional Commissions 3 may be brought to this Court on certiorari by
the aggrieved party within thirty (30) days from receipt of a copy thereof.
The certiorari referred to is the special civil action for certiorari under Rule
65 of the Rules of Court. 4
Considering, however, that the allegations that the COA acted with:
(a) total lack of jurisdiction in completely ignoring and showing absolutely
no respect for the findings and rulings of the administrator of the fund itself
and in disallowing a claim which is still pending resolution at the OEA level,
and (b) "grave abuse of discretion and completely without jurisdiction" 5 in
declaring that petitioner cannot avail of the right to offset any amount that
it may be required under the law to remit to the OPSF against any amount
that it may receive by way of reimbursement therefrom are sufficient to
bring this petition within Rule 65 of the Rules of Court, and, considering
further the importance of the issues raised, the error in the designation of
the remedy pursued will, in this instance, be excused.
The issues raised revolve around the OPSF created under Section 8 of
Presidential Decree (P.D.) No. 1956, as amended by Executive Order
(E.O.) No. 137. As amended, said Section 8 reads as follows:
Sec. 8 . There is hereby created a Trust Account in the
books of accounts of the Ministry of Energy to be
designated as Oil Price Stabilization Fund (OPSF) for the
purpose of minimizing frequent price changes brought
about by exchange rate adjustments and/or changes in
world market prices of crude oil and imported petroleum
products. The Oil Price Stabilization Fund may be sourced
from any of the following:
a) Any increase in the tax collection
from ad valorem tax or customs duty
imposed on petroleum products subject to
tax under this Decree arising from
exchange rate adjustment, as may be
determined by the Minister of Finance in
consultation with the Board of Energy;
b) Any increase in the tax collection as a
result of the lifting of tax exemptions of
government corporations, as may be
determined by the Minister of Finance in
consultation with the Board of Energy;
c) Any additional amount to be imposed on
petroleum products to augment the
resources of the Fund through an
appropriate Order that may be issued by
the Board of Energy requiring payment by
persons or companies engaged in the
business of importing, manufacturing
and/or marketing petroleum products;
d) Any resulting peso cost differentials in
case the actual peso costs paid by oil
Page 6 of 70
companies in the importation of crude oil
and petroleum products is less than the
peso costs computed using the reference
foreign exchange rate as fixed by the Board
of Energy.
The Fund herein created shall be used for the following:
1) To reimburse the oil companies for cost
increases in crude oil and imported
petroleum products resulting from
exchange rate adjustment and/or increase
in world market prices of crude oil;
2) To reimburse the oil companies for
possible cost under-recovery incurred as a
result of the reduction of domestic prices of
petroleum products. The magnitude of the
underrecovery, if any, shall be determined
by the Ministry of Finance. "Cost
underrecovery" shall include the following:
i. Reduction in oil company take as
directed by the Board of Energy without
the corresponding reduction in the
landed cost of oil inventories in the
possession of the oil companies at the
time of the price change;
ii. Reduction in internal ad
valorem taxes as a result of foregoing
government mandated price
reductions;
iii. Other factors as may be determined
by the Ministry of Finance to result in
cost underrecovery.
The Oil Price Stabilization Fund (OPSF) shall be
administered by the Ministry of Energy.
The material operative facts of this case, as gathered from the pleadings
of the parties, are not disputed.
On 2 February 1989, the COA sent a letter to Caltex Philippines, Inc. (CPI),
hereinafter referred to as Petitioner, directing the latter to remit to the OPSF
its collection, excluding that unremitted for the years 1986 and 1988, of the
additional tax on petroleum products authorized under the aforesaid
Section 8 of P.D. No. 1956 which, as of 31 December 1987, amounted to
P335,037,649.00 and informing it that, pending such remittance, all of its
claims for reimbursement from the OPSF shall be held in abeyance. 6
On 9 March 1989, the COA sent another letter to petitioner informing it that
partial verification with the OEA showed that the grand total of its
unremitted collections of the above tax is P1,287,668,820.00, broken down
as follows:
1986 — P233,190,916.00
1987 — 335,065,650.00
1988 — 719,412,254.00;
directing it to remit the same, with interest and surcharges thereon, within
sixty (60) days from receipt of the letter; advising it that the COA will hold
in abeyance the audit of all its claims for reimbursement from the OPSF;
and directing it to desist from further offsetting the taxes collected against
outstanding claims in 1989 and subsequent periods. 7
In its letter of 3 May 1989, petitioner requested the COA for an early
release of its reimbursement certificates from the OPSF covering claims
with the Office of Energy Affairs since June 1987 up to March 1989,
invoking in support thereof COA Circular No. 89-299 on the lifting of pre-
audit of government transactions of national government agencies and
government-owned or controlled corporations. 8
In its Answer dated 8 May 1989, the COA denied petitioner's request for the early release of the
reimbursement certificates from the OPSF and repeated its earlier directive to petitioner to forward
payment of the latter's unremitted collections to the OPSF to facilitate COA's audit action on the
reimbursement claims. 9
By way of a reply, petitioner, in a letter dated 31 May 1989, submitted to
the COA a proposal for the payment of the collections and the recovery of
claims, since the outright payment of the sum of P1.287 billion to the OEA
Page 7 of 70
as a prerequisite for the processing of said claims against the OPSF will
cause a very serious impairment of its cash position. 10 The proposal reads:
We, therefore, very respectfully propose the following:
(1) Any procedural arrangement acceptable to COA to
facilitate monitoring of payments and reimbursements will
be administered by the ERB/Finance Dept./OEA, as
agencies designated by law to administer/regulate OPSF.
(2) For the retroactive period, Caltex will deliver to OEA,
P1.287 billion as payment to OPSF, similarly OEA will
deliver to Caltex the same amount in cash reimbursement
from OPSF.
(3) The COA audit will commence immediately and will be
conducted expeditiously.
(4) The review of current claims (1989) will be conducted
expeditiously to preclude further accumulation of
reimbursement from OPSF.
On 7 June 1989, the COA, with the Chairman taking no part, handed down
Decision No. 921 accepting the above-stated proposal but prohibiting
petitioner from further offsetting remittances and reimbursements for the
current and ensuing years. 11 Decision No. 921 reads:
This pertains to the within separate requests of Mr. Manuel A. Estrella,
President, Petron Corporation, and Mr. Francis Ablan, President and
Managing Director, Caltex (Philippines) Inc., for reconsideration of this
Commission's adverse action embodied in its letters dated February 2,
1989 and March 9, 1989, the former directing immediate remittance to
the Oil Price Stabilization Fund of collections made by the firms
pursuant to P.D. 1956, as amended by E.O. No. 137, S. 1987, and the
latter reiterating the same directive but further advising the firms to
desist from offsetting collections against their claims with the notice
that "this Commission will hold in abeyance the audit of all . . . claims
for reimbursement from the OPSF."
It appears that under letters of authority issued by the Chairman,
Energy Regulatory Board, the aforenamed oil companies were
allowed to offset the amounts due to the Oil Price Stabilization Fund to us by your Office in support of Caltex (Philippines), Inc. offsets
against their outstanding claims from the said Fund for the calendar (sic) for the year 1986 to May 31, 1989, as well as its outstanding
years 1987 and 1988, pending with the then Ministry of Energy, the claims against the Oil Price Stabilization Fund (OPSF) as of May
government entity charged with administering the OPSF. This 31, 1989, we are pleased to inform your Office that Caltex
Commission, however, expressing serious doubts as to the (Philippines), Inc. shall be required to remit to OPSF an amount of
propriety of the offsetting of all types of reimbursements from the P1,505,668,906, representing remittances to the OPSF which were
OPSF against all categories of remittances, advised these oil offset against its claims reimbursements (net of unsubmitted
companies that such offsetting was bereft of legal basis. Aggrieved claims). In addition, the Commission hereby authorize (sic) the
thereby, these companies now seek reconsideration and in support Office of Energy Affairs (OEA) to cause payment of P1,959,182,612
thereof clearly manifest their intent to make arrangements for the to Caltex, representing claims initially allowed in audit, the details of
remittance to the Office of Energy Affairs of the amount of which are presented hereunder: . . .
collections equivalent to what has been previously
offset, provided that this Commission authorizes the Office of As presented in the foregoing computation the disallowances
Energy Affairs to prepare the corresponding checks representing totalled P387,683,535, which included P130,420,235 representing
reimbursement from the OPSF. It is alleged that the implementation those claims disallowed by OEA, details of which is (sic) shown in
of such an arrangement, whereby the remittance of collections due Schedule 1 as summarized as follows:
to the OPSF and the reimbursement of claims from the Fund shall
be made within a period of not more than one week from each other, Disallowance of COA
will benefit the Fund and not unduly jeopardize the continuing daily Particulars Amount
cash requirements of these firms.
Recovery of financing charges
Upon a circumspect evaluation of the circumstances herein P162,728,475 /a
obtaining, this Commission perceives no further objectionable Product sales 48,402,398 /b
feature in the proposed arrangement, provided that 15% of Inventory losses
whatever amount is due from the Fund is retained by the Office of Borrow loan arrangement 14,034,786
Energy Affairs, the same to be answerable for suspensions or /c
disallowances, errors or discrepancies which may be noted in the Sales to Atlas/Marcopper 32,097,083
course of audit and surcharges for late remittances without /d
prejudice to similar future retentions to answer for any deficiency in Sales to NPC 558
such surcharges, and provided further that no offsetting of ——————
remittances and reimbursements for the current and ensuing years P257,263,300
shall be allowed.
Disallowances of OEA 130,420,235
Pursuant to this decision, the COA, on 18 August 1989, sent the ————————— ——————
following letter to Executive Director Wenceslao R. De la Paz of the Total P387,683,535
Office of Energy Affairs: 12
The reasons for the disallowances are discussed hereunder:
Dear Atty. dela Paz:
a. Recovery of Financing Charges
Pursuant to the Commission on Audit Decision No. 921 dated June
7, 1989, and based on our initial verification of documents submitted

Page 8 of 70
Review of the provisions of P.D. 1596 as amended by E.O. 137
seems to indicate that recovery of financing charges by oil
companies is not among the items for which the OPSF may be
utilized. Therefore, it is our view that recovery of financing charges
has no legal basis. The mechanism for such claims is provided in
DOF Circular 1-87.
b. Product Sales –– Sales to International Vessels/Airlines
BOE Resolution No. 87-01 dated February 7, 1987 as implemented
by OEA Order No. 87-03-095 indicating that (sic) February 7, 1987
as the effectivity date that (sic) oil companies should pay OPSF
impost on export sales of petroleum products. Effective February
7, 1987 sales to international vessels/airlines should not be
included as part of its domestic sales. Changing the effectivity date
of the resolution from February 7, 1987 to October 20, 1987 as
covered by subsequent ERB Resolution No. 88-12 dated
November 18, 1988 has allowed Caltex to include in their domestic
sales volumes to international vessels/airlines and claim the
corresponding reimbursements from OPSF during the period. It is
our opinion that the effectivity of the said resolution should be
February 7, 1987.
c. Inventory losses –– Settlement of Ad Valorem
We reviewed the system of handling Borrow and Loan (BLA)
transactions including the related BLA agreement, as they affect
the claims for reimbursements of ad valorem taxes. We observed
that oil companies immediately settle ad valorem taxes for BLA
transaction (sic). Loan balances therefore are not tax paid
inventories of Caltex subject to reimbursements but those of the
borrower. Hence, we recommend reduction of the claim for July,
August, and November, 1987 amounting to P14,034,786.
d. Sales to Atlas/Marcopper
LOI No. 1416 dated July 17, 1984 provides that "I hereby order and
direct the suspension of payment of all taxes, duties, fees, imposts
and other charges whether direct or indirect due and payable by
the copper mining companies in distress to the national and local
governments." It is our opinion that LOI 1416 which implements the
Page 9 of 70
exemption from payment of OPSF imposts as effected by OEA has
no legal basis.
Furthermore, we wish to emphasize that payment to Caltex (Phil.)
Inc., of the amount as herein authorized shall be subject to
availability of funds of OPSF as of May 31, 1989 and applicable
auditing rules and regulations. With regard to the disallowances, it
is further informed that the aggrieved party has 30 days within
which to appeal the decision of the Commission in accordance with
law.
On 8 September 1989, petitioner filed an Omnibus Request for the
Reconsideration of the decision based on the following grounds: 13
A) COA-DISALLOWED CLAIMS ARE AUTHORIZED UNDER
EXISTING RULES, ORDERS, RESOLUTIONS, CIRCULARS ISSUED
BY THE DEPARTMENT OF FINANCE AND THE ENERGY
REGULATORY BOARD PURSUANT TO EXECUTIVE ORDER NO.
137.
xxx xxx xxx
B) ADMINISTRATIVE INTERPRETATIONS IN THE COURSE OF
EXERCISE OF EXECUTIVE POWER BY DEPARTMENT OF
FINANCE AND ENERGY REGULATORY BOARD ARE LEGAL AND
SHOULD BE RESPECTED AND APPLIED UNLESS DECLARED
NULL AND VOID BY COURTS OR REPEALED BY LEGISLATION.
xxx xxx xxx
C) LEGAL BASIS FOR RETENTION OF OFFSET ARRANGEMENT,
AS AUTHORIZED BY THE EXECUTIVE BRANCH OF
GOVERNMENT, REMAINS VALID.
xxx xxx xxx
On 6 November 1989, petitioner filed with the COA a Supplemental
Omnibus Request for Reconsideration. 14
On 16 February 1990, the COA, with Chairman Domingo taking no part
and with Commissioner Fernandez dissenting in part, handed down
Decision No. 1171 affirming the disallowance for recovery of financing
charges, inventory losses, and sales to MARCOPPER and ATLAS, while
allowing the recovery of product sales or those arising from export
sales. 15 Decision No. 1171 reads as follows:
Anent the recovery of financing charges you contend that Caltex Phil.
Inc. has the .authority to recover financing charges from the OPSF on
the basis of Department of Finance (DOF) Circular 1-87, dated
February 18, 1987, which allowed oil companies to "recover cost of
financing working capital associated with crude oil shipments,"
and provided a schedule of reimbursement in terms of peso per
barrel. It appears that on November 6, 1989, the DOF issued a
memorandum to the President of the Philippines explaining the nature
of these financing charges and justifying their reimbursement as
follows:
As part of your program to promote economic recovery, . . . oil
companies (were authorized) to refinance their imports of crude
oil and petroleum products from the normal trade credit of 30 days
up to 360 days from date of loading . . . Conformably . . ., the oil
companies deferred their foreign exchange remittances for
purchases by refinancing their import bills from the normal 30-day
payment term up to the desired 360 days. This refinancing of
importations carried additional costs (financing charges) which
then became, due to government mandate, an inherent part of the
cost of the purchases of our country's oil requirement.
We beg to disagree with such contention. The justification that
financing charges increased oil costs and the schedule of
reimbursement rate in peso per barrel (Exhibit 1) used to support
alleged increase (sic) were not validated in our independent
inquiry. As manifested in Exhibit 2, using the same formula which
the DOF used in arriving at the reimbursement rate but using
comparable percentages instead of pesos, the ineluctable
conclusion is that the oil companies are actually gaining rather
than losing from the extension of credit because such extension
enables them to invest the collections in marketable securities
which have much higher rates than those they incur due to the
extension. The Data we used were obtained from CPI (CALTEX)
Management and can easily be verified from our records.
Page 10 of 70
With respect to product sales or those arising from sales to
international vessels or airlines, . . ., it is believed that export sales
(product sales) are entitled to claim refund from the OPSF.
As regard your claim for underrecovery arising from inventory
losses, . . . It is the considered view of this Commission that the
OPSF is not liable to refund such surtax on inventory losses
because these are paid to BIR and not OPSF, in view of which
CPI (CALTEX) should seek refund from BIR. . . .
Finally, as regards the sales to Atlas and Marcopper, it is
represented that you are entitled to claim recovery from the OPSF
pursuant to LOI 1416 issued on July 17, 1984, since these copper
mining companies did not pay CPI (CALTEX) and OPSF imposts
which were added to the selling price.
Upon a circumspect evaluation, this Commission believes and so
holds that the CPI (CALTEX) has no authority to claim
reimbursement for this uncollected OPSF impost because LOI
1416 dated July 17, 1984, which exempts distressed mining
companies from "all taxes, duties, import fees and other charges"
was issued when OPSF was not yet in existence and could not
have contemplated OPSF imposts at the time of its formulation.
Moreover, it is evident that OPSF was not created to aid
distressed mining companies but rather to help the domestic oil
industry by stabilizing oil prices.
Unsatisfied with the decision, petitioner filed on 28 March 1990 the present
petition wherein it imputes to the COA the commission of the following
errors: 16
I
RESPONDENT COMMISSION ERRED IN DISALLOWING RECOVERY
OF FINANCING CHARGES FROM THE OPSF.
II
RESPONDENT COMMISSION ERRED IN DISALLOWING
CPI's 17
CLAIM FOR REIMBURSEMENT OF UNDERRECOVERY
ARISING FROM SALES TO NPC.
 III
RESPONDENT COMMISSION ERRED IN DENYING CPI's CLAIMS
FOR REIMBURSEMENT ON SALES TO ATLAS AND MARCOPPER.
IV
RESPONDENT COMMISSION ERRED IN PREVENTING CPI FROM
EXERCISING ITS LEGAL RIGHT TO OFFSET ITS REMITTANCES
AGAINST ITS REIMBURSEMENT VIS-A-VIS THE OPSF.
V government mandated price reductions;
RESPONDENT COMMISSION ERRED IN DISALLOWING CPI's
CLAIMS WHICH ARE STILL PENDING RESOLUTION BY (SIC) THE
OEA AND THE DOF.
In the Resolution of 5 April 1990, this Court required the respondents to
comment on the petition within ten (10) days from notice. 18
On 6 September 1990, respondents COA and Commissioners Fernandez
and Cruz, assisted by the Office of the Solicitor General, filed their
Comment. 19
This Court resolved to give due course to this petition on 30 May 1991 and
required the parties to file their respective Memoranda within twenty (20)
days from notice. 20
In a Manifestation dated 18 July 1991, the Office of the Solicitor General
prays that the Comment filed on 6 September 1990 be considered as the
Memorandum for respondents. 21
Upon the other hand, petitioner filed its Memorandum on 14 August 1991.
I. Petitioner dwells lengthily on its first assigned error contending, in
support thereof, that:
(1) In view of the expanded role of the OPSF pursuant to Executive Order
No. 137, which added a second purpose, to wit:
Page 11 of 70
2) To reimburse the oil companies for possible cost underrecovery
incurred as a result of the reduction of domestic prices of petroleum
products. The magnitude of the underrecovery, if any, shall be
determined by the Ministry of Finance. "Cost underrecovery" shall
include the following:
i. Reduction in oil company take as directed by the Board of Energy
without the corresponding reduction in the landed cost of oil inventories
in the possession of the oil companies at the time of the price change;
ii. Reduction in internal ad valorem taxes as a result of foregoing
iii. Other factors as may be determined by the Ministry of Finance to
result in cost underrecovery.
the "other factors" mentioned therein that may be determined by the
Ministry (now Department) of Finance may include financing charges for
"in essence, financing charges constitute unrecovered cost of acquisition
of crude oil incurred by the oil companies," as explained in the 6 November
1989 Memorandum to the President of the Department of Finance; they
"directly translate to cost underrecovery in cases where the money market
placement rates decline and at the same time the tax on interest income
increases. The relationship is such that the presence of underrecovery or
overrecovery is directly dependent on the amount and extent of financing
charges."
(2) The claim for recovery of financing charges has clear legal and factual
basis; it was filed on the basis of Department of Finance Circular No.
1-87, dated 18 February 1987, which provides:
To allow oil companies to recover the costs of financing working capital
associated with crude oil shipments, the following guidelines on the
utilization of the Oil Price Stabilization Fund pertaining to the payment
of the foregoing (sic) exchange risk premium and recovery of financing
charges will be implemented:
1. The OPSF foreign exchange premium shall be reduced to a
flat rate of one (1) percent for the first (6) months and 1/32 of one
percent per month thereafter up to a maximum period of one
year, to be applied on crude oil' shipments from January 1, 1987.
 Shipments with outstanding financing as of January 1, 1987 shall on crude oil imports. Accordingly, the OPSF foreign
be charged on the basis of the fee applicable to the remaining exchange risk fee shall be reduced to a flat charge of 1%
period of financing. for the first six (6) months plus 1/32% of 1% per month
thereafter up to a maximum period of one year, effective
2. In addition, for shipments loaded after January 1987, oil January 1, 1987. In addition, since the prevailing company
companies shall be allowed to recover financing charges directly take would still leave unrecovered financing charges,
from the OPSF per barrel of crude oil based on the following reimbursement may be secured from the OPSF in
schedule: accordance with the provisions of the attached Department
of Finance circular. 23
Financing Period Reimbursement Rate
Pesos per Barrel Acting on this letter, the OEA issued on 4 May 1987 Order No. 87-05-096
which contains the guidelines for the computation of the foreign exchange
Less than 180 days None risk fee and the recovery of financing charges from the OPSF, to wit:
180 days to 239 days 1.90
241 (sic) days to 299 4.02 B. FINANCE CHARGES
300 days to 369 (sic) days 6.16
360 days or more 8.28 1. Oil companies shall be allowed to
recover financing charges directly from the
The above rates shall be subject to review every sixty OPSF for both crude and product
days. 22 shipments loaded after January 1, 1987
based on the following rates:Financing
Pursuant to this circular, the Department of Finance, in its letter of 18 Period Reimbursement Rate
February 1987, advised the Office of Energy Affairs as follows: (PBbl.)

HON. VICENTE T. PATERNO Less than 180 days None

Deputy Executive Secretary 180 days to 239 days 1.90
For Energy Affairs 240 days to 229 (sic) days 4.02
Office of the President 300 days to 359 days 6.16
Makati, Metro Manila 360 days to more 8.28

