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COMMISSIONER OF CUSTOMS and the DISTRICT COLLECTOR OF THE PORT OF SUBIC,

Petitioners,
- versus HYPERMIX FEEDS CORPORATION,
Before us is a Petition for Review under Rule 45, [1] assailing the Decision[2]and the Resolution[3] of the
Court of Appeals (CA), which nullified the Customs Memorandum Order (CMO) No. 27-2003 [4] on the tariff
classification of wheat issued by petitioner Commissioner of Customs.
The antecedent facts are as follows:
On 7 November 2003, petitioner Commissioner of Customs issued CMO 27-2003. Under the
Memorandum, for tariff purposes, wheat was classified according to the following: (1) importer or consignee; (2)
country of origin; and (3) port of discharge.[5] The regulation provided an exclusive list of corporations, ports of
discharge, commodity descriptions and countries of origin. Depending on these factors, wheat would be classified
either as food grade or feed grade. The corresponding tariff for food grade wheat was 3%, for feed grade, 7%.
CMO 27-2003 further provided for the proper procedure for protest or Valuation and Classification Review
Committee (VCRC) cases. Under this procedure, the release of the articles that were the subject of protest
required the importer to post a cash bond to cover the tariff differential. [6]
A month after the issuance of CMO 27-2003, on 19 December 2003, respondent filed a Petition for
Declaratory Relief[7] with the Regional Trial Court (RTC) of Las Pias City. It anticipated the implementation of the
regulation on its imported and perishable Chinese milling wheat in transit from China. [8] Respondent contended
that CMO 27-2003 was issued without following the mandate of the Revised Administrative Code on public
participation, prior notice, and publication or registration with the University of the Philippines Law Center.
Respondent also alleged that the regulation summarily adjudged it to be a feed grade supplier without the
benefit of prior assessment and examination; thus, despite having imported food grade wheat, it would be
subjected to the 7% tariff upon the arrival of the shipment, forcing them to pay 133% more than was proper.
Furthermore, respondent claimed that the equal protection clause of the Constitution was violated when
the regulation treated non-flour millers differently from flour millers for no reason at all.
Lastly, respondent asserted that the retroactive application of the regulation was confiscatory in nature.
On 19 January 2004, the RTC issued a Temporary Restraining Order (TRO) effective for twenty (20) days
from notice.[9]
Petitioners thereafter filed a Motion to Dismiss. [10] They alleged that: (1) the RTC did not have jurisdiction
over the subject matter of the case, because respondent was asking for a judicial determination of the
classification of wheat; (2) an action for declaratory relief was improper; (3) CMO 27-2003 was an internal
administrative rule and not legislative in nature; and (4) the claims of respondent were speculative and premature,
because the Bureau of Customs (BOC) had yet to examine respondents products. They likewise opposed the
application for a writ of preliminary injunction on the ground that they had not inflicted any injury through the
issuance of the regulation; and that the action would be contrary to the rule that administrative issuances are
assumed valid until declared otherwise.
On 28 February 2005, the parties agreed that the matters raised in the application for preliminary
injunction and the Motion to Dismiss would just be resolved together in the main case. Thus, on 10 March 2005,
the RTC rendered its Decision[11] without having to resolve the application for preliminary injunction and the Motion
to Dismiss.
The trial court ruled in favor of respondent, to wit:
WHEREFORE, in view of the foregoing, the Petition is GRANTED and the subject
Customs Memorandum Order 27-2003 is declared INVALID and OF NO FORCE AND EFFECT.
Respondents Commissioner of Customs, the District Collector of Subic or anyone acting in their
behalf are to immediately cease and desist from enforcing the said Customs Memorandum Order
27-2003.
SO ORDERED.[12]

The RTC held that it had jurisdiction over the subject matter, given that the issue raised by respondent
concerned the quasi-legislative powers of petitioners. It likewise stated that a petition for declaratory relief was the
proper remedy, and that respondent was the proper party to file it. The court considered that respondent was a
regular importer, and that the latter would be subjected to the application of the regulation in future transactions.
With regard to the validity of the regulation, the trial court found that petitioners had not followed the basic
requirements of hearing and publication in the issuance of CMO 27-2003. It likewise held that petitioners had
substituted the quasi-judicial determination of the commodity by a quasi-legislative predetermination. [13]The lower
court pointed out that a classification based on importers and ports of discharge were violative of the due process
rights of respondent.
Dissatisfied with the Decision of the lower court, petitioners appealed to the CA, raising the same
allegations in defense of CMO 27-2003. [14] The appellate court, however, dismissed the appeal. It held that, since
the regulation affected substantial rights of petitioners and other importers, petitioners should have observed the
requirements of notice, hearing and publication.
Hence, this Petition.
Petitioners raise the following issues for the consideration of this Court:
I.

THE COURT OF APPEALS DECIDED A QUESTION OF SUBSTANCE WHICH IS NOT IN


ACCORD WITH THE LAW AND PREVAILING JURISPRUDENCE.

II.

THE COURT OF APPEALS GRAVELY ERRED IN DECLARING THAT THE TRIAL COURT
HAS JURISDICTION OVER THE CASE.

The Petition has no merit.


We shall first discuss the propriety of an action for declaratory relief.
Rule 63, Section 1 provides:
Who may file petition. Any person interested under a deed, will, contract or other written
instrument, or whose rights are affected by a statute, executive order or regulation, ordinance, or
any other governmental regulation may, before breach or violation thereof, bring an action in the
appropriate Regional Trial Court to determine any question of construction or validity arising, and
for a declaration of his rights or duties, thereunder.
The requirements of an action for declaratory relief are as follows: (1) there must be a justiciable
controversy; (2) the controversy must be between persons whose interests are adverse; (3) the party seeking
declaratory relief must have a legal interest in the controversy; and (4) the issue involved must be ripe for judicial
determination.[15] We find that the Petition filed by respondent before the lower court meets these requirements.
First, the subject of the controversy is the constitutionality of CMO 27-2003 issued by petitioner
Commissioner of Customs. In Smart Communications v. NTC,[16] we held:
The determination of whether a specific rule or set of rules issued by an administrative
agency contravenes the law or the constitution is within the jurisdiction of the regular
courts. Indeed, the Constitution vests the power of judicial review or the power to declare
a law, treaty, international or executive agreement, presidential decree, order, instruction,
ordinance, or regulation in the courts, including the regional trial courts. This is within the
scope of judicial power, which includes the authority of the courts to determine in an
appropriate action the validity of the acts of the political departments. Judicial power
includes the duty of the courts of justice to settle actual controversies involving rights which are
legally demandable and enforceable, and to determine whether or not there has been a grave
abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government. (Emphasis supplied)

[17]

Meanwhile, in Misamis Oriental Association of Coco Traders, Inc. v. Department of Finance Secretary,
we said:

xxx [A] legislative rule is in the nature of subordinate legislation, designed to implement a
primary legislation by providing the details thereof. xxx
In addition such rule must be published. On the other hand, interpretative rules are designed to
provide guidelines to the law which the administrative agency is in charge of enforcing.
Accordingly, in considering a legislative rule a court is free to make three
inquiries: (i) whether the rule is within the delegated authority of the administrative
agency; (ii) whether it is reasonable; and (iii) whether it was issued pursuant to proper
procedure. But the court is not free to substitute its judgment as to the desirability or wisdom of
the rule for the legislative body, by its delegation of administrative judgment, has committed those
questions to administrative judgments and not to judicial judgments. In the case of an
interpretative rule, the inquiry is not into the validity but into the correctness or propriety of the
rule. As a matter of power a court, when confronted with an interpretative rule, is free to (i) give
the force of law to the rule; (ii) go to the opposite extreme and substitute its judgment; or (iii) give
some intermediate degree of authoritative weight to the interpretative rule. (Emphasis supplied)
Second, the controversy is between two parties that have adverse interests. Petitioners are summarily
imposing a tariff rate that respondent is refusing to pay.
Third, it is clear that respondent has a legal and substantive interest in the implementation of CMO 272003. Respondent has adequately shown that, as a regular importer of wheat, on 14 August 2003, it has actually
made shipments of wheat from China to Subic. The shipment was set to arrive in December 2003. Upon its
arrival, it would be subjected to the conditions of CMO 27-2003. The regulation calls for the imposition of different
tariff rates, depending on the factors enumerated therein. Thus, respondent alleged that it would be made to pay
the 7% tariff applied to feed grade wheat, instead of the 3% tariff on food grade wheat. In addition, respondent
would have to go through the procedure under CMO 27-2003, which would undoubtedly toll its time and
resources. The lower court correctly pointed out as follows:
xxx As noted above, the fact that petitioner is precisely into the business of importing
wheat, each and every importation will be subjected to constant disputes which will result
into (sic) delays in the delivery, setting aside of funds as cash bond required in the CMO as
well as the resulting expenses thereof. It is easy to see that business uncertainty will be a
constant occurrence for petitioner. That the sums involved are not minimal is shown by
the discussions during the hearings conducted as well as in the pleadings filed. It may be
that the petitioner can later on get a refund but such has been foreclosed because the Collector
of Customs and the Commissioner of Customs are bound by their own CMO. Petitioner cannot
get its refund with the said agency. We believe and so find that Petitioner has presented such a
stake in the outcome of this controversy as to vest it with standing to file this petition.
[18]
(Emphasis supplied)
Finally, the issue raised by respondent is ripe for judicial determination, because litigation is
inevitable[19] for the simple and uncontroverted reason that respondent is not included in the enumeration of flour
millers classified as food grade wheat importers. Thus, as the trial court stated, it would have to file a protest case
each time it imports food grade wheat and be subjected to the 7% tariff.
It is therefore clear that a petition for declaratory relief is the right remedy given the circumstances of the
case.
Considering that the questioned regulation would affect the substantive rights of respondent as explained
above, it therefore follows that petitioners should have applied the pertinent provisions of Book VII, Chapter 2 of
the Revised Administrative Code, to wit:
Section 3. Filing. (1) Every agency shall file with the University of the Philippines Law
Center three (3) certified copies of every rule adopted by it. Rules in force on the date of
effectivity of this Code which are not filed within three (3) months from that date shall not
thereafter be the bases of any sanction against any party of persons.
xxx xxx xxx

Section 9. Public Participation. - (1) If not otherwise required by law, an agency shall, as
far as practicable, publish or circulate notices of proposed rules and afford interested parties the
opportunity to submit their views prior to the adoption of any rule.
(2) In the fixing of rates, no rule or final order shall be valid unless the proposed rates
shall have been published in a newspaper of general circulation at least two (2) weeks before the
first hearing thereon.
(3) In case of opposition, the rules on contested cases shall be observed.
When an administrative rule is merely interpretative in nature, its applicability needs nothing further than
its bare issuance, for it gives no real consequence more than what the law itself has already prescribed. When, on
the other hand, the administrative rule goes beyond merely providing for the means that can facilitate or render
least cumbersome the implementation of the law but substantially increases the burden of those governed, it
behooves the agency to accord at least to those directly affected a chance to be heard, and thereafter to be duly
informed, before that new issuance is given the force and effect of law.[20]
Likewise, in Taada v. Tuvera,[21] we held:
The clear object of the above-quoted provision is to give the general public
adequate notice of the various laws which are to regulate their actions and conduct as
citizens. Without such notice and publication, there would be no basis for the application of the
maxim ignorantia legis non excusat. It would be the height of injustice to punish or otherwise
burden a citizen for the transgression of a law of which he had no notice whatsoever, not
even a constructive one.
Perhaps at no time since the establishment of the Philippine Republic has the publication
of laws taken so vital significance that at this time when the people have bestowed upon the
President a power heretofore enjoyed solely by the legislature. While the people are kept abreast
by the mass media of the debates and deliberations in the Batasan Pambansa and for the diligent
ones, ready access to the legislative records no such publicity accompanies the law-making
process of the President.Thus, without publication, the people have no means of knowing
what presidential decrees have actually been promulgated, much less a definite way of
informing themselves of the specific contents and texts of such decrees. (Emphasis
supplied)
Because petitioners failed to follow the requirements enumerated by the Revised Administrative Code, the
assailed regulation must be struck down.
Going now to the content of CMO 27-3003, we likewise hold that it is unconstitutional for being violative of
the equal protection clause of the Constitution.
The equal protection clause means that no person or class of persons shall be deprived of the same
protection of laws enjoyed by other persons or other classes in the same place in like circumstances. Thus, the
guarantee of the equal protection of laws is not violated if there is a reasonable classification. For a classification
to be reasonable, it must be shown that (1) it rests on substantial distinctions; (2) it is germane to the purpose of
the law; (3) it is not limited to existing conditions only; and (4) it applies equally to all members of the same class.
[22]

Unfortunately, CMO 27-2003 does not meet these requirements. We do not see how the quality of wheat
is affected by who imports it, where it is discharged, or which country it came from.
Thus, on the one hand, even if other millers excluded from CMO 27-2003 have imported food grade
wheat, the product would still be declared as feed grade wheat, a classification subjecting them to 7% tariff. On
the other hand, even if the importers listed under CMO 27-2003 have imported feed grade wheat, they would only
be made to pay 3% tariff, thus depriving the state of the taxes due. The regulation, therefore, does not become
disadvantageous to respondent only, but even to the state.
It is also not clear how the regulation intends to monitor more closely wheat importations and thus prevent
their misclassification. A careful study of CMO 27-2003 shows that it not only fails to achieve this end, but results

in the opposite. The application of the regulation forecloses the possibility that other corporations that are
excluded from the list import food grade wheat; at the same time, it creates an assumption that those who meet
the criteria do not import feed grade wheat. In the first case, importers are unnecessarily burdened to prove the
classification of their wheat imports; while in the second, the state carries that burden.
Petitioner Commissioner of Customs also went beyond his powers when the regulation limited the
customs officers duties mandated by Section 1403 of the Tariff and Customs Law, as amended. The law provides:
Section 1403. Duties of Customs Officer Tasked to Examine, Classify, and Appraise
Imported Articles. The customs officer tasked to examine, classify, and appraise imported
articles shall determine whether the packages designated for examination and their
contents are in accordance with the declaration in the entry, invoice and other pertinent
documents and shall make return in such a manner as to indicate whether the articles
have been truly and correctly declared in the entry as regard their quantity, measurement,
weight, and tariff classification and not imported contrary to law. He shall submit samples to
the laboratory for analysis when feasible to do so and when such analysis is necessary for the
proper classification, appraisal, and/or admission into the Philippines of imported articles.
Likewise, the customs officer shall determine the unit of quantity in which they are
usually bought and sold, and appraise the imported articles in accordance with Section
201 of this Code.
Failure on the part of the customs officer to comply with his duties shall subject him to the
penalties prescribed under Section 3604 of this Code.
The provision mandates that the customs officer must first assess and determine the classification of the imported
article before tariff may be imposed. Unfortunately, CMO 23-2007 has already classified the article even before
the customs officer had the chance to examine it. In effect, petitioner Commissioner of Customs diminished the
powers granted by the Tariff and Customs Code with regard to wheat importation when it no longer required the
customs officers prior examination and assessment of the proper classification of the wheat.
It is well-settled that rules and regulations, which are the product of a delegated power to create new and
additional legal provisions that have the effect of law, should be within the scope of the statutory authority granted
by the legislature to the administrative agency. It is required that the regulation be germane to the objects and
purposes of the law; and that it be not in contradiction to, but in conformity with, the standards prescribed by law.
[23]

In summary, petitioners violated respondents right to due process in the issuance of CMO 27-2003 when
they failed to observe the requirements under the Revised Administrative Code. Petitioners likewise violated
respondents right to equal protection of laws when they provided for an unreasonable classification in the
application of the regulation. Finally, petitioner Commissioner of Customs went beyond his powers of delegated
authority when the regulation limited the powers of the customs officer to examine and assess imported articles.
WHEREFORE, in view of the foregoing, the Petition is DENIED.

JUDY ANNE L. SANTOS, - versus- PEOPLE OF THE PHILIPPINESand BUREAU OF INTERNAL REVENUE,
Before this Court is a Petition for Review on Certiorari[1] under Rule 45 of the Revised Rules of Court filed
by petitioner Judy Anne L. Santos (Santos) seeking the reversal and setting aside of the Resolution, [2] dated 19
June 2006, of the Court of Tax Appeals (CTA) en banc in C.T.A. EB. CRIM. No. 001 which denied petitioners
Motion for Extension of Time to File Petition for Review. Petitioner intended to file the Petition for Review with the
CTA en banc to appeal the Resolutions dated 23 February 2006 [3] and 11 May 2006[4] of the CTA First Division in
C.T.A. Crim. Case No. 0-012 denying, respectively, her Motion to Quash the Information filed against her for
violation of Section 255, in relation to Sections 254 and 248(B) of the National Internal Revenue Code (NIRC), as
amended; and her Motion for Reconsideration.
There is no controversy as to the facts that gave rise to the present Petition.
On 19 May 2005, then Bureau of Internal Revenue (BIR) Commissioner Guillermo L. Parayno, Jr. wrote to
the Department of Justice (DOJ) Secretary Raul M. Gonzales a letter [5] regarding the possible filing of criminal
charges against petitioner. BIR Commissioner Parayno began his letter with the following statement:
I have the honor to refer to you for preliminary investigation and filing of an information in
court if evidence so warrants, the herein attached Joint Affidavit ofRODERICK C. ABAD,
STIMSON P. CUREG, VILMA V. CARONAN, RHODORA L. DELOS REYES under Group
Supervisor TEODORA V. PURINO, of the National Investigation Division, BIR National Office
Building, BIR Road, Diliman, Quezon City, recommending the criminal prosecution of MS. JUDY
ANNE LUMAGUI SANTOS for substantial underdeclaration of income, which constitutes
as prima facie evidence of false or fraudulent return under Section 248(B) of the NIRC and
punishable under Sections 254 and 255 of the Tax Code.

In said letter, BIR Commissioner Parayno summarized the findings of the investigating BIR officers that
petitioner, in her Annual Income Tax Return for taxable year 2002 filed with the BIR, declared an income
of P8,033,332.70 derived from her talent fees solely from ABS-CBN; initial documents gathered from the BIR
offices and those given by petitioners accountant and third parties, however, confirmed that petitioner received in
2002 income in the amount of at leastP14,796,234.70, not only from ABS-CBN, but also from other sources, such
as
movies
and
product
endorsements;
the
estimated
tax
liability
arising
from
petitionersunderdeclaration amounted to P1,718,925.52, including incremental penalties; the non-declaration by
petitioner of an amount equivalent to at least 84.18% of the income declared in her return was considered a
substantial underdeclaration of income, which constituted prima facie evidence of false or fraudulent return under
Section 248(B)[6] of the NIRC, as amended; and petitioners failure to account as part of her income the
professional fees she received from sources other than ABS-CBN and her underdeclaration of the income she
received from ABS-CBN amounted to manifest violations of Sections 254 [7] and 255,[8] as well as Section 248(B) of
the NIRC, as amended.
After an exchange of affidavits and other pleadings by the parties, Prosecution Attorney Olivia LarozaTorrevillas issued a Resolution[9] dated 21 October 2005finding probable cause and recommending the filing of a
criminal information against petitioner for violation of Section 255 in relation to Sections 254 and 248(B) of the
NIRC, as amended. The said Resolution was approved by Chief State Prosecutor Jovencito R. Zuno.
Pursuant to the 21 October 2005 DOJ Resolution, an Information [10] for violation of Section 255 in relation
to Sections 254 and 248(B) of the NIRC, as amended, was filed with the CTA on 3 November 2005 and docketed
as C.T.A.Crim. Case No. 0-012. However, the CTA First Division, after noting several discrepancies in the

Information filed, required the State Prosecutor to clarify and explain the same, and to submit the original copies
of the parties affidavits, memoranda, and all other evidence on record. [11]
Consequently, Prosecution Attorney Torrevillas, on behalf of respondent People, submitted on 1
December 2005 a Compliance with Ex Parte Motion to Admit Attached Information. [12] Prosecution
Attorney Torrevillas moved that the documents submitted be admitted as part of the record of the case and the
first Information be substituted by the attached second Information. The second Information[13] addressed the
discrepancies noted by the CTA in the first Information, by now reading thus:
The undersigned Prosecution Attorney of the Department of Justice hereby
accuses JUDY ANNE SANTOS y Lumagui of the offense of violation of Section 255, of Republic
Act No. 8424, otherwise known as the Tax Reform Act of 1997, as amended, committed as
follows:
That on or about the 15th day of April, 2003, at Quezon City, Philippines,
and within the jurisdiction of this Honorable Court, the above-named accused did
then and there, willfully, unlawfully, and feloniously file a false and fraudulent
income tax return for taxable year 2002 by indicating therein a gross income
of P8,033,332.70 when in truth and in fact her correct income for taxable year
2002 isP16,396,234.70 or a gross underdeclaration/difference of P8,362,902
resulting to an income tax deficiency of P1,395,116.24 excluding interest and
penalties thereon of P1,319,500.94 or a total income tax deficiency
of P2,714,617.18 to the damage and prejudice of the government of the same
amount.[]
In a Resolution[14] dated 8 December 2005, the CTA First Division granted the
Peoples Ex Parte Motion and admitted the second Information.
The CTA First Division then issued on 9 December 2005 a warrant for the arrest of petitioner.[15] The tax
court lifted and recalled the warrant of arrest on 21 December 2005 after petitioner voluntarily appeared and
submitted herself to its jurisdiction and filed the required bail bond in the amount of P20,000.00.[16]
On 10 January 2006, petitioner filed with the CTA First Division a Motion to Quash [17] the Information
filed in C.T.A. Crim. Case No. 0-012 on the following grounds:
1. The facts alleged in the INFORMATION do not constitute an offense;
2. The officer who filed the information had no authority to do so;
3. The Honorable Court of Tax Appeals has no jurisdiction over the subject matter of the
case; and
4. The information is void ab initio, being violative of due process, and the equal
protection of the laws.
In a Resolution[18] dated 23 February 2006, the CTA First Division denied petitioners Motion to Quash
and accordingly scheduled her arraignment on 2 March 2006 at 9:00 a.m. Petitioner filed a Motion for
Reconsideration and/or Reinvestigation,[19] which was again denied by the CTA First Division in a
Resolution[20] dated 11 May 2006.
Petitioner received a copy of the 11 May 2006 Resolution of the CTA First Division on 17 May
2006. On 1 June 2006, petitioner filed with the CTA en banc a Motion for Extension of Time to File Petition for

Review, docketed as C.T.A. EB. CRIM. No. 001. She filed her Petition for Review with the CTA en banc on 16
June 2006. However, in its Resolution[21] dated 19 June 2006, the CTA en banc denied petitioners Motion for
Extension of Time to File Petition for Review, ratiocinating that:
In the case before Us, the petitioner is asking for an extension of time to file her Petition
for Review to appeal the denial of her motion to quash in C.T.A. Crim. Case No. 0-012. As stated
above, a resolution denying a motion to quash is not a proper subject of an appeal to the
Court En Banc under Section 11 of R.A. No. 9282 because a ruling denying a motion to quash is
only an interlocutory order, as such, it cannot be made the subject of an appeal pursuant to said
law and the Rules of Court.Section 1 of Rule 41 of the Rules of Court provides that no appeal
may be taken from an interlocutory order and Section 1 (i) of Rule 50 provides for the dismissal of
an appeal on the ground that the order or judgment appealed from is not appealable. Time and
again, the Supreme Court had ruled that the remedy of the accused in case of denial of a motion
to quash is for the accused to enter a plea, go to trial and after an adverse decision is rendered,
to appeal therefrom in the manner authorized by law.
Since a denial of a Motion to Quash is not appealable, granting petitioners Motion for
Extension of Time to File Petition for Review will only be an exercise in futility considering that the
dismissal of the Petition for Review that will be filed by way of appeal is mandated both by law
and jurisprudence.[22]
Ultimately, the CTA en banc decreed:
WHEREFORE, premises considered, petitioners Motion for Extension of Time to File Petition for
Review filed on June 1, 2006 is hereby DENIED for lack of merit.[23]

Now comes petitioner before this Court raising the sole issue of:
WHETHER A RESOLUTION OF A CTA DIVISION DENYING A MOTION TO QUASH IS A
PROPER SUBJECT OF AN APPEAL TO THE CTA EN BANCUNDER SECTION 11 OF
REPUBLIC ACT NO. 9282, AMENDING SECTION 18 OF REPUBLIC ACT NO. 1125.[24]
Section 18 of Republic Act No. 1125,[25] as amended by Republic Act No. 9282,[26] provides:
SEC. 18. Appeal to the Court of Tax Appeals En Banc. No civil proceedings involving
matters arising under the National Internal Revenue Code, the Tariff and Customs Code or the
Local Government Code shall be maintained, except as herein provided, until and unless an
appeal has been previously filed with the CTA and disposed of in accordance with the provisions
of this Act.
A party adversely affected by a resolution of a Division of the CTA on a motion for
reconsideration or new trial, may file a petition for review with the CTAen banc.
Petitioners primary argument is that a resolution of a CTA Division denying a motion to quash is a
proper subject of an appeal to the CTA en banc under Section 18 of Republic Act No. 1125, as amended,
because the law does not say that only a resolution that constitutes a final disposition of a case may be
appealed to the CTAen banc. If the interpretation of the law by the CTA en banc prevails, a procedural void is
created leaving the parties, such as petitioner, without any remedy involving erroneous resolutions of a CTA
Division.

The Court finds no merit in the petitioners assertion.


The petition for review under Section 18 of Republic Act
No. 1125, as amended, may be new to the CTA, but it is
actually a mode of appeal long available in courts of
general jurisdiction.
Petitioner is invoking a very narrow and literal reading of Section 18 of Republic Act No. 1125, as
amended.
Indeed, the filing of a petition for review with the CTA en banc from a decision, resolution, or order of
a CTA Division is a remedy newly made available in proceedings before the CTA, necessarily adopted to
conform to and address the changes in the CTA.
There was no need for such rule under Republic Act No. 1125, prior to its amendment, since the CTA
then was composed only of one Presiding Judge and two Associate Judges. [27] Any two Judges constituted a
quorum and the concurrence of two Judges was necessary to promulgate any decision thereof. [28]
The amendments introduced by Republic Act No. 9282 to Republic Act No. 1125 elevated the rank of
the CTA to a collegiate court, with the same rank as the Court of Appeals, and increased the number of its
members to one Presiding Justice and five Associate Justices. [29] The CTA is now allowed to sit en banc or in
two Divisions with each Division consisting of three Justices. Four Justices shall constitute a quorum for
sessions en banc, and the affirmative votes of four members of the Court en banc are necessary for the
rendition of a decision or resolution; while two Justices shall constitute a quorum for sessions of a Division
and the affirmative votes of two members of the Division shall be necessary for the rendition of a decision or
resolution.[30]
In A.M. No. 05-11-07-CTA, the Revised CTA Rules, this Court delineated the jurisdiction of the
CTA en banc[31] and in Divisions.[32] Section 2, Rule 4 of the Revised CTA Rules recognizes the exclusive
appellate jurisdiction of the CTA en banc to review by appeal the following decisions, resolutions, or orders of
the CTA Division:
SEC. 2. Cases within the jurisdiction of the Court en banc. The Court en banc shall
exercise exclusive appellate jurisdiction to review by appeal the following:
(a) Decisions or resolutions on motions for reconsideration or new trial of the Court in
Divisions in the exercise of its exclusive appellate jurisdiction over:
(1) Cases arising from administrative agencies Bureau of Internal Revenue, Bureau of
Customs, Department of Finance, Department of Trade and Industry, Department of
Agriculture;
(2) Local tax cases decided by the Regional Trial Courts in the exercise of their original
jurisdiction; and
(3) Tax collection cases decided by the Regional Trial Courts in the exercise of their
original jurisdiction involving final and executory assessments for taxes, fees,
charges and penalties, where the principal amount of taxes and penalties claimed is
less than one million pesos;

xxxx
(f) Decisions, resolutions or orders on motions for reconsideration or new trial of the
Court in Division in the exercise of its exclusive original jurisdiction over cases involving criminal
offenses arising from violations of the National Internal Revenue Code or the Tariff and Customs
Code and other laws administered by the Bureau of Internal Revenue or Bureau of Customs.
(g) Decisions, resolutions or order on motions for reconsideration or new trial of the Court
in Division in the exercise of its exclusive appellate jurisdiction over criminal offenses mentioned
in the preceding subparagraph; x x x.

Although the filing of a petition for review with the CTA en banc from a decision, resolution, or order of
the CTA Division, was newly made available to the CTA, such mode of appeal has long been available in
Philippine courts of general jurisdiction. Hence, the Revised CTA Rules no longer elaborated on it but merely
referred to existing rules of procedure on petitions for review and appeals, to wit:
RULE 7
PROCEDURE IN THE COURT OF TAX APPEALS
SEC. 1. Applicability of the Rules of the Court of Appeals. The procedure in the Court en
banc or in Divisions in original and in appealed cases shall be the same as those in petitions for
review and appeals before the Court of Appeals pursuant to the applicable provisions of
Rules 42, 43, 44 and 46 of the Rules of Court, except as otherwise provided for in these Rules.

RULE 8
PROCEDURE IN CIVIL CASES
xxxx
SEC. 4. Where to appeal; mode of appeal.
xxxx
(b) An appeal from a decision or resolution of the Court in Division on a motion for
reconsideration or new trial shall be taken to the Court by petition for review as provided in Rule
43 of the Rules of Court. The Court en banc shall act on the appeal.
xxxx
RULE 9
PROCEDURE IN CRIMINAL CASES

SEC. 1. Review of cases in the Court. The review of criminal cases in the Court en banc
or in Division shall be governed by the applicable provisions of Rule 124 of the Rules of Court.
xxxx
SEC. 9. Appeal; period to appeal.
xxxx
(b) An appeal to the Court en banc in criminal cases decided by the Court in Division
shall be taken by filing a petition for review as provided in Rule 43 of the Rules of Court within
fifteen days from receipt of a copy of the decision or resolution appealed from. The Court may, for
good cause, extend the time for filing of the petition for review for an additional period not
exceeding fifteen days.(Emphasis ours.)