Dear Sir: 2. The above rates shall be subject to

This refers to the letters of the Oil Industry dated December
4, 1986 and February 5, 1987 and subsequent discussions
held by the Price Review committee on February 6, 1987.
On the basis of the representations made, the Department
of Finance recognizes the necessity to reduce the foreign
exchange risk premium accruing to the Oil Price
Stabilization Fund (OPSF). Such a reduction would allow
the industry to recover partly associated financing charges
Page 12 of 70
review every sixty days. 24
Then on 22 November 1988, the Department of Finance issued Circular
No. 4-88 imposing further guidelines on the recoverability of financing
charges, to wit:
Following are the supplemental rules to Department of
Finance Circular No. 1-87 dated February 18, 1987 which
allowed the recovery of financing charges directly from the
Oil Price Stabilization Fund. (OPSF):
 1. The Claim for reimbursement shall be on a per shipment basis.
2. The claim shall be filed with the Office of Energy Affairs together
with the claim on peso cost differential for a particular shipment and
duly certified supporting documents providedfor under Ministry of
Finance No. 11-85.
3. The reimbursement shall be on the form of reimbursement
certificate (Annex A) to be issued by the Office of Energy Affairs. The
said certificate may be used to offset against amounts payable to the
OPSF. The oil companies may also redeem said certificates in cash
if not utilized, subject to availability of funds. 25
The OEA disseminated this Circular to all oil companies in its
Memorandum Circular No. 88-12-017. 26
The COA can neither ignore these issuances nor formulate its own
interpretation of the laws in the light of the determination of executive
agencies. The determination by the Department of Finance and the OEA
that financing charges are recoverable from the OPSF is entitled to great
weight and consideration. 27 The function of the COA, particularly in the
matter of allowing or disallowing certain expenditures, is limited to the
promulgation of accounting and auditing rules for, among others, the
disallowance of irregular, unnecessary, excessive, extravagant, or
unconscionable expenditures, or uses of government funds and
properties. 28
(3) Denial of petitioner's claim for reimbursement would be inequitable.
Additionally, COA's claim that petitioner is gaining, instead of losing, from
the extension of credit, is belatedly raised and not supported by expert
analysis.
In impeaching the validity of petitioner's assertions, the respondents argue
that:
1. The Constitution gives the COA discretionary power to
disapprove irregular or unnecessary government
expenditures and as the monetary claims of petitioner are
not allowed by law, the COA acted within its jurisdiction in
denying them;
Page 13 of 70
2. P.D. No. 1956 and E.O. No. 137 do not allow
reimbursement of financing charges from the OPSF;
3. Under the principle of ejusdem generis, the "other
factors" mentioned in the second purpose of the OPSF
pursuant to E.O. No. 137 can only include "factors which
are of the same nature or analogous to those enumerated;"
4. In allowing reimbursement of financing charges from
OPSF, Circular No. 1-87 of the Department of Finance
violates P.D. No. 1956 and E.O. No. 137; and
5. Department of Finance rules and regulations
implementing P.D. No. 1956 do not likewise allow
reimbursement of financing
charges. 29
We find no merit in the first assigned error.
As to the power of the COA, which must first be resolved in view of its
primacy, We find the theory of petitioner –– that such does not extend to
the disallowance of irregular, unnecessary, excessive, extravagant, or
unconscionable expenditures, or use of government funds and properties,
but only to the promulgation of accounting and auditing rules for, among
others, such disallowance –– to be untenable in the light of the provisions
of the 1987 Constitution and related laws.
Section 2, Subdivision D, Article IX of the 1987 Constitution expressly
provides:
Sec. 2(l). The Commission on Audit shall have the power, authority,
and duty to examine, audit, and settle all accounts pertaining to the
revenue and receipts of, and expenditures or uses of funds and
property, owned or held in trust by, or pertaining to, the Government,
or any of its subdivisions, agencies, or instrumentalities, including
government-owned and controlled corporations with original charters,
and on a post-audit basis: (a) constitutional bodies, commissions and
offices that have been granted fiscal autonomy under this
Constitution; (b) autonomous state colleges and universities; (c) other
government-owned or controlled corporations and their subsidiaries;
and (d) such non-governmental entities receiving subsidy or equity,
 directly or indirectly, from or through the government, which are
required by law or the granting institution to submit to such audit as a
condition of subsidy or equity. However, where the internal control
system of the audited agencies is inadequate, the Commission may
adopt such measures, including temporary or special pre-audit, as are
necessary and appropriate to correct the deficiencies. It shall keep the
general accounts, of the Government and, for such period as may be
provided by law, preserve the vouchers and other supporting papers
pertaining thereto.
(2) The Commission shall have exclusive authority, subject to the
limitations in this Article, to define the scope of its audit and
examination, establish the techniques and methods required therefor,
and promulgate accounting and auditing rules and regulations,
including those for the prevention and disallowance of irregular,
unnecessary, excessive, extravagant, or, unconscionable
expenditures, or uses of government funds and properties.
These present powers, consistent with the declared independence of the
Commission, 30 are broader and more extensive than that conferred by the
1973 Constitution. Under the latter, the Commission was empowered to:
Examine, audit, and settle, in accordance with law and regulations,
all accounts pertaining to the revenues, and receipts of, and
expenditures or uses of funds and property, owned or held in trust
by, or pertaining to, the Government, or any of its subdivisions,
agencies, or instrumentalities including government-owned or
controlled corporations, keep the general accounts of the
Government and, for such period as may be provided by law,
preserve the vouchers pertaining thereto; and promulgate
accounting and auditing rules and regulations including those for the
prevention of irregular, unnecessary, excessive, or extravagant
expenditures or uses of funds and property. 31
Upon the other hand, under the 1935 Constitution, the power and authority
of the COA's precursor, the General Auditing Office, were, unfortunately,
limited; its very role was markedly passive. Section 2 of Article XI
thereofprovided:
Sec. 2. The Auditor General shall examine, audit, and settle all
accounts pertaining to the revenues and receipts from whatever
Page 14 of 70
source, including trust funds derived from bond issues; and audit, in
accordance with law and administrative regulations, all expenditures of
funds or property pertaining to or held in trust by the Government or
the provinces or municipalities thereof. He shall keep the general
accounts of the Government and the preserve the vouchers pertaining
thereto. It shall be the duty of the Auditor General to bring to the
attention of the proper administrative officer expenditures of funds or
property which, in his opinion, are irregular, unnecessary, excessive,
or extravagant. He shall also perform such other functions as may be
prescribed by law.
As clearly shown above, in respect to irregular, unnecessary, excessive or
extravagant expenditures or uses of funds, the 1935 Constitution did not
grant the Auditor General the power to issue rules and regulations to
prevent the same. His was merely to bring that matter to the attention of
the proper administrative officer.
The ruling on this particular point, quoted by petitioner from the cases
of Guevarra vs. Gimenez 32 and Ramos vs.Aquino, 33 are no longer
controlling as the two (2) were decided in the light of the 1935 Constitution.
There can be no doubt, however, that the audit power of the Auditor
General under the 1935 Constitution and the Commission on Audit under
the 1973 Constitution authorized them to disallow illegal expenditures of
funds or uses of funds and property. Our present Constitution retains that
same power and authority, further strengthened by the definition of the
COA's general jurisdiction in Section 26 of the Government Auditing Code
of the Philippines 34 and Administrative Code of 1987. 35 Pursuant to its
power to promulgate accounting and auditing rules and regulations for the
prevention of irregular, unnecessary, excessive or extravagant
expenditures or uses of funds, 36 the COA promulgated on 29 March 1977
COA Circular No. 77-55. Since the COA is responsible for the enforcement
of the rules and regulations, it goes without saying that failure to comply
with them is a ground for disapproving the payment of the proposed
expenditure. As observed by one of the Commissioners of the 1986
Constitutional Commission, Fr. Joaquin G. Bernas: 37
It should be noted, however, that whereas under Article XI,
Section 2, of the 1935 Constitution the Auditor General
could not correct "irregular, unnecessary, excessive or
extravagant" expenditures of public funds but could only
 "bring [the matter] to the attention of the proper
administrative officer," under the 1987 Constitution, as also
under the 1973 Constitution, the Commission on Audit can
"promulgate accounting and auditing rules and regulations
including those for the prevention and disallowance of
irregular, unnecessary, excessive, extravagant, or
unconscionable expenditures or uses of government funds
and properties." Hence, since the Commission on Audit
must ultimately be responsible for the enforcement of these
rules and regulations, the failure to comply with these
regulations can be a ground for disapproving the payment
of a proposed expenditure.
Indeed, when the framers of the last two (2) Constitutions conferred upon
the COA a more active role and invested it with broader and more
extensive powers, they did not intend merely to make the COA a toothless
tiger, but rather envisioned a dynamic, effective, efficient and independent
watchdog of the Government.
The issue of the financing charges boils down to the validity of Department
of Finance Circular No. 1-87, Department of Finance Circular No. 4-88 and
the implementing circulars of the OEA, issued pursuant to Section 8, P.D.
No. 1956, as amended by E.O. No. 137, authorizing it to determine "other
factors" which may result in cost underrecovery and a consequent
reimbursement from the OPSF.
The Solicitor General maintains that, following the doctrine of ejusdem
generis, financing charges are not included in "cost underrecovery" and,
therefore, cannot be considered as one of the "other factors." Section 8 of
P.D. No. 1956, as amended by E.O. No. 137, does not explicitly define
what "cost underrecovery" is. It merely states what it includes. Thus:
. . . "Cost underrecovery" shall include the following:
i. Reduction in oil company takes as directed by the Board
of Energy without the corresponding reduction in the
landed cost of oil inventories in the possession of the oil
companies at the time of the price change;
ii. Reduction in internal ad valorem taxes as a result of
foregoing government mandated price reductions;
Page 15 of 70
iii. Other factors as may be determined by the Ministry of
Finance to result in cost underrecovery.
These "other factors" can include only those which are of the same class
or nature as the two specifically enumerated in subparagraphs (i) and (ii).
A common characteristic of both is that they are in the nature of
government mandated price reductions. Hence, any other factor which
seeks to be a part of the enumeration, or which could qualify as a cost
underrecovery, must be of the same class or nature as those specifically
enumerated.
Petitioner, however, suggests that E.O. No. 137 intended to grant the
Department of Finance broad and unrestricted authority to determine or
define "other factors."
Both views are unacceptable to this Court.
The rule of ejusdem generis states that "[w]here general words follow an
enumeration of persons or things, by words of a particular and specific
meaning, such general words are not to be construed in their widest extent,
but are held to be as applying only to persons or things of the same kind
or class as those specifically mentioned. 38 A reading of subparagraphs (i)
and (ii) easily discloses that they do not have a common characteristic. The
first relates to price reduction as directed by the Board of Energy while the
second refers to reduction in internal ad valoremtaxes. Therefore,
subparagraph (iii) cannot be limited by the enumeration in these
subparagraphs. What should be considered for purposes of determining
the "other factors" in subparagraph (iii) is the first sentence of paragraph
(2) of the Section which explicitly allows cost underrecovery only if such
were incurred as a result of the reduction of domestic prices of petroleum
products.
Although petitioner's financing losses, if indeed incurred, may constitute
cost underrecovery in the sense that such were incurred as a result of the
inability to fully offset financing expenses from yields in money market
placements, they do not, however, fall under the foregoing provision of P.D.
No. 1956, as amended, because the same did not result from the reduction
of the domestic price of petroleum products. Until paragraph (2), Section 8
of the decree, as amended, is further amended by Congress, this Court
can do nothing. The duty of this Court is not to legislate, but to apply or
interpret the law. Be that as it may, this Court wishes to emphasize that as
the facts in this case have shown, it was at the behest of the Government . . . are restored effective March 10, 1987." In a Memorandum issued on 5
that petitioner refinanced its oil import payments from the normal 30-day October 1987 by the Office of the President, NPC's tax exemption was
trade credit to a maximum of 360 days. Petitioner could be correct in its confirmed and approved.
assertion that owing to the extended period for payment, the financial
institution which refinanced said payments charged a higher interest, Furthermore, as pointed out by respondents, the intention to exempt sales
thereby resulting in higher financing expenses for the petitioner. It would of petroleum products to the NPC is evident in the recently passed
appear then that equity considerations dictate that petitioner should Republic Act No. 6952 establishing the Petroleum Price Standby Fund to
somehow be allowed to recover its financing losses, if any, which may have support the OPSF. 41 The pertinent part of Section 2, Republic Act No. 6952
been sustained because it accommodated the request of the Government. provides:
Although under Section 29 of the National Internal Revenue Code such
losses may be deducted from gross income, the effect of that loss would Sec. 2. Application of the Fund shall be subject to the following conditions:
be merely to reduce its taxable income, but not to actually wipe out such
losses. The Government then may consider some positive measures to
(1) That the Fund shall be used to reimburse the oil companies for (a) cost
help petitioner and others similarly situated to obtain substantial relief. An
increases of imported crude oil and finished petroleum products resulting
amendment, as aforestated, may then be in order.
from foreign exchange rate adjustments and/or increases in world market
prices of crude oil; (b) cost underrecovery incurred as a result of fuel oil
Upon the other hand, to accept petitioner's theory of "unrestricted sales to the National Power Corporation (NPC); and (c) other cost
authority" on the part of the Department of Finance to determine or define underrecoveries incurred as may be finally decided by the Supreme
"other factors" is to uphold an undue delegation of legislative power, it Court; . . .
clearly appearing that the subject provision does not provide any standard
for the exercise of the authority. It is a fundamental rule that delegation of
Hence, petitioner can recover its claim arising from sales of petroleum
legislative power may be sustained only upon the ground that some
products to the National Power Corporation.
standard for its exercise is provided and that the legislature, in making the
delegation, has prescribed the manner of the exercise of the delegated
authority. 39 III. With respect to its claim for reimbursement on sales to ATLAS and
MARCOPPER, petitioner relies on Letter of Instruction (LOI) 1416, dated
17 July 1984, which ordered the suspension of payments of all taxes,
Finally, whether petitioner gained or lost by reason of the extensive credit
duties, fees and other charges, whether direct or indirect, due and payable
is rendered irrelevant by reason of the foregoing disquisitions. It may
by the copper mining companies in distress to the national government.
nevertheless be stated that petitioner failed to disprove COA's claim that it
Pursuant to this LOI, then Minister of Energy, Hon. Geronimo Velasco,
had in fact gained in the process. Otherwise stated, petitioner failed to
issued Memorandum Circular No. 84-11-22 advising the oil companies that
sufficiently show that it incurred a loss. Such being the case, how can
Atlas Consolidated Mining Corporation and Marcopper Mining Corporation
petitioner claim for reimbursement? It cannot have its cake and eat it too.
are among those declared to be in distress.
II. Anent the claims arising from sales to the National Power Corporation,
In denying the claims arising from sales to ATLAS and MARCOPPER, the
We find for the petitioner. The respondents themselves admit in their
COA, in its 18 August 1989 letter to Executive Director Wenceslao R. de
Comment that underrecovery arising from sales to NPC are reimbursable
la Paz, states that "it is our opinion that LOI 1416 which implements the
because NPC was granted full exemption from the payment of taxes; to
exemption from payment of OPSF imposts as effected by OEA has no legal
prove this, respondents trace the laws providing for such exemption. 40 The
basis;" 42 in its Decision No. 1171, it ruled that "the CPI (CALTEX) (Caltex)
last law cited is the Fiscal Incentives Regulatory Board's Resolution No.
has no authority to claim reimbursement for this uncollected impost
17-87 of 24 June 1987 which provides, in part, "that the tax and duty
because LOI 1416 dated July 17, 1984, . . . was issued when OPSF was
exemption privileges of the National Power Corporation, including those
not yet in existence and could not have contemplated OPSF imposts at the
pertaining to its domestic purchases of petroleum and petroleum products
Page 16 of 70
time of its formulation." 43 It is further stated that: "Moreover, it is evident
that OPSF was not created to aid distressed mining companies but rather
to help the domestic oil industry by stabilizing oil prices."
In sustaining COA's stand, respondents vigorously maintain that LOI 1416
could not have intended to exempt said distressed mining companies from
the payment of OPSF dues for the following reasons:
a. LOI 1416 granting the alleged exemption was issued on
July 17, 1984. P.D. 1956 creating the OPSF was
promulgated on October 10, 1984, while E.O. 137,
amending P.D. 1956, was issued on February 25, 1987.
b. LOI 1416 was issued in 1984 to assist distressed copper
mining companies in line with the government's effort to
prevent the collapse of the copper industry. P.D No. 1956,
as amended, was issued for the purpose of minimizing
frequent price changes brought about by exchange rate
adjustments and/or changes in world market prices of
crude oil and imported petroleum product's; and
c. LOI 1416 caused the "suspension of all taxes, duties,
fees, imposts and other charges, whether direct or indirect,
due and payable by the copper mining companies in
distress to the Notional and Local Governments . . ." On
the other hand, OPSF dues are not payable by (sic)
distressed copper companies but by oil companies. It is to
be noted that the copper mining companies do not pay
OPSF dues. Rather, such imposts are built in or already
incorporated in the prices of oil products. 44
Lastly, respondents allege that while LOI 1416 suspends the payment of
taxes by distressed mining companies, it does not accord petitioner the
same privilege with respect to its obligation to pay OPSF dues.
We concur with the disquisitions of the respondents. Aside from such
reasons, however, it is apparent that LOI 1416 was never published in the
Official Gazette 45 as required by Article 2 of the Civil Code, which reads:
Page 17 of 70
Laws shall take effect after fifteen days following the
completion of their publication in the Official Gazette,
unless it is otherwise provided. . . .
In applying said provision, this Court ruled in the case of Tañada
vs. Tuvera: 46
WHEREFORE, the Court hereby orders respondents to
publish in the Official Gazette all unpublished presidential
issuances which are of general application, and unless so
published they shall have no binding force and effect.
Resolving the motion for reconsideration of said decision, this Court, in its
Resolution promulgated on 29 December 1986, 47 ruled:
We hold therefore that all statutes, including those of local
application and private laws, shall be published as a
condition for their effectivity, which shall begin fifteen days
after publication unless a different effectivity date is fixed
by the legislature.
Covered by this rule are presidential decrees and executive
orders promulgated by the President in the exercise of
legislative powers whenever the same are validly
delegated by the legislature or, at present, directly
conferred by the Constitution. Administrative rules and
regulations must also be published if their purpose is to
enforce or implement existing laws pursuant also to a valid
delegation.
xxx xxx xxx
WHEREFORE, it is hereby declared that all laws as above
defined shall immediately upon their approval, or as soon
thereafter as possible, be published in full in the Official
Gazette, to become effective only after fifteen days from
their publication, or on another date specified by the
legislature, in accordance with Article 2 of the Civil Code.
LOI 1416 has, therefore, no binding force or effect as it was never
published in the Official Gazette after its issuance or at any time after the
decision in the abovementioned cases.
Article 2 of the Civil Code was, however, later amended by Executive Order
No. 200, issued on 18 June 1987. As amended, the said provision now
reads:
Laws shall take effect after fifteen days following the
completion of their publication either in the Official Gazette
or in a newspaper of general circulation in the Philippines,
unless it is otherwise provided.
We are not aware of the publication of LOI 1416 in any newspaper of
general circulation pursuant to Executive Order No. 200.
Furthermore, even granting arguendo that LOI 1416 has force and effect,
petitioner's claim must still fail. Tax exemptions as a general rule are
construed strictly against the grantee and liberally in favor of the taxing
authority. 48The burden of proof rests upon the party claiming exemption to
prove that it is in fact covered by the exemption so claimed. The party
claiming exemption must therefore be expressly mentioned in the
exempting law or at least be within its purview by clear legislative intent.
In the case at bar, petitioner failed to prove that it is entitled, as a
consequence of its sales to ATLAS and MARCOPPER, to claim
reimbursement from the OPSF under LOI 1416. Though LOI 1416 may
suspend the payment of taxes by copper mining companies, it does not
give petitioner the same privilege with respect to the payment of OPSF
dues.
IV. As to COA's disallowance of the amount of P130,420,235.00, petitioner
maintains that the Department of Finance has still to issue a final and
definitive ruling thereon; accordingly, it was premature for COA to disallow
it. By doing so, the latter acted beyond its jurisdiction. 49 Respondents, on
the other hand, contend that said amount was already disallowed by the
OEA for failure to substantiate it. 50 In fact, when OEA submitted the claims
of petitioner for pre-audit, the abovementioned amount was already
excluded.
Page 18 of 70
An examination of the records of this case shows that petitioner failed to
prove or substantiate its contention that the amount of P130,420,235.00 is
still pending before the OEA and the DOF. Additionally, We find no reason
to doubt the submission of respondents that said amount has already been
passed upon by the OEA. Hence, the ruling of respondent COA
disapproving said claim must be upheld.
V. The last issue to be resolved in this case is whether or not the amounts
due to the OPSF from petitioner may be offset against petitioner's
outstanding claims from said fund. Petitioner contends that it should be
allowed to offset its claims from the OPSF against its contributions to the
fund as this has been allowed in the past, particularly in the years 1987
and 1988. 51
Furthermore, petitioner cites, as bases for offsetting, the provisions of the
New Civil Code on compensation and Section 21, Book V, Title I-B of the
Revised Administrative Code which provides for "Retention of Money for
Satisfaction of Indebtedness to Government." 52 Petitioner also mentions
communications from the Board of Energy and the Department of Finance
that supposedly authorize compensation.
Respondents, on the other hand, citing Francia vs. IAC and
Fernandez, 53 contend that there can be no offsetting of taxes against the
claims that a taxpayer may have against the government, as taxes do not
arise from contracts or depend upon the will of the taxpayer, but are
imposed by law. Respondents also allege that petitioner's reliance on
Section 21, Book V, Title I-B of the Revised Administrative Code, is
misplaced because "while this provision empowers the COA to withhold
payment of a government indebtedness to a person who is also indebted
to the government and apply the government indebtedness to the
satisfaction of the obligation of the person to the government, like authority
or right to make compensation is not given to the private person." 54 The
reason for this, as stated in Commissioner of Internal Revenue vs. Algue,
Inc., 55 is that money due the government, either in the form of taxes or
other dues, is its lifeblood and should be collected without hindrance. Thus,
instead of giving petitioner a reason for compensation or set-off, the
Revised Administrative Code makes it the respondents' duty to collect
petitioner's indebtedness to the OPSF.
Refuting respondents' contention, petitioner claims that the amounts due
from it do not arise as a result of taxation because "P.D. 1956, amended,
did not create a source of taxation; it instead established a special fund . .
.," 56 and that the OPSF contributions do not go to the general fund of the
state and are not used for public purpose, i.e., not for the support of the
government, the administration of law, or the payment of public expenses.
This alleged lack of a public purpose behind OPSF exactions distinguishes
such from a tax. Hence, the ruling in the Francia case is inapplicable.
Lastly, petitioner cites R.A. No. 6952 creating the Petroleum Price Standby
Fund to support the OPSF; the said law provides in part that:
Sec. 2. Application of the fund shall be subject to the
following conditions:
xxx xxx xxx
(3) That no amount of the Petroleum Price
Standby Fund shall be used to pay any oil
company which has an outstanding
obligation to the Government without said
obligation being offset first, subject to the
requirements of compensation or offset
under the Civil Code.
We find no merit in petitioner's contention that the OPSF contributions are
not for a public purpose because they go to a special fund of the
government. Taxation is no longer envisioned as a measure merely to raise
revenue to support the existence of the government; taxes may be levied
with a regulatory purpose to provide means for the rehabilitation and
stabilization of a threatened industry which is affected with public interest
as to be within the police power of the state. 57 There can be no doubt that
the oil industry is greatly imbued with public interest as it vitally affects the
general welfare. Any unregulated increase in oil prices could hurt the lives
of a majority of the people and cause economic crisis of untold proportions.
It would have a chain reaction in terms of, among others, demands for
wage increases and upward spiralling of the cost of basic commodities.
The stabilization then of oil prices is of prime concern which the state, via
its police power, may properly address.
Also, P.D. No. 1956, as amended by E.O. No. 137, explicitly provides that
the source of OPSF is taxation. No amount of semantical juggleries could
dim this fact.
Page 19 of 70
It is settled that a taxpayer may not offset taxes due from the claims that
he may have against the government. 58Taxes cannot be the subject of
compensation because the government and taxpayer are not mutually
creditors and debtors of each other and a claim for taxes is not such a debt,
demand, contract or judgment as is allowed to be set-off. 59
We may even further state that technically, in respect to the taxes for the
OPSF, the oil companies merely act as agents for the Government in the
latter's collection since the taxes are, in reality, passed unto the end-users
–– the consuming public. In that capacity, the petitioner, as one of such
companies, has the primary obligation to account for and remit the taxes
collected to the administrator of the OPSF. This duty stems from the
fiduciary relationship between the two; petitioner certainly cannot be
considered merely as a debtor. In respect, therefore, to its collection for the
OPSF vis-a-vis its claims for reimbursement, no compensation is likewise
legally feasible. Firstly, the Government and the petitioner cannot be said
to be mutually debtors and creditors of each other. Secondly, there is no
proof that petitioner's claim is already due and liquidated. Under Article
1279 of the Civil Code, in order that compensation may be proper, it is
necessary that:
(1) each one of the obligors be bound principally, and that
he be at the same time a principal creditor of the other;
(2) both debts consist in a sum of :money, or if the things
due are consumable, they be of the same kind, and also of
the same quality if the latter has been stated;
(3) the two (2) debts be due;
(4) they be liquidated and demandable;
(5) over neither of them there be any retention or
controversy, commenced by third persons and
communicated in due time to the debtor.
That compensation had been the practice in the past can set no valid
precedent. Such a practice has no legal basis. Lastly, R.A. No. 6952 does
not authorize oil companies to offset their claims against their OPSF
contributions. Instead, it prohibits the government from paying any amount
from the Petroleum Price Standby Fund to oil companies which have
outstanding obligations with the government, without said obligation being
offset first subject to the rules on compensation in the Civil Code.
WHEREFORE, in view of the foregoing, judgment is hereby rendered
AFFIRMING the challenged decision of the Commission on Audit, except
that portion thereof disallowing petitioner's claim for reimbursement of
underrecovery arising from sales to the National Power Corporation, which
is hereby allowed.
With costs against petitioner.
SO ORDERED.
G.R. No. L-75697
VALENTIN TIO doing business under the name and style of OMI
ENTERPRISES, petitioner,
vs.
VIDEOGRAM REGULATORY BOARD, MINISTER OF FINANCE,
METRO MANILA COMMISSION, CITY MAYOR and CITY TREASURER
OF MANILA, respondents.
Nelson Y. Ng for petitioner.
The City Legal Officer for respondents City Mayor and City Treasurer.
MELENCIO-HERRERA, J.:
This petition was filed on September 1, 1986 by petitioner on his own
behalf and purportedly on behalf of other videogram operators adversely
affected. It assails the constitutionality of Presidential Decree No. 1987
entitled "An Act Creating the Videogram Regulatory Board" with broad
powers to regulate and supervise the videogram industry (hereinafter
briefly referred to as the BOARD). The Decree was promulgated on
October 5, 1985 and took effect on April 10, 1986, fifteen (15) days after
completion of its publication in the Official Gazette.
Page 20 of 70
On November 5, 1985, a month after the promulgation of the
abovementioned decree, Presidential Decree No. 1994 amended the
National Internal Revenue Code providing, inter alia:
SEC. 134. Video Tapes. — There shall be collected on each
processed video-tape cassette, ready for playback, regardless of
length, an annual tax of five pesos; Provided, That locally
manufactured or imported blank video tapes shall be subject to
sales tax.
On October 23, 1986, the Greater Manila Theaters Association, Integrated
Movie Producers, Importers and Distributors Association of the Philippines,
and Philippine Motion Pictures Producers Association, hereinafter
collectively referred to as the Intervenors, were permitted by the Court to
intervene in the case, over petitioner's opposition, upon the allegations that
intervention was necessary for the complete protection of their rights and
that their "survival and very existence is threatened by the unregulated
proliferation of film piracy." The Intervenors were thereafter allowed to file
their Comment in Intervention.
The rationale behind the enactment of the DECREE, is set out in its
preambular clauses as follows:
1. WHEREAS, the proliferation and unregulated circulation of
videograms including, among others, videotapes, discs, cassettes
or any technical improvement or variation thereof, have greatly
prejudiced the operations of moviehouses and theaters, and have
caused a sharp decline in theatrical attendance by at least forty
percent (40%) and a tremendous drop in the collection of sales,
contractor's specific, amusement and other taxes, thereby resulting
in substantial losses estimated at P450 Million annually in
government revenues;
2. WHEREAS, videogram(s) establishments collectively earn
around P600 Million per annum from rentals, sales and disposition
of videograms, and such earnings have not been subjected to tax,
thereby depriving the Government of approximately P180 Million in
taxes each year;
3. WHEREAS, the unregulated activities of videogram
establishments have also affected the viability of the movie
 industry, particularly the more than 1,200 movie houses and
theaters throughout the country, and occasioned industry-wide
displacement and unemployment due to the shutdown of
numerous moviehouses and theaters;
4. "WHEREAS, in order to ensure national economic recovery, it is
imperative for the Government to create an environment conducive
to growth and development of all business industries, including the
movie industry which has an accumulated investment of about P3
Billion;
5. WHEREAS, proper taxation of the activities of videogram
establishments will not only alleviate the dire financial condition of
the movie industry upon which more than 75,000 families and
500,000 workers depend for their livelihood, but also provide an
additional source of revenue for the Government, and at the same
time rationalize the heretofore uncontrolled distribution of
videograms;
6. WHEREAS, the rampant and unregulated showing of obscene
videogram features constitutes a clear and present danger to the
moral and spiritual well-being of the youth, and impairs the
mandate of the Constitution for the State to support the rearing of
the youth for civic efficiency and the development of moral
character and promote their physical, intellectual, and social well-
being;
7. WHEREAS, civic-minded citizens and groups have called for
remedial measures to curb these blatant malpractices which have
flaunted our censorship and copyright laws;
8. WHEREAS, in the face of these grave emergencies corroding
the moral values of the people and betraying the national economic
recovery program, bold emergency measures must be adopted
with dispatch; ... (Numbering of paragraphs supplied).
Petitioner's attack on the constitutionality of the DECREE rests on the
following grounds:
Page 21 of 70
1. Section 10 thereof, which imposes a tax of 30% on the gross
receipts payable to the local government is a RIDER and the same
is not germane to the subject matter thereof;
2. The tax imposed is harsh, confiscatory, oppressive and/or in
unlawful restraint of trade in violation of the due process clause of
the Constitution;
3. There is no factual nor legal basis for the exercise by the
President of the vast powers conferred upon him by Amendment
No. 6;
4. There is undue delegation of power and authority;
5. The Decree is an ex-post facto law; and
6. There is over regulation of the video industry as if it were a
nuisance, which it is not.
We shall consider the foregoing objections in seriatim.
1. The Constitutional requirement that "every bill shall embrace only one
subject which shall be expressed in the title thereof" 1 is sufficiently
complied with if the title be comprehensive enough to include the general
purpose which a statute seeks to achieve. It is not necessary that the title
express each and every end that the statute wishes to accomplish. The
requirement is satisfied if all the parts of the statute are related, and are
germane to the subject matter expressed in the title, or as long as they are
not inconsistent with or foreign to the general subject and title. 2An act
having a single general subject, indicated in the title, may contain any
number of provisions, no matter how diverse they may be, so long as they
are not inconsistent with or foreign to the general subject, and may be
considered in furtherance of such subject by providing for the method and
means of carrying out the general object." 3 The rule also is that the
constitutional requirement as to the title of a bill should not be so narrowly
construed as to cripple or impede the power of legislation. 4 It should be
given practical rather than technical construction. 5
Tested by the foregoing criteria, petitioner's contention that the tax
provision of the DECREE is a rider is without merit. That section
reads, inter alia:
 Section 10. Tax on Sale, Lease or Disposition of Videograms. —
Notwithstanding any provision of law to the contrary, the province
shall collect a tax of thirty percent (30%) of the purchase price or
rental rate, as the case may be, for every sale, lease or disposition
of a videogram containing a reproduction of any motion picture or
audiovisual program. Fifty percent (50%) of the proceeds of the tax
collected shall accrue to the province, and the other fifty percent
(50%) shall acrrue to the municipality where the tax is collected;
PROVIDED, That in Metropolitan Manila, the tax shall be shared
equally by the City/Municipality and the Metropolitan Manila
Commission.
xxx xxx xxx
The foregoing provision is allied and germane to, and is reasonably
necessary for the accomplishment of, the general object of the DECREE,
which is the regulation of the video industry through the Videogram
Regulatory Board as expressed in its title. The tax provision is not
inconsistent with, nor foreign to that general subject and title. As a tool for
regulation 6 it is simply one of the regulatory and control mechanisms
scattered throughout the DECREE. The express purpose of the DECREE
to include taxation of the video industry in order to regulate and rationalize
the heretofore uncontrolled distribution of videograms is evident from
Preambles 2 and 5, supra. Those preambles explain the motives of the
lawmaker in presenting the measure. The title of the DECREE, which is
the creation of the Videogram Regulatory Board, is comprehensive enough
to include the purposes expressed in its Preamble and reasonably covers
all its provisions. It is unnecessary to express all those objectives in the
title or that the latter be an index to the body of the DECREE. 7
2. Petitioner also submits that the thirty percent (30%) tax imposed is harsh
and oppressive, confiscatory, and in restraint of trade. However, it is
beyond serious question that a tax does not cease to be valid merely
because it regulates, discourages, or even definitely deters the activities
taxed. 8 The power to impose taxes is one so unlimited in force and so
searching in extent, that the courts scarcely venture to declare that it is
subject to any restrictions whatever, except such as rest in the discretion
of the authority which exercises it. 9 In imposing a tax, the legislature acts
upon its constituents. This is, in general, a sufficient security against
erroneous and oppressive taxation. 10
Page 22 of 70
The tax imposed by the DECREE is not only a regulatory but also a
revenue measure prompted by the realization that earnings of videogram
establishments of around P600 million per annum have not been subjected
to tax, thereby depriving the Government of an additional source of
revenue. It is an end-user tax, imposed on retailers for every videogram
they make available for public viewing. It is similar to the 30% amusement
tax imposed or borne by the movie industry which the theater-owners pay
to the government, but which is passed on to the entire cost of the
admission ticket, thus shifting the tax burden on the buying or the viewing
public. It is a tax that is imposed uniformly on all videogram operators.
The levy of the 30% tax is for a public purpose. It was imposed primarily to
answer the need for regulating the video industry, particularly because of
the rampant film piracy, the flagrant violation of intellectual property rights,
and the proliferation of pornographic video tapes. And while it was also an
objective of the DECREE to protect the movie industry, the tax remains a
valid imposition.
The public purpose of a tax may legally exist even if the motive
which impelled the legislature to impose the tax was to favor one
industry over another. 11
It is inherent in the power to tax that a state be free to select the
subjects of taxation, and it has been repeatedly held that
"inequities which result from a singling out of one particular class
for taxation or exemption infringe no constitutional
limitation". 12 Taxation has been made the implement of the state's
police power.13
At bottom, the rate of tax is a matter better addressed to the taxing
legislature.
3. Petitioner argues that there was no legal nor factual basis for the
promulgation of the DECREE by the former President under Amendment
No. 6 of the 1973 Constitution providing that "whenever in the judgment of