Given the foregoing, the petition for review to be filed with the CTA en bancas the mode for appealing
a decision, resolution, or order of the CTA Division, under Section 18 of Republic Act No. 1125, as amended,
is not a totally new remedy, unique to the CTA, with a special application or use therein. To the contrary, the
CTA merely adopts the procedure for petitions for review and appeals long established and practiced in other
Philippine courts. Accordingly, doctrines, principles, rules, and precedents laid down in jurisprudence by this
Court as regards petitions for review and appeals in courts of general jurisdiction should likewise bind the
CTA, and it cannot depart therefrom.
General rule: The denial of a motion to quash is an
interlocutory order which is not the proper subject of an
appeal or a petition for certiorari.
According to Section 1, Rule 41 of the Revised Rules of Court, governing appeals from the Regional
Trial Courts (RTCs) to the Court of Appeals, an appeal may be taken only from a judgment or final order that
completely disposes of the case or of a matter therein when declared by the Rules to be appealable. Said
provision, thus, explicitly states that no appeal may be taken from an interlocutory order.[33]
The Court distinguishes final judgments and orders from interlocutory orders in this wise:
Section 2, Rule 41 of the Revised Rules of Court provides that "(o)nly final judgments or orders
shall be subject to appeal." Interlocutory or incidental judgments or orders do not stay the
progress of an action nor are they subject of appeal "until final judgment or order is rendered for
one party or the other." The test to determine whether an order or judgment is interlocutory or
final is this: "Does it leave something to be done in the trial court with respect to the merits of the
case? If it does, it is interlocutory; if it does not, it is final. A court order is final in character if it
puts an end to the particular matter resolved or settles definitely the matter therein disposed of,
such that no further questions can come before the court except the execution of the order. The
term "final" judgment or order signifies a judgment or an order which disposes of the cause as to
all the parties, reserving no further questions or directions for future determination. The order or
judgment may validly refer to the entire controversy or to some definite and separate branch
thereof. "In the absence of a statutory definition, a final judgment, order or decree has been held
to be x x x one that finally disposes of, adjudicates, or determines the rights, or some right or
rights of the parties, either on the entire controversy or on some definite and separate branch
thereof, and which concludes them until it is reversed or set aside." The central point to consider
is, therefore, the effects of the order on the rights of the parties. A court order, on the other hand,

is merely interlocutory in character if it is provisional and leaves substantial proceeding to be had


in connection with its subject. The word "interlocutory" refers to "something intervening between
the commencement and the end of a suit which decides some point or matter but is not a final
decision of the whole controversy."[34]

In other words, after a final order or judgment, the court should have nothing more to do in respect of
the relative rights of the parties to the case. Conversely, an order that does not finally dispose of the case and
does not end the Court's task of adjudicating the parties' contentions in determining their rights and liabilities
as regards each other, but obviously indicates that other things remain to be done by the Court, is
interlocutory.[35]
The rationale for barring the appeal of an interlocutory order was extensively discussed in Matute v.
Court of Appeals,[36] thus:
It is settled that an "interlocutory order or decree made in the progress of a case is always under
the control of the court until the final decision of the suit, and may be modified or rescinded upon
sufficient grounds shown at any time before final judgment . . ." Of similar import is the ruling of
this Court declaring that "it is rudimentary that such (interlocutory) orders are subject to change in
the discretion of the court." Moreover, one of the inherent powers of the court is "To amend and
control its process and orders so as to make them conformable to law and justice. In the
language of Chief Justice Moran, paraphrasing the ruling in Veluz vs. Justice of the Peace
of Sariaya, since judges are human, susceptible to mistakes, and are bound to administer justice
in accordance with law, they are given the inherent power of amending their orders or judgments
so as to make them conformable to law and justice, and they can do so before they lose their
jurisdiction of the case, that is before the time to appeal has expired and no appeal has been
perfected. And in theabovecited Veluz case, this Court held that If the trial court should discover
or be convinced that it had committed an error in its judgment, or had done an injustice, before
the same has become final, it may, upon its own motion or upon a motion of the parties, correct
such error in order to do justice between the parties. . . . It would seem to be the very height of
absurdity to prohibit a trial judge from correcting an error, mistake, or injustice which is called to
his attention before he has lost control of his judgment. Corollarily, it has also been held that a
judge of first instance is not legally prevented from revoking the interlocutory order of another
judge in the very litigation subsequently assigned to him for judicial action.

Another recognized reason of the law in permitting appeal only from a final order or judgment, and not
from an interlocutory or incidental one, is to avoid multiplicity of appeals in a single action, which must
necessarily suspend the hearing and decision on the merits of the case during the pendency of the appeal. If
such appeal were allowed, the trial on the merits of the case would necessarily be delayed for a considerable
length of time, and compel the adverse party to incur unnecessary expenses, for one of the parties may
interpose as many appeals as incidental questions may be raised by him, and interlocutory orders rendered
or issued by the lower court.[37]
There is no dispute that a court order denying a motion to quash is interlocutory. The denial of the
motion to quash means that the criminal information remains pending with the court, which must proceed with
the trial to determine whether the accused is guilty of the crime charged therein. Equally settled is the rule that
an order denying a motion to quash, being interlocutory, is not immediatelyappealable,[38] nor can it be the
subject of a petition for certiorari. Such order may only be reviewed in the ordinary course of law by an appeal
from the judgment after trial.[39]

The Court cannot agree in petitioners contention that there would exist a procedural void following the
denial of her Motion to Quash by the CTA First Division in its Resolutions dated 23 February 2006 and 11 May
2006, leaving her helpless. The remedy of an accused from the denial of his or her motion to quash has
already been clearly laid down as follows:
An order denying a Motion to Acquit (like an order denying a motion to quash) is
interlocutory and not a final order. It is, therefore, not appealable. Neither can it be the subject of
a petition for certiorari. Such order of denial may only be reviewed, in the ordinary course of law,
by an appeal from the judgment, after trial. As stated in Collins vs. Wolfe, and reiterated in Mill
vs. Yatco, the accused, after the denial of his motion to quash, should have proceeded with the
trial of the case in the court below, and if final judgment is rendered against him, he could then
appeal, and, upon such appeal, present the questions which he sought to be decided by the
appellate court in a petition for certiorari.
In Acharon vs. Purisima, the procedure was well defined, thus:
Moreover, when the motion to quash filed by Acharon to nullify the
criminal cases filed against him was denied by the Municipal Court of General
Santos his remedy was not to file a petition for certiorari but to go to trial without
prejudice on his part to reiterate the special defenses he had invoked in his
motion and, if, after trial on the merits, an adverse decision is rendered, to
appealtherefrom in the manner authorized by law. This is the procedure that he
should have followed as authorized by law and precedents. Instead, he took the
usual step of filing a writ of certiorari before the Court of First Instance which in
our opinion is unwarranted it being contrary to the usual course of law.[40]

Hence, the CTA en banc herein did not err in denying petitioners Motion for Extension of Time to File
Petition for Review, when such Petition for Review is the wrong remedy to assail an interlocutory order
denying her Motion to Quash.
While the general rule proscribes the appeal of an interlocutory order, there are also recognized
exceptions to the same. The general rule is not absolute. Where special circumstances clearly demonstrate
the inadequacy of an appeal, then the special civil action of certiorari or prohibition may exceptionally be
allowed.[ 4 1 ] This Court recognizes that under certain situations, recourse to extraordinary legal remedies, such
as a petition for certiorari, is considered proper to question the denial of a motion to quash (or any other
interlocutory order) in the interest of a more enlightened and substantial justice; [42] or to promote public welfare
and public policy;[43] or when the cases have attracted nationwide attention, making it essential to proceed
with dispatch in the consideration thereof; [44] or when the order was rendered with grave abuse of discretion.
[45]
Certiorari is an appropriate remedy to assail an interlocutory order (1) when the tribunal issued such order
without or in excess of jurisdiction or with grave abuse of discretion; and (2) when the assailed interlocutory
order is patently erroneous, and the remedy of appeal would not afford adequate and expeditious relief. [46]
Recourse to a petition for certiorari to assail an interlocutory order is now expressly recognized in the
ultimate paragraph of Section 1, Rule 41 of the Revised Rules of Court on the subject of appeal, which states:
In all the above instances where the judgment or final order is not appealable, the
aggrieved party may file an appropriate special civil action under Rule 65.

As to whether the CTA en banc, under its expanded jurisdiction in Republic Act No. 9282, has been
granted jurisdiction over special civil actions for certiorari is not raised as an issue in the Petition at bar, thus,
precluding the Court from making a definitive pronouncement thereon. However, even if such an issue is
answered in the negative, it would not substantially affect the ruling of this Court herein, for a party whose motion
to quash had been denied may still seek recourse, under exceptional and meritorious circumstances, via a special
civil action for certiorari with this Court, refuting petitioners assertion of a procedural void.

The CTA First Division did not commit grave abuse of


discretion in denying petitioners Motion to Quash.
Assuming that the CTA en banc, as an exception to the general rule, allowed and treated petitioners
Petition for Review in C.T.A. EB. CRIM. No. 001 as a special civil action for certiorari, [47] it would still be
dismissible for lack of merit.
An act of a court or tribunal may only be considered as committed in grave abuse of discretion when
the same was performed in a capricious or whimsical exercise of judgment, which is equivalent to lack of
jurisdiction. The abuse of discretion must be so patent and gross as to amount to an evasion of positive duty
or to a virtual refusal to perform a duty enjoined by law or to act at all in contemplation of law, as where the
power is exercised in an arbitrary and despotic manner by reason of passion or personal hostility. In this
connection, it is only upon showing that the court acted without or in excess of jurisdiction or with grave abuse
of discretion that an interlocutory order such as that involved in this case may be impugned. Be that as it
may, it must be emphasized that this practice is applied only under certain exceptional circumstances to
prevent unnecessary delay in the administration of justice and so as not to unduly burden the courts. [48]
Certiorari is not available to correct errors of procedure or mistakes in the judges findings and
conclusions of law and fact. It is only in the presence of extraordinary circumstances evincing a patent
disregard of justice and fair play where resort to a petition for certiorari is proper. A party must not be allowed
to delay litigation by the sheer expediency of filing a petition for certiorari under Rule 65 of the Revised Rules
of Court based on scant allegations of grave abuse. [49]
A writ of certiorari is not intended to correct every controversial interlocutory ruling: it is resorted to
only to correct a grave abuse of discretion or a whimsical exercise of judgment equivalent to lack of
jurisdiction. Its function is limited to keeping an inferior court within its jurisdiction and to relieve persons from
arbitrary acts acts which courts or judges have no power or authority in law to perform. It is not designed to
correct erroneous findings and conclusions made by the courts. [50]
The Petition for Review which petitioner intended to file before the CTA en banc relied on two
grounds: (1) the lack of authority of Prosecuting AttorneyTorrevillas to file the Information; and (2) the filing of
the said Information in violation of petitioners constitutional rights to due process and equal protection of the
laws.
Anent the first ground, petitioner argues that the Information was filed without the approval of the BIR
Commissioner in violation of Section 220 of NIRC, as amended, which provides:
SEC. 220. Form and Mode of Proceeding in Actions Arising under this Code. - Civil and
criminal actions and proceedings instituted in behalf of the Government under the authority of this
Code or other law enforced by the Bureau of Internal Revenue shall be brought in the name of
the Government of the Philippines and shall be conducted by legal officers of the Bureau of
Internal Revenue but no civil or criminal action for the recovery of taxes or the enforcement of any

fine, penalty or forfeiture under this Code shall be filed in court without the approval of the
Commissioner.

Petitioners argument must fail in light of BIR Commissioner Paraynos letter dated 19 May 2005 to DOJ
Secretary Gonzales referring for preliminary investigation and filing of an information in court if evidence
so warrants, the findings of the BIR officers recommending the criminal prosecution of petitioner. In said letter,
BIR Commissioner Parayno already gave his prior approval to the filing of an information in court should the
DOJ, based on the evidence submitted, find probable cause against petitioner during the preliminary
investigation. Section 220 of the NIRC, as amended, simply requires that the BIR Commissioner approve the
institution of civil or criminal action against a tax law violator, but it does not describe in what form such
approval must be given. In this case, BIR Commissioner Paraynos letter of 19 May 2005 already states his
express approval of the filing of an information against petitioner and his signature need not appear on the
Resolution of the State Prosecutor or the Information itself.
Still on the purported lack of authority of Prosecution Attorney Torrevillas to file the Information, petitioner
asserts that it is the City Prosecutor under the Quezon City Charter, who has the authority to investigate and
prosecute offenses allegedly committed within the jurisdiction of Quezon City, such as petitioners case.
The Court is not persuaded. Under Republic Act No. 537, the Revised Charter ofQuezon City, the City
Prosecutor shall have the following duties relating to the investigation and prosecution of criminal offenses:

SEC. 28. The City Attorney - His assistants - His duties.


xxxx
(g) He shall also have charge of the prosecution of all crimes, misdemeanors, and
violations of city ordinances, in the Court of First Instance and the municipal courts of the city, and
shall discharge all the duties in respect to the criminal prosecutions enjoined by law upon
provincial fiscals.
(h) He shall cause to be investigated all charges of crimes, misdemeanors, and violations
of ordinances and have the necessary information or complaints prepared or made against the
persons accused. He or any of his assistants may conduct such investigations by taking oral
evidence of reputable witnesses, and for this purpose may issue subpoena, summon witnesses
to appear and testify under oath before him, and the attendance or evidence of an absent or
recalcitrant witness may be enforced by application to the municipal court or the Court of First
Instance. No witness summoned to testify under this section shall be under obligation to give any
testimony which tend to incriminate himself.

Evident from the foregoing is that the City Prosecutor has the power to investigate crimes, misdemeanors,
and violations of ordinances committed within the territorial jurisdiction of the city, and which can be prosecuted
before the trial courts of the said city. The charge against petitioner, however, is already within the exclusive
original jurisdiction of the CTA,[51] as the Information states that her gross underdeclaration resulted in an income
tax deficiency of P1,395,116.24, excluding interest and penalties. The City Prosecutor does not have the authority
to appear before the CTA, which is now of the same rank as the Court of Appeals.

In contrast, the DOJ is the principal law agency of the Philippine government which shall be both its legal
counsel and prosecution arm.[52] It has the power to investigate the commission of crimes, prosecute offenders
and administer the probation and correction system. [53] Under the DOJ is the Office of the State Prosecutor whose
functions are described as follows:
Sec. 8. Office of the Chief State Prosecutor. - The Office of the Chief State Prosecutor
shall have the following functions:
(1) Assist the Secretary in the performance of powers and functions of the Department
relative to its role as the prosecution arm of the government;
(2) Implement the provisions of laws, executive orders and rules, and carry out the
policies, plans, programs and projects of the Department relative to the investigation and
prosecution of criminal cases;
(3) Assist the Secretary in exercising supervision and control over the National
Prosecution Service as constituted under P.D. No. 1275 and/or otherwise hereinafter provided;
and
(4) Perform such other functions as may be provided by law or assigned by the
Secretary.[54]

As explained by CTA First Division in its Resolution dated 11 May 2006:


[T]he power or authority of the Chief State Prosecutor Jovencito Zuo, Jr. and his deputies in the
Department of Justice to prosecute cases is national in scope; and the Special Prosecutors
authority to sign and file informations in court proceeds from the exercise of said persons
authority to conduct preliminary investigations.[55]
Moreover, there is nothing in the Revised Quezon City Charter which would suggest that the power of
the City Prosecutor to investigate and prosecute crimes, misdemeanors, and violations of ordinances
committed within the territorial jurisdiction of the city is to the exclusion of the State Prosecutors. In fact, the
Office of the State Prosecutor exercises control and supervision over City Prosecutors under Executive Order
No. 292, otherwise known as the Administrative Code of 1987.
As regards petitioners second ground in her intended Petition for Review with the CTA en banc, she
asserts that she has been denied due process and equal protection of the laws when similar charges for
violation of the NIRC, as amended, against Regina Encarnacion A. Velasquez (Velasquez) were dismissed by
the DOJ in its Resolution dated 10 August 2005 in I.S. No. 2005-330 for the reason that Velasquezs tax
liability was not yet fully determined when the charges were filed.
The Court is unconvinced.
First, a motion to quash should be based on a defect in the information which is evident on its face.
The same cannot be said herein. The Information against petitioner appears valid on its face; and that it
was filed in violation of her constitutional rights to due process and equal protection of the laws is not evident
on the face thereof. As pointed out by the CTA First Division in its 11 May 2006Resolution, the more
appropriate recourse petitioner should have taken, given the dismissal of similar charges against Velasquez,
[56]

was to appeal the Resolution dated21 October 2005 of the Office of the State Prosecutor recommending the
filing of an information against her with the DOJ Secretary.[57]
Second, petitioner cannot claim denial of due process when she was given the opportunity to file her
affidavits and other pleadings and submit evidence before the DOJ during the preliminary investigation of her
case and before the Information was filed against her. Due process is merely an opportunity to be heard. In
addition, preliminary investigation conducted by the DOJ is merely inquisitorial. It is not a trial of the case on
the merits. Its sole purpose is to determine whether a crime has been committed and whether the respondent
therein is probably guilty of the crime. It is not the occasion for the full and exhaustive display of the parties
evidence. Hence, if the investigating prosecutor is already satisfied that he can reasonably determine the
existence of probable cause based on the parties evidence thuspresented, he may terminate the proceedings
and resolve the case.[58]
Third, petitioner cannot likewise aver that she has been denied equal protection of the laws.
The equal protection clause exists to prevent undue favor or privilege. It is intended to eliminate
discrimination and oppression based on inequality. Recognizing the existence of real differences among men,
the equal protection clause does not demand absolute equality. It merely requires that all persons shall be
treated alike, under like circumstances and conditions, both as to the privileges conferred and liabilities
enforced.[59]
Petitioner was not able to duly establish to the satisfaction of this Court that she and Velasquez were
indeed similarly situated, i.e., that they committed identical acts for which they were charged with the violation
of the same provisions of the NIRC; and that they presented similar arguments and evidence in their defense
- yet, they were treated differently.
Furthermore, that the Prosecution Attorney dismissed what were supposedly similar charges against
Velasquez did not compel Prosecution Attorney Torrevillasto rule the same way on the charges against
petitioner. In People v. Dela Piedra,[60]this Court explained that:
The prosecution of one guilty person while others equally guilty are not prosecuted,
however, is not, by itself, a denial of the equal protection of the laws. Where the official action
purports to be in conformity to the statutory classification, an erroneous or mistaken performance
of the statutory duty, although a violation of the statute, is not without more a denial of the equal
protection of the laws. The unlawful administration by officers of a statute fair on its face, resulting
in its unequal application to those who are entitled to be treated alike, is not a denial of equal
protection unless there is shown to be present in it an element of intentional or purposeful
discrimination. This may appear on the face of the action taken with respect to a particular class
or person, or it may only be shown by extrinsic evidence showing a discriminatory design over
another not to be inferred from the action itself. But a discriminatory purpose is not
presumed, there must be a showing of clear and intentional discrimination. Appellant has
failed to show that, in charging appellant in court, that there was a clear and intentional
discrimination on the part of the prosecuting officials.
The discretion of who to prosecute depends on the prosecutions sound assessment
whether the evidence before it can justify a reasonable belief that a person has committed an
offense. The presumption is that the prosecuting officers regularly performed their duties,
and this presumption can be overcome only by proof to the contrary, not by mere
speculation. Indeed, appellant has not presented any evidence to overcome this presumption.
The mere allegation that appellant, a Cebuana, was charged with the commission of a crime,
while a Zamboanguea, the guilty party in appellants eyes, was not, is insufficient to support a
conclusion that the prosecution officers denied appellant equal protection of the laws.
There is also common sense practicality in sustaining appellants prosecution.

While all persons accused of crime are to be treated on a basis of equality before
the law, it does not follow that they are to be protected in the commission of crime. It
would be unconscionable, for instance, to excuse a defendant guilty of murder because others
have murdered with impunity. The remedy for unequal enforcement of the law in such
instances does not lie in the exoneration of the guilty at the expense of society x x x.
Protection of the law will be extended to all persons equally in the pursuit of their lawful
occupations, but no person has the right to demand protection of the law in the commission of a
crime.
Likewise, [i]f the failure of prosecutors to enforce the criminal laws as to some persons
should be converted into a defense for others charged with crime, the result would be that the trial
of the district attorney for nonfeasance would become an issue in the trial of many persons
charged with heinous crimes and the enforcement of law would suffer a complete
breakdown. (Emphasis ours.)

In the case at bar, no evidence of a clear and intentional discrimination against petitioner was shown,
whether by Prosecution Attorney Torrevillas in recommending the filing of Information against petitioner or by
the CTA First Division in denying petitioners Motion to Quash. The only basis for petitioners claim of denial of
equal protection of the laws was the dismissal of the charges against Velasquez while those against her were
not.
And lastly, the Resolutions of the CTA First Division dated 23 February 2006 and 11 May 2006 directly
addressed the arguments raised by petitioner in her Motion to Quash and Motion for Reconsideration,
respectively, and explained the reasons for the denial of both Motions. There is nothing to sustain a finding
that these Resolutions were rendered capriciously, whimsically, or arbitrarily, as to constitute grave abuse of
discretion amounting to lack or excess of jurisdiction.
In sum, the CTA en banc did not err in denying petitioners Motion for Extension of Time to File
Petition for Review. Petitioner cannot file a Petition for Review with the CTA en banc to appeal the Resolution
of the CTA First Division denying her Motion to Quash. The Resolution is interlocutory and,
thus,unappealable. Even if her Petition for Review is to be treated as a petition forcertiorari, it is dismissible
for lack of merit.
WHEREFORE, premises considered, the instant Petition for Review is hereby DENIED. Costs
against petitioner.

People of the Philippines vs. Judy Anne Santos, CTA CRIM. CASE NO. O012, January 16, 2013 Bautista, J.
Facts:
The accused, Jud y Anne Santos is charged for f iling a false and f raudulent Income
Tax R e t u r n ( I T R )
for the taxable year 2002 by indicating therein a gross income of P 8, 003,332.70, when in truth
and infact her correct income for taxable year 2002 is P 16, 396, 234.70. She is prosecuted for
violationSection 255 of the 1997 NIRC as amended for her failure to supply correct and accurate
information,which resulted to an income tax deficiency in the amount of P 1, 395,116.24, excluded
interest
and penalties thereon in the amount of P 1, 319, 500. 94, or in the aggregate income tax deficiency of P 2,7 1 4 , 6
17.18.
Issue:
Whether or not the accused may be held liable for violation of Section 255 of the National
InternalRevenue Code, as amended.
Held:
Section 255 enumerates the following offenses: a.
Willful failure to pay tax; b.
Willful failure to make a return; c.
Willful failure to keep any record; d.
Willful failure to supply correct and accurate information; e.
Willful failure to withhold or remit taxes withheld; or f.
Willful failure to refund excess taxes withheld on compensation.One of the offenses aboveenumerated is willful failure to supply correct and accurate information,which is being attributed
to the accused. The elements of the said offense are as follows: 1.
That a person is required to supply correct and accurate information; 2.
That there is failure to supply correct and accurate information at the time or times required
bylaw or rules and regulations; and 3.
That such failure to supply correct and accurate information is done wilfully.
Require to supply Correct and Accurate Information
Based on the records of the case, the accused unequivocally admitted that as early as eight (8)
years old,she entered the entertainment industry, and that at present is an established movie
actress, celebrityendorser and showbiz personality. Further, for the subject taxable year 2002,
she admitted that sheentered into contracts for her engagement as a professional entertainer,
movie actress, and productendorser. With this, accused is required to file an income tax return for
all her income from all sources.

The prosecution was able to prove that the accused, earning her professional income as an
entertainer isrequired to file an income tax return, as she did, and that accused apparently
supplied correct andaccurate information thereof.
Failure to Supply Correct and Accurate Information at the Time Required by Law
The prosecution was able to prove the element of failure to supply correct and accurate
information atthe time required by law.The prosecution presented that there were: a.
Undeclared income form ABS-CBN Broadcasting Corporation b.
Undeclared income from Viva Productions, Inc. c.
Undeclared income from Star Cinema Productions, Inc. d.
Undeclared income from Regal Entertainment, Inc. e.
Undeclared income from Century Canning CorporationFrom the foregoing, the prosecution was
able to show that from the declared Gross Taxable ProfessionalIncome of the accused in the
amount of P 8, 003, 332.70, in her ITR for the taxable year 2002, accusedhas an aggregate
amount of P16, 396, 234.70, or a gross underdeclaration of P 8, 362, 902.00.
Willful Fa ilure to S uppl y Corre c t and Ac c ura te Informa tion
As early discussed, the prosecution was able to prove that the accused failed to supply correct
andaccurate information in her ITR for the year2002 for her failure declare her other income
paymentsreceived from other sources.However, it is well settled that mere understatement of a
tax is not itself proof of fraud for the purpose oftax evasion.Based on the records of the case, the
accused denied the
signature appearing on top of the name JudyAnne Santos in the ITR for taxable
year 2002, presented by the prosecution, and that the Certif iedPublic Accountant,
whos participation is limited to the preparation of the Financial Statements attached
to the return, likewise, denied signing the return on behalf of the accused. Further, the working
paperswere all provided by the manager of the accused.The Court, therefore, finds the records
bereft of any evidence to establish the element of wilfulness onthe part of the accused to supply
the correct and accurate information on her subject return.The Court, however, only finds the
accused negligent; and such is not enough to convict her in the case a t
b e n c h . Negligence, whether slight or gross, is not equivalent to the fraud with intent to evade the taxcontempla
ted by law. Fraud must amount to intentional wrong-doing with the sole object of avoiding the t a x .
The Court also notes the intention of the accused to settle the case were it not for the opposition
of herManager and then counsel, which negated any motive of the accused to commit fraud.In
sum, the Court finds the failure of the prosecution to establish the guilt of the accused beyond
therequired reasonable doubt.

AMERICAN BIBLE SOCIETY, plaintiff-appellant,


vs.
CITY OF MANILA, defendant-appellee.
City Fiscal Eugenio Angeles and Juan Nabong for appellant.
Assistant City Fiscal Arsenio Naawa for appellee.
FELIX, J.:
Plaintiff-appellant is a foreign, non-stock, non-profit, religious, missionary corporation duly registered and doing
business in the Philippines through its Philippine agency established in Manila in November, 1898, with its
principal office at 636 Isaac Peral in said City. The defendant appellee is a municipal corporation with powers that
are to be exercised in conformity with the provisions of Republic Act No. 409, known as the Revised Charter of the
City of Manila.
In the course of its ministry, plaintiff's Philippine agency has been distributing and selling bibles and/or gospel
portions thereof (except during the Japanese occupation) throughout the Philippines and translating the same into
several Philippine dialects. On May 29 1953, the acting City Treasurer of the City of Manila informed plaintiff that it
was conducting the business of general merchandise since November, 1945, without providing itself with the
necessary Mayor's permit and municipal license, in violation of Ordinance No. 3000, as amended, and
Ordinances Nos. 2529, 3028 and 3364, and required plaintiff to secure, within three days, the corresponding
permit and license fees, together with compromise covering the period from the 4th quarter of 1945 to the 2nd
quarter of 1953, in the total sum of P5,821.45 (Annex A).
Plaintiff protested against this requirement, but the City Treasurer demanded that plaintiff deposit and pay under
protest the sum of P5,891.45, if suit was to be taken in court regarding the same (Annex B). To avoid the closing
of its business as well as further fines and penalties in the premises on October 24, 1953, plaintiff paid to the
defendant under protest the said permit and license fees in the aforementioned amount, giving at the same time
notice to the City Treasurer that suit would be taken in court to question the legality of the ordinances under
which, the said fees were being collected (Annex C), which was done on the same date by filing the complaint
that gave rise to this action. In its complaint plaintiff prays that judgment be rendered declaring the said Municipal
Ordinance No. 3000, as amended, and Ordinances Nos. 2529, 3028 and 3364 illegal and unconstitutional, and
that the defendant be ordered to refund to the plaintiff the sum of P5,891.45 paid under protest, together with legal
interest thereon, and the costs, plaintiff further praying for such other relief and remedy as the court may deem
just equitable.
Defendant answered the complaint, maintaining in turn that said ordinances were enacted by the Municipal Board
of the City of Manila by virtue of the power granted to it by section 2444, subsection (m-2) of the Revised
Administrative Code, superseded on June 18, 1949, by section 18, subsection (1) of Republic Act No. 409, known
as the Revised Charter of the City of Manila, and praying that the complaint be dismissed, with costs against
plaintiff. This answer was replied by the plaintiff reiterating the unconstitutionality of the often-repeated
ordinances.
Before trial the parties submitted the following stipulation of facts:
COME NOW the parties in the above-entitled case, thru their undersigned attorneys and respectfully
submit the following stipulation of facts:
1. That the plaintiff sold for the use of the purchasers at its principal office at 636 Isaac Peral, Manila,
Bibles, New Testaments, bible portions and bible concordance in English and other foreign languages
imported by it from the United States as well as Bibles, New Testaments and bible portions in the local
dialects imported and/or purchased locally; that from the fourth quarter of 1945 to the first quarter of 1953
inclusive the sales made by the plaintiff were as follows:
2. That the parties hereby reserve the right to present evidence of other facts not herein stipulated.
WHEREFORE, it is respectfully prayed that this case be set for hearing so that the parties may present
further evidence on their behalf. (Record on Appeal, pp. 15-16).
When the case was set for hearing, plaintiff proved, among other things, that it has been in existence in the
Philippines since 1899, and that its parent society is in New York, United States of America; that its, contiguous
real properties located at Isaac Peral are exempt from real estate taxes; and that it was never required to pay any
municipal license fee or tax before the war, nor does the American Bible Society in the United States pay any

license fee or sales tax for the sale of bible therein. Plaintiff further tried to establish that it never made any profit
from the sale of its bibles, which are disposed of for as low as one third of the cost, and that in order to maintain
its operating cost it obtains substantial remittances from its New York office and voluntary contributions and gifts
from certain churches, both in the United States and in the Philippines, which are interested in its missionary
work. Regarding plaintiff's contention of lack of profit in the sale of bibles, defendant retorts that the admissions of
plaintiff-appellant's lone witness who testified on cross-examination that bibles bearing the price of 70 cents each
from plaintiff-appellant's New York office are sold here by plaintiff-appellant at P1.30 each; those bearing the price
of $4.50 each are sold here at P10 each; those bearing the price of $7 each are sold here at P15 each; and those
bearing the price of $11 each are sold here at P22 each, clearly show that plaintiff's contention that it never makes
any profit from the sale of its bible, is evidently untenable.
After hearing the Court rendered judgment, the last part of which is as follows:
As may be seen from the repealed section (m-2) of the Revised Administrative Code and the repealing
portions (o) of section 18 of Republic Act No. 409, although they seemingly differ in the way the legislative
intent is expressed, yet their meaning is practically the same for the purpose of taxing the merchandise
mentioned in said legal provisions, and that the taxes to be levied by said ordinances is in the nature of
percentage graduated taxes (Sec. 3 of Ordinance No. 3000, as amended, and Sec. 1, Group 2, of
Ordinance No. 2529, as amended by Ordinance No. 3364).
IN VIEW OF THE FOREGOING CONSIDERATIONS, this Court is of the opinion and so holds that this
case should be dismissed, as it is hereby dismissed, for lack of merits, with costs against the plaintiff.
Not satisfied with this verdict plaintiff took up the matter to the Court of Appeals which certified the case to Us for
the reason that the errors assigned to the lower Court involved only questions of law.
Appellant contends that the lower Court erred:
1. In holding that Ordinances Nos. 2529 and 3000, as respectively amended, are not unconstitutional;
2. In holding that subsection m-2 of Section 2444 of the Revised Administrative Code under which
Ordinances Nos. 2592 and 3000 were promulgated, was not repealed by Section 18 of Republic Act No.
409;
3. In not holding that an ordinance providing for taxes based on gross sales or receipts, in order to be
valid under the new Charter of the City of Manila, must first be approved by the President of the
Philippines; and
4. In holding that, as the sales made by the plaintiff-appellant have assumed commercial proportions, it
cannot escape from the operation of said municipal ordinances under the cloak of religious privilege.
The issues. As may be seen from the proceeding statement of the case, the issues involved in the present
controversy may be reduced to the following: (1) whether or not the ordinances of the City of Manila, Nos. 3000,
as amended, and 2529, 3028 and 3364, are constitutional and valid; and (2) whether the provisions of said
ordinances are applicable or not to the case at bar.
Section 1, subsection (7) of Article III of the Constitution of the Republic of the Philippines, provides that:
(7) No law shall be made respecting an establishment of religion, or prohibiting the free exercise thereof,
and the free exercise and enjoyment of religious profession and worship, without discrimination or
preference, shall forever be allowed. No religion test shall be required for the exercise of civil or political
rights.
Predicated on this constitutional mandate, plaintiff-appellant contends that Ordinances Nos. 2529 and 3000, as
respectively amended, are unconstitutional and illegal in so far as its society is concerned, because they provide
for religious censorship and restrain the free exercise and enjoyment of its religious profession, to wit: the
distribution and sale of bibles and other religious literature to the people of the Philippines.
Before entering into a discussion of the constitutional aspect of the case, We shall first consider the provisions of
the questioned ordinances in relation to their application to the sale of bibles, etc. by appellant. The records, show
that by letter of May 29, 1953 (Annex A), the City Treasurer required plaintiff to secure a Mayor's permit in
connection with the society's alleged business of distributing and selling bibles, etc. and to pay permit dues in the
sum of P35 for the period covered in this litigation, plus the sum of P35 for compromise on account of plaintiff's
failure to secure the permit required by Ordinance No. 3000 of the City of Manila, as amended. This Ordinance is
of general application and not particularly directed against institutions like the plaintiff, and it does not contain any