the President ... , there exists a grave emergency or a threat or imminence
thereof, or whenever the interim Batasang Pambansa or the regular
National Assembly fails or is unable to act adequately on any matter for
any reason that in his judgment requires immediate action, he may, in order
to meet the exigency, issue the necessary decrees, orders, or letters of
instructions, which shall form part of the law of the land."
In refutation, the Intervenors and the Solicitor General's Office aver that
the 8th "whereas" clause sufficiently summarizes the justification in that
grave emergencies corroding the moral values of the people and betraying
the national economic recovery program necessitated bold emergency
measures to be adopted with dispatch. Whatever the reasons "in the
judgment" of the then President, considering that the issue of the validity
of the exercise of legislative power under the said Amendment still pends
resolution in several other cases, we reserve resolution of the question
raised at the proper time.
4. Neither can it be successfully argued that the DECREE contains an
undue delegation of legislative power. The grant in Section 11 of the
DECREE of authority to the BOARD to "solicit the direct assistance of other
agencies and units of the government and deputize, for a fixed and limited
period, the heads or personnel of such agencies and units to perform
enforcement functions for the Board" is not a delegation of the power to
legislate but merely a conferment of authority or discretion as to its
execution, enforcement, and implementation. "The true distinction is
between the delegation of power to make the law, which necessarily
involves a discretion as to what it shall be, and conferring authority or
discretion as to its execution to be exercised under and in pursuance of
the law. The first cannot be done; to the latter, no valid objection can be
made." 14 Besides, in the very language of the decree, the authority of the
BOARD to solicit such assistance is for a "fixed and limited period" with the
deputized agencies concerned being "subject to the direction and control
of the BOARD." That the grant of such authority might be the source of
graft and corruption would not stigmatize the DECREE as unconstitutional.
Should the eventuality occur, the aggrieved parties will not be without
adequate remedy in law.
5. The DECREE is not violative of the ex post facto principle. An ex post
facto law is, among other categories, one which "alters the legal rules of
evidence, and authorizes conviction upon less or different testimony than
the law required at the time of the commission of the offense." It is
petitioner's position that Section 15 of the DECREE in providing that:
All videogram establishments in the Philippines are hereby given a
period of forty-five (45) days after the effectivity of this Decree
within which to register with and secure a permit from the BOARD
to engage in the videogram business and to register with the
BOARD all their inventories of videograms, including videotapes,
discs, cassettes or other technical improvements or variations
Page 23 of 70
thereof, before they could be sold, leased, or otherwise disposed
of. Thereafter any videogram found in the possession of any
person engaged in the videogram business without the required
proof of registration by the BOARD, shall be prima facie evidence
of violation of the Decree, whether the possession of such
videogram be for private showing and/or public exhibition.
raises immediately a prima facie evidence of violation of the DECREE
when the required proof of registration of any videogram cannot be
presented and thus partakes of the nature of an ex post facto law.
The argument is untenable. As this Court held in the recent case of Vallarta
vs. Court of Appeals, et al. 15
... it is now well settled that "there is no constitutional objection to
the passage of a law providing that the presumption of innocence
may be overcome by a contrary presumption founded upon the
experience of human conduct, and enacting what evidence shall
be sufficient to overcome such presumption of innocence" (People
vs. Mingoa 92 Phil. 856 [1953] at 858-59, citing 1 COOLEY, A
TREATISE ON THE CONSTITUTIONAL LIMITATIONS, 639-641).
And the "legislature may enact that when certain facts have been
proved that they shall be prima facie evidence of the existence of
the guilt of the accused and shift the burden of proof provided there
be a rational connection between the facts proved and the ultimate
facts presumed so that the inference of the one from proof of the
others is not unreasonable and arbitrary because of lack of
connection between the two in common experience". 16
Applied to the challenged provision, there is no question that there is a
rational connection between the fact proved, which is non-registration, and
the ultimate fact presumed which is violation of the DECREE, besides the
fact that the prima facie presumption of violation of the DECREE attaches
only after a forty-five-day period counted from its effectivity and is,
therefore, neither retrospective in character.
6. We do not share petitioner's fears that the video industry is being over-
regulated and being eased out of existence as if it were a nuisance. Being
a relatively new industry, the need for its regulation was apparent. While
the underlying objective of the DECREE is to protect the moribund movie
industry, there is no question that public welfare is at bottom of its
enactment, considering "the unfair competition posed by rampant film
piracy; the erosion of the moral fiber of the viewing public brought about by
the availability of unclassified and unreviewed video tapes containing
pornographic films and films with brutally violent sequences; and losses in
government revenues due to the drop in theatrical attendance, not to
mention the fact that the activities of video establishments are virtually
untaxed since mere payment of Mayor's permit and municipal license fees
are required to engage in business. 17
The enactment of the Decree since April 10, 1986 has not brought about
the "demise" of the video industry. On the contrary, video establishments
are seen to have proliferated in many places notwithstanding the 30% tax
imposed.
In the last analysis, what petitioner basically questions is the necessity,
wisdom and expediency of the DECREE. These considerations, however,
are primarily and exclusively a matter of legislative concern.
Only congressional power or competence, not the wisdom of the
action taken, may be the basis for declaring a statute invalid. This
is as it ought to be. The principle of separation of powers has in the
main wisely allocated the respective authority of each department
and confined its jurisdiction to such a sphere. There would then be
intrusion not allowable under the Constitution if on a matter left to
the discretion of a coordinate branch, the judiciary would substitute
its own. If there be adherence to the rule of law, as there ought to
be, the last offender should be courts of justice, to which rightly
litigants submit their controversy precisely to maintain unimpaired
the supremacy of legal norms and prescriptions. The attack on the
validity of the challenged provision likewise insofar as there may
be objections, even if valid and cogent on its wisdom cannot be
sustained. 18
In fine, petitioner has not overcome the presumption of validity which
attaches to a challenged statute. We find no clear violation of the
Constitution which would justify us in pronouncing Presidential Decree No.
1987 as unconstitutional and void.
WHEREFORE, the instant Petition is hereby dismissed.
No costs.
Page 24 of 70
SO ORDERED.
G.R. No. L-31156 February 27, 1976
PEPSI-COLA BOTTLING COMPANY OF THE PHILIPPINES,
INC., plaintiff-appellant,
vs.
MUNICIPALITY OF TANAUAN, LEYTE, THE MUNICIPAL MAYOR, ET
AL., defendant appellees.
Sabido, Sabido & Associates for appellant.
Provincial Fiscal Zoila M. Redona & Assistant Provincial Fiscal Bonifacio
R Matol and Assistant Solicitor General Conrado T. Limcaoco & Solicitor
Enrique M. Reyes for appellees.
MARTIN, J.:
This is an appeal from the decision of the Court of First Instance of Leyte
in its Civil Case No. 3294, which was certified to Us by the Court of Appeals
on October 6, 1969, as involving only pure questions of law, challenging
the power of taxation delegated to municipalities under the Local
Autonomy Act (Republic Act No. 2264, as amended, June 19, 1959).
On February 14, 1963, the plaintiff-appellant, Pepsi-Cola Bottling
Company of the Philippines, Inc., commenced a complaint with preliminary
injunction before the Court of First Instance of Leyte for that court to
declare Section 2 of Republic Act No. 2264.1 otherwise known as the Local
Autonomy Act, unconstitutional as an undue delegation of taxing authority
as well as to declare Ordinances Nos. 23 and 27, series of 1962, of the
municipality of Tanauan, Leyte, null and void.
On July 23, 1963, the parties entered into a Stipulation of Facts, the
material portions of which state that, first, both Ordinances Nos. 23 and 27
embrace or cover the same subject matter and the production tax rates
imposed therein are practically the same, and second, that on January 17,
1963, the acting Municipal Treasurer of Tanauan, Leyte, as per his letter
addressed to the Manager of the Pepsi-Cola Bottling Plant in said
municipality, sought to enforce compliance by the latter of the provisions
of said Ordinance No. 27, series of 1962.
Municipal Ordinance No. 23, of Tanauan, Leyte, which was approved on
September 25, 1962, levies and collects "from soft drinks producers and
manufacturers a tai of one-sixteenth (1/16) of a centavo for every bottle of
soft drink corked." 2 For the purpose of computing the taxes due, the
person, firm, company or corporation producing soft drinks shall submit to
the Municipal Treasurer a monthly report, of the total number of bottles
produced and corked during the month. 3
On the other hand, Municipal Ordinance No. 27, which was approved on
October 28, 1962, levies and collects "on soft drinks produced or
manufactured within the territorial jurisdiction of this municipality a tax of
ONE CENTAVO (P0.01) on each gallon (128 fluid ounces, U.S.) of volume
capacity." 4 For the purpose of computing the taxes due, the person, fun
company, partnership, corporation or plant producing soft drinks shall
submit to the Municipal Treasurer a monthly report of the total number of
gallons produced or manufactured during the month. 5
The tax imposed in both Ordinances Nos. 23 and 27 is denominated as
"municipal production tax.'
On October 7, 1963, the Court of First Instance of Leyte rendered judgment
"dismissing the complaint and upholding the constitutionality of [Section 2,
Republic Act No. 2264] declaring Ordinance Nos. 23 and 27 legal and
constitutional; ordering the plaintiff to pay the taxes due under the oft the
said Ordinances; and to pay the costs."
From this judgment, the plaintiff Pepsi-Cola Bottling Company appealed to
the Court of Appeals, which, in turn, elevated the case to Us pursuant to
Section 31 of the Judiciary Act of 1948, as amended.
There are three capital questions raised in this appeal:
1. — Is Section 2, Republic Act No. 2264 an undue
delegation of power, confiscatory and oppressive?
2. — Do Ordinances Nos. 23 and 27 constitute double
taxation and impose percentage or specific taxes?
Page 25 of 70
3. — Are Ordinances Nos. 23 and 27 unjust and unfair?
1. The power of taxation is an essential and inherent attribute of
sovereignty, belonging as a matter of right to every independent
government, without being expressly conferred by the people. 6 It is a
power that is purely legislative and which the central legislative body
cannot delegate either to the executive or judicial department of the
government without infringing upon the theory of separation of powers. The
exception, however, lies in the case of municipal corporations, to which,
said theory does not apply. Legislative powers may be delegated to local
governments in respect of matters of local concern. 7 This is sanctioned by
immemorial practice. 8 By necessary implication, the legislative power to
create political corporations for purposes of local self-government carries
with it the power to confer on such local governmental agencies the power
to tax. 9 Under the New Constitution, local governments are granted the
autonomous authority to create their own sources of revenue and to levy
taxes. Section 5, Article XI provides: "Each local government unit shall
have the power to create its sources of revenue and to levy taxes, subject
to such limitations as may be provided by law." Withal, it cannot be said
that Section 2 of Republic Act No. 2264 emanated from beyond the sphere
of the legislative power to enact and vest in local governments the power
of local taxation.
The plenary nature of the taxing power thus delegated, contrary to plaintiff-
appellant's pretense, would not suffice to invalidate the said law as
confiscatory and oppressive. In delegating the authority, the State is not
limited 6 the exact measure of that which is exercised by itself. When it is
said that the taxing power may be delegated to municipalities and the like,
it is meant that there may be delegated such measure of power to impose
and collect taxes as the legislature may deem expedient. Thus,
municipalities may be permitted to tax subjects which for reasons of public
policy the State has not deemed wise to tax for more general
purposes. 10 This is not to say though that the constitutional injunction
against deprivation of property without due process of law may be passed
over under the guise of the taxing power, except when the taking of the
property is in the lawful exercise of the taxing power, as when (1) the tax
is for a public purpose; (2) the rule on uniformity of taxation is observed;
(3) either the person or property taxed is within the jurisdiction of the
government levying the tax; and (4) in the assessment and collection of
certain kinds of taxes notice and opportunity for hearing are
provided. 11 Due process is usually violated where the tax imposed is for a
private as distinguished from a public purpose; a tax is imposed on
property outside the State, i.e., extraterritorial taxation; and arbitrary or
oppressive methods are used in assessing and collecting taxes. But, a tax
does not violate the due process clause, as applied to a particular taxpayer,
although the purpose of the tax will result in an injury rather than a benefit
to such taxpayer. Due process does not require that the property subject
to the tax or the amount of tax to be raised should be determined by judicial
inquiry, and a notice and hearing as to the amount of the tax and the
manner in which it shall be apportioned are generally not necessary to due
process of law. 12
There is no validity to the assertion that the delegated authority can be
declared unconstitutional on the theory of double taxation. It must be
observed that the delegating authority specifies the limitations and
enumerates the taxes over which local taxation may not be
exercised. 13 The reason is that the State has exclusively reserved the
same for its own prerogative. Moreover, double taxation, in general, is not
forbidden by our fundamental law, since We have not adopted as part
thereof the injunction against double taxation found in the Constitution of
the United States and some states of the Union.14 Double taxation becomes
obnoxious only where the taxpayer is taxed twice for the benefit of the
same governmental entity 15 or by the same jurisdiction for the same
purpose, 16 but not in a case where one tax is imposed by the State and the
other by the city or municipality. 17
2. The plaintiff-appellant submits that Ordinance No. 23 and 27 constitute
double taxation, because these two ordinances cover the same subject
matter and impose practically the same tax rate. The thesis proceeds from
its assumption that both ordinances are valid and legally enforceable. This
is not so. As earlier quoted, Ordinance No. 23, which was approved on
September 25, 1962, levies or collects from soft drinks producers or
manufacturers a tax of one-sixteen (1/16) of a centavo for .every bottle
corked, irrespective of the volume contents of the bottle used. When it was
discovered that the producer or manufacturer could increase the volume
contents of the bottle and still pay the same tax rate, the Municipality of
Tanauan enacted Ordinance No. 27, approved on October 28, 1962,
imposing a tax of one centavo (P0.01) on each gallon (128 fluid ounces,
U.S.) of volume capacity. The difference between the two ordinances
clearly lies in the tax rate of the soft drinks produced: in Ordinance No. 23,
it was 1/16 of a centavo for every bottle corked; in Ordinance No. 27, it is
one centavo (P0.01) on each gallon (128 fluid ounces, U.S.) of volume
capacity. The intention of the Municipal Council of Tanauan in enacting
Ordinance No. 27 is thus clear: it was intended as a plain substitute for the
Page 26 of 70
prior Ordinance No. 23, and operates as a repeal of the latter, even without
words to that effect. 18 Plaintiff-appellant in its brief admitted that
defendants-appellees are only seeking to enforce Ordinance No. 27, series
of 1962. Even the stipulation of facts confirms the fact that the Acting
Municipal Treasurer of Tanauan, Leyte sought t6 compel compliance by
the plaintiff-appellant of the provisions of said Ordinance No. 27, series of
1962. The aforementioned admission shows that only Ordinance No. 27,
series of 1962 is being enforced by defendants-appellees. Even the
Provincial Fiscal, counsel for defendants-appellees admits in his brief "that
Section 7 of Ordinance No. 27, series of 1962 clearly repeals Ordinance
No. 23 as the provisions of the latter are inconsistent with the provisions of
the former."
That brings Us to the question of whether the remaining Ordinance No. 27
imposes a percentage or a specific tax. Undoubtedly, the taxing authority
conferred on local governments under Section 2, Republic Act No. 2264,
is broad enough as to extend to almost "everything, accepting those which
are mentioned therein." As long as the text levied under the authority of a
city or municipal ordinance is not within the exceptions and limitations in
the law, the same comes within the ambit of the general rule, pursuant to
the rules of exclucion attehus and exceptio firmat regulum in cabisus non
excepti 19 The limitation applies, particularly, to the prohibition against
municipalities and municipal districts to impose "any percentage tax or
other taxes in any form based thereon nor impose taxes on articles subject
to specific tax except gasoline, under the provisions of the National Internal
Revenue Code." For purposes of this particular limitation, a municipal
ordinance which prescribes a set ratio between the amount of the tax and
the volume of sale of the taxpayer imposes a sales tax and is null and void
for being outside the power of the municipality to enact. 20 But, the
imposition of "a tax of one centavo (P0.01) on each gallon (128 fluid
ounces, U.S.) of volume capacity" on all soft drinks produced or
manufactured under Ordinance No. 27 does not partake of the nature of a
percentage tax on sales, or other taxes in any form based thereon. The tax
is levied on the produce (whether sold or not) and not on the sales. The
volume capacity of the taxpayer's production of soft drinks is considered
solely for purposes of determining the tax rate on the products, but there
is not set ratio between the volume of sales and the amount of the tax.21
Nor can the tax levied be treated as a specific tax. Specific taxes are those
imposed on specified articles, such as distilled spirits, wines, fermented
liquors, products of tobacco other than cigars and cigarettes, matches
firecrackers, manufactured oils and other fuels, coal, bunker fuel oil, diesel
fuel oil, cinematographic films, playing cards, saccharine, opium and other
habit-forming drugs. 22 Soft drink is not one of those specified.
3. The tax of one (P0.01) on each gallon (128 fluid ounces, U.S.) of volume
capacity on all softdrinks, produced or manufactured, or an equivalent of
1-½ centavos per case, 23 cannot be considered unjust and unfair. 24 an
increase in the tax alone would not support the claim that the tax is
oppressive, unjust and confiscatory. Municipal corporations are allowed
much discretion in determining the reates of imposable taxes. 25 This is in
line with the constutional policy of according the widest possible autonomy
to local governments in matters of local taxation, an aspect that is given
expression in the Local Tax Code (PD No. 231, July 1, 1973). 26 Unless
the amount is so excessive as to be prohibitive, courts will go slow in writing
off an ordinance as unreasonable. 27 Reluctance should not deter
compliance with an ordinance such as Ordinance No. 27 if the purpose of
the law to further strengthen local autonomy were to be realized. 28
Finally, the municipal license tax of P1,000.00 per corking machine with
five but not more than ten crowners or P2,000.00 with ten but not more
than twenty crowners imposed on manufacturers, producers, importers
and dealers of soft drinks and/or mineral waters under Ordinance No. 54,
series of 1964, as amended by Ordinance No. 41, series of 1968, of
defendant Municipality, 29 appears not to affect the resolution of the validity
of Ordinance No. 27. Municipalities are empowered to impose, not only
municipal license taxes upon persons engaged in any business or
occupation but also to levy for public purposes, just and uniform taxes. The
ordinance in question (Ordinance No. 27) comes within the second power
of a municipality.
ACCORDINGLY, the constitutionality of Section 2 of Republic Act No.
2264, otherwise known as the Local Autonomy Act, as amended, is hereby
upheld and Municipal Ordinance No. 27 of the Municipality of Tanauan,
Leyte, series of 1962, re-pealing Municipal Ordinance No. 23, same series,
is hereby declared of valid and legal effect. Costs against petitioner-
appellant.
SO ORDERED.
Castro, C.J., Teehankee, Barredo, Makasiar, Antonio, Esguerra, Muñoz
Palma, Aquino and Concepcion, Jr., JJ., concur.
Page 27 of 70
Separate Opinions
FERNANDO, J., concurring:
The opinion of the Court penned by Justice Martin is impressed with a
scholarly and comprehensive character. Insofar as it shows adherence to
tried and tested concepts of the law of municipal taxation, I am only in
agreement. If I limit myself to concurrence in the result, it is primarily
because with the article on Local Autonomy found in the present
Constitution, I feel a sense of reluctance in restating doctrines that arose
from a different basic premise as to the scope of such power in accordance
with the 1935 Charter. Nonetheless it is well-nigh unavoidable that I do so
as I am unable to share fully what for me are the nuances and implications
that could arise from the approach taken by my brethren. Likewise as to
the constitutional aspect of the thorny question of double taxation, I would
limit myself to what has been set forth in City of Baguio v. De Leon.1
1. The present Constitution is quite explicit as to the power of taxation
vested in local and municipal corporations. It is therein specifically
provided: "Each local government unit shall have the power to create its
own sources of revenue and to levy taxes subject to such limitations as
may be provided by law. 2 That was not the case under the 1935 Charter.
The only limitation then on the authority, plenary in character of the national
government, was that while the President of the Philippines was vested
with the power of control over all executive departments, bureaus, or
offices, he could only . It exercise general supervision over all local
governments as may be provided by law ... 3As far as legislative power over
local government was concerned, no restriction whatsoever was placed on
the Congress of the Philippines. It would appear therefore that the extent
of the taxing power was solely for the legislative body to decide. It is true
that in 1939, there was a statute that enlarged the scope of the municipal
taxing power. 4 Thereafter, in 1959 such competence was further
expanded in the Local Autonomy Act. 5 Nevertheless, as late as December
of 1964, five years after its enactment of the Local Autonomy Act, this
Court, through Justice Dizon, in Golden Ribbon Lumber Co. v. City of
Butuan, 6 reaffirmed the traditional concept in these words: "The rule is
well-settled that municipal corporations, unlike sovereign states, after
clothed with no power of taxation; that its charter or a statute must clearly
show an intent to confer that power or the municipal corporation cannot
assume and exercise it, and that any such power granted must be
construed strictly, any doubt or ambiguity arising from the terms of the
grant to be resolved against the municipality."7
Taxation, according to Justice Parades in the earlier case of Tan v.
Municipality of Pagbilao,8 "is an attribute of sovereignty which municipal
corporations do not enjoy." 9 That case left no doubt either as to weakness
of a claim "based merely by inferences, implications and deductions, [as
they have no place in the interpretation of the power to tax of a municipal
corporation." 10 As the conclusion reached by the Court finds support in
such grant of the municipal taxing power, I concur in the result. 2. As to
any possible infirmity based on an alleged double taxation, I would prefer
to rely on the doctrine announced by this Court in City of Baguio v. De
Leon. 11 Thus: "As to why double taxation is not violative of due process,
Justice Holmes made clear in this language: 'The objection to the taxation
as double may be laid down on one side. ... The 14th Amendment [the due
process clause) no more forbids double taxation than it does doubling the
amount of a tax, short of (confiscation or proceedings unconstitutional on
other grouse With that decision rendered at a time when American
sovereignty in the Philippines was recognized, it possesses more than just
a persuasive effect. To some, it delivered the coup justice to the bogey of
double taxation as a constitutional bar to the exercise of the taxing power.
It would seem though that in the United States, as with us, its ghost, as
noted by an eminent critic, still stalks the juridical stage. 'In a 1947 decision,
however, we quoted with approval this excerpt from a leading American
decision: 'Where, as here, Congress has clearly expressed its intention,
the statute must be sustained even though double taxation results. 12
So I would view the issues in this suit and accordingly concur in the result.
Separate Opinions
FERNANDO, J., concurring:
The opinion of the Court penned by Justice Martin is impressed with a
scholarly and comprehensive character. Insofar as it shows adherence to
Page 28 of 70
tried and tested concepts of the law of municipal taxation, I am only in
agreement. If I limit myself to concurrence in the result, it is primarily
because with the article on Local Autonomy found in the present
Constitution, I feel a sense of reluctance in restating doctrines that arose
from a different basic premise as to the scope of such power in accordance
with the 1935 Charter. Nonetheless it is well-nigh unavoidable that I do so
as I am unable to share fully what for me are the nuances and implications
that could arise from the approach taken by my brethren. Likewise as to
the constitutional aspect of the thorny question of double taxation, I would
limit myself to what has been set forth in City of Baguio v. De Leon.1
1. The present Constitution is quite explicit as to the power of taxation
vested in local and municipal corporations. It is therein specifically
provided: "Each local government unit shall have the power to create its
own sources of revenue and to levy taxes subject to such limitations as
may be provided by law. 2 That was not the case under the 1935 Charter.
The only limitation then on the authority, plenary in character of the national
government, was that while the President of the Philippines was vested
with the power of control over all executive departments, bureaus, or
offices, he could only . It exercise general supervision over all local
governments as may be provided by law ... 3As far as legislative power over
local government was concerned, no restriction whatsoever was placed on
the Congress of the Philippines. It would appear therefore that the extent
of the taxing power was solely for the legislative body to decide. It is true
that in 1939, there was a statute that enlarged the scope of the municipal
taxing power. 4 Thereafter, in 1959 such competence was further
expanded in the Local Autonomy Act. 5 Nevertheless, as late as December
of 1964, five years after its enactment of the Local Autonomy Act, this
Court, through Justice Dizon, in Golden Ribbon Lumber Co. v. City of
Butuan, 6 reaffirmed the traditional concept in these words: "The rule is
well-settled that municipal corporations, unlike sovereign states, after
clothed with no power of taxation; that its charter or a statute must clearly
show an intent to confer that power or the municipal corporation cannot
assume and exercise it, and that any such power granted must be
construed strictly, any doubt or ambiguity arising from the terms of the
grant to be resolved against the municipality."7
Taxation, according to Justice Parades in the earlier case of Tan v.
Municipality of Pagbilao,8 "is an attribute of sovereignty which municipal
corporations do not enjoy." 9 That case left no doubt either as to weakness
of a claim "based merely by inferences, implications and deductions, [as
they have no place in the interpretation of the power to tax of a municipal
corporation." 10 As the conclusion reached by the Court finds support in
such grant of the municipal taxing power, I concur in the result. 2. As to
any possible infirmity based on an alleged double taxation, I would prefer
to rely on the doctrine announced by this Court in City of Baguio v. De
Leon. 11 Thus: "As to why double taxation is not violative of due process,
Justice Holmes made clear in this language: 'The objection to the taxation
as double may be laid down on one side. ... The 14th Amendment [the due
process clause) no more forbids double taxation than it does doubling the
amount of a tax, short of (confiscation or proceedings unconstitutional on
other grouse With that decision rendered at a time when American
sovereignty in the Philippines was recognized, it possesses more than just
a persuasive effect. To some, it delivered the coup justice to the bogey of
double taxation as a constitutional bar to the exercise of the taxing power.
It would seem though that in the United States, as with us, its ghost, as
noted by an eminent critic, still stalks the juridical stage. 'In a 1947 decision,
however, we quoted with approval this excerpt from a leading American
decision: 'Where, as here, Congress has clearly expressed its intention,
the statute must be sustained even though double taxation results. 12
So I would view the issues in this suit and accordingly concur in the result.
G.R. No. 78742 July 14, 1989
ASSOCIATION OF SMALL LANDOWNERS IN THE PHILIPPINES, INC.,
JUANITO D. GOMEZ, GERARDO B. ALARCIO, FELIPE A. GUICO, JR.,
BERNARDO M. ALMONTE, CANUTO RAMIR B. CABRITO, ISIDRO T.
GUICO, FELISA I. LLAMIDO, FAUSTO J. SALVA, REYNALDO G.
ESTRADA, FELISA C. BAUTISTA, ESMENIA J. CABE, TEODORO B.
MADRIAGA, AUREA J. PRESTOSA, EMERENCIANA J. ISLA,
FELICISIMA C. ARRESTO, CONSUELO M. MORALES, BENJAMIN R.
SEGISMUNDO, CIRILA A. JOSE & NAPOLEON S.
FERRER, petitioners,
vs.
HONORABLE SECRETARY OF AGRARIAN REFORM, respondent.
G.R. No. 79310 July 14, 1989
ARSENIO AL. ACUNA, NEWTON JISON, VICTORINO FERRARIS,
DENNIS JEREZA, HERMINIGILDO GUSTILO, PAULINO D.
TOLENTINO and PLANTERS' COMMITTEE, INC., Victorias Mill
District, Victorias, Negros Occidental, petitioners,
Page 29 of 70
vs.
JOKER ARROYO, PHILIP E. JUICO and PRESIDENTIAL AGRARIAN
REFORM COUNCIL, respondents.
G.R. No. 79744 July 14, 1989
INOCENTES PABICO, petitioner,
vs.
HON. PHILIP E. JUICO, SECRETARY OF THE DEPARTMENT OF
AGRARIAN REFORM, HON. JOKER ARROYO, EXECUTIVE
SECRETARY OF THE OFFICE OF THE PRESIDENT, and Messrs.
SALVADOR TALENTO, JAIME ABOGADO, CONRADO AVANCENA
and ROBERTO TAAY, respondents.
G.R. No. 79777 July 14, 1989
NICOLAS S. MANAAY and AGUSTIN HERMANO, JR., petitioners,
vs.
HON. PHILIP ELLA JUICO, as Secretary of Agrarian Reform, and
LAND BANK OF THE PHILIPPINES, respondents.
SYLLABUS
1. CONSTITUTIONAL LAW; SUPREME COURT; ROLE. — Although
holding neither purse nor sword and so regarded as the weakest of the
three departments of the government, the judiciary is nonetheless vested
with the power to annul the acts of either the legislative or the executive or
of both when not conformable to the fundamental law. This is the reason
for what some quarters call the doctrine of judicial supremacy.
2. ID.; SEPARATION OF POWERS; CONSTRUED. — The doctrine
of separation of powers imposes upon the courts a proper restraint, born
of the nature of their functions and of their respect for the other
departments, in striking down the acts of the legislative and the executive
as unconstitutional. The policy, indeed, is a blend of courtesy and caution.
To doubt is to sustain. The theory is that before the act was done or the
law was enacted, earnest studies were made by Congress or the
President, or both, to insure that the Constitution would not be breached.
3. ID.; SUPREME COURT; POWER TO DECLARE AN ACT OR LAW
UNCONSTITUTIONAL; CONSTITUTIONS. — The Constitution itself lays
down stringent conditions for a declaration of unconstitutionality, requiring
therefor the concurrence of a majority of the members of the Supreme
Court who took part in the deliberations and voted on the issue during their
session en banc.
4. ID.; ID.; ID.; JUDICIAL INQUIRY; REQUISITES. — The Court will
assume jurisdiction over a constitutional question only if it is shown that the
essential requisites of a judicial inquiry into such a question are first
satisfied. Thus, there must be an actual case or controversy involving a
conflict of legal rights susceptible of judicial determination, the
constitutional question must have been opportunely raised by the proper
party, and the resolution of the question is unavoidably necessary to the
decision of the case itself.
5. REMEDIAL LAW; ACTIONS; PROPER PARTY; CASE AT BAR. —
With particular regard to the requirement of proper party as applied in the
cases before us, we hold that the same is satisfied by the petitioners and
intervenors because each of them has sustained or is in danger of
sustaining an immediate injury as a result of the acts or measures
complained of.
6. CONSTITUTIONAL LAW; SUPREME COURT; POWER TO
DECLARE AN ACT OR LAW UNCONSTITUTIONAL; TRIBUNAL WITH
WIDE DISCRETION TO WAIVE REQUIREMENT. — Even if, strictly
speaking, they are not covered by the definition, it is still within the wide
discretion of the Court to waive the requirement and so remove the
impediment to its addressing and resolving the serious constitutional
questions raised.
7. ID.; ID.; JUDICIAL SUPREMACY. — . . . When the judiciary
mediates to allocate constitutional boundaries, it does not assert any
superiority over the other departments; it does not in reality nullify or
invalidate an act of the Legislature, but only asserts the solemn and sacred
obligation assigned to it by the Constitution to determine conflicting claims
of authority under the Constitution and to establish for the parties in an
actual controversy the rights which that instrument secures and
guarantees to them. This is in truth all that is involved in what is termed
"judicial supremacy" which properly is the power of judicial review under
the Constitution.
Page 30 of 70
8. ID.; 1973 CONSTITUTION; PRESIDENT; EXERCISE OF
LEGISLATIVE POWER DURING MARTIAL LAW, SUSTAINED. — The
promulgation of P.D. No. 27 by President Marcos in the exercise of his
powers under martial law has already been sustained in Gonzales v.
Estrella and we find no reason to modify or reverse it on that issue.
9. ID.; 1987 CONSTITUTION; PRESIDENT; LEGISLATIVE POWER,
AUTHORIZED. — As for the power of President Aquino to promulgate
Proc. No. 131 and E.O. Nos. 228 and 229, the same was authorized under
Section 6 of the Transitory Provisions of the 1987 Constitution, quoted
above. The said measures were issued by President Aquino before July
27, 1987, when the Congress of the Philippines was formally convened
and took over legislative power from her. They are not "midnight"
enactments intended to pre-empt the legislature because E.O. No. 228
was issued on July 17, 1987, and the other measures, i.e., Proc. No. 131
and E.O. No. 229, were both issued on July 22, 1987.
10. ID.; ID.; ID.; MEASURES PROMULGATED REMAINS VALID EVEN
AFTER LOST OF LEGISLATIVE POWER; RATIONALE. — Neither is it
correct to say that these measures ceased to be valid when she lost her
legislative power for, like any statute, they continue to be in force unless
modified or repealed by subsequent law or declared invalid by the courts.
A statute does not ipso facto become inoperative simply because of the
dissolution of the legislature that enacted it. By the same token, President
Aquino's loss of legislative power did not have the effect of invalidating all
the measures enacted by her when and as long as she possessed it.
11. ID.; STATUTES; PROCLAMATION REMAINS VALID EVEN
AFTER LOST OF LEGISLATIVE POWER; RATIONALE. — Proc. No. 131
is not an appropriation measure even if it does provide for the creation of
said fund, for that is not its principal purpose. An appropriation law is one
the primary and specific purpose of which is to authorize the release of
public funds from the treasury. The creation of the fund is only incidental
to the main objective of the proclamation, which is agrarian reform.
12. ID.; ID.; PROCLAMATION NO. 131 AND EXECUTIVE ORDER NO.
229; ABSENCE OF RETENTION LIMIT PROVIDED FOR IN REPUBLIC
ACT NO. 6657. — The argument of some of the petitioners that Proc. No.
131 and E.O. No. 229 should be invalidated because they do not provide
for retention limits as required by Article XIII, Section 4 of the Constitution
is no longer tenable. R.A. No. 6657 does provide that in no case shall
retention by the landowner exceed five (5) hectares. three (3) hectares may
be awarded to each child of the landowner, subject to two (2) qualification
which is now in Section 6 of the law.
13. ID.; ID.; TITLE OF A BILL NEED NOT BE CATALOGUED. — The
title of the bill does not have to be a catalogue of its contents and will suffice
if the matters embodied in the text are relevant to each other and may be
inferred from the title.
14. CIVIL LAW; EFFECT AND APPLICATION OF LAWS; ISSUANCES
FROM THE PRESIDENT REQUIRE PUBLICATION FOR EFFECTIVITY.
— But for all their peremptoriness, these issuances from the President
Marcos still had to comply with the requirement for publication as this Court
held in Tañada v. Tuvera. Hence, unless published in the Official Gazette
in accordance with Article 2 of the Civil Code, they could not have any force
and effect if they were among those enactments successfully challenged
in that case. (LOI 474 was published, though, in the Official Gazette dated
November 29, 1976.)
15. REMEDIAL LAW; SPECIAL CIVIL ACTION; MANDAMUS; OFFICE.
— Mandamus will lie to compel the discharge of the discretionary duty itself
but not to control the discretion to be exercised. In other words, mandamus
can issue to require action only but not specific action.
16. ID.; ID.; ID.; GENERALLY NOT AVAILABLE WHERE THERE IS A
PLAIN, SPEEDY REMEDY; EXCEPTION. — While it is true that as a rule
the writ will not be proper as long as there is still a plain, speedy and
adequate remedy available from the administrative authorities, resort to the
courts may still be permitted if the issue raised is a question of law.
17. POLITICAL LAW; POLICE POWER AND EMINENT DOMAIN;
TRADITIONAL DISTINCTIONS. — There are traditional distinctions
between the police power and the power of eminent domain that logically
preclude the application of both powers at the same time on the same
subject. The cases before us present no knotty complication insofar as the
question of compensable taking is concerned. To the extent that the
measures under challenge merely prescribe retention limits for
landowners, there is an exercise of the police power for the regulation of
private property in accordance with the Constitution. But where, to carry
out such regulation, it becomes necessary to deprive such owners of
whatever lands they may own in excess of the maximum area allowed,
there is definitely a taking under the power of eminent domain for which
payment of just compensation is imperative. The taking contemplated is
Page 31 of 70
not a mere limitation of the use of the land. What is required is the
surrender of the title to and the physical possession of the said excess and
all beneficial rights accruing to the owner in favor of the farmer-beneficiary.
This is definitely an exercise not of the police power but of the power of
eminent domain.
18. BILL OF RIGHTS; EQUAL PROTECTION CLAUSE;
CLASSIFICATION; DEFINED. — Classification has been defined as the
grouping of persons or things similar to each other in certain particulars
and different from each other in these same particulars.
19. ID.; ID.; ID.; REQUISITES.; EQUAL PROTECTION CLAUSE;
CLASSIFICATION; DEFINED. — To be valid, it must conform to the
following requirements: (1) it must be based on 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 the members of
the class.
20. ID.; ID.; ID.; MEANING. — Equal protection simply means that all
persons or things similarly situated must be treated alike both as to the
rights conferred and the liabilities imposed.
21. POLITICAL LAW; EMINENT DOMAIN; NATURE. — Eminent
domain is an inherent power of the State that enables it to forcibly acquire
private lands intended for public use upon payment of just compensation
to the owner.
22. ID.; ID.; WHEN AVAILED OF. — Obviously, there is no need to
expropriate where the owner is willing to sell under terms also acceptable
to the purchaser, in which case an ordinary deed of sale may be agreed
upon by the parties. It is only where the owner is unwilling to sell, or cannot
accept the price or other conditions offered by the vendee, that the power
of eminent domain will come into play to assert the paramount authority of
the State over the interests of the property owner. Private rights must then
yield to the irresistible demands of the public interest on the time-honored
justification, as in the case of the police power, that the welfare of the
people is the supreme law.
23. ID.; ID.; REQUIREMENTS. — Basically, the requirements for a
proper exercise of the power are: (1) public use and (2) just compensation.
24. ID.; POLITICAL QUESTION; DEFINED. — The term "political
question" connotes what it means in ordinary parlance, namely, a question