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

xxx

xxx

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

xxx

xxx

As may be seen, the license fees required to be paid quarterly in Section 1 of said Ordinance No. 2529, as
amended, are not imposed directly upon any religious institution but upon those engaged in any of the business
or occupations therein enumerated, such as retail "dealers in general merchandise" which, it is alleged, cover the
business or occupation of selling bibles, books, etc.
Chapter 60 of the Revised Administrative Code which includes section 2444, subsection (m-2) of said legal body,
as amended by Act No. 3659, approved on December 8, 1929, empowers the Municipal Board of the City of
Manila:
(M-2) To tax and fix the license fee on (a) dealers in new automobiles or accessories or both, and (b)
retail dealers in new (not yet used) merchandise, which dealers are not yet subject to the payment of any
municipal tax.
For the purpose of taxation, these retail dealers shall be classified as (1) retail dealers in general
merchandise, and (2) retail dealers exclusively engaged in the sale of (a) textiles . . . (e) books, including
stationery, paper and office supplies, . . .: PROVIDED, HOWEVER, That the combined total tax of any
debtor or manufacturer, or both, enumerated under these subsections (m-1) and (m-2), whether dealing
in one or all of the articles mentioned herein, SHALL NOT BE IN EXCESS OF FIVE HUNDRED PESOS
PER ANNUM.

and appellee's counsel maintains that City Ordinances Nos. 2529 and 3000, as amended, were enacted in virtue
of the power that said Act No. 3669 conferred upon the City of Manila. Appellant, however, contends that said
ordinances are longer in force and effect as the law under which they were promulgated has been expressly
repealed by Section 102 of Republic Act No. 409 passed on June 18, 1949, known as the Revised Manila Charter.
Passing upon this point the lower Court categorically stated that Republic Act No. 409 expressly repealed the
provisions of Chapter 60 of the Revised Administrative Code but in the opinion of the trial Judge, although Section
2444 (m-2) of the former Manila Charter and section 18 (o) of the new seemingly differ in the way the legislative
intent was expressed, yet their meaning is practically the same for the purpose of taxing the merchandise
mentioned in both legal provisions and, consequently, Ordinances Nos. 2529 and 3000, as amended, are to be
considered as still in full force and effect uninterruptedly up to the present.
Often the legislature, instead of simply amending the pre-existing statute, will repeal the old statute in its
entirety and by the same enactment re-enact all or certain portions of the preexisting law. Of course, the
problem created by this sort of legislative action involves mainly the effect of the repeal upon rights and
liabilities which accrued under the original statute. Are those rights and liabilities destroyed or preserved?
The authorities are divided as to the effect of simultaneous repeals and re-enactments. Some adhere to
the view that the rights and liabilities accrued under the repealed act are destroyed, since the statutes
from which they sprang are actually terminated, even though for only a very short period of time. Others,
and they seem to be in the majority, refuse to accept this view of the situation, and consequently maintain
that all rights an liabilities which have accrued under the original statute are preserved and may be
enforced, since the re-enactment neutralizes the repeal, therefore, continuing the law in force without
interruption. (Crawford-Statutory Construction, Sec. 322).
Appellant's counsel states that section 18 (o) of Republic Act No, 409 introduces a new and wider concept of
taxation and is different from the provisions of Section 2444(m-2) that the former cannot be considered as a
substantial re-enactment of the provisions of the latter. We have quoted above the provisions of section 2444(m2) of the Revised Administrative Code and We shall now copy hereunder the provisions of Section 18, subdivision
(o) of Republic Act No. 409, which reads as follows:
(o) To tax and fix the license fee on dealers in general merchandise, including importers and indentors,
except those dealers who may be expressly subject to the payment of some other municipal tax under the
provisions of this section.
Dealers in general merchandise shall be classified as (a) wholesale dealers and (b) retail dealers. For
purposes of the tax on retail dealers, general merchandise shall be classified into four main classes:
namely (1) luxury articles, (2) semi-luxury articles, (3) essential commodities, and (4) miscellaneous
articles. A separate license shall be prescribed for each class but where commodities of different classes
are sold in the same establishment, it shall not be compulsory for the owner to secure more than one
license if he pays the higher or highest rate of tax prescribed by ordinance. Wholesale dealers shall pay
the license tax as such, as may be provided by ordinance.
For purposes of this section, the term "General merchandise" shall include poultry and livestock,
agricultural products, fish and other allied products.
The only essential difference that We find between these two provisions that may have any bearing on the case at
bar, is that, while subsection (m-2) prescribes that the combined total tax of any dealer or manufacturer, or both,
enumerated under subsections (m-1) and (m-2), whether dealing in one or all of the articles mentioned
therein,shall not be in excess of P500 per annum, the corresponding section 18, subsection (o) of Republic Act
No. 409, does not contain any limitation as to the amount of tax or license fee that the retail dealer has to pay per
annum. Hence, and in accordance with the weight of the authorities above referred to that maintain that "all rights
and liabilities which have accrued under the original statute are preserved and may be enforced, since the
reenactment neutralizes the repeal, therefore continuing the law in force without interruption", We hold that the
questioned ordinances of the City of Manila are still in force and effect.
Plaintiff, however, argues that the questioned ordinances, to be valid, must first be approved by the President of
the Philippines as per section 18, subsection (ii) of Republic Act No. 409, which reads as follows:
(ii) To tax, license and regulate any business, trade or occupation being conducted within the City of
Manila,not otherwise enumerated in the preceding subsections, including percentage taxes based on
gross sales or receipts, subject to the approval of the PRESIDENT, except amusement taxes.

but this requirement of the President's approval was not contained in section 2444 of the former Charter of the
City of Manila under which Ordinance No. 2529 was promulgated. Anyway, as stated by appellee's counsel, the
business of "retail dealers in general merchandise" is expressly enumerated in subsection (o), section 18 of
Republic Act No. 409; hence, an ordinance prescribing a municipal tax on said business does not have to be
approved by the President to be effective, as it is not among those referred to in said subsection (ii). Moreover,
the questioned ordinances are still in force, having been promulgated by the Municipal Board of the City of Manila
under the authority granted to it by law.
The question that now remains to be determined is whether said ordinances are inapplicable, invalid or
unconstitutional if applied to the alleged business of distribution and sale of bibles to the people of the Philippines
by a religious corporation like the American Bible Society, plaintiff herein.
With regard to Ordinance No. 2529, as amended by Ordinances Nos. 2779, 2821 and 3028, appellant contends
that it is unconstitutional and illegal because it restrains the free exercise and enjoyment of the religious
profession and worship of appellant.
Article III, section 1, clause (7) of the Constitution of the Philippines aforequoted, guarantees the freedom of
religious profession and worship. "Religion has been spoken of as a profession of faith to an active power that
binds and elevates man to its Creator" (Aglipay vs. Ruiz, 64 Phil., 201).It has reference to one's views of his
relations to His Creator and to the obligations they impose of reverence to His being and character, and
obedience to His Will (Davis vs. Beason, 133 U.S., 342). The constitutional guaranty of the free exercise and
enjoyment of religious profession and worship carries with it the right to disseminate religious information. Any
restraints of such right can only be justified like other restraints of freedom of expression on the grounds that there
is a clear and present danger of any substantive evil which the State has the right to prevent". (Taada and
Fernando on the Constitution of the Philippines, Vol. 1, 4th ed., p. 297). In the case at bar the license fee herein
involved is imposed upon appellant for its distribution and sale of bibles and other religious literature:
In the case of Murdock vs. Pennsylvania, it was held that an ordinance requiring that a license be
obtained before a person could canvass or solicit orders for goods, paintings, pictures, wares or
merchandise cannot be made to apply to members of Jehovah's Witnesses who went about from door to
door distributing literature and soliciting people to "purchase" certain religious books and pamphlets, all
published by the Watch Tower Bible & Tract Society. The "price" of the books was twenty-five cents each,
the "price" of the pamphlets five cents each. It was shown that in making the solicitations there was a
request for additional "contribution" of twenty-five cents each for the books and five cents each for the
pamphlets. Lesser sum were accepted, however, and books were even donated in case interested
persons were without funds.
On the above facts the Supreme Court held that it could not be said that petitioners were engaged in
commercial rather than a religious venture. Their activities could not be described as embraced in the
occupation of selling books and pamphlets. Then the Court continued:
"We do not mean to say that religious groups and the press are free from all financial burdens of
government. See Grosjean vs. American Press Co., 297 U.S., 233, 250, 80 L. ed. 660, 668, 56 S. Ct.
444. We have here something quite different, for example, from a tax on the income of one who engages
in religious activities or a tax on property used or employed in connection with activities. It is one thing to
impose a tax on the income or property of a preacher. It is quite another to exact a tax from him for the
privilege of delivering a sermon. The tax imposed by the City of Jeannette is a flat license tax, payment of
which is a condition of the exercise of these constitutional privileges. The power to tax the exercise of a
privilege is the power to control or suppress its enjoyment. . . . Those who can tax the exercise of this
religious practice can make its exercise so costly as to deprive it of the resources necessary for its
maintenance. Those who can tax the privilege of engaging in this form of missionary evangelism can
close all its doors to all those who do not have a full purse. Spreading religious beliefs in this ancient and
honorable manner would thus be denied the needy. . . .
It is contended however that the fact that the license tax can suppress or control this activity is
unimportant if it does not do so. But that is to disregard the nature of this tax. It is a license tax a flat
tax imposed on the exercise of a privilege granted by the Bill of Rights . . . The power to impose a license
tax on the exercise of these freedom is indeed as potent as the power of censorship which this Court has
repeatedly struck down. . . . It is not a nominal fee imposed as a regulatory measure to defray the
expenses of policing the activities in question. It is in no way apportioned. It is flat license tax levied and

collected as a condition to the pursuit of activities whose enjoyment is guaranteed by the constitutional
liberties of press and religion and inevitably tends to suppress their exercise. That is almost uniformly
recognized as the inherent vice and evil of this flat license tax."
Nor could dissemination of religious information be conditioned upon the approval of an official or
manager even if the town were owned by a corporation as held in the case of Marsh vs. State of
Alabama (326 U.S. 501), or by the United States itself as held in the case of Tucker vs. Texas (326 U.S.
517). In the former case the Supreme Court expressed the opinion that the right to enjoy freedom of the
press and religion occupies a preferred position as against the constitutional right of property owners.
"When we balance the constitutional rights of owners of property against those of the people to enjoy
freedom of press and religion, as we must here, we remain mindful of the fact that the latter occupy a
preferred position. . . . In our view the circumstance that the property rights to the premises where the
deprivation of property here involved, took place, were held by others than the public, is not sufficient to
justify the State's permitting a corporation to govern a community of citizens so as to restrict their
fundamental liberties and the enforcement of such restraint by the application of a State statute." (Taada
and Fernando on the Constitution of the Philippines, Vol. 1, 4th ed., p. 304-306).
Section 27 of Commonwealth Act No. 466, otherwise known as the National Internal Revenue Code, provides:
SEC. 27. EXEMPTIONS FROM TAX ON CORPORATIONS. The following organizations shall not be
taxed under this Title in respect to income received by them as such
(e) Corporations or associations organized and operated exclusively for religious, charitable, . . . or
educational purposes, . . .: Provided, however, That the income of whatever kind and character from any
of its properties, real or personal, or from any activity conducted for profit, regardless of the disposition
made of such income, shall be liable to the tax imposed under this Code;
Appellant's counsel claims that the Collector of Internal Revenue has exempted the plaintiff from this tax and says
that such exemption clearly indicates that the act of distributing and selling bibles, etc. is purely religious and does
not fall under the above legal provisions.
It may be true that in the case at bar the price asked for the bibles and other religious pamphlets was in some
instances a little bit higher than the actual cost of the same but this cannot mean that appellant was engaged in
the business or occupation of selling said "merchandise" for profit. For this reason We believe that the provisions
of City of Manila Ordinance No. 2529, as amended, cannot be applied to appellant, for in doing so it would impair
its free exercise and enjoyment of its religious profession and worship as well as its rights of dissemination of
religious beliefs.
With respect to Ordinance No. 3000, as amended, which requires the obtention the Mayor's permit before any
person can engage in any of the businesses, trades or occupations enumerated therein, We do not find that it
imposes any charge upon the enjoyment of a right granted by the Constitution, nor tax the exercise of religious
practices. In the case of Coleman vs. City of Griffin, 189 S.E. 427, this point was elucidated as follows:
An ordinance by the City of Griffin, declaring that the practice of distributing either by hand or otherwise,
circulars, handbooks, advertising, or literature of any kind, whether said articles are being delivered free,
or whether same are being sold within the city limits of the City of Griffin, without first obtaining written
permission from the city manager of the City of Griffin, shall be deemed a nuisance and punishable as an
offense against the City of Griffin, does not deprive defendant of his constitutional right of the free
exercise and enjoyment of religious profession and worship, even though it prohibits him from introducing
and carrying out a scheme or purpose which he sees fit to claim as a part of his religious system.
It seems clear, therefore, that Ordinance No. 3000 cannot be considered unconstitutional, even if applied to
plaintiff Society. But as Ordinance No. 2529 of the City of Manila, as amended, is not applicable to plaintiffappellant and defendant-appellee is powerless to license or tax the business of plaintiff Society involved herein
for, as stated before, it would impair plaintiff's right to the free exercise and enjoyment of its religious profession
and worship, as well as its rights of dissemination of religious beliefs, We find that Ordinance No. 3000, as
amended is also inapplicable to said business, trade or occupation of the plaintiff.
Wherefore, and on the strength of the foregoing considerations, We hereby reverse the decision appealed from,
sentencing defendant return to plaintiff the sum of P5,891.45 unduly collected from it. Without pronouncement as
to costs. It is so ordered.

ANGELES UNIVERSITY FOUNDATION,

G.R. No. 189999

Petitioner,
Present:
- versus -

LEONARDO-DE CASTRO,J.,*
Acting Chairperson,
BERSAMIN,

CITY OF ANGELES, JULIET G.

VILLARAMA, JR.,

QUINSAAT, in her capacity as

PEREZ,* and
PERLAS-BERNABE,* JJ.

Treasurer of Angeles City and ENGR.


DONATO N. DIZON, in his capacity as Acting
Angeles City Building Official,
Respondents.

Promulgated:
June 27, 2012

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
VILLARAMA, JR., J.:
Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as
amended, which seeks to reverse and set aside the Decision [1]dated July 28, 2009 and Resolution[2] dated
October 12, 2009 of the Court of Appeals (CA) in CA-G.R. CV No. 90591. The CA reversed the Decision[3] dated
September 21, 2007 of the Regional Trial Court of Angeles City, Branch 57 in Civil Case No. 12995 declaring
petitioner exempt from the payment of building permit and other fees and ordering respondents to refund the
same with interest at the legal rate.
The factual antecedents:
Petitioner Angeles University Foundation (AUF) is an educational institution established on May 25, 1962
and was converted into a non-stock, non-profit education foundation under the provisions of Republic Act (R.A.)
No. 6055[4] on December 4, 1975.
Sometime in August 2005, petitioner filed with the Office of the City Building Official an application for a
building permit for the construction of an 11-storey building of the Angeles University Foundation Medical Center
in its main campus located at MacArthur Highway, Angeles City, Pampanga. Said office issued a Building Permit
Fee Assessment in the amount of P126,839.20. An Order of Payment was also issued by the City Planning and
Development Office, Zoning Administration Unit requiring petitioner to pay the sum of P238,741.64 as Locational
Clearance Fee.[5]
In separate letters dated November 15, 2005 addressed to respondents City Treasurer Juliet G. Quinsaat
and Acting City Building Official Donato N. Dizon, petitioner claimed that it is exempt from the payment of the
building permit and locational clearance fees, citing legal opinions rendered by the Department of Justice (DOJ).
Petitioner also reminded the respondents that they have previously issued building permits acknowledging such
exemption from payment of building permit fees on the construction of petitioners 4-storey AUF Information
Technology Center building and the AUF Professional Schools building on July 27, 2000 and March 15, 2004,
respectively.[6]
Respondent City Treasurer referred the matter to the Bureau of Local Government Finance (BLGF) of the
Department of Finance, which in turn endorsed the query to the DOJ. Then Justice Secretary Raul M. Gonzalez, in
his letter-reply dated December 6, 2005, cited previous issuances of his office (Opinion No. 157, s. 1981 and
Opinion No. 147, s. 1982) declaring petitioner to be exempt from the payment of building permit fees. Under the
1st Indorsement dated January 6, 2006, BLGF reiterated the aforesaid opinion of the DOJ stating further that xxx the
Department of Finance, thru this Bureau, has no authority to review the resolution or the decision of the DOJ.[7]

Petitioner wrote the respondents reiterating its request to reverse the disputed assessments and invoking
the DOJ legal opinions which have been affirmed by Secretary Gonzalez. Despite petitioners plea, however,
respondents refused to issue the building permits for the construction of the AUF Medical Center in the main campus
and renovation of a school building located at Marisol Village. Petitioner then appealed the matter to City Mayor
Carmelo F. Lazatin but no written response was received by petitioner.[8]
Consequently, petitioner paid under protest[9] the following:
Medical Center (new construction)
Building Permit and Electrical Fee
Locational Clearance Fee
Fire Code Fee

P 217,475.20
283,741.64
144,690.00
Total - P 645,906.84

School Building (renovation)


Building Permit and Electrical Fee

P 37,857.20

Locational Clearance Fee

6,000.57

Fire Code Fee

5,967.74
Total - P 49,825.51

Petitioner likewise paid the following sums as required by the City Assessors Office:
Real Property Tax Basic Fee
SEF
Locational Clearance Fee

P 86,531.10
43,274.54
1,125.00
Total P130,930.64[10]
[GRAND TOTAL - P 826,662.99]

By reason of the above payments, petitioner was issued the corresponding Building Permit, Wiring Permit,
Electrical Permit and Sanitary Building Permit. On June 9, 2006, petitioner formally requested the respondents to
refund the fees it paid under protest. Under letters dated June 15, 2006 and August 7, 2006, respondent City
Treasurer denied the claim for refund.[11]
On August 31, 2006, petitioner filed a Complaint [12] before the trial court seeking the refund of P826,662.99 plus
interest at the rate of 12% per annum, and also praying for the award of attorneys fees in the amount
of P300,000.00 and litigation expenses.
In its Answer,[13] respondents asserted that the claim of petitioner cannot be granted because its structures are not
among those mentioned in Sec. 209 of the National Building Code as exempted from the building permit
fee. Respondents argued that R.A. No. 6055 should be considered repealed on the basis of Sec. 2104 of
theNational Building Code. Since the disputed assessments are regulatory in nature, they are not taxes from
which petitioner is exempt. As to the real property taxes imposed on petitioners property located in Marisol
Village, respondents pointed out that said premises will be used as a school dormitory which cannot be
considered as a use exclusively for educational activities.
Petitioner countered that the subject building permit are being collected on the basis of Art. 244 of
the Implementing Rules and Regulations of the Local Government Code, which impositions are really taxes
considering that they are provided under the chapter on Local Government Taxation in reference to the revenue
raising power of local government units (LGUs). Moreover, petitioner contended that, as held inPhilippine Airlines,
Inc. v. Edu,[14] fees may be regarded as taxes depending on the purpose of its exaction. In any case, petitioner
pointed out that the Local Government Code of 1991 provides in Sec. 193 that non-stock and non-profit
educational institutions like petitioner retained the tax exemptions or incentives which have been granted to

them. Under Sec. 8 of R.A. No. 6055 and applicable jurisprudence and DOJ rulings, petitioner is clearly exempt
from the payment of building permit fees.[15]
On September 21, 2007, the trial court rendered judgment in favor of the petitioner and against the
respondents. The dispositive portion of the trial courts decision[16]reads:
WHEREFORE, premises considered, judgment is rendered as follows:
a. Plaintiff is exempt from the payment of building permit and other fees Ordering
the Defendants to refund the total amount of Eight Hundred Twenty Six Thousand Six
Hundred Sixty Two Pesos and 99/100 Centavos (P826,662.99) plus legal interest thereon
at the rate of twelve percent (12%) per annum commencing on the date of extra-judicial
demand or June 14, 2006, until the aforesaid amount is fully paid.
b. Finding the Defendants liable for attorneys fees in the amount of Seventy
Thousand Pesos (Php70,000.00), plus litigation expenses.
c. Ordering the Defendants to pay the costs of the suit.
SO ORDERED.[17]
Respondents appealed to the CA which reversed the trial court, holding that while petitioner is a tax-free entity, it is
not exempt from the payment of regulatory fees. The CA noted that under R.A. No. 6055, petitioner was granted
exemption only from income tax derived from its educational activities and real property used exclusively for
educational purposes. Regardless of the repealing clause in the National Building Code, the CA held that petitioner
is still not exempt because a building permit cannot be considered as the other charges mentioned in Sec. 8 of R.A.
No. 6055 which refers to impositions in the nature of tax, import duties, assessments and other collections for
revenue purposes, following the ejusdem generisrule. The CA further stated that petitioner has not shown that the
fees collected were excessive and more than the cost of surveillance, inspection and regulation. And while petitioner
may be exempt from the payment of real property tax, petitioner in this case merely alleged that the subject property
is to be used actually, directly and exclusively for educational purposes, declaring merely that such premises is
intended to house the sports and other facilities of the university but by reason of the occupancy of informal settlers
on the area, it cannot yet utilize the same for its intended use. Thus, the CA concluded that petitioner is not entitled
to the refund of building permit and related fees, as well as real property tax it paid under protest.
Petitioner filed a motion for reconsideration which was denied by the CA.
Hence, this petition raising the following grounds:
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR AND DECIDED A QUESTION
OF SUBSTANCE IN A WAY NOT IN ACCORDANCE WITH LAW AND THE APPLICABLE
DECISIONS OF THE HONORABLE COURT AND HAS DEPARTED FROM THE ACCEPTED
AND USUAL COURSE OF JUDICIAL PROCEEDINGS NECESSITATING THE HONORABLE
COURTS EXERCISE OF ITS POWER OF SUPERVISION CONSIDERING THAT:
I. IN REVERSING THE TRIAL COURTS DECISION DATED 21 SEPTEMBER 2007, THE COURT
OF APPEALS EFFECTIVELY WITHDREW THE PRIVILEGE OF EXEMPTION GRANTED
TO NON-STOCK, NON-PROFIT EDUCATIONAL FOUNDATIONS BY VIRTUE OF RA 6055
WHICH WITHDRAWAL IS BEYOND THE AUTHORITY OF THE COURT OF APPEALS TO
DO.
A. INDEED, RA 6055 REMAINS VALID AND IS IN FULL FORCE AND EFFECT. HENCE,
THE COURT OF APPEALS ERRED WHEN IT RULED IN THE QUESTIONED
DECISION THAT NON-STOCK, NON-PROFIT EDUCATIONAL FOUNDATIONS ARE
NOT EXEMPT.
B. THE COURT OF APPEALS APPLICATION OF THE PRINCIPLE OFEJUSDEM
GENERIS IN RULING IN THE QUESTIONED DECISION THAT THE TERM OTHER
CHARGES IMPOSED BY THE GOVERNMENT UNDER SECTION 8 OF RA 6055
DOES NOT INCLUDE BUILDING PERMIT AND OTHER RELATED FEES AND/OR
CHARGES IS BASED ON ITS ERRONEOUS AND UNWARRANTED ASSUMPTION
THAT THE TAXES, IMPORT DUTIES AND ASSESSMENTS AS PART OF THE
PRIVILEGE OF EXEMPTION GRANTED TO NON-STOCK, NON-PROFIT

EDUCATIONAL FOUNDATIONS ARE LIMITED TO COLLECTIONS FOR REVENUE


PURPOSES.
C. EVEN ASSUMING THAT THE BUILDING PERMIT AND OTHER RELATED FEES
AND/OR CHARGES ARE NOT INCLUDED IN THE TERM OTHER CHARGES
IMPOSED BY THE GOVERNMENT UNDER SECTION 8 OF RA 6055, ITS
IMPOSITION IS GENERALLY A TAX MEASURE AND THEREFORE, STILL
COVERED UNDER THE PRIVILEGE OF EXEMPTION.
II. THE COURT OF APPEALS DENIAL OF PETITIONER AUFS EXEMPTION FROM REAL
PROPERTY TAXES CONTAINED IN ITS QUESTIONED DECISION AND QUESTIONED
RESOLUTION IS CONTRARY TO APPLICABLE LAW AND JURISPRUDENCE.[18]
Petitioner stresses that the tax exemption granted to educational stock corporations which have converted into
non-profit foundations was broadened to include any other charges imposed by the Government as one of the
incentives for such conversion. These incentives necessarily included exemption from payment of building permit
and related fees as otherwise there would have been no incentives for educational foundations if the privilege
were only limited to exemption from taxation, which is already provided under the Constitution.
Petitioner further contends that this Court has consistently held in several cases that the primary purpose
of the exaction determines its nature. Thus, a charge of a fixed sum which bears no relation to the cost of
inspection and which is payable into the general revenue of the state is a tax rather than an exercise of the police
power. The standard set by law in the determination of the amount that may be imposed as license fees is such
that is commensurate with the cost of regulation, inspection and licensing. But in this case, the amount
representing the building permit and related fees and/or charges is such an exorbitant amount as to warrant a
valid imposition; such amount exceeds the probable cost of regulation. Even with the alleged criteria submitted by
the respondents (e.g., character of occupancy or use of building/structure, cost of construction, floor area and
height), and the construction by petitioner of an 11-storey building, the costs of inspection will not amount
toP645,906.84, presumably for the salary of inspectors or employees, the expenses of transportation for
inspection and the preparation and reproduction of documents.Petitioner thus concludes that the disputed fees
are substantially and mainly for purposes of revenue rather than regulation, so that even these fees cannot be
deemed charges mentioned in Sec. 8 of R.A. No. 6055, they should properly be treated as tax from which
petitioner is exempt.
In their Comment, respondents maintain that petitioner is not exempt from the payment of building permit and
related fees since the only exemptions provided in the National Building Code are public buildings and traditional
indigenous family dwellings. Inclusio unius est exclusio alterius. Because the law did not include petitioners
buildings from those structures exempt from the payment of building permit fee, it is therefore subject to the
regulatory fees imposed under the National Building Code.
Respondents assert that the CA correctly distinguished a building permit fee from those other charges mentioned
in Sec. 8 of R.A. No. 6055. As stated by petitioner itself, charges refer to pecuniary liability, as rents, and fees
against persons or property. Respondents point out that a building permit is classified under the term fee. A fee is
generally imposed to cover the cost of regulation as activity or privilege and is essentially derived from the
exercise of police power; on the other hand, impositions for services rendered by the local government units or for
conveniences furnished, are referred to as service charges.
Respondents also disagreed with petitioners contention that the fees imposed and collected are exorbitant and
exceeded the probable expenses of regulation. These fees are based on computations and assessments made
by the responsible officials of the City Engineers Office in accordance with the Schedule of Fees and criteria
provided in the National Building Code. The bases of assessment cited by petitioner (e.g. salary of employees,
expenses of transportation and preparation and reproduction of documents) refer to charges and fees on
business and occupation under Sec. 147 of the Local Government Code, which do not apply to building permit
fees. The parameters set by the National Building Code can be considered as complying with the reasonable cost
of regulation in the assessment and collection of building permit fees. Respondents likewise contend that the
presumption of regularity in the performance of official duty applies in this case. Petitioner should have presented
evidence to prove its allegations that the amounts collected are exorbitant or unreasonable.
For resolution are the following issues: (1) whether petitioner is exempt from the payment of building permit and
related fees imposed under the National Building Code; and (2) whether the parcel of land owned by petitioner
which has been assessed for real property tax is likewise exempt.

R.A. No. 6055 granted tax exemptions to educational institutions like petitioner which converted to non-stock, nonprofit educational foundations. Section 8 of said law provides:
SECTION 8. The Foundation shall be exempt from the payment of all taxes, import
duties, assessments, and other charges imposed by the Government onallincome derived
from or property, real or personal, used exclusively for the educational activities of the
Foundation.(Emphasis supplied.)
On February 19, 1977, Presidential Decree (P.D.) No. 1096 was issued adopting theNational Building Code of the
Philippines. The said Code requires every person, firm or corporation, including any agency or instrumentality of the
government to obtain a building permit for any construction, alteration or repair of any building or structure. [19]Building
permit refers to a document issued by the Building Official x x x to anowner/applicant to proceed with the construction,
installation, addition, alteration, renovation, conversion, repair, moving, demolition or other work activity of a
specificproject/building/structure or portions thereof after the accompanying principal plans, specifications and
other pertinent documents with the duly notarized application are found satisfactory and substantially conforming
with the National Building Code of the Philippines x x x and its Implementing Rules and Regulations (IRR).
[20]
Building permit fees refers to the basic permit fee and other charges imposed under the National Building Code.
Exempted from the payment of building permit fees are: (1) public buildings and (2) traditional indigenous family
dwellings.[21] Not being expressly included in the enumeration of structures to which the building permit fees do
not apply, petitioners claim for exemption rests solely on its interpretation of the term other charges imposed by
the National Government in the tax exemption clause of R.A. No. 6055.
A charge is broadly defined as the price of, or rate for, something, while the word fee pertains to a charge
fixed by law for services of public officers or for use of a privilege under control of government. [22] As used in the
Local Government Code of 1991 (R.A. No. 7160), charges refers to pecuniary liability, as rents or fees against
persons or property, while fee means a charge fixed by law or ordinance for the regulation or inspection of a
business or activity.[23]
That charges in its ordinary meaning appears to be a general term which could cover a specific fee does
not support petitioners position that building permit fees are among those other charges from which it was
expressly exempted. Note that the other charges mentioned in Sec. 8 of R.A. No. 6055 is qualified by the words
imposed by the Government on all x x x property used exclusively for the educational activities of the
foundation. Building permit fees are not impositions on property but on the activity subject of government regulation.
While it may be argued that the fees relate to particular properties, i.e., buildings and structures, they are actually
imposed on certain activities the owner may conduct either to build such structures or to repair, alter, renovate or
demolish the same. This is evident from the following provisions of the National Building Code:
Section 102. Declaration of Policy
It is hereby declared to be the policy of the State to safeguard life, health, property, and public
welfare, consistent with theprinciples of sound environmental management and control; and tothis
end, make it the purpose of this Code to provide for allbuildings and structures, a framework of
minimum standards and requirements to regulate and control their location, site, design quality of
materials, construction, use, occupancy, and maintenance.
Section 103. Scope and Application
(a) The provisions of this Code shall apply to the design,location, sitting, construction,
alteration, repair,conversion, use, occupancy, maintenance, moving, demolitionof, and addition to
public and private buildings andstructures, except traditional indigenous family dwellingsas
defined herein.
xxxx
Section 301. Building Permits
No person, firm or corporation, including any agency orinstrumentality of the government
shall erect, construct, alter, repair, move, convert or demolish any building or structure or
causethe same to be done without first obtaining a building permittherefor from the Building
Official assigned in the place where thesubject building is located or the building work is to be
done. (Italics supplied.)

That a building permit fee is a regulatory imposition is highlighted by the fact that in processing an application
for a building permit, the Building Official shall see to it that the applicant satisfies and conforms with approved standard
requirements on zoning and land use, lines and grades, structural design, sanitary and sewerage, environmental
health, electrical and mechanical safety as well as with other rules and regulations implementing the National Building
Code.[24] Thus, ancillary permits such as electrical permit, sanitary permit and zoning clearance must also be secured
and the corresponding fees paid before a building permit may be issued. And as can be gleaned from the
implementing rules and regulations of the National Building Code, clearances from various government authorities
exercising and enforcing regulatory functions affecting buildings/structures, like local government units, may be further
required before a building permit may be issued.[25]
Since building permit fees are not charges on property, they are not impositions from which petitioner is
exempt.
As to petitioners argument that the building permit fees collected by respondents are in reality taxes
because the primary purpose is to raise revenues for the local government unit, the same does not hold water.
A charge of a fixed sum which bears no relation at all to the cost of inspection and regulation may be held
to be a tax rather than an exercise of the police power. [26] In this case, the Secretary of Public Works and
Highways who is mandated to prescribe and fix the amount of fees and other charges that the Building Official
shall collect in connection with the performance of regulatory functions, [27] has promulgated and issued the
Implementing Rules and Regulations[28] which provide for the bases of assessment of such fees, as follows:
1.