of policy. It refers to "those questions which, under the Constitution, are to
be decided by the people in their sovereign capacity; or in regard to which
full discretionary authority has been delegated to the legislative or
executive branch of the government." It is concerned with issues
dependent upon the wisdom, not legality, of a particular measure. (Tañada
vs. Cuenco, 100 Phil. 1101)
25. ID.; EMINENT DOMAIN JUST COMPENSATION; DEFINED. —
Just compensation is defined as the full and fair equivalent of the property
taken from its owner by the expropriator.
26. ID.; ID.; ID.; WORD "JUST", EXPLAINED. — It has been repeatedly
stressed by this Court that 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" to convey the idea that the equivalent to be rendered for
the property to be taken shall be real, substantial, full, ample.
27. ID.; ID.; ID.; COMPENSABLE TAKING; CONDITIONS. — There is
compensable taking when the following conditions concur: (1) the
expropriator must enter a private property; (2) the entry must be for more
than a momentary period; (3) the entry must be under warrant or color of
legal authority; (4) the property must be devoted to public use or otherwise
informally appropriated or injuriously affected; and (5) the utilization of the
property for public use must be in such a way as to oust the owner and
deprive him of beneficial enjoyment of the property.
28. ID.; ID.; ID.; DEPOSIT NOT NECESSARY WHERE THE
EXPROPRIATOR IS THE ESTATE. — Where the State itself is the
expropriator, it is not necessary for it to make a deposit upon its taking
possession of the condemned property, as "the compensation is a public
charge, the good faith of the public is pledged for its payment, and all the
resources of taxation may be employed in raising the amount."
29. ID.; ID.; ID.; DETERMINATION THEREOF, ADDRESSED TO THE
COURTS OF JUSTICE. — The determination of just compensation is a
function addressed to the courts of justice and may not be usurped by any
other branch or official of the government.
30. ID.; ID.; ID.; EMINENT DOMAIN UNDER THE COMPREHENSIVE
AGRARIAN REFORM LAW; DETERMINATION MADE BY THE
Page 32 of 70
DEPARTMENT OF AGRARIAN RELATIONS, ONLY PRELIMINARY. —
The determination of the just compensation by the DAR is not by any
means final and conclusive upon the landowner or any other interested
party, for Section 16 (f) clearly provides: Any party who disagrees with the
decision may bring the matter to the court of proper jurisdiction for final
determination of just compensation. The determination made by the DAR
is only preliminary unless accepted by all parties concerned. Otherwise,
the courts of justice will still have the right to review with finality the said
determination in the exercise of what is admittedly a judicial function. —
31. ID.; ID.; ID.; PAYMENT IN MONEY ONLY NOT APPLICABLE IN
REVOLUTIONARY KIND OF EXPROPRIATION. — We do not deal here
with the traditional exercise of the power of eminent domain. This is not an
ordinary expropriation where only a specific property of relatively limited
area is sought to be taken by the State from its owner for a specific and
perhaps local purpose. What we deal with here is a revolutionary kind of
expropriation. The expropriation before us affects all private agricultural
lands whenever found and of whatever kind as long as they are in excess
of the maximum retention limits allowed their owners. Such a program will
involve not mere millions of pesos. The cost will be tremendous.
Considering the vast areas of land subject to expropriation under the laws
before us, we estimate that hundreds of billions of pesos will be needed,
far more indeed than the amount of P50 billion initially appropriated, which
is already staggering as it is by our present standards. The Court has not
found in the records of the Constitutional Commission any categorial
agreement among the members regarding the meaning to be given the
concept of just compensation as applied to the comprehensive agrarian
reform program being contemplated. On the other hand, there is nothing in
the records either that militates against the assumptions we are making of
the general sentiments and intention of the members on the content and
manner of the payment to be made to the landowner in the light of the
magnitude of the expenditure and the limitations of the expropriator.
Therefore, payment of the just compensation is not always required to be
made fully in money.
32. ID.; ID.; ID.; PRINCIPLE THAT TITLE SHALL PASS ONLY UPON
FULL PAYMENT OF JUST COMPENSATION, NOT APPLICABLE. —
Title to the property expropriated shall pass from the owner to the
expropriator only upon full payment of the just compensation. The CARP
Law, for its part, conditions the transfer of possession and ownership of the
land to the government on receipt by the landowner of the corresponding
payment or the deposit by the DAR of the compensation in cash or LBP
bonds with an accessible bank. Until then, title also remains with the
landowner. No outright change of ownership is contemplated either.
Hence, that the assailed measures violate due process by arbitrarily
transferring title before the land is fully paid for must also be rejected.
33. ADMINISTRATIVE LAW; EXHAUSTION OF ADMINISTRATIVE
REMEDIES; CASE AT BAR. — It does not appear in G.R. No. 78742 that
the appeal filed by the petitioners with the Office of the President has
already been resolved. Although we have said that the doctrine of
exhaustion of administrative remedies need not preclude immediate resort
to judicial action, there are factual issues that have yet to be examined on
the administrative level, especially the claim that the petitioners are not
covered by LOI 474 because they do not own other agricultural lands than
the subjects of their petition. Obviously, the Court cannot resolve these
issues.
CRUZ, J.:
In ancient mythology, Antaeus was a terrible giant who blocked and
challenged Hercules for his life on his way to Mycenae after performing his
eleventh labor. The two wrestled mightily and Hercules flung his adversary
to the ground thinking him dead, but Antaeus rose even stronger to resume
their struggle. This happened several times to Hercules' increasing
amazement. Finally, as they continued grappling, it dawned on Hercules
that Antaeus was the son of Gaea and could never die as long as any part
of his body was touching his Mother Earth. Thus forewarned, Hercules then
held Antaeus up in the air, beyond the reach of the sustaining soil, and
crushed him to death.
Mother Earth. The sustaining soil. The giver of life, without whose
invigorating touch even the powerful Antaeus weakened and died.
The cases before us are not as fanciful as the foregoing tale. But they also
tell of the elemental forces of life and death, of men and women who, like
Antaeus need the sustaining strength of the precious earth to stay alive.
"Land for the Landless" is a slogan that underscores the acute imbalance
in the distribution of this precious resource among our people. But it is more
than a slogan. Through the brooding centuries, it has become a battle-cry
Page 33 of 70
dramatizing the increasingly urgent demand of the dispossessed among
us for a plot of earth as their place in the sun.
Recognizing this need, the Constitution in 1935 mandated the policy of
social justice to "insure the well-being and economic security of all the
people," 1 especially the less privileged. In 1973, the new Constitution
affirmed this goal adding specifically that "the State shall regulate the
acquisition, ownership, use, enjoyment and disposition of private property
and equitably diffuse property ownership and profits." 2 Significantly, there
was also the specific injunction to "formulate and implement an agrarian
reform program aimed at emancipating the tenant from the bondage of the
soil." 3
The Constitution of 1987 was not to be outdone. Besides echoing these
sentiments, it also adopted one whole and separate Article XIII on Social
Justice and Human Rights, containing grandiose but undoubtedly sincere
provisions for the uplift of the common people. These include a call in the
following words for the adoption by the State of an agrarian reform
program:
SEC. 4. The State shall, by law, undertake an agrarian
reform program founded on the right of farmers and regular
farmworkers, who are landless, to own directly or
collectively the lands they till or, in the case of other
farmworkers, to receive a just share of the fruits thereof. To
this end, the State shall encourage and undertake the just
distribution of all agricultural lands, subject to such
priorities and reasonable retention limits as the Congress
may prescribe, taking into account ecological,
developmental, or equity considerations and subject to the
payment of just compensation. In determining retention
limits, the State shall respect the right of small landowners.
The State shall further provide incentives for voluntary
land-sharing.
Earlier, in fact, R.A. No. 3844, otherwise known as the Agricultural Land
Reform Code, had already been enacted by the Congress of the
Philippines on August 8, 1963, in line with the above-stated principles. This
was substantially superseded almost a decade later by P.D. No. 27, which
was promulgated on October 21, 1972, along with martial law, to provide
for the compulsory acquisition of private lands for distribution among
tenant-farmers and to specify maximum retention limits for landowners.
The people power revolution of 1986 did not change and indeed even
energized the thrust for agrarian reform. Thus, on July 17, 1987, President
Corazon C. Aquino issued E.O. No. 228, declaring full land ownership in
favor of the beneficiaries of P.D. No. 27 and providing for the valuation of
still unvalued lands covered by the decree as well as the manner of their
payment. This was followed on July 22, 1987 by Presidential Proclamation
No. 131, instituting a comprehensive agrarian reform program (CARP),
and E.O. No. 229, providing the mechanics for its implementation.
Subsequently, with its formal organization, the revived Congress of the
Philippines took over legislative power from the President and started its
own deliberations, including extensive public hearings, on the
improvement of the interests of farmers. The result, after almost a year of
spirited debate, was the enactment of R.A. No. 6657, otherwise known as
the Comprehensive Agrarian Reform Law of 1988, which President Aquino
signed on June 10, 1988. This law, while considerably changing the earlier
mentioned enactments, nevertheless gives them suppletory effect insofar
as they are not inconsistent with its provisions. 4
The above-captioned cases have been consolidated because they involve
common legal questions, including serious challenges to the
constitutionality of the several measures mentioned above. They will be
the subject of one common discussion and resolution, The different
antecedents of each case will require separate treatment, however, and
will first be explained hereunder.
G.R. No. 79777
Squarely raised in this petition is the constitutionality of P.D. No. 27, E.O.
Nos. 228 and 229, and R.A. No. 6657.
The subjects of this petition are a 9-hectare riceland worked by four tenants
and owned by petitioner Nicolas Manaay and his wife and a 5-hectare
riceland worked by four tenants and owned by petitioner Augustin
Hermano, Jr. The tenants were declared full owners of these lands by E.O.
No. 228 as qualified farmers under P.D. No. 27.
Page 34 of 70
The petitioners are questioning P.D. No. 27 and E.O. Nos. 228 and 229 on
grounds inter alia of separation of powers, due process, equal protection
and the constitutional limitation that no private property shall be taken for
public use without just compensation.
They contend that President Aquino usurped legislative power when she
promulgated E.O. No. 228. The said measure is invalid also for violation of
Article XIII, Section 4, of the Constitution, for failure to provide for retention
limits for small landowners. Moreover, it does not conform to Article VI,
Section 25(4) and the other requisites of a valid appropriation.
In connection with the determination of just compensation, the petitioners
argue that the same may be made only by a court of justice and not by the
President of the Philippines. They invoke the recent cases of EPZA v.
Dulay 5 andManotok v. National Food Authority. 6 Moreover, the just
compensation contemplated by the Bill of Rights is payable in money or in
cash and not in the form of bonds or other things of value.
In considering the rentals as advance payment on the land, the executive
order also deprives the petitioners of their property rights as protected by
due process. The equal protection clause is also violated because the
order places the burden of solving the agrarian problems on the owners
only of agricultural lands. No similar obligation is imposed on the owners
of other properties.
The petitioners also maintain that in declaring the beneficiaries under P.D.
No. 27 to be the owners of the lands occupied by them, E.O. No. 228
ignored judicial prerogatives and so violated due process. Worse, the
measure would not solve the agrarian problem because even the small
farmers are deprived of their lands and the retention rights guaranteed by
the Constitution.
In his Comment, the Solicitor General stresses that P.D. No. 27 has
already been upheld in the earlier cases ofChavez v. Zobel, 7 Gonzales v.
Estrella, 8 and Association of Rice and Corn Producers of the Philippines,
Inc. v. The National Land Reform Council. 9 The determination of just
compensation by the executive authorities conformably to the formula
prescribed under the questioned order is at best initial or preliminary only.
It does not foreclose judicial intervention whenever sought or warranted.
At any rate, the challenge to the order is premature because no valuation
of their property has as yet been made by the Department of Agrarian
Reform. The petitioners are also not proper parties because the lands
owned by them do not exceed the maximum retention limit of 7 hectares.
Replying, the petitioners insist they are proper parties because P.D. No.
27 does not provide for retention limits on tenanted lands and that in any
event their petition is a class suit brought in behalf of landowners with
landholdings below 24 hectares. They maintain that the determination of
just compensation by the administrative authorities is a final ascertainment.
As for the cases invoked by the public respondent, the constitutionality of
P.D. No. 27 was merely assumed in Chavez, while what was decided
in Gonzales was the validity of the imposition of martial law.
In the amended petition dated November 22, 1588, it is contended that
P.D. No. 27, E.O. Nos. 228 and 229 (except Sections 20 and 21) have
been impliedly repealed by R.A. No. 6657. Nevertheless, this statute
should itself also be declared unconstitutional because it suffers from
substantially the same infirmities as the earlier measures.
A petition for intervention was filed with leave of court on June 1, 1988 by
Vicente Cruz, owner of a 1. 83- hectare land, who complained that the DAR
was insisting on the implementation of P.D. No. 27 and E.O. No. 228
despite a compromise agreement he had reached with his tenant on the
payment of rentals. In a subsequent motion dated April 10, 1989, he
adopted the allegations in the basic amended petition that the above-
mentioned enactments have been impliedly repealed by R.A. No. 6657.
G.R. No. 79310
The petitioners herein are landowners and sugar planters in the Victorias
Mill District, Victorias, Negros Occidental. Co-petitioner Planters'
Committee, Inc. is an organization composed of 1,400 planter-members.
This petition seeks to prohibit the implementation of Proc. No. 131 and
E.O. No. 229.
The petitioners claim that the power to provide for a Comprehensive
Agrarian Reform Program as decreed by the Constitution belongs to
Congress and not the President. Although they agree that the President
could exercise legislative power until the Congress was convened, she
could do so only to enact emergency measures during the transition period.
At that, even assuming that the interim legislative power of the President
was properly exercised, Proc. No. 131 and E.O. No. 229 would still have
Page 35 of 70
to be annulled for violating the constitutional provisions on just
compensation, due process, and equal protection.
They also argue that under Section 2 of Proc. No. 131 which provides:
Agrarian Reform Fund.-There is hereby created a special fund, to be
known as the Agrarian Reform Fund, an initial amount of FIFTY BILLION
PESOS (P50,000,000,000.00) to cover the estimated cost of the
Comprehensive Agrarian Reform Program from 1987 to 1992 which shall
be sourced from the receipts of the sale of the assets of the Asset
Privatization Trust and Receipts of sale of ill-gotten wealth received
through the Presidential Commission on Good Government and such other
sources as government may deem appropriate. The amounts collected
and accruing to this special fund shall be considered automatically
appropriated for the purpose authorized in this Proclamation the amount
appropriated is in futuro, not in esse. The money needed to cover the cost
of the contemplated expropriation has yet to be raised and cannot be
appropriated at this time.
Furthermore, they contend that taking must be simultaneous with payment
of just compensation as it is traditionally understood, i.e., with money and
in full, but no such payment is contemplated in Section 5 of the E.O. No.
229. On the contrary, Section 6, thereof provides that the Land Bank of the
Philippines "shall compensate the landowner in an amount to be
established by the government, which shall be based on the owner's
declaration of current fair market value as provided in Section 4 hereof, but
subject to certain controls to be defined and promulgated by the
Presidential Agrarian Reform Council." This compensation may not be paid
fully in money but in any of several modes that may consist of part cash
and part bond, with interest, maturing periodically, or direct payment in
cash or bond as may be mutually agreed upon by the beneficiary and the
landowner or as may be prescribed or approved by the PARC.
The petitioners also argue that in the issuance of the two measures, no
effort was made to make a careful study of the sugar planters' situation.
There is no tenancy problem in the sugar areas that can justify the
application of the CARP to them. To the extent that the sugar planters have
been lumped in the same legislation with other farmers, although they are
a separate group with problems exclusively their own, their right to equal
protection has been violated.
A motion for intervention was filed on August 27,1987 by the National
Federation of Sugarcane Planters (NASP) which claims a membership of
at least 20,000 individual sugar planters all over the country. On
September 10, 1987, another motion for intervention was filed, this time by
Manuel Barcelona, et al., representing coconut and riceland owners. Both
motions were granted by the Court.
NASP alleges that President Aquino had no authority to fund the Agrarian
Reform Program and that, in any event, the appropriation is invalid
because of uncertainty in the amount appropriated. Section 2 of Proc. No.
131 and Sections 20 and 21 of E.O. No. 229 provide for an initial
appropriation of fifty billion pesos and thus specifies the minimum rather
than the maximum authorized amount. This is not allowed. Furthermore,
the stated initial amount has not been certified to by the National Treasurer
as actually available.
Two additional arguments are made by Barcelona, to wit, the failure to
establish by clear and convincing evidence the necessity for the exercise
of the powers of eminent domain, and the violation of the fundamental right
to own property.
The petitioners also decry the penalty for non-registration of the lands,
which is the expropriation of the said land for an amount equal to the
government assessor's valuation of the land for tax purposes. On the other
hand, if the landowner declares his own valuation he is unjustly required to
immediately pay the corresponding taxes on the land, in violation of the
uniformity rule.
In his consolidated Comment, the Solicitor General first invokes the
presumption of constitutionality in favor of Proc. No. 131 and E.O. No. 229.
He also justifies the necessity for the expropriation as explained in the
"whereas" clauses of the Proclamation and submits that, contrary to the
petitioner's contention, a pilot project to determine the feasibility of CARP
and a general survey on the people's opinion thereon are not indispensable
prerequisites to its promulgation.
On the alleged violation of the equal protection clause, the sugar planters
have failed to show that they belong to a different class and should be
differently treated. The Comment also suggests the possibility of Congress
first distributing public agricultural lands and scheduling the expropriation
Page 36 of 70
of private agricultural lands later. From this viewpoint, the petition for
prohibition would be premature.
The public respondent also points out that the constitutional prohibition is
against the payment of public money without the corresponding
appropriation. There is no rule that only money already in existence can be
the subject of an appropriation law. Finally, the earmarking of fifty billion
pesos as Agrarian Reform Fund, although denominated as an initial
amount, is actually the maximum sum appropriated. The word "initial"
simply means that additional amounts may be appropriated later when
necessary.
On April 11, 1988, Prudencio Serrano, a coconut planter, filed a petition on
his own behalf, assailing the constitutionality of E.O. No. 229. In addition
to the arguments already raised, Serrano contends that the measure is
unconstitutional because:
(1) Only public lands should be included in the CARP;
(2) E.O. No. 229 embraces more than one subject which is
not expressed in the title;
(3) The power of the President to legislate was terminated
on July 2, 1987; and
(4) The appropriation of a P50 billion special fund from the
National Treasury did not originate from the House of
Representatives.
G.R. No. 79744
The petitioner alleges that the then Secretary of Department of Agrarian
Reform, in violation of due process and the requirement for just
compensation, placed his landholding under the coverage of Operation
Land Transfer. Certificates of Land Transfer were subsequently issued to
the private respondents, who then refused payment of lease rentals to him.
On September 3, 1986, the petitioner protested the erroneous inclusion of
his small landholding under Operation Land transfer and asked for the
recall and cancellation of the Certificates of Land Transfer in the name of
the private respondents. He claims that on December 24, 1986, his petition
was denied without hearing. On February 17, 1987, he filed a motion for
reconsideration, which had not been acted upon when E.O. Nos. 228 and
229 were issued. These orders rendered his motion moot and academic
because they directly effected the transfer of his land to the private
respondents.
The petitioner now argues that:
(1) E.O. Nos. 228 and 229 were invalidly issued by the
President of the Philippines.
(2) The said executive orders are violative of the
constitutional provision that no private property shall be
taken without due process or just compensation.
(3) The petitioner is denied the right of maximum retention
provided for under the 1987 Constitution.
The petitioner contends that the issuance of E.0. Nos. 228 and 229 shortly
before Congress convened is anomalous and arbitrary, besides violating
the doctrine of separation of powers. The legislative power granted to the
President under the Transitory Provisions refers only to emergency
measures that may be promulgated in the proper exercise of the police
power.
The petitioner also invokes his rights not to be deprived of his property
without due process of law and to the retention of his small parcels of
riceholding as guaranteed under Article XIII, Section 4 of the Constitution.
He likewise argues that, besides denying him just compensation for his
land, the provisions of E.O. No. 228 declaring that:
Lease rentals paid to the landowner by the farmer-
beneficiary after October 21, 1972 shall be considered as
advance payment for the land.
is an unconstitutional taking of a vested property right. It is also his
contention that the inclusion of even small landowners in the program
along with other landowners with lands consisting of seven hectares or
more is undemocratic.
Page 37 of 70
In his Comment, the Solicitor General submits that the petition is premature
because the motion for reconsideration filed with the Minister of Agrarian
Reform is still unresolved. As for the validity of the issuance of E.O. Nos.
228 and 229, he argues that they were enacted pursuant to Section 6,
Article XVIII of the Transitory Provisions of the 1987 Constitution which
reads:
The incumbent president shall continue to exercise legislative powers until
the first Congress is convened.
On the issue of just compensation, his position is that when P.D. No. 27
was promulgated on October 21. 1972, the tenant-farmer of agricultural
land was deemed the owner of the land he was tilling. The leasehold
rentals paid after that date should therefore be considered amortization
payments.
In his Reply to the public respondents, the petitioner maintains that the
motion he filed was resolved on December 14, 1987. An appeal to the
Office of the President would be useless with the promulgation of E.O. Nos.
228 and 229, which in effect sanctioned the validity of the public
respondent's acts.
G.R. No. 78742
The petitioners in this case invoke the right of retention granted by P.D.
No. 27 to owners of rice and corn lands not exceeding seven hectares as
long as they are cultivating or intend to cultivate the same. Their respective
lands do not exceed the statutory limit but are occupied by tenants who are
actually cultivating such lands.
According to P.D. No. 316, which was promulgated in implementation of
P.D. No. 27:
No tenant-farmer in agricultural lands primarily devoted to
rice and corn shall be ejected or removed from his
farmholding until such time as the respective rights of the
tenant- farmers and the landowner shall have been
determined in accordance with the rules and regulations
implementing P.D. No. 27.
The petitioners claim they cannot eject their tenants and so are unable to
enjoy their right of retention because the Department of Agrarian Reform
has so far not issued the implementing rules required under the above-
quoted decree. They therefore ask the Court for a writ of mandamus to
compel the respondent to issue the said rules.
In his Comment, the public respondent argues that P.D. No. 27 has been
amended by LOI 474 removing any right of retention from persons who
own other agricultural lands of more than 7 hectares in aggregate area or
lands used for residential, commercial, industrial or other purposes from
which they derive adequate income for their family. And even assuming
that the petitioners do not fall under its terms, the regulations implementing
P.D. No. 27 have already been issued, to wit, the Memorandum dated July
10, 1975 (Interim Guidelines on Retention by Small Landowners, with an
accompanying Retention Guide Table), Memorandum Circular No. 11
dated April 21, 1978, (Implementation Guidelines of LOI No. 474),
Memorandum Circular No. 18-81 dated December 29,1981 (Clarificatory
Guidelines on Coverage of P.D. No. 27 and Retention by Small
Landowners), and DAR Administrative Order No. 1, series of 1985
(Providing for a Cut-off Date for Landowners to Apply for Retention and/or
to Protest the Coverage of their Landholdings under Operation Land
Transfer pursuant to P.D. No. 27). For failure to file the corresponding
applications for retention under these measures, the petitioners are now
barred from invoking this right.
The public respondent also stresses that the petitioners have prematurely
initiated this case notwithstanding the pendency of their appeal to the
President of the Philippines. Moreover, the issuance of the implementing
rules, assuming this has not yet been done, involves the exercise of
discretion which cannot be controlled through the writ of mandamus. This
is especially true if this function is entrusted, as in this case, to a separate
department of the government.
In their Reply, the petitioners insist that the above-cited measures are not
applicable to them because they do not own more than seven hectares of
agricultural land. Moreover, assuming arguendo that the rules were
intended to cover them also, the said measures are nevertheless not in
force because they have not been published as required by law and the
ruling of this Court in Tanada v. Tuvera.10 As for LOI 474, the same is
ineffective for the additional reason that a mere letter of instruction could
not have repealed the presidential decree.
Page 38 of 70
I
Although holding neither purse nor sword and so regarded as the weakest
of the three departments of the government, the judiciary is nonetheless
vested with the power to annul the acts of either the legislative or the
executive or of both when not conformable to the fundamental law. This is
the reason for what some quarters call the doctrine of judicial supremacy.
Even so, this power is not lightly assumed or readily exercised. The
doctrine of separation of powers imposes upon the courts a proper
restraint, born of the nature of their functions and of their respect for the
other departments, in striking down the acts of the legislative and the
executive as unconstitutional. The policy, indeed, is a blend of courtesy
and caution. To doubt is to sustain. The theory is that before the act was
done or the law was enacted, earnest studies were made by Congress or
the President, or both, to insure that the Constitution would not be
breached.
In addition, the Constitution itself lays down stringent conditions for a
declaration of unconstitutionality, requiring therefor the concurrence of a
majority of the members of the Supreme Court who took part in the
deliberations and voted on the issue during their session en banc.11 And as
established by judge made doctrine, the Court will assume jurisdiction over
a constitutional question only if it is shown that the essential requisites of
a judicial inquiry into such a question are first satisfied. Thus, there must
be an actual case or controversy involving a conflict of legal rights
susceptible of judicial determination, the constitutional question must have
been opportunely raised by the proper party, and the resolution of the
question is unavoidably necessary to the decision of the case itself. 12
With particular regard to the requirement of proper party as applied in the
cases before us, we hold that the same is satisfied by the petitioners and
intervenors because each of them has sustained or is in danger of
sustaining an immediate injury as a result of the acts or measures
complained of. 13 And even if, strictly speaking, they are not covered by the
definition, it is still within the wide discretion of the Court to waive the
requirement and so remove the impediment to its addressing and resolving
the serious constitutional questions raised.
In the first Emergency Powers Cases, 14 ordinary citizens and taxpayers
were allowed to question the constitutionality of several executive orders
issued by President Quirino although they were invoking only an indirect
and general interest shared in common with the public. The Court
dismissed the objection that they were not proper parties and ruled that
"the transcendental importance to the public of these cases demands that
they be settled promptly and definitely, brushing aside, if we must,
technicalities of procedure." We have since then applied this exception in
many other cases. 15
The other above-mentioned requisites have also been met in the present
petitions.
In must be stressed that despite the inhibitions pressing upon the Court
when confronted with constitutional issues like the ones now before it, it
will not hesitate to declare a law or act invalid when it is convinced that this
must be done. In arriving at this conclusion, its only criterion will be the
Constitution as God and its conscience give it the light to probe its meaning
and discover its purpose. Personal motives and political considerations are
irrelevancies that cannot influence its decision. Blandishment is as
ineffectual as intimidation.
For all the awesome power of the Congress and the Executive, the Court
will not hesitate to "make the hammer fall, and heavily," to use Justice
Laurel's pithy language, where the acts of these departments, or of any
public official, betray the people's will as expressed in the Constitution.
It need only be added, to borrow again the words of Justice Laurel, that —
... when the judiciary mediates to allocate constitutional
boundaries, it does not assert any superiority over the other
departments; it does not in reality nullify or invalidate an act
of the Legislature, but only asserts the solemn and sacred
obligation assigned to it by the Constitution to determine
conflicting claims of authority under the Constitution and to
establish for the parties in an actual controversy the rights
which that instrument secures and guarantees to them.
This is in truth all that is involved in what is termed "judicial
supremacy" which properly is the power of judicial review
under the Constitution. 16
The cases before us categorically raise constitutional questions that this
Court must categorically resolve. And so we shall.
Page 39 of 70
II
We proceed first to the examination of the preliminary issues before
resolving the more serious challenges to the constitutionality of the several
measures involved in these petitions.
The promulgation of P.D. No. 27 by President Marcos in the exercise of his
powers under martial law has already been sustained in Gonzales v.
Estrella and we find no reason to modify or reverse it on that issue. As for
the power of President Aquino to promulgate Proc. No. 131 and E.O. Nos.
228 and 229, the same was authorized under Section 6 of the Transitory
Provisions of the 1987 Constitution, quoted above.
The said measures were issued by President Aquino before July 27, 1987,
when the Congress of the Philippines was formally convened and took over
legislative power from her. They are not "midnight" enactments intended
to pre-empt the legislature because E.O. No. 228 was issued on July 17,
1987, and the other measures, i.e., Proc. No. 131 and E.O. No. 229, were
both issued on July 22, 1987. Neither is it correct to say that these
measures ceased to be valid when she lost her legislative power for, like
any statute, they continue to be in force unless modified or repealed by
subsequent law or declared invalid by the courts. A statute does not ipso
facto become inoperative simply because of the dissolution of the
legislature that enacted it. By the same token, President Aquino's loss of
legislative power did not have the effect of invalidating all the measures
enacted by her when and as long as she possessed it.
Significantly, the Congress she is alleged to have undercut has not rejected
but in fact substantially affirmed the challenged measures and has
specifically provided that they shall be suppletory to R.A. No. 6657
whenever not inconsistent with its provisions. 17 Indeed, some portions of
the said measures, like the creation of the P50 billion fund in Section 2 of
Proc. No. 131, and Sections 20 and 21 of E.O. No. 229, have been
incorporated by reference in the CARP Law. 18
That fund, as earlier noted, is itself being questioned on the ground that it
does not conform to the requirements of a valid appropriation as specified
in the Constitution. Clearly, however, Proc. No. 131 is not an appropriation
measure even if it does provide for the creation of said fund, for that is not
its principal purpose. An appropriation law is one the primary and specific
purpose of which is to authorize the release of public funds from the
treasury. 19 The creation of the fund is only incidental to the main objective
of the proclamation, which is agrarian reform.
It should follow that the specific constitutional provisions invoked, to wit,
Section 24 and Section 25(4) of Article VI, are not applicable. With
particular reference to Section 24, this obviously could not have been
complied with for the simple reason that the House of Representatives,
which now has the exclusive power to initiate appropriation measures, had
not yet been convened when the proclamation was issued. The legislative
power was then solely vested in the President of the Philippines, who
embodied, as it were, both houses of Congress.
The argument of some of the petitioners that Proc. No. 131 and E.O. No.
229 should be invalidated because they do not provide for retention limits
as required by Article XIII, Section 4 of the Constitution is no longer
tenable. R.A. No. 6657 does provide for such limits now in Section 6 of the
law, which in fact is one of its most controversial provisions. This section
declares:
Retention Limits. — Except as otherwise provided in this
Act, no person may own or retain, directly or indirectly, any
public or private agricultural land, the size of which shall
vary according to factors governing a viable family-sized
farm, such as commodity produced, terrain, infrastructure,
and soil fertility as determined by the Presidential Agrarian
Reform Council (PARC) created hereunder, but in no case
shall retention by the landowner exceed five (5) hectares.
Three (3) hectares may be awarded to each child of the
landowner, subject to the following qualifications: (1) that
he is at least fifteen (15) years of age; and (2) that he is
actually tilling the land or directly managing the farm;
Provided, That landowners whose lands have been
covered by Presidential Decree No. 27 shall be allowed to
keep the area originally retained by them thereunder,
further, That original homestead grantees or direct
compulsory heirs who still own the original homestead at
the time of the approval of this Act shall retain the same
areas as long as they continue to cultivate said homestead.
The argument that E.O. No. 229 violates the constitutional requirement that
a bill shall have only one subject, to be expressed in its title, deserves only
Page 40 of 70
short attention. It is settled that the title of the bill does not have to be a
catalogue of its contents and will suffice if the matters embodied in the text
are relevant to each other and may be inferred from the title. 20
The Court wryly observes that during the past dictatorship, every
presidential issuance, by whatever name it was called, had the force and
effect of law because it came from President Marcos. Such are the ways
of despots. Hence, it is futile to argue, as the petitioners do in G.R. No.
79744, that LOI 474 could not have repealed P.D. No. 27 because the
former was only a letter of instruction. The important thing is that it was
issued by President Marcos, whose word was law during that time.
But for all their peremptoriness, these issuances from the President
Marcos still had to comply with the requirement for publication as this Court
held in Tanada v. Tuvera. 21 Hence, unless published in the Official Gazette
in accordance with Article 2 of the Civil Code, they could not have any force
and effect if they were among those enactments successfully challenged
in that case. LOI 474 was published, though, in the Official Gazette dated
November 29,1976.)
Finally, there is the contention of the public respondent in G.R. No. 78742
that the writ of mandamus cannot issue to compel the performance of a
discretionary act, especially by a specific department of the government.
That is true as a general proposition but is subject to one important
qualification. Correctly and categorically stated, the rule is that mandamus
will lie to compel the discharge of the discretionary duty itself but not to
control the discretion to be exercised. In other words, mandamus can issue
to require action only but not specific action.
Whenever a duty is imposed upon a public official and an
unnecessary and unreasonable delay in the exercise of
such duty occurs, if it is a clear duty imposed by law, the
courts will intervene by the extraordinary legal remedy of
mandamus to compel action. If the duty is purely
ministerial, the courts will require specific action. If the duty
is purely discretionary, the courts by mandamus will
require action only. For example, if an inferior court, public
official, or board should, for an unreasonable length of time,
fail to decide a particular question to the great detriment of
all parties concerned, or a court should refuse to take
jurisdiction of a cause when the law clearly gave it
 jurisdiction mandamus will issue, in the first case to require
a decision, and in the second to require that jurisdiction be
taken of the cause. 22
And while it is true that as a rule the writ will not be proper as long as there
is still a plain, speedy and adequate remedy available from the
administrative authorities, resort to the courts may still be permitted if the
issue raised is a question of law. 23
III
There are traditional distinctions between the police power and the power
of eminent domain that logically preclude the application of both powers at
the same time on the same subject. In the case of City of Baguio v.
NAWASA, 24for example, where a law required the transfer of all municipal
waterworks systems to the NAWASA in exchange for its assets of
equivalent value, the Court held that the power being exercised was
eminent domain because the property involved was wholesome and
intended for a public use. Property condemned under the police power is
noxious or intended for a noxious purpose, such as a building on the verge
of collapse, which should be demolished for the public safety, or obscene
materials, which should be destroyed in the interest of public morals. The
confiscation of such property is not compensable, unlike the taking of
property under the power of expropriation, which requires the payment of
just compensation to the owner.
In the case of Pennsylvania Coal Co. v. Mahon, 25 Justice Holmes laid
down the limits of the police power in a famous aphorism: "The general
rule at least is that while property may be regulated to a certain extent, if
regulation goes too far it will be recognized as a taking." The regulation
that went "too far" was a law prohibiting mining which might cause the
subsidence of structures for human habitation constructed on the land
surface. This was resisted by a coal company which had earlier granted a
deed to the land over its mine but reserved all mining rights thereunder,
with the grantee assuming all risks and waiving any damage claim. The
Court held the law could not be sustained without compensating the
grantor. Justice Brandeis filed a lone dissent in which he argued that there
was a valid exercise of the police power. He said:
Every restriction upon the use of property imposed in the
exercise of the police power deprives the owner of some
Page 41 of 70
right theretofore enjoyed, and is, in that sense, an
abridgment by the State of rights in property without
making compensation. But restriction imposed to protect
the public health, safety or morals from dangers threatened
is not a taking. The restriction here in question is merely
the prohibition of a noxious use. The property so restricted
remains in the possession of its owner. The state does not
appropriate it or make any use of it. The state merely
prevents the owner from making a use which interferes with
paramount rights of the public. Whenever the use
prohibited ceases to be noxious — as it may because of
further changes in local or social conditions — the
restriction will have to be removed and the owner will again
be free to enjoy his property as heretofore.
Recent trends, however, would indicate not a polarization but a mingling of
the police power and the power of eminent domain, with the latter being
used as an implement of the former like the power of taxation. The
employment of the taxing power to achieve a police purpose has long been
accepted. 26 As for the power of expropriation, Prof. John J. Costonis of the
University of Illinois College of Law (referring to the earlier case of Euclid
v. Ambler Realty Co., 272 US 365, which sustained a zoning law under the
police power) makes the following significant remarks:
Euclid, moreover, was decided in an era when judges
located the Police and eminent domain powers on different
planets. Generally speaking, they viewed eminent domain
as encompassing public acquisition of private property for
improvements that would be available for public use,"
literally construed. To the police power, on the other hand,
they assigned the less intrusive task of preventing harmful
externalities a point reflected in the Euclid opinion's
reliance on an analogy to nuisance law to bolster its
support of zoning. So long as suppression of a privately
authored harm bore a plausible relation to some legitimate
"public purpose," the pertinent measure need have
afforded no compensation whatever. With the progressive
growth of government's involvement in land use, the
distance between the two powers has contracted
considerably. Today government often employs eminent
domain interchangeably with or as a useful complement to
the police power-- a trend expressly approved in the
 Supreme Court's 1954 decision in Berman v. Parker, which
broadened the reach of eminent domain's "public use" test
to match that of the police power's standard of "public
purpose." 27
The Berman case sustained a redevelopment project and the improvement
of blighted areas in the District of Columbia as a proper exercise of the
police power. On the role of eminent domain in the attainment of this
purpose, Justice Douglas declared:
If those who govern the District of Columbia decide that the
Nation's Capital should be beautiful as well as sanitary,
there is nothing in the Fifth Amendment that stands in the
way.
Once the object is within the authority of Congress, the
right to realize it through the exercise of eminent domain is
clear.
For the power of eminent domain is merely the means to
the end. 28
In Penn Central Transportation Co. v. New York City, 29 decided by a 6-3
vote in 1978, the U.S Supreme Court sustained the respondent's
Landmarks Preservation Law under which the owners of the Grand Central
Terminal had not been allowed to construct a multi-story office building
over the Terminal, which had been designated a historic landmark.
Preservation of the landmark was held to be a valid objective of the police
power. The problem, however, was that the owners of the Terminal would
be deprived of the right to use the airspace above it although other
landowners in the area could do so over their respective properties. While
insisting that there was here no taking, the Court nonetheless recognized
certain compensatory rights accruing to Grand Central Terminal which it
said would "undoubtedly mitigate" the loss caused by the regulation. This
"fair compensation," as he called it, was explained by Prof. Costonis in this
wise:
In return for retaining the Terminal site in its pristine landmark status, Penn
Central was authorized to transfer to neighboring properties the authorized
but unused rights accruing to the site prior to the Terminal's designation as
a landmark — the rights which would have been exhausted by the 59-story
Page 42 of 70
building that the city refused to countenance atop the Terminal. Prevailing
bulk restrictions on neighboring sites were proportionately relaxed,
theoretically enabling Penn Central to recoup its losses at the Terminal site
by constructing or selling to others the right to construct larger, hence more
profitable buildings on the transferee sites. 30
The cases before us present no knotty complication insofar as the question
of compensable taking is concerned. To the extent that the measures
under challenge merely prescribe retention limits for landowners, there is
an exercise of the police power for the regulation of private property in
accordance with the Constitution. But where, to carry out such regulation,
it becomes necessary to deprive such owners of whatever lands they may
own in excess of the maximum area allowed, there is definitely a taking
under the power of eminent domain for which payment of just
compensation is imperative. The taking contemplated is not a mere
limitation of the use of the land. What is required is the surrender of the title
to and the physical possession of the said excess and all beneficial rights
accruing to the owner in favor of the farmer-beneficiary. This is definitely
an exercise not of the police power but of the power of eminent domain.
Whether as an exercise of the police power or of the power of eminent
domain, the several measures before us are challenged as violative of the
due process and equal protection clauses.
The challenge to Proc. No. 131 and E.O. Nos. 228 and 299 on the ground
that no retention limits are prescribed has already been discussed and
dismissed. It is noted that although they excited many bitter exchanges
during the deliberation of the CARP Law in Congress, the retention limits
finally agreed upon are, curiously enough, not being questioned in these
petitions. We therefore do not discuss them here. The Court will come to
the other claimed violations of due process in connection with our
examination of the adequacy of just compensation as required under the
power of expropriation.
The argument of the small farmers that they have been denied equal
protection because of the absence of retention limits has also become
academic under Section 6 of R.A. No. 6657. Significantly, they too have
not questioned the area of such limits. There is also the complaint that they
should not be made to share the burden of agrarian reform, an objection
also made by the sugar planters on the ground that they belong to a
particular class with particular interests of their own. However, no evidence
has been submitted to the Court that the requisites of a valid classification
have been violated.
Classification has been defined as the grouping of persons or things similar
to each other in certain particulars and different from each other in these
same particulars. 31 To be valid, it must conform to the following
requirements: (1) it must be based on 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 the members of the
class. 32 The Court finds that all these requisites have been met by the
measures here challenged as arbitrary and discriminatory.
Equal protection simply means that all persons or things similarly situated
must be treated alike both as to the rights conferred and the liabilities
imposed. 33 The petitioners have not shown that they belong to a different
class and entitled to a different treatment. The argument that not only
landowners but also owners of other properties must be made to share the
burden of implementing land reform must be rejected. There is a
substantial distinction between these two classes of owners that is clearly
visible except to those who will not see. There is no need to elaborate on
this matter. In any event, the Congress is allowed a wide leeway in
providing for a valid classification. Its decision is accorded recognition and
respect by the courts of justice except only where its discretion is abused
to the detriment of the Bill of Rights.
It is worth remarking at this juncture that a statute may be sustained under
the police power only if there is a concurrence of the lawful subject and the
lawful method. Put otherwise, the interests of the public generally as
distinguished from those of a particular class require the interference of the
State and, no less important, the means employed are reasonably
necessary for the attainment of the purpose sought to be achieved and not
unduly oppressive upon individuals. 34 As the subject and purpose of
agrarian reform have been laid down by the Constitution itself, we may say
that the first requirement has been satisfied. What remains to be examined
is the validity of the method employed to achieve the constitutional goal.
One of the basic principles of the democratic system is that where the
rights of the individual are concerned, the end does not justify the means.
It is not enough that there be a valid objective; it is also necessary that the
means employed to pursue it be in keeping with the Constitution. Mere
expediency will not excuse constitutional shortcuts. There is no question
Page 43 of 70
that not even the strongest moral conviction or the most urgent public need,
subject only to a few notable exceptions, will excuse the bypassing of an
individual's rights. It is no exaggeration to say that a, person invoking a
right guaranteed under Article III of the Constitution is a majority of one
even as against the rest of the nation who would deny him that right.
That right covers the person's life, his liberty and his property under Section
1 of Article III of the Constitution. With regard to his property, the owner
enjoys the added protection of Section 9, which reaffirms the familiar rule
that private property shall not be taken for public use without just
compensation.
This brings us now to the power of eminent domain.
IV
Eminent domain is an inherent power of the State that
enables it to forcibly acquire private lands intended for
public use upon payment of just compensation to the
owner. Obviously, there is no need to expropriate where
the owner is willing to sell under terms also acceptable to
the purchaser, in which case an ordinary deed of sale may
be agreed upon by the parties. 35 It is only where the owner
is unwilling to sell, or cannot accept the price or other
conditions offered by the vendee, that the power of eminent
domain will come into play to assert the paramount
authority of the State over the interests of the property
owner. Private rights must then yield to the irresistible
demands of the public interest on the time-honored
justification, as in the case of the police power, that the
welfare of the people is the supreme law.
But for all its primacy and urgency, the power of expropriation is by no
means absolute (as indeed no power is absolute). The limitation is found
in the constitutional injunction that "private property shall not be taken for
public use without just compensation" and in the abundant jurisprudence
that has evolved from the interpretation of this principle. Basically, the
requirements for a proper exercise of the power are: (1) public use and (2)
just compensation.
Let us dispose first of the argument raised by the petitioners in G.R. No.
79310 that the State should first distribute public agricultural lands in the
pursuit of agrarian reform instead of immediately disturbing property rights
by forcibly acquiring private agricultural lands. Parenthetically, it is not
correct to say that only public agricultural lands may be covered by the
CARP as the Constitution calls for "the just distribution of all agricultural
lands." In any event, the decision to redistribute private agricultural lands
in the manner prescribed by the CARP was made by the legislative and
executive departments in the exercise of their discretion. We are not
justified in reviewing that discretion in the absence of a clear showing that
it has been abused.
A becoming courtesy admonishes us to respect the decisions of the
political departments when they decide what is known as the political
question. As explained by Chief Justice Concepcion in the case of Tañada
v. Cuenco: 36
The term "political question" connotes what it means in
ordinary parlance, namely, a question of policy. It refers to
"those questions which, under the Constitution, are to be
decided by the people in their sovereign capacity; or in
regard to which full discretionary authority has been
delegated to the legislative or executive branch of the
government." It is concerned with issues dependent upon
the wisdom, not legality, of a particular measure.
It is true that the concept of the political question has been constricted with
the enlargement of judicial power, which now includes the authority of the
courts "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." 37 Even so, this should not
be construed as a license for us to reverse the other departments simply
because their views may not coincide with ours.
The legislature and the executive have been seen fit, in their wisdom, to
include in the CARP the redistribution of private landholdings (even as the
distribution of public agricultural lands is first provided for, while also
continuing apace under the Public Land Act and other cognate laws). The
Court sees no justification to interpose its authority, which we may assert
only if we believe that the political decision is not unwise, but illegal. We do
not find it to be so.
Page 44 of 70
In U.S. v. Chandler-Dunbar Water Power Company,38 it was held:
Congress having determined, as it did by the Act of March
3,1909 that the entire St. Mary's river between the
American bank and the international line, as well as all of
the upland north of the present ship canal, throughout its
entire length, was "necessary for the purpose of navigation
of said waters, and the waters connected therewith," that
determination is conclusive in condemnation proceedings
instituted by the United States under that Act, and there is
no room for judicial review of the judgment of Congress ...
.
As earlier observed, the requirement for public use has already been
settled for us by the Constitution itself No less than the 1987 Charter calls
for agrarian reform, which is the reason why private agricultural lands are
to be taken from their owners, subject to the prescribed maximum retention
limits. The purposes specified in P.D. No. 27, Proc. No. 131 and R.A. No.
6657 are only an elaboration of the constitutional injunction that the State
adopt the necessary measures "to encourage and undertake the just
distribution of all agricultural lands to enable farmers who are landless to
own directly or collectively the lands they till." That public use, as
pronounced by the fundamental law itself, must be binding on us.
The second requirement, i.e., the payment of just compensation, needs a
longer and more thoughtful examination.
Just compensation is defined as the full and fair equivalent of the property
taken from its owner by the expropriator. 39 It has been repeatedly stressed
by this Court that the measure is not the taker's gain but the owner's
loss. 40 The word "just" is used to intensify the meaning of the word
"compensation" to convey the idea that the equivalent to be rendered for
the property to be taken shall be real, substantial, full, ample. 41
It bears repeating that the measures challenged in these petitions
contemplate more than a mere regulation of the use of private lands under
the police power. We deal here with an actual taking of private agricultural
lands that has dispossessed the owners of their property and deprived
them of all its beneficial use and enjoyment, to entitle them to the just
compensation mandated by the Constitution.
As held in Republic of the Philippines v. Castellvi, 42 there is compensable
taking when the following conditions concur: (1) the expropriator must
enter a private property; (2) the entry must be for more than a momentary
period; (3) the entry must be under warrant or color of legal authority; (4)
the property must be devoted to public use or otherwise informally
appropriated or injuriously affected; and (5) the utilization of the property
for public use must be in such a way as to oust the owner and deprive him
of beneficial enjoyment of the property. All these requisites are envisioned
in the measures before us.
Where the State itself is the expropriator, it is not necessary for it to make
a deposit upon its taking possession of the condemned property, as "the
compensation is a public charge, the good faith of the public is pledged for
its payment, and all the resources of taxation may be employed in raising
the amount." 43 Nevertheless, Section 16(e) of the CARP Law provides
that:
Upon receipt by the landowner of the corresponding
payment or, in case of rejection or no response from the
landowner, upon the deposit with an accessible bank
designated by the DAR of the compensation in cash or in
LBP bonds in accordance with this Act, the DAR shall take
immediate possession of the land and shall request the
proper Register of Deeds to issue a Transfer Certificate of
Title (TCT) in the name of the Republic of the Philippines.
The DAR shall thereafter proceed with the redistribution of
the land to the qualified beneficiaries.
Objection is raised, however, to the manner of fixing the just compensation,
which it is claimed is entrusted to the administrative authorities in violation
of judicial prerogatives. Specific reference is made to Section 16(d), which
provides that in case of the rejection or disregard by the owner of the offer
of the government to buy his land-
... the DAR shall conduct summary administrative
proceedings to determine the compensation for the land by
requiring the landowner, the LBP and other interested
parties to submit evidence as to the just compensation for
the land, within fifteen (15) days from the receipt of the
notice. After the expiration of the above period, the matter
is deemed submitted for decision. The DAR shall decide
Page 45 of 70
the case within thirty (30) days after it is submitted for
decision.
To be sure, the determination of just compensation is a function addressed
to the courts of justice and may not be usurped by any other branch or
official of the government. EPZA v. Dulay 44 resolved a challenge to several
decrees promulgated by President Marcos providing that the just
compensation for property under expropriation should be either the
assessment of the property by the government or the sworn valuation
thereof by the owner, whichever was lower. In declaring these decrees
unconstitutional, the Court held through Mr. Justice Hugo E. Gutierrez, Jr.:
The method of ascertaining just compensation under the
aforecited decrees constitutes impermissible
encroachment on judicial prerogatives. It tends to render
this Court inutile in a matter which under this Constitution
is reserved to it for final determination.
Thus, although in an expropriation proceeding the court
technically would still have the power to determine the just
compensation for the property, following the applicable
decrees, its task would be relegated to simply stating the
lower value of the property as declared either by the owner
or the assessor. As a necessary consequence, it would be
useless for the court to appoint commissioners under Rule
67 of the Rules of Court. Moreover, the need to satisfy the
due process clause in the taking of private property is
seemingly fulfilled since it cannot be said that a judicial
proceeding was not had before the actual taking. However,
the strict application of the decrees during the proceedings
would be nothing short of a mere formality or charade as
the court has only to choose between the valuation of the
owner and that of the assessor, and its choice is always
limited to the lower of the two. The court cannot exercise
its discretion or independence in determining what is just
or fair. Even a grade school pupil could substitute for the
judge insofar as the determination of constitutional just
compensation is concerned.
xxx
 In the present petition, we are once again confronted with The second and more serious objection to the provisions on just
the same question of whether the courts under P.D. No. compensation is not as easily resolved.
1533, which contains the same provision on just
compensation as its predecessor decrees, still have the This refers to Section 18 of the CARP Law providing in full as follows:
power and authority to determine just compensation,
independent of what is stated by the decree and to this SEC. 18. Valuation and Mode of Compensation. — The
effect, to appoint commissioners for such purpose. LBP shall compensate the landowner in such amount as
may be agreed upon by the landowner and the DAR and
This time, we answer in the affirmative. the LBP, in accordance with the criteria provided for in
Sections 16 and 17, and other pertinent provisions hereof,
xxx or as may be finally determined by the court, as the just
compensation for the land.
It is violative of due process to deny the owner the
opportunity to prove that the valuation in the tax documents The compensation shall be paid in one of the following
is unfair or wrong. And it is repulsive to the basic concepts modes, at the option of the landowner:
of justice and fairness to allow the haphazard work of a
minor bureaucrat or clerk to absolutely prevail over the (1) Cash payment, under the following terms and
judgment of a court promulgated only after expert conditions:
commissioners have actually viewed the property, after
evidence and arguments pro and con have been (a) For lands above fifty
presented, and after all factors and considerations (50) hectares, insofar as
essential to a fair and just determination have been the excess hectarage is
judiciously evaluated. concerned — Twenty-five
percent (25%) cash, the
A reading of the aforecited Section 16(d) will readily show that it does not balance to be paid in
suffer from the arbitrariness that rendered the challenged decrees government financial
constitutionally objectionable. Although the proceedings are described as instruments negotiable at
summary, the landowner and other interested parties are nevertheless any time.
allowed an opportunity to submit evidence on the real value of the property.
But more importantly, the determination of the just compensation by the (b) For lands above twenty-
DAR is not by any means final and conclusive upon the landowner or any four (24) hectares and up to
other interested party, for Section 16(f) clearly provides: fifty (50) hectares — Thirty
percent (30%) cash, the
Any party who disagrees with the decision may bring the balance to be paid in
matter to the court of proper jurisdiction for final government financial
determination of just compensation. instruments negotiable at
any time.
The determination made by the DAR is only preliminary unless accepted
by all parties concerned. Otherwise, the courts of justice will still have the (c) For lands twenty-four
right to review with finality the said determination in the exercise of what is (24) hectares and below —
admittedly a judicial function. Thirty-five percent (35%)
Page 46 of 70
 cash, the balance to be
paid in government
financial instruments
negotiable at any time.
(2) Shares of stock in government-owned or controlled
corporations, LBP preferred shares, physical assets or
other qualified investments in accordance with guidelines
set by the PARC;
(3) Tax credits which can be used against any tax liability;
(4) LBP bonds, which shall have the following features:
(a) Market interest rates aligned with 91-day treasury bill rates. Ten
percent (10%) of the face value of the bonds shall mature every
year from the date of issuance until the tenth (10th) year: Provided,
That should the landowner choose to forego the cash portion,
whether in full or in part, he shall be paid correspondingly in LBP
bonds;
(b) Transferability and negotiability. Such LBP bonds may be used
by the landowner, his successors-in- interest or his assigns, up to
the amount of their face value, for any of the following:
(i) Acquisition of land or other real properties of the government,
including assets under the Asset Privatization Program and other
assets foreclosed by government financial institutions in the same
province or region where the lands for which the bonds were paid
are situated;
(ii) Acquisition of shares of stock of government-owned or
controlled corporations or shares of stock owned by the
government in private corporations;
(iii) Substitution for surety or bail bonds for the provisional release
of accused persons, or for performance bonds;
(iv) Security for loans with any government financial institution,
provided the proceeds of the loans shall be invested in an
economic enterprise, preferably in a small and medium- scale
Page 47 of 70
industry, in the same province or region as the land for which the
bonds are paid;
(v) Payment for various taxes and fees to government: Provided,
That the use of these bonds for these purposes will be limited to a
certain percentage of the outstanding balance of the financial
instruments; Provided, further, That the PARC shall determine the
percentages mentioned above;
(vi) Payment for tuition fees of the immediate family of the original
bondholder in government universities, colleges, trade schools,
and other institutions;
(vii) Payment for fees of the immediate family of the original
bondholder in government hospitals; and
(viii) Such other uses as the PARC may from time to time allow.
The contention of the petitioners in G.R. No. 79777 is that the above
provision is unconstitutional insofar as it requires the owners of the
expropriated properties to accept just compensation therefor in less than
money, which is the only medium of payment allowed. In support of this
contention, they cite jurisprudence holding that:
The fundamental rule in expropriation matters is that the
owner of the property expropriated is entitled to a just
compensation, which should be neither more nor less,
whenever it is possible to make the assessment, than the
money equivalent of said property. Just compensation has
always been understood to be the just and complete
equivalent of the loss which the owner of the thing
expropriated has to suffer by reason of the expropriation
. 45 (Emphasis supplied.)
In J.M. Tuazon Co. v. Land Tenure Administration, 46 this Court held:
It is well-settled that just compensation means the
equivalent for the value of the property at the time of its
taking. Anything beyond that is more, and anything short of
that is less, than just compensation. It means a fair and full
equivalent for the loss sustained, which is the measure of
 the indemnity, not whatever gain would accrue to the
expropriating entity. The market value of the land taken is
the just compensation to which the owner of condemned
property is entitled, the market value being that sum of
money which a person desirous, but not compelled to buy,
and an owner, willing, but not compelled to sell, would
agree on as a price to be given and received for such
property. (Emphasis supplied.)
In the United States, where much of our jurisprudence on the subject has
been derived, the weight of authority is also to the effect that just
compensation for property expropriated is payable only in money and not
otherwise. Thus —
The medium of payment of compensation is ready money
or cash. The condemnor cannot compel the owner to
accept anything but money, nor can the owner compel or
require the condemnor to pay him on any other basis than
the value of the property in money at the time and in the
manner prescribed by the Constitution and the statutes.
When the power of eminent domain is resorted to, there
must be a standard medium of payment, binding upon both
parties, and the law has fixed that standard as money in
cash. 47 (Emphasis supplied.)
Part cash and deferred payments are not and cannot, in
the nature of things, be regarded as a reliable and constant
standard of compensation. 48
"Just compensation" for property taken by condemnation
means a fair equivalent in money, which must be paid at
least within a reasonable time after the taking, and it is not
within the power of the Legislature to substitute for such
payment future obligations, bonds, or other valuable
advantage. 49(Emphasis supplied.)
It cannot be denied from these cases that the traditional medium for the
payment of just compensation is money and no other. And so,
conformably, has just compensation been paid in the past solely in that
medium. However, we do not deal here with the traditional excercise of the
power of eminent domain. This is not an ordinary expropriation where only
Page 48 of 70
a specific property of relatively limited area is sought to be taken by the
State from its owner for a specific and perhaps local purpose.
What we deal with here is a revolutionary kind of expropriation.
The expropriation before us affects all private agricultural lands whenever
found and of whatever kind as long as they are in excess of the maximum
retention limits allowed their owners. This kind of expropriation is intended
for the benefit not only of a particular community or of a small segment of
the population but of the entire Filipino nation, from all levels of our society,
from the impoverished farmer to the land-glutted owner. Its purpose does
not cover only the whole territory of this country but goes beyond in time to
the foreseeable future, which it hopes to secure and edify with the vision
and the sacrifice of the present generation of Filipinos. Generations yet to
come are as involved in this program as we are today, although hopefully
only as beneficiaries of a richer and more fulfilling life we will guarantee to
them tomorrow through our thoughtfulness today. And, finally, let it not be
forgotten that it is no less than the Constitution itself that has ordained this
revolution in the farms, calling for "a just distribution" among the farmers of
lands that have heretofore been the prison of their dreams but can now
become the key at least to their deliverance.
Such a program will involve not mere millions of pesos. The cost will be
tremendous. Considering the vast areas of land subject to expropriation
under the laws before us, we estimate that hundreds of billions of pesos
will be needed, far more indeed than the amount of P50 billion initially
appropriated, which is already staggering as it is by our present standards.
Such amount is in fact not even fully available at this time.
We assume that the framers of the Constitution were aware of this difficulty
when they called for agrarian reform as a top priority project of the
government. It is a part of this assumption that when they envisioned the
expropriation that would be needed, they also intended that the just
compensation would have to be paid not in the orthodox way but a less
conventional if more practical method. There can be no doubt that they
were aware of the financial limitations of the government and had no
illusions that there would be enough money to pay in cash and in full for
the lands they wanted to be distributed among the farmers. We may
therefore assume that their intention was to allow such manner of payment
as is now provided for by the CARP Law, particularly the payment of the
balance (if the owner cannot be paid fully with money), or indeed of the
entire amount of the just compensation, with other things of value. We may
also suppose that what they had in mind was a similar scheme of payment
as that prescribed in P.D. No. 27, which was the law in force at the time
they deliberated on the new Charter and with which they presumably
agreed in principle.
The Court has not found in the records of the Constitutional Commission
any categorical agreement among the members regarding the meaning to
be given the concept of just compensation as applied to the comprehensive
agrarian reform program being contemplated. There was the suggestion to
"fine tune" the requirement to suit the demands of the project even as it
was also felt that they should "leave it to Congress" to determine how
payment should be made to the landowner and reimbursement required
from the farmer-beneficiaries. Such innovations as "progressive
compensation" and "State-subsidized compensation" were also proposed.
In the end, however, no special definition of the just compensation for the
lands to be expropriated was reached by the Commission. 50
On the other hand, there is nothing in the records either that militates
against the assumptions we are making of the general sentiments and
intention of the members on the content and manner of the payment to be
made to the landowner in the light of the magnitude of the expenditure and
the limitations of the expropriator.
With these assumptions, the Court hereby declares that the content and
manner of the just compensation provided for in the afore- quoted Section
18 of the CARP Law is not violative of the Constitution. We do not mind
admitting that a certain degree of pragmatism has influenced our decision
on this issue, but after all this Court is not a cloistered institution removed
from the realities and demands of society or oblivious to the need for its
enhancement. The Court is as acutely anxious as the rest of our people to
see the goal of agrarian reform achieved at last after the frustrations and
deprivations of our peasant masses during all these disappointing
decades. We are aware that invalidation of the said section will result in
the nullification of the entire program, killing the farmer's hopes even as
they approach realization and resurrecting the spectre of discontent and
dissent in the restless countryside. That is not in our view the intention of
the Constitution, and that is not what we shall decree today.
Accepting the theory that payment of the just compensation is not always
required to be made fully in money, we find further that the proportion of
Page 49 of 70
cash payment to the other things of value constituting the total payment,
as determined on the basis of the areas of the lands expropriated, is not
unduly oppressive upon the landowner. It is noted that the smaller the land,
the bigger the payment in money, primarily because the small landowner
will be needing it more than the big landowners, who can afford a bigger
balance in bonds and other things of value. No less importantly, the
government financial instruments making up the balance of the payment
are "negotiable at any time." The other modes, which are likewise available
to the landowner at his option, are also not unreasonable because payment
is made in shares of stock, LBP bonds, other properties or assets, tax
credits, and other things of value equivalent to the amount of just
compensation.
Admittedly, the compensation contemplated in the law will cause the
landowners, big and small, not a little inconvenience. As already remarked,
this cannot be avoided. Nevertheless, it is devoutly hoped that these
countrymen of ours, conscious as we know they are of the need for their
forebearance and even sacrifice, will not begrudge us their indispensable
share in the attainment of the ideal of agrarian reform. Otherwise, our
pursuit of this elusive goal will be like the quest for the Holy Grail.
The complaint against the effects of non-registration of the land under E.O.
No. 229 does not seem to be viable any more as it appears that Section 4
of the said Order has been superseded by Section 14 of the CARP Law.
This repeats the requisites of registration as embodied in the earlier
measure but does not provide, as the latter did, that in case of failure or
refusal to register the land, the valuation thereof shall be that given by the
provincial or city assessor for tax purposes. On the contrary, the CARP
Law says that the just compensation shall be ascertained on the basis of
the factors mentioned in its Section 17 and in the manner provided for in
Section 16.
The last major challenge to CARP is that the landowner is divested of his
property even before actual payment to him in full of just compensation, in
contravention of a well- accepted principle of eminent domain.
The recognized rule, indeed, is that title to the property expropriated shall
pass from the owner to the expropriator only upon full payment of the just
compensation. Jurisprudence on this settled principle is consistent both
here and in other democratic jurisdictions. Thus:
Title to property which is the subject of condemnation proceedings does
not vest the condemnor until the judgment fixing just compensation is
entered and paid, but the condemnor's title relates back to the date on
which the petition under the Eminent Domain Act, or the commissioner's
report under the Local Improvement Act, is filed. 51
... although the right to appropriate and use land taken for a canal is
complete at the time of entry, title to the property taken remains in the
owner until payment is actually made. 52 (Emphasis supplied.)
In Kennedy v. Indianapolis, 53 the US Supreme Court cited several cases
holding that title to property does not pass to the condemnor until just
compensation had actually been made. In fact, the decisions appear to be
uniformly to this effect. As early as 1838, in Rubottom v. McLure, 54 it was
held that "actual payment to the owner of the condemned property was a
condition precedent to the investment of the title to the property in the
State" albeit "not to the appropriation of it to public use." In Rexford v.
Knight, 55 the Court of Appeals of New York said that the construction upon
the statutes was that the fee did not vest in the State until the payment of
the compensation although the authority to enter upon and appropriate the
land was complete prior to the payment. Kennedy further said that "both
on principle and authority the rule is ... that the right to enter on and use
the property is complete, as soon as the property is actually appropriated
under the authority of law for a public use, but that the title does not pass
from the owner without his consent, until just compensation has been made
to him."
Our own Supreme Court has held in Visayan Refining Co. v. Camus and
Paredes, 56 that:
If the laws which we have exhibited or cited in the
preceding discussion are attentively examined it will be
apparent that the method of expropriation adopted in this
jurisdiction is such as to afford absolute reassurance
that no piece of land can be finally and irrevocably taken
from an unwilling owner until compensation is paid ...
. (Emphasis supplied.)
It is true that P.D. No. 27 expressly ordered the emancipation of tenant-
farmer as October 21, 1972 and declared that he shall "be deemed the
owner" of a portion of land consisting of a family-sized farm except that "no
Page 50 of 70
title to the land owned by him was to be actually issued to him unless and
until he had become a full-fledged member of a duly recognized farmers'
cooperative." It was understood, however, that full payment of the just
compensation also had to be made first, conformably to the constitutional
requirement.
When E.O. No. 228, categorically stated in its Section 1 that:
All qualified farmer-beneficiaries are now deemed full
owners as of October 21, 1972 of the land they acquired
by virtue of Presidential Decree No. 27. (Emphasis
supplied.)
it was obviously referring to lands already validly acquired under the said
decree, after proof of full-fledged membership in the farmers' cooperatives
and full payment of just compensation. Hence, it was also perfectly proper
for the Order to also provide in its Section 2 that the "lease rentals paid to
the landowner by the farmer- beneficiary after October 21, 1972 (pending
transfer of ownership after full payment of just compensation), shall be
considered as advance payment for the land."
The CARP Law, for its part, conditions the transfer of possession and
ownership of the land to the government on receipt by the landowner of
the corresponding payment or the deposit by the DAR of the compensation
in cash or LBP bonds with an accessible bank. Until then, title also remains
with the landowner. 57 No outright change of ownership is contemplated
either.
Hence, the argument that the assailed measures violate due process by
arbitrarily transferring title before the land is fully paid for must also be
rejected.
It is worth stressing at this point that all rights acquired by the tenant-farmer
under P.D. No. 27, as recognized under E.O. No. 228, are retained by him
even now under R.A. No. 6657. This should counter-balance the express
provision in Section 6 of the said law that "the landowners whose lands
have been covered by Presidential Decree No. 27 shall be allowed to keep
the area originally retained by them thereunder, further, That original
homestead grantees or direct compulsory heirs who still own the original
homestead at the time of the approval of this Act shall retain the same
areas as long as they continue to cultivate said homestead."
In connection with these retained rights, it does not appear in G.R. No.
78742 that the appeal filed by the petitioners with the Office of the
President has already been resolved. Although we have said that the
doctrine of exhaustion of administrative remedies need not preclude
immediate resort to judicial action, there are factual issues that have yet to
be examined on the administrative level, especially the claim that the
petitioners are not covered by LOI 474 because they do not own other
agricultural lands than the subjects of their petition.
Obviously, the Court cannot resolve these issues. In any event, assuming
that the petitioners have not yet exercised their retention rights, if any,
under P.D. No. 27, the Court holds that they are entitled to the new
retention rights provided for by R.A. No. 6657, which in fact are on the
whole more liberal than those granted by the decree.
only deep despair, now can he see in it the fruition of his hopes for a more
fulfilling future. Now at last can he banish from his small plot of earth his
insecurities and dark resentments and "rebuild in it the music and the
dream."
WHEREFORE, the Court holds as follows:
1. R.A. No. 6657, P.D. No. 27, Proc. No. 131, and E.O.
Nos. 228 and 229 are SUSTAINED against all the
constitutional objections raised in the herein petitions.
2. Title to all expropriated properties shall be transferred to
the State only upon full payment of compensation to their
respective owners.

V 3. All rights previously acquired by the tenant- farmers

under P.D. No. 27 are retained and recognized.
The CARP Law and the other enactments also involved in these cases
have been the subject of bitter attack from those who point to the 4. Landowners who were unable to exercise their rights of
shortcomings of these measures and ask that they be scrapped entirely. retention under P.D. No. 27 shall enjoy the retention rights
To be sure, these enactments are less than perfect; indeed, they should granted by R.A. No. 6657 under the conditions therein
be continuously re-examined and rehoned, that they may be sharper prescribed.
instruments for the better protection of the farmer's rights. But we have to
start somewhere. In the pursuit of agrarian reform, we do not tread on
5. Subject to the above-mentioned rulings all the petitions
familiar ground but grope on terrain fraught with pitfalls and expected
are DISMISSED, without pronouncement as to costs.
difficulties. This is inevitable. The CARP Law is not a tried and tested
project. On the contrary, to use Justice Holmes's words, "it is an
experiment, as all life is an experiment," and so we learn as we venture SO ORDERED.
forward, and, if necessary, by our own mistakes. We cannot expect
perfection although we should strive for it by all means. Meantime, we G.R. No. 159610 June 12, 2008
struggle as best we can in freeing the farmer from the iron shackles that
have unconscionably, and for so long, fettered his soul to the soil. COMMISSIONER OF INTERNAL REVENUE, petitioner,
vs.
By the decision we reach today, all major legal obstacles to the CENTRAL LUZON DRUG CORPORATION, respondent.
comprehensive agrarian reform program are removed, to clear the way for
the true freedom of the farmer. We may now glimpse the day he will be DECISION
released not only from want but also from the exploitation and disdain of
the past and from his own feelings of inadequacy and helplessness. At last CARPIO, J.:
his servitude will be ended forever. At last the farm on which he toils will
be his farm. It will be his portion of the Mother Earth that will give him not The Case
only the staff of life but also the joy of living. And where once it bred for him

Page 51 of 70
This petition for review on certiorari1 assails the 13 August 2003
Decision2 of the Court of Appeals in CA-G.R. SP No. 70480. The Court of
Appeals dismissed the appeal filed by the Commissioner of Internal
Revenue (petitioner) questioning the 15 April 2002 Decision3 of the Court
of Tax Appeals (CTA) in CTA Case No. 6054 ordering petitioner to issue,
in favor of Central Luzon Drug Corporation (respondent), a tax credit
certificate in the amount of P2,376,805.63, arising from the alleged
erroneous interpretation of the term "tax credit" used in Section 4(a) of
Republic Act No. (RA) 7432.4
The Facts
Respondent is a domestic corporation engaged in the retail of medicines
and other pharmaceutical products.5 In 1997, it operated eight drugstores
under the business name and style "Mercury Drug."6
Pursuant to the provisions of RA 7432 and Revenue Regulations No. (RR)
2-947 issued by the Bureau of Internal Revenue (BIR), respondent granted
20% sales discount to qualified senior citizens on their purchases of
medicines covering the calendar year 1997. The sales discount granted to
senior citizens totaled P2,798,508.00.
On 15 April 1998, respondent filed its 1997 Corporate Annual Income Tax
Return reflecting a nil income tax liability due to net loss incurred from
business operations of P2,405,140.00.8 Respondent filed its 1997 Income
Tax Return under protest.9
On 19 March 1999, respondent filed with the petitioner a claim for refund
or credit of overpaid income tax for the taxable year 1997 in the amount
of P2,660,829.00.10 Respondent alleged that the overpaid tax was the
result of the wrongful implementation of RA 7432. Respondent treated the
20% sales discount as a deduction from gross sales in compliance with RR
2-94 instead of treating it as a tax credit as provided under Section 4(a) of
RA 7432.
On 6 April 2000, respondent filed a Petition for Review with the CTA in
order to toll the running of the two-year statutory period within which to file
a judicial claim. Respondent reasoned that RR 2-94, which is a mere
implementing administrative regulation, cannot modify, alter or amend the
clear mandate of RA 7432. Consequently, Section 2(i) of RR 2-94 is
Page 52 of 70
without force and effect for being inconsistent with the law it seeks to
implement.11
In his Answer, petitioner stated that the construction given to a statute by
a specialized administrative agency like the BIR is entitled to great respect
and should be accorded great weight. When RA 7432 allowed senior
citizens' discounts to be claimed as tax credit, it was silent as to the
mechanics of availing the same. For clarification, the BIR issued RR 2-94
and defined the term "tax credit" as a deduction from the establishment's
gross income and not from its tax liability in order to avoid an absurdity that
is not intended by the law. 12
The Ruling of the Court of Tax Appeals
On 15 April 2002, the CTA rendered a Decision ordering petitioner to issue
a tax credit certificate in the amount of P2,376,805.63 in favor of
respondent.
The CTA stated that in a number of analogous cases, it has consistently
ruled that the 20% senior citizens' discount should be treated as tax credit
instead of a mere deduction from gross income.13 In quoting its previous
decisions, the CTA ruled that RR 2-94 engraved a new meaning to the
phrase "tax credit" as deductible from gross income which is a deviation
from the plain intendment of the law. An administrative regulation must not
contravene but should conform to the standards that the law prescribes.14
The CTA also ruled that respondent has properly substantiated its claim
for tax credit by documentary evidence. However, based on the
examination conducted by the commissioned independent certified public
accountant (CPA), there were some material discrepancies due to missing
cash slips, lack of senior citizen's ID number, failure to include the cash
slips in the summary report and vice versa. Therefore, between the
Summary Report presented by respondent and the audited amount
presented by the independent CPA, the CTA deemed it proper to consider
the lesser of two amounts.
The re-computation of the overpaid income tax15 for the year 1997 is as
follows:
Sales, Net P176,742,607.00
 Add: 20% Sales Discount to Senior Citizens 2,798,508.00 The Court of Appeals distinguished "tax credit" as an amount subtracted
Sales, Gross P179,541,115.00 from a taxpayer's total tax liability to arrive at the tax due while a "tax
deduction" reduces the taxpayer's taxable income upon which the tax
Less: Cost of Sales liability is computed. "A credit differs from deduction in that the former is
Merchandise inventory, beg. P subtracted from tax while the latter is subtracted from income before the
20,905,489.00 tax is computed."19
Purchases 168,762,950.00
Merchandise inventory, end -27,281,439.00 162,387,000.00 The Court of Appeals found no legal basis to support petitioner's opinion
that actual payment by the taxpayer or actual receipt by the government of
Gross Profit P 17,154,115.00
the tax sought to be credited or refunded is a condition sine qua non for
Add: Miscellaneous income 402,124.00 the availment of tax credit as enunciated in Section 22920 of the Tax Code.
Total Income P 17,556,239.00 The Court of Appeals stressed that Section 229 of the Tax Code pertains
Less: Operating expenses 16,913,699.00 to illegally collected or erroneously paid taxes while RA 7432 is a special
law which uses the method of tax credit in the context of just compensation.
Net Income P 642,540.00
Further, RA 7432 does not require prior tax payment as a condition for
Less: Income subjected to final tax (Interest 249,172.00 claiming the cost of the sales discount as tax credit.
Income16)
Net Taxable Income P 393,368.00 Hence, this petition.
Income Tax Due (35%) P 137,679.00
Less: Tax Credit (Cost of 20% discount as 2,514,484.63 The Issues
adjusted17)
Income Tax Payable (P 2,376,805.63) Petitioner raises two issues21 in this Petition:
Income Tax Actually Paid 0.00
1. Whether the appellate court erred in holding that respondent
Income Tax Refundable (P 2,376,805.63)
may claim the 20% senior citizens' sales discount as a tax credit
deductible from future income tax liabilities instead of a mere
Aggrieved by the CTA's decision, petitioner elevated the case before the deduction from gross income or gross sales; and
Court of Appeals.
2. Whether the appellate court erred in holding that respondent is
The Ruling of the Appellate Court entitled to a refund.