Character of occupancy or use of building

2.

Cost of construction 10,000/sq.m (A,B,C,D,E,G,H,I), 8,000 (F), 6,000 (J)

3.

Floor area

4.

Height

Petitioner failed to demonstrate that the above bases of assessment were arbitrarily determined or
unrelated to the activity being regulated. Neither has petitioner adduced evidence to show that the rates of
building permit fees imposed and collected by the respondents were unreasonable or in excess of the cost of
regulation and inspection.
In Chevron Philippines, Inc. v. Bases Conversion Development Authority,[29]this Court explained:
In distinguishing tax and regulation as a form of police power, the determining factor is
the purpose of the implemented measure. If the purpose is primarily to raise revenue, then it will
be deemed a tax even though the measure results in some form of regulation. On the other
hand, if the purpose is primarily to regulate, then it is deemed a regulation and an exercise
of the police power of the state, even though incidentally, revenue is generated. Thus,
in Gerochi v. Department of Energy, the Court stated:
The conservative and pivotal distinction between these two (2) powers
rests in the purpose for which the charge is made. If generation of revenue is the
primary purpose and regulation is merely incidental, the imposition is a tax; but if
regulation is the primary purpose, the fact that revenue is incidentally raised
does not make the imposition a tax.[30] (Emphasis supplied.)
Concededly, in the case of building permit fees imposed by the National Government under the National
Building Code, revenue is incidentally generated for the benefit of local government units. Thus:
Section 208. Fees
Every Building Official shall keep a permanent record and accurate account of all fees
and other charges fixed and authorized by the Secretary to be collected and received under this
Code.
Subject to existing budgetary, accounting and auditing rules and regulations, the Building
Official is hereby authorized to retain not more than twenty percent of his collection for the
operating expenses of his office.
The remaining eighty percent shall be deposited with the provincial, city or municipal
treasurer and shall accrue to the General Fund of the province, city or municipality concerned.

Petitioners reliance on Sec. 193 of the Local Government Code of 1991 is likewise misplaced. Said
provision states:
SECTION 193. Withdrawal of Tax Exemption Privileges. -- Unless otherwise provided in
this Code, tax exemptions or incentives granted to, or presently enjoyed by all persons, whether
natural or juridical, including government-owned or controlled corporations, except local water
districts, cooperatives duly registered under R.A. No. 6938, non-stock and non-profit hospitals
andeducational institutions, are hereby withdrawn upon the effectivity of this Code. (Emphasis
supplied.)
Considering that exemption from payment of regulatory fees was not among those incentives granted to petitioner
under R.A. No. 6055, there is no such incentive that is retained under the Local Government Code of
1991. Consequently, no reversible error was committed by the CA in ruling that petitioner is liable to pay the
subject building permit and related fees.
Now, on petitioners claim that it is exempted from the payment of real property tax assessed against its real
property presently occupied by informal settlers.
Section 28(3), Article VI of the 1987 Constitution provides:
xxxx
(3) Charitable institutions, churches and parsonages or convents appurtenant thereto,
mosques, non-profit cemeteries, and all lands, buildings, and improvements,actually, directly
and exclusively used for religious, charitable or educational purposes shall be exempt from
taxation.
x x x x (Emphasis supplied.)
Section 234(b) of the Local Government Code of 1991 implements the foregoing constitutional provision
by declaring that -SECTION 234. Exemptions from Real Property Tax. The following are exempted from
payment of the real property tax:
xxxx
(b) Charitable institutions, churches, parsonages or convents appurtenant thereto,
mosques, non-profit or religious cemeteries and all lands, buildings, and improvements actually,
directly, and exclusively used for religious, charitable oreducational purposes;
x x x x (Emphasis supplied.)
In Lung Center of the Philippines v. Quezon City,[31] this Court held that only portions of the hospital actually,
directly and exclusively used for charitable purposes are exempt from real property taxes, while those portions
leased to private entities and individuals are not exempt from such taxes. We explained the condition for the tax
exemption privilege of charitable and educational institutions, as follows:
Under the 1973 and 1987 Constitutions and Rep. Act No. 7160 in order to be entitled to
the exemption, the petitioner is burdened to prove, by clear and unequivocal proof, that (a) it is a
charitable
institution;
and
(b)
its
real
properties
areACTUALLY, DIRECTLY and EXCLUSIVELY used for charitable purposes.Exclusive is
defined as possessed and enjoyed to the exclusion of others; debarred from participation or
enjoyment; and exclusively is defined, in a manner to exclude; as enjoying a privilege exclusively.
If real property is used for one or more commercial purposes, it is not exclusively used for the
exempted purposes but is subject to taxation. The words dominant use or principal use cannot be
substituted for the words used exclusively without doing violence to the Constitutions and the law.
Solely is synonymous with exclusively.
What is meant by actual, direct and exclusive use of the property for charitable
purposes is the direct and immediate and actual application of the property itself to the
purposes for which the charitable institution is organized. It is not the use of the income from
the real property that is determinative of whether the property is used for tax-exempt purposes.
[32]
(Emphasis and underscoring supplied.)

Petitioner failed to discharge its burden to prove that its real property is actually, directly and exclusively used for
educational purposes. While there is no allegation or proof that petitioner leases the land to its present occupants,
still there is no compliance with the constitutional and statutory requirement that said real property is actually,
directly and exclusively used for educational purposes. The respondents correctly assessed the land for real
property taxes for the taxable period during which the land is not being devoted solely to petitioners educational
activities. Accordingly, the CA did not err in ruling that petitioner is likewise not entitled to a refund of the real
property tax it paid under protest.
WHEREFORE, the petition is DENIED. The Decision dated July 28, 2009 and Resolution dated October 12, 2009
of the Court of Appeals in CA-G.R. CV No. 90591 are AFFIRMED.
No pronouncement as to costs.

LUNG CENTER OF THE PHILIPPINES, petitioner, vs. QUEZON CITY and CONSTANTINO P. ROSAS, in his
capacity as City Assessor of Quezon City, respondents.
DECISION
CALLEJO, SR., J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court, as amended, of the
Decision[1] dated July 17, 2000 of the Court of Appeals in CA-G.R. SP No. 57014 which affirmed the decision of
the Central Board of Assessment Appeals holding that the lot owned by the petitioner and its hospital building
constructed thereon are subject to assessment for purposes of real property tax.
The Antecedents
The petitioner Lung Center of the Philippines is a non-stock and non-profit entity established on January 16,
1981 by virtue of Presidential Decree No. 1823. [2] It is the registered owner of a parcel of land, particularly
described as Lot No. RP-3-B-3A-1-B-1, SWO-04-000495, located at Quezon Avenue corner Elliptical Road,
Central District, Quezon City. The lot has an area of 121,463 square meters and is covered by Transfer Certificate
of Title (TCT) No. 261320 of the Registry of Deeds of Quezon City. Erected in the middle of the aforesaid lot is a
hospital known as the Lung Center of the Philippines. A big space at the ground floor is being leased to private
parties, for canteen and small store spaces, and to medical or professional practitioners who use the same as
their private clinics for their patients whom they charge for their professional services. Almost one-half of the
entire area on the left side of the building along Quezon Avenue is vacant and idle, while a big portion on the right
side, at the corner of Quezon Avenue and Elliptical Road, is being leased for commercial purposes to a private
enterprise known as the Elliptical Orchids and Garden Center.
The petitioner accepts paying and non-paying patients. It also renders medical services to out-patients, both
paying and non-paying. Aside from its income from paying patients, the petitioner receives annual subsidies from
the government.
On June 7, 1993, both the land and the hospital building of the petitioner were assessed for real property
taxes in the amount of P4,554,860 by the City Assessor of Quezon City.[3] Accordingly, Tax Declaration Nos. C021-01226 (16-2518) and C-021-01231 (15-2518-A) were issued for the land and the hospital building,
respectively.[4] OnAugust 25, 1993, the petitioner filed a Claim for Exemption [5] from real property taxes with the
City Assessor, predicated on its claim that it is a charitable institution. The petitioners request was denied, and a
petition was, thereafter, filed before the Local Board of Assessment Appeals of Quezon City (QC-LBAA, for
brevity) for the reversal of the resolution of the City Assessor. The petitioner alleged that under Section 28,
paragraph 3 of the 1987 Constitution, the property is exempt from real property taxes. It averred that a minimum
of 60% of its hospital beds are exclusively used for charity patients and that the major thrust of its hospital
operation is to serve charity patients. The petitioner contends that it is a charitable institution and, as such, is
exempt from real property taxes. The QC-LBAA rendered judgment dismissing the petition and holding the
petitioner liable for real property taxes.[6]
The QC-LBAAs decision was, likewise, affirmed on appeal by the Central Board of Assessment Appeals of
Quezon City (CBAA, for brevity)[7] which ruled that the petitioner was not a charitable institution and that its real
properties were not actually, directly and exclusively used for charitable purposes; hence, it was not entitled to

real property tax exemption under the constitution and the law. The petitioner sought relief from the Court of
Appeals, which rendered judgment affirming the decision of the CBAA. [8]
Undaunted, the petitioner filed its petition in this Court contending that:
A. THE COURT A QUO ERRED IN DECLARING PETITIONER AS NOT ENTITLED TO REALTY TAX
EXEMPTIONS ON THE GROUND THAT ITS LAND, BUILDING AND IMPROVEMENTS, SUBJECT
OF ASSESSMENT, ARE NOT ACTUALLY, DIRECTLY AND EXCLUSIVELY DEVOTED FOR
CHARITABLE PURPOSES.
B. WHILE PETITIONER IS NOT DECLARED AS REAL PROPERTY TAX EXEMPT UNDER ITS
CHARTER, PD 1823, SAID EXEMPTION MAY NEVERTHELESS BE EXTENDED UPON PROPER
APPLICATION.
The petitioner avers that it is a charitable institution within the context of Section 28(3), Article VI of the 1987
Constitution. It asserts that its character as a charitable institution is not altered by the fact that it admits paying
patients and renders medical services to them, leases portions of the land to private parties, and rents out
portions of the hospital to private medical practitioners from which it derives income to be used for operational
expenses. The petitioner points out that for the years 1995 to 1999, 100% of its out-patients were charity patients
and of the hospitals 282-bed capacity, 60% thereof, or 170 beds, is allotted to charity patients. It asserts that the
fact that it receives subsidies from the government attests to its character as a charitable institution. It contends
that the exclusivity required in the Constitution does not necessarily mean solely. Hence, even if a portion of its
real estate is leased out to private individuals from whom it derives income, it does not lose its character as a
charitable institution, and its exemption from the payment of real estate taxes on its real property. The petitioner
cited our ruling in Herrera v. QC-BAA[9] to bolster its pose. The petitioner further contends that even if P.D. No.
1823 does not exempt it from the payment of real estate taxes, it is not precluded from seeking tax exemption
under the 1987 Constitution.
In their comment on the petition, the respondents aver that the petitioner is not a charitable entity. The
petitioners real property is not exempt from the payment of real estate taxes under P.D. No. 1823 and even under
the 1987 Constitution because it failed to prove that it is a charitable institution and that the said property is
actually, directly and exclusively used for charitable purposes. The respondents noted that in a newspaper report,
it appears that graft charges were filed with the Sandiganbayan against the director of the petitioner, its
administrative officer, and Zenaida Rivera, the proprietress of the Elliptical Orchids and Garden Center, for
entering into a lease contract over 7,663.13 square meters of the property in 1990 for only P20,000 a month,
when the monthly rental should be P357,000 a month as determined by the Commission on Audit; and that
instead of complying with the directive of the COA for the cancellation of the contract for being grossly prejudicial
to the government, the petitioner renewed the same on March 13, 1995 for a monthly rental of only P24,000. They
assert that the petitioner uses the subsidies granted by the government for charity patients and uses the rest of its
income from the property for the benefit of paying patients, among other purposes. They aver that the petitioner
failed to adduce substantial evidence that 100% of its out-patients and 170 beds in the hospital are reserved for
indigent patients. The respondents further assert, thus:
13. That the claims/allegations of the Petitioner LCP do not speak well of its record of service. That before a
patient is admitted for treatment in the Center, first impression is that it is pay-patient and required to pay a certain
amount as deposit. That even if a patient is living below the poverty line, he is charged with high hospital
bills. And, without these bills being first settled, the poor patient cannot be allowed to leave the hospital or be
discharged without first paying the hospital bills or issue a promissory note guaranteed and indorsed by an

influential agency or person known only to the Center; that even the remains of deceased poor patients suffered
the same fate. Moreover, before a patient is admitted for treatment as free or charity patient, one must undergo a
series of interviews and must submit all the requirements needed by the Center, usually accompanied by
endorsement by an influential agency or person known only to the Center. These facts were heard and admitted
by the Petitioner LCP during the hearings before the Honorable QC-BAA and Honorable CBAA.These are the
reasons of indigent patients, instead of seeking treatment with the Center, they prefer to be treated at the Quezon
Institute. Can such practice by the Center be called charitable? [10]
The Issues
The issues for resolution are the following: (a) whether the petitioner is a charitable institution within the
context of Presidential Decree No. 1823 and the 1973 and 1987 Constitutions and Section 234(b) of Republic Act
No. 7160; and (b) whether the real properties of the petitioner are exempt from real property taxes.
The Courts Ruling
The petition is partially granted.
On the first issue, we hold that the petitioner is a charitable institution within the context of the 1973 and 1987
Constitutions. To determine whether an enterprise is a charitable institution/entity or not, the elements which
should be considered include the statute creating the enterprise, its corporate purposes, its constitution and bylaws, the methods of administration, the nature of the actual work performed, the character of the services
rendered, the indefiniteness of the beneficiaries, and the use and occupation of the properties. [11]
In the legal sense, a charity may be fully defined as a gift, to be applied consistently with existing laws, for
the benefit of an indefinite number of persons, either by bringing their minds and hearts under the influence of
education or religion, by assisting them to establish themselves in life or otherwise lessening the burden of
government.[12] It may be applied to almost anything that tend to promote the well-doing and well-being of social
man. It embraces the improvement and promotion of the happiness of man. [13] The word charitable is not
restricted to relief of the poor or sick. [14] The test of a charity and a charitable organization are in law the
same. The test whether an enterprise is charitable or not is whether it exists to carry out a purpose reorganized in
law as charitable or whether it is maintained for gain, profit, or private advantage.
Under P.D. No. 1823, the petitioner is a non-profit and non-stock corporation which, subject to the provisions
of the decree, is to be administered by the Office of the President of the Philippines with the Ministry of Health and
the Ministry of Human Settlements. It was organized for the welfare and benefit of the Filipino people principally to
help combat the high incidence of lung and pulmonary diseases in the Philippines. The raison detre for the
creation of the petitioner is stated in the decree, viz:
Whereas, for decades, respiratory diseases have been a priority concern, having been the leading cause of
illness and death in the Philippines, comprising more than 45% of the total annual deaths from all causes, thus,
exacting a tremendous toll on human resources, which ailments are likely to increase and degenerate into serious
lung diseases on account of unabated pollution, industrialization and unchecked cigarette smoking in the country;
Whereas, the more common lung diseases are, to a great extent, preventable, and curable with early and
adequate medical care, immunization and through prompt and intensive prevention and health education
programs;