On 13 August 2003, the Court of Appeals affirmed the CTA's decision in
toto.
The Court of Appeals disagreed with petitioner's contention that the CTA's
decision applied a literal interpretation of the law. It reasoned that under
the verba legis rule, if the statute is clear, plain, and free from ambiguity, it
must be given its literal meaning and applied without interpretation. This
principle rests on the presumption that the words used by the legislature in
a statute correctly express its intent and preclude the court from construing
it differently.18
Page 53 of 70
The Ruling of the Court
The petition lacks merit.
The issues presented are not novel. In two similar cases involving the
same parties where respondent lodged its claim for tax credit on the senior
citizens' discount granted in 199522 and 1996,23 this Court has squarely
ruled that the 20% senior citizens' discount required by RA 7432 may be
claimed as a tax credit and not merely a tax deduction from gross sales or
gross income. Under RA 7432, Congress granted the tax credit benefit to
all covered establishments without conditions. The net loss incurred in a
taxable year does not preclude the grant of tax credit because by its nature,
the tax credit may still be deducted from a future, not a present, tax liability.
However, the senior citizens' discount granted as a tax credit cannot be
refunded.
RA 7432 expressly allows private establishments
to claim the amount of discounts they grant to senior citizens
as tax credit.
Section 4(a) of RA 7432 states:
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 the utilization of transportation
services, hotels and similar lodging establishments,
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)
However, RR 2-94 interpreted the tax credit provision of RA 7432 in this
wise:
Sec. 2. DEFINITIONS. - For purposes of these regulations:
xxx
i. Tax Credit - refers to the amount representing 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.
(Emphasis supplied).
Page 54 of 70
xxx
Sec. 4. Recording/Bookkeeping Requirement for Private
Establishments
xxx
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. (Emphasis supplied)
Tax credit is defined as a peso-for-peso reduction from a taxpayer's tax
liability. It is a direct subtraction from the tax payable to the government.
On the other hand, RR 2-94 treated the amount of senior citizens' discount
as a tax deduction which is only a subtraction from gross income resulting
to a lower taxable income. RR 2-94 treats the senior citizens' discount in
the same manner as the allowable deductions provided in Section 34,
Chapter VII of the National Internal Revenue Code. RR 2-94 affords merely
a fractional reduction in the taxes payable to the government depending
on the applicable tax rate.
In Commissioner of Internal Revenue v. Central Luzon Drug
Corporation,24 the Court ruled that petitioner's definition in RR 2-94 of a tax
credit is clearly erroneous. To deny the tax credit, despite the plain
mandate of the law, is indefensible. In Commissioner of Internal Revenue
v. Central Luzon Drug Corporation, the Court declared, "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 Court further stated that the law cannot be
amended by a mere regulation because "administrative agencies in 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." Hence, there being a dichotomy in the law and the revenue regulation,
the definition provided in Section 2(i) of RR 2-94 cannot be given effect.
The tax credit may still be deducted
from a future, not a present, tax liability.
In the petition filed before this Court, petitioner alleged that respondent
incurred a net loss from its business operations in 1997; hence, it did not
pay any income tax. Since no tax payment was made, it follows that no tax
credit can also be claimed because tax credits are usually applied against
a tax liability.25
In Commissioner of Internal Revenue v. Central Luzon Drug
Corporation,26 the Court stressed that prior payment of tax liability is not a
pre-condition before a taxable entity can avail of the tax credit. The Court
declared, "Where there is no tax liability or where a private establishment
reports a net loss for the period, the tax credit can be availed of and carried
over to the next taxable year."27 It is irrefutable that under RA 7432,
Congress has granted the tax credit benefit to all covered establishments
without conditions. Therefore, neither a tax liability nor a prior tax payment
is required for the existence or grant of a tax credit.28 The applicable law
on this point is clear and without any qualifications.29
Hence, respondent is entitled to claim the amount of P2,376,805.63 as tax
credit despite incurring net loss from business operations for the taxable
year 1997.
The senior citizens' discount may be claimed
as a tax credit and not a refund.
Section 4(a) of RA 7432 expressly provides that private establishments
may claim the cost as a tax credit. A tax credit can only be utilized as
payment for future internal revenue tax liabilities of the taxpayer while a tax
refund, issued as a check or a warrant, can be encashed. A tax refund can
be availed of immediately while a tax credit can only be utilized if the
taxpayer has existing or future tax liabilities.
If the words of the law are clear, plain, and free of ambiguity, it must be
given its literal meaning and applied without any interpretation. Hence, the
senior citizens' discount may be claimed as a tax credit and not as a
refund.30
RA 9257 now specifically provides that all covered establishments
may claim the senior citizens' discount as tax deduction.
On 26 February 2004, RA 9257, otherwise known as the "Expanded Senior
Citizens Act of 2003," was signed into law and became effective on 21
March 2004.31
Page 55 of 70
RA 9257 has amended RA 7432. Section 4(a) of RA 9257 reads:
"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 medicinesin all establishments for the exclusive
use or enjoyment of senior citizens, including funeral and burial
services for the death of senior citizens;
xxx
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 supplied)
Contrary to the provision in RA 7432 where the senior citizens' discount
granted by all covered establishments can be claimed as tax credit, RA
9257 now specifically provides that this discount should be treated as tax
deduction.
With the effectivity of RA 9257 on 21 March 2004, there is now a new tax
treatment for senior citizens' discount granted by all covered
establishments. This discount should be considered as a deductible
expense from gross income and no longer as tax credit.32 The present
case, however, covers the taxable year 1997 and is thus governed by the
old law, RA 7432.
WHEREFORE, we DENY the petition. We AFFIRM the assailed Decision
of the Court of Appeals dated 13 August 2003 in CA-G.R. SP No. 70480.
No pronouncement as to costs.
SO ORDERED.
G.R. No. 180651 July 30, 2014
NURSERY CARE CORPORATION; SHOEMART, INC.; STAR
APPLIANCE CENTER, INC.; H&B, INC.; SUPPLIES STATION, INC.;
and HARDWARE WORKSHOP, INC., Petitioners,
vs.
ANTHONY ACEVEDO, in his capacity as THE TREASURER OF
MANILA; and THE CITY OF MANILA,Respondents.
DECISION
BERSAMIN, J.:
The issue here concerns double taxation. There is double taxation when
the same taxpayer is taxed twice when he should be taxed only once for
the same purpose by the same taxing authority within the same jurisdiction
during the same taxing period, and the taxes are of the same kind or
character. Double taxation is obnoxious.
The Case
Under review are the resolution promulgated in CA-G.R. SP No. 72191 on
June 18, 2007,1 whereby the Court of Appeals (CA) denied petitioners'
appeal for lack of jurisdiction; and the resolution promulgated on November
14, 2007,2 whereby the CA denied their motion for reconsideration for its
lack of merit.
Antecedents
The City of Manila assessed and collected taxes from the individual
petitioners pursuant to Section 15 (Tax on Wholesalers, Distributors, or
Dealers) and Section 17 (Tax on Retailers) of the Revenue Code of
Manila.3 At the same time, the City of Manila imposed additional taxes upon
the petitioners pursuant to Section 21 ofthe Revenue Code of Manila,4 as
amended, as a condition for the renewal of their respective business
licenses for the year 1999. Section 21 of the Revenue Code of Manila
stated:
Page 56 of 70
Section 21. Tax on Business Subject to the Excise, Value-Added or
Percentage Taxes under the NIRC - On any of the following businesses
and articles of commerce subject to the excise, value-added or percentage
taxes under the National Internal Revenue Code, hereinafter referred to as
NIRC, as amended, a tax of FIFTY PERCENT (50%) OF ONE PERCENT
(1%) per annum on the gross sales or receipts of the preceding calendar
year is hereby imposed:
A) On person who sells goods and services in the course of trade or
businesses; x x x PROVIDED, that all registered businesses in the City of
Manila already paying the aforementioned tax shall be exempted from
payment thereof.
To comply with the City of Manila’s assessmentof taxes under Section 21,
supra, the petitioners paid under protest the following amounts
corresponding to the first quarter of 1999,5 to wit:
(a) Nursery Care Corporation ₱595,190.25
(b) Shoemart Incorporated ₱3,283,520.14
(c) Star Appliance Center ₱236,084.03
(d) H & B, Inc. ₱1,271,118.74
(e) Supplies Station, Inc. ₱239,501.25
(f) Hardware Work Shop, Inc. ₱609,953.24
By letter dated March 1, 1999, the petitioners formally requested the Office
of the City Treasurer for the tax credit or refund of the local business taxes
paid under protest.6 However, then City Treasurer Anthony Acevedo
(Acevedo) denied the request through his letter of March 10, 1999.7
On April 8, 1999, the petitioners, through their representative, Cecilia R.
Patricio, sought the reconsideration of the denial of their request.8 Still, the
City Treasurer did not reconsider.9 In the meanwhile, Liberty Toledo
succeeded Acevedo as the City Treasurer of Manila.10
On April 29, 1999, the petitioners filed their respective petitions for
certiorariin the Regional Trial Court (RTC) in Manila. The petitions,
docketed as Civil Cases Nos. 99-93668 to 99-93673,11 were initially raffled
to different branches, but were soon consolidated in Branch 34.12 After the
presiding judge of Branch 34 voluntarily inhibited himself, the consolidated
cases were transferred to Branch 23,13 but were again re-raffled to Branch
19 upon the designation of Branch 23 as a special drugs court.14
The parties agreed on and jointly submitted the following issues for the
consideration and resolution of the RTC, namely:
(a) Whether or not the collection of taxes under Section 21 of
Ordinance No. 7794, as amended, constitutes double taxation.
(b) Whether or not the failure of the petitioners to avail of the
statutorily provided remedy for their tax protest on the ground of
unconstitutionality, illegality and oppressiveness under Section
187 of the Local Government Code renders the present action
dismissible for non-exhaustion of administrative remedy.15
Decision of the RTC
On April 26, 2002, the RTC rendered its decision, holding thusly:
The Court perceives of no instance of the constitutionally proscribed
double taxation, in the strict, narrow or obnoxious sense, imposed upon
the petitioners under Section 15 and 17, on the one hand, and under
Section 21, on the other, of the questioned Ordinance. The tax imposed
under Section 15 and 17, as against that imposed under Section 21, are
levied against different tax objects or subject matter. The tax under Section
15 is imposed upon wholesalers, distributors or dealers, while that under
Section 17 is imposedupon retailers. In short, taxes imposed under Section
15 and 17 is a tax on the business of wholesalers, distributors, dealers and
retailers. On the other hand, the tax imposed upon herein petitioners under
Section 21 is not a tax against the business of the petitioners (as
wholesalers, distributors, dealers or retailers)but is rather a tax against
consumers or end-users of the articles sold by petitioners. This is plain
from a reading of the modifying paragraph of Section 21 which says:
"The tax shall be payable by the person paying for the services rendered
and shall be paid to the person rendering the services who is required to
Page 57 of 70
collect and pay the tax within twenty (20) days after the end of each
quarter." (Underscoring supplied)
In effect, the petitioners only act as the collection or withholding agent of
the City while the ones actually paying the tax are the consumers or end-
users of the articles being sold by petitioners. The taxes imposed under
Sec. 21 represent additional amounts added by the business
establishment to the basic prices of its goods and services which are paid
by the end-users to the businesses. It is actually not taxes on the business
of petitioners but on the consumers. Hence, there is no double taxation in
the narrow, strict or obnoxious sense,involved in the imposition of taxes by
the City of Manila under Sections 15, 17 and 21 of the questioned
Ordinance. This in effect resolves infavor of the constitutionality of the
assailed sections of Ordinance No. 7807 of the City of Manila.
Petitioners, likewise, pray the Court to direct respondents to cease and
desist from implementing Section 21 of the questioned Ordinance. That the
Court cannot do, without doing away with the mandatory provisions of
Section 187 of the Local Government Code which distinctly commands that
an appeal questioning the constitutionality or legality of a tax ordinance
shall not have the effectof suspending the effectivity of the ordinance and
the accrual and payment of the tax, fee or charge levied therein. This is so
because an ordinance carries with it the presumption of validity.
xxx
With the foregoing findings, petitioners’ prayer for the refund of the
amounts paid by them under protest must, likewise, fail.
Wherefore, the petitions are dismissed. Without pronouncement as to
costs.
SO ORDERED.16
The petitioners appealed to the CA.17
Ruling of the CA
On June 18, 2007, the CA deniedthe petitioners’ appeal, ruling as follows:
The six (6) cases were consolidated on a common question of fact and THE COURT OF APPEALS, IN DISMISSING THE APPEAL OF THE
law, that is, whether the act ofthe City Treasurer of Manila of assessing PETITIONERS AND DENYING THEIR MOTION FOR
and collecting business taxes under Section 21of Ordinance 7807, on top RECONSIDERATION, ERRED INRULING THAT THE ISSUE INVOLVED
of other business taxes alsoassessed and collected under the previous IS A PURELY LEGAL QUESTION.
sections of the same ordinance is a violation of the provisions of Section
143 of the Local Government Code. B.

Clearly, the disposition of the present appeal in these consolidated cases
does not necessitate the calibration of the whole evidence as there is no
question or doubt as to the truth or the falsehood of the facts obtaining
herein, as both parties agree thereon. The present case involves a
question of law that would not lend itself to an examination or evaluation
by this Court of the probative value of the evidence presented.
THE COURT OF APPEALS ERRED IN NOT REVERSING THE
DECISION OF BRANCH 19 OF THE REGIONAL TRIAL COURT OF
MANILA DATED 26 APRIL 2002 DENYING PETITIONERS’ PRAYER
FOR REFUND OF THE AMOUNTS PAID BY THEM UNDER PROTEST
AND DISMISSING THE PETITION FOR CERTIORARI FILED BY THE
PETITIONERS.

Thus the Court is constrained todismiss the instant petition for lack of
jurisdiction under Section 2,Rule 50 of the 1997 Rules on Civil Procedure
which states:
"Sec. 2. Dismissal of improper appeal to the Court of Appeals. – An appeal
under Rule 41 taken from the Regional Trial Court to the Court of Appeals
raising only questions of law shall be dismissed, issues purely of law not
being reviewable by said court. similarly, an appeal by notice of appeal
instead of by petition for review from the appellate judgment of a Regional
Trial Court shall be dismissed.
An appeal erroneously taken tothe Court of Appeals shall not be
transferred to the appropriate court but shall be dismissed outright.
WHEREFORE, the foregoing considered, the appeal is DISMISSED.
SO ORDERED.18
The petitioners moved for reconsideration, but the CA denied their motion
through the resolution promulgated on November 14, 2007.19
C.
THE COURT OF APPEALS ERRED IN NOT RULING THAT THE ACT OF
THE CITY TREASURER OF MANILA IN IMPOSING, ASSESSING AND
COLLECTING THE ADDITIONAL BUSINESS TAX UNDER SECTION 21
OFORDINANCE NO. 7794, AS AMENDED BY ORDINANCE NO. 7807,
ALSO KNOWN AS THE REVENUE CODE OF THE CITY OFMANILA, IS
CONSTITUTIVE OF DOUBLE TAXATION AND VIOLATIVE OF THE
LOCAL GOVERNMENT CODE OF 1991.20
The main issues for resolution are, therefore, (1) whether or not the CA
properly denied due course to the appeal for raising pure questions of law;
and (2) whether or not the petitioners were entitled to the tax credit or tax
refund for the taxes paid under Section 21, supra.
Ruling
The appeal is meritorious.
1.

Issues The CA did not err in dismissing the appeal;

but the rules should be liberally applied
The petitioners now appeal, raising the following grounds, to wit: for the sake of justice and equity

A.

Page 58 of 70
The Rules of Courtprovides three modes of appeal from the decisions and
final orders of the RTC, namely: (1) ordinary appeal or appeal by writ of
error under Rule 41, where the decisionsand final orders were rendered in
civil or criminal actions by the RTC in the exercise of original jurisdiction;
(2) petition for review under Rule 42, where the decisions and final orders
were rendered by the RTC in the exerciseof appellate jurisdiction; and (3)
petition for review on certiorarito the Supreme Court under Rule 45.21 The
first mode of appeal is taken to the CA on questions of fact, or mixed
questions of fact and law. The second mode of appeal is brought to the CA
on questions of fact, of law, or mixed questions of fact and law.22 The third
mode of appeal is elevated to the Supreme Court only on questions of
law.23
The distinction between a question oflaw and a question of fact is well
established. On the one hand, a question of law ariseswhen there is doubt
as to what the law is on a certain state of facts; on the other, there is a
question of fact when the doubt arises asto the truth or falsity of the alleged
facts.24 According to Leoncio v. De Vera:25
x x x For a question to beone of law, the same must not involve an
examination of the probative value ofthe evidence presented by the
litigants or any of them. The resolution of the issue must restsolely on what
the law provides on the given set of circumstances. Once it is clear that the
issue invites a review of the evidence presented, the question posed is one
of fact. Thus, the test of whether a question isone of law or offact is not the
appellation given to such question by the party raising the same; rather, it
is whether the appellate court can determine the issue raised without
reviewing or evaluating the evidence, in which case, it is a question oflaw;
otherwise it is a question of fact.26
The nature of the issues to be raised on appeal can be gleaned from the
appellant’s notice of appeal filed in the trial court, and from the appellant’s
brief submitted to the appellate court.27 In this case, the petitioners filed a
notice of appeal in which they contended that the April 26, 2002 decision
and the order of July 17, 2002 issued by the RTC denying their
consolidated motion for reconsideration were contrary to the facts and law
obtaining in the consolidated cases. In their consolidated memorandum
28
filed in the CA, they essentially assailed the RTC’s ruling that the taxes
imposed on and collected from the petitioners under Section 21 of the
Revenue Code of Manila constituted double taxation in the strict, narrow
or obnoxious sense. Considered together, therefore, the notice of appeal
and consolidated memorandum evidently did notraise issues that required
Page 59 of 70
the reevaluation of evidence or the relevance of surrounding
circumstances.
The CA rightly concluded that the petitioners thereby raised only a question
of law. The dismissal of their appeal was proper, strictly speaking, because
Section 2, Rule 50 of the Rules of Court provides that an appeal from the
RTC to the CA raising only questions of law shall be dismissed;
and that an appeal erroneously taken to the CA shall be outrightly
dismissed.29
2.
Collection of taxes pursuant to Section 21 of the
Revenue Code of Manila constituted double taxation
The foregoing notwithstanding, the Court, given the circumstances
obtaining herein and in light of jurisprudence promulgated subsequent to
the filing of the petition, deems it fitting and proper to adopt a liberal
approach in order to render a justand speedy disposition of the substantive
issue at hand. Hence, we resolve, bearing inmind the following
pronouncement in Go v. Chaves:30
Our rules of procedure are designed to facilitate the orderly disposition of
cases and permit the prompt disposition of unmeritorious cases which clog
the court dockets and do little more than waste the courts’ time. These
technical and procedural rules, however, are intended to ensure, rather
than suppress, substantial justice. A deviation from their rigid enforcement
may thus be allowed, as petitioners should be given the fullest opportunity
to establish the merits of their case, rather than lose their property on mere
technicalities. We held in Ong Lim Sing, Jr. v. FEB Leasing and Finance
Corporation that:
Courts have the prerogative to relax procedural rules of even the most
mandatory character, mindful of the duty to reconcile both the need to
speedily put an end to litigation and the parties' right to due process.In
numerous cases, this Court has allowed liberal construction of the rules
when to do so would serve the demands of substantial justice and equity.
The petitioners point out that although Section 21 of the Revenue Code of
Manila was not itself unconstitutional or invalid, its enforcement against the
petitioners constituted double taxation because the local business taxes
under Section 15 and Section 17 of the Revenue Code of Manila were
already being paid by them.31 They contend that the proviso in Section 21
exempted all registered businesses in the City of Manila from paying the
tax imposed under Section 21;32 and that the exemption was more in
accord with Section 143 of the Local Government Code,33 the law that
vested in the municipal and city governments the power to impose
business taxes.
The respondents counter, however, that double taxation did not occur from
the imposition and collection of the tax pursuant to Section 21 of the
Revenue Code of Manila;34 that the taxes imposed pursuant to Section 21
were in the concept of indirect taxes upon the consumers of the goods and
services sold by a business establishment;35 and that the petitioners did not
exhaust their administrative remedies by first appealing to the Secretary of
Justice to challenge the constitutionalityor legality of the tax ordinance.36
In resolving the issue of double taxation involving Section 21 of the
Revenue Code of Manila, the Court is mindful of the ruling in City of Manila
v. Coca-Cola Bottlers Philippines, Inc.,37 which has been reiterated in
Swedish Match Philippines, Inc. v. The Treasurer of the City of Manila.38 In
the latter, the Court has held:
x x x [T]he issue of double taxation is not novel, as it has already been
settled by this Court in The City of Manila v. Coca-Cola Bottlers Philippines,
Inc.,in this wise:
Petitioners obstinately ignore the exempting proviso in Section 21 of Tax
Ordinance No. 7794, to their own detriment. Said exempting proviso was
1âw phi 1
precisely included in said section so as to avoid double taxation.
Double taxation means taxingthe same property twice when it should be
taxed only once; that is, "taxing the same person twice by the same
jurisdictionfor the same thing." It is obnoxious when the taxpayer is taxed
twice, when it should be but once. Otherwise described as "direct duplicate
taxation," the two taxes must be imposed on the same subject matter, for
the same purpose, by the same taxing authority, within the same
jurisdiction, during the same taxing period; and the taxes must be of the
same kind or character.
Page 60 of 70
Using the aforementioned test, the Court finds that there is indeed double
taxation if respondent is subjected to the taxes under both Sections 14 and
21 of Tax Ordinance No. 7794, since these are being imposed: (1) on the
same subject matter – the privilege of doing business in the City of Manila;
(2) for the same purpose – to make persons conducting business within
the City of Manila contribute tocity revenues; (3) by the same taxing
authority – petitioner Cityof Manila; (4) within the same taxing jurisdiction
– within the territorial jurisdiction of the City of Manila; (5) for the same
taxing periods – per calendar year; and (6) of the same kind or character
– a local business tax imposed on gross sales or receipts of the business.
The distinction petitioners attempt to make between the taxes under
Sections 14 and 21 of Tax Ordinance No. 7794 is specious. The Court
revisits Section 143 of the LGC, the very source of the power of
municipalities and cities to impose a local business tax, and to which any
local business tax imposed by petitioner City of Manila must conform. It is
apparent from a perusal thereof that when a municipality or city has already
imposed a business tax on manufacturers, etc.of liquors, distilled spirits,
wines, and any other article of commerce, pursuant to Section 143(a) of
the LGC, said municipality or city may no longer subject the same
manufacturers, etc.to a business tax under Section 143(h) of the same
Code. Section 143(h) may be imposed only on businesses that are subject
to excise tax, VAT, or percentagetax under the NIRC, and that are "not
otherwise specified in preceding paragraphs." In the same way,
businesses such as respondent’s, already subject to a local business tax
under Section 14 of Tax Ordinance No. 7794 [which is based on Section
143(a) of the LGC], can no longer be made liable for local business tax
under Section 21 of the same Tax Ordinance [which is based on Section
143(h) of the LGC].
Based on the foregoing reasons, petitioner should not have been subjected
to taxes under Section 21 of the ManilaRevenue Code for the fourth quarter
of 2001, considering thatit had already been paying local business tax
under Section 14 of the same ordinance.
xxxx
Accordingly, respondent’s assessment under both Sections 14 and 21 had
no basis. Petitioner is indeed liable to pay business taxes to the City of
Manila; nevertheless, considering that the former has already paid these
taxes under Section 14 of the Manila Revenue Code, it is exempt from the
same payments under Section 21 of the same code. Hence, payments
made under Section 21 must be refunded in favor of petitioner.
It is undisputed thatpetitioner paid business taxes based on Sections 14
and 21 for the fourth quarter of 2001 in the total amount of ₱470,932.21.
Therefore, it is entitled to a refund of ₱164,552.04 corresponding to the
payment under Section 21 of the Manila Revenue Code.
On the basis of the rulings in Coca-Cola Bottlers Philippines, Inc. and
Swedish Match Philippines, Inc., the Court now holds that all the elements
of double taxation concurred upon the Cityof Manila’s assessment on and
collection from the petitioners of taxes for the first quarter of 1999 pursuant
to Section 21 of the Revenue Code of Manila.
Firstly, because Section 21 of the Revenue Code of Manila imposed the
tax on a person who sold goods and services in the course of trade or
business based on a certain percentage ofhis gross sales or receipts in the
preceding calendar year, while Section 15 and Section 17 likewise
imposed the tax on a person who sold goods and services in the course of
trade or business but only identified such person with particularity, namely,
the wholesaler, distributor or dealer (Section 15), and the retailer (Section
17), all the taxes – being imposed on the privilege of doing business in the
City of Manila in order to make the taxpayers contributeto the city’s
revenues – were imposed on the same subject matter and for the same
purpose.
Secondly, the taxes were imposed by the same taxing authority (the City
of Manila) and within the same jurisdiction in the same taxing period (i.e.,
per calendar year).
Thirdly, the taxes were all in the nature of local business taxes.
We note that although Coca-Cola Bottlers Philippines, Inc. and Swedish
Match Philippines, Inc. involved Section 21 vis-à-vis Section 14 (Tax on
Manufacturers, Assemblers and Other Processors)39 of the Revenue Code
of Manila, the legal principlesenunciated therein should similarly apply
because Section 15 (Tax on Wholesalers, Distributors, or Dealers)and
Section 17 (Tax on Retailers) of the Revenue Code of Manila imposed the
same nature of tax as that imposed under Section 14, i.e., local business
tax, albeit on a different subject matter or group of taxpayers.
In fine, the imposition of the tax under Section 21 of the Revenue Code of
Manila constituted double taxation, and the taxes collected pursuant
thereto must be refunded.
WHEREFORE, the Court GRANTS the petition for review on certiorari;
REVERSES and SETS ASIDE the resolutions promulgated on June 18,
2007 and November 14, 2007 in CA-G.R. SP No. 72191; and DIRECTS
the City of Manila to refund the payments made by the petitioners of the
taxes assessed and collected for the first quarter of 1999 pursuant to
Section 21 of the Revenue Code of Manila.
No pronouncement on costs of suit.
SO ORDERED.
G.R. No. 168056 October 18, 2005
Agenda for Item No. 45
G.R. No. 168056 (ABAKADA Guro Party List Officer Samson S.
Alcantara, et al. vs. The Hon. Executive Secretary Eduardo R. Ermita);
G.R. No. 168207 (Aquilino Q. Pimentel, Jr., et al. vs. Executive
Secretary Eduardo R. Ermita, et al.); G.R. No. 168461 (Association of
Pilipinas Shell Dealers, Inc., et al. vs. Cesar V. Purisima, et al.); G.R.
No. 168463 (Francis Joseph G. Escudero vs. Cesar V. Purisima, et al);
and G.R. No. 168730 (Bataan Governor Enrique T. Garcia, Jr. vs. Hon.
Eduardo R. Ermita, et al.)
RESOLUTION
For resolution are the following motions for reconsideration of the Court’s
Decision dated September 1, 2005 upholding the constitutionality of
Republic Act No. 9337 or the VAT Reform Act1:
1) Motion for Reconsideration filed by petitioners in G.R. No. 168463,
Escudero, et al., on the following grounds:
A. THE DELETION OF THE "NO PASS ON PROVISIONS" FOR THE
SALE OF PETROLEUM PRODUCTS AND POWER GENERATION
SERVICES CONSTITUTED GRAVE ABUSE OF DISCRETION

Page 61 of 70
AMOUNTING TO LACK OR EXCESS OF JURISDICTION ON THE PART
OF THE BICAMERAL CONFERENCE COMMITTEE.
B. REPUBLIC ACT NO. 9337 GROSSLY VIOLATES THE
CONSTITUTIONAL IMPERATIVE ON EXCLUSIVE ORIGINATION OF
REVENUE BILLS UNDER §24, ARTICLE VI, 1987 PHILIPPINE
CONSTITUTION.
C. REPUBLIC ACT NO. 9337’S STAND-BY AUTHORITY TO THE
EXECUTIVE TO INCREASE THE VAT RATE, ESPECIALLY ON
ACCOUNT OF THE EFFECTIVE RECOMMENDATORY POWER
GRANTED TO THE SECRETARY OF FINANCE, CONSTITUTES UNDUE
DELEGATION OF LEGISLATIVE AUTHORITY.
2) Motion for Reconsideration of petitioner in G.R. No. 168730, Bataan
Governor Enrique T. Garcia, Jr., with the argument that burdening the
consumers with significantly higher prices under a VAT regime vis-à-vis a
3% gross tax renders the law unconstitutional for being arbitrary,
oppressive and inequitable.
and
3) Motion for Reconsideration by petitioners Association of Pilipinas Shell
Dealers, Inc. in G.R. No. 168461, on the grounds that:
I. This Honorable Court erred in upholding the constitutionality of Section
110(A)(2) and Section 110(B) of the NIRC, as amended by the EVAT Law,
imposing limitations on the amount of input VAT that may be claimed as a
credit against output VAT, as well as Section 114(C) of the NIRC, as
amended by the EVAT Law, requiring the government or any of its
instrumentalities to withhold a 5% final withholding VAT on their gross
payments on purchases of goods and services, and finding that the
questioned provisions:
A. are not arbitrary, oppressive and consfiscatory as to amount to a
deprivation of property without due process of law in violation of Article III,
Section 1 of the 1987 Philippine Constitution;
B. do not violate the equal protection clause prescribed under Article III,
Section 1 of the 1987 Philippine Constitution; and
Page 62 of 70
C. apply uniformly to all those belonging to the same class and do not
violate Article VI, Section 28(1) of the 1987 Philippine Constitution.
II. This Honorable Court erred in upholding the constitutionality of Section
110(B) of the NIRC, as amended by the EVAT Law, imposing a limitation
on the amount of input VAT that may be claimed as a credit against output
VAT notwithstanding the finding that the tax is not progressive as exhorted
by Article VI, Section 28(1) of the 1987 Philippine Constitution.
Respondents filed their Consolidated Comment. Petitioner Garcia filed his
Reply.
Petitioners Escudero, et al., insist that the bicameral conference committee
should not even have acted on the no pass-on provisions since there is no
disagreement between House Bill Nos. 3705 and 3555 on the one hand,
and Senate Bill No. 1950 on the other, with regard to the no pass-
on provision for the sale of service for power generation because both the
Senate and the House were in agreement that the VAT burden for the sale
of such service shall not be passed on to the end-consumer. As to the no
pass-on provision for sale of petroleum products, petitioners argue that the
fact that the presence of such a no pass-on provision in the House version
and the absence thereof in the Senate Bill means there is no conflict
because "a House provision cannot be in conflict with something that does
not exist."
Such argument is flawed. Note that the rules of both houses of Congress
provide that a conference committee shall settle the "differences" in the
respective bills of each house. Verily, the fact that a no pass-on provision
is present in one version but absent in the other, and one version intends
two industries, i.e., power generation companies and petroleum sellers, to
bear the burden of the tax, while the other version intended only the
industry of power generation, transmission and distribution to be saddled
with such burden, clearly shows that there are indeed differences between
the bills coming from each house, which differences should be acted upon
by the bicameral conference committee. It is incorrect to conclude that
there is no clash between two opposing forces with regard to the no pass-
on provision for VAT on the sale of petroleum products merely because
such provision exists in the House version while it is absent in the Senate
version. It is precisely the absence of such provision in the Senate bill and
the presence thereof in the House bills that causes the conflict. The
absence of the provision in the Senate bill shows the Senate’s
disagreement to the intention of the House of Representatives make the
sellers of petroleum bear the burden of the VAT. Thus, there are indeed
two opposing forces: on one side, the House of Representatives which
wants petroleum dealers to be saddled with the burden of paying VAT and
on the other, the Senate which does not see it proper to make that
particular industry bear said burden. Clearly, such conflicts and differences
between the no pass-on provisions in the Senate and House bills had to
be acted upon by the bicameral conference committee as mandated by the
rules of both houses of Congress.
Moreover, the deletion of the no pass-on provision made the present VAT
law more in consonance with the very nature of VAT which, as stated in
the Decision promulgated on September 1, 2005, is a tax on spending or
consumption, thus, the burden thereof is ultimately borne by the end-
consumer.
Escudero, et al., then claim that there had been changes introduced in the
Rules of the House of Representatives regarding the conduct of the House
panel in a bicameral conference committee, since the time of Tolentino vs.
Secretary of Finance2 to act as safeguards against possible abuse of
authority by the House members of the bicameral conference committee.
Even assuming that the rule requiring the House panel to report back to
the House if there are substantial differences in the House and Senate bills
had indeed been introduced after Tolentino, the Court stands by its ruling
that the issue of whether or not the House panel in the bicameral
conference committee complied with said internal rule cannot be inquired
into by the Court. To reiterate, "mere failure to conform to parliamentary
usage will not invalidate the action (taken by a deliberative body) when the
requisite number of members have agreed to a particular measure."3
Escudero, et. al., also contend that Republic Act No. 9337 grossly violates
the constitutional imperative on exclusive origination of revenue bills under
Section 24 of Article VI of the Constitution when the Senate introduced
amendments not connected with VAT.
The Court is not persuaded.
Article VI, Section 24 of the Constitution provides:
Sec. 24 All appropriation, revenue or tariff bills, bills authorizing increase
of the public debt, bills of local application, and private bills shall originate
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exclusively in the House of Representatives, but the Senate may propose
or concur with amendments.
Section 24 speaks of origination of certain bills from the House of
Representatives which has been interpreted in the Tolentino case as
follows:
… To begin with, it is not the law — but the revenue bill — which is required
by the Constitution to "originate exclusively" in the House of
Representatives. It is important to emphasize this, because a bill
originating in the House may undergo such extensive changes in the
Senate that the result may be a rewriting of the whole … At this point, what
is important to note is that, as a result of the Senate action, a distinct bill
may be produced. To insist that a revenue statute — and not only the bill
which initiated the legislative process culminating in the enactment of the
law — must substantially be the same as the House bill would be to deny
the Senate's power not only to "concur with amendments" but also to "
propose amendments." It would be to violate the coequality of legislative
power of the two houses of Congress and in fact make the House superior
to the Senate.
… Given, then, the power of the Senate to propose amendments, the
Senate can propose its own version even with respect to bills which are
required by the Constitution to originate in the House.
...
Indeed, what the Constitution simply means is that the initiative for filing
revenue, tariff, or tax bills, bills authorizing an increase of the public debt,
private bills and bills of local application must come from the House of
Representatives on the theory that, elected as they are from the districts,
the members of the House can be expected to be more sensitive to the
local needs and problems. On the other hand, the senators, who are
elected at large, are expected to approach the same problems from the
national perspective. Both views are thereby made to bear on the
enactment of such laws.4
Clearly, after the House bills as approved on third reading are duly
transmitted to the Senate, the Constitution states that the latter can
propose or concur with amendments. The Court finds that the subject
provisions found in the Senate bill are within the purview of such
constitutional provision as declared in the Tolentino case.
The intent of the House of Representatives in initiating House Bill Nos.
3555 and 3705 was to solve the country’s serious financial problems. It
was stated in the respective explanatory notes that there is a need for the
government to make significant expenditure savings and a credible
package of revenue measures. These measures include improvement of
tax administration and control and leakages in revenues from income taxes
and value added tax. It is also stated that one opportunity that could be
beneficial to the overall status of our economy is to review existing tax
rates, evaluating the relevance given our present conditions. Thus, with
these purposes in mind and to accomplish these purposes for which the
house bills were filed, i.e., to raise revenues for the government, the
Senate introduced amendments on income taxes, which as admitted by
Senator Ralph Recto, would yield about ₱10.5 billion a year.
Moreover, since the objective of these house bills is to raise revenues, the
increase in corporate income taxes would be a great help and would also
soften the impact of VAT measure on the consumers by distributing the
burden across all sectors instead of putting it entirely on the shoulders of
the consumers.
As to the other National Internal Revenue Code (NIRC) provisions found
in Senate Bill No. 1950, i.e., percentage taxes, franchise taxes,
amusement and excise taxes, these provisions are needed so as to
cushion the effects of VAT on consumers. As we said in our decision,
certain goods and services which were subject to percentage tax and
excise tax would no longer be VAT exempt, thus, the consumer would be
burdened more as they would be paying the VAT in addition to these taxes.
Thus, there is a need to amend these sections to soften the impact of VAT.
The Court finds no reason to reverse the earlier ruling that the Senate
introduced amendments that are germane to the subject matter and
purposes of the house bills.
Petitioners Escudero, et al., also reiterate that R.A. No. 9337’s stand- by
authority to the Executive to increase the VAT rate, especially on account
of the recommendatory power granted to the Secretary of Finance,
constitutes undue delegation of legislative power. They submit that the
recommendatory power given to the Secretary of Finance in regard to the
occurrence of either of two events using the Gross Domestic Product
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(GDP) as a benchmark necessarily and inherently required extended
analysis and evaluation, as well as policy making.
There is no merit in this contention. The Court reiterates that in making his
recommendation to the President on the existence of either of the two
conditions, the Secretary of Finance is not acting as the alter ego of the
President or even her subordinate. He is acting as the agent of the
legislative department, to determine and declare the event upon which its
expressed will is to take effect. The Secretary of Finance becomes the
means or tool by which legislative policy is determined and implemented,
considering that he possesses all the facilities to gather data and
information and has a much broader perspective to properly evaluate
them. His function is to gather and collate statistical data and other
pertinent information and verify if any of the two conditions laid out by
Congress is present. Congress granted the Secretary of Finance the
authority to ascertain the existence of a fact, namely, whether by
December 31, 2005, the value-added tax collection as a percentage of
GDP of the previous year exceeds two and four-fifth percent (24/5%) or the
national government deficit as a percentage of GDP of the previous year
exceeds one and one-half percent (1½%). If either of these two instances
has occurred, the Secretary of Finance, by legislative mandate, must
submit such information to the President. Then the 12% VAT rate must be
imposed by the President effective January 1, 2006. Congress does not
abdicate its functions or unduly delegate power when it describes what job
must be done, who must do it, and what is the scope of his authority; in our
complex economy that is frequently the only way in which the legislative
process can go forward. There is no undue delegation of legislative power
but only of the discretion as to the execution of a law. This is constitutionally
permissible. Congress did not delegate the power to tax but the mere
implementation of the law. The intent and will to increase the VAT rate to
12% came from Congress and the task of the President is to simply
execute the legislative policy. That Congress chose to use the GDP as a
benchmark to determine economic growth is not within the province of the
Court to inquire into, its task being to interpret the law.
With regard to petitioner Garcia’s arguments, the Court also finds the same
to be without merit. As stated in the assailed Decision, the Court
recognizes the burden that the consumers will be bearing with the passage
of R.A. No. 9337. But as was also stated by the Court, it cannot strike down
the law as unconstitutional simply because of its yokes. The legislature has
spoken and the only role that the Court plays in the picture is to determine
whether the law was passed with due regard to the mandates of the
Constitution. Inasmuch as the Court finds that there are no constitutional
infirmities with its passage, the validity of the law must therefore be upheld.
Finally, petitioners Association of Pilipinas Shell Dealers, Inc. reiterated
their arguments in the petition, citing this time, the dissertation of Associate
Justice Dante O. Tinga in his Dissenting Opinion.
The glitch in petitioners’ arguments is that it presents figures based on an
event that is yet to happen. Their illustration of the possible effects of the
70% limitation, while seemingly concrete, still remains theoretical. Theories
have no place in this case as the Court must only deal with an existing
case or controversy that is appropriate or ripe for judicial
determination, not one that is conjectural or merely anticipatory.5 The
Court will not intervene absent an actual and substantial controversy
admitting of specific relief through a decree conclusive in nature, as
distinguished from an opinion advising what the law would be upon a
hypothetical state of facts.6
The impact of the 70% limitation on the creditable input tax will ultimately
depend on how one manages and operates its business. Market forces,
strategy and acumen will dictate their moves. With or without these VAT
provisions, an entrepreneur who does not have the ken to adapt to
economic variables will surely perish in the competition. The arguments
posed are within the realm of business, and the solution lies also in
business.
Petitioners also reiterate their argument that the input tax is a property or
a property right. In the same breath, the Court reiterates its finding that it
is not a property or a property right, and a VAT-registered person’s
entitlement to the creditable input tax is a mere statutory privilege.
Petitioners also contend that even if the right to credit the input VAT is
merely a statutory privilege, it has already evolved into a vested right that
the State cannot remove.
As the Court stated in its Decision, the right to credit the input tax is a mere
creation of law. Prior to the enactment of multi-stage sales taxation, the
sales taxes paid at every level of distribution are not recoverable from the
taxes payable. With the advent of Executive Order No. 273 imposing a
10% multi-stage tax on all sales, it was only then that the crediting of the
input tax paid on purchase or importation of goods and services by VAT-
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registered persons against the output tax was established. This continued
with the Expanded VAT Law (R.A. No. 7716), and The Tax Reform Act of
1997 (R.A. No. 8424). The right to credit input tax as against the output tax
is clearly a privilege created by law, a privilege that also the law can limit.
It should be stressed that a person has no vested right in statutory
privileges.7
The concept of "vested right" is a consequence of the constitutional
guaranty of due process that expresses a present fixed interest which in
right reason and natural justice is protected against arbitrary state action;
it includes not only legal or equitable title to the enforcement of a demand
but also exemptions from new obligations created after the right has
become vested. Rights are considered vested when the right to enjoyment
is a present interest, absolute, unconditional, and perfect or fixed and
irrefutable.8 As adeptly stated by Associate Justice Minita V. Chico-Nazario
in her Concurring Opinion, which the Court adopts, petitioners’ right to the
input VAT credits has not yet vested, thus –
It should be remembered that prior to Rep. Act No. 9337, the petroleum
dealers’ input VAT credits were inexistent – they were unrecognized and
disallowed by law. The petroleum dealers had no such property called input
VAT credits. It is only rational, therefore, that they cannot acquire vested
rights to the use of such input VAT credits when they were never entitled
to such credits in the first place, at least, not until Rep. Act No. 9337.
My view, at this point, when Rep. Act No. 9337 has not yet even been
implemented, is that petroleum dealers’ right to use their input VAT as
credit against their output VAT unlimitedly has not vested, being a mere
expectancy of a future benefit and being contingent on the continuance of
Section 110 of the National Internal Revenue Code of 1997, prior to its
amendment by Rep. Act No. 9337.
The elucidation of Associate Justice Artemio V. Panganiban is likewise
worthy of note, to wit:
Moreover, there is no vested right in generally accepted accounting
principles. These refer to accounting concepts, measurement techniques,
and standards of presentation in a company’s financial statements, and
are not rooted in laws of nature, as are the laws of physical science, for
these are merely developed and continually modified by local and
international regulatory accounting bodies. To state otherwise and
recognize such asset account as a vested right is to limit the taxing power
of the State. Unlimited, plenary, comprehensive and supreme, this power
cannot be unduly restricted by mere creations of the State.
More importantly, the assailed provisions of R.A. No. 9337 already involve
legislative policy and wisdom. So long as there is a public end for which
R.A. No. 9337 was passed, the means through which such end shall be
accomplished is for the legislature to choose so long as it is within
constitutional bounds. As stated in Carmichael vs. Southern Coal & Coke
Co.:
If the question were ours to decide, we could not say that the legislature,
in adopting the present scheme rather than another, had no basis for its
choice, or was arbitrary or unreasonable in its action. But, as the state is
free to distribute the burden of a tax without regard to the particular purpose
for which it is to be used, there is no warrant in the Constitution for setting
the tax aside because a court thinks that it could have distributed the
burden more wisely. Those are functions reserved for the legislature.9
WHEREFORE, the Motions for Reconsideration are hereby DENIED
WITH FINALITY. The temporary restraining order issued by the Court
is LIFTED.
SO ORDERED.
(The Justices who filed their respective concurring and dissenting opinions
maintain their respective positions. Justice Dante O. Tinga filed a
dissenting opinion to the present Resolution; while Justice Consuelo
Ynares- Santiago joins him in his dissenting opinion.)
DISSENTING OPINION
Tinga, J.:
Once again, the majority has refused to engage and refute in any
meaningful fashion the arguments raised by the petitioners in G.R. No.
168461. The de minimis appreciation exhibited by the majority of the
issues of 70% cap, the 60-month amortization period, and 5% withholding
VAT on transactions made with the national government is regrettable, with
ruinous consequences for the nation. I see no reason to turn back from any
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of the views expressed in my Dissenting Opinion, and I accordingly dissent
from the denial of the Motion for Reconsideration filed by the petitioners in
G.R. No. 168461.1
The reasons for my vote have been comprehensively discussed in my
previous Dissenting Opinion, and I do not see the need to replicate them
herein. However, I wish to stress a few points.
Tax Statutes May Be Invalidated
If They Pose a Clear and Present Danger
To the Deprivation of Life, Liberty and
Property Without Due Process of Law
The majority again dismisses the arguments of the petitioners as
"theoretical", "conjectural" or merely "anticipatory," notwithstanding that
the injury to the taxpayers resulting from Section 8 and 12 of the E-VAT
Law is ascertainable with mathematical certainty. In support of this view,
the majority cites the Court’s Resolution dated 15 June 2005 in Information
Technology Foundation v. COMELEC,2 one of the rulings issued in that
case subsequent to the main Decision rendered on 13 January 2004. The
reference is grievously ironic, considering that in the 13 January
2004 Decision, the Court, over vigorous dissents, chose anyway to
intervene and grant the petition despite the fact that the petitioners therein
did not allege any violation of any constitutional provision or letter of
statute.3 In this case, the petitioners have squarely invoked the violation of
the Bill of Rights of the Constitution, and yet the majority is suddenly timid,
unlike in Infotech.
Still, the formulation of the majority unfortunately leaves the impression that
any statute, taxing or otherwise, is beyond judicial attack prior to its
implementation. If the tax measure in question provided that the taxpayer
shall remit all income earned to the government beginning 1 January 2008,
would this mean that the Court can take cognizance of the legal challenge
only starting 2 January 2008?
I do not share the majority’s penchant for awaiting the blood spurts before
taking action even when the knife’s edge already dangles. As I maintained
in my Dissenting Opinion, a tax measure may be validly challenged and
stricken down even before its implementation if it poses a clear and present
danger to the deprivation of life, liberty or property of the taxpayer without
due process of law. This is the expectation of every citizen who wishes to
maintain trust in all the branches of government. In the enforcement of the
constitutional rights of all persons, the commonsense expectation is that
the Court, as guardian of these rights, is empowered to step in even before
the prospective violation takes place. Hence, the evolution of the "clear and
present danger" doctrine and other analogous principles, without which,
the Court would be seen as inutile in the face of constitutional violation.
Of course, not every anticipatory threat to constitutional liberties can be
assailed prior to implementation, hence the employment of the "clear and
present danger" standard to separate the wheat from the chaff. Still, the
Court should not be so readily dismissive of the petitioners’ posture herein
merely because it is anticipatory. There should have been a meaningful
engagement by the majority of the facts and formulae presented by the
petitioners before the reasonable conclusion could have been reached on
the maturity of the claim. That the majority has not bothered to do so is
ultimately of tragic consequence.
70% Input VAT Credit
An Impaired Asset
The ponencia, joined by Justices Panganiban and Chico-Nazario, express
the belief that no property rights attach to the input VAT paid by the
taxpayer. This is a bizarre view that assumes that all income earned by
private persons preternaturally belongs to the government, and whatever
is retained by the person after taxes is acquired as a matter of privilege.
This is the sort of thinking that has fermented revolutions throughout
history, such as the American Revolution of 1776.
I pointed out in my Dissenting Opinion that under current accepted
international accounting standards, the 30% prepaid input VAT would be
recorded as a loss in the accounting books, since the possibility of its
recovery is improbable, considering that the E-VAT Law allows its recovery
only after the business has ceased to exist. Even the Bureau of Internal
Revenue itself has long recognized the unutilized input VAT as an asset.
The majority fails to realize that even under the new E-VAT Law, the State
recognizes that the persons who pre-pay that input VAT, usually the
Page 67 of 70
dealers or retailers, are not the persons who are liable to pay for the tax.
The VAT system, as implemented through the previous VAT law and the
new E-VAT Law, squarely holds the end consumer as the taxpayer liable
to shoulder the input VAT. Nonetheless, under the mechanism foisted in
the new E-VAT Law, the dealer or retailer who pre-pays the input VAT is
virtually precluded from recovering the pre-paid input VAT, since the law
only allows such recovery upon the cessation of the business. Indeed, the
only way said class of taxpayers can recover this pre-paid input VAT was
if it were to cease operations at the end of every quarter.
The illusion that blinds the majority to this state of affairs is the claim that
the pre-paid input VAT may anyway be carried over into the succeeding
quarter, a chimera enhanced by the grossly misleading presentation of the
Office of the Solicitor General. What this deception fosters, and what the
majority fails to realize, is that since the taxpayer is perpetually obliged to
remit the 30% input VAT every quarter, there would be a continuous
accumulation of excess input VAT. It is not true then that the input VAT
prepaid for the first quarter can be recovered in the second, third or fourth
quarter of that year, or at any time in the next year for that matter since the
amount of prepaid input VAT accumulates with every succeeding
prepayment of input VAT. Moreover, the accumulation of the prepaid input
VAT diminishes the actual value of the refundable amounts, considering
the established principle of "time-value of money", as explained in
my Dissenting Opinion.
Thus, the pre-paid input VAT, for which the petitioners and other similarly
situated taxpayers are not even ultimately liable in the first place,
represents in tangible terms an actual loss. To put it more succinctly, when
the taxpayer prepays the 30% input VAT, there is no chance for its
recovery except until after the taxpayer ceases to be such. This point is
crucial, as it goes in the heart of the constitutional challenge raised by the
petitioners. A recognition that the input VAT is a property asset places it
squarely in the ambit of the due process clause.
The majority now stresses that prior to Executive Order No. 273 sales
taxes paid by the retailer or dealers were not recoverable. The nature of a
sales tax precisely is that it is shouldered by the seller, not the consumer.
In that case, the clear legislative intent is to encumber the retailer with the
end tax. Under the VAT system, as enshrined under Rep. Act No. 9337,
the new E-VAT Law, there is precisely a legislative recognition that it is the
end user, not the seller, who shoulders the E-VAT. The problem with the
new E-VAT law is that it correspondingly imposes a defeatist mechanism
that obviates this entitlement of the seller by forcibly withholding
in perpetua this pre-paid input VAT.
The majority cites with approval Justice Chico-Nazario’s argument, as
expressed in her concurring opinion, that prior to the new E-VAT Law, the
petroleum dealers in particular had no input VAT credits to speak of, and
therefore, could not assert any property rights to the input VAT credits
under the new law. Of course the petroleum dealers had no input VAT
credits prior to the E-VAT Law because precisely they were not covered
by the VAT system in the first place. What would now be classified as "input
VAT credits" was, in real terms, profit obtainable by the petroleum dealers
prior to the new E-VAT Law. The E-VAT Law stands to diminish such profit,
not by outright taking perhaps, but by ad infinitum confiscation with the
illusory promise of eventual return. Obviously, there is a deprivation of
property in such case; yet is it seriously contended that such deprivation
is ipso facto sheltered if it is not classified as a taking, but instead
reclassified as a "credit"?
It is highly distressful that the Court, in its haste to decree petitioners as
bereft of any vested property rights, rejects the notion that a person has a
vested right to the earnings and profits incurred in business. Before, no
legal basis could be found to prop up such a palpably outlandish claim; but
the Decision, as affirmed by the majority’s Resolution, now enshrines a
temerarious proposition with doctrinal status.
In the Decision, and also in Justice Panganiban’s Separate
Opinion therein, the case of United Paracale Mining Co. v. De la
Rosa4 was cited in support of the proposition that there is no vested right
to the input VAT credit. Justice Panganiban went as far as to cite that case
to support the contention that "[t]here is no vested right in a deferred input
tax account; it is a mere statutory privilege." Reliance on the case is quite
misplaced. First, as pointed out in my Dissenting Opinion, it does not even
pertain to tax credits involving as it does, questions on the jurisdiction of
the Bureau of Mines.5 Second, the putative vested rights therein pertained
to mining claims, yet all mineral resources indisputably belong to the State.
Herein, the rights pertain to profit incurred by private enterprise, and
certainly the majority cannot contend that such profits actually belong to
the State.
As stated in my Dissenting Opinion, the Constitution itself recognizes a
right to income and profit when it recognizes "the right of enterprises to
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reasonable returns on investments, and to expansion and
growth."6 Section 20, Article II of the Constitution further mandates that the
State recognize the indispensable role of the private sector, the
encouragement of private enterprise, and the provision of incentives to
needed investments.7 Indeed, there is a fundamental recognition in any
form of democratic government that recognizes a capitalist economy that
the enterprise has a right to its profits. Today, the Court instead affirms that
there is no such right. Should capital flight ensue, the phenomenom should
not be blamed on investors in view of our judicial system’s rejection of
capitalism’s fundamental precept.
Mainstream Denunciation of 70% Cap
The fact that petitioners are dealers of petroleum products may have left
the impression that the 70% cap singularly affects the petroleum industry;
or that other classes of dealers or retailers do not pose the same objections
to these "innovations" in the E-VAT law. This is far from the truth.
In fact, the clamor against the 70% cap has been widespread among the
players and components in the financial mainstream. Denunciations have
been registered by the Philippine Chamber of Commerce and Industry8,
the Joint Foreign Chambers of the Philippines (comprising of the American
Chamber of Commerce in the Philippines, the Australian-New Zealand
Chamber Commerce of the Philippines, Inc., the Canadian Chamber of
Commerce of the Philippines, Inc., the European Chamber of Commerce
of the Philippines, Inc., the Japanese Chamber of Commerce of the
Philippines, Inc., the Korean Chamber of Commerce and Industry of the
Philippines, and the Philippine Association of Multinational Companies
Regional Headquarters, Inc.),9 the Filipino-Chinese Chamber of
Commerce and Industry,10 the Federation of Philippine Industries,11 the
Consumer and Oil Price Watch,12 the Association of Certified Public
Accountants in Public Practice,13 the Philippine Tobacco Institute,14 and the
auditing firm of PricewaterhouseCooper.15
Even newly installed Finance Secretary Margarito Teves has expressed
concern that the 70% input VAT "may not work across all industries
because of varying profit margins".16 Other experts who have voiced
concerns on the 70% input VAT are former NEDA Directors Cielito
Habito17 and Solita Monsod,18 Peter Wallace of the Wallace Business
Forum,19 and Paul R. Cooper, director of PricewaterhouseCooper.
In fact, Mr. Cooper published in the Philippine Daily Inquirer a lengthy
disquisition on the problems surrounding the 70% cap, portions of which I
replicate below:
Policy concerns on the cap
When the idea of putting a cap was originally introduced on the floor of the
Senate. The idea was to address to some extent the under-reporting of
output VAT by non-complaint taxpayers. The original suggestion was a 90
percent cap, or effectively a 1-percent minimum VAT. At that level, the rule
should not impact adversely on complaint taxpayers, but would result in
non-complaint taxpayers having to account for closer to their true tax
liability.
As a general policy consideration, one should question why our legislators
are penalizing complaint taxpayers when the fundamental issue is at the
apparent inability of the Bureau of Internal Revenue (BIR) to implement tax
law effectively.
At a 90-percent cap, the measure might still have been defensible as a
rough proxy for VAT. However, somewhere in the bicameral process, the
rule has become even more punitive with a 70-percent cap. As with most
amendments introduced at the bicameral stage, there is no public
indication about what lawmakers were thinking when they put the travesty
in place.
xxx
One of the arguments in Senate debates for taxing the power and
petroleum sectors was that if it was good enough for mom-and-pop stores
to have to account for the VAT, it was good enough for the biggest
companies in the country to do the same. A similar argument here is that
if small businesses have to pay a minimum 3-percent tax, why should
larger VAT-registered persons get away with paying less?
The problem with this thinking is threefold:
· The percentage tax applies to small businesses in the hard-to-tax sector
and a few believe the BIR collects close to what it should from this. Nor
should we be overly concerned if this is the case—the revenues are small,
Page 69 of 70
and the BIR’s efforts would be a lot better focused on larger taxpayers
where more significant revenues will be at issue.
· VAT-registered persons incur compliance costs. The 3-percent tax might
be better conceived as a slightly more expensive option to allow taxpayers
to opt out of the VAT, rather than a punitive rule for small businesses. (If
the percentage tax is considered unduly punitive, why is it not just
repealed?)
· Ironically, one of the new measures in the Senate bill was to allow
taxpayers with turnovers below, the registration threshold to register
voluntarily for VAT if they believe the 3-percent tax imposition to be
excessive. Without the minimum VAT, smaller taxpayers might have been
encouraged to enter the more formalized VAT sector.
Potential consequences of the cap
The minimum VAT will distort the way taxpayers conduct business. A 3-
percent minimum VAT is more likely to impact on sellers of goods than on
sellers of services, as their proportion of taxable inputs are lower (there is
no VAT paid when using labor, but there is VAT on the purchase of goods).
Consequently, there will be a bias toward consuming services over goods.
Businesses may have an incentive to obtain goods from the informal (and
potentially tax-evading) sector as there will be no input tax paid for the
purchase—in other words, the bill may actively encourage less tax
complaint behavior. Business structures may change; expect buy-sell
distributors to convent into commission agents, as this reduces the risk that
they will need to pay more than should be paid under a VAT system to
cover the 3-percent minimum VAT.20
These objections are voiced by members of the sensible center, and not
those reflexively against VAT or any tax imposition of the current
administration. These objections are raised by the people who stand to be
directly affected on a daily punitive basis by the imposition of the 70% cap,
the 60-month amortization period and the 5% withholding VAT. Indeed,
Justice Chico-Nazario has expressed her disbelief over, or at least has
asserted as unproven, the claimed impact of the input VAT on the
petroleum dealers.21 Of course there can be no tangible gauge as of yet on
the impact of these changes in the VAT law, since they have yet to be
implemented. However, the prevalent adverse reaction within the business
sector should be sufficiently expressive of the actual fears of the people
who should know better. It is sad that the majority, by maintaining a blithely
naïve view of the input VAT, perpetuates the disconnect between the Court
and the business sector, unnecessarily considering that in this instance,
the concerns of the financial community can be translated into a viable
constitutional challenge.
Reliance on Legislative Amendments
An Abdication of the Court’s Constitutional Duty
Justice Panganiban has already expressed the view that the remedy to the
inequities caused by the new input VAT system would be amending the
law, and not an outright declaration of unconstitutionality. I can only hazard
a guess on how many members of the Court or the legal community are
similarly reliant on that remedy as a means of assuaging their fears on the
impact of the input VAT innovations.
As I stated in my Dissenting Opinion, it is this Court, and not the legislature,
which has the duty to strike down unconstitutional laws. Congress may
amend unconstitutional laws to remedy such legal infirmities, but it is under
no constitutional or legal obligation to do so. The same does not hold true
with this Court. The essence of judicial review mandates that the Court
strike down unconstitutional laws.
Another corollary prospect has also arisen, that the Executive Department
itself will mitigate the implementation of the 70% cap by not fully
implementing the law.
This prospect of course is speculative, the sort of speculation that is wholly
dependent on the whim of the officials of the executive branch and one that
cannot be quantified by mathematical formula. This cannot be the basis for
any judicial action or vote. Moreover, such resort may actually be illegal.
For one, Article 239 of the Revised Penal Code imposes the penalty
of prision correccional on public officers "who shall encroach upon the
powers of the legislative branch of the Government, either by making
general rules or regulations beyond the scope of his authority, or by
attempting to repeal a law or suspending the execution thereof." Certainly,
the remedy to the inequities of the E-VAT Law cannot be left to
administrative pussy-footing, considering that these officials may be jailed
for refusing to implement the law, or obfuscating the legislative will.
Page 70 of 70
Second, it is a cardinal rule that an administrative agency such as the
Bureau of Internal Revenue or even the Department of Finance cannot
amend an act of Congress. Whatever administrative regulations they may
adopt under legislative authority must be in harmony with the provisions of
the law they are intended to carry into effect. They cannot widen or diminish
its scope.22
Finally, it must be remembered that one of the central doctrines enforced
in the disposition of the joint petitions is that the power to tax belongs solely
to the legislative branch of government. If the legislative will were to be
frustrated by haphazard implementation by the executive branch, all our
disquisitions on this matter, as well as the key constitutional principle on
the inherent, non-delegable nature of the legislative power of taxation, will
be for naught.
Indeed, I truly fear the scenario when, after the deluge, the executive
branch of government suspends the implementation of the 70% cap, or
increases the cap to a higher amount such as 90%. Any taxpayer will have
standing to attack such remedial measure, considering that the net effect
would be to diminish the government’s collection of cash at hand. Following
the law, the proper judicial action would be to uphold the clear legislative
intent over the reengineering of the taxing provisions by the executive
branch of government. Yet if the courts instead uphold the power of the
executive branch of government to reinvent the tax statute, then the end
concession would be that the power to enact tax laws ultimately belongs
to the executive branch of government.
I hesitate to say this, but there will be confusion, instability, and multiple
fatalities within the business sector with the enforcement of the
amendments of Section 8 and 12 of the E-VAT Law. It could have been
stopped through the allowance of the petition in G.R. No. 168461, but
regrettably the Court did not act.
I respectfully dissent.
DANTE O. TINGA
Associate Justice