Whereas, there is an urgent need to consolidate and reinforce existing programs, strategies and efforts at
preventing, treating and rehabilitating people affected by lung diseases, and to undertake research and training on
the cure and prevention of lung diseases, through a Lung Center which will house and nurture the above and
related activities and provide tertiary-level care for more difficult and problematical cases;
Whereas, to achieve this purpose, the Government intends to provide material and financial support towards the
establishment and maintenance of a Lung Center for the welfare and benefit of the Filipino people. [15]
The purposes for which the petitioner was created are spelled out in its Articles of Incorporation, thus:
SECOND: That the purposes for which such corporation is formed are as follows:
1. To construct, establish, equip, maintain, administer and conduct an integrated medical institution which shall
specialize in the treatment, care, rehabilitation and/or relief of lung and allied diseases in line with the concern of
the government to assist and provide material and financial support in the establishment and maintenance of a
lung center primarily to benefit the people of the Philippines and in pursuance of the policy of the State to secure
the well-being of the people by providing them specialized health and medical services and by minimizing the
incidence of lung diseases in the country and elsewhere.
2. To promote the noble undertaking of scientific research related to the prevention of lung or pulmonary ailments
and the care of lung patients, including the holding of a series of relevant congresses, conventions, seminars and
conferences;
3. To stimulate and, whenever possible, underwrite scientific researches on the biological, demographic, social,
economic, eugenic and physiological aspects of lung or pulmonary diseases and their control; and to collect and
publish the findings of such research for public consumption;
4. To facilitate the dissemination of ideas and public acceptance of information on lung consciousness or
awareness, and the development of fact-finding, information and reporting facilities for and in aid of the general
purposes or objects aforesaid, especially in human lung requirements, general health and physical fitness, and
other relevant or related fields;
5. To encourage the training of physicians, nurses, health officers, social workers and medical and technical
personnel in the practical and scientific implementation of services to lung patients;
6. To assist universities and research institutions in their studies about lung diseases, to encourage advanced
training in matters of the lung and related fields and to support educational programs of value to general health;
7. To encourage the formation of other organizations on the national, provincial and/or city and local levels; and to
coordinate their various efforts and activities for the purpose of achieving a more effective programmatic approach
on the common problems relative to the objectives enumerated herein;
8. To seek and obtain assistance in any form from both international and local foundations and organizations; and
to administer grants and funds that may be given to the organization;
9. To extend, whenever possible and expedient, medical services to the public and, in general, to promote and
protect the health of the masses of our people, which has long been recognized as an economic asset and a
social blessing;

10. To help prevent, relieve and alleviate the lung or pulmonary afflictions and maladies of the people in any and
all walks of life, including those who are poor and needy, all without regard to or discrimination, because of race,
creed, color or political belief of the persons helped; and to enable them to obtain treatment when such disorders
occur;
11. To participate, as circumstances may warrant, in any activity designed and carried on to promote the general
health of the community;
12. To acquire and/or borrow funds and to own all funds or equipment, educational materials and supplies by
purchase, donation, or otherwise and to dispose of and distribute the same in such manner, and, on such basis as
the Center shall, from time to time, deem proper and best, under the particular circumstances, to serve its general
and non-profit purposes and objectives;
13. To buy, purchase, acquire, own, lease, hold, sell, exchange, transfer and dispose of properties, whether real
or personal, for purposes herein mentioned; and
14. To do everything necessary, proper, advisable or convenient for the accomplishment of any of the powers
herein set forth and to do every other act and thing incidental thereto or connected therewith. [16]
Hence, the medical services of the petitioner are to be rendered to the public in general in any and all walks
of life including those who are poor and the needy without discrimination. After all, any person, the rich as well as
the poor, may fall sick or be injured or wounded and become a subject of charity.[17]
As a general principle, a charitable institution does not lose its character as such and its exemption from
taxes simply because it derives income from paying patients, whether out-patient, or confined in the hospital, or
receives subsidies from the government, so long as the money received is devoted or used altogether to the
charitable object which it is intended to achieve; and no money inures to the private benefit of the persons
managing or operating the institution. [18] In Congregational Sunday School, etc. v. Board of Review,[19] the State
Supreme Court of Illinois held, thus:
[A]n institution does not lose its charitable character, and consequent exemption from taxation, by reason of the
fact that those recipients of its benefits who are able to pay are required to do so, where no profit is made by the
institution and the amounts so received are applied in furthering its charitable purposes, and those benefits are
refused to none on account of inability to pay therefor.The fundamental ground upon which all exemptions in favor
of charitable institutions are based is the benefit conferred upon the public by them, and a consequent relief, to
some extent, of the burden upon the state to care for and advance the interests of its citizens. [20]
As aptly stated by the State Supreme Court of South Dakota in Lutheran Hospital Association of South
Dakota v. Baker:[21]
[T]he fact that paying patients are taken, the profits derived from attendance upon these patients being exclusively
devoted to the maintenance of the charity, seems rather to enhance the usefulness of the institution to the poor;
for it is a matter of common observation amongst those who have gone about at all amongst the suffering classes,
that the deserving poor can with difficulty be persuaded to enter an asylum of any kind confined to the reception of
objects of charity; and that their honest pride is much less wounded by being placed in an institution in which
paying patients are also received. The fact of receiving money from some of the patients does not, we think, at all
impair the character of the charity, so long as the money thus received is devoted altogether to the charitable
object which the institution is intended to further.[22]

The money received by the petitioner becomes a part of the trust fund and must be devoted to public trust
purposes and cannot be diverted to private profit or benefit. [23]
Under P.D. No. 1823, the petitioner is entitled to receive donations. The petitioner does not lose its character
as a charitable institution simply because the gift or donation is in the form of subsidies granted by the
government. As held by the State Supreme Court of Utah in Yorgason v. County Board of Equalization of Salt
Lake County:[24]
Second, the government subsidy payments are provided to the project. Thus, those payments are like a gift or
donation of any other kind except they come from the government. In bothIntermountain Health Care and the
present case, the crux is the presence or absence of material reciprocity. It is entirely irrelevant to this analysis
that the government, rather than a private benefactor, chose to make up the deficit resulting from the exchange
between St. Marks Tower and the tenants by making a contribution to the landlord, just as it would have been
irrelevant inIntermountain Health Care if the patients income supplements had come from private individuals
rather than the government.
Therefore, the fact that subsidization of part of the cost of furnishing such housing is by the government rather
than private charitable contributions does not dictate the denial of a charitable exemption if the facts otherwise
support such an exemption, as they do here.[25]
In this case, the petitioner adduced substantial evidence that it spent its income, including the subsidies from
the government for 1991 and 1992 for its patients and for the operation of the hospital. It even incurred a net loss
in 1991 and 1992 from its operations.
Even as we find that the petitioner is a charitable institution, we hold, anent the second issue, that those
portions of its real property that are leased to private entities are not exempt from real property taxes as these are
not actually, directly and exclusively used for charitable purposes.
The settled rule in this jurisdiction is that laws granting exemption from tax are construed strictissimi
juris against the taxpayer and liberally in favor of the taxing power.Taxation is the rule and exemption is the
exception. The effect of an exemption is equivalent to an appropriation. Hence, a claim for exemption from tax
payments must be clearly shown and based on language in the law too plain to be mistaken. [26] As held
inSalvation Army v. Hoehn:[27]
An intention on the part of the legislature to grant an exemption from the taxing power of the state will never be
implied from language which will admit of any other reasonable construction. Such an intention must be
expressed in clear and unmistakable terms, or must appear by necessary implication from the language used, for
it is a well settled principle that, when a special privilege or exemption is claimed under a statute, charter or act of
incorporation, it is to be construed strictly against the property owner and in favor of the public. This principle
applies with peculiar force to a claim of exemption from taxation . [28]
Section 2 of Presidential Decree No. 1823, relied upon by the petitioner, specifically provides that the
petitioner shall enjoy the tax exemptions and privileges:
SEC. 2. TAX EXEMPTIONS AND PRIVILEGES. Being a non-profit, non-stock corporation organized primarily to
help combat the high incidence of lung and pulmonary diseases in the Philippines, all donations, contributions,
endowments and equipment and supplies to be imported by authorized entities or persons and by the Board of
Trustees of the Lung Center of the Philippines, Inc., for the actual use and benefit of the Lung Center, shall be

exempt from income and gift taxes, the same further deductible in full for the purpose of determining the
maximum deductible amount under Section 30, paragraph (h), of the National Internal Revenue Code, as
amended.
The Lung Center of the Philippines shall be exempt from the payment of taxes, charges and fees imposed by the
Government or any political subdivision or instrumentality thereof with respect to equipment purchases made by,
or for the Lung Center.[29]
It is plain as day that under the decree, the petitioner does not enjoy any property tax exemption privileges
for its real properties as well as the building constructed thereon. If the intentions were otherwise, the same
should have been among the enumeration of tax exempt privileges under Section 2:
It is a settled rule of statutory construction that the express mention of one person, thing, or consequence implies
the exclusion of all others. The rule is expressed in the familiar maxim,expressio unius est exclusio alterius.
The rule of expressio unius est exclusio alterius is formulated in a number of ways. One variation of the rule is
principle that what is expressed puts an end to that which is implied. Expressium facit cessare tacitum. Thus,
where a statute, by its terms, is expressly limited to certain matters, it may not, by interpretation or construction,
be extended to other matters.
...
The rule of expressio unius est exclusio alterius and its variations are canons of restrictive interpretation. They are
based on the rules of logic and the natural workings of the human mind.They are predicated upon ones own
voluntary act and not upon that of others. They proceed from the premise that the legislature would not have
made specified enumeration in a statute had the intention been not to restrict its meaning and confine its terms to
those expressly mentioned.[30]
The exemption must not be so enlarged by construction since the reasonable presumption is that the State
has granted in express terms all it intended to grant at all, and that unless the privilege is limited to the very terms
of the statute the favor would be intended beyond what was meant. [31]
Section 28(3), Article VI of the 1987 Philippine Constitution provides, thus:
(3) Charitable institutions, churches and parsonages or convents appurtenant thereto, mosques, non-profit
cemeteries, and all lands, buildings, and improvements, actually, directly and exclusivelyused for religious,
charitable or educational purposes shall be exempt from taxation. [32]
The tax exemption under this constitutional provision covers property taxes only.[33]As Chief Justice Hilario G.
Davide, Jr., then a member of the 1986 Constitutional Commission, explained: . . . what is exempted is not the
institution itself . . .; those exempted from real estate taxes are lands, buildings and improvements actually,
directly and exclusively used for religious, charitable or educational purposes. [34]
Consequently, the constitutional provision is implemented by Section 234(b) of Republic Act No. 7160
(otherwise known as the Local Government Code of 1991) as follows:
SECTION 234. Exemptions from Real Property Tax. The following are exempted from payment of the real
property tax:

...
(b) Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, non-profit or
religious cemeteries and all lands, buildings, and improvements actually, directly, andexclusively used for
religious, charitable or educational purposes.[35]
We note that under the 1935 Constitution, ... all lands, buildings, and improvements used exclusively for
charitable purposes shall be exempt from taxation. [36] However, under the 1973 and the present Constitutions, for
lands, buildings, and improvements of the charitable institution to be considered exempt, the same should not
only be exclusively used for charitable purposes; it is required that such property be used actually and directly for
such purposes.[37]
In light of the foregoing substantial changes in the Constitution, the petitioner cannot rely on our ruling
in Herrera v. Quezon City Board of Assessment Appeals which was promulgated on September 30, 1961 before
the 1973 and 1987 Constitutions took effect.[38] As this Court held in Province of Abra v. Hernando:[39]
Under the 1935 Constitution: Cemeteries, churches, and parsonages or convents appurtenant thereto, and all
lands, buildings, and improvements used exclusively for religious, charitable, or educational purposes shall be
exempt from taxation. The present Constitution added charitable institutions, mosques, and non-profit cemeteries
and required that for the exemption of lands, buildings, and improvements, they should not only be exclusively but
also actually and directly used for religious or charitable purposes. The Constitution is worded differently. The
change should not be ignored. It must be duly taken into consideration. Reliance on past decisions would have
sufficed were the words actually as well as directly not added. There must be proof therefore of
the actualand direct use of the lands, buildings, and improvements for religious or charitable purposes to be
exempt from taxation.
Under the 1973 and 1987 Constitutions and Rep. Act No. 7160 in order to be entitled to the exemption, the
petitioner is burdened to prove, by clear and unequivocal proof, that (a) it is a charitable institution; and (b) its real
properties are ACTUALLY, DIRECTLY andEXCLUSIVELY used for charitable purposes. Exclusive is defined as
possessed and enjoyed to the exclusion of others; debarred from participation or enjoyment; and exclusively
is defined, in a manner to exclude; as enjoying a privilege exclusively.[40] If real property is used for one or more
commercial purposes, it is not exclusively used for the exempted purposes but is subject to taxation. [41] The words
dominant use or principal use cannot be substituted for the words used exclusively without doing violence to the
Constitutions and the law.[42] Solely is synonymous with exclusively.[43]
What is meant by actual, direct and exclusive use of the property for charitable purposes is the direct and
immediate and actual application of the property itself to the purposes for which the charitable institution is
organized. It is not the use of the income from the real property that is determinative of whether the property is
used for tax-exempt purposes.[44]
The petitioner failed to discharge its burden to prove that the entirety of its real property is actually, directly
and exclusively used for charitable purposes. While portions of the hospital are used for the treatment of patients
and the dispensation of medical services to them, whether paying or non-paying, other portions thereof are being
leased to private individuals for their clinics and a canteen. Further, a portion of the land is being leased to a
private individual for her business enterprise under the business name Elliptical Orchids and Garden Center.
Indeed, the petitioners evidence shows that it collectedP1,136,483.45 as rentals in 1991 and P1,679,999.28 for
1992 from the said lessees.

Accordingly, we hold that the portions of the land leased to private entities as well as those parts of the
hospital leased to private individuals are not exempt from such taxes. [45] On the other hand, the portions of the
land occupied by the hospital and portions of the hospital used for its patients, whether paying or non-paying, are
exempt from real property taxes.
IN LIGHT OF ALL THE FOREGOING, the petition is PARTIALLY GRANTED. The respondent Quezon City
Assessor is hereby DIRECTED to determine, after due hearing, the precise portions of the land and the area
thereof which are leased to private persons, and to compute the real property taxes due thereon as provided for
by law.

Case Digest: Lung Center of the Philippines vs. Quezon City and Constantino Rosas
G.R. No. 144104

June 29, 2004

FACTS:
The Petitioner is a non-stock, non-profit entity which owns a parcel of land in Quezon City. Erected in the middle
of the aforesaid lot is a hospital known as the Lung Center of the Philippines. The ground floor is being leased to
a canteen, medical professionals whom use the same as their private clinics, as well as to other private parties.
The right portion of the lot is being leased for commercial purposes to the Elliptical Orchids and Garden Center.
The petitioner accepts paying and non-paying patients. It also renders medical services to out-patients, both
paying and non-paying. Aside from its income from paying patients, the petitioner receives annual subsidies from
the government.
Petitioner filed a Claim for Exemption from realty taxes amounting to about Php4.5 million, predicating its claim as
a charitable institution. The city assessor denied the Claim. When appealed to the QC-Local Board of
Assessment, the same was dismissed. The decision of the QC-LBAA was affirmed by the Central Board of
Assessment Appeals, despite the Petitioners claim that 60% of its hospital beds are used exclusively for charity.
ISSUE:
Whether or not the Petitioner is entitled to exemption from realty taxes notwithstanding the fact that it admits
paying clients and leases out a portion of its property for commercial purposes.
HELD:
The Court held that the petitioner is indeed a charitable institution based on its charter and articles of
incorporation. As a general principle, a charitable institution does not lose its character as such and its exemption
from taxes simply because it derives income from paying patients, whether out-patient or confined in the hospital,
or receives subsidies from the government, so long as the money received is devoted or used altogether to the
charitable object which it is intended to achieve; and no money inures to the private benefit of the persons
managing or operating the institution.
Despite this, the Court held that the portions of real property that are leased to private entities are not exempt
from real property taxes as these are not actually, directly and exclusively used for charitable purposes.
(strictissimi juris) Moreover, P.D. No. 1823 only speaks of tax exemptions as regards to:
income and gift taxes for all donations, contributions, endowments and equipment and supplies to be
imported by authorized entities or persons and by the Board of Trustees of the Lung Center of the Philippines for
the actual use and benefit of the Lung Center; and
taxes, charges and fees imposed by the Government or any political subdivision or instrumentality thereof
with respect to equipment purchases (expression unius est exclusion alterius/expressium facit cessare tacitum